The FTSE 100 continued its rebound on Friday in a broad rally led by cyclical sectors, including miners, housebuilders, and retailers. Defensive names were also getting in on the action with Unilever surging 3%.

“The UK market looks set to end a tumultuous week with gains as it took its cue from advances in the US and Asia overnight,” said AJ Bell investment director Russ Mould.

“More reassuring data on the US economy, as jobless claims came in below forecasts, has helped calm fears over recession risks and made the calls for emergency rate cuts from the Federal Reserve earlier in the week appear premature.

“Mining stocks supported the move higher in the FTSE 100, which is now only a touch lower for the week as a whole, as an uptick in Chinese inflation allayed fears about deflation and economic slowdown in the world’s second largest economy and most rapacious consumer of many commodities.”

London’s leading index has rallied from the worst levels of the week after Monday produced the greatest volatility in global equities in over a year.

As the week progressed, a distinct calm descended over markets, with fears about the end of the Yen carry trade and an imminent US recession steadily fading into the background.

This doesn’t mean these risks have gone away or will not rear their heads again; rather, equity traders took a step back and focused on what’s important for stocks: earnings.

The outlook for earnings isn’t tremendously strong; however, it isn’t as bad as the dramatic declines in stocks on Monday suggested.

Many have taken the sell-off as a buying opportunity and bought into some of their favourite names. Given the extent of their declines, US technology shares were obvious choices. Whether the ‘Magnificent 7’ rally continues will depend on market perceptions of risk when it comes to AI and whether traders are prepared to wait it out in stocks with frothy valuations until earnings catch up with market pricing. Nvidia earnings at the end of August will be a big test of this.

In the UK, the FTSE 100 displayed its defensive attributes again this week, with declines relatively contained and quickly bought into. Surprisingly, zero FTSE 100 stocks are over 10% lower than they were a week ago. More than half are higher over the past 5 days.

Stalwarts AstraZeneca and Unilever are actually trading higher this week, and their combined market capitalisation means they have offset losses in some of the worst performers.

Housebuilders have had a good week, all things considered. Halifax released upbeat average house price data for July, suggesting the market could be on the turn. Rising housing prices coupled with Labour’s new housing targets have the potential to fire up the housebuilders’ afterburners.

Entain continued its rally of Friday and was the top riser with a gain of 3.2%.

Only 8 of the FTSE 100’s constituents were down at the time of writing.

Although volatility can be unnerving for even the most seasoned fund managers, dramatic swings in share prices does do one thing for investors – present them with opportunities.

The experience of seeing share prices crash is rarely enjoyable. However, it can result in high-quality companies trading at very attractive valuations.

We have selected three FTSE 350 companies that stand out as shares that should be considered by long-term investors after the recent global equity sell-off.

Rio Tinto

Rio Tinto’s exposure to China should come with its own risk warning. The company is heavily dependent on China’s demand for natural resources, and the slowdown in China’s growth rate has been particularly unhelpful.

That said, with shares now back beneath the 5,000p mark, the risk/reward ratio warrants consideration. Despite all the doom and gloom surrounding China in the first half of the year, Rio Tinto managed to increase underlying EBITDA by 3% demonstrating a prudently run operation able to withstand external headwinds.

Mining is a horribly cyclical pursuit. The industry is dictated by long, drawn-out periods of expansion and contraction driven by underlying commodity prices and the wider macroeconomic environment. Iron ore prices have been in a downtrend since their 2021 highs and are currently residing near the lower end of the trading range. Copper is stronger than it has been historically but is well off the most recent highs.

Lower prices are themselves not a precursor for a rise, although they do reflect negative sentiment that is unlikely to get dramatically worse.

The recent declines in metal prices have created an interesting set-up for investors looking to enter Rio Tinto, and the sell-off earlier this week made it all the more interesting.

Legal & General

Legal & General is a FTSE 100 dividend heavyweight, and the company’s half-year results released this week solidified the reliable nature of the group’s cashflows.

“There are a lot of strings to L&G’s bow, with bulk annuities at its core, and the market looks like it’ll stay healthy over the medium term,” explained Matt Britzman, senior equity analyst, Hargreaves Lansdown, in response to L&G half-year results.

“The next challenge is to deliver improved performance from the refreshed Asset Management division, which will carry some execution risk. There’s plenty to like here; the balance sheet is strong, and total returns to shareholders are attractive with a growing dividend and ongoing buybacks too.”

Shares in the life insurance and asset management company came under pressure earlier this year after it outlined mediocre dividend growth plans at a capital market event earlier this year. Legal & General shares are yet to recover, and this week’s volatility has brought the stock within touching distance of 200p.

As Britzman highlights, the dividend plans aren’t bad – they just didn’t blow investors away. More importantly, the dividend is well covered by earnings, and investors needn’t be overly concerned about any threat of a cut to the dividend’s current 9% yield.

Next Energy Solar Fund

Just as the Next Energy Solar Fund was starting to build momentum, the recent came along and knocked it off track. This will be frustrating for existing investors, but it gives those looking for an entry an opportunity.

