Markets in retreat and Unilever’s major setback

“The party was good while it lasted. Following two days of strong stock market gains, Boris Johnson has now poured cold water over the celebrations and sent the pound and various UK stocks falling on the renewed threat of no-deal Brexit," says Russ Mould, Investment Director at AJ Bell.

“Arguably this isn’t new news as during the election campaign the Prime Minister promised he wouldn’t seek an extension to the post-Brexit transition period which is due to conclude in December 2020. A vote in the Commons this Friday will give clarity on the matter.

“The impact of this news is that many stocks are giving up some of their earlier post-general election gains, including various banks and housebuilders.

“While this has dampened sentiment towards UK equities it is perhaps a reality check with investors doing well to appreciate that Johnson is going to go to any lengths to get Brexit sorted out without further delay. The message is that UK equities are not guaranteed to stay in the fast lane despite recent gains.”

Unilever

“Even a bucket of Domestos couldn’t clean up the stink created by Unilever’s trading update.

“The company revealed that not only is sales growth short of expectations for 2019 as a whole but it will also be behind in the first half of 2020.

“It is easy to see the expectation for next year to have a second-half weighting translate into a further warning if sales do not recover.

“The company blames an economic slowdown in South Asia and tricky trading conditions in West Africa as well as continued challenges in developed markets including North America. The reality is the consumer goods giant has been struggling to deliver organic growth for some time.

“As recently as late November at a big investor day, CEO Alan Jope had emphasised that improving growth rates was a big priority for the group.

“It now appears this will be very much a long-term project as Jope looks to reshape the portfolio of brands through investment, acquisitions and disposals.

“Another challenge for Unilever, and other big consumer goods firms, is weakening brand power amid increasing levels of choice for consumers.

“The company does at least seem able to keep its profit ticking over thanks to tight control of costs and it is notable that earnings, margins and cash flow are not expected to be impacted by the shortfall on sales.”

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