Market Overview

Dear Investor,

This week has been dominated by a significant escalation in tensions between Israel and Iran, with the situation intensifying rapidly.

These developments have stirred fears of a broader conflict in the region, with Israel also intensifying its ground offensive in southern Lebanon. The rising threat of all-out war has created a difficult environment for managing geopolitical risk.

In response, financial markets have reacted cautiously, particularly in the energy and safe-haven asset sectors. Oil prices, which had been struggling near recent lows, bounced higher as traders began to factor in the risk of disruption to global oil supplies. Brent crude has trended higher all week and is currently trading around the $78 mark. Oil traders remains sensitive to any developments that could impact key infrastructure or transport routes in the Middle East. However, the current rise in oil prices has been measured, reflecting increased supply from Libya and the fact that the conflict has yet to significantly disrupt supply chains.

The US dollar has also strengthened from the escalating tensions, rallying as investors sought the safety of more stable assets. Geopolitical uncertainty tends to favour the dollar, and this week’s developments have been no exception. The currency’s rebound from recent lows highlights its ongoing role as a global haven in times of crisis.

Meanwhile, gold has held firm near recent highs, reflecting the broader risk-averse sentiment in the market. Investors are turning to gold to hedge against the uncertainty, and its performance this year underscores the defensive positioning many are adopting as the conflict evolves.

Wishing you a peaceful weekend,

Tom

Market Movers

On the rise: Saga (LSE:SAGA) +11.7% on the week

Saga’s share price has rallied this week after the company announced that it is in discussions with Belgian insurer Ageas regarding a potential partnership. The news sent Saga’s shares higher by more than 14%, reflecting investor optimism about the strategic implications of this collaboration.

The backdrop of these discussions includes Saga’s previous attempt to sell its insurance underwriting arm, a process that was put on hold earlier this year after an acquisition by Australia’s Open fell through.

Despite the recent gains, Saga’s shares remain down 18% year-to-date, highlighting the challenges the company has faced. However, the news of the potential partnership has reinvigorated investor interest and confidence in Saga’s ability to navigate its current challenges and drive future growth.

REGENCY VIEW:

Saga’s strong brand loyalty, diverse revenue streams, and recent operational successes, particularly in the cruising division, underscore its resilience and potential for upside as the market re-evaluates its worth. Click here to read our full report on Saga.

On the slide: Aston Martin Lagonda (LSE:AML) -31.9% on the week

Shares in Aston Martin Lagonda went into reverse this week after the luxury car-maker issued a stark warning about lower-than-expected profits due to ongoing supply chain issues and sluggish demand, particularly in China. The company’s announcement marked a significant shift from its previous guidance just nine weeks earlier, when it had confidently reiterated its forecasts.

Furthermore, Aston Martin’s adjusted earnings (EBITDA) is now anticipated to be slightly below last year’s figures, with gross margins expected to fall below the 40% target. The company also indicated that it would no longer achieve positive free cash flow in the second half of 2024, a departure from its earlier guidance, which further rattled investor confidence.

REGENCY VIEW:

Aston Martin is struggling as supply chain disruptions and weak demand in China have put pressure on its profitability and free cash flow expectations for 2024. With a significant decline in share price over the past year and a precarious balance sheet, the company faces an uphill battle to improve efficiency and meet its ambitious growth targets for 2025.

Sector Snapshot

The UK market is being held up by the Energy sector this week as the FTSE’s oil giants rallied in response to rising tensions in the Middle East.

Energy aside, the market has a bearish aesthetic seven sectors showing losses of more than -1% during the last seven sessions.

UK Price Action

The symmetrical triangle consolidation pattern that we identified last week remains very much in place with prices being ‘funnelled’ towards the apex. As a general rule, the more intense the period of price compression, the more explosive the eventual breakout – we continue to monitor this pattern closely.