Markets upbeat ahead of Bank of England update and Crest Nicholson boosted by housing boom

“It’s a positive day for markets across Europe, with the FTSE 100 up 0.2% to 7,089 and the Euro Stoxx 50 advancing by 0.6%. Key Asian markets also pushed ahead, suggesting that investors are taking a rational view of inflation risks and potential changes to central bank monetary policy,” says AJ Bell Investment Director Russ Mould.

“The Bank of England will provide its latest view of inflationary pressures today. It is unlikely to make any drastic changes to its current policy at this stage, but market watchers will be looking for any signs as it when it could start reducing quantitative easing and raise interest rates.

“Mining, industrials and financials were the key sectors catching investors’ attention on the UK market, with Rio Tinto, Ashtead and HSBC among the top movers.

“A decision to ban junk food advertising online and before 9pm on TV from 2023 should in theory be negative for various UK stocks including ITV, Just Eat and Deliveroo but investors in these stocks shrugged off the news, expected to be confirmed by ministers today.

“Advertising is a crucial source of income for ITV and its clients include many companies that sell products that fall under the ‘junk food’ banner, although they will still be allowed to promote their brand before 9pm on TV and online, just not specific junk food products. Just Eat and Deliveroo are also heavy advertisers and they will have to rethink their promotions to get round the rules.

“Elsewhere, GlaxoSmithKline struggled to hang on to the gains it enjoyed yesterday, spurred by an investor day explaining its plans to spin off the consumer business, the details of which helped to make up for negative news of a dividend cut.

“Analysts had already been expecting a reduction to GlaxoSmithKline’s dividend and the cost savings will be funnelled into research and development for new drugs, which ultimately could help drive earnings in the future.”

Crest Nicholson

“The same trends which have benefited Crest Nicholson’s peers in recent months are in evidence in its first half results.

“Not only are state-backed incentives boosting demand but the pandemic-led work from home trend is pushing those purchasers who can afford it to larger, more expensive properties with more space to accommodate home offices.

“These catalysts are boosting volumes and profitability and helping to support the company’s ongoing turnaround strategy, launched by CEO Peter Truscott when he took the helm in September 2019.

“With pandemic disruption out of the way, and the wider market backdrop highly favourable, Truscott has fewer excuses when it comes to delivering on the targeted improvements in margins which have lagged those achieved by its rivals for some time.

“One obstacle to achieving this goal will be rising raw material costs and wage inflation driven by a shortage of quality labour.

“The reinstatement of a first half dividend, while not a surprise, is still another show of confidence in Crest Nicholson’s future prospects.

“Traditionally Crest Nicholson has been focused on the south of England and on high end properties but with other parts of the UK housing market looking buoyant it should come as little surprise that Crest is targeting a move into new geographies.”

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