Interactive Investor

Market movers: US Fed, EU Russian oil ban, Flutter, Wetherspoon

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

EUROPEAN MARKETS

European markets are treading water as investors await the outcome of the Fed’s two-day policy meeting tonight. Key earnings continue to trickle out, but central bank action is the most important theme for markets this week amid the global shift towards monetary tightening as inflation takes its toll.

Flutter Entertainment (LSE:FLTR) is trading at the top of the FTSE 100 after an upbeat trading statement while miners like Rio Tinto (LSE:RIO), Anglo American (LSE:AAL) and Fresnillo (LSE:FRES) struggle at the bottom of the UK index.

EU’S RUSSIAN OIL BAN

The European Union has announced its sixth package of sanctions against Russia, including proposals to ban all Russian oil imports in an attempt to warn President Putin against further military action in Ukraine. European Commission President Ursula von der Leyen said ‘this will be a complete import ban on all Russian oil, seaborne and pipeline, crude and refined.” She said Russian crude oil will be phased out in six months and refined products by the end of the year.

Brent crude and WTI are trading notably higher, buoyed by supply concerns as the EU pulls the plug on oil imports from its most critical trading partner in the commodity. Russia provides around a quarter of EU oil imports, with Germany the top buyer importing around a third of its oil last year. This development is likely to create severe headwinds for the EU economy, particularly Germany, with the potential to push price levels higher and exacerbate the inflationary backdrop. As such the European Central Bank will be watching closely, with market expectations for lift-off on interest rate hikes likely to be brought forward.

FLUTTER

Flutter delivered 6% revenue growth in the first quarter, driven by a 15% increase in average monthly players and a 45% increase in sales in the United States, sending shares to the top of the FTSE 100. However, outside the US group revenue declined by 3% on the back of safer gambling and regulatory headwinds.

This is a company that fared extremely well during the pandemic as a stay-at-home stock, with millions of people glued to their laptops at home. However, since the global economy has reopened the post-Covid environment has proven to be a lot more challenging, with the stock under pressure since March 2021. Nonetheless, its US market is successfully navigating these challenges with strong revenue growth stateside driving its share price sharply higher this morning, bucking the recent downtrend. Beyond the US borders however, the macro uncertainties, the cost-of-living crisis and the post-pandemic lull in demand remain key challenges for the business, which is why the stock down by more than 25% year-to-date.

JD WETHERSPOON

Wetherspoon (J D) (LSE:JDW) is expecting profits to break-even in the current financial year, with a slow improvement in sales in the absence of further restrictions. For the 13 weeks to 24 April, the pub chain said like-for-like sales fell 4% compared with the same period in 2019.

JD Wetherspoon is struggling to restore sales back up to their pre-pandemic levels, with weaker demand making profitability a major challenge as the pub group targets the feeble aim of breaking even by year-end. Although chairman Tim Martin is relieved that Covid restrictions are finally over, with the cost-of-living crisis, household budgets are tight leaving many individuals and families with little left over at the end of the month to splurge on treats like going to the pub.

On top of that Wetherspoons is also dealing with input cost pressures from rising food, drink and energy as well as the recent VAT increase on food and non-alcoholic drinks from 12.5% to 20%. Reflecting these pressures, shares are down by over 45% over the last 12 months with the stock close to testing support at the March 2020 lows.

ASTON MARTIN

Tobias Moers is standing down as CEO of Aston Martin (LSE:AML) and is being replaced with immediate effect by ex-Ferrari boss Amedeo Felisa, who the company said will ‘significantly strengthen the senior leadership team’. The automaker reported a first quarter pre-tax loss of £111.6 million, widening from £42.2 million in the same period last year but kept is 2022 guidance unchanged.

Aston Martin has been struggling with uncertainties stemming from the war in Ukraine, Covid lockdown measures in China as well as materials cost inflation and supply chain problems. Having said that, the company insists that retail customer demand is robust with GT/Sports models sold out this year.

Having been in the top job for less than two years, Moers has struggled to breathe life into Aston Martin’s share price. The carmaker is betting on the experience of Felisa to steer its share price in a more favourable direction, as Aston Martin focuses on its arduous journey towards hybridisation, carbon neutrality and ultimately full electrification.

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