AJ Bell Comments

The ONS has issued new analysis that looks at how private pensions are affecting the income of retired households.

The delivery of a first-half trading update that was simply no worse than expected is proving enough to take Next to the top of the FTSE 100 this morning, helped by confirmation of the retailer’s special dividend plan and a rally in the pound, as well as the absence of any further profit warning. This is not to say the results were pretty.

Shares in megabank HSBC are trading at post-financial-crisis highs, helped by a set of solid interims, an unchanged dividend and a new $2 billion share buyback scheme as the lender makes the most of buoyant conditions in Asia.

Intu’s departure from the FTSE 100 last month suggests that investors are starting to fret about how the switch to online shopping could hit the value of retail properties but strong interim results from warehouse owner SEGRO, which took Intu’s place among the UK’s corporate elite, show who is benefitting from the surge in shopping from home.

Health-to-hygiene group Reckitt Benckiser’s interims will soothe fans of the stock but may not fully persuade the sceptics that its growth prospects justify the company’s lofty valuation, especially as life-for-like sales progress remains limited and adjusted earnings figures put a flattering gloss on the first half.

The Pensions Policy Institute (PPI) has published a report setting out the importance of improving consumer engagement to support Government policy interventions such as automatic enrolment.

Former Government health adviser Sir Michael Marmot has warned life expectancy improvements in the UK have dropped drastically in recent years.

The West would be ecstatic if its economies were to suddenly start growing by nearly 7% a year but the second-quarter increase of 6.9% generated by China is the norm for the Middle Kingdom and this figure should help to reassure those who are worried that Beijing’s gathering debt mountain mean it could one day suffer a hard landing.

“Even though they are trading near four-year lows, shares in Babcock are receiving little love from investors this morning, even as the support services giant offers some reassurance on its order backlog in a brief first-quarter trading update,” says AJ Bell Investment Director Russ Mould.

The Government has confirmed all Finance Bill 2017 policies announced pre-election to start from April 2017 will be effective on that date.

Shareholders will be delighted by today’s upbeat trading statement from Barratt Developments as the FTSE 100 firm unveils better-than-expected pre-tax profits, but very modest growth in actual housing completions will be less welcome with those struggling to get onto the property ladder (and possibly the Government) as prices creep ever higher.

A profit and dividend catastrophe at Carillion, which is also prompting chief executive Richard Howson to step down after five-and-a-half years at the helm, offers useful lessons to private investors, besides a killing to some shrewd professional ones.

An early 2% fall puts M&S in amongst the worst five performers in the FTSE 100, taking the shares back to where they were in April (and still way below the 400p-a-share bid offered by Sir Philip Green, all the way back in 2004).

AJ Bell has written to Christopher Woolard, director of strategy and competition at the FCA, calling for the regulator to address the increasingly complex point of sale disclosure regime which is no longer fit for purpose.

A closing overnight price of $16.99 means shares in Snap are now trading below their $17 flotation price, as technology stocks’ valuations come under fresh scrutiny.

The Government has confirmed that it will require pension providers to give personalised risk warnings to savers considering transferring out of policies with Guaranteed Annuity Rates (GARs).

Encouraging trading updates from nationwide house builder Persimmon and Northern-focused builder and urban regeneration expert MJ Gleeson both offer further evidence that the UK residential property market is holding up well, just over a year after Brexit and in the midst of ongoing political uncertainty.

New Work and Pensions Secretary David Gauke has set the Government on a collision course with Labour after hinting at more rapid rises in the state pension age.

The Office for National Statistics has today published preliminary findings from its Wealth and Assets Survey, covering July – December 2016.

Debenhams shares sank 4% to levels not seen since the end of the last bear market in spring 2009 as new chief executive officer Sergio Bucher admitted that trading in the 15 weeks to 17 June had been “volatile”.

