Market report

Burberry shares take China hit | Aston Martin raising £653m


5pm: London closes higher

The FTSE 100 rebounded strongly to end the week on an upbeat tone. The index closed 111.4 points (1.58%) higher at 7,151.21 as investors warmed to more conciliatory message about US interest rates.

9.30am: Burberry blow

Burberry’s shares fell 3.73% at the open, as it reported a 35% drop in sales to mainland China in the 13 weeks to 2 July due to restrictions and store closures designed to control Covid-19 outbreaks. 

In a Q1 update the company said performance continued to be impacted by lockdowns in mainland China, but leather goods and outerwear continued to perform well elsewhere.

“While the current macro-economic environment creates some near-term uncertainty, we are confident we can build on our platform for growth,” said CEO Jonathan Akeroyd.

Q1 comparable store sales increase 1% and by 16% excluding mainland China.

The company signed South Korean Premier League footballer Son Heung-min who scored an immediate success for luxury goods retailer Burberry.

The Tottenham striker last month signed on as brand ambassador. This was greeted with a 21% increase on the previous engagement peak on Instagram.

The company has commenced a share buy back with the full £400m expected to be completed by the financial year end.

Investors were encouraged by more comforting words on interest rate strategy in the US, helping the FTSE 100 to open higher. It was trading 57 points up at 7,096.83.

Aston Martin raises capital

Aston Martin Valkyrie

Aston Martin shares were 50.50p (13.60%) higher at 420p after it announced it is raising a higher than expected £653m to help slash its debt and secure its long-term future.

The funding package includes a £78m deal with the Saudi Public Investment Fund (PIF) in exchange for a 16.7% shareholding and a seat on its board.

PIF and Mercedes Benz will jointly invest £335m.

Aston Martin said it had rejected a £1.3bn equity investment proposal from Investindustrial Group and Geely International (Hong Kong), known as the Atlas Consortium, as it would have been heavily dilutive for existing shareholders.

The company said it hopes to hit its target of 10,000 wholesales, £2bn of revenue and £500m adjusted EBITDA by 2024/25.

Global markets

Asian stocks fell to a two-year low early today and were heading for a weekly loss, while the dollar was set for its third week of gains after a fresh round of rate hikes globally deepened concern about the outlook for world economic growth.

China’s economic growth slowed sharply in the second quarter as Covid lockdowns took a toll on activity and added to the gloomy global outlook.

Gross domestic product in the April-June quarter expanded by just 0.4% from a year earlier. Reuters noted that it was the worst showing for the world’s second-biggest economy since the data series began in 1992, excluding a 6.9% contraction in the first quarter of 2020 due to the initial COVID shock.

The Shanghai SSE index fell 1.6% and Hong Kong’s Hang Seng dived 2.4%.

US president Joe Biden will discuss energy supply, human rights, and security cooperation in Saudi Arabia today during a visit designed to reset the US relationship with a country he once pledged to make a “pariah” on the world stage.

Mr Biden will hold meetings with Saudi Arabia’s King Salman bin Abdulaziz and Crown Prince Mohammed bin Salman, along with other government officials, a senior Biden administration official told reporters.

Brent crude futures were steady at $99.96 a barrel.

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