Equity markets remain fragile, water stocks rebound on Thames Water cash injection and BT boss resigns

“Last week’s big pullback in global equities has hurt investor sentiment and triggered a ‘wait and see’ approach among many people who have become nervous about deploying more money in the markets until there is more clarity on the next central bank interest rate decisions,” says Russ Mould, Investment Director at AJ Bell.

“It seems likely the Federal Reserve, ECB and Bank of England will continue to raise rates in the fight against inflation. Labour markets are holding up better than expected and plenty of businesses continue to grow profits. However, the more rates go up, the bigger the risk of a hard landing – reaching the point where a lot more consumers and businesses cannot cope with the higher cost of borrowing and we suddenly see a slump in the economy.

“While Asian markets pressed forward in most locations apart from Japan, European markets saw a small pullback, including a 0.1% dip in the FTSE 100. Strength on the UK market from energy and healthcare stocks wasn’t enough to fully offset weakness in miners, real estate and financials.

“News of a £750 million cash injection in Thames Water provided some relief to the broader water utilities sector, with Severn Trent and United Utilities topping the FTSE 100 leaderboard.”

BT

“Philip Jansen had a massive list of problems to fix the second he walked in the door as the new boss of BT in February 2019.

“His decisions were logical: cut more of the fat from the business, sharpen the focus on providing faster broadband to households across the country and find alternatives for non-core operations such as putting the sports broadcasting arm into a joint venture.

“Sadly, Jansen is not going to be remembered for being the person who breathed life back into BT. It’s still the slow, creaking juggernaut today that it was before he joined. Earnings are forecast to go into reverse this financial year and show minimal progress over the following two years.

“Shareholders have suffered big time: more than £10 billion has been wiped off the value of the business under Jansen’s leadership, and BT is now nearly one-quarter owned by a French billionaire who has taken advantage of the weak share price to build a strategic stake.

“To resign a mere four years into running one of Britain’s best-known companies would suggest Jansen has had enough of the challenges that come with BT. There is speculation he had already been offered a CEO job by a US tech firm and that he might want to return to running Worldpay.

“Most CEOs want to grow the company they are leading, but reviving BT has to be one of the least glamourous jobs going. Jansen might feel his skills are better utilised with a more innovative business.”

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