Daily market update: defensive stocks, investment trusts, BP

“With markets having suffered their worst week in five years, investors were hiding under their duvet on Friday hoping the pain would go away,” says Russ Mould, Investment Director at AJ Bell.

“Unfortunately, the relentless selling continued, with markets falling across Asia and Europe and futures prices implying the US will do the same when trading begins later on.

“There are so many moving parts that getting your head around the situation isn’t easy. With countless sectors set to be hit by tariffs, it’s difficult to know where to begin to comprehend the situation.

“Investors looking to buy on the dip were spoiled for choice given the sharp declines seen on the market this week. It’s now a question of when investors feel brave enough to go shopping. Today’s extended sell-off implies investors are still too nervous to take the plunge.

“Defensive stocks continued to buck the sell-off, with SSE, British American Tobacco and Diageo among the risers on the FTSE 100. You can see where people’s priorities lie — keeping the lights on, having a smoke and a pint of Guinness are simple pleasures when the world is falling apart.

“Tariffs add complexity to an already tricky situation for the UK. From Sunday, companies are likely to push up prices to offset extra employment-related costs linked to last October’s Budget. While firms will be acutely aware that consumers are already under enough financial pressure, most won’t be prepared to stomach lower profit margins so these costs will be passed on as much as possible. Sadly, job cuts also look inevitable.

“Against a backdrop of chaos, there was more news on takeovers and IPOs. Investment trust consolidation has been on overdrive over the past 12 months and that trend was firmly intact despite the market sell-off. Fidelity Japan Trust said it wasn’t interested in being gobbled up by AVI Japan Opportunity Trust. The two trusts might invest in the same part of the world but their styles are very different. AVI takes an activist approach whereas Fidelity has a growth at a reasonable price style.

“Quantum Base certainly picked the wrong week for its UK stock market debut, but at least the IPO wasn’t yesterday. The quantum science company enjoyed a small bounce as its shares began trading.”

BP

“If any major executive was on borrowed time, it was BP chair Helge Lund. The occupant of that role is often the first to carry the can for corporate failures. Having overseen the company’s recently abandoned energy transition strategy it’s a surprise it has taken this long for Lund to announce he is stepping down.

“He was the co-architect of the ‘performing while transforming’ plan alongside former chief executive Bernard Looney who left more than 18 months ago.

“BP will hope Lund falling on his sword helps satisfy frustrated shareholders, in particular activist Elliott.

“Current chief executive Murray Auchincloss will still be under significant pressure as the market looks for meaningful improvements in the group’s operational and financial showing.

“So far investors, including Elliott, do not seem overly impressed with Auchincloss’ new vision for the business outlined at a strategy day in February. He will need to do more than just row back on the company’s green push to truly convince the doubters.

“A big gap has opened up in terms of financial and share price performance not only with BP’s rivals across the Atlantic but also with fellow UK-listed oil giant Shell. Closing that gap is going to be a big challenge for BP and may mean taking more radical action than has been proposed thus far.

“BP could do with bringing in a chair with real heft and credibility with the industry and the market. It has some time to find the right person given Lund is sticking around until next year.”

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