China stimulus talk lifts Asian markets and FTSE miners, Unilever soars as quarterly sales beat expectations

“After a poor start to the week as investors grew tired of waiting for the next stimulus initiative from China to boost its economy, Asia stocks rallied on Tuesday as investors got some of the news they wanted,” says Danni Hewson, Head of Financial Analysis at AJ Bell.

“Reports suggested Beijing will provide more support, albeit details remain thin on the ground at present. It was enough to lift the Hang Seng by 4% and send investors scrambling to own shares in real estate, basic materials, technology and financial sectors.

“Good news from China always makes its way to the UK market in a flash, with commodity producers riding high including a 4% gain from Anglo American and Rio Tinto. But that wasn’t enough to lift the FTSE 100, which remained stubbornly flat as gains from miners were offset by weakness from utility companies.

“If the hottest June on record can’t get the punters to the seaside and spending money on Brighton Pier, it’s hard to know what kind of sales catalyst the leisure operator needs to do well. Brighton Pier Group issued a profit warning, blaming the cost-of-living crisis for weak trading, along with ongoing cost pressures. A washout July hasn’t helped, leaving investors shaking their heads, wondering why they bothered in the first place as the share price dived by a third on the news.

“Surprisingly, Brighton Pier didn’t get the wooden spoon award. That went to Wandisco whose shares crashed 96% after the suspension on its shares was lifted following a potential fraud and a heavily discounted equity raising.”

Unilever

“Decent headline sales growth across the business and an improvement in operating profit, operating margin and free cash flow helped to drive a 5% spike in Unilever’s share price at the market open. That was one of its strongest sessions on the stock market in a long time, helped by quarterly sales beating estimates.

“But dig deeper and there are several reasons not to get carried away.

“First, group sales growth has come entirely from putting up prices, not shifting more units of products. The sign of a good business is one that can grow prices and volumes. Unilever’s group volumes actually declined in both the first and second quarter periods.

“Second, chief executive Hein Schumacher is still new in the role and it’s easy to get excited when a new leader delivers messages of optimism.

“He talks about bringing greater focus, sharper execution and a simplified operating model. We’ve heard all of this before and the proof of the pudding will be in the execution, not simply sweet-talking investors into thinking a new CEO automatically equates to greater success.”

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