FTSE 100 up on hopes for progress in Russia-Ukraine talks, AG Barr now ahead of pre-Covid earnings and Bellway lifts house price guidance

“Having tripped over on Monday afternoon amid concern about China lockdowns and the conflict in Ukraine the FTSE 100 sprang back to its feet on Tuesday on hopes the latest round of peace talks between Moscow and Kyiv might yield tangible progress,” says AJ Bell Investment Director Russ Mould.

“Suggestions the Russian side are softening some of their previous demands raised spirits, but the market is unlikely to take anything for granted when it comes to the machinations of Vladimir Putin.

“The resilience of global stocks given the cocktail of risks facing the global economy is truly impressive but this stoicism is likely to face continuing tests as the impact of mounting prices and the actions of central banks continue to feed through, not to mention the ongoing geopolitical concerns.

“The FTSE 100 has proved to be better placed than most thanks to relatively cheap valuations, strong income credentials and exposure to surging commodity markets, however it is not immune to the current pressures.

“The next big economic announcement to watch is the US jobs release on Friday which may have some impact on expectations around the pace of rate hikes in the world’s largest economy.

“It appears that, in contrast with some other luxury goods firms, posh handbags seller Mulberry doesn’t have a huge number of Russian customers as it lifts guidance thanks to robust sales. The company is putting a strong balance sheet to good use by investing in marketing to boost awareness of the brand globally.

“This is exactly what companies should be doing, namely investing in the business for future growth.”

AG Barr

“Having suffered considerable disruption during the pandemic as restaurants, bars and nightclubs were closed, drinks manufacturer AG Barr has now come out the other side smiling. Full-year sales and profit are now ahead of pre-Covid days, and it is doling out more generous dividends once again.

“While the company is sitting pretty, sustaining this positive momentum won’t be easy. There are considerable uncertainties about the strength of consumer spending once we move into April and energy prices shoot up. Inflationary pressures in general are intensifying and consumers will have to make some serious decisions about where they spend money, and where they cut back.

“AG Barr will no doubt be banking on the consumer continuing to find some cash for small treats like its range of fizzy drinks including Irn Bru, as well as people refusing to give up small luxuries such as a night out with friends which is relevant to its Funkin cocktail brand.

“While it couldn’t have foreseen the Ukraine war pushing up the cost of living further, AG Barr last year taking steps to diversify its income might prove to have been a wise move. An investment in plant-based foods group Moma gives it a position in the foods sector and a new avenue through which to explore earnings growth opportunities.

“Decent weather this spring and summer would be a major boost to the company, so too the Queen’s Jubilee bank holiday break which could turn out to be a four-day bumper sales period for all companies in the hospitality sector.”

Bellway

“It’s difficult not to view the UK housing market as the man who fell from a tall building saying ‘so far so good’ on the way down as it continues to defy gravity.

“This is reflected in the latest set of numbers from housebuilder Bellway as it hiked guidance for average selling prices above £300,000.

“Pent-up demand from the pandemic and appetite for larger homes, as more people spend at least part of their working week at home, are apparently still live factors when it comes to property purchases.

“At some point the momentum in house prices will run up against a brick wall of cost-of-living pressures and rising interest rates. The markets certainly seems to think so judging by a Bellway share price which is down more than 20% in 2022.

“This shift in market conditions will represent a direct reversal of the trend over the last decade when the sector benefited from wide availability of cheap mortgages and state support through the Help to Buy scheme.

“What hasn’t gone away are tight supply and demand dynamics and at least the housebuilders have taken the opportunity to fix the roof while the sun is shining.

“Most have strong balance sheets and Bellway is no exception with net cash of nearly £200 million. This may also support the ability to pay dividends to reward investors for their patience during any future market downturn.

“Bellway’s increased investment in land in the last year-and-a-half, often at advantageous prices, is also supporting strong returns and cash generation even against a backdrop of supply shortages and inflationary pressures.”

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