FTSE 100 bounces back on China hopes, EasyJet still loss-making, Shell buys biogas firm and Boohoo doubles stake in Revolution Beauty

“The FTSE 100 bounced back on Tuesday as the same oil and mining stocks which had driven the index lower yesterday recovered on hopes for an easing of China’s strict zero-Covid policy,” says AJ Bell Investment Director Russ Mould.

“Oil prices were also being lifted by chatter around OPEC production cuts. The widespread protests across China against Covid restrictions seem to have drawn a carrot and stick response from the government. Police have been out in force to prevent further civil disobedience while news the country plans to ramp up booster shots for the elderly hint at a more pragmatic response to the pandemic.

“However, China has largely been reliant on less effective domestic vaccines and rates of vaccination are still a long way behind those in the West, while more successful containment of the virus means there is less natural immunity than in other parts of the world.

“As the shutdown at several car manufacturing sites across China shows, all the disruption is only likely to add to global supply chain woes.

“There is a flood of data coming from the US in the remainder of the week – PMI, core inflation and jobs data are all likely to be closely scrutinised by investors aiming to guess the next moves from the US Federal Reserve.”

Easyjet

“EasyJet is doing everything it can to accelerate its recovery from Covid, but there just isn’t enough momentum to swing the company back to positive earnings. It has now suffered annual losses for three years in a row and investors have had to stomach share price weakness and no dividends for that period.

“While forecasts suggest it will move back into profit during its new financial year (ending 30 September 2023), EasyJet’s post-pandemic journey has had more twists and turns than a rollercoaster at Alton Towers.

“It is trying to put across a positive message: losses are narrowing, it has high levels of cash to provide a buffer if the recovery takes longer than expected, and the holidays business is profitable and growing. In difficult times such as now, consumers will seek value for money and EasyJet believes its proposition ticks the right boxes.

“However, if you exclude peak periods like half-term, Christmas and New Year, the airline is having to work extra hard to fill planes. That suggests ticket prices will have to come down during non-peak periods to entice people to book, which is great for the customer but bad for the airline when you consider that cost pressures are still intense on the aviation industry. If that happens, it’s fair to assume that peak airfares will go even higher to compensate.”

Shell

“Clearly 2022 has been a good year to be a traditional oil and gas company but Shell hasn’t taken its eye off the longer term need to diversify away from fossil fuels.

“Though it is worth noting that while a €1.9 billion deal for Danish biogas firm Nature Energy may sound like a material move, in the context of Shell’s guided capital expenditure of more than $20 billion for 2022 it is small fry.”

Revolution Beauty

“Boohoo revealing it had doubled its stake Revolution Beauty overnight represents an early vote of confidence in City veteran Bob Holt as he takes the helm at the troubled cosmetics outfit.

“Coincidentally, investment trust Chrysalis, which had written down the value of its holding in the firm to zero, announced a few days ago it had managed to sell this position for £5 million in an off-market deal.

“Boohoo apparently still believes in the growth potential of Revolution Beauty and the brand despite the accounting problems and inconsistent trading which have dogged it since joining the market in July 2021.”

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