FTSE 100 higher with US and Asian stocks in recovery mode, Novo Nordisk hit by supply issues and competition, Glencore sticks with coal, Legal & General lifts dividend and WPP cuts guidance

“The FTSE 100 took succour from a continued recovery in Asian and US stocks overnight to trade appreciably higher on Wednesday morning,” says AJ Bell Investment Director Russ Mould.

“Although with warnings that the unwinding of carry trades – seeing people borrow at low cost in one currency to achieve higher returns from investments in another – are still to fully play out, there remains an air of tension around financial markets.

“Helping to provide at least a measure of calm was the Bank of Japan. Deputy governor Shinichi Uchida signalled there was no plan to increase interest rates further ‘for the time being’ after the yen surged on the second Japanese rate hike in 17 years last week.

“The latest house price data from Halifax for July suggests the property market was already starting to sputter into life before the Bank of England applied the jump leads with an interest rate cut last week. This helped to give housebuilders a lift and they will be hoping for evidence of further momentum in the market, driven by improved mortgage affordability, when the numbers for August drop.”

Novo Nordisk

“Second-quarter results from the maker of diabetes and obesity drugs Ozempic and Wegovy, Novo Nordisk, showed some of the challenges the big winner to date in the burgeoning weight loss market is facing.

“Profit and sales came in below forecasts and there were mixed changes to guidance, with the sales outlook modestly improved but profit somewhat light of expectations.

“Any market with this kind of potential is likely to attract competition, although the only other heavyweight player on the field for now is Eli Lilly. It will take time for other rivals to catch up given the development timeframes associated with new drugs.

“Another problem, which in a sense is a nice problem to have, is that unprecedented levels of demand are creating significant supply issues. Novo is trying to scale up manufacturing capacity, including through the acquisition of manufacturing sites, but it simply cannot afford to compromise on safety standards in its push to ramp up production.”

Glencore

“The volatility in mining outfit and commodities trader Glencore’s results is to be expected given its exposure to inherently unpredictable metal and energy prices, but the company’s decision to retain its coal assets is one that may raise eyebrows.

“The company and a large number of its investors, given this move has followed significant consultation with its shareholder base, clearly still see a place for coal in its portfolio of assets. The retention is being sold on the basis it will enhance cash generation and allow the business to invest in its energy transition assets.

“However, whether this will pass muster with institutions which place a strong emphasis on ESG factors and with companies in transition industries looking to secure supply of necessary metals is an open question.”

Legal & General

“There may not have been too much to get investors excited in the financial results themselves, with new chief executive António Simões only recently setting out a growth strategy which will take time to bear fruit. However Legal & General continues to deliver on a key metric which matters for shareholders – dividends.

“The increase in the payout will be well received and there will be an expectation that the company will continue to return capital to shareholders as it looks to deliver on its profit goals.”

WPP

“Advertisers are seen as good bellwethers for the economy because companies will increase spending on ads when they are feeling positive and scale back during tougher times.

“Advertising agency WPP has significant scale, breadth and geographic reach, therefore its decision to downgrade forecasts for the remainder of the year should have wider resonance beyond direct followers of the stock. Like a number of businesses in the West, the company is facing difficulties in China but also sees an uncertain picture elsewhere – notably in the tech sector.

“Part of the strategy under current CEO Mark Read has been around simplifying the business and in this context the sale of FGS Global to its minority shareholder KKR makes sense. The proceeds can be used to pay down debt and will allow the company to focus on its strengths in creative advertising.”

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