Week Ending 29/08/2025 – Is Drax (ironically) the canary in the coal mine ?
This week, Jeremy and Gareth debate Trump's ongoing attacks on the US Fed...perhaps Powell is rolling over, but the recently "sacked" board member Lisa Cook is not. The dollar fell and long bond yields rose, but not by much. France is showing renewed (and traditional) political risk, and the landscape across Europe feels pressured. The UK is once again facing an Autumn of Worry as the budget's tax-more-or-spend-less balancing act seems destined to repeat last year's wheel of fortune on which part of the economy will bear the brunt of new taxes.
In the absence of much small-cap news, the pair consider the misfortunes of Drax, the former coal-fired power generation group, now reinvented doing the "green thing" of burning wood pellets to produce electricity. This week saw news that the FCA is investigating the veracity of some of the their historic claims around the source of these pellets (Drax claims they're mainly "off-cuts" of wood that's already being logged). Whether or not there's an issue, it is possible that the attention might focus minds on the genuine green credentials of shipping wood across the Atlantic to burn it, and then claiming that by capturing the carbon released and then burying it, the whole process is "carbon negative". More broadly, some governments are actively against the renewables agenda, and others actively can't afford it.
Next week we get the excitement of US jobs data - Trump wants data weak enough to prompt a big interest rate cut, but not weak enough to look like a recession. Whoever's in charge of "deciding" the number better tread a careful line, or they might join the jobless stats for the following months.
Brought to you by Progressive Equity.
This communication is provided for information purposes only, and is not a solicitation or inducement to buy, sell, subscribe, or underwrite securities or units. Investors should seek advice from an Independent Financial Adviser or regulated stockbroker before making any investment decisions. Progressive Equity Research Ltd (“PERL”) does not make investment recommendations.
Opinions contained in this communication represent those of PERL and/or our affiliates at the time of publication and PERL does not undertake to provide updates to any opinions or views expressed. PERL does not hold any positions in the securities mentioned in this communication, however, PERL’s directors, officers, employees, contractors and affiliates may hold a position, and/or may perform services or solicit business from, any of the companies or related securities mentioned.
Any prices quoted in our research are as at the previous day’s close.