Miners drag FTSE 100 lower amid China concerns, Moody’s warns on US credit rating, AG Barr fizzes higher, ASOS turnaround hit by soggy trading and Card Factory eyes tough Christmas ahead

“The FTSE 100 was a touch lower on Tuesday morning despite US markets breaking their recent losing streak as concerns over China hit the index’s mining contingent,” says AJ Bell Investment Director Russ Mould.

“Investors remain understandably wary about China’s troubled property sector and while Wall Street regained some poise overnight, the threat of a government shutdown is creating nervousness across the Atlantic too.

“Moody’s has warned about a possible downgrade for the credit rating of the world’s largest economy, yet another thing for the markets to fret about. And the message of higher rates for longer doesn’t seem to be going away.”

AG Barr

“Irn-Bru maker AG Barr had some fizz about it as it confirmed full year guidance after a strong first half. Given the wet weather and the impact this could have had on demand, this is a highly creditable outcome and suggests the company’s portfolio of products retains strong appeal.

“The affordable luxury of a soft drink is the kind of purchase people are less likely to put off even if they’re feeling the squeeze and, if they like the brand, they’re unlikely to be discouraged by a few pence being added to the purchase price.”

ASOS

“When you are trying to claw your way out of a hole, as online fast fashion retailer ASOS is, the helping hand of favourable trading conditions can make all the difference.

“Unfortunately for the company it faces the exact opposite – making its hopes of achieving positive free cash flow, a must for the long-term sustainability of the business, look very distant at this point. The best you can say is the company has a bit of breathing space thanks to its fundraise and refinancing in May.

“Wet weather deterred people from making the impulse purchases of summer clothing ASOS needed them to make and this merely exacerbated a situation where its customer base has less disposable income to expend on items they may only wear a handful of times.

“In terms of what the company itself can control it is doing a reasonable job – reducing inventory by more than expected, albeit through heavy promotional activity, and keeping a tight rein on costs.

“The danger for ASOS is it is just no longer as relevant in a world where people can buy clothes in stores again and where the tide has turned away from the whole fast fashion concept. And by failing to fix the roof while the sun was shining bright for it during the pandemic the business is left really exposed.”

Card Factory

“Given the shares have more than doubled over the last 12 months, it’s perhaps no surprise to see investors taking stock after Card Factory’s first half results.

“The numbers themselves are impressive and show there is still a place for keenly priced greetings cards and gifts in the market, with the retrenchment of troubled rival Clintons Cards doing no harm at all to the company’s competitive position.

“A warning that tough Christmas conditions are in the post is the likely reason for today’s round of profit taking, even if the company sounds confident about navigating these challenges.

“To give the company its due credit it is also executing well on its growth strategy, moving into new markets and extending its reach through partnerships with other retailers and boosting its online footprint.”

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