FTSE on fourth day of gains, Moneysupermarket on a roll and Bellway sees fall in demand

“The FTSE 100 was on track for its fourth consecutive day of gains, flirting with the 7,000 level once again as investors bid up shares in multiple sectors including energy, pharmaceuticals and mining,” says Russ Mould, Investment Director at AJ Bell.

“Investors appear to have regained optimism after the U-turn in UK government policy and hopes that the new earnings season that kicked off last week might not be as bad as feared.

“Bank of America beat expectations yesterday with its latest results, while last week we saw better than forecast numbers from UnitedHealth, JPMorgan, Wells Fargo, Taiwan Semiconductor, Louis Vuitton and PepsiCo. Later today we get figures from Johnson & Johnson and Netflix, while numbers are due in the following days from the likes of Tesla, Procter & Gamble, ASML and Danaher.

“As a bellwether for the media sector, advertising group Publicis helped breathe some positivity into the markets by raising its full-year outlook for the second time this year. There had been worries that advertising companies would see a sharp downturn in trading if corporates scaled back promotions for fear that consumers would be less willing or able to buy their products. That had a positive read-across to WPP whose shares jumped 4%.

“Also helping to drive more positive investor sentiment were reports that the Bank of England might delay further sales of government bonds until markets settle down. There had been some concerns that the Bank selling bonds would push down prices and push up yields just at the point when the cost of government borrowing was starting to come back down. After the chaos we’ve seen in recent weeks, markets could really do with some calm.”

Moneysupermarket

“The cost-of-living crisis is putting pressure on households to ensure their finances are ship-shape and that means shopping around for better deals. That’s music to the ears of Moneysupermarket, which is clearly benefiting from the difficult backdrop as individuals seek better rates on credit cards and other financial products.

“It’s not all perfect though, as the energy switching market has effectively shut up shop on a temporary basis, and weaker consumer sentiment has trickled through to weaker demand for travel insurance.

“The net effect still swings in Moneysupermarket’s favour as revenue jumped by a third in the three months to 30 September, a greater rate of growth than the 24% revenue gain recorded in the first nine months of its financial year.

“Newspapers and mainstream news websites are full of stories giving personal finance tips and a large majority will recommend shopping around for better deals. Therefore, one might expect sales momentum to remain strong for Moneysupermarket well into 2023.”

Bellway

“The annual profit announced by Bellway looks impressive but there’s a good chance it won’t enjoy such a prosperous 12 months for quite some time to come.

“For years housebuilders have enjoyed almost perfect conditions. Low mortgage costs ensured there were plenty of potential purchasers, government support helped to stimulate demand and there was an undersupplied market which helped prop up prices.

“In the short-term the pandemic put the property market into deep freeze but coming out the other side it saw significant pent-up demand, further supported by a temporary stamp duty cut and by people wanting to upgrade to a larger living space.

“This was a sugar rush which may now turn to a sugar crash as a surge in interest rates helps shift the calculus for the market. Bellway’s commentary on recent trading shows clear signs of a drop in demand, similar to that evident in a recent update from Barratt Developments.

“In that context Bellway’s guidance for a flat year in terms of sales volumes looks ambitious. Even if it achieves this, margins are likely to suffer as rising input costs are no longer masked by continuing house price inflation.

“Bellway and other housebuilders have already had a horrible year in share price terms, so the question is just how much of this is priced in. The sector may remain out of fashion for as long as mortgage costs are on the rise.”

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