Switzerland’s Nestlé, owner of beloved British brands such as KitKat, Aero, Jelly Tots, Fruit Pastilles and Yorkie, is facing calls from American investor Daniel Loeb to improve its financial and share price performance.

AJ Bell senior analyst, Tom Selby, comments on the confirmation that the state pension triple-lock will remain in place as part of a deal struck between Theresa May's Conservative Party and Arlene Foster's Democratic Unionist Party (DUP).

Second-guessing Tony Pidgeley, chairman is Berkeley Homes, is unwise, so it is not surprising that investors are taking heed by marking the shares higher this morning, as the company’s full-year results reveal it is still adding to land bank and planning further cash returns via a mixture of share buybacks and dividends.

An unexpected shift towards increasing interest rates on the Bank of England’s Monetary Policy Committee (MPC) is driving the pound higher and at the same time kicking the FTSE 100 lower.

Just as investors had begun to give up on the Federal Reserve following through on its plan to deliver three interest rate hikes this year, the US central bank has pushed through a second rate, reaffirmed its plans for a third and even stated it intends to start to sterilise its huge Quantitative Easing (QE) programme.

Higher-than-expected sales completions, a 13% jump in the weekly reservation rate and an increased order backlog are all chiming with investors in FTSE 250 house builder Bellway today, as the shares are trading up by more than 4% in early trading, to take them back to where they were in early 2016 before Brexit jitters began to hit home.

“It might not be a household name although a record of 38 consecutive increases of more than 5% in Halma’s annual dividend suggests that it should be,” comments Russ Mould, investment director at AJ Bell.

A thumping stated operating loss and a big cut in the full-year dividend both mean that Mitie’s first set of full-year results under new boss Phil Bentley are pretty ugly, but the conclusion to the accounting review, the launch of a new strategy and a drop in net debt are all giving the shares a lift.

As investors prepare to head to the polls tomorrow, the relative calm pervading the UK stock market suggests investors are pricing in a conservative win. Any other result could therefore lead to some short term volatility but investors should not let this distract them from their long term strategies.

The latest reshuffle of the FTSE 100 is due to be confirmed this evening and based on current market capitalisations Hikma Pharmaceuticals and Intu Properties are due to be relegated to the FTSE 250. Royal Mail is hovering on the fringes of relegation, although it looks safe this time around.

Early gains in Marks & Spencer shares are taking the stock to fresh 12-month highs as chief executive Steve Rowe targets further strategic and operational changes designed to improve financial performance - even if today’s 2016-17 figures are messy and still raise as many questions as they give answers.

In the Jack Nicholson film Chinatown the powerful Noah Cross remarks that even ugly buildings become respectable if they last long enough, so it is perhaps only to be expected that FTSE 250 property play Shaftesbury is attracting a potential suitor, given its owns 14 acres of prime (and far from ugly) London property, including Chinatown, Soho, Carnaby Street and Charlotte Street.

A 3% increase in net asset value, a 3% dividend increase for the year just ended and a planned identical hike for the year just begun are not providing support to British Land's shares as investors continue to focus on the possible impact of Brexit, retailers' woes and the Labour Party's proposed Robin Hood tax upon the FTSE 100 Real Estate Investment Trust.

Higher cash flow and yet another dividend increase are giving a boost to Vodafone’s shares but the juicy 5.5% yield looks necessary to compensate investors for the modest underlying sales and profit increase revealed by both this set of annual numbers and weak long-term record of growing book, or net asset, value.

Jeremy Corbyn has today unveiled the Labour Party’s programme for Government ahead of the General Election on 8 June.

Today’s statement from the Bank of England’s Monetary Policy Committee notes that “monetary policy can respond in either direction to changes in the economic outlook” and the 7-1 and 8-0 votes against tighter policy hardly smack of a central bank itching to raise interest rates, especially as the sole dissenter, Kristin Forbes, is stepping down in June.

