Whitbread Shares Spreads Tumble on Slowing Sales Growth
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 13 December 2011: 10.30am Update
London equities were marginally higher this morning as UK economic data showed that inflation had fallen, but shares struggled for traction after rating agencies soured financial spread betting investor sentiment yet again.
By 10am (London time) the FTSE 100 was 0.34% higher at 5446.37 while the broader FTSE 250 was up 0.41% at 9941.82.
UK inflation eases
Just before the release of UK inflation data this morning, Bank of England chief economist Spencer Dale said that inflation is likely to fall to just over 3% by March, but warned that the behaviour of inflation from April onwards is far more uncertain.
Mr Dale said that there is a possibility that inflation could fall significantly below the target, especially if demand turns out to be weaker than we expect. But there is also a risk that inflation could prove to be more persistent.
UK November inflation data showed a fall to 4.8% from 5% the previous month, though this is still far above the Bank's target of 2%. The November CPI figure came in as expected, helped by a slowing rate of increase in the prices of food, transport and clothing. The largest upward contributors were alcohol and tobacco.
The figure agrees with the Bank of England’s forecasts that inflation has peaked and will fall back sharply in the coming months.
Meanwhile the retail price inflation index (which includes housing costs) fell to 5.2% from 5.4%, versus a forecast of 5.1%.
Rating agencies express further opinions
Last night, ratings agencies Fitch and Moody’s spoke up once again to sour investor sentiment. Fitch Ratings predicted a significant economic downturn in Europe and added that the region’s debt crisis was likely to continue throughout next year. Fitch’s comments came after Moody’s announced the crisis remained in a critical and volatile stage.
Moody’s then placed eight Spanish banks and two bank holding companies on review for a downgrade, and downgraded the subordinated debts of 21 Spanish financial institutions.
The agency said the move was in light of the weakened growth outlook for the Spanish economy, and also suggested that a deal on fiscal discipline agreed upon last Friday at the EU summit had not been enough to calm investor concerns about the region’s debt crisis.
Whitbread’s growth slows
This morning Britain's biggest hotel operator said its sales growth had slowed in the third quarter as tough economic conditions kept customers away from its Premier Inn hotels and Costa Coffee shops, which had previously proved resilient.
Sales at Premier Inn hotels open more than a year were up 2.6% in the quarter, compared with growth of 5.2% in the first half, while sales at Costa Coffee shops were up 3.8% compared with growth of 6.7% in the first half.
Though sales have been hit by the current market turmoil, the company still says that total sales (up 11.4%) showed impressive growth and that the company remained on course to meet expectations with full-year pre-tax profit ranging from £301 million to £329 million.
News of the slowing growth sent Whitbread shares plummeting over 7% to a low of 1465p, before bouncing up to 1484p.
US pre-market
This morning US March futures were marginally higher with Dow futures up 59 points, while those for the S&P 500 had risen five points.
With developments from the Eurozone dominating spread betting market sentiment in the past few days, a string of US economic data released will provide the markets with a brief distraction from the turmoil.
At 12.30pm US retail sales and small business optimism figures will be released, followed by economic optimism data, job openings and business inventories figures at 3pm (all London time). Lastly, investors will be closely watching the outcome of the latest Federal Reserve FOMC meeting, where the interest rate is expected to remain at the all-time-low of 0.25%.
Remember that financial spread betting is a leveraged product and can result in losses that exceed your initial deposit. Spread betting may not be suitable for everyone, so please ensure that you fully understand the risks involved.
The above comments do not constitute investment advice and neither IG Index nor SpreadBets.org.uk accept any responsibility for any use that may be made of them.
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Spread Betting 13 December 2011: 5.00am Update
US and European markets were sold off overnight after ratings agencies said the summit did little to switch their views on Europe’s struggling governments.
Moody’s and Fitch feel there is still significant pressure on euro-area nations’ debt ratings, after leaders failed to come up with a comprehensive solution to deal with the region’s debt crisis.
However, there were some bright spots with a fairly positive reaction to the Italian bond auction. The reasonably good response to the auction is positive ahead of the supply coming into the bond market this week.
Among the major averages the Dow Jones Industrial Average lost 1.3% to 12,022. The S&P declined 1.5% to 1236 and the Nasdaq shed 1.3% to 2612. Intel weighed on tech companies after cutting its fourth-quarter revenue forecast.
Asia & Australia
Across Asia, regional markets are struggling as shares spread betting investors react to the latest comments by ratings agencies regarding the outlook for Eurozone nations. Fitch came out and said the EU Summit did little to ease the pressure on the debt crisis, while Moody's stated that it will review the ratings of all EU countries in the first quarter of 2012.
Europe just can’t seem to shake off this debt crisis, with most post-summit comments showing disappointment in the lack of a comprehensive solution.
The ASX 200 is the worst performer in the region with a 1.4% drop, weighed on by the resource stocks. Elsewhere, the Nikkei is 1.3% lower, the Hang Seng has lost 1.2% and the Shanghai Composite has shed 1%.
US and European markets are pointing towards modest gains on the open after having been heavily sold off overnight.
Australia's S&P/ASX 200 is down 1.4% at 4192 after hitting an eight-day low of 4181.2. We have seen significant risk aversion, with resource stocks suffering most after a poor night for commodities. Comments from the ratings agencies have deflated the positive sentiment from the EU summit.
To be frank, however, not many analysts felt European leaders had done enough to avert the crisis. Miners are leading broad-based declines, with BHP Billiton down 2.3% and Woodside Petroleum 2.5% lower.
The big banks are also suffering from offshore peer weakness, with Westpac down 2.6% and Commonwealth Bank dropping 1.4%. Conversely, ANZ is outperforming after BAML upgraded it to buy, while downgrading the other major banks.
Europe
Following the statements by the ratings agencies, it seems that Mr Sarkozy is preparing the market (and voters) for the possible loss of France’s prized AAA rating, with comments that a downgrade could be overcome and that he would respond ‘with a cool head’ if it were to happen.
Italian bond yields are again nearing 7% and, despite a well bid one-year bill auction last night, Mr Monti and his technocratic team have a mountain to climb in the first quarter of 2012, with around EUR57 billion of debt needing to be repaid.
Given we have the chance of a raft of ratings downgrades in Europe in the short term and the market is seemingly uninspired by the EU summit, it is hard to get too bullish on risk assets.
Given the significant two-way trade flow between the UK and the Eurozone, talk of 'isolation' does seem somewhat overstated - even if there's scope for plenty more rhetoric here as we run down to Christmas. Tonight, UK CPI, RPI, Core CPI and DCLG HPI numbers are due for release.
Ahead of the open we are calling the FTSE up 22 at 5450, the DAX up 21 at 5806 and the CAC up 12 at 3102.
Remember that financial spread betting is a leveraged product and can result in losses that exceed your initial deposit. Spread betting may not be suitable for everyone, so please ensure that you fully understand the risks involved.
The above comments do not constitute investment advice and neither IG Index nor SpreadBets.org.uk accept any responsibility for any use that may be made of them.
Advert:
IG Index Spread Betting - No Fees, No Commissions, Free Charts and Live Prices.
Spread Bet on Indices, Forex, Commodities, Shares and more. For details see IG Index.
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"Whitbread Shares Spreads Tumble on Slowing Sales Growth" last update by AG, 13-Dec-2011
Warning: Financial spread betting carries a high level of risk. You can lose more than your initial investment or stake. Financial spread betting may not be suitable for all investors. Only trade with money that you can afford to lose. Make sure you fully understand the risk involved. If necessary, seek independent financial advice.
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