Market movers: Europe, Vodafone, Cineworld

Victoria Scholar, interactive investor's head of investment, runs through today's big stories and how financial markets are reacting. 

European markets have started the week on a softer tone following a sharp decline for the tech-heavy Nasdaq on Friday stateside amid concerns about tighter Fed policy. Investors await the Jackson Hole Symposium this week as Fed chair Jerome Powell gets set to share his insights into the US economy. Overnight the People’s Bank of China cut its one-year benchmark lending rate with the one-year loan prime rate now at 3.65%.

• Read about: Free regular investing | Opening a Stocks & Shares ISA | Cashback Offers

VODAFONE

Vodafone Group (LSE:VOD) has agreed to sell its operations in Hungary for 1.8 billion euros in cash to Hungarian 4iG and state-run Corvinus Zrt. The sale will create Hungary’s second-largest telecoms operator with the aim for the deal to complete by the end of 2022.

It is clear the Hungary government is keen to build its own national telecoms champion with Vodafone prepared to take the cash in exchange for the spin-off. In November last year Vodafone’s CEO Nick Read said he was pursuing consolidation in Europe. Now the telecoms giant can focus more of its attention on Germany instead, a market it considers to be the most attractive on the continent. There is also M&A potential for Vodafone in the UK amid recent reports that it considered a merger with Three’s UK division. Vodafone’s share price has been in long-term decline, halving since the peak in January 2018 but it still offers an attractive dividend yield.

CINEWORLD

Cineworld Group (LSE:CINE) said it is considering various options including voluntarily filing for bankruptcy in the US. It is also considering ways to obtain liquidity and reduce its debt burden which has left the world’s second largest cinema chain on the brink of collapse.

The company has been destroyed by the pandemic. Covid meant that cinemas were closed for many months, Hollywood was unable to churn out hits and consumer preferences shifted towards streaming instead which has caused lasting damage for ticket demand even after movie theatres reopened. On top of that, Sky, for example now releases new blockbusters at the same time as the cinemas, again reducing the incentive to leave the house and organise a cinema trip. Plus, Cineworld has been dealing with problems of its own with its £700 million damages bill for abandoning its takeover of Cineplex, landing the embattled cinema chain with an unmanageable debt pile. Shares have plunged from above 300p before the pandemic to around 4p a share today.