A firm reading from the America’s small business sentiment index and a 1.1% month-on-month increase in new openings both suggest that the US economy remains on track – and strong enough to withstand further interest rate increases from the Federal Reserve.

A recommendation from the management team at Hornby that investors shunt into the sidings a 32.375p-a-share offer from Phoenix Asset Management leaves shareholders with three possible options when it comes to rescuing something from a situation where there seems to be little light at the end of the tunnel for the Corgi, Humbrol and Airfix brands owner.

Although the better-than-expected first quarter results are putting BP at the very top of the FTSE 100 leaderboard in early trading, with a 2% gain, sceptics of the stock will point out that free cash flow yet again does not cover the quarterly dividend payment of $0.10 a share, fuelling debate over whether the oil major’s shareholder payout could eventually come under pressure.

The monthly manufacturing purchasing managers index (PMI) soared to 57.3, the highest reading since November 2013 and comfortably above the last 12 months’ average of 53.8.

The state pension, and in particular the triple-lock which guarantees it rises by the highest of average earnings, inflation or 2.5%, looks set to be a key battleground ahead of the General Election in June.

“A 68% jump in stated net income at Lloyds is giving the high street lender’s shares an early boost as investors feel the width of the bank’s first-quarter profits and decide not to worry about the quality,” comments Russ Mould, investment director at AJ Bell.

HMRC has today issued its pension freedoms statistics for Q1 2017.

American activist investor Elliott Management is booking its second win of the week today as Dutch chemicals giant Akzo Nobel outlines a radical restructuring plan just two days after Klaus Kleinfeld, the boss of American firm Arconic resigned, following a protracted battle with this particular investor.

"An improvement in the third and final economic sentiment survey of the week, the services purchasing managers’ index (PMI), will offer some comfort to Chancellor of the Exchequer Philip Hammond and those investors whose portfolio strategy is based on an improvement in the UK’s economic momentum in 2017 and beyond,” says Russ Mould, investment director at AJ Bell.

Shares in Imagination are down by two-thirds this morning after key client Apple’s decision not to use the FTSE Small Cap’s silicon chip designs in products due for release in 18 to 24 months’ time.

Twenty-six FTSE 100 firms have raised their dividend every year for the past decade but when it comes to consistent increases in the shareholder pay-out few can match AIM-quoted flooring expert James Halstead, whose interim dividend hike today adds to a streak of consecutive increases that stretches back to the late 1970s.

Today’s forecast beating non-farm payrolls number of 235,000 paves the way for a US Federal Reserve rate hike next Wednesday.

The Investment Association has announced the conclusion of its UK Equity Income sector review.

The FCA has today published its final rules and guidance on the Lifetime ISA.

The DWP has today published its long-awaited Green Paper on the future of defined benefit (DB) pensions in the UK.

Consumer price index (CPI) inflation increases to 1.8% in January, its highest level since June 2014

Gold mining shares are taking on a fresh lustre after larger-than-expected dividend increases from FTSE 100 firm Randgold Resources and FTSE 250 members Centamin and Acacia Mining, which is the best performer in the FTSE All-Share today with a near-7% gain.

On Tuesday 14 February we will see if the weak pound continues to stoke UK inflation, as well as annual results from Rolls-Royce and gold miner Acacia. Russ Mould, investment director at AJ Bell, looks at some of the key points to keep an eye out for in those announcements.

Woodford Investment Management is expected to launch a new income ‘focus’ fund in March.

Ryan Hughes, head of fund selection at AJ Bell comments on the Investment Association’s statistics on UK investor behaviour for 2016.

Central banks take centre stage this week with the Bank of Japan, US Federal Reserve and Bank of England all delivering their latest monetary policy decisions. Russ Mould, investment director at AJ Bell, looks at some of the key points to keep an eye out for in those announcements, as well as the trading updates from SSE and Royal Dutch Shell.

The Government has today announced that £9.2 billion has been withdrawn since the pension freedoms were introduced.