Must read: housebuilders, UK house prices, 888, Inditex

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

GLOBAL MARKETS 

European markets have opened lower, although the FTSE 100 has managed to hold back above 7,600. 

Overnight, Australia’s first quarter GDP fell to the weakest level in 1.5 years and below expectations while China’s exports slumped by 7.5% year-on-year in May, the first drop since February in another sign of sluggish global growth. 

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US futures are pointing to a softer open after Wall Street closed higher on Tuesday. The Nasdaq led the charge, reaching its best close of 2023, while the S&P 500 touched the highest level since August.

UK HALIFAX HOUSE PRICE INDEX 

The UK Halifax house price index for May came in flat month-on-month and declined by 1% year-on-year, falling short of analysts’ expectations for -0.95%. The average UK property price now stands at £286,532 down a modest £130 from April. 

This was the first time since 2012 that annual house price growth came in below zero, highlighting the strain on the UK property market from the cost-of-living crisis, rising mortgage rates, and a sluggish growth backdrop. Property prices have shed £7,500 on average since the peak last August but are still higher by £25,000 than two years ago. 

Mortgage providers have been increasing their rates in response to the Bank of England’s inflation-combative rate hiking path. Halifax has confirmed that it is among the brokers increasing its prices with two-year deals currently the most popular as borrowers opt for shorter term loans instead of five-year deals pinning their hopes on a medium term drop in interest rates. 

According to MoneyFacts, the average two-year fixed rate mortgage deal costs £35 more a month than it did a few weeks ago after the latest UK inflation rate topped expectations, hitting 8.7%, suggesting the central bank has more work to do to tame inflation.

Housebuilder stocks are under pressure today, with Persimmon (LSE:PSN) at the bottom of the FTSE 100 while Taylor Wimpey (LSE:TW.), Berkeley Group Holdings (The) (LSE:BKG), Land Securities Group (LSE:LAND) and British Land Co (LSE:BLND) also in the red.

888

Shares in 888 Holdings (LSE:888) have surged at the European market open, after Bloomberg reported that a consortium of gambling industry veterans has amassed a 6.6% stake in the owner of William Hill on the belief that its assets are undervalued. The group includes Lee Feldman who is the former chairman of GVC Holdings, now Entain (LSE:ENT) Plc. 

This could mark the beginning of significant changes for 888 including the potential for a C-suite and broader strategic shake-up. Even after this week’s surge, shares in 888 have more than halved in value over a one-year period, in stark contrast to Flutter Entertainment (LSE:FLTR) which is up by more than 70%. This is providing a chance for opportunistic investors to strike while the iron is hot, making the most of its depressed share price. 

888 shares already surged 14% on Tuesday with an even bigger percentage gain today. This has helped the stock swing from a year-to-date loss to a gain of more than 6% since the beginning of January. The consortium provides a vote of confidence in the group and arguably could mark the beginning of a more bullish phase for the stock.

INDITEX 

Inditex - Industria De Diseno Textil SA Share From Split (XMAD:ITX) - reported a 54% surge in first quarter profit. Net profit reached 1.2 billion euros in the three months to April, outpacing analysts’ forecasts for 980 million euros. Sales rose by 13% to 7.56 billion euros, meeting consensus expectations.

The owner of Zara, Massimo Dutti and Stradivarius, is successfully navigating the challenges of a sluggish global growth backdrop and the cost-of-living crisis. Inditex’s competitive pricing continues to draw in customers at a time when many shoppers are refraining from more expensive purchases.

Inditex has managed to pass on some of its additional cost pressures, including loftier wage bills to consumers in terms of higher prices without denting demand, allowing the fashion group to preserve its gross margin at 60.5%. Inditex also started charging online shoppers for returns, which rather than deterring purchases, has provided some financial support, and may actually have encouraged customers to add more items to each shopping basket in order to maximise the small levy. Zara’s in-store technology such as its self-checkout booths have also improved the customer experience, expedited the shopping experience, and minimised queuing times. 

Inditex shares are up significantly today, lifting their year-to-date gain to around 30%, outperforming high street rival H&M - Hennes & Mauritz AB Class B (OMX:HM B) - which is up around 23%. There is a very positive assessment from the analyst community on Inditex with 21 buy recommendations versus 8 holds and just one sell.