FTSE 100 in the red again, Bloomsbury earnings upgrades, Prudential shares swerved despite China reopening boost and Trainline’s recovery held back by rail strikes

“It would be nice to have a sense of calm across the markets following troubles earlier this week but it’s clear that investors remain nervous about what might be lurking in the shadows,” says Russ Mould, Investment Director at AJ Bell.

“Wednesday was initially greeted by gains across much of Asia and Europe but a small recovery in a few of the banking stocks that had been knocked for six over the past week didn’t last long.

“Initial gains from the likes of HSBC, Lloyds and Barclays didn’t hold and the stocks slipped back in the second hour of trading, dragging the FTSE 100 down 1.3%. That suggests there are few people willing to put their neck on the line and load up on cut-price banking shares.

“It’s no wonder that investor sentiment remains cautious towards the big banks given that credit agency Moody’s downgraded its outlook on the US banking system to ‘negative’. Investors keep asking ‘who’s next?’ and until there is more clarity, the sector could remain off limits to many people.

“Instead, it was pharma, healthcare and insurance commanding investors’ attention as they sought stocks with more defensive elements.

“To be fair, a lot of investors will be waiting for the Budget later today before committing any new money to equities or shifting their portfolio. So far it looks like a Budget to get more people working and to stay in employment for longer, both key drivers for the economy.”

Bloomsbury

“Harry Potter publisher Bloomsbury might have its shareholders believing in witchcraft based on its performance over the last three years.

“People rediscovered the joys of reading during the pandemic, so Bloomsbury has benefited thanks to a range of popular titles across different categories. The company has also been boosted by growth in the digital side of the business.

“Unlike other Covid winners though, Bloomsbury has continued to enjoy success as we return to something closer to normality.

“Bloomsbury’s argument, and it’s a fair one, is reading is a very affordable form of escapism from the troubles of everyday life and this provides some reassurance that sales can hold up despite cost-of-living pressures.

“Exposure to a growing stream of income from professional and academic publications and a healthy exposure to children’s books are also significant in this regard as these areas can prove more resilient in a downturn.

“The latest in a series of earnings upgrades sees a not insignificant increase in profit guidance for the year just gone and a diversified portfolio means – unlike in the past when its fortunes were inextricably linked to the Hogwarts saga – there is reason for optimism about the future too.”

Prudential

“Prudential’s results may well have got a better hearing a week ago before the collapse of SVB but right now investors are treating financial stocks with the same suspicion as something they’ve found on their shoe.

“There were positives in the Asia-focused insurer’s numbers, the dividend was boosted and operating profit was up. This is significant as it marked the first full year of its strategy of focusing entirely on Asia and Africa, having sold its US arm.

“The company flagged a benefit from a reopening of the Chinese economy as the country moved on from its zero-Covid policy.

“In the long-term Prudential is expecting to deliver big growth by targeting two markets where the levels of penetration in terms of insurance and financial services are way below those seen in the West.

“In the short-term there are concerns about China both from a political and economic perspective as it continues to clamp down on internal opposition. Questions have been raised about the free movement of money in and out of the country, and because Beijing set an underwhelming growth target for 2023.

“Set against that is the meaningful growth Prudential has seen in the first two months of this year. More of the same could help address any market scepticism.”

Trainline

“Trainline has delivered a big recovery in sales growth, but just imagine what it could have achieved without constant rail strikes. Its ‘I Came by Train’ campaign is all very well if the locomotives are running yet ‘Help, My Train Has Been Cancelled’ feels like a more appropriate contemporary slogan for the masses.

“Herein lies a key problem for Trainline. Strikes on the rail network are out of its control so it’s stuffed if trains are not running. The alternative is to push bus and coach ticket sales.

“Trainline’s business proposition is centred upon convenience for the customer – highlighting the cheapest tickets for each journey and hoping that’s enough to get people to pay the extra booking fee that isn’t applicable when you book through a train operator’s website.

“In one way, disruption to parts of the transport network gives Trainline an opportunity to highlight alternative ways to reach certain destinations. However, most people can’t be bothered with the hassle and simply won’t travel on strike days, so Trainline needs to hope acceptable pay deals are reached in the rail industry soon and it can get back to its long-term growth plan.”

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