FTSE 100 higher ahead of election week, Boeing brings key manufacturer in-house, Anglo American hit by mine fire, Raspberry Pi targeted by short seller

“The FTSE 100 started July on the front foot, lifted by property, energy and financial stocks,” says AJ Bell Investment Director Russ Mould.

“Elections dominate the agenda this week. Overnight results saw the far-right Rassemblement National (RN) take a significant lead in the first round of French parliamentary elections. However, the lead was somewhat lower than expected and there was something of a relief rally in the euro and French stocks.

“The second-round election run-offs are now anticipated to result in a hung parliament rather than an absolute majority for RN. The big risk exercising the market is higher public spending, which puts pressure on France’s strained public finances.

“UK elections at the end of this week look set to produce a more predictable result, with the market only likely to be disturbed in the short term if polling is a long way off and Labour fail to claim a majority, given the implications this might have for further political instability and uncertainty.

“Boeing’s decision to acquire Spirit AeroSystems and bring it back in-house, having spun it off in 2005, makes sense. The company was at the heart of the manufacturing defects and safety concerns over its 737 Max airliner which have put the Boeing’s share price into a tailspin. This move gives Boeing more control.

“Anglo American shares were under pressure as the company had to suspend production at its Grosvenor steelmaking coal mine in Queensland after an underground fire. Mercifully, no-one was hurt in the incident but, while operational issues in a hazardous activity like mining are not unusual, the early indications are the mine will not be back online for months so this is a serious issue for the group.”

Raspberry PI

“Few people would have predicted the bears would quickly stalk what’s been one of the most successful IPOs in a long time. At first glance, the fact JPMorgan is shorting Raspberry Pi might simply be a strategy to make a quick buck from trading typical share price patterns with new listings. However, the timing of when its short position was revealed might suggest something else is behind its decision.

“IPOs often follow the same pattern in the early days of being on the market. If there is excitement around the story, the shares can often pop in the first few days of being a listed company. Investors get FOMO – fear of missing out – and pile in when they see the price moving higher. It’s then common to see some investors take profits and that pulls the price back down.

“Long-term investors often wait for this pattern to play out before they move in and take a position, signalling the potential start of a slower, but longer, rise in the share price. This trend is clear to see in Raspberry Pi’s share price performance since its IPO.

“What’s odd is the point at which JPMorgan opened its short position. Its short against Raspberry Pi was made on 25 June, which is after the initial pullback happened in the share price. In effect, it is betting against the current up-trend in the stock which implies it might have concerns about the business or its valuation.

“Its IPO prospectus lists numerous risks to the business and its investment case, and these are worth considering when trying to work out why someone might want to short the stock.

“Any disruption to its supply chain could push up costs or restrict component availability – two factors which could lead to customers having to pay more for its kit. It is also heavily reliant on a handful of partners, principally Broadcom as a component supplier and Sony as its biggest manufacturer. Any breakdown with these relationships could be catastrophic for the business.”

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