Must read: Italy banks windfall tax, China data, UK retail sales, IHG

GLOBAL MARKETS

European markets have opened in the red, driven by banks and miners, with Glencore (LSE:GLEN) near the bottom of the FTSE 100 after first-half earnings slumped on the back of weaker commodity prices. 

Banks are under pressure across Europe after Moody’s cut its credit ratings on 10 small to mid-sized US banks, and warned it may do the same for some of the larger lenders such as Bank of New York Mellon Corp (NYSE:BK) and State Street Corporation (NYSE:STT) which have been placed on review for a possible downgrade. 

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Italian banks such as Intesa Sanpaolo (MTA:ISP), BPER Banca SpA (MTA:BPE) and UniCredit SpA (MTA:UCG) are falling particularly sharply after the government approved a 40% windfall tax on the sector for 2023. Banks have enjoyed a major tailwind from rising interest rates with the government looking to redistribute those earnings towards those who are struggling with expensive mortgage payments. 

The Euro Stoxx banks index is on track for its worst session since March.

China reported disappointing trade data for July. Exports fell 14.5% year-on-year to a five-month low, below analysts’ expectations while imports dropped by 12.4%, also missing forecasts, representing the fastest drop since January. The data weighed on Chinese markets overnight with the Hang Seng and the Shanghai Composite under pressure. 

Germany’s inflation rate hit 6.2% in July, falling from 6.4% in June but above May’s 14-month low of 6.1%. Inflation in Europe’s largest economy is showing signs of easing but remains sharply above target. 

UK BRC-KPMG RETAIL SALES 

The UK BRC-KPMG retail sales monitor increased by 1.5% in July, down from 2.3% in the same month last year and below the three-month average of 3.5%. Between May and July, food sales rose by 8.4% while non-food sales fell by 0.5%. 

Wet weather in July reduced the incentive for consumers to visit their high streets and lowered their appetite for summer clothes shopping. With inflation finally starting to come down. This also led to lower sales in July. Online sales were hit particularly hard, falling 7% year-on-year, with consumers reluctant to pursue e-commerce, preferring to buy through physical stores instead now that they are back up and running post Covid. Food spending remains strong driven by the backdrop of particularly high inflation across this category while non-food sales suffered amid broader macroeconomic weakness.  

With expensive mortgages and other bills as well as falling real wages, consumers are feeling the squeeze, prompting retail businesses to offer attractive promotions to entice shoppers. But lower prices are having a dampening effect on overall retail sales and margins.

INTERCONTINENTAL HOTELS GROUP 

InterContinental Hotels Group (LSE:IHG) reported a 24% jump in revenue per available room (RevPAR) in the first half and 17% in the second quarter. It expects further positive RevPAR growth in the second half of the year. 

The owner of Holiday Inn and Crowne Plaza reported first half operating profit up 27% to $479 million. It raised its dividend and said that, together with its share buyback, it is on track to return around $1 billion to shareholders in 2023. 

After more than 30 years with the company, and six years in the top job, Keith Barr stepped down as CEO at the end of June, with Americas regional chief Elie Maalouf taking over. These are big boots to fill after the success of Barr’s period at the helm, but Maalouf’s leadership begins at a time when the industry is enjoying an impressive rebound from the painful Covid era, which is helping him get off to a good start. 

Despite pressures from inflation, weak global growth, and the cost-of-living crisis, IHG has enjoyed robust leisure demand for travel across all markets. Many consumers are maximising the opportunity to go on holiday abroad, prioritising this over other discretionary spending now that pandemic travel restrictions have ended around the world.   

IHG is up around 19% year-to-date, enjoying a strong rally so far in 2023 but is lagging US rival Marriott.