FTSE pushes ahead, oil price still rising, Primark owner sees brighter outlook, Fevertree hit by unfavourable weather

“Telecoms, banks and pharmaceutical stocks helped to put the FTSE 100 at its highest level in a month. The UK blue chip index added another 0.4% to trade at 7,528, coming off the back of a positive session on Wall Street last night,” says Russ Mould, Investment Director at AJ Bell.

“Seventy-six stocks in the FTSE 100 traded higher on Tuesday, suggesting investor confidence is picking up. The main outlier was Smurfit Kappa which slumped 8% after it confirmed plans to merge with US packaging rival, WestRock.

“The market doesn’t seem to think this is a good deal for Smurfit despite the potential economy of scale benefits from parking the two companies together.

“Oil prices continued to edge higher as Brent Crude briefly topped $91 per barrel, putting it at levels not seen since November 2022. Production cuts led by Saudi Arabia and further draws on US inventories have lifted the price.

“A higher oil price is a worry, given how the talk this summer has been about easing inflationary pressures. Higher energy costs could derail that trend and cause new problems for consumers and businesses. However, investors don’t appear to recognise that risk given trends seen on global markets in recent sessions.”

Associated British Foods

“After experiencing two years of growing cost pressures, these negative factors on the business have started to reverse. Think raw material and freight costs which should lead to better gross margins for its Primark retail chain.

“While there have been some hiccups along the way, such as unfavourable weather conditions in several geographic territories which has hurt footfall to its shops, the outlook for Primark continues to be favourable.

“It is rolling out more shops, expanding a click and collect trial to include more products and it is pushing up prices where possible.

“Even the non-retail parts of its business are generally doing well, with the company reporting brighter prospects ahead.”

Fevertree

“Unfavourable weather for much of the summer has made it harder to shift tonic water and other mixers for spirits, judging by comments from Fevertree. Naturally, the market doesn’t like the news, with Fevertree’s share price falling.

“The business can’t seem to get a break. Despite delivering strong growth in the US, gaining market share in the UK and seeing progress in other parts of the world, Fevertree still seems to have as many critics as it does fans.

“Admittedly, profits, margins and cash fell in the first-half period which suggests a business under pressure. Its challenge is to reverse that trend and get everything back on track.”

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