Market action on Brexit day and lifeline for Aston Martin

Market action on Brexit day

“The pound pushed forward on Friday as the UK finally makes its exit from the European Union. A 0.35% rise to $1.3139 puts the currency almost back to where it was at the start of the year but still some way short of the $1.3335 level seen just after the general election result in December,” says Russ Mould, Investment Director at AJ Bell.

“A stronger pound was positive for the large number of UK domestic companies in the FTSE 250, thereby giving the mid-cap index a 0.5% lift to 21,388. Drinks company Britvic, pub group Marston’s and rail/bus operator Go-Ahead were among the UK-facing businesses in demand.

“In contrast, the FTSE 100 fell 0.3% to 7,362 as companies with big exposure to Asia continued to tumble. Key fallers on Friday included banking groups Standard Chartered and HSBC, posh trench coats seller Burberry and miner Rio Tinto. The tobacco and utilities sectors were also out of favour.

“In Asia, Hong Kong’s Hang Seng index fell 0.4% while Japan’s Nikkei 255 index jumped 1%, the latter movement helping to reverse some of the losses seen on that market this week. Last in the US, the S&P advanced by 0.3% and the Dow Jones closed 0.4% higher.

“Expectations are high for UK stocks to have a strong year in 2020 now there is certainty over who is running the country and how Brexit might play out. While there is a still a big hurdle to clear in the form of agreeing a trade deal by the end of the year, there are plenty of positive signs in economic data to suggest the UK could do quite well over the next 11 months.

“Manufacturing confidence is picking up, business activity is expanding, the labour market is strong, and there is pent-up demand for investment by corporates and investors who have been sitting on the sidelines for some time, waiting for more clarity on all things politics and Brexit.

“Helping the pound on Friday was also the Bank of England’s decision yesterday not to cut interest rates, giving another vote of support to the UK’s economy.

“The big issues to consider near-term are the impact of the coronavirus and developments with trade talks. Both will be watched closely by the markets and could result in volatile share price movements.”

Aston Martin

“Is luxury carmaker Aston Martin finally on to the road to recovery having been refuelled with this latest injection of funds?

“The news that Canadian billionaire Lawrence Stroll will acquire a big stake in the business, which in combination with a rights issue will give the company a £500m lifeline, is a reminder that the Aston Martin brand still has some value.

“Stroll is planning to use the Aston Martin name, with all its James Bond cachet, for his F1 team. This element of the transaction also implies a long-term commitment to the business.

“Having been no stranger to bankruptcy during its 106-year history, the company’s board will have been fully aware of the stakes following a disastrous 2019 which made a mockery of the company’s £4bn valuation at IPO.

“Having secured some breathing space the firm will look to address its problems by limiting production to prioritise demand over supply and support prices, fully launching its SUV model DBX and slashing costs.

“Under the circumstances the departure of chair Penny Hughes was inevitable, with Stroll becoming executive chairman as a condition of his investment. Focus is now likely to fall on CEO Andy Palmer and whether he is the right man to have behind the wheel as Aston Martin looks to find another gear.

“The company itself acknowledges it will not be fully compliant with the UK Corporate Governance Code due to the composition of its board in the wake of today’s developments and it may come under increasing pressure on this issue over time.”

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