Markets remain resilient, Devro takeover and property-related stocks hit by profit warning and bearish broker comment

“Investors might not realise it, but we’ve just had an important week in terms of the potential direction of markets going forward. Signs that the Federal Reserve might slow down the pace of interest rate hikes is the first step towards the pivot in strategy desired by so many investors,” says Russ Mould, Investment Director at AJ Bell.

“US markets were closed for Thanksgiving on Thursday, and they are only open for half a day on Friday, suggesting that trading could be quiet across the pond. European markets have held up well over the week, with the Dax and the FTSE 100 both on track for a 1.2% five-day gain.

“Black Friday deals are now in full swing, and retailers will be hoping they can shift some of their excess stock. While this should clear some space in their warehouses, it won’t necessarily be good for their profit margins as consumers are under significant financial pressure and the only way to get them to keep spending is to slash prices to the bone.

“Energy group SSE is set to raise more cash, to the tune of £1.46 billion, by striking a deal to sell a 25% stake in its electricity transmission business. It’s part of a strategic shift towards renewable energy generation and a desire to focus more on wind and hydropower. The deal didn’t move the dial for investors, with the share price barely budging on the news.

“There was a bigger reaction to SCS’ trading update which triggered a 2.6% rise in its share price. Like-for-like orders have picked up in recent weeks, helping to reassure the market that consumers haven’t completely stopped spending on big ticket items like sofas.”

Devro

“A very generous takeover deal has been tabled for sausage skin maker Devro, pitched at a 65% premium to last night’s closing market price. The 316.1p takeover price put the shares back to levels not seen since 2015.

“Devro has been plagued by profit warnings over the years, but it’s had a habit of bouncing back. While its latest half year results showed profits slipping, the company was confident about the full year.”

Property

“The wooden spoon award was handed to LSL Property Services which reported mounting problems in the housing sector and issued a profit warning. It flagged a shift in the market environment, with reduced mortgage activity and new house sales, and more agreed housing sales falling through at the last minute.

“Making matters worse for investors in the broader space was a bearish note on the housebuilders from Berenberg. It has slashed pre-tax profit forecasts for the sector by 40% on average, saying a trough in earnings won’t happen until 2024. This may surprise investors who took the view that so much potential bad news was already factored into the value of housebuilders’ shares.”

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