Five things to know this morning, including stocks, sterling and Saga

Currency markets are grabbing headlines, but there's plenty of action on stock exchanges, with Saga plunging to a new low after results. Our head of investment has the latest news and analysis.

GLOBAL MARKETS 

Following a sell-off on Wall Street with the Dow and the S&P 500 shedding more than 1%, there has been a pick-up overnight in Asia and as well as at the European open with the major bourses kicking off in the green. While the DAX and the CAC are trading sharply higher, the FTSE 100 is staging more tepid gains with Saga (LSE:SAGA)’s disappointing update dragging other companies in the insurance sector like Admiral Group (LSE:ADM) and Legal & General Group (LSE:LGEN) down with it.

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Concerns about the housing market amid rising rate expectations and disorder in the gilt market are weighing on housing related companies like Barratt Developments (LSE:BDEV) and Rightmove (LSE:RMV). Meanwhile, Burberry Group (LSE:BRBY) is near the top of the FTSE 100 after a triumphant star-studded show at London Fashion Week.

POUND STERLING 

The pound is attempting to recover some lost ground after yesterday’s plunge thanks to US dollar profit taking and a sense that Monday’s knee-jerk sell-off was overdone. Although GBPUSD is trading back up around $1.08, the currency pair is still down 20% year-to-date underpinned by strong demand for the greenback, and a lack of international investor confidence in the UK’s economic outlook and its policymakers.

Although the Bank of England’s attempt yesterday afternoon at verbal intervention through its released statement from Governor Andrew Bailey initially failed to breathe life into the pound, this morning sterling’s fortunes appear to be picking up. 

Ten-year gilt yields are on track for their biggest ever monthly increase after the Chancellor’s mini-budget of tax cuts and borrowing sparked a major sell-off in the bond market.

SAGA 

Saga (LSE:SAGA) has sharply downgraded its full-year profit before tax forecast to £20-£30 million, below its previous guidance for £35-50 million but a pick-up from last year’s £24 million loss. The over-50s insurer returned to profitability with first half underlying pre-tax earnings of £14 million versus a loss of £2.8 million in the same period last year. Revenues hit £258 million, rising 65% year-on-year. However, it warned that trading conditions in the UK insurance market continue to be challenging.

While the insurer has managed to restore profitability, considerable headwinds remain with insurance claims inflation, the UK’s broader pricing environment and expectations of a recession which is likely to slow demand. The second half of the year looks extremely challenging for investors in Saga who have had a torrid time holding this stock.

Shares are down over 50% so far this year and down 95% over the last five years. This morning’s major downgrade to its full-year profit outlook is weighing heavily on its share price so far in this session, dragging other stocks in the sector like Admiral down too.

A G BARR 

Barr (A G) (LSE:BAG) reported adjust profit before tax of £25.3 million in the first half, rising from £20.6 million year-on-year. The drinks maker raised its interim dividend by 25%, but warned that increasing costs would impact second-half margins. 

Although A G Barr reported robust profits, there are concerns both on the demand and the supply side as the inflationary environment creates cost pressures for the drinks maker, while the UK’s economic slowdown weighs on consumer demand.

Nonetheless, A G Barr has outperformed the FTSE 100 and the FTSE 250 so far this year, down just 4% year-to-date. But shares have had a rough ride since the peak in 2019 when it began to lose its fizz following a major profit warning before the onset of the pandemic.

CARD FACTORY 

Card Factory (LSE:CARD) achieved first half pre-tax profit of £14.3 million versus a loss of £6.5 million last year while revenues grew by 69.4% to £198 million, sending shares higher. The British retailer kept its expectations for the remainder of full-year 2023 unchanged. 

This is a strong set of earnings lifting Card Factory’s share price thanks to a strong top and bottom line performance. The return to bricks-and-mortar shopping has been a big theme for the retailer post pandemic with a revival of in store shopping more than offsetting a decline in website sales. The greetings card maker will be pinning its hopes on a seasonal boost in the run up to Christmas to offset headwinds from the cost-of-living crisis, which is squeezing household budgets and weighing on demand for consumer discretionary spending across the board.

Pricing remains critical for Card Factory as it looks to compete with the likes of Moonpig Group Ordinary Shares (LSE:MOON) and others for a slice of the available customer wallet. Shares have still struggled amid the market turmoil this year with Card Factory shedding over a fifth of its stock market value.