FTSE 100 higher amid China stimulus talk, Boohoo continues fight against Frasers, WPP shares unfazed by talk of arch-rivals merging, Domino’s agrees deal with franchisees

“The FTSE 100 was higher on Monday amid a strong showing from resources stocks,” says AJ Bell Investment Analyst, Dan Coatsworth.

“The mining sector, as well as other China-exposed stocks like Prudential, Standard Chartered and Burberry, moved higher on tweaked wording from the country’s Politburo that suggested more economic stimulus could be on the way. Stocks in Hong Kong were also higher.

“The latest Chinese inflation figures, which came in lower than anticipated, suggest previous efforts to stoke economic demand are having a limited impact so far.

“Oil giants BP and Shell rose as oil prices ticked higher on the ousting of Syrian president Bashar al-Assad over the weekend. For now, the equity market response is quite muted, suggesting investors are waiting to judge the wider impact of this latest development.

“The latest UK jobs data hinted at an impact from the Budget with KPMG and the Recruitment of Employment Confederation highlighting a ‘sharp and accelerated’ drop in demand for staff in November.

“Employers will be weighing the impact of higher National Insurance contributions and the increase in the National Living Wage.”

Boohoo

“Boohoo says it is not deliberately seeking confrontation with Frasers, yet this is more than just a simple war of words. Its battle against the Sports Direct retailer is being played out in the public domain for all to see.

“Each week brings a new form of attack from one side or the other, the latest being Boohoo latching onto a recommendation from proxy adviser ISS to vote against Frasers’ quest to get Mike Ashley a seat on Boohoo’s board.

“Recommendations from ISS or fellow proxy adviser Glass Lewis rarely form the backbone of an announcement to the stock market, but Boohoo has seized upon ISS’s latest recommendation to launch another attack on Frasers. This follows comments at the weekend from Mike Ashley that Boohoo must avoid a ‘fire sale’ of assets.

“The fate of Boohoo will be in the hands of its shareholders when they vote on 20 December.

“At 35.88p, Boohoo’s share price is on its knees, trading at a fraction of the 400p+ level seen in 2020. Long-suffering shareholders might welcome someone of Ashley’s calibre joining the board and offering a different viewpoint to revive the business. Equally, some shareholders may not take kindly to his vulture-like tendencies and view a board appointment as a pre-cursor to Frasers muscling in and taking Boohoo out on the cheap.

“What’s certain is that both parties are going to be working flat out over the next 11 days to get their viewpoint across and win over Boohoo shareholders.”

WPP

“Investors in WPP seemed to shrug off the prospect of two arch-rivals coming together and creating a force to be reckoned with. Speculation that Omnicom and Interpublic are plotting a $30 billion merger is the talk of the town yet shares in WPP moved 3.5% higher on Monday.

“On one hand, a merger of two companies this size would inevitably involve widespread cost cutting as the first course of action. That could give WPP a window of opportunity to try and poach some clients while its enlarged rival’s management is distracted. On the other hand, a merger would bring together the cream of the crop from both companies which would aid their narrative during account pitches.

“A merger between Omnicom and Interpublic is the latest example of bid talk in the advertising sector. WPP itself has been seen as a bid target, potentially for private equity companies, given its share price has struggled to make progress since the pandemic.

“It’s somewhat ironic given that the sector’s growth strategy has been hinged on non-stop acquisitions, snapping up smaller companies to gain scale and broaden the client base. To now see mergers among the top players would suggest the industry has run out of smaller things to buy – effectively hitting a ceiling and not knowing where to go next.”

Domino's Pizza

“After a period when relations with franchisees were frequently fraught, shareholders will likely appreciate the smooth delivery of new terms announced by the UK arm of Domino’s Pizza.

“The five-year growth and profitability framework essentially divvies up the share of profit between the parent group and the people who run Domino’s outlets, and how much each will contribute to spending in areas like marketing and digital infrastructure.

“It’s positive that these issues are agreed for a five-year period as that allows the company to plan for the medium term with a relative degree of certainty. Incentives to drive new store openings show Domino’s believes it can still grow and that it thinks the market is not yet fully saturated in the UK.

“Proving this to investors is key – with a danger new Domino’s outlets cannibalise existing sales elsewhere and a risk the company doesn’t keep up with shifting consumer tastes.

“Some households may baulk at paying the best part of £20 for takeaway pizza, at least on a regular basis, and it is far from the healthiest option at a time when people are more conscious of what they eat.

“Separately, the company has offered some reassurance on trading, although it notes an ongoing annual £3 million cost from measures announced in the recent Budget – unsurprising given the nature of Domino’s workforce.”

These articles are for information purposes only and are not a personal recommendation or advice.