Big week for markets, Barclays CEO steps down, and Howden Joinery is still in demand

“It is an incredibly important week ahead for markets and there are numerous macro and political factors which could easily upset investors,” says Russ Mould, Investment Director at AJ Bell.

“The US Federal Reserve is expected to start tapering its bond purchases and the Bank of England could press the button on the first of many interest rate hikes expected over the next 12 months.

“Investors have been given plenty of notice that the Fed will start to ease its monetary stimulus measures, but the market can be easily shocked. The Bank of England might wait another month to push up UK rates, but again it shouldn’t be a surprise to see action before the end of 2021.

“Oil producers’ cartel OPEC+ has its next meeting to determine output rates which could have a major influence over the commodity price. We’ve also got a spat between the UK and France regarding fishing licenses which has created new storm clouds.

“While the backdrop is somewhat fragile, investors don’t seem nervous as the new trading week has kicked off with a bang. Markets across Europe and much of Asia have pressed ahead, including a 2.6% rise in the Nikkei 225 following Japan’s general election result which saw Fumio Kishida declare victory for his ruling Liberal Democratic Party.

“In the UK, the FTSE 100 was up 0.5% to 7,270, with pharmaceuticals and some of the banks leading the index.”

Barclays

“In the market there seems to be some regret at the sudden departure of Barclays CEO Jes Staley.

“While the move was almost inevitable given the latest developments in the regulatory probe into the American’s dealings with disgraced financier Jeffery Epstein, Staley’s tenure since taking over in December 2015 has ultimately proved a successful one.

“Profitability has improved, the balance sheet is stronger and, judged purely in share price terms, Barclays has outperformed its UK counterparts – albeit the shares are still lower. Given Staley’s time in charge took in the seismic Brexit vote and the pandemic though, the slight decline in Barclays’ market valuation is not surprising.

“His decision to face down pressure from activist investor Edward Bramson to spin off Barclays’ investment banking arm has been vindicated in the short term at least by the recent bumper period for this part of industry driven by corporate M&A.

“The retained focus on investment banking notably enabled Barclays to emulate the bumper third quarter results posted by its US counterparts.

“Staley’s commitment to the investment banking side of the business should probably have come as little surprise given the ex-JP Morgan man is steeped in it.

“This is not the first time Staley has faced negative headlines, having received a £642,430 fine over a whistleblowing scandal back in 2016, and ultimately his departure shows how important governance can be, particularly for a high profile company like Barclays which faces the glare of political and regulatory pressure more than many other businesses.

“An internal replacement, head of global markets C.S. Venkatakrishnan or Venkat for short, suggests the bank is prioritising continuity for the time being.”

Howden Joinery

“Lockdowns may be consigned to history (we hope), but the freedom of being allowed out again hasn’t dampened people’s appetite for doing up their home.

“The pandemic shifted the nation’s attention to the state of one’s dwellings, namely if you’re now spending more time at home, it might as well look smart.

“DIY retailers like B&Q have flourished as demand soared for paint, cement and the likes. But bigger projects have also enjoyed a tailwind and Howden Joinery’s latest update would suggest this trend remains in motion.

“New kitchens, bathrooms and garden rooms are all the rage as many households put cash saved up during lockdown to work.

“Howden Joinery has a strong position in the kitchen segment and importantly during a period of rising inflation, it has pricing power where can pass on extra costs to the customer without damaging demand for its products. It also claims to have good stock availability, which is impressive given widespread supply chain problems across multiple industries.

“There was some fear that the end of the stamp duty holiday in England and Northern Ireland would lead to a slowdown in the property market, and have a knock-on effect for companies like Howden whose product sales are often triggered by someone moving to a different home. Yet this does not seem to be happening.

“There are still risks from tradesmen’s availability as the rush to do up one’s home has led to big queues to get experts in to do the work. Having to wait six months to get the work done might put some people off from ordering a new kitchen.

“One must also consider the risks that rising inflation across areas like energy, food and fuel is putting pressure on family finances, and so big-ticket items like new kitchens might have to be put on the backburner.

“Howden acknowledges various risks including tough comparative figures to beat in 2022, but for now it is very much on a roll and that is reflected by its share price having gone up by nearly 50% in the past 12 months.”

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