“While signs of a softer economy in the US are typically taken as a positive by markets as they anticipate an end to their trial by interest rate hikes, weak economic data from China is just bad news,” says AJ Bell Investment Director Russ Mould.

“Worse-than-expected Chinese trade data prompted a gloomy start to proceedings on Tuesday as some of the euphoria from rate pauses in the US and UK ebbed away. Helping to sour sentiment was news of Australia’s central bank going against the grain and increasing rates for the first time in five months.”

Persimmon

“Housebuilder Persimmon picked a good day to update on trading as Halifax house price data showed the first price increase in seven months. This helped paint the company’s statement in a positive light as it announced an increase in its build target for the year thanks to improved sales since the start of the October.

“The sector is clearly not out of the woods yet but there are some shards of light creeping through a gloomy outlook.”

Associated British Foods

“Primark is an attractive option when household budgets are tight – particularly in areas like children’s clothing where longevity is less of an issue.

“The chain’s owner, Associated British Foods, has sacrificed some margin to deliver growth but there is strategic sense in keeping a lid on prices to take market share and underscore its value credentials. What helps the business in terms of keeping prices keen is an easing of inflationary pressures.

“Its competitive position is also bolstered by the struggles at many of its rivals which don’t have the same level of balance sheet strength. This should support the brand’s expansion plans in the US and Germany.

“With other parts of the business also doing well – notably the Grocery and Ingredients divisions – the company has the largesse to dole out an impressive special dividend as well as ploughing ahead with a recurring share buyback.

“Associated British Foods can look like an odd collection of businesses but the diversification inherent in its conglomerate structure is serving it well in more uncertain times – none more so than during the pandemic when its stores were shuttered.”

Watches Of Switzerland

“Watches of Switzerland has had to contend with a double blow of bad news this year. First, there was a slowdown in sales growth which troubled the market. Then one of its rivals, Bucherer, was bought by Rolex, causing investors to worry that the luxury watch maker would now have a strong platform from which to sell direct to consumers and therefore make Watches of Switzerland a less important sales channel.

“To make matters worse, bad news started coming out of other parts of the luxury goods market, leading investors to question if the good times were over.

“Watches of Switzerland has now updated the market with the news that despite headwinds, people are still buying posh watches. A new growth plan has also been unveiled, with used watches becoming more important, an intention to speed up opening new showrooms and making acquisitions, and to become a key player in luxury branded jewellery. It hopes this strategic move will more than double sales and profits over the next five years.

“The business is certainly ambitious and having a clear plan about how it will grow should help to soothe investors worried that it was getting left behind. That said, having a plan is one thing, successfully executing on it is another. The company has now set a new benchmark and failure to hit expectations will not go down well.”

Direct Line

“Having royally messed up in 2022, Direct Line certainly seems to be getting its act together. Left with a weak balance sheet after a series of setbacks including persistent cost inflation and a spike in claims, Direct Line had no choice but to readjust its business.

“Asset sales have helped to strengthen its finances, a hike in premiums puts more money into the pot and the launch of a no-frills package in motor insurance means it can better compete against players in the cheap end of the market. The weather also seems to be on Direct Line’s side, avoiding any out of the ordinary events to trigger another rush of claims beyond what it already expected.

“While management should be happy with the repair job in the business, customers and shareholders won’t necessarily share the enthusiasm. The cost of a comprehensive motor insurance policy has gone up a lot while shareholders are currently without a dividend, which is a problem given that the stock’s key attraction historically has been its generous income stream.”

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