FTSE surges, ASML rebound on US reports, market laps up HSBC buyback, GSK’s shingles woes overshadow results beat and investors race for a date with Match Group

“Commodities came to the rescue, driving strong gains for the FTSE 100 and helping the UK stock market to buck the sell-off that gripped Wall Street yesterday,” says Russ Mould, Investment Director at AJ Bell.

“A 1.2% gain from the FTSE 100 was driven by Shell, BP and Glencore following a bounce in the oil price. Brent Crude jumped 2% to $79.61 per barrel, rebounding after declining for five days straight.

“The index was also propelled by a positive reaction to HSBC’s latest share buyback news and a bounce-back from Diageo after yesterday’s troublesome financial results.

“The common thread with these stocks and the UK market in general is that there is a lot of value on offer. Valuations aren’t expensive, particularly relative to the US market and the tech titans in the Nasdaq. When we get a big sell-off in tech names, investors often rotate to more value-orientated stocks and the UK market is full of them.”

ASML

“The tech sector might have experienced some choppy sessions of late, but sometimes it only takes one small nugget of good news to win over investors. ASML’s shares jumped 7% on reports that the Dutch chip equipment manufacturer will be exempt from new US rules on foreign chip equipment exports.

“The Biden administration is worried that China is still getting its hands on advanced technology that could be deployed by its military, hence talk of a fierce clampdown on foreign kit reaching its shores. Reports suggest the US will exclude certain allies from the export restrictions, including Japan, the Netherlands and South Korea.

“ASML and Tokyo Electron were caught up in chatter earlier in this month about the US getting tougher over technology going to China, so a rebound in both of their share prices on the latest reports is the market breathing a sigh of relief that their business may not face significant disruptions.”

HSBC

“Out with the old, in with the new. It’s time to usher in a new era for HSBC as Noel Quinn delivers his last set of results as chief executive. He leaves on a satisfactory note, with half-year profits staying firm year-on-year.

“While it’s not a ticker tape parade in terms of earnings growth for the latest session, Quinn’s legacy is that he managed to stop the rot in the bank and stabilise the business.

“Asset sales have made the bank leaner and keener and Georges Elhedery’s challenge when he starts in September is to accelerate growth while also finding new ways to trim costs. It’s easier to get the ball rolling when the foundations have already been laid to move the business forward.

“A new $3 billion share buyback programme will keep investors happy and gives Elhedery time to get his feet under the table.”

GSK

“The market can be a fierce judge of a company and often hard to please. Even though GSK’s results beat expectations and full-year guidance was upgraded, the vaccines arm is flagging. Its shingles treatment is the problem child with a poor showing in the US.

“This will put pressure on the business to do better. In its favour is a strong performance for the shingles vaccine outside of the US. Sustaining momentum in stronger territories will be the near-term goal while it tries to boost demand in the US and hopes inventory run-downs aren’t a long-term issue.”

Match Group

“Investors rushed for a date with Tinder-owner Match Group after its quarterly revenue smashed expectations and it announced job cuts. The shares jumped 9% in pre-market trading following its latest results.

“The timing is interesting, given Starboard Value recently became the third activist investor to appear on Match Group’s top 20 shareholder register, alongside Neuberger Berman and Elliott, all hoping to flex their muscles and bring about change.

“An 78% slump in the share price since 2021 implies that something has gone very wrong with the business. Prior to the latest results, investors appeared to have swiped left at Match Group’s progress since the pandemic, but the presence of three activists implies the company is not entirely undatable. It simply needs help to bring out its best qualities.

“Despite owning some of the best-known brands in the dating market, Match Group has been struggling with intense competition. A lack of innovation seems to be a key bugbear and activists are putting pressure on the company to come up with some new ideas to drive up user numbers.

“Fortunately for Match Group, there is a glimmer of hope. Tinder saw a smaller decline in paying users in the second quarter year-on-year versus the previous three-month period. That’s a small but positive step towards Match Group achieving its goal of achieving sustainable growth for Tinder.

“There was also progress with Hinge, which Match Group has set its sights on becoming the second largest dating app globally. Hinge’s direct revenue was up 48% versus the prior year quarter, helped by introducing new features and a big marketing push. It is deploying AI to make suggestions for which pictures a customer should use on their profile from their photo library and will soon start offering AI-enabled suggestions for chatting with other app users

“Ultimately, users will judge the worthiness of a dating app on whether they’re meeting the right people. If success rates are high, it should, in theory, help the app to stand out from the crowd.”

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