FTSE in the red, Unilever leads sell-off in big brand companies, Rolls-Royce hit by broker downgrade, Aldi’s new threat for Sainsbury’s and Tesco and IPO data shows challenge ahead for London market

“The FTSE 100 started the week on the back foot, dragged down by consumer non-cyclicals, basic materials and industrials,” says Russ Mould, Investment Director at AJ Bell.

“Share price weakness in big brand companies including Unilever, Reckitt and Haleon is often a signal that investors are worried about consumer spending and growing inflationary pressures. Renewed cost pressures may prompt companies to hike prices and this could see shoppers switch to cheaper supermarket own-brand items. It’s a major risk for investors in big brand stocks to consider.

“Driving down the shares in the sector this time was negative broker comment as RBC downgraded Unilever to ‘underperform’, which hurt the Marmite maker and took its big brand peers down at the same time.”

Rolls-Royce

“Stock market darling Rolls-Royce saw its engines splutter after Citigroup downgraded its rating on the stock to ‘neutral’ from ‘buy’ on valuation grounds. Even though Citigroup raised its price target for the stock, investors appear to have taken the rating downgrade as a signal to lock in some profit.

“Rolls-Royce has been a runaway success for investors in recent years as its recovery story gained traction. The turnaround opportunity is now looking like old news and investors increasingly want to hear about the next phase of the company’s growth, not simply what it is doing to get back on track as that looks to have already happened.”

Aldi

“Investors in Sainsbury’s and Tesco were looking slightly troubled after Aldi revealed bumper Christmas sales including a boom in premium own-label items.

“Sainsbury’s and Tesco have enjoyed strong growth in recent years for their own premium ranges, helping to differentiate their offerings from discounters Aldi and Lidl. To see Aldi start to eat their premium lunch is a concern.”

IPO data

“New research by EY found that 88 companies delisted or transferred their primary stock listing from London’s Main Market in 2024. While there have been a lot of headlines around the US effectively poaching UK-listed companies with the lure of higher valuations, in reality the bulk of the 88 companies leaving London were down to takeovers and not transfers. Nevertheless, it’s clear that London needs to replenish its shrinking pot of listed companies.

“Last year’s changes to the UK listing rules should make it more attractive for companies to list in London, which explains the widely held view that 2025 will be a much better year for IPOs. However, with business sentiment currently weak due to government decisions in the Budget, we may have to wait until the second half of the year before the pace of UK IPOs starts to accelerate. Businesses are still getting their heads around new cost pressures and solutions need to be found before they rush into a stock market listing.”

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