FTSE 100 boosted by resource stocks, China provides growth reassurance, JD Sports update troubles the market and PZ Cussons hit by Nigerian currency moves

“A combination of geopolitical tensions in Russia stoking supply fears and pledges of state support for the Chinese economy have helped lift commodities and boosted the resource-heavy FTSE 100 on Tuesday,” says AJ Bell Investment Director Russ Mould.

“The big oil and mining stocks were joined by the banks in helping to lift the index 0.5% in early trading.

“Beijing’s number two, Premier Li Qiang, pointed to higher growth in the second quarter than the first and said the country would bring through policies to boost domestic demand.

“The pace of China’s Covid recovery has disappointed many but probably reflects the different nature of its pandemic experience.

“Households did not benefit from the same levels of support seen in the West and therefore hopes for a wave of ‘revenge spending’ in China were probably always going to be forlorn with an economic rebound likely to be more gradual.

“Aston Martin Lagonda continues to point to acceleration in annual profit to £500 million by 2024/2025 – though whether this would be enough to earn executive chair Lawrence Stroll a knighthood, which he reportedly believes he’s entitled to, is still up in the air. It would certainly earn him the gratitude of long-suffering shareholders in the business.”

JD Sports

“Terms like ‘softening in trade’ and ‘moderation in growth’ in JD Sports’ latest update go to show that even the most successful retail businesses can go through bad patches.

“The trainers and athleisure seller recently got the market excited that it expects to exceed £1 billion in pre-tax profit this financial year, and it is sticking with that guidance despite pockets of weakness in its business.

“We continue to see many trainers from the likes of Nike sell out as soon as they go on sale, creating a buzz about the products which makes consumers want them even more. Many people see trainers as collectibles and they are happy to pay high prices in the belief they could be worth even more in the future.

“Yet if the recession clouds darken over the economy, particularly in North America, then there is a risk that the demand dynamic could change because of affordability factors.”

PZ Cussons

“At this point it might be fair to question exactly what role Nigeria plays for PZ Cussons given it often seems to mar the company’s updates.

“The country is a big contributor, accounting for nearly a third of PZ Cussons’ revenue, but volatility in the currency and sometimes the country itself often seem to be a problem and may prompt questions about whether a sale of this part of the business could aid the long-term stability of the group.

“The latest issues in Nigeria, which relate to the revaluation of the naira, detract from what is otherwise a solid update from PZ Cussons.

“The company is on track for a third year of revenue growth and the price increases it has been able to push through have supported an improvement in margins and speak to the strength of a brand portfolio which includes Carex and Imperial Leather.

“The company seems confident it will be a case of short-term pain, long-term gain in Nigeria as the new government brings through economic reforms. Time will tell.”

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