Markets pull back ahead of US and UK rate decisions, Pendragon undergoes radical transformation and S4 Capital warns again

“Last week’s positive sentiment on the markets failed to extend to the new trading week. All the major European indices were in the red on Monday, albeit only by a small margin. The FTSE 100 slipped 0.15% to 7,699, dragged down by utilities and real estate,” says Russ Mould, Investment Director at AJ Bell.

“It’s a big week ahead for central bank interest rate decisions, which can understandably make investors a bit jittery. The Fed reports its decision on Wednesday, with the Bank of England following the next day.

“There are mixed opinions regarding what the Fed will do. Some experts believe it will pause and make no change to US interest rates; others believe a quarter point rise is coming. Despite companies starting to discuss weakness in US consumer spending, the economy is still looking resilient. Therefore, the Fed might wish to continue its rate hike path in the fight against inflation.

“As for the Bank of England, the consensus forecast is a quarter point rise to 5.5%. The big question is whether that would be the final rate hike of the current cycle.

“Mondi saw its shares jump nearly 5% after agreeing to sell its last remaining Russian plant for €775 million, meaning it has finally exited the country.”

Pendragon

“Small cap car retailer Pendragon saw its shares jump 27% after striking a deal that can only be described as a takeover with a twist.

“Rather than being swallowed up completely, Pendragon is selling its UK motor retail and leasing operation to North American player Lithia, together with offloading all debt and pension liabilities. It will be left as a pureplay technology company, owning a car dealer management software platform.

“It’s an interesting move and one that completely changes the investment case.”

S4 Capital

“Advertising agencies are at the mercy of the economy. In bright times, companies are prepared to spend big to promote their products and services. In harder or uncertain times, those budgets are pared back, which means companies like S4 Capital will find it harder to grow fast.

“Martin Sorrell’s digital advertising agency is currently suffering from subdued client activity – its customers are worried about recession so they are cautious about signing off big advertising campaigns.

“This is not a new trend for S4 as it has been moaning about the state of the market for some time. However, the latest downgrade to earnings expectations has caused yet another sell-off in the share price, down a further 20%.

“S4’s shares are now down 69% since their year-to-date peak in February, illustrating how its fortunes are going from bad to worse.”

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