Daily market update: AstraZeneca, Anglo American, Kering, Babcock, Maersk

“The FTSE 100 has hit another record high at 8,720 as investors piled into healthcare, energy and mining stocks and the index benefited from a weaker pound,” says Russ Mould, Investment Director at AJ Bell.

“A weaker pound against the US dollar benefits companies which earn some or all of their money in the American currency, hence why we saw miners, gambling group Entain, construction rental firm Ashtead and ratcatcher Rentokil get a boost.

“Sterling dipped ahead of the Bank of England’s monetary policy meeting where it is widely expected to cut rates. Traders have priced in a 94.7% probability of a cut. Perhaps more important will be the Bank’s new economic outlook as that could give some indication as to whether we’re at the end of the current rate cut cycle.

“It’s possible we could get another cut in March but the backdrop changes after that point. Household energy bills are expected to go up in April as the price cap changes come into force. At the same time, the price of goods and services may rise as companies pass on extra costs related to changes to employer National Insurance, National Living Wage and employment rights. If we see a spike in the rate of inflation then the Bank of England will have less of a reason to keep cutting rates.

“Housebuilders and banks will be the ones to watch today as the Bank of England announces its rate decision and issues its outlook. They’re among the most UK economically sensitive sectors on the London Stock Exchange. Housebuilders want as many rate cuts as possible as that makes it cheaper to borrow money to buy a home. Persimmon and Taylor Wimpey moved higher ahead of the midday announcement.”

AstraZeneca

“AstraZeneca is in rude health. It has delivered a solid set of numbers, beating market expectations on both the revenue and earnings lines.

“A good run of Phase III trials during the year bodes well for converting the pipeline of drug developments into the next generation of products to sustain earnings growth. Having something else ready on the conveyer belt is paramount to the success of pharma companies as they face patent cliffs.

“China import-related tax issues won’t derail the business. They’re just noise and any fines will be small fry relative to the typical outflows from a company the size of AstraZeneca.

“Unlike GSK which delivered a lopsided performance thanks to weakness in its vaccines arm, AstraZeneca looks more balanced with gains recorded across all therapy areas.

“So far, so good, yet AstraZeneca needs to sustain this strong momentum if it is to achieve ambitious medium-term goals.”

Anglo American

“Diamonds clearly aren’t forever for Anglo American and the announcement it is preparing to write down the value of its De Beers unit ahead of its demerger shows why it is keen to jettison the business.

“While not quite the monopoly it was in the 20th century, De Beers still commands a decent share of the global diamond market. The problem lies with shifting dynamics in the sector. De Beers was forced to cut prices by 10% to 15% in its last auction of 2024 due to sliding demand and competition from lab-created diamonds.

“Today’s eye-catching news was that production guidance has been slashed as the company looks to stabilise diamond supply and demand and clear a large inventory position.

“Anglo’s direction of travel is already clear. With the steelmaking coal sale agreed and the nickel and platinum operations also being carved out, the company will become a more streamlined operation focused on metals like copper and iron ore as well as crop nutrients.

“Whether this once again makes the business vulnerable to a bid, having fought off interest from BHP last year, remains to be seen.”

Kering

“Luxury goods firm Kering slipped 2.1% after parting ways with Gucci’s creative director Sabato De Sarno. That’s effectively Kering saying its current styles aren’t chiming with the public and it needs to bring in fresh ideas. Third quarter earnings were disappointing amid a slowdown in Asia and were the latest setback for the company which has nursed a steadily declining share price since 2021.

“New chief executive Stefano Cantino has clearly wasted no time in making his mark on the business. If something is broken, fix it and that’s why Cantino has cast aside the Gucci designer, accepting that major changes are required to put Kering back on top.

“Normally, a change in a strategically important director after a bad patch would be applauded by the market. The fact Kering’s share price fell on the news implies that investors don’t believe there is a simple solution to the company’s problems.”

Babcock

“Babcock straddles both civil and military markets with its nuclear and marine expertise and the business is firing on all cylinders.

“As countries strive to hit net zero targets nuclear has emerged as an increasingly viable energy solution and Babcock is getting more work in decommissioning old plants and building new ones. The company has won major contracts on UK submarines and has a big part to play in the UK military satellite Skynet programme.

“It has been an up and down decade for Babcock beset by financial problems and uneven financial and operational performance, but under CEO David Lockwood and numbers man David Mellors, the past couple of years have seen a revival in fortunes.

“Today’s upgrade is just the latest endorsement of the current strategy and has notably helped drive the shares to a five-year high.”

Maersk

“Maersk posting its third most profitable year on record reflects the boost to freight rates delivered by disruption to shipping goods through the Red Sea.

“This has enabled the company to reward shareholders, who have had to contend with some choppy waters over the last 12 months, with a bumper dividend and a healthy share buyback.

“These don’t necessarily signal confidence in the year ahead – the company has actually raised the warning flag for 2025 by guiding for negative cash flow.

“That raises doubts over whether generous shareholder returns can be sustained. The strong performance in the year just gone was largely driven by the more volatile freight business.

“The company is sticking to margin targets for this year for its logistics and services arm but, given returns here came in short of expectations in 2024 despite its efforts to lift profitability, there has to be a question mark over whether they can be delivered.

“This would once again put Maersk at the mercy of shipping rates where the situation is highly fluid. A reopening of the Red Sea or the imposition of widespread tariffs by the US could have a big impact.”

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