Must read: UK GDP, Royal Mail, Barclays, Cineworld, UK house prices

Our head of investment looks at the big news attracting interest today.

GLOBAL MARKETS

European markets are trading higher with the DAX up by more than 1% as markets take a pause for breath after a week of heightened volatility and nervousness.

In the final day of trade for the third quarter, beaten up housebuilders are attempting to stage a bounce-back with Barratt Developments (LSE:BDEV) and Persimmon (LSE:PSN) trading at the top of the FTSE 100 after a torrid week for the sector and broader markets. The FTSE 100 looks set to close the month down by around 5% as international investors flee UK equities amid the gilt market’s disorder. The broader FTSE 250 has also been suffering in September and is set to book a monthly loss of more than 10%.

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UK second-quarter final GDP grew by 0.2% improving versus the initial estimate for a contraction of 0.1%, helping the UK economy to avoid a recession at least for now. However, growth remains below its pre-pandemic levels unlike the rest of the G7 nations which have recovered their pre-Covid levels of real GDP.

Royal Mail (LSE:RMG) workers begin a 48-hour strike today, having announced an extra 19 days of industrial action for October and November in the critical run up to Christmas around Black Friday and Cyber Monday.

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BARCLAYS

Barclays (LSE:BARC) has agreed to pay a $361 million settlement to the US Securities and Exchange Commission over its securities selling misconduct disclosed in March. The trading error caused profits to halve in the second quarter due to £1.3 billion of litigation and conduct provisions.

This was the latest in a string of blunders for the British bank. CEO Venkat was brought in eleven months ago to create a fresh start for the embattled lender after former CEO Jes Staley departed following revelations of his ties to disgraced financier and sex offender Jeffrey Epstein. Shares in Barclays are trading higher this morning, amid optimism that the trading mistake can be set to one side now.

Despite relative bullishness towards the banking sector amid the market turmoil on the back of rising interest rates this year, shares in Barclays have failed to inspire investors with the stock down 25% since January. On top of the trading blunder, the British lender has struggled with a sharp slump in deal making that has weighed on its investment bank and a drop in equity trading amid the stock market weakness. This week’s turmoil in UK gilt markets is likely to create another headwind for Barclays in its third quarter results due in October.

CINEWORLD

Cineworld Group (LSE:CINE) reported a first half loss before tax of $364.9 million shrinking from a loss of $576.4 million in the same period last year. The struggling cinema chain said third quarter admissions were below expectations while its cash position dwindled from $354 million in December to $131 million at the end of June.

There were reports this week that Canada’s Cineplex approached Cineworld to acquire its US franchise, Regal Entertainment, sending shares in Cineworld down by 4%. It comes after Cineworld abandoned a planned takeover of Cineplex over two years ago, which is expected to land the UK cinema chain with hundreds of millions of dollars to pay in damages, adding to its recent woes.

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In August, Cineworld confirmed it was considering filing for bankruptcy in the US as it grapples with $5 billion of debt. The company had an extremely tough time during the pandemic with the forced closure of cinemas for many months, Hollywood unable to churn out blockbusters and, the shift in consumer preferences towards home streaming.

Shares in Cineworld are trading higher this morning with investors cheering its shrinking first half loss. However the stock remains almost worthless amid the bankruptcy overhang, trading as a penny stock around 3p per share, a serious fall from grace from its 2019 high above £3 per share.

UK NATIONWIDE HOUSE PRICE INDEX

Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “House prices might finally be coming back down to earth following a meteoric rise in recent history.

“While the pace of house price growth remained robust in September with annual house price inflation just shy of double digits, the recent violent gyrations in the money market, which wreaked havoc on the business models lenders use to price mortgages, could accelerate a more prominent property market slowdown.

“The recent mortgage market turmoil, which has seen lenders pull competitive home loans in anticipation of further interest rate rises, has pushed many wannabe homeowners to the sidelines. While the emergency bond-buying programme launched by the Bank of England on Wednesday could see the return of fixed-rate mortgage deals hastily withdrawn, the affordability squeeze is still set to become more acute, with the cost of living set to intensify and the spectre of higher interest rates set to push up mortgage costs.

“Challenges for first-time buyers to save for a deposit are mounting. Rampant inflation has curtailed purchasing (and saving) power in real terms, while volatile stock markets are hampering efforts to build a large enough deposit. Even those able to raid the Bank of Mum and Dad to bump up their deposit might struggle to afford mortgage repayments.

“The plight of those making a second rung on the property ladder is also important as they are living in homes that many first-time buyers seek to purchase. Runaway property prices and rising mortgage rates have left many of these so-called second steppers struggling to trade up to a bigger home.”