Daily market update: Legal & General, Marks & Spencer

“It’s been a golden year so far for investors in more ways than one,” says Russ Mould, Investment Director at AJ Bell.

“While stock markets paused for breath at the end of a big week for economics and corporate earnings, commodity markets remained on the front foot.

“Having hit a new record high earlier this week and then suffered a small pullback, gold did its best to recover some of that lost territory to hover around the $2,889 per ounce mark. Meanwhile oil prices strengthened by 0.8% to $71.19 per barrel.

“The FTSE 100 held firm at 8,719 as strength in financials, miners and utilities was offset by weakness in healthcare.

“It might feel as if the housing market is being held back by high mortgage rates curbing affordability, yet industry figures tell a different story. The average UK house price hit a new record high in January at £299,138, suggesting the market is more resilient than many people think.

“Forthcoming changes to stamp duty have spurred on a rush of activity ahead of the April deadline and the Bank of England cutting rates this week provides another tailwind.

“The big question is whether everything changes from April when stamp duty goes up, inflation is expected to rise, and the Bank of England might find it harder to justify further rate cuts which would have a negative impact for those expecting mortgages to be even cheaper.

“All eyes will be on US jobs figures later today. The market is expecting a big drop in non-farm payrolls in January to 170,000 versus 256,000 added in December, likely impacted by the LA fires and cold weather. The unemployment rate is expected to remain unchanged at 4.1%. The Federal Reserve looks at jobs figures closely as part of its decision-making on interest rates.”

Legal & General

“Anyone who had Legal & General pegged as boring is having to change their minds as CEO António Simões gets stuck into transforming the business.

“Fresh from announcing a new structure last June as he looks to streamline the insurer’s operations, Simões has now unveiled an eye-catching deal with Meiji Yasuda.

“The Japanese firm has an existing relationship with Legal & General in asset management but this is set to see a meaningful extension as it buys the latter’s US insurance business and takes a 20% stake in its pension risk transfer (or PRT) business across the Atlantic.

“PRT – which involves the likes of Legal & General being paid to take on corporate pension liabilities – is central to Simões’ vision for the business. While this is a growing area, and the American market is potentially huge, some investors are uncomfortable with the capital demands required in this area.

“Perhaps the share buyback, returning a good chunk of the proceeds of the deal to shareholders, will help salve these concerns. Added up, the company expects to dole out a highly material 40% of its market value in buybacks and dividends through to 2027.

“Meiji Yasuda is also committed to taking a 5% stake in Legal & General as a group. While there’s no suggestion this is the precursor to any sort of eventual takeover and it is likely just about cementing the relationship, it may nonetheless set some tongues wagging.”

Marks & Spencer

“Marks & Spencer shares weakened as investors reacted to news that the former CEO of Boohoo would be joining as the new boss of its clothing, home and beauty divisions.

“John Lyttle might seem an odd choice, given that Boohoo lost its way during his tenure and his previous role as chief operating officer at Primark means he’s done time with two value retailers, suggesting that bargain prices are where his expertise lies. That’s not Marks & Spencer’s model.

“People are happy to pay a bit extra in M&S because they know the products are good quality and will last for a long time.

“M&S boss Stuart Machin insists Lyttle will be a good fit culturally and that he has experience in volume-based growth and supply chain transformation which will come in handy.

“Outgoing clothing boss Richard Price has done such a good job in recent years and losing him is a massive blow to M&S.

“Lyttle will have big shoes to fill and for once, investors might hope that he doesn’t try and bring a flavour of former employers to his new role.”

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