The Next Energy Solar Fund is an FTSE 250-listed Investment Trust with a portfolio of solar assets, primarily in the UK. The management team and assets play a major part in the UK’s solar power generation, with installations throughout the country, including the 9MW capacity Gover Farm installation in Cornwall and the 4.8MW capacity Balhearty asset in Scotland.

The trust has 103 assets in total, 92 directly owned in the UK and 8 in Italy. It also has co-investments in Portugal and Spain.

Next Energy Solar Fund, like almost all clean energy infrastructure investment trusts, was a victim of the global interest rate tightening cycle and will likely be a beneficiary from the easing cycle. Higher interest rates raised questions about the valuation of privately held assets, and share prices suffered as a result. However, there is a clear disconnect between this trust’s NAV – which undergoes rigorous third-party assessment – and the share price.

The trust is targeting dividend payouts of 8.43p for 2024/25. This translate to a forecast yield of just over 10% with shares at 82p.

The FTSE 100 fell on Thursday as the weight of investor caution after recent volatility offset very robust earnings updates from Persimmon, Entain, Hikma and Entain. Ex-dividends also dragged on the index on Thursday.

After a strong rally yesterday, traders shouldn’t be surprised to see the FTSE 100 down 1% on Thursday given the swings we’ve seen in global equities this week as markets contend with concerns about the unwinding of the Yen carry trade and US growth.

“Markets may have simmered down but this roller-coaster week isn’t over yet. UK markets opened lower in a move that unwinds a good chunk of yesterday’s gains. Corporate earnings are starting to slow but there’s plenty for traders to get their teeth into,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.

“Deliveroo hit two of its major financial milestones over the first half centred around positive free cash flow and profitability. Commentary suggested encouraging behaviour from those looking for a quick bite to eat, but second quarter volumes were weaker than expected across both the UK and international markets. Elsewhere, Ladbrokes owner Entain delivered a good half and upped guidance, while Persimmon saw a boost from higher selling prices.”

Persimmon’s first-half results were notable not because they were a complete blowout but because they broke the trend of falling revenues and completions. Completions were up 5% on last year, and revenue and operating profit increased.

“Persimmon’s had a great first half to the year, despite the ongoing affordability issues weighing on buyers’ purchasing power. Revenue growth came from a healthy mix of both higher sales rates and average selling prices,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

“Given Persimmon’s houses are typically cheaper than the UK average, its selling prices were always likely to prove more resilient than other names in the sector during tough times. The private order book has also climbed at double-digit rates, indicating that buyers are more confident about the market’s health than they were 12 months ago and are more willing to sign on the dotted line. Alongside its in-house materials business, which is a key differentiator against peers, Persimmon’s profitability looks to be holding up better than most this year too.”

Persimmon shares were 1.4% higher at the time of writing.

Beazley was the FTSE 100’s top riser after profit before tax rose 99% in the first half on higher insurance premiums and steady claims. Investors will also be reassured that the insurer said the recent technology outage will have no impact on its guidance for the year. Beazley shares were 12% higher.

Entain shares were also higher after offering investors a glimmer of hope as it upgraded guidance for the year. Losses for the half year were less than expected and the group saw positive revenue increases from some areas of its bookmaking business.

AJ Bell investment director Russ Mould explains today’s rally is more of a relief rally than out and out optimism about future prospects: “Ladbrokes and Coral owner Entain has been in a bit of a mess for some time, so investors will take succour from the company’s latest results.”

“Yes, the company is still losing money at the pre-tax level, but the scale of these losses has been significantly reduced and the company has notably upgraded its outlook. 

“This provides some decent foundations for incoming CEO Gavin Isaacs’ efforts to revive Entain’s fortunes when he takes charge at the beginning of next month. He won’t be able to duplicate the benefit the company enjoyed from Euro 2024 and there is still plenty on his to do list.”

Spirax was the biggest FTSE 100 casualty, sliding 9%, after a 3% decrease in revenue for the first half.

Premier African Minerals has announced a substantial equity issue to settle a longstanding liability with China Zenith Capital Ltd., which sued Premier for the payment of a success fee related to a deal with its partner Canmax.

The AIM-listed mining company has issued 2 billion new ordinary shares to address its £1.38 million liability to China Zenith Capital Ltd. The newly issued “Settlement Shares” will be held in trust for China Zenith Capital and gradually sold under orderly market conditions.

The issue of shares was previously agreed upon by shareholders at a recent general meeting and announced to the market.

The proceeds from these sales will be used to pay down the debt. Should the share sales fall short of covering the full liability, Premier will have to either issue additional shares or use its cash reserves to settle any remaining balance. Interestingly, Premier will benefit if the share sales exceed the debt amount, as the company will retain any surplus.

With Premier African Minerals’ Zulu lithium project showing little sign of producing meaningful amounts of lithium, Premier African Minerals is being backed into a corner and has turned to the issue of its own stock as a means of paying its suppliers and settling debt. While this settles debts and protects the company’s limited cash reserves, it acts as a constant weight on shareholder value creation.

We have yet to learn of Canmax’s plans to take action under the terms of their offtake agreement. Premier has missed a series of targets and is racking up significant penalties under the agreement. Failure to meet these penalties could result in Canmax taking an ownership stake in the Zulu project.