Must read: Glencore, UK government borrowing, Heathrow, Tate & Lyle

GLOBAL MARKETS

The FTSE 100 has opened on a negative note, underperforming other European indices such as the DAX and the CAC which are roughly trading flat. HSBC Holdings (LSE:HSBA) is the worst-performing stock on the UK blue-chip index today, trading down nearly 7%, on track for its biggest one-day drop since March 2020 after taking an impairment hit on China’s Bank of Communications. Glencore (LSE:GLEN) is also struggling, down over 5% after earnings fell sharply last year on the back of weaker commodity prices. Another miner Rio Tinto Registered Shares (LSE:RIO) is languishing near the bottom of the FTSE 100 after reporting a 12% drop in underlying earnings.

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In the US, after a strong quarterly scorecard from Walmart Inc (NYSE:WMT) yesterday, attention turns to results from NVIDIA Corp (NASDAQ:NVDA), the AI proxy play and the standout stock market winner of late. According to Bloomberg, options pricing implies a more than 10% move in the chipmaker’s shares after it reports in either direction. US futures are pointing to a weaker open at lunchtime.

UK PUBLIC SECTOR NET BORROWING

UK public sector net borrowing excluding public sector banks hit £16.7 billion in surplus in January, more than double the figure from January of last year and the largest since monthly records began in 1993. Meanwhile, government borrowing hit £96.6 billion in the first 10 months of the financial year, better than the official OBR forecasts.

Tax receipts are typically highest in January due to self-assessed taxes, which normally results in a surplus at the start of a new year. Borrowing in the year to January is also down versus the same period last year. Government spending was lower without last year’s energy support schemes, even though expenditure on public services and benefits went up. Plus, the recent reduction in the RPI inflation rate reduced interest payable on government gilts.

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This is a win for the Treasury and could provide some wiggle room for Chancellor Jeremy Hunt to deliver some vote-winning giveaways in the Budget next month. However, given the government’s focus on bringing down inflation and fiscal discipline he’s unlikely to offer any huge increased spending or tax-cutting prizes. Some studies suggest he’s only likely to have between £10 billon and £23 billion to play with, a small fraction of the government’s total budget.

HEATHROW

Heathrow reported an adjusted pre-tax profit of £38 million in 2023, swinging from a loss of £684 million year-on-year. This is the first profit reported by the London airport in four years since before the pandemic which severely damaged the international travel industry. Meanwhile, it anticipates record passenger numbers this year of around 81.4 million up from 79.2 million in 2023.

Heathrow enjoyed particular strength in transatlantic routes with New York JFK its most popular destination, serving over three million passengers for the first time since 2019. It also enjoyed a significant rebound in the Asia-Pacific region. Christmas was particularly strong for Heathrow – in fact the airport enjoyed its busiest ever December.

While cost-of-living pressures continue to hurt consumers amid the backdrop of elevated prices and higher interest rates, it looks like individuals and families continue to prioritise travel over other luxuries where possible, even in the face of higher air fares. February will be the next major test for Heathrow as a gauge of demand over the typically busy half term period following the seasonal post-Christmas lull.

TATE & LYLE

Tate & Lyle (LSE:TATE) reported a 4% drop in third-quarter revenue year-on-year and said annual revenue is likely to come in ‘slightly’ below last year’s figure. However, it kept its full-year core profit forecast unchanged at between 7% and 9% growth.

Volumes and revenues suffered within food and beverage due to weaker customer demand and customer de-stocking. It has seen customers delaying orders into the next calendar year amid the weak macroeconomic backdrop. It has also seen reduced inflation pass through. However, it is more optimistic about this year, forecasting a return to volume growth.

Shares in Tate & Lyle are under pressure today, down by over 1%, extending its one-year slide to nearly 24%. Despite this, most analysts remain optimistic towards the stock, with six buy recommendations versus 2 holds and zero sells and an average price target up 46% from the current share price.