Markets retreat on political tensions and Virgin Money shares rally

“It’s a very busy day for events influencing the market. The latest Yougov poll suggests the Tories are on course for an election win which has helped to drive sterling higher, up 0.07% against the US dollar to $1.2930. That’s good news for many UK domestic stocks including some of the housebuilders and retailers,” comments Russ Mould, Investment Director at AJ Bell.

“Unfortunately events elsewhere in the world have overshadowed the UK political update and weighed on equities almost across the board.

“Donald Trump signing a law backing the Hong Kong protesters has angered China and could put a spanner in the works for the ongoing trade talks. Making matters worse are reports that North Korea has starting missile testing again, causing investors to become concerned about heightened geopolitical tensions.

“The FTSE 100 fell 0.4% to 7,397 with industrial and mining stocks among the main fallers. In Hong Kong, the Hang Seng index fell 0.2% with industrials and consumer cyclicals the worst performing sectors.

“Many stock markets have been rallying this year, perhaps causing some investors to be overly optimistic. The latest state of affairs in Asia and the US is not going to be welcomed by equity markets and could cause a late wobble among stocks as the year draws to the close. It’s not the early Christmas present investors wanted.”

Virgin Money

“Usually a company would expect raspberries from the market when suspending its dividend so the very positive reaction to today’s full year results from Virgin Money is surprising on the face of it.

“Expectations were pitched fairly low heading into today’s announcement so the company’s solid if unspectacular performance across several metrics has been treated with a sigh of relief.

“While the lack of a dividend is disappointing, given that many people invest in banks purely for income, it may also be prudent given that Virgin Money faced a big last minute surge in PPI claims and it also incurred larger than expected restructuring costs during the period.

“The so-called challenger banks have really struggled to unseat their established counterparts and the current Virgin Money is now a bit of a rag tag collection of banking franchises – encompassing Clydesdale Bank, Yorkshire Bank and Virgin Money – formed as part of the consolidation which followed the wave of new entrants in this sector.

“Having only changed its name at the end of October following the merger between Virgin Money and CYBG, the company will hope these numbers can provide a platform for a brighter future as it continues the integration process.

“But, like the rest of its peer group, it will have to contend with an unhelpful low interest rate environment.”

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