Tough month for stocks as October draws to a close, BP misses expectations and Vodafone’s Spanish deal fails to impress

“We’re at the end of a difficult month for equity markets, shaken by conflict in the Middle East and a mixed set of corporate results. The FTSE 100 and Dax indices are on track to end the month down 4%. In the US, the S&P is looking at a 3% decline on the month. Investors will be hoping for an end-of-year rally to help repair portfolios,” says Russ Mould, Investment Director at AJ Bell.

“NatWest has had a shocker of a time with its share price down more than 23% in October. Rat-catcher Rentokil has shown that its business is not as defensive as one might have thought, with its shares down 30% on the month.

“Nonetheless, the last trading day of October showed signs of resilience early in the session. Despite the heavy anchor from BP’s disappointing results, the FTSE 100 managed to stay afloat thanks to renewed strength in the banking sector and investors bidding up consumer-facing companies including various housebuilders and retailers.

“With the double whammy of interest rate decisions from the US and UK still to come this week, investors will be focusing hard on signals about where rates might go in 2024. Rates are likely to stay higher for longer which is good news for savers but bad news for borrowers.”

BP

“BP is a business with lots of moving parts and with significant volatility in its earnings and cash flow – that can lead to wild swings in quarterly profit such as the one we’ve seen today.

“The company’s gas trading division – which has been going great guns for quite some time – has rather appropriately run out of gas.

“So, while quarter-on-quarter profit was up, it more than halved year-on-year and came in markedly below analysts’ forecasts. More reassuringly, operating cash flow was higher year-on-year and, given it is cash which pays the bills and the dividends, this is probably a more relevant measure for a lot of shareholders.

“That doesn’t mean all is well at BP. The shock departure of CEO Bernard Looney for his lack of transparency on past relationships with colleagues leaves the company lacking some direction at a critical juncture where questions about commitment to its net zero strategy are mounting up.

“A big write-down to the value of its US offshore wind portfolio will do nothing to quell the doubters who think it should, much as its US counterparts have done, stick to its knitting of oil and gas and not invest in greener forms of energy with less tried and tested levels of return.

“Whether this is an approach which can be sustained over the long term is open to question. All interim CEO Murray Auchincloss can do is try and keep the ship on course while the wait for a permanent appointment goes on.”

Vodafone

“Once a major force in the telecoms sector, Vodafone has lost its way in recent years and has been forced to review its business. That has led to asset sales and mergers with the intention of having a more streamlined platform from which to try and revive growth.

“The latest piece in the jigsaw puzzle is selling its Spanish business to Zegona. This deal is another tick in the box for the company’s turnaround efforts but the journey is far from complete. Vodafone still needs to simplify its business, having suffered from being in too many markets with too little resource.

“Marks & Spencer may hold the crown for the slowest turnaround in UK plc history, but Vodafone is right behind. The market has shrugged off the Spanish news, with the shares dipping on the announcement. This suggests the telecoms group needs to be more imaginative in reviving its fortunes otherwise its shares might continue to drift.”

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