Must read: FTSE 100, InterContinental Hotels Group, Chinese rate cut
Our head of investment rounds up the morning's big news.
20th February 2024 08:54
by Victoria Scholar from interactive investor
GLOBAL MARKETS
European markets have opened mixed, with the FTSE 100 trading in the red dragged down by miners like Anglo American (LSE:AAL), Fresnillo (LSE:FRES), Rio Tinto Registered Shares (LSE:RIO) and Glencore (LSE:GLEN).
InterContinental Hotels Group (LSE:IHG) is also towards the bottom of the index despite strong earnings. Barclays (LSE:BARC) meanwhile is leading the charge after earnings, up over 5%, lifting other stocks in the sector like NatWest Group (LSE:NWG) and Lloyds Banking Group (LSE:LLOY) towards the top of the leaderboard.
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Overnight, the People’s Bank of China cut its five-year loan prime rate by 25 basis points, more than analysts expected, and the largest reduction on record. This was the first cut since June. Meanwhile, it kept its one-year rate unchanged at a record low of 3.45%. However, the decision did little to boost markets.
Brent crude is trading around a three-week high, supported by Middle East supply concerns and hopes of stronger demand from China as the authorities in Beijing take action to support its struggling economy.
Stateside, focus is on fourth-quarter earnings from Walmart Inc (NYSE:WMT) today, a bellwether for the strength of the US consumer. Year-to-date its shares are up almost 7% already.
INTERCONTINENTAL HOTELS GROUP (IHG)
IHG is planning to return more than $1 billion to shareholders, including a newly launched share buyback programme worth $800 million as well as its dividend.
Meanwhile, the owner of Holiday Inn and Crowne Plaza reported global revenue per available room of 16.1% year-on-year, beating analysts’ expectations for 15.7% and 11% ahead of the 2019 pre-Covid peak.
Adjusted operating profit came in above $1 billion for the first time and the group is targeting profits of about $2 billion over the next five years.
A better-than-expected top and bottom-line performance as well as impressive plans to return cash to shareholders have all been fuelled by a strong performance in 2023, with impressive travel demand across all of its markets. These results are a major win for its new CEO Elie Maalouf, an IHG veteran who took to the top job in July after leading the Americas region for close to a decade.
After the pandemic period which destroyed demand in the travel industry, IHG continues to enjoy the release of post covid pent-up demand, particularly from Asia. Despite pressures from the higher cost-of-living, its relatively affordable hotel chains continue to attract customers who have clearly been prioritising travel spending over other discretionary items, a trend that has also been seen in terms of strong demand across the airlines.
Despite an impressive update today, shares are trading lower this morning, giving back some gains after rallying ahead of the release. The stock is still up around 10% year-to-date and around 40% over the past 12 months.
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