Must read: UK leadership race, China GDP, Pearson, Frasers Group

The pound is attempting to make gains as the Conservative leadership race takes centre stage with Rishi Sunak in pole position to become the next UK prime minister.

GLOBAL MARKETS

European markets have opened higher with the FTSE 100 lagging behind, trading just above the flatline. The pound is attempting to make gains as the Tory leadership race takes centre stage with Rishi Sunak in pole position to become the next prime minister after Boris Johnson abandoned his bid.

Overnight in Asia, the Hang Seng fell sharply with the Hang Seng Tech Index sliding 9% after Xi Jinping unveiled his new leadership team, raising concerns about fresh regulation on China’s tech giants. Meanwhile, China’s GDP grew by 3.9% year-on-year ahead of analysts’ estimates but below its own full-year target of 5.5%.

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US futures are trading higher after the major averages logged their best week since June ahead of a critical week for earnings season stateside.

PEARSON

Pearson (LSE:PSON) reported 2022 nine-month group underlying sales up 7% and scored an ‘outstanding’ result in English language learning with sales up 28%. The publisher said it is on track to deliver its full-year sales and profit guidance. Pearson confirmed it is hoping to achieve at least £100 million of cost efficiencies in 2023 and it is continuing with its £350 million share buyback programme.

Pearson’s strategy to reposition itself away from traditional educational textbook publishing towards technology-enabled training is paying off with shares sharply outperforming the wider stock market this year. Since Andy Bird’s appointment two years ago as CEO, shares in Pearson have staged an impressive turnaround, reversing the prior downtrend to gain more than 60% off the lows. Bird has helped secure several accretive acquisitions and the launch of Pearson+, its online subscription service with access to videos, textbooks and more. With the cost-of-living crisis as well as the rising cost of higher education, more and more people across age categories are looking for alternative ways to upskill, a trend that Pearson is successfully capitalising on.

FRASERS

Frasers Group (LSE:FRAS) has raised its stake in Hugo Boss to £840 million. It now owns 4.3% of the German fashion brand’s stock directly with a further 28.5% by selling put options. Mike Ashley’s retail conglomerate first acquired a stake in Hugo Boss in 2020. It has also been upping its stake in ASOS (LSE:ASC) to over 5%, capitalising on its recent share price decline after the fashion retailer reported slowing sales and a disappointing full-year loss.

It is no surprise that Frasers Group is raising its stakes in ASOS and Hugo Boss. In the summer, the company said it was planning more acquisitions after full-year profits increased to £366 million versus £8.5 million a year ago with sales up almost 31%. The group is clearly looking to diversify both at the higher end with Hugo Boss and away from the struggling high street towards online with ASOS as it looks to spread its risk amid the challenging macroeconomic headwinds, namely rising cost inflation and the threat of a looming recession. As we’ve seen with results from Hermes and others, the higher end, more luxurious part of retail exhibits greater resilience to the cost-of-living crisis with customers much more willing and able to absorb higher prices.

Shares in Frasers Group have struggled since the spike in July, trading in a downward trendline.