Russia close to debt default but bargain hunters help boost London listed shares

by | Mar 9, 2022

*             Fitch ratings agency downgrades Russia

*             FTSE 100 gains ground as bargain hunters snap up shares

*             Travel stocks among the biggest risers

*             Stagecoach set to drive away with rival bid from DWS

*             Brick maker Ibstock remains resilient in the face of soaring inflation

Susannah Streeter, senior investment and markets analyst Hargreaves Lansdown comments on today’s market moves:

‘’With the sanction screws turning ever tighter, and access to the depths of its war chest out of reach, Russia’s financial system looks in even greater peril. The Fitch ratings agency has warned that the country is close to defaulting on its debts and is expected to miss a raft of bond payments. Russia has now retreated further into junk status, downgraded from B to C, as trade and financial restrictions bite. The country’s deteriorating financial  situation comes as more big consumer names take a short-term hit by suspending business in Russia to protect their long-term reputations. McDonald’s, Coca-Cola, PepsiCo and Starbucks have now climbed into the corporate fortress aimed at isolating Russia, after coming under pressure from consumers with calls for boycotts on some products, if management didn’t change tack.

On the London market there is a spate of bargain hunting going on today, with investors sniffing out stocks which have plunged since the invasion. Airlines, which had suffered some steep losses amid concerns about soaring fuel costs and a knock to traveller confidence, are among the risers with British Airways owner, International Consolidated Airlines Group jumping 7.5% and easyJet up 11%. Rolls Royce, highly dependent on commercial air travel, also rose around 4%. InterContinental Hotels Group and Premier Inn owner Whitbread also gained ground amid some speculation that even if international travel takes a knock, domestic bookings could rebound again if holidaymakers opt to stay closer to home.  Prudential was one of the top risers in early trade after releasing a solid set of numbers. Investors seem enthused about its newly streamlined strategy of offloading its UK and US businesses and doubling down on its focus on Asia and Africa, with the growth potential those regions offer.

Stagecoach has announced it’s received a rival bid from German asset manager DWS,  and looks set to pursue that relationship instead of driving off into the sunset with National Express. News of the £595 million cash bid sent shares hurtling up 37% in early trade to 105p, reflecting the cash offer per share being made for the company, which was the big premium on the previous stock price. The stage had been set for another bidder to jump in given the brakes had already been put on the merger with National Express, as the UK’s Competition and Markets authority had been investigating if the deal would have reduced competition in the industry. Stagecoach had been hit hard by travel restrictions during the pandemic, but clearly DWS sees significant potential ahead with an increase in bus travel an essential part of the big jigsaw to hit climate change targets.

Brick maker Ibstock has chipped away concerns about the effect of highly volatile fuel costs on the business in its annual results, revealing 85% of this year’s  energy requirements have been secured. It also says its pricing structure can remain dynamic in the face of soaring inflation, clearly confident that it will be able to pass on increases to customers when needed. Obviously there will be a limit to the extent of that elastic ability, but the latest results show that brick by brick the company is building back from the pandemic hit. Although pre-tax profits are not yet back at 2019 levels, they snapped back to £65 million for the year compared to a £24 million loss in 2020. Plans to produce the UK’s first net-zero carbon bricks also might have whetted appetite for the stock, with shares rising 5%, given the UK construction industry increasingly under pressure to meet emissions targets.’’

 

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