Asian stocks rally, Vodafone CEO to leave, and good and bad news for oil and gas stocks

“After several weeks of investors asking, ‘will it, or won’t it?’ about China relaxing its Covid restrictions, the balance of opinion seems to be positive at the start of the new trading week. Asian stocks were off to the races including a 4.5% jump in the Hang Seng index,” said Russ Mould, Investment Director at AJ Bell.

“China easing the rules should pave the way to a reopening of its economy after several years of disruption. Naturally that would bode well for commodities demand and hence why Brent Crude oil prices nudged up 0.6% to $86.07 per barrel on Monday.

“Oil prices had been slipping in general since June amid concerns about a global economic slowdown, yet they seem to have found a floor around the $84 per barrel level, having twice bounced from this level in recent months.

“Many investors holding stocks in the oil and gas sector will have had a fortuitous year thanks to the surge in prices in the first half of 2022, with Brent rising from $78 to a peak of $127. However, it’s not been a one-way ticket to riches as these stocks have seen as many ups and downs as a rollercoaster at Alton Towers.

“Serica Energy has certainly had investors reaching for the sick bag after nearly doubling in value in early 2022, only to lose most of those gains before repeating the cycle again. It’s now testing the true loyalty of its backers with a disappointing drilling update.

“The opposite can be said for Wentworth Resources whose shares rocketed on a takeover approach from project partner M&P.

“The FTSE 100 was flat on Monday as strength among miners was offset by weakness in consumer goods and pharmaceutical stocks. This week’s UK corporate reporting calendar is dominated by smaller companies, although a trading update from Berkeley will shed the latest light on the state of the housing market and Thursday sees an update from British American Tobacco which is not expected to contain any surprises.”

Vodafone

“With the shares languishing at their lowest levels in more than 20 years it is hard to describe departing Vodafone CEO Nick Read’s tenure as anything other than a disappointment.

“Read has faced some exceptional challenges in that time, notably an inflation crisis and a global pandemic, however he has struggled to persuade the market and, ultimately his employers, that he has a strategic plan to help revive Vodafone’s growth.

“It was a damning indictment back in October that activist investor Cevian Capital had apparently begun to give up on hopes of Vodafone ever turning it around as it slashed its stake in the company.

“Read’s final set of results last month did him absolutely no favours, as Vodafone downgraded full-year guidance. Perhaps more worrying was that the response to the pressures the company was facing was simply to cut more costs.

“It felt like an underpowered plan for the challenges in front of Vodafone and in that context the board probably had little option but to dial up a new leader.

“Fresh ideas are needed at Vodafone as the challenges facing the company are significant. It operates in a highly competitive market both in terms of broadband and mobile and has struggled for years to generate meaningful growth.

“What a change at the top means for a potential tie-up with rival network Three remains to be seen, presumably the incoming boss will have his own ideas about how to charge up growth at Vodafone. Chatter about a takeover of TalkTalk to bolster its UK broadband offer may gather pace.

“The good news for whoever takes charge at Vodafone on a permanent basis is the share price is at rock bottom and they probably have licence to take bold steps, but equally patience could be in short supply.”

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