FTSE up on Ukraine-Russia peace talks as Shanghai locks down, and Ted Baker fights off takeover interest

“It almost feels like we’ve stepped back in time two years as lockdowns in China once again rock the markets,” says AJ Bell Investment Director Russ Mould.

“The two-day restrictions imposed in Shanghai are evidence that the pandemic is not yet over and inevitably, given the implications for global growth, have put oil prices under pressure.

“It was no surprise to see Asian stocks slump on the move as the region’s dominant economy is once again threatened by the sceptre of Covid-19.

“The FTSE 100 is preferring to focus on renewed peace talks between Russia and Ukraine, amid hopes there can at least be a move towards an end in the fighting.

“A return to the status quo which existed before the invasion seems impossible though and the implications of the conflict are almost certain to be lasting whenever it comes to an end.

“President Biden brought about as much calm to the situation as Will Smith at the Oscars as unscripted remarks hinted at regime change in Moscow over the weekend.

“While these comments have been hastily walked back by officials acutely aware that the ad lib is helpful to Russia, in a sense the damage has already been done.

“Elsewhere, Natwest is finally free of state control after well over a decade as the UK Government reduced its stake below 50%, though any champagne might have to be put on ice given the challenges facing the bank from the cost-of-living crisis and the risks of mounting bad debts.

“At least the company is having a happier Monday than its rival Barclays. The £450 million hit it announced after issuing too many financial instruments makes this a very expensive mistake and one which will both hit the company’s credibility and frustrate shareholders looking forward to a now delayed share buyback.”

Ted Baker

“One of the worst things that can happen to a company in turnaround mode is a takeover offer before the business has had a chance to properly repair earnings.

“Ted Baker has found itself in this situation with two offers from US private equity group Sycamore. Naturally these bids have been rejected.

“The retailer has been through a prolonged difficult period and was just starting to see the first fruits of its recovery strategy. Selling out now would mean letting someone else come in and steal all the credit for the turnaround plan.

“One might argue that a bid at a small premium to the market price before the takeover news first emerged is giving shareholders a sweetener to sell out. However, any shareholder who has suffered this long and not bailed ship already will probably be looking for a much greater takeout price.

“Even at Sycamore’s second offer price of 137.5p, that’s still significantly below the near-£30 levels at which the shares traded in 2015.

“Ted Baker’s fortunes have collapsed in recent years. First came the hugging incident where founder Ray Kelvin was accused of inappropriate behaviour towards staff. Then the company was besieged by a series of profit warnings, a new chief executive who lasted less than a year, and accounting errors where it overstated the value of its inventory.

“It was forced to slash prices to compete in a heavily discounted market, which really hurt profit margins.

“Ted Baker’s latest trading update shows an acceleration in sales growth, improved margins, a small year-end net cash position and encouraging comments from the management. That’s encouraging but the market has yet to be won over by the numbers, so Sycamore must be putting a lot of faith in the company’s turnaround potential.

“There are major headwinds over the coming months for retailers given the inflationary pressures on family finances. Therefore, acquiring Ted Baker now could come with additional challenges beyond those which have already shaken the business for years.”

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