Market appears to welcome Biden's withdrawal, Ryanair issues warning, bid talk for Rentokil, Ocado jumps, Entain appoints new CEO, Hammerson in major disposal and second English wine maker up for sale

“The market appears to have welcomed Joe Biden’s withdrawal from the presidential race, given how futures prices imply a decent opening for Wall Street. However, there is still a lot of uncertainty until the new Democratic candidate is confirmed. That means we could see heightened volatility over the next few weeks, with assets quickly changing direction depending on the latest comments from Washington,” says Dan Coatsworth, Investment Analyst at AJ Bell.

“Vice President Kamala Harris being endorsed by Biden helps to avoid any panic on markets for now, given she provides continuity and experience supporting the current President. That means the focus for markets in the near-term is likely to be investors reassessing any previous trades they made when it looked like Donald Trump would get back into power.

“Many investors will have looked at Trump’s ratings boost in the polls last week and placed trades on assets that could benefit if he returned to the White House. That included cryptocurrency, explaining why bitcoin has now pulled back on the news of Biden stepping down in the presidential election.

“The so-called ‘Trump trade’ assumed a boost for corporate profit but increased pressure on the US fiscal situation and a kicker for inflation if the former president won this year’s election. A victory also implied heightened geopolitical tension given Trump’s track record of being outspoken.

“Kamala Harris looks likely to be the Democratic nominee and while she might score better than Biden in the polls ahead of the election, there is still considerable uncertainty for investors to navigate as the nomination process plays out and election campaigning enters its final stage.”

Airlines: Ryanair, Easyjet, Jet2, Wizz Air, International Consolidated Airlines

“It’s a chaotic time to run an airline as there are so many factors causing turbulence in the sector.

“Cheaper air fares are great for travellers but bad for airlines trying to repair their finances after the pandemic. It puts more pressure on airlines to put bums on seats and fill planes to maximise the revenue potential.

“While travel demand has bounced back since the pandemic, travellers are reluctant to book too far ahead. That’s possibly because they are feeling the pressure of persistent high interest rates or because they are holding out for a bargain.

“Jet2 recently warned of the trend for late booking and how that’s driven the airline industry to lower prices to drive ticket sales. Ryanair has now also warned, saying its average fare between April and June fell by 15% to €41.93. It also didn’t help that a chunk of the Easter weekend fell in Ryanair’s fourth quarter (January to March), so the airline missed out on most of the traditional April bump in prices.

“Compounding the problem has been a resurgence in air traffic control strikes causing delays and cancellations which has a negative impact on Ryanair’s earnings. Delivering the final punch was the global IT meltdown over the past weekend which affected flights around the world.

“The more people read about delays and cancellations, the more likely a chunk of potential last-minute bookers aren’t going to bother. They might think it’s all too much hassle so they just have a holiday at home.

“Ryanair’s shares slumped on a warning that it expects its July to September fares to be materially lower than last summer. That triggered a sell-off elsewhere in the sector, with EasyJet, Jet2, Wizz Air and International Consolidated Airlines all suffering from falling share prices. To make matters worse, there is the prospect of the airline industry potentially taking the rest of the week to recover from the global IT meltdown.

“It’s starting to feel clear that 2024 is not going down in history as a good year for the airline sector.”

Rentokil

“Activist investor Nelson Peltz may have failed with his quest to get a board seat at Disney but efforts to make a buck from pest control group Rentokil look like an easy win. His investment in the group couldn’t have been timed better, if reports prove correct that Rentokil is in the sights of private equity.

“A share price sell-off after a big push on North America backfired left Rentokil a sitting duck. Whereas the group has historically been the one catching prey, the tables have turned with Rentokil now potentially being snatched by a private equity predator. There was no comment from the company in early trading but a 10% bump in the share price might force it to disclose any approaches.

“A takeover of Rentokil would mean Peltz stands to make a sizeable return on his investment, arguably without having to run a normal activist campaign that drives change in how a business is run.”

Entain

“Never mind a new broom, Ladbrokes-owner Entain was in such a mess that it needed someone armed with a mop and bucket. The market has given a tentative thumbs up to the appointment of Gavin Isaacs as new CEO and he will start the clean-up operation in September.

“Isaacs should have some insight into the business given he served on the board of DraftKings which ran the rule over Entain in 2021 before walking away from a bid.”

Hammerson

“The change to listing rules announced by the FCA just a few weeks ago is already showing an impact as retail property investor Hammerson announces it will not need to seek shareholder approval for a major disposal of assets.

“While the deal will allow for a material return of capital to investors and help reduce borrowings, the fact shareholders are not being given a say in a transaction which will have a big strategic impact will likely raise some eyebrows.

“Hammerson will now rely on a recovery in consumer sentiment to help lift valuations for the remainder of its portfolio.”

Ocado

“Online groceries specialist Ocado has largely repaired the damage from Canadian partner Sobeys putting their relationship on pause in June as subsequent progress in Japan and the US suggest all might not be lost with the company’s long-term strategy.

“This is predicated on the company’s Ocado Smart Platform, an out-of-the-box technology and logistics solution for supermarkets looking to build up a web-based offering for customers.

“The orders from US chain Kroger for two of the company’s newest technology solutions show how Ocado can get more out of its existing client relationships, although the company still has plenty to do to rebuild the excitement which drove the shares to all-time highs during the pandemic.”

Mony Group

“The owner of price comparison site Moneysupermarket may have announced a bumper first-half but the market has focused on the decision not to lift full-year guidance as growth in the booming insurance line is expected to slow.

“The company’s services are still in demand as households count their pennies but it is yet to see energy switching come back and revenues are falling in the money and homes services categories.”

Gusbourne

“You wait ages for a bus to appear and then two arrive together. We’ve now got the same concept with English sparkling wine companies on the stock market being put up for sale. Hot on the heels of Chapel Down hoisting the ‘for sale’ flag, Gusbourne has done the same after majority shareholder Lord Ashcroft indicated he wants out.

“A bidder looking to capitalise on opportunities in the UK market could snap up both companies and instantly have a decent position in the industry. Climate change has improved growing conditions for vineyards in the UK and players like Chapel Down have talked about bumper harvests.

“Ultimately, Gusbourne and Chapel Down are small businesses and could do with a larger owner to accelerate growth plans. Selling now, while the narrative is positive, makes sense.”

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