Must read: GSK, Apple, Moderna, food inflation, Entain, Maersk

GLOBAL MARKETS

European markets are trading lower, taking their cues from weakness on Wall Street in what’s shaping up to be a challenging start to 2024 as risk-off sentiment takes hold.

While the FTSE 100 is in the red, it is nursing shallower losses than the CAC 40 in France and the DAX in Germany. GSK (LSE:GSK) is trading near the top of the FTSE 100 index, rallying over 2% thanks to encouraging broker comment from Jefferies which raised the stock to a 'buy' from 'hold' and increased its target price to 1,900p from 1,550p. Meanwhile, Jefferies downgraded AstraZeneca (LSE:AZN) from a 'buy' to a 'hold', sending shares lower. 

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It was a tough start to the year stateside, with the Nasdaq slumping over 1.6%, its biggest one-day slide since October, while the S&P 500 shed over 0.5%. Bonds also fell on Tuesday with Treasury yields climbing ahead of a busy week for US jobs data due to culminate with the non-farm payrolls report on Friday. 

Apple Inc (NASDAQ:AAPL) shares fell by over 3.5% after Barclays cut the stock to 'underweight' and trimmed its price target, citing concerns about iPhone 15 sales, broader hardware weakness and regulatory headwinds in its services division. Meanwhile, Moderna Inc (NASDAQ:MRNA) surged over 15% thanks to an analyst upgrade from Oppenheimer ahead of its new product launches in the next 12-18 months.

KANTAR FOOD INFLATION 

According to Kantar, UK grocery inflation slowed to an April 2022 low of 6.7% in December versus 9.1% in November - the fastest month-on-month decline on record. 

While inflation is coming down, prices are still rising on average albeit at a slower pace, meaning that customers are still having to spend more to obtain a similar number of items. The cost-of-living crisis has prompted shoppers to trade down to cheaper, unbranded products, a shift which has boosted sales of supermarkets’ own-label lines such as Sainsbury's Taste the Difference. 

Price sensitivity among consumers has improved the fortunes of the German discounters Aldi and Lidl which enjoyed stellar Christmas sales, allowing them to increase their combined market share to 17%. The two supermarkets have intensified price competition in the UK, prompting other supermarkets to offer discounts and promotions and think of innovative ways to drive customer demand such as a renewed focus on their loyalty schemes. 

While Marks & Spencer Group (LSE:MKS) is not included in the Kantar figures, it was a standout stock market winner for 2023, with shares hitting a five-year high, valuing the company at over £5 billion.

ENTAIN 

Entain (LSE:ENT), which owns Coral and Ladbrokes, is rallying this morning after Eminence Capital founder, Ricky Sandler was appointed a non-executive director (NED) of the board. Last summer, Sandler, an activist investor, criticised the then CEO Jette Nygaard-Andersen who then stepped down from the role in December. 

Sander’s appointment could pave the way for a divestment of its state in US betting joint venture BetMGM, something he previously suggested. His role could also help to appease other activist investors who were unsure of Nygaard-Andersen. She was criticised for her handling of the takeover of STS Holdings, Poland’s largest bookmaker, and her leadership has been clouded by a Turkish bribery scandal. Since becoming CEO in 2021, Entain’s share price has struggled, another reason for her departure and the need for new voices on the board to help mastermind a turnaround. Over the past year alone, shares are down over 25%. 

Investors are cheering the appointment of Sandler as NED this morning, encouraged by the change in direction. According to Entain, he will also be involved in appointing another board director.

MAERSK 

Goldman Sachs has raised Maersk to 'neutral' from a 'sell'. The analyst team is anticipating a sharp increase in freight rates which will benefit the Danish shipping giant. This is on the back of the turmoil in the Red Sea which has forced vessels to reroute following the Houthi attacks on container ships which began last month. Goldman Sachs has raised its 2024 EBITDA forecast and now anticipates positive free cash flow this year. 

Over the weekend, Houthi militants supporting Hamas in Gaza attacked a Maersk vessel forcing the company to pause its sailing via the Red Sea.  

Shares in Maersk have surged over 5% today, lifting the stock to a one-month gain of almost 25%, helping to erase part of its decline over the last 12 months. 

There are concerns that the increased shipping costs could be passed onto consumers in terms of higher prices, fuelling a rebound in inflation of goods on shelves as well as supply chain disruptions, shortages and product delays.