Good start to December for FTSE 100, housebuilders lifted by positive market data, Tesco hit by broker downgrade and Nelson Peltz returns for round two with Disney

“A 0.8% rise in the FTSE 100 will have put investors in a good mood as we move into the final month of 2023,” said Russ Mould, Investment Director at AJ Bell.

“Miners led the charge after Chinese manufacturing data beat expectations, raising hopes that the Asian superpower will require more commodities from the big natural resources companies on the stock market. The Caixin China General Manufacturing PMI index rose to 50.7 in November from 49.5 in October – a figure above 50 implies expansion and a figure below 50 is contraction.

“Tentative signs of a stronger housing market gave a lift to shares in housebuilders including a 1.5% gain for both Persimmon and Taylor Wimpey.

“Nationwide’s house price index recorded the third successive monthly increase, implying some resilience to the UK property market. While the annual change is still in negative territory, the level narrowed from -3.3% in October to -2% in November.

“Hopes that interest rates have peaked might have led more people to see if they can sell their home, while an easing in mortgage rates will have made home loans more affordable to people looking to buy.

“Shares in housebuilders are heavily influenced by sentiment towards the property market and so even the slightest glimmer of hope can lift the sector.

“Tesco was the top faller on the FTSE 100 after JPMorgan cut its target price to 230p from 240p. That knocked the supermarket’s share price by 1.8% to 280.6p and ended a rally in the stock which has been in motion since August. The company has gained market share this year but still faces intense competition.

“LVMH was also the victim of a broker downgrade, with Morgan Stanley moving to ‘equal weight’ from ‘overweight’ and cutting its price target to €790 from €860. There have been cracks in the luxury market in recent months, with signs the sector isn’t completely immune to a consumer spending slowdown.”

Disney

“Nelson Peltz wants squatters’ rights in the House of Mouse but head honcho Bob Iger is not saying ‘Be Our Guest’ and instead is having none of it. Activist investor Peltz continues to push for a seat on the board as he looks for what he thinks is required to help fix Disney’s sorry performance over several years.

“Iger is in no mood to give in, having returned to his former charge when his appointed successor Bob Chapek failed to make the grade in 2022. Initially Iger cast a spell over the share price but the stardust has rapidly faded as he confronts problems with streaming and traditional cable TV while seeking to justify a $60 billion bill for revamping its parks.

“Iger and the rest of the current management team are looking to keep investors sweet, unveiling plans for a 30 cents per share dividend in January and recently intimating plans to increase buybacks and dividends going forward.

“Whether this is the best use of capital for a business which is confronting several big strategic challenges is up for debate.

“Peltz stepped back from a proxy battle in February this year, seemingly sated by Iger’s pledge to cut costs, but it doesn’t feel like either side will back down this time round – particularly in light of the involvement of a disgruntled ex-Disney employee Isaac Perlmutter.

“Given the track record Peltz’s Trian Partners has for achieving change at other targets, Iger and his fellow executives will not be sitting comfortably. Particularly as succession planning around Iger and the extension to his tenure as CEO out until the end of 2026 are thought to be among Peltz’s key bugbears.

“Disney is a company with an enviable cache of content and an almost unrivalled brand in entertainment – clearly Peltz sees value in that or he wouldn’t be pursuing his case so vigorously.”

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