Markets have staged an impressive comeback this week and Redrow is holding up well

“Global markets continue to feel more comfortable about the likely outcome of the US election and so equities press ahead once again. It’s an interesting change of fortunes with investors feeling nervous only a week ago,” says Russ Mould, Investment Director at AJ Bell.

“As it currently stands, the FTSE 100 is on track to end the week nearly 6% ahead and the S&P 500 has already rallied 7% in the first four days of the week.

“The US market last night was particularly strong, with the main indices rising 2% or more.

“On Friday, the FTSE 100 pushed ahead by 0.3% to 5,925, led by financials, miners, energy and real estate. Injecting some fizz into the markets is another wave of takeover activity.

“RSA’s approach from Canada’s Intact and Denmark’s Tryg has excited the market with investors bidding up shares in Aviva, Legal & General and Prudential in the hope that there could be further consolidation in the market.

“RSA’s bid situation also puts the spotlight back on UK equities and the fact many of them are very cheap in the eyes of overseas buyers. The UK finally sorting out a Brexit trade deal could be a trigger for more takeover action as it would remove some of the uncertainty that has depressed the UK market for so long.

“The Wellcome Trust’s bid for Urban & Civic had positive read-across to real estate stocks, making investors sit up and question if there was underappreciated value elsewhere in the sector.

“In Japan, the Nikkei 225 index closed at its highest level since 1991 with materials, utilities and industrials leading the charge at the end of the trading week.”

Redrow

“If you could have told housebuilder Redrow in March that by the autumn its turnover and reservations would be running ahead of the same period from a year earlier, it would have bitten your hand off and even the whole arm.

“In common with its peer group, the company has benefitted from pent-up demand which built during lockdown, aided by the stamp duty holiday introduced by Chancellor Rishi Sunak, and people looking for more space having experienced the restrictions of being stuck indoors.

“While the first two are likely to have a short-term impact – though Redrow and its rivals will be praying that Sunak comes up with more support for the sector in 2021 – the last one could be more of a long-term structural change in the market.

“In this context Redrow points to its premium ‘Heritage Collection’ offer as chiming with potential purchasers looking for extra living space and bigger gardens.

“Undermining the foundations of Redrow’s rebuild job after the pandemic is growing unemployment in the UK – which may be tempered in the short-term by the extension of furlough.

“At least lockdown 2.0 will see the company continue to operate – it will hope that even more stringent measures, with the construction industry forced to down tools as it did in the spring, aren’t coming down the road.

“Investors will not respond positively if anything derails a pledge to resume dividends at the half year stage.”

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