Daily market update: Thames Water, British American Tobacco, MJ Gleeson, Dalata Hotel

“European equity markets struggled to find direction early on Tuesday, with investors still showing signs of nervousness around tariffs and the economic outlook,” says Russ Mould, Investment Director at AJ Bell.

“The Organisation for Economic Co-operation and Development (OECD) has downgraded its forecast for global economic growth as the effects of the trade war start to be felt. It’s only a small revision – from 3.1% to 2.9% for 2025 – but it’s still enough to cause investors some digestion as they consume their morning news. The downgrade weighed on the mining sector as the market fears it could mean reduced demand for commodities, and therefore a potential knock to the price of metals and minerals.

“The 90-day pause on tariffs has just over a month before expiration, meaning the pressure is on countries to do deals with the Trump administration. Reports suggest that Trump wants best offers on trade negotiations by Wednesday, perhaps to avoid any last-minute rush or stalemate situations.”

Thames Water

“Mere days after the UK government closed the final chapter on its banking sector bailout by selling its remaining stake in NatWest, it’s now the turn of the utility sector to be rescued.

“It looks increasingly like Thames Water will have to be renationalised, after US private equity firm KKR pulled out of plans to inject £4 billion into the business.

“KKR’s U-turn is a surprise, given its investment seemed like a done deal. The government indicated all through the fundraising process that it was ready to step in and take over Thames Water if necessary. If this does happen, it would represent a soggy end to what’s been a failed privatisation.

“Thames Water has been like a sponge, soaking up debt and getting into a financial mess.”

British American Tobacco

“On the face of it, British American Tobacco’s trading update contains the type of information that investors might celebrate.

“A problem area (the US) looks to be improving, revenue is ahead of guidance, and it continues to generate lots of cash. Unfortunately for investors, so much good news has already been priced into the shares that the update failed to move the dial.

“Investors have embraced defensive sectors such as tobacco during the recent market turmoil and shares in British American Tobacco are now trading on their most expensive rating in three years.

“It’s notable that profit is not ahead of guidance, despite revenue beating forecasts. That’s down to unfavourable foreign exchange rates. When you factor in these negatives, it means British American Tobacco is still plodding along as expected, but there is nothing to shoot the lights out in the statement. Hence the muted share price reaction.”

MJ Gleeson

“MJ Gleeson was meant to be the resilient player in the housebuilding sector, given it focused on the affordable end of the market. Sadly, that’s not proved to be the case.

“A profit warning has knocked its share price for six as Gleeson has spelt out headwinds which are crimping margins.

“It is suffering from higher build costs, no growth in selling prices, and ongoing reliance on incentives to shift properties, among other factors. Layer on top disappointment over failing to sell a big patch of land and profits are going to be nowhere near market expectations.”

Dalata Hotel

“The starting gun has been fired on Dalata’s potential takeover. The Irish hotels business put itself up for sale in March, effectively saying it didn’t suit being a listed company because it was much smaller than quoted peers, the business was undervalued in its opinion, and the shareholder base was concentrated, among other factors.

“Fundamentally, Dalata is looking for a new owner with deep pockets that can fund its grand vision of significant growth.

“A consortium of Swedish hotels group Pandox and Norwegian real estate investor Eiendomsspar have thrown their hat into the ring with a potential offer. Their skills and experience are perfectly matched to taking Dalata to the next level.

“The big unknown is whether their proposed bid is enough to seal the deal and whether another party makes a higher offer. The consortium’s 27.1% bid premium is below the 36% average on UK-listed takeovers so far this year, according to analysis by AJ Bell. That leaves scope for someone else to come along and offer slightly more.

“Sometimes all it takes is one person to move, for another to follow suit. Dalata’s attractions as a European growth story in the hotels sector have been known for a long time, but the fact no-one has publicly moved on the business until now is also telling. Many hoteliers prefer to cherry pick assets rather than buy companies outright.”

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