Daily market update: BAE Systems, Wetherspoons, Novo Nordisk, Trainline

“The FTSE 100 was lower in early trading after a ramp-up in geopolitical tensions,” says AJ Bell Investment Director Russ Mould.

“Nuclear powers India and Pakistan in a stand-off over the Kashmir prompted a few jitters, with the Federal Reserve meeting later also inducing a few butterflies in investors’ stomachs. The Fed is widely expected to remain in wait-and-see mode as it awaits further evidence of the impact of tariffs on US economic health.

“Asia-related stocks and miners were in demand as markets looked forward to trade talks between Washington and Beijing this week, amid hopes there can be some de-escalation in the tit-for-tat tariffs between the two major economies.

“Suggestions the US could be set to impose tariffs on pharmaceuticals in the next fortnight, the appointment of vaccine sceptic Vinay Prasad to a key role at the FDA, and a warning from leading player in the sector Novo Nordisk heaped pressure on UK-listed pharma names GSK and AstraZeneca.

“The planned retirement of Rentokil’s CEO Andy Ransom by 2026 has unsettled the company’s share price. After 12 years in the job and amid uneven recent performance in the business, a refresh at the pest control firm was probably due. However, given Ransom is in the middle of efforts to turn around a struggling North American business, shareholders may not welcome the disruption.”

BAE Systems

“BAE Systems is a rare beast on the UK stock market in that it is one of the few companies not to be derailed by tariff and economic turmoil. Governments in many parts of the world have pledged to increase defence spending, thereby creating a richer backdrop for BAE to bid for contracts. Most of the equipment delivered to US customers is made domestically with parts mostly sourced from American suppliers, so tariffs aren’t applicable in these cases.

“Trading is ticking along as expected and there is no change to earnings guidance. It intends to hire more people, including the training of many individuals to create tomorrow’s skilled workforce.

“The key question now is whether this bounty of good news is already priced into the stock. The shares haven’t budged on the latest reassuring trading update and euphoria around the defence sector’s earnings growth opportunities has been in motion for some time. BAE arguably needs more earnings upgrades to keep driving the share price higher, and that means it needs to win as many contracts as it can as tenders come up.”

Wetherspoons

“There is nothing better than a prolonged dry spell for pub operators, particularly if the sun is shining and it feels hot enough to go to the beer garden. Wetherspoons should have benefited from blue skies and higher temperatures over the past few weeks and the weather forecast for the coming few weeks is certainly on its side. However, the company will need all the help it can get as consumer confidence has been deteriorating.

“Without sunny weather to encourage a trip to the pub beer garden, drinkers might opt for cracking open a can of lager at home as times are tough. April saw a rise in utility and council tax bills, tariffs threaten to drive up the cost of living further, and there are widespread job cuts or hiring freezes amid the uncertain economic outlook. It’s a troubling backdrop for any company that relies on consumer spending and even Wetherspoons with its cheaper prices isn’t immune. The company itself has to contend with higher employment and energy costs.

“It's notable that Wetherspoons’ shares haven’t moved higher on its trading update, despite hinting at the weather-related boost in recent trading and reporting a 5.6% rise in like-for-like sales in the 13 weeks to 27 April. Its choice of language doesn’t suggest it is standing on the pub table, holding a pint aloft in celebration of strong takings at the bar.

“Saying it expects a ‘reasonable’ outcome for the financial year is like someone gritting their teeth with a fake smile and raised eyebrows – trying to give the impression everything is ok, but knowing there is a danger of sinking into quicksand.”

Novo Nordisk

“Downgraded sales guidance from Novo Nordisk suggests that either the bubble has burst on the weight-loss drug craze or it is struggling to compete with rival Eli Lilly.

“As with all hot areas of the investment market, expectations tend to get ahead of reality. US growth seems to have hit a stumbling block for Novo Nordisk and that’s a major problem for the company. The US was seen to be one of its biggest growth markets, so it will have to think on its feet how to regain momentum.

“This situation also puts pressure on Novo to crack the perfect recipe for the next generation of weight loss treatments, namely greater efficacy than ones already on the market and fewer side effects.”

Trainline

“The Trainline growth story was chugging along nicely until it was derailed by the announcement of a long-feared state-backed alternative ticketing platform.

“The messages coming over the PA system to shareholders alongside full year results have, in the manner of a train manager revealing bad news on a protracted train journey, generated further gloom.

“The numbers themselves are reassuring in part – the UK enjoying a strong showing and Spain delivering. However, other areas of the international business have struggled and the company also faces headwinds linked to Google changes to its search engine results page, an expansion of Transport for London’s contactless travel zone and the impact of macroeconomic uncertainty on foreign travel.

“Given the strength of Trainline’s brand, it may be able to stave off some of the impacts from a commission-free, state-backed rival, but what may really hurt is the reduction in complexity of the whole ticketing system in UK rail. If delivered, this would reduce one of Trainline’s key appeals to travellers – which is helping them navigate complexity and get the best ticket prices available.”

BMW

“In an environment where its peers have been withdrawing guidance left, right and centre, BMW’s decision to stick with guidance was well-received by the market.

“Part of this is predicated on some tariffs going into reverse from July onwards – so investors will be able to judge from the summer whether or not the current forecasts remain credible.

“Appropriately enough, BMW’s operations look like a well-oiled machine and this has enabled the company to protect its margin performance. Its resilience is also testament to the strength of the brand.

“That doesn’t mean life will be easy for BMW. It must steer an uncertain course through the transition to electric vehicles, the impact of tariffs on global supply chains and the impact of uneven consumer confidence on demand.

“The latest trading update offers some evidence the company can keep on motoring despite these speed bumps.”

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