FTSE gains limited by weak BP update, Indivior shares at three-year low on profit warning, PageGroup hit by deteriorating jobs market and Vistry sees cost pressures ease

“The FTSE 100 ticked higher on Tuesday despite a weak update from index heavyweight BP acting as a drag on the market,” says AJ Bell Investment Director Russ Mould.

“Later today, Federal Reserve chair Jerome Powell is due to testify before the US Senate with investors alive for clues on plans for monetary policy. Recent data points have implied some weakening in economic conditions across the Atlantic.”

BP

“A teaser ahead of second-quarter results later this month from BP suggests they won’t be a winner.

“The major issue is a big hit to refining margins, reflecting both market dynamics but also operational issues for the company. These factors also underpin guided impairments of $1 billion to $2 billion for the quarter. The broad range left the market with some uncertainty over how the second-quarter numbers will land.

“There are suggestions CEO Murray Auchincloss, who recently saw his stint as caretaker boss made permanent, will look to take costs out of the business and moderate net zero ambitions in order to prioritise boosting returns to help close the valuation gap on US rivals.

“However, alongside any major strategic shifts, BP needs to demonstrate competence in the day-to-day running of the business and today’s update doesn’t help in that sense.”

Indivior

“Just days after shifting its main stock market listing to the US, a major warning from Indivior has wiped more than a third off its market value. So much for heading across the Atlantic in search of a higher valuation.

“Weaker than expected sales of its opioid addiction treatment Sublocade, a decision to discontinue its Perseris schizophrenia medicine and settling a legal matter have created a tornado effect that has knocked profit expectations off track.

“While the share price reaction implies serious problems, Indivior is no stranger to setbacks since being spun out of Reckitt 10 years ago.

“There have already been settlements linked to criminal and civil investigations in recent years which have caused turbulence to the business and its share price. Investors with a nervous disposition will have jumped ship a long time ago and it’s the thicker-skinned individuals who’ve held on as they can see the longer-term prize.

“A growing opioid addiction problem in the US means there is still a big opportunity for the group, assuming it isn’t derailed by rivals taking market share. Indivior also has its eyes on treating alcohol and cannabis misuse, leaning on its skills to diversify the group revenue base.

“The latter is particularly important given it is pulling Perseris from the market, saying the schizophrenia treatment is no longer financially viable. Perseris had previously been expected to achieve sales of $200 million to $300 million at its peak, so removing that product from the equation is meaningful.”

Pagegroup

“What may alarm investors in recruiter PageGroup after the company’s profit warning is the evidence of an acceleration in the extent to which trading conditions are deteriorating.

“Look at the numbers and it’s clear the company had a horrible June. The company blames geopolitical and macroeconomic uncertainty and this has wider significance given the importance of labour market conditions to central bank decision-making.

“If the jobs market continues to cool and wage inflation eases then the likes of the Federal Reserve and Bank of England may feel they have more room to cut interest rates.

“Recruitment firms are always tied to wider economic conditions to some extent but this seems particularly to be the case for PageGroup and suggests a shift in market positioning might be required if the business is going to make itself more resilient in the future.”

Vistry

“Vistry has successfully shifted strategy of late to focus on regeneration projects and affordable housing, helping it to outperform its rivals, but it notes in today’s update that the wider property market remains fragile. A notable bright spot was an easing of cost inflation.

“Unsurprisingly, the company welcomes the move by new chancellor Rachel Reeves to reintroduce housebuilding targets and reform planning policy, something which could give the wider industry a big kicker.

“That tailwind and an easing of interest rates are what’s required if the wider sector is going to enjoy a concerted recovery.”

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