Must read: oil price, Vodafone, AG Barr, Cineworld

It's another busy Monday morning for financial markets. Our head of investment explains what's moving and why.

European markets are trading mostly lower with the FTSE 100 just below the flatline buoyed by China-sensitive stocks such as Prudential (LSE:PRU) and Rio Tinto (LSE:RIO). They are trading towards the top of the UK index after China relaxed some of its Covid testing restrictions after two years of strict lockdowns, sending the Hang Seng in Hong Kong sharply higher by more than 4.5% with tech stocks leading the charge.

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OIL

OPEC+ stuck to its current output targets as the cartel waits to make a judgement on the strength of Chinese oil demand before making any changes to its production strategy. Meanwhile, the G7 $60 price cap on Russian seaborne oil came into effect today as the West tries to limit Russia’s ability to finance the war in Ukraine. However, Ukrainian president Volodymyr Zelenskyy condemned the price cap as weak and not low enough.

There are a lot of moving parts in the oil market at the moment with uncertainty around the outlook for Chinese demand as well as global demand with the extent of the economic slowdown yet to be seen. Meanwhile, the cartel is waiting to see whether the new Russian cap goes anyway to impacting market prices. As a result, OPEC+ has made the call to hold steady for now, despite the recent downtrend for prices. Over the last six-months Brent crude has shed nearly 25%. However, given the spike in the first quarter following Russia’s invasion of Ukraine, it is still up by nearly 14% so far this year with Brent and WTI rallying this morning after China eased some of its Covid restrictions.

VODAFONE

Vodafone Group (LSE:VOD) CEO Nick Read will step down at the end of the year, replaced on an interim basis by CFO Margherita Della Valle. Read has been at Vodafone for over 20 years since 2001 and has been chief executive since 2008. He helped to steer the telecoms giant through the challenges of the pandemic, aiding connectivity when individuals and households were forced to stay home during strict lockdowns.

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Just recently, Read announced an ambitious one-billion-euro cost cutting strategy as well as plans to increase prices to offset the pressures from inflation. Despite this, Read said, ‘now is the right moment to hand over to a new leader.’ Under his tenure as CEO, shares in Vodafone are down by nearly 50%. Investors are welcoming the leadership change today with shares trading towards the top of the FTSE 100.

A G BARR

Barr (A G) (LSE:BAG) has announced the acquisition of Boost Drinks for an initial consideration of £20 million, on a debt-free cash free basis, entirely funded from the group’s net cash position. A. G. Barr has a range of drinks already in its portfolio, including Irn-Bru, KA, San Benedetto, Snapple and Strathmore water. Its portfolio is well diversified spanning from healthy juices and bottled water all the way to fizzy drinks and even pre-mixed cocktail cans. Boost Drinks, which will add to its offering, adding to its energy drinks offering alongside its existing Xyber energy drinks brand.

Shares in A. G. Barr have been resilient against the macroeconomic and geopolitical uncertainty this year, trading only modestly lower year-to-date.

CINEWORLD

Shares in Cineworld Group (LSE:CINE) are trading higher by more than 6% following a report from Bloomberg on Friday that it held talks about breaking up the chain and selling its Eastern European operations. It is reportedly considering selling its Cinema City and Yes Planet franchises in eastern Europe as well as the Rav-Chen operations in Israel. This follows Cineworld’s announced bankruptcy settlement on 31 October, having filed for Chapter 11 bankruptcy in Texas in September.

Shares in Cineworld have lost almost all of their value over the last year, shedding 90% in London. However investors are cheering the potential spin-off as a way for Cineworld to strengthen its balance sheet, slim down its assets and reduce its debts. The company had a very tough ride during the pandemic when cinemas were forced to shut, Hollywood stopped churning out hits and at-home streaming surged in popularity. Plus Cineworld faced problems of its own with a £700 million damages bill for abandoning its takeover of Cineplex in Canada.