Markets calm after Fed leaves rates unchanged, BT disappoints, H&M trips up, Wizz Air hit by cost headwinds, Meta beats forecasts and Fevertree agrees Molson Coors tie-up

“The FTSE 100 opened flat, following a slight pullback on Wall Street last night and a mixed showing from Asia,” says Russ Mould, Investment Director at AJ Bell.

“The Federal Reserve’s decision to leave US interest rates unchanged was widely expected and that has brought some calm to the markets.

“Donald Trump isn’t happy as he is determined for US interest rates to come down to help American businesses and consumers. He said the Fed has ‘failed to stop the problem they created with inflation’ – somewhat ironic given the new President’s policy agenda looks primed to increase the rate of inflation. Investors took the President’s comments in their stride as it’s no secret that he isn’t the biggest fan of Fed Chair Jerome Powell.

“BT fell 4.1% after a patchy third quarter. It’s all well and good talking about cost transformation when sales are falling nearly across the board. Openreach was the only business area to show revenue progression.

“Just as it looked as if H&M was starting to regain strength, along comes another disappointing quarter. The company talks about ‘great potential’ and having a clear plan to drive profitable and long-term growth. Sadly, the uncertain economic backdrop in many of its operating regions means it faces an uphill battle in the short term.

“Wizz Air shares traded close to all-time lows after flagging cost headwinds. The airline has dramatically fallen out of favour with investors since 2021. Previously the market lapped up the narrative around rapid expansion; now, there is considerable scepticism because of high debt levels, cost pressures, engine problems and fierce competition.”

Meta Platforms

“Social media giant Meta’s quarterly earnings were just what the doctor ordered after DeepSeek infected the big tech space with gloom earlier this week.

“Revenue and earnings were better than expected and CEO Mark Zuckerberg promised the ‘trajectory’ of some of its longer-term initiatives will be clearer by the end of 2025. He will hope he hasn’t made himself a hostage to fortune by giving this indication.

“The forward guidance may temper market enthusiasm. The projected first quarter out-turn was a bit worse than what analysts had hoped for, and the company has not provided any visibility on the full-year outlook.

“The company is continuing to invest heavily in AI, although whether there will be any change of tack off the back of DeepSeek’s emergence remains to be seen.

“The decision to axe third-party factchecking programmes may, along with the settlement of a lawsuit with Donald Trump over banning him from Facebook, help smooth relations with the new US administration but could prove a risk to advertising spend. Big brands may be wary of their goods and services being advertised alongside inappropriate or divisive content.

“As Zuckerberg himself contends, the eventual outcome of the current TikTok saga and whether it will remain available in the US going forward could have a significant impact on Meta. If it is banned then it offers a kicker for its Reels video content on Facebook and Instagram.”

Fevertree drinks

“Fevertree’s tie-up with Molson Coors has several benefits for the business but first and foremost it is a big endorsement of the brand it has built up across the Atlantic.

“The news may well restore some of the fizz Fevertree shares enjoyed after their listing 10 years ago as excitement bubbles about what this venture could mean for the business.

“From Molson Coors’ side, shifting consumer habits means there is an incentive for it to diversify its offering and it’s significant that it has seen Fevertree as a means of doing so. It shows that for all Fevertree’s problems with cost and supply chain issues in recent years, it has built something meaningful with its range of premium mixers.

“The terms of the agreement with Molson Coors reduces demands on Fevertree’s capital and should power its growth in the US thanks to the beer maker’s heavyweight distribution and marketing capabilities.

“While it banks its share of the profit, Fevertree will have newly freed-up cash flow which can be potentially returned to shareholders or invested in expanding in other parts of the globe.

“Molson taking a meaningful stake in the business also underscores its commitment to the partnership and could even translate into a full takeover of the group in time if the arrangement works out well.”

Shell

“The market has taken news of a big drop-off in profit for Shell in the fourth quarter in its stride. Investors in oil companies generally accept there can be considerable volatility in quarterly earnings given commodities prices are often subject to wild swings.

“Shell has raised its dividend and unveiled a new share buyback, suggesting it is not too worried about its performance in the final three months of 2024.

“In the 18 months since Wael Sawan took the helm at Shell, he has been focused on trying to increase efficiency and bring some hard-nosed business sense to the running of the business.

“His big strategic move has been to dial back the company’s previous commitment to the transition – essentially taking the attitude it’s fine to invest in renewables and other clean energies but these investments have to stack up on their own merits.

“Like a marathon runner which has fallen behind the leading pack, Sawan is desperately trying to close Shell’s valuation gap to its US rivals and, while he has had more joy than his counterpart at BP, that gap still exists.

“A strategy update in March is an opportunity for Sawan to lay out the next steps. The fear in the London market is that this update includes shifting the primary listing out of London and to the US, where Sawan could argue the investment case might get a kinder hearing.”

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