By Anna Peel. Originally published at ValueWalk.
“With peace talks appearing to falter, and expectations increasing that the devastating war in Ukraine will become entrenched, the oil price has been on the march upwards again. Brent crude is trading around $108 dollars a barrel, causing a fresh ripple of worry about the effect rising energy prices will have on businesses and consumers. Equity markets remain highly sensitive to the repercussions of the conflict and as fighting enters the fourth week, there still seems a gulf separating Russian and Ukrainian negotiators. The higher oil price is expected to boost shares in energy giants, with the FTSE 100 expected to open marginally higher in early trade.
Q4 2021 hedge fund letters, conferences and more
Sanctions Against Russia
Russian aggression is expected to be discussed on a difficult call between the US President and China’s premier later which is causing nervousness given it comes at a sensitive diplomatic time between Russia and the US. Reports that Joe Biden will tell Xi Jinping that Beijing will pay a price if it supports Russia, has done little to calm worries about the potential escalation of the geopolitical situation. With the corporate world having built up a solid fortress to isolate Russia from the global economy, the US clearly wants to ensure Russia can’t find an escape route to avoid the effectiveness of sanctions.
US indices are expected to open lower, amid this uncertainty, but are still on track to end firmly positive territory on the week. Investors appear to appreciate the follow through of central banks in their quest to try and rein in inflation, given worries it risks spiralling out of control, and even the Federal Reserve’s more aggressive plan ahead hasn’t de-railed sentiment.
Disruptions to the flow of commodities due to the ongoing conflict are set to continue to cause a headache for businesses. For companies in the UK, a fresh migraine has erupted with major disruption to freight at ports around the UK after mass job losses were announced by P&O with no warning. The suspension of services has caused severe log jams around Dover, in particular, which handles a third of the goods trade between Britain and the EU. For business reliant on road haulage this is yet another set-back, just at a time when logistical problems brought on by Brexit and then Covid had begun to ease.
J D Wetherspoon Faces An Uphill Battle
J D Wetherspoon plc (LON:JDW) is among the companies facing an uphill battle with an onslaught of higher costs. It’s now facing price pressures from food drink and energy suppliers, as the long struggle continues to regain its pre-pandemic form, forcing it to hike the price of pints at its pubs. The pub operator made a half year loss before tax of just over £21 million compared to a profit of £57.9 million it reported for the same period in 2020. Despite high hopes that punters would once again be elbowing each other to get to the bar, the glass is very much half empty for the company, with pre-Covid levels of profits remaining elusive. Just in the last few weeks, the outlook is brighter with sales improving, but they are still 2.6% lower than the same period in 2019. The company has once again put a big chunk of its troubles firmly at the door of the government, calling restrictions imposed on the sector lockdown-by-stealth. It’s described the rules imposed as like kryptonite for the sector and Spoons is now clearly desperate for a superhero level of support from customers, to recover from double blow of the pandemic and soaring commodity prices.”
Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
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