Interactive Investor

Must read: FTSE 100 latest, US rates, Flutter, Haleon, Barratt Developments

3rd May 2023 08:47

by Victoria Scholar from interactive investor

Share on

Our head of investment rounds up the morning's big news.

banks lender finance chart 600

EUROPEAN MARKETS 

The FTSE 100 has opened higher, with Pearson (LSE:PSON) and CRH (LSE:CRH) leading the gains. Haleon (LSE:HLN) and Lloyds Banking Group (LSE:LLOY) are in negative territory after reporting updates this morning.  

US markets sold off on Tuesday, with regional banks bearing the brunt of the declines following JPMorgan’s rescue deal for First Republic earlier this week. Comments from the Wall Street giant’s CEO Jamie Dimon saying ‘there may be another smaller one’ referring to a risk of another potential banking collapse ahead, appear to have accelerated the declines, with the SPDR S&P Regional Banking ETF shedding over 6% and PacWest Bancorp (NASDAQ:PACW) and Western Alliance Bancorp (NYSE:WAL) sliding double digits in percentage terms. 

Focus turns to the conclusion of the Federal Reserve’s two-day policy meeting today when the central bank is expected to raise rates by a further 25-basis points, despite uncertainty in the US mid-size banking sector.

US job openings hit a near two-year low in March and the consumer price index for March dropped to 5% year-on-year, slowing for the ninth consecutive period. This suggests the Fed’s hawkish agenda is beginning to take hold in the economy.

FLUTTER 

Flutter Entertainment (LSE:FLTR)’s first quarter average monthly players hit 12.3 million up 30%, with revenue growth up 46% to £2.4 billion. In the US, quarterly revenue grew by 92% on a constant currency basis, with igaming sales gaining 43% and market share rising to 23% versus 21% in the previous quarter. UK and Ireland revenue grew by 17%, with average monthly players up 11%. However in Australia, revenue fell by 4%. 

Flutter is eyeing a possible US listing to grow market share stateside and gain access new US investors, as its attention to the American sports betting market mushrooms. Flutter is among a handful of UK businesses eyeing a New York listing, raising concerns about an exodus of listed businesses from London post Brexit.

In a blow to the UK, Arm Holdings similarly recently decided to list in the US despite British government hopes for a mega tech London IPO. Corporates are drawn to the US market because of its strong liquidity, spreads, and valuations. 

Last week, the owner of Paddy Power and Betfair said it welcomed the new government White Paper on gambling regulation, describing it as a ‘significant moment’ for the sector. The proposals include education and help for gambling addiction, increased affordability checks and extra powers for regulators to tackle illicit gambling websites. The threat of regulation has long been a headwind for the sector. 

Investors have enjoyed very strong share price gains lately, with Flutter up over 90% year-on-year and up almost 40% year-to-date. That's thanks to strong growth in the United States, with the acquisition FanDuel as well as its recent takeovers of Sisal and Tombola elsewhere. 

Flutter is the star performer in the sector versus rivals Entain and 888 which are both in the red over a 12-month period.

HALEON 

Haleon confirmed it expects full-year organic revenue growth to come in at the upper end of its guidance range for 4-6%. First-quarter adjusted earnings per share hit 4.2p, falling short of analysts’ expectations for 5.24p, while revenue reached almost £3 billion, roughly in line with forecasts.  

The consumer health spin-off from GSK (LSE:GSK) has been dealing with squeezed profit margins which fell by 90 basis points on the back of cost inflation. It has been raising prices to offset the challenge of rising cost pressures, with price increases rather than volumes mostly responsible for revenue growth in its biggest regions. However, these price hikes have been insufficient to prevent a bottom line miss.

Nonetheless it reported strong sales growth across respiratory health, pain relief, oral health and digestive health, thanks to demand for drugs during the cold and flu season. It has benefited from strength in China as Beijing unwound its strict anti-Covid lockdown measures.

Since the spin-off last summer, shares got off to a difficult start, reaching a trough in September last year, but the stock has been progressing nicely in recent months, rallying almost 30% over the past six months. But the disappointing earnings are weighing on shares today.

BARRATT DEVELOPMENTS

Barratt Developments (LSE:BDEV) said it is on track to deliver adjusted pre-tax profit in line with current market expectations. At 23 April, total forward sales year-to-date hit £2.96 billion, down sharply from £4.5 billion year-on-year, falling by over a third. 

The Nationwide house price index this week pointed to tentative signs of recovery in the housing market at the chaos around September’s mini-budget shifts to the rear-view mirror. With the Bank of England approaching the peak of its rate hiking cycle, inflation expected to fall this year and the UK’s most pessimistic economic forecasts from last year having unwound, there are hopes for a bounce back in Britain’s housing market, providing a tailwind to the housebuilders sector. 

Shares in Barratt Developments have sharply outperformed the FTSE 100 and rival Persimmon (LSE:PSN) so far this year, gaining over 20% reflecting the growing investor optimism towards the sector.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Get more news and expert articles direct to your inbox