Eerie calm in markets despite war in Ukraine, and Travis Perkins could find life harder

“The fairly calm mood in the markets seems at odds with the escalating conflict in the Ukraine as the FTSE 100 ekes out modest gains on Tuesday following progress in Asian markets,” says AJ Bell Investment Director Russ Mould.

“Investors, like almost everyone else, have little insight into what happens next in Ukraine or how Russia might respond to what it perceives as provocations by the West.

“Usually in these situations the uncertainty sparks indiscriminate selling of stocks and shares, however for now the sell-off has been fairly contained.

“Late yesterday Shell followed BP’s lead of cutting its ties to Russia and it’s hard to see what the future is for Russian businesses listed in London which, as investments, look about as radioactive as some of the rhetoric coming out of the Kremlin.

“Gold miner Polymetal’s update on operations and resources reads like absolutely nothing untoward is happening, but the true story is told by a year-to-date share price down more than 70%.

“Gambling outfit Flutter Entertainment, a business you might have expected to be fairly insulated against geopolitical events, is running into its own problems.

“The punter has to win sometimes and Flutter has been hurt by a string of customer-friendly sporting results while investment in US expansion, which in fairness is crucial to future growth, and the costs of adapting to new regulation have tipped the business into a loss.

“Flutter does have exposure to Russia and Ukraine but this is relatively modest at tens of millions of pounds out of total revenue base of more than £6 billion.”

Travis Perkins

“We’re at a big turning point in society which could determine whether Travis Perkins continues its run of good luck or not. Covid and the associated lockdowns made people appreciate their homes more, which drove demand for repairs and improvements. That kept the tills ringing at Travis Perkins as tradesmen queued up for the kit needed to fix homes.

“The backdrop for Travis Perkins is now less favourable. Plenty of people now back at work in the office means there is less focus on how the home looks. There is also pressure on family finances from rising inflation, so homeowners might put off doing those jobs around the house. Travis Perkins has its own problems dealing with higher input, wage and energy costs.

“The business has streamlined during the pandemic, selling its plumbing and heating arm and demerging Wickes. Being lean and mean is the name of the game these days, and a tighter focus has come just at the right time as things could get tougher from here.”

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