Interactive Investor

Must read: UK election, NatWest, Aviva, National Grid, Wizz Air

Our head of investment rounds up the morning's big news.

23rd May 2024 08:41

by Victoria Scholar from interactive investor

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Aviva lge 600

    EUROPEAN MARKETS

    Election fever takes centre stage in the UK amid a mixed market open across Europe. The DAX and the CAC have managed to eke out modest gains while the FTSE 100 is hovering just below the flatline.

    The pound is trading flat against the US dollar after hitting two-month highs yesterday amid expectations the Bank of England could take longer to cut interest rates after inflation data came in hotter than expected.

    The news of a snap general election in the UK this summer has prompted a Reuters report suggesting NatWest Group (LSE:NWG)’s sale of shares to the general public could be scrapped, sending shares in the lender lower.

    Elsewhere in the UK, National Grid (LSE:NG.) has plunged to the bottom of the index after announcing plans for a £7 billion capital raise, wiping out all of its year-to-date gains, landing the stock in the red now so far this year.

    Other utilities, United Utilities Group Class A (LSE:UU.) and Severn Trent (LSE:SVT) are also under pressure. At the other end, Unilever (LSE:ULVR) is among the top gainers after JP Morgan upgraded the stock to overweight from underweight, sharply increasing its target price to 60 euros from 41 euros. 

    WIZZ AIR 

    Wizz Air Holdings (LSE:WIZZ) reported annual net profit of 365.9 million euros, swinging from a loss of 535 million euros year-on-year. It also expects higher earnings this year, with net income likely to come in between 500 million euros and 600 million euros. 

    As with the other low cost carriers, Wizz Air is benefitting from ongoing strong customer spending particularly over the upcoming summer season which is likely to be a blockbuster period for travel demand. Despite pressures from the cost-of-living crisis, individuals and families continue to prioritise their summer holiday spend, even if it comes at the expense of other discretionary spending such as on white goods or in restaurants and bars. That has helped the airline navigate pressures from the Middle East conflict and jet fuel price uncertainty. 

    Last year, the company was forced to cut its annual profit forecast in November because of potential problems relating to its Pratt & Whitney engines. The company described it as an ‘unprecedented operational challenge’. 

    The challenge for Wizz Air and other low cost carriers is translating strong travel demand into an improved share price performance. Investors have been cautious towards the sector this year amid the geopolitical instability and ongoing cost of living pressures. But shares are enjoying a nice boost today, up almost 6%, helping to reverse some of this year’s year-to-date losses.

    AVIVA 

    Aviva (LSE:AV.) reported a 16% increase in general insurance (GI) gross written premiums to £2.7 billion while retirement sales also rose by 13%. It has kept its guidance unchanged to achieve operating profit of £2 billion by 2026. CEO Amanda Blanc described the results as ‘excellent’ and said Aviva is ‘in great health’, ‘financially strong’ and ‘trading well’. 

    Aviva enjoyed particular strength in GI in the UK where premiums were up 19% to £1.7 billion, with 27% growth in personal lines. GI premiums in Canada were also strong up 11% to £0.9 billion. Aviva announced last year it is planning to expand its wealth business to reach more than £250 billion in assets over the next five years representing annual growth of over 10%. 

    Shares in Aviva have performed well so far this year gaining around 15% and they are up 17% over the past 12 months. Aviva is an attractive stock to income investors with its strong dividend yield of around 6.7%, plus it is in the midst of a share buyback programme announced in March.

    These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

    Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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