European markets opened just above the flatline following a lacklustre session on Wall Street, but have since moved lower, with the major averages on track to end September in the red, as the message of higher for longer interest rates takes its toll on stocks and bond markets. The FTSE 100 is underperforming, dragged down by Barratt Developments (LSE:BDEV) on ex-dividend day and Phoenix Group Holdings (LSE:PHNX) after its interim financial report.
Focus is on the latest US GDP figures today for clues into the strength of the US economy. It comes after Bank of America’s chief executive Brian Moynihan said he anticipates a ‘soft landing’ stateside with the economy likely to stave off a recession.
Oil markets continue their upward climb with Brent crude trading above $97 a barrel, with another tailwind provided by data from the EIA which reported a sharp drop in US crude stockpiles of 2.2 million barrels, adding to concerns about a supply deficit in the market. Underlying oil price gains have catapulted Shell (LSE:SHEL) and BP (LSE:BP.) towards the top of the FTSE 100.
Zoopla said enquiries about properties listed on its website rose by 12% over the past four weeks, suggesting that the worst could be over for the UK’s ailing housing market.
A combination of the back-to-school season, disinflation, soaring rents, cooling house prices, and an improvement in mortgage offers, have prompted potential buyers to revisit the property purchase market. With the Bank of England keeping rates on hold and dwindling demand for borrowing, mortgage brokers are having to price their rates more competitively to attract customers.
Year-on-year property enquiries are still down, and mortgage rates are up, but dynamics have become slightly more favourable for potential mortgage holders in recent weeks. Seasonally, September is typically seen as a good month for the property market after the end of the summer lull and before the festive season kicks in, prompting more buyers to strike while the iron is hot, particularly with house prices dropping at their fastest pace in 14 years in August, according to Halifax.
888 Holdings (LSE:888) has reduced its annual core profit forecast and said third-quarter overall revenue is expected to drop 10% to around £400 million. Adjusted core profit margin for the full year is now also forecast to come in lower at 18-19% versus previous guidance for 20%. This is partly because of customer friendly sports results as well as compliance changes in dotcom markets as regulatory headwinds take their toll.
Reflecting the downgrades, shares in the bookmaker are trading sharply lower by around 14%, wiping out some of its year-to-date gains. Shares are now up by around a more modest 8% this year, continuing to pull away from the 2023 highs. Other stocks in the sector like Entain (LSE:ENT) and Flutter Entertainment (LSE:FLTR) are also under pressure on that back of 888’s announcement.
MITCHELLS & BUTLERS
In an encouraging update, Mitchells & Butlers (LSE:MAB) reported like-for-like sales in the fourth quarter up by 9.7%, with ‘sustained growth in both food and drink volumes.’ The pub chain said cost headwinds are abating and remain at the bottom end of its previously guided range. It said trading continues to be strong, predicting that the current year outturn will come in at the top end of consensus expectations.
Shares have enjoyed a strong rebound this year, rallying by over 50%. However, this fails to capture the broader long-term weakness - its share price is still struggling to regain its pre-Covid levels. M&B is trading sharply below the highs seen in 2019 just before the onset of the pandemic. A combination of lockdowns and travel restrictions followed by the revival of post-Covid inflation and cost of living pressures have punished the stock.
Shares in Peloton Interactive Inc (NASDAQ:PTON) surged over 15% in the post-market session after it announced a five-year partnership deal with Lululemon. Peloton will provide content for Lululemon’s exercise app and in return, Lululemon will become the main sportswear partner of the at-home bike and treadmill business.
Peloton was a major stay-at-home winner during the pandemic when gyms and exercise classes were out of bounds and consumers stocked up on at-home fitness equipment. However, since the post-pandemic return to economic normality, shares have faced heavy selling pressure, with investors struggling to understand where the next wave of demand comes from. In a major fall from grace, the stock price has tumbled from its all-time high of $167.42 in January 2021 to just over $5 even after the 15% jump.
The tie-up between Peloton and Lululemon feels like a healthy strategic fit. Peloton can gain access to Lululemon’s fitness-engaged customer userbase, while Lululemon can promote its fashionable athleisure collection via Peloton’s influential instructors. However, while we have seen a bounce in Peloton’s shares, the deal isn’t likely to be enough to allow the shares to revisit its Covid-era hysteria with demand for at-home exercise hardware still in the doldrums.
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.