Aviva and Ted Baker

“There is growing chatter that US President Donald Trump and Chinese leader Xi Jinping could meet this month to end the US/China trade war," says Russ Mould, Investment Director at AJ Bell.

“A positive outcome would be a major catalyst for global markets; indeed, stocks are rallying in many parts of the world on Monday following media reports that the two leaders were preparing to meet.

“For example, China’s SSE Composite index jumped 1.1%, Japan’s Nikkei 225 index advanced 1% and the UK’s FTSE 100 index rose 0.3%. The UK market, in particular, was driven by strong gains in construction, mining and insurance stocks.

“It is certainly turning out to be a busy month. On Thursday we’ll get the latest interest rate decision from the European Central Bank. The markets currently want to know if the ECB is going to provide monetary stimulus once again to support economic growth.

“A day later we’ll have US non-farm payrolls and wage growth figures. Investors, economists and the US Federal Reserve will all be watching this like a hawk – or more probably in the Fed’s case like a dove.

“In theory, the stronger the jobs number and the faster the wage growth, the more likely the US central bank would be to reach for its 10th interest rate hike of this cycle (and first of 2019) and keep withdrawing its quantitative easing (QE) scheme at up to $50 billion a month.

“But at its January meeting, Fed chair Jay Powell seemed to put rate rises on hold, saying any future decisions would be data dependent, and even said he could recalibrate the QE withdrawal if the economy slowed,” .

Aviva

“The decision to appoint an insider as the new chief executive of Aviva may disappoint critics hoping for someone fresh to shake up the life insurer.

“While Maurice Tulloch has the advantage of knowing the business inside out, some shareholders may have been looking for an outsider to come in with an open mind on how the business should really be run.

“Tulloch will be immediately under pressure to reduce gearing levels (debt) and that could mean less generous dividend growth or lower share buybacks in the future if there are more pressing demands on cash.

“He will also have to address criticisms about Aviva’s perceived lack of earnings growth. Yet even that may have to take a backseat until the new boss has right-sized the business for the future, with asset sales no doubt on the agenda.

“Aviva has significantly lagged its peers on the stock market meaning Tulloch has his work cut out in terms of pacifying shareholders, getting the business in better shape and carving out a path for the future.”

Five Year Total Returns (share price gains plus dividends)

Aviva 17.2%
Prudential 33.3%
Legal & General 46.6%

Ted Baker

“Quirky British retailer Ted Baker is probably hoping the resignation of founder and chief executive Ray Kelvin in the face of harassment allegations can provide it with a clean break and enable it to move forward. It may not prove that simple.

“For one thing it is not yet clear what lasting damage the episode has done to the Ted Baker brand and, for another, Kelvin himself has been inextricably linked with the development of said brand. Shareholders may legitimately ask what is Ted Baker without him?

“Meanwhile in the background an independent committee continues to look into the allegations and the culture at the group and Kelvin himself still owns a 35% stake in the business.

“If Ted Baker’s recent struggles continue, and it warned on profit just last week, will there be a clamour for Kelvin to return, despite the scandal, and turn things around?

“The news that acting chief executive Lindsay Page and executive chairman David Bernstein will remain in their roles provides a measure of stability, but if no permanent successor to Bernstein were to be appointed until the November 2020 deadline outlined today, or even close to that date, it would rather leave the business in limbo.”

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