Markets zigzag as Trump returns, Lloyds jumps on hopes the Treasury will intervene on motor finance scandal, Marston’s hit by weather, Shoe Zone trips up and Premier Foods lifts guidance

“Donald Trump is the master of unpredictability. Just as markets think they’ve sussed his next move, he either does something different or nothing at all,” says Russ Mould, Investment Director at AJ Bell.

“It only took a few hours into the new presidential term for this situation to arise, hence markets have been up and down like a yo-yo as investors try to separate speculation from fact.

“The big surprise was a lack of immediate action on trade tariffs as part of Trump’s initial list of executive orders. For someone who has talked repeatedly about wanting American companies to buy American goods and to deter foreign countries from profiting from the US, it was a surprise to see tariffs take a back seat as Trump put his new powers to use.

“However, Trump did manage to comment on tariffs before inauguration day was over. He implied 25% tariffs on imports from Mexico and Canada could happen as soon as 1 February. Naturally, that caused their respective currencies to weaken and for US equity futures to ease back, albeit the latter only temporarily as S&P 500 futures have subsequently pushed higher.

“Mexico and Canada are two of the three countries at the top of Trump’s hit list, with China being the other. Having shocked the market by being the saviour of TikTok in the US, turning the lights back on after a blink-and-you-missed-it shutdown, Trump is now using the Chinese social media network as a bargaining chip.

“The threat to apply up to 100% tariffs on Chinese imports if Beijing doesn’t agree to sell at least half of TikTok’s American operations to a US company goes further than the previous 60% tariffs touted by Trump.

“Chinese markets took this threat in their stride, with key equity indices holding firm. This suggests investors don’t believe Trump would be so bold as to take the nuclear option on tariffs. That said, the risk of higher tariffs in some form still puts the pressure on China to accelerate its strategy of generating a greater proportion of economic growth from domestic activities.

“The one area where Trump took decisive action was illegal immigration and this poses a big threat to labour costs in the US. It threatens to reduce the pool of workers for construction and agricultural industries, meaning companies might have to pay more to attract staff. Trump promised to lower prices for the American public, yet already on day one we’ve got policies in action that have inflationary consequences. Companies presented with extra costs will simply pass them on to the customer through higher prices.

“The FTSE 100 was subject to choppy trading following Trump’s inauguration. Having jumped at the market open, the UK index quickly pulled back as investors were unsure as to whether they needed to position their portfolio defensively in anticipation of sweeping changes under the new US president, or whether to keep the foot on the accelerator with growth stocks.

“Lloyds was the top riser on reports that Rachel Reeves was going to protect car loan providers from multi-billion pound payouts relating to a potential mis-selling scandal. The Treasury appears eager to ensure that lenders (and the UK economy) aren’t derailed by the issue and any redress is simply proportionate to the loss suffered, rather than significantly greater sums inflated by large compensation payments.”

Marston’s

“People were keen to celebrate over Christmas, with Marston’s the latest hospitality name to toast strong trading during the festive season. However, the before and after periods weren’t good as the company blamed the weather for more sluggish trading in November and January.

“It all adds up to a rather uninspiring picture with guidance remaining unchanged.

“Marston’s sale of its brewing operation, and the injection of capital it provided, has provided it with a solid platform. It now needs to demonstrate it can deliver sustainable growth, an improvement in cash flow and contend with rising costs arising from the Budget.”

Shoe Zone

“Shoe Zone seems like it has been stumbling around with its laces undone for a while and full-year results have done nothing to dispel this notion with the company not paying a final dividend.

“Shoe Zone’s value credentials should have stood it in good stead during a period of economic uncertainty but that hasn’t proved to be the case. Rising costs have been a headwind thanks to global supply chain issues – particularly as the company sources from China – and the impact of Budget changes.

“One crumb of comfort is these numbers are about as good as could have been expected based on a dire pre-Christmas profit warning.”

Premier Foods

“For years Premier Foods was going nowhere fast – like someone who had overindulged in its Mr Kipling cakes it was heavily weighed down, with debt to blame. In recent years this situation has been transformed and the company is now fighting fit again.

“A strong roster of brands is providing the platform for robust performance and the company has augmented its position and gained market share with smart and easily digestible acquisitions. Expansion overseas is also providing another layer to its growth story.

“Of late the grocery division had been doing better as people stocked up on store cupboard essentials rather than sweet treats but, over Christmas, it seems people were ready to indulge and there was particular appetite for premium ranges. The extension of a licence from US food giant Mondelez to make Cadbury cakes and ambient desserts is another positive for the company.

“Premier Foods is a textbook example of a recovery story and, for now, it continues to make impressive progress despite an uncertain consumer backdrop.”

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