Asian stocks spooked by potential trade deal delay and M&C Saatchi in a mess

“UK stocks have avoided the sharp falls experienced by Asian markets, the latter pulled down by comments from Donald Trump that a trade agreement between the US and China could wait until after the November 2020 presidential election.

“The FTSE 100 slipped 0.2% to 7,145, meaning the market has really gone nowhere since August. Strength among utility stocks and housebuilders wasn’t enough to compensate for weakness in tobacco, telecoms, pharmaceutical and mining stocks.

“In contrast, Hong Kong’s Hang Seng index fell 1.2% and Japan’s Nikkei 225 dropped 1.1%,” says Russ Mould, Investment Director at AJ Bell.

M&C Saatchi

“It may be a fabled name in UK advertising circles but M&C Saatchi would have a really tough time selling its own update this morning. A mess would be a polite description.

“The backdrop is not helpful, but the agency has largely been the author of its own misfortune, with the completed review into an accounting blunder revealing the problem to be worse than when issues were first identified in August.

“This bad news is compounded by a pretty serious looking profit warning, and the company’s reliance on fourth quarter trading is proving to be an Achilles heel.

“Finance director Mickey Kalifa has only been in post since the end of March this year so at least has some credibility when it comes to fixing the problems.

“The remedies look like things you would expect any decent-sized company to be doing already. Having a proper management structure in the finance function, standardised accounting policies and platforms, and tight control of cash hardly looks like rocket science.

“Longstanding chief executive David Kerslake, a founding director of the company, may take more of the flak given the problems arose under his watch.

“There will be considerable pressure on the company to deliver on its pledge for an improvement in performance in 2020.”

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