Big moves in Asia, UK housing market setback, Direct Line’s recovery knocked off track, Nintendo and Sony results in focus

“European markets were fairly quiet on Tuesday compared to Asia where there were more pronounced moves up and down,” says Russ Mould, Investment Director at AJ Bell.

“In Japan, the Nikkei advanced 1% thanks to a positive market reaction to various corporate earnings updates including steelmaker JFE which jumped 14.5% to a four-year high. Shares in marine transportation group Kawasaki Kisen Kaisha were also in demand after its better-than-expected results, up 9.3%.

“In China, the SSE Composite fell 1.1%, dragged down by technology, energy and healthcare stocks despite Chinese exports being more resilient than expected, growing 8.5% in April.

“In the UK, the FTSE 100 was flat at 7,771 as strength in consumer cyclicals and financials was offset by weakness in real estate and energy.

“The housing market was in focus after Halifax’s latest house price index showed a decline in prices in April after three months in a row of recovery.

“Estate agent Purplebricks saw its share price crash 57% as the ground continues to crumble beneath its feet. Talks over selling the business indicate an offer might be pitched at a price significantly below the value of the company last week and its cash pile is dwindling fast. The future is looking far from bright for the group.”

Direct Line

“After a miserable 2022 which saw the insurer bombarded with claims caused by extreme weather conditions and a spike in the cost of fixing problems, Direct Line dusted off its crisis management playbook and got to work addressing its issues. A share buyback was paused, the dividend was suspended, the CEO was given the boot and it started to push up prices for insurance policies.

“Sadly, it wasn’t a simple ‘click your finger and everything is fixed’ situation. The adverse claims trend is still intact, which is going to put pressure on earnings in 2023.

“With expectations of high single-digit claims inflation across motor and home policies, Direct Line is no doubt crossing its fingers that we don’t get a hot summer that causes widespread subsidence, nor a brutally cold autumn/winter that freezes up pipes.

“All insurers want a Goldilocks scenario where the weather is not too hot or not too cold, but the impact of climate change would suggest this is a big ask.”

Ninetendo/Sony

“Its diminutive Italian plumber Mario may be smashing cinema box office records across the globe but with the current iteration of the flagship Switch console getting a little long in the tooth, Nintendo is seeing pressure on its revenue and profit.

“At least the drop-off was a little better than the company had forecast and it will hope the success of the movie – effectively a 90-minute advert for the company’s biggest brand – can, along with a rumoured Switch 2, help revive its fortunes.

“No release date for the new console has yet been announced but the markets will be alive to any hints about new hardware.

“Nintendo’s integrated model, with its games pretty much exclusively made to be played on its own consoles, increases the stakes here.

“The larger danger for Nintendo is that people are less willing or able to spend on games given cost-of-living pressures.

“There was little evidence of any drop off in gaming spend in Sony’s latest numbers as it reported a record profit for the twelve months to 31 March. The Playstation 5 is only two years old and its sales are also hitting all-time highs.

“Nintendo’s more family-orientated product may have left it more exposed to tight household budgets, while Sony benefits from a young adult audience which might have more disposable income.”

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