Must read: oil, gold, UK consumer confidence, retail sales, Intercontinental Hotels

GLOBAL MARKETS

Risk-off sentiment continues to grip European markets, with the Stoxx 600 slumping to a seven-month low and DAX, CAC and FTSE MIB shedding around 1% each in today’s session. 

Trading has resumed as normal today on the LSE after an incident temporarily disrupted activity on Thursday. 

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A weak session overnight in Asia has dragged Anglo American (LSE:AAL) to the bottom of the FTSE 100, while safe-haven gold miner Endeavour Mining (LSE:EDV) is at the top of the basket as investors flock to safety assets. The conflict between Israel and Gaza has pushed gold to a three-month high and sparked further gains in the oil market with Brent crude breaking back above $93 a barrel. 

The 10-year Treasury yield rose to 5%, the highest level since July 2007 on Thursday after four straight days of gains. But comments from Federal Reserve Chair Jay Powell helped it pull back from the highs - he signalled that the central bank is likely to keep rates on hold in November, refraining from another hike at its next decision meeting. Nonetheless, Powell reiterated the Fed’s commitment to bringing inflation back down to 2%, warning that it is still too high.

UK GfK CONSUMER CONFIDENCE 

UK GfK October consumer confidence fell to -30 from -21 in September, missing forecasts for an improvement to -20. The sentiment reading slumped to the lowest level since July amid ongoing nervousness among consumers about the state of the economy and their personal finances. 

With inflation proving to be stickier than expected coupled with ‘higher for longer’ interest rates, cost-of-living pressures continue to hurt consumers who are dealing with expensive mortgages, high rental costs and hefty household bills for food, energy and petrol. On top of that, job vacancies are falling at home and abroad, the Israel-Hamas war has sparked growing geopolitical unease.

UK RETAIL SALES 

UK retail sales fell by 0.9% in September, swinging from a gain of 0.4% in August and missing expectations for a drop of 0.2%. Over the three months to September, sales fell by 0.8% versus the previous three months. Retail spending is up 17% versus 2019 but volumes are down 3% highlighting the fact that inflation is responsible for the spending increase in recent years with consumers forced to spend more money to purchase fewer goods. 

The warmer than expected weather conditions in September meant there was less urgency among consumers to stock up on autumn/winter clothing essentials like coats, hats, and gloves. As a result, clothing sales volumes slid by 1.6% while household goods also fell by 2.3%. Offsetting this to some extent was an increase in spending on motor fuel driven by the rise in underlying oil prices between June and September. And the warm weather helped to provide a modest boost to food store sales too. 

Rising prices and broader cost-of-living pressures have prompted consumers to cut back on non-essential shopping  – there was a slump in spending on watches and jewellery for example in September. Today’s figures highlight the sluggish consumer backdrop that is contributing to a weak economy.

INTERCONTINENTAL HOTELS GROUP 

InterContinental Hotels Group (LSE:IHG) issued a mixed trading update, with global revenue per available room up 10.5% in the third quarter year-on-year, with a strong rebound in Greater China after its Covid restrictions came to an end. However, this marked a slowdown from growth of 17% in the second quarter. Growth was driven by China’s post-Covid rebound and an increase in room rates. The Holiday Inn-owner said two of its hotels in Israel remain closed, but it hasn’t seen a slowdown in demand in the Middle East yet. 

While CEO Elie Maalouf who replaced Keith Barr in July said ‘travel demand remained very healthy during the quarter’, he warned that ‘there are macro-economic uncertainties and some short-term financing challenges holding back new hotel development’. 

Shares are trading lower following the mixed report from the hotel group. While price increases have helped support airlines and hotels, the travel sector is grappling with the weak consumer backdrop, with elevated inflation and higher for longer interest rates, elongating the cost-of-living crisis. 

IHG shares are up by around 24% so far this year, but gains have eased off over the last month, as the busy summer season ends and macroeconomic headwinds as well as the Israel-Hamas war dampen risk appetite among investors.