FTSE 100 grounded for second week in a row, Tesco sells banking, Bellway hopes for return to sales growth in 2025 and Ubisoft boosted by Assassin’s Creed Mirage

“After a barrage of company announcements this week, it’s no wonder that markets have paused for breath on Friday. Investors have had so much to take in from a wealth of big names that they’re exhausted by the all the numbers,” says Russ Mould, Investment Director at AJ Bell.

“European indices were parked in neutral and seemed unlikely to budge until it all starts again next week. A bit more action was seen in Asia where the Nikkei nudged up to a new record high.

“China took the crown for the best performing market across the week, up nearly 6% as a state-backed entity said it would actively buy shares.

“On the FTSE 350, precision engineer Renishaw managed a 17% weekly gain thanks to a brighter outlook. Mid-cap takeovers were a strong theme as we saw Redrow and DS Smith both subject to takeover interest, making them the second and third biggest FTSE 350 risers since Monday.

“Despite all the M&A excitement and a decent showing from parts of Asia and the US, it wasn’t a great week overall for UK shares. The FTSE 100 has gone nowhere for the second week in a row.

“Next week sees the big UK banks kick off their reporting season, led by NatWest on Friday, and that could have major implications for the FTSE 100. NatWest’s numbers will be studied even more closely in light of the government’s plan to sell its near-40% stake in a ‘Tell Sid’-style initiative later this year. Pre-tax income is expected to have advanced to £6 billion in 2023 (from £5.1 billion in 2022) and then recede to £4.8 billion in 2024.”

Tesco

“Tesco’s deal to get Barclays to take over its banking arm is a win-win situation for both parties.

“The supermarket gets a chunk of cash upfront and an annual income from the partner linked to brand licensing, using its channels to grow the proposition and Barclays being part of the Clubcard scheme. Barclays gets to sell its products, albeit under the Tesco name, to a bigger pool of individuals.

“We’re in an era where companies are going back to basics – focusing on what they do best and letting non-core operations either be outsourced or sold.

“For Tesco, the deal with Barclays means it can concentrate on the retail side where fierce competition means being on top of its game at all times. It constantly needs to make the business more efficient, be clever with marketing, and learn from the oodles of data it collects from Clubcard.

“Grocery companies have tried lots of things over the years to apply their brands to different areas beyond food and drink. Cafes, garden centres, mobile phone networks, broadband, the list is endless.

“Supermarkets took the view that if a person chooses them as the place to buy essential items, then they might also want to spend on other areas such as in the utilities space and in more discretionary areas. Some of these initiatives have provided a nice additional income, others haven’t worked out as planned.

“Tesco shifting part of its business to Barclays isn’t a sign of failure, instead it is a recognition that its time is better spent on the bread and butter, not the jam on the side when it comes to banking.”

Bellway

“Like much of the housebuilding sector Bellway has seen its shares bounce back strongly since the autumn on hopes a shift in rate expectations can make mortgages more affordable and revive a moribund housing market.

“That might still be the case but today’s update shows what’s in the immediate rearview mirror is ugly. Sales volumes have collapsed and average sales prices have gone stale, all the while the company continues to battle cost pressures.

“More positively, cost pressures are starting to ease and the company is confident enough to point to a return to sales growth in the July 2025 financial year.

“What may prompt some concern among investors is a drop in the company’s cash position. The one saving grace for the sector during this market downturn has been its constituents’ relatively strong balance sheets but Bellway’s cash buffer has largely been eroded.

“Asking prices are set to drop further, in part due to customer incentives, which demonstrates the company is having to work harder to make sales. However, the guided drop in prices is also linked to a decision to pivot towards social housing.”

Ubisoft

“Ubisoft, the French gaming outfit behind the Assassin’s Creed series, has got investors plugged in after its trading statement.

“The latest Assassin’s Creed game, Mirage, is a big factor behind the company’s robust quarterly performance. Chief executive Yves Guillemot says the company is going to start consistently delivering good games again. Which begs two obvious questions: why didn’t they think of that before and if it was that easy, why weren’t they already?

“The shares have had a torrid time coming out of the pandemic as the boom period which resulted from people being stuck inside with nothing to do very quickly turned to bust as pressures increased on household finances and people had alternative activities to pursue.

“This has been compounded at Ubisoft by delays to key releases and some poorly received titles, and the company reached a nadir with the record loss it reported last year.

“Its latest update offers new hope – as does the upcoming release of Star Wars Outlaws which is obviously tapping into some extremely strong IP.”

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