- Brent crude edges up amid Russia’s instability to above $74 a barrel.
- Gold rises as investors add more ballast to portfolios amid political and economic uncertainty.
- Business advisors BDO report that 9 out of 10 firms face refinancing issues.
- Braemar shares tumble amid reports it will delay its full-year accounts.
- Shares in ABF dip slightly despite signs shoppers keep spending resiliently.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’The weekend rebellion which rocked Russia has sent the price of oil higher, as traders assess the regime’s instability following the insurgency. Brent crude jumped by more than 1% before retreating a little, amid expectations of tighter supply.
Despite the sanctions by Western powers, Russia is still one of the world’s largest oil producers, with China and India key customers. Putin has been judged to be significantly weakened following the Wagner group’s actions and uncertainty has thrown light on potential production issues ahead if more unrest follows.
However, concerns about the effect of high interest rates in major economies on growth and China’s recovery losing steam are still set to keep a lid on prices going forward.
Equities are set for a lacklustre bout of trading with the unstable political situation in Russia adding to the uncertainties surrounding the prospects for the global economy.
The heightened tensions have stepped up appetite for gold, which has risen further from three-month lows, up above $1,926 an ounce. Investors are adding ballast to their portfolios and taking more defensive positions as geo-political developments bring fresh winds of uncertainty. This more cautious stance is likely to continue as investors wait for further signs about the path of inflation.
There are more indications that punishing borrowing costs in the UK are set to force more companies into reassessing plans for expansion and could push more into financial difficulty.
According to business advisors BDO nine in ten mid-sized firms are finding it harder to secure financing for investment and almost a quarter being forced to make cuts across their businesses rather than preparing for expansion.
The economy is already struggling to eke out growth, and with much higher than expected interest rates colliding with labour shortages and inflation, problems are piling up for companies, making the prospects of recession more likely.
Shares in Braemar have plunged by more than 16% amid reports that there is going to be a delay to the publication of its full-year accounts. Auditors have apparently flagged concerns about certain items on the books.
This will have sideswiped investors given that only in February the company reported a two-thirds surge in pre-tax profits and there were expectations that the company would be well-ahead of previous guidance.
The warmer weather has seen a surge of shopping at Primark as customers piled baskets high with new summer styles. Sales surged by 13% in the third quarter as new fashions proved a big draw and revenues were also boosted by demand for expanded health and beauty ranges. This has set parent company Associated British Foods up for a better-than-expected performance over the full year with full-year adjusted operating profits set to be moderately ahead of the £1.4 billion made last year.
These upbeat results showed that the company’s lower price points are a big draw as belts are tightened. It’s also fresh evidence of consumer resilience amid the pain of high inflation, with shoppers defying expectations of drawing their purse-strings tighter. In its grocery business, sales in the third quarter also rose 13% as the power of its brands like Jordans cereals, Twinings tea and Ovaltine remain strong. Finance director Eoin Tonge remained cautiously optimistic consumers will continue to be resilient, though there are still doubts ahead about how long the spending spree will continue. But if consumers do keep splashing the cash, it’s likely the Bank of England will have to keep raising rates to try and reduce demand. Amid this still uncertain outlook, ABF shares dipped in early trade.’’
