Markets higher after House of Representatives signs off on debt ceiling deal, house prices dip, Dr. Martens’ profit under pressure and Auto Trader squeezes more out of client base

“The FTSE 100 started the day on the front foot as the US debt ceiling deal was approved by the House of Representatives, virtually guaranteeing it will be signed off ahead of the extended 5 June deadline,” says AJ Bell Investment Director Russ Mould.

“This positive driver for stocks may not last as a US Treasury which has been draining its account at the Federal Reserve to keep the government going, thereby injecting significant liquidity into the system, reverses this policy and starts tapping the debt markets to bolster its coffers.

“For now, though, relief that a US default has been averted is dominating market sentiment.

“UK house prices renewed their downward trajectory in May according to the latest figures from Nationwide.

“The recently reported sticky inflation in the UK has increased interest rate expectations and could have a dampening effect on the property market.”

Dr Martens

“Its footwear may be iconic but its time on the stock market has seen little to celebrate for Dr Martens, which tripped up yet again with its latest update and is now at less than 40% of its value when listing in 2021.

“Dr Martens has struggled operationally but also hasn’t done a good job of managing expectations. This is a key part of being a public company, where the aim should always be to under-promise and over-deliver.

“Revenue may have hit a £1 billion milestone, but profit is heading in the wrong direction as the company’s margins are under strain thanks to rising costs.

“Investment in the business also accounts for some of the pressure on the bottom line and the company may reap the benefits of these in the future although previous failures in its supply chain don’t exactly inspire confidence.

“It feels like the brand is strong enough for Dr Martens to stand tall on the stock market and the current management team may come under increasing pressure if they don’t deliver soon.”

Auto Trader

“Despite car listings dropping amid a shortage of new cars, online vehicle marketplace Auto Trader’s profit is still accelerating as it squeezes more out of its client base.

“Auto Trader’s website is the one most visited by prospective car buyers because it has the most listings. Car retailers are therefore compelled to use its products, reinforcing its leading position.

“As well as increasing prices, the company is also upselling customers to subscribe for new products and services.

“Its ability to do so is impressive but you feel there will come a point at which it squeezes clients too much and subscriptions start to drop off. Auto Trader’s job is to work out where that breaking point lies.”

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