European markets up on US election day, end to Boeing strikes, breakthrough for Vodafone merger, Primark owner shakes off wet weather, ASOS losses continue and Schroders hit by outflows

“European indices including the FTSE 100 pressed ahead on US election day,” says Russ Mould, Investment Director at AJ Bell.

“The fact both defensive sectors including utilities and tobacco and cyclical sectors such as miners were in demand would suggest that investors might be hedging their bets ahead of the US election result. A series of broker upgrades for the UK utilities sector also helped.

“A contested election result could cause volatility on the markets which theoretically would see defensive stocks provide some portfolio ballast. Equally, a clear winner quickly after voting ends could provide some relief to investors and keep markets trucking along.

“Whether that remains the case a few days later is uncertain as investors haven’t priced in a particular win yet, and there will be good and bad points to digest for markets if either Donald Trump or Kamala Harris wins. Once investors have had time to consider the new lay of the land, there will almost certainly be shifts in investment portfolios.”

Boeing

“An end to the Boeing workers’ strike failed to breathe some life back into the company’s share price. The stock has been weak over the past few months as workers went on a seven-week-long walkout. The shares only moved 0.6% higher in pre-market trading in the US following news that workers have voted to accept a new pay deal.

“Boeing’s production has been severely disrupted and has caused turbulence in the airline sector. Ryanair even had to downgrade its growth forecasts yesterday after getting caught up in the strike fallout, saying Boeing hadn’t delivered as many planes as it wanted. The focus will now be on Boeing playing catch-up with output, albeit ensuring that it doesn’t cut any corners.”

Vodafone

“Tentative signs of a potential green light for Vodafone’s merger with Three is a game-changer for the telecoms operator in terms of reigniting its growth spark.

“Vodafone had banked on the merger being its ticket to regaining strength in the UK, boosting its customer numbers and triggering investment in a better mobile experience for users.

“Assuming it agrees to the competition authority’s demands, Vodafone could be at the forefront of a radical reshaping of the UK mobile network infrastructure. However, significant spending will inevitably lead to higher prices for consumers down the line, so the merger isn’t necessarily good for everyone.

“Two decades ago, Vodafone was seen as the go-to mobile operator but it has since been left behind. Turnaround efforts have been sluggish and the brand has lost its strength. Vodafone now seems to be slowly regaining its mojo, selling assets to become a leaner, more focused business, but there is still a long way to go.”

Associated British Foods

“Associated British Foods is a company that really knows what it is doing. It understands its audience – particularly for its Primark chain – and it makes sensible long-term decisions to help drive long-term growth.

“What is notable is the company achieved a strong set of results despite Primark in the UK being affected by a wet summer which, for a business reliant on footfall, was less than ideal. This was made up for by strong progress in overseas markets, lending credence to the idea the Primark offering can be a success outside of its domestic market.

“Primark does things differently to most retailers. It may not do online deliveries but its recent digital strategy of allowing click and collect sales helps to get more customers through the doors where they can then make additional impulse purchases.

“The agriculture, grocery and ingredients businesses all chalked up a solid performance, but the sugar arm left a bitter aftertaste thanks to problems in Europe which look set to have a continuing impact in the current financial year. The company has long heralded the benefits of its diversified model, which was important during the pandemic when Primark stores were shuttered.

“The company’s enviable financial position allowed for some significant generosity to shareholders while still investing for future growth.”

ASOS

“The headlines from ASOS’ full-year results are terrible but if you look closely enough there are some signs the fallen fast fashion star is getting its act together.

“Revenue is substantially lower and the company is still chalking up significant losses. However, ASOS did see an improvement at the cash flow level and has made some progress in clearing the pile of old inventory which has weighed it down for some time.

“Actions taken following the end of the period covered by the results have also taken a chunk out of the company’s net debt and this means questions over ASOS’ future are not quite as existential as they had been previously.

“This is still not a particularly happy story. Active customers are down and the frequency and volume of orders are falling. But average basket sizes are up a touch – suggesting a strategy of focusing on more profitable orders is starting to gain some traction.

“There are concerns over whether younger age groups still like fast fashion when the more sustainable alternative of buying vintage gear is very much in vogue. Even getting close to reclaiming its past glories remains a very long way off for ASOS. However, if the company can just get back on a sure footing it would be a good start.”

Schroders

“Up until now Schroders has fared rather better than its asset management peers who have been hit by the rising popularity of passive alternatives and less than helpful trends in financial markets.

“However, there are signs Schroders is now feeling the heat based on the significant quarterly outflows unveiled today – the highest since the onset of the pandemic. Perhaps more worryingly there is the promise of more to come.

“All of this adds up to a difficult start for incoming boss Richard Oldfield who at least has the inside track on the challenges facing the business given his previous role as finance chief at the company.

“Oldfield will hope the recent trends reflect short-term issues around Chinese volatility and its legacy mandate with Scottish Widows, but he has plenty to do to arrest a decline in the share price which has dragged Schroders to eleven-year lows.”

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