FTSE 100 flat, China pushes insurers to invest in domestic stocks, Associated British Foods hit by Primark woes, Revolution Beauty stumbles and THG on track after Ingenuity spin-off

“The FTSE 100’s strong start to 2025 is starting to lose some momentum despite gains in the US and China,” says AJ Bell Investment Director Russ Mould.

“The S&P 500 was in touching distance of its all-time high set early last month on investor relief that, in economic terms, Donald Trump’s bark seems to be worse than his bite.

“Markets are still in the dark about whether tariffs on a number of parties will be introduced at the beginning of next month or whether they are simply a hardline negotiating tactic. It’s a hint of the sort of uncertainty investors may have to get used to under Trump’s presidency.

“The technology sector was in heavy demand in the afterglow of the announcement of the Stargate project to invest in the infrastructure required to accelerate the expansion of AI.

“China’s push to get its insurance sector to invest in domestic stocks provided some support to the country’s equity indices. However, recent history would suggest Beijing will need to take more radical action if Chinese shares are to enjoy a sustained recovery.

“In London, retailers were on the back foot with some recent measures of UK consumer confidence suggesting the Budget and the gloomy rhetoric proceeding it continue to dog the British economy.”

Associated British Foods

“If Primark is struggling, you know the UK retail sector is in trouble. Shoppers remain cautious about spending and reticence over popping a few cheap tops or jumpers in their basket at Primark suggests times are very hard indeed.

“A lot of people go into Primark with the intention of buying one item and they walk out with three because prices are affordable. It’s classic retail therapy – treat yourself to a few extra bits because they won’t break the bank.

“When Primark says UK sales are weak, you know there has been a change in shopper behaviour. People might still be visiting its stores but they are being more selective and that’s a problem when the business model is built on shifting high volumes of goods.

“Retailers love to blame the weather when things don’t go well. While the UK autumn was relatively mild, winter has been bitterly cold so Primark should still have been able to shift plenty of jumpers and coats in recent weeks, albeit the last couple of weeks fall outside of the reporting period to 4 January for the trading update.

“It’s situations like now where Primark’s parent company benefits from its conglomerate structure. While the retail arm has been weak, the ingredients arm has come to the rescue and that’s why the share price hasn’t tanked on the update.”

Revolution Beauty

“Revolution Beauty’s trading update is more Beast than Beauty. Delays to product launches in the shops, destocking by US retailers and weaker online sales has soured the turnaround story.

“The bad news pulled the share price down by 15%, knocking £7 million off its market value. That directly impacts Boohoo as its 27.09% stake in the business is now worth £1.9 million less.

“For a business that was worth nearly £500 million when it joined the stock market four years ago, Revolution Beauty’s life as a listed company has been nothing short of ugly.

“While Boohoo has been building a stake, so too has activist investor Pentwater Capital Management which owns 8.91%. Quite what it intends to do remains to be seen, particularly as Revolution Beauty seems like small fry compared to its other positions including stakes in Boeing, Ansys and Kellanova.

“With a turnaround that seems to be one step forward, two steps back, it’s getting to the point where Revolution Beauty’s management might need to accept the company is better off as part of a larger entity rather than trying to sweat it out alone.”

THG

“The fanfare which greeted THG’s arrival on the stock market when it listed in 2020 feels a long time ago.

“There was plenty of excitement about its Ingenuity arm – seen as offering logistics solutions to third parties and compared to the out-of-box solution provided to global supermarkets by Ocado – whose star was very much in the ascendancy at the time. Now the Ingenuity arm has been spun off as a private entity, THG is being judged as a collection of beauty, health and nutrition e-commerce sites.

“Despite a fourth quarter drop in revenue these are actually performing OK – with the beauty side doing particularly well.

“There are no guarantees but if the company can start growing its revenue sustainably then it may in time be judged on its own merits and not on the unrealistic yardsticks in place at the time of its IPO.”

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