Markets upbeat ahead of Powell speech, water stocks shrug off talk of Thames Water rescue and Revolution Beauty shares resume trading after AGM spat with Boohoo

“Today’s speech by Fed chair Jerome Powell is likely to reinforce the belief that the US central bank will push up rates once again at its July meeting,” says Russ Mould, Investment Director at AJ Bell.

“While there are tentative signs of weakness in the US economy such as softer business investment and falling house prices in some states, it feels as if the Fed is comfortable that lifting rates again won’t topple the economy.

“It’s a calculated bet in the fight against inflation – but at some point, the pain of higher borrowing costs will be too much for many businesses and consumers, so the Fed cannot be gung-ho with its rate decisions.

“Markets don’t appear to be too worried, with a good showing on Wall Street last night including a 1.2% rise in the S&P 500 and a 1.7% advance in the Nasdaq. The FTSE 100 jumped 0.4% to 7,488 on Wednesday morning, helped by strength in telecoms, financials and retail.

“Investors shrugged off drama in the water sector with reports that Thames Water might have to be placed into temporary public ownership. While it is not a listed business, such news would normally cause investors to speculate what might happen to other companies in the sector.

“Shares in United Utilities, Severn Trent and Pennon barely moved, suggesting that investors see Thames Water as a company-specific problem (drowning in debt) rather than the start of broader trouble.”

Boohoo/Revolution Beauty

“There’s nothing beautiful about the spat between Boohoo and Revolution Beauty, in fact it has turned downright ugly. A fashion for retail businesses to take stakes in their peers was always a recipe for friction and Boohoo has certainly been throwing its weight around after taking a hefty stake in the cosmetics business.

“This led to unedifying and somewhat farcical scenes at the company’s AGM where Boohoo was successful in ousting the senior management only for the sole remaining director to bring in two non-executive directors who then reappointed the executives which had been forced out.

“Revolution Beauty’s contention that Boohoo is aiming to take the company over by stealth through a boardroom coup without making an offer for the business may find some sympathy with minority shareholders.

“On the other hand, Revolution Beauty shares have been suspended for a long period thanks to issues with its accounts, so it is not like management have a lot of credit in the bank.

“The return from suspension today is welcome news for investors and the shares have surged higher, although, at 29p, it is a long road back to the issue price of 160p from its 2021 IPO.

“You can see why Boohoo built its stake in Revolution Beauty in the first place. The brand does have strengths and spending on cosmetics is often fairly resilient in difficult economic conditions, while Boohoo offers Revolution Beauty a very useful sales channel.

“For the sake of other shareholders, both parties could do with putting the war of words behind them and working together constructively, whatever concessions this might require on both sides.”

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