- Futures markets indicating a quiet start to week
- Oil prices ease back with Brent crude at $91
- Discounts eat into Vistry earnings as housing market corrects
- Phillips sees revenues strengthening
Steve Clayton, head of equity funds, Hargreaves Lansdown:
“Global stock markets were routed last week as the potential escalation of the Israeli crisis dominated sentiment. Both the MSCI World index and the FTSE 100 index lost around 3% over the course of the week. Trading on Friday had been especially downbeat as risk-takers looked to hedge away the risks they were carrying into the weekend. Sentiment was dampened by news of disappointing earnings from Tesla and LVMH and signs that US bond yields could soon top 5%.
Monday brings a new week and at the moment, European futures markets are suggesting a small sigh of relief. With no further protagonists joining the Israeli/Hamas conflict, markets look to be steadying, with little news flow from the corporate sector this morning to change investors’ minds in either direction.
Oil prices eased back on the lack of further escalation in the Middle East, with both Brent crude oil and West Texas Intermediate, the two global marker prices for oil, both slipping back almost a dollar to trade at $91 and $87 respectively.
There’s a trading update from housebuilder Vistry, which is evolving to become a specialised developer of mixed tenure affordable housing projects, in partnership with local authorities and housing associations. They are looking at a slight downgrade on previous guidance for full-year profits, which was in excess of £450m. An allowance also needs to be made for a £40m impact from discounting home sales by an average of 5%. Sales volumes in the housebuilding division are under pressure, with reservations per site per week slipping to 0.60 in the third quarter, which is below the first half and year-ago run rate. Vistry do say that they have been able to negotiate lower prices across their supply chain as a result of the certainty of volumes that they can deliver through their partnership approach. The company announced a further 200 job losses as it completes its transformation away from traditional housebuilding. Vistry’s £40m charge is the first sign that market weakness is threatening to begin impacting housebuilders’ balance sheets.
Finally, some relief on trading from Philips, the Dutch healthcare giant. They are raising their outlook for full year sales and profits after improvements in their supply chain. This comes after a prolonged period of pressure on trading for the group, as a result of both supply issues and the financial impact of a costly product recall in their sleep health division. It’s not all good news though; whilst revenues are now seen rising by 6-7% this year, order intake dropped 9% in the third quarter, which Philips blamed upon a slowdown in Chinese demand. The cost of the sleep apnoea device recall and associated lawsuits has now topped the billion dollar mark with the group still potentially facing thousands of individual claims against it. Dow Jones reports that the stock rose 1.6% in early European trading.”
