Markets rally as lockdown restrictions start to ease, and Ashtead is coping well in the crisis

“Markets kicked off the week in a good mood thanks to a plethora of information about how certain countries plan to come out of lockdown and further central bank stimulus,” says Russ Mould, Investment Director at AJ Bell.

“The FTSE 100 jumped by 1.6% to 5,842 with 97 of the 100 stocks in the index going up in value. Insurers led the charge, helped by utilities, banks and miners.

“The pound moved 0.6% higher against the US dollar to $1.2438 after Prime Minister Boris Johnson returned to Downing Street nearly a month after being diagnosed with coronavirus.

“In Asia, the Nikkei jumped 2.7% after the Bank of Japan expanded its stimulus by removing a limit on government bonds and ramping up its purchases of corporate debt. Hong Kong’s Hang Seng index traded 2% higher while Bombay’s BSE Sensex advanced by 2.3%.

“Investors are starting to be more hopeful that the virus has peaked in many parts of the world and so there will be a greater focus on reviving economies.

“The next two weeks should see businesses slowly start to reopen in places like Italy, Belgium and Switzerland, and there is talk that Australia may not be too far off the stage where it can begin to lift restrictions on public movement.

“The journey back to normality is likely to be very long but every small step towards getting people back to work and not stuck indoors should act as a positive catalyst for stock markets.”

Ashtead

“Many companies will envy the kind of reassurance equipment hire business Ashtead has been able to give its stakeholders today. Effectively it has said that even if business drops off a cliff it can remain cash flow positive for the current year.

“And just to make them even greener with envy, business is currently holding up very well in the circumstances – with Ashtead adapting its operations to incorporate social distancing.

“An anticipated 15% drop in revenue for April at its core US rental business is a lot better than many other businesses will have seen in recent weeks.

“There has been plenty for Ashtead to do amid the coronavirus crisis and given the support it provides to the healthcare, telecoms and utilities sectors, to name a few of its end markets, it is unsurprising the firm’s activities have been classified as essential in the US, UK and Canada.

“Ashtead is following the playbook set by many companies in response to the global pandemic with cuts to capital expenditure, M&A activity on hold, hiring freezes in place and its share buyback programme on hold.

“However, it is encouraging to see management keep an eye to the future by keeping staff on. Businesses who are able to do so will be better placed for recovery as they won’t need to recruit and train lots of new hires to cope with increased levels of activity when they come.

“It will be interesting to see what happens with the company’s dividend given it has an exceptional track record of growth. There is no mention of the payout in today’s statement and investors will be watching June’s full year results closely for an update.”

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