“The market’s continuing verdict on the mini-Budget which turned out to be anything but mini couldn’t really have been any more savage as sterling hit an all-time low against the dollar,” says AJ Bell Investment Director Russ Mould.
“The sceptre of parity against the dollar, which felt far off just a week ago, now feels dangerously close.
“Amid talk of an emergency rate rise from the Bank of England, the FTSE 100 tried to rebound on Monday but quickly lost strength.
“When the pound is weak it lifts the relative value of the overseas earnings which dominate the index. More instructive is the performance of the more domestic-facing FTSE 250 which remained under pressure and slipped to its lowest levels since 2020.
“The problem for the new Government is the growth it hopes to engineer through tax cuts is unlikely to come through that quickly while the reduction in the buying power of the pound will effectively import more inflation at a time of already acute inflationary pressures.
“Government borrowing costs are also going through the roof – a key question facing investors in the face of all this is can and will Truss, Kwarteng and co. hold their nerve.
“In a sign of the nervousness pervading the UK market and UK assets, property investor LXI REIT pulled out of a £500 million deal, struck just last week, to buy supermarket property from Sainsbury’s.
“The tenor of the brief announcement hints that shareholders weren’t prepared to stump up the cash to fund the transaction given the current market storm.”
“It can never feel great for the leader of a business when its shares rise on news of their departure, but that is the fate facing Unilever CEO Alan Jope who has said he will retire at the end of 2023.
“It has been a difficult tenure for Jope since taking over in 2019 with the shares roughly at the level they were at when he started.
“There has been a fair amount of volatility in the interim plus criticism of the failed takeover approach for GSK’s consumer health business – now trading as standalone entity Haleon – and the whole strategic direction of the group.
“Jope and the rest of the management team have faced criticism, fair or otherwise, of being too focused on ‘woke’ issues and neglecting the fundamentals of the business.
“The influence of billionaire activist and major shareholder Nelson Peltz is only likely to increase in the wake of this announcement and this could mean more radical action to streamline the group and improve its performance.”
These articles are for information purposes only and are not a personal recommendation or advice.