European markets shrug off French political strife, bitcoin hits $100,000, Frasers warns, Vodafone merger approved, Shell strikes North Sea venture, Future soars and Warpaint and Card Factory go shopping

“The French political crisis failed to knock European indices off course, with the CAC 40 up 0.6% and the FTSE 100 holding firm. That might be the calm before the storm if the pressure grows on president Emmanuel Macron to resign and there is a full breakdown of the current regime,” says Dan Coatsworth, Investment Analyst at AJ Bell.

“Financials led the way on the UK stock market with Admiral and Barclays at the top of the FTSE leaderboard. Admiral was given a boost by positive broker comment as Deutsche Bank moved its stock rating to ‘buy’ from ‘hold’.

“Bitcoin smashed through $100,000 as the Trump Trade powered on with force. The incoming Trump administration is expected to be pro-crypto and that’s sent bitcoin fans into a frenzy*.”

*Further analysis of how bitcoin hit $100,000 can be found here.

Frasers

“Rachel Reeves won’t be getting a Christmas card from Mike Ashley given how her Budget decisions have caused Frasers to downgrade profit forecasts.

“When consumers read headlines about companies potentially putting up prices or cutting jobs to offset Budget-related cost increases, it’s no wonder that sentiment has weakened. People might be worried about their own job or think the cost of living is going up again, so the natural reaction is to curb spending.

“Life isn’t going to grind to a halt for Frasers but it will have to work harder to shift goods. Even though it is an international business, the largest source of its earnings is the UK.

“Budget-related risks aside, the company continues to reap the benefits of its strategy to go more upmarket. It is enjoying rapid profit growth from premium lifestyle interests as a sharp focus on cost efficiencies is helping to offset ongoing challenges in the luxury market. Investment in its warehousing is paying off, with automation benefits now feeding through.

“A push into the buy now, pay later market is also yielding benefits as more people use its finance service, augmented by two external partnerships with THG and Hornby.

“Retail is a cyclical industry and headwinds are front and centre at present. It’s frustrating for Frasers but nothing it hasn’t had to overcome before. Frasers rivals Ryanair in terms of creativity for either cutting costs or squeezing more money out of the consumer, and no doubt Mike Ashley will be on the phone to Frasers’ chief executive Michael Murray with his latest ideas to get the company back on top.”

Vodafone / Three Merger

“Long-suffering shareholders in Vodafone will hope that the green light for its merger with Three is the launchpad for the business to finally show some dynamism after years of stasis.

“The deal comes with strings attached. These include the need to invest heavily in the UK’s 5G network and cap tariffs for three years. The regulator will be looking over their shoulder, like a teacher looming over an errant pupil, to ensure these terms are met.

“Vodafone is promising the investment will be funded internally and that customers won’t see extra costs but that kind of promise is easier to make than it is to deliver. If nothing else, there will be relief on the part of investors that the deal has been concluded and everyone can move on.

“Vodafone has a long list of other issues to address, including weak performance in the German market, where it has been affected by regulatory changes.

“With the Three deal concluded, patience for any future messages of Vodafone being in transition is likely to run thin. The company must now deliver.”

Shell / Equinor

“The big oil companies have been managing their gradual exit from the UK North Sea for years – the substantial discoveries having already been made and production in decline.

“Shell’s tie-up of its remaining North Sea assets with those of Norway’s Equinor should be seen in this context, but there will be modest hopes it could breathe some life into an industry in the doldrums. The 50-50 joint venture will be based in Aberdeen and could be a boon for the UK’s energy capital.

“Exploration licences are included within the deal, although given the government’s stance on new drilling how relevant these will be remains to be seen.

“For all the warm words about playing a key role in the UK energy system it could be little more than a corporate tidying-up exercise for Shell and Equinor. Both companies are awaiting the outcome of a court case on two of the fields encompassed within the deal which could see development halted.

“This kind of transaction is likely to be fraught with complications so it’s little surprise that completion isn’t expected until the end of next year.”

Future

“Future’s full-year results don’t exactly paint a picture of a business in rude health. Profits are down by a quarter, the chief executive is leaving, and there is no growth in the dividend. One could argue the first two factors are old news and the dividend is irrelevant given Future has never been an income stock.

“What really matters is the direction of travel strategically and two announcements which have acted like fairy dust for the share price – partnering with ChatGPT owner Open AI and launching a new share buyback programme.

“Future’s business model is based upon creating engaging content that leads to the reader making a purchase, with the media group taking a commission on any transactions that have originated from clicking links in its articles. Given the fragile backdrop for consumer spending, Future needs to work hard on new initiatives to keep driving clicks.

“While the shares have motored on today’s news, they still remain significantly down on Future’s halcyon days before interest rates shot up. It’s a long way to get back to previous peaks and the journey is unlikely to be a smooth one.”

Takeovers

“After months of UK-listed companies receiving takeover bids, it’s refreshing to see two companies sitting on the other side of the table. Warpaint and Card Factory have both announced acquisitions to support their growth plans.

“Admittedly, Warpaint is buying another UK-listed company, Brand Architekts, but this company was so far under the radar of the general investment community that very few people will lament its absence from the stock market. However, it’s a strategically important deal for Warpaint as it provides a low-risk way of boosting its health, beauty and personal card brand portfolio. Paying double last night’s closing price shows that Warpaint is serious about wanting to own this business and the target’s shareholders may not think too much before agreeing to such an offer.

“Card Factory has secured its ticket into the US gift market through the $25 million acquisition of Garven. It’s the next step in Card Factory’s efforts to diversify its income stream beyond the sale of cheap greetings cards. Its UK stores have slowly given more shelf space to items like balloons and teddy bears, and now there is an opportunity to learn more about this market from an established US player. It will also open doors to potential design and buying synergies across the group.

“Meanwhile, WPP had a minor setback after Ipsos said it wouldn’t make an offer to buy Kantar Media following news three days ago that it was in talks about a potential acquisition. WPP founded the TV ratings data business but sold a 60% stake in parent group Kantar to Bain Capital in 2019. While that means the remaining stake is only an investment for WPP and doesn’t represent an operating subsidiary, 40% of a potential €1 billion sale would have been a nice early Christmas present for UK media group.”

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