Market movers: FTSE 100, Haleon, TUI, Frasers Group, Moonpig

After a long weekend, UK stocks are factoring in events at home and abroad. Our head of investment rounds up the early action.

GLOBAL MARKETS 

European markets have opened higher as the Federal Reserve’s two-day policy meeting kicks off with basic resources and banks leading the charge. The FTSE 100 is outperforming in Europe, inching closer to the psychological 7,300 mark. British Airways’ parent company International Consolidated Airlines Group SA (LSE:IAG) is near the top of the UK basket thanks to a positive read across from an upbeat trading statement from travel giant TUI AG (LSE:TUI). 

• Discover: How to buy Shares | Free regular investing | Super 60 Investment Ideas

Germany’s producer price index for August soared by 45.8% year-on-year, sharply outpacing forecasts for 37.1%. Month-on-month the figure rose by 7.9%, almost five times the forecast for 1.6%, signalling red hot producer inflation in the eurozone’s largest economy, well above analysts’ expectations. Japan’s inflation rate also accelerated to 3% in August, the highest reading since September 2014, driven by soaring food and fuel costs.

HALEON 

In its first set of earnings since listing on the LSE this summer following its spin-off from GSK (LSE:GSK), Haleon (LSE:HLN) reported first half revenue up 13.4% to £5.19 billion, while adjusted operating profit rose by 21.2% to £1.19 billion.

The world’s biggest consumer health business kept its full-year revenue and operating margin guidance unchanged, but warned that the first half’s positive momentum would continue but at a slower pace in the third quarter amid the macroeconomic challenges and uncertainties. 

Concerns around heartburn drug Zantac, which is facing allegations that it contains possible carcinogens, weighed heavily on a slew of pharma stocks including Haleon back in August. However, Haleon insisted it has never marketed Zantac in any form in the US, and today the company said it rejected requests from GSK and Pfizer Inc (NYSE:PFE) for indemnification. 

Today’s set of results are largely upbeat, with strong top and bottom-line growth in the first half, lifting shares towards the top of the FTSE 100. Although a more challenging economic backdrop lies ahead, some of this pain will be offset by a strong cold and flu season for Haleon, boosting demand for some of its products.

• Five things to expect from Kwasi Kwarteng's emergency mini-budget
• Why Lloyds Bank shares could soon hit an 8-month high

As a seller of mostly consumer staples, Haleon looks set to be relatively well positioned to navigate an economic downturn. The biggest risk is if consumer trade down from branded products like Panadol, Advil and Aquafresh to cheaper unbranded rivals instead. Uncertainty around Zantac remains another overhang for the shares.

Haleon has struggled since listing on the public markets this summer with the stock down around 15%. There is a large number of hold recommendations on Haleon, suggesting the analyst community is still unsure about the company’s prospects.

TUI 

Tui said 2022 UK cumulative bookings are 4% ahead of summer 2019, with momentum in Germany and the Netherlands well ahead of pre-Covid levels. Winter bookings are now at 78% of pre-pandemic levels.

Tui says it continues to see a higher share of short-term bookings for winter and strong pricing, confirming solid customer demand for holiday travel. The travel giant reiterated its expectations to return to profitability this year despite third quarter losses and elevated flight disruption costs. 

Although 2022 was expected to be the year of the comeback for travel stocks after the industry was ravaged by the pandemic, Tui and others have had a rough ride this year. Shares in Tui have plummeted almost 50% year-to-date as the broader market sell-off, soaring cost inflation, labour shortages and the general chaos for international travellers have created a perfect storm for the company.

Longer-term, investors in Tui have had a rough ride with shares down 75% over the last five years after the stock peaked in 2018. Although Tui enjoyed an uptrend in late 2020 into early 2021 after the vaccine was announced, the stock has since given back most of those gains. Today’s update comes as a welcomed development for investors with shares rallying more than 2%, lifting stocks in the broader travel sector such as IAG with it.

FRASERS GROUP / MIKE ASHLEY 

Frasers Group (LSE:FRAS) said Mike Ashley will not be standing for re-election at this year’s AGM on 19 October, instead stepping down from the board at the conclusion of this year’s meeting. Ashley will continue to be available to the group in an advisory capacity when called upon and he will provide the group with £100 million of additional funding.

Ashley will remain the biggest shareholder in the group behind retail brands including Sports Direct, Jack Wills, Sofa.com and Flannels. Back in May, Ashley took a step back from Frasers, appointing his son-in-law Michael Murrey as CEO. 

• Will investors shop elsewhere as Kingfisher profits slump?

After a rough start to life as a public company in 2007-2008 during the financial crisis, from 2009 to the peak in 2014, the stock surged by more than 2,000%. During the pandemic, Frasers Group had a tough time, with a slide in profits and major write downs for its stores and investment properties amid the shift to online shopping and the demise of the high street.

This year, Frasers Group has managed to successfully navigate the macroeconomic backdrop with shares trading only modestly lower year-to-date, modestly outperforming the FTSE 100. It rallied to a 10-year high in June following upbeat earnings guidance, with profits expected to rise 45% this year, but has since given back some of those gains. 

MOONPIG 

Shares in Moonpig Group Ordinary Shares (LSE:MOON) have plunged double digits this morning, despite its trading performance and guidance both coming in in line with expectations. The greetings card company said it expected 58-60% of revenue to occur in the second half of the year as seasonality around Christmas looks set to boost demand. 

Concerns about the cost-of-living crisis, squeezed household budgets and rampant inflation have dampened investor appetite for Moonpig, with shares slumping more than 50% so far this year.

Moonpig was previously trying to upsell, pushing higher margin products such as soft toys, champagne, flowers and chocolates, but is now refocusing on its bread and butter, greetings cards instead to navigate the economic downturn. This year has seen a series of price target cuts on the stock from the analyst community, as the pandemic surge in demand for its stay-at-home offering dries up.