Market report

Fed hikes rate | Whitbread to raise pay | AssetCo divi


7.30pm: US Fed announces 0.75% rate rise

The United States Federal Reserve announced a 0.75 percentage-point increase in interest rates – the largest hike since 1994.

It Fed said “overall economic activity appears to have picked up after edging down in the first quarter”.

But it warned that “inflation remains elevated”, and the invasion of Ukraine by Russia had created “additional upward pressure on inflation and [is] weighing on global economic activity. In addition, Covid-related lockdowns in China are likely to exacerbate supply-chain disruptions.”

5pm: Stocks close higher on ECB pledge

Stocks in London ended higher on Wednesday as the European Central Bank pledged to ease the stress in volatile eurozone bond markets.

Investors have already priced in a potential 75 bps hike in US interest rates this evening and a fifth consecutive hike by the Bank of England tomorrow.

The FTSE 100 index closed up 85.95 points, or 1.2%, at 7,273.41.

Whitbread ended 6.3% higher after the hospitality firm said trading has been ahead of expectations. The Premier Inn owner also said its plans for higher costs of labour and for refurbishment will add £20 million to £30 million to its current financial year (see below).

Brent oil was quoted at $120.95 a barrel at the London equities close, down sharply from %124.93 at the close on Tuesday.

11am: Protocol action

The European Union just announced fresh legal action against the UK as part of a series of measures in response to the Government’s move to unilaterally scrap parts of the Northern Ireland Protocol.

The European Commission is also resuming legal proceedings against the UK that were shelved last year to facilitate negotiations on post-Brexit trade.

The stalled legal action related to the UK’s unilateral extension of protocol grace periods in 2021.

8.10am: AssetCo to restructure shares, pay dividend

AssetCo, the wealth management business, intends to restructure its shares to improve their liquidity, spread and marketability to a wider group of investors. Their value will fall as more shares are issued.

The board, chaired by Martin Gilbert, also expects to declare a 13p interim dividend in Q4 and to adopt a progressive dividend policy.

For the six months ended 31 March 2022 the company posted revenue of £1.3 million (31 March 2021: nil) and a loss before taxation of £2.6m (31 March 2021: profit £22.3m).

7am: Whitbread expects higher costs

Premier Inn owner Whitbread said it expects £20m to £30m in additional costs to meet higher pay demands and bringing forward some investment plans.

It said labour supply remains tight across the hospitality sector “and assuming that consumer demand and occupancy remain strong, we expect some additional costs due to targeted pay increases.”

It added: “We are also taking the opportunity to bring forward our investment in refurbishments and maintenance projects as well as accelerate some additional IT spend that will underpin our market leading position and drive future earnings.

“Taken together, these factors are expected to increase total costs by £20m – £30m in FY23.”

CEO Alison Brittain, said: “The strength of Premier Inn’s recovery in the UK continues to be ahead of expectations with a particularly strong Q1 performance that is well ahead of pre-pandemic levels and we continue to significantly outperform the market. 

“This impressive Q1 performance together with improved visibility into Q2, gives us increased confidence in delivering a strong first half and remaining ahead of the market for the rest of the year.”

7am: WH Smith

The stationery retailer and travel agent said group revenue in the 15 weeks to 11 June was ahead of 2019 levels, with a particularly strong performance from travel.

“We remain in a strong position to benefit from the significant growth opportunities across the global travel retail market,” it said in an update.

12.01am: Retail sales weaken

Scotland’s high streets reported stalled sales last month as shoppers cut spending amid the cost of living crisis.

The Scottish Retail Consortium (SRC) reported a 1.6% year-on-year rise in total sales in May, but adjusted for inflation, sales were 1.1% down on the same period last year.

Full story here

Global markets

The dollar hit a 20-year high yesterday as traders anticipated a steep rate hike from the US Federal Reserve to bring rampant inflation under control.

A 0.75 percentage points is now under consideration. It would be the biggest increase since 1994, and markets already predict rates of 3.75% to 4% by the end of the year.

Rising expectations that the Fed will raise interest rates by more than forecast followed a higher than forecast CPI figure last Friday which sent the S&P 500 into a bear market.

The Dow Jones Industrial Average fell 0.5%, the S&P 500 lost 0.38% while the Nasdaq Composite offered some positivity by rising 0.18%.

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