Lloyds focuses on vulnerable customers, tech stocks slump and energy prices jump again

Lloyds

“Lloyds’ first quarter update reveals a lot about the state of the UK economy. The country has been getting back on its feet, which is reflected by an increase in lending and savings deposits for Lloyds. However, the outlook is less than rosy,” says Russ Mould, Investment Director at AJ Bell.

“It’s serious when a bank talks about proactively contacting customers that could be facing financial troubles to offer help and guidance.

“This is quite a different tone from a company whose key messages were recently focused on expansion into wealth management – i.e. helping the rich to look after their money.

“It’s a reminder that Lloyds’ customer base is broad and that having a caring mentality is the right approach, even if it doesn’t necessarily result in earnings growth.

“Banks cannot alienate a chunk of their customer base simply because they don’t match the target market for future growth. Lloyds’ roots lie in helping people of all types and this inclusive approach is fundamentally correct.

“The bank doesn’t want bad debts on its books, but neither does it want customers to be in trouble, so it is in its own interest and of society to help people manage their finances during this cost of living crisis. Lloyds is in a strong position financially to weather any storm but many of its customers won’t be.”

Tech Stocks

“Once considered incapable of doing anything wrong, tech superstars such as Alphabet are now shocking investors with news that growth can slow, and that they are susceptible to headwinds like any other business.

“It’s put the fear into investors holding these stocks that the current reporting season will contain a mixed bag of news from the sector, hence the big sell-off in the tech-heavy Nasdaq index on Tuesday.

“A key reason why Alphabet’s share price fell was a slowdown in YouTube’s advertising growth quarter-on-quarter. YouTube has recently been one of the big earnings drivers for the group with millions of people now treating it as a priority destination for content.

“Microsoft’s results beat expectations across all the key metrics, but its shares still slipped. Fundamentally a good stock will struggle if a sector is out of favour, whereas bad stocks can thrive if a sector is in favour.

“Apple, Amazon and Meta are next to report their earnings and investors seems to be braced for potential bad news. Apple and Amazon are heavily reliant on consumer spending and the current cost of living crisis has cast a dark cloud over how much money the public has spare to splash on non-essential items. Meta is heavily reliant on advertising spend so if YouTube is seeing weakness, it too might be suffering.

“Also weighing on the Nasdaq was a decline in Tesla where the market fears Elon Musk might have to sell some of his stock to help finance his takeover of Twitter.”

Energy prices surge as Russia turns off the taps

“Energy markets received another jolt as Russia, in an act which feels a bit like cutting off its nose to spite its face, turned off the gas to Poland and Bulgaria. Both countries failed to put roubles in the meter as the Kremlin had demanded.

“This action has put renewed upward pressure on oil and gas prices and offers a reminder that the impact of the path Russia has chosen over the last two months or so will continue to be unpredictable.

“Today’s news will only incentivise others to accelerate their efforts to wean themselves off Russian gas and oil imports.

“Notably power generation specialist Drax commented alongside its latest update that it had been asked by the Government to consider extending the life of its coal-fired plants to help with the process of abandoning any reliance on Russia.”

Other Market News

“A big drop in the euro demonstrates how investors are concerned about the impact of a further surge in energy prices on the Eurozone economy and how the European Central Bank is lagging behind counterparts like the US Federal Reserve and Bank of England in its efforts to get inflation under control.

“Arguably the ECB faces a much more difficult task as it looks to balance the needs of a group of economies with very different dynamics.

“On the UK stock market, higher commodity prices saw miners bounce back from their recent losses and advertising agency WPP also impressed off the back of a decent set of first quarter results and an increase in 2022 guidance.

“Given advertising spend is typically heavily tied to the economy this resilient performance is testament to the changes Mark Read has made since he took over from founder Martin Sorrell in 2018.

“The company continues to refine its focus, announcing plans to consolidate operations in its media buying agency GroupM. A move which is reflective of the approach under Read which has been to simplify a business which previously had a huge number of moving parts.

“Unlike its peer Taylor Wimpey, housebuilder Persimmon did not impress the market with its latest trading statement. Nothing too alarming was revealed but build rates are lagging behind a little and overall, the company seems a little less bullish than Taylor Wimpey.”

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