Must read: US inflation data, Wetherspoons, Uber, Compass

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

GLOBAL MARKETS 

European markets are trading flat to modestly higher. The FTSE 100 is in the green, with Melrose Industries (LSE:MRO) and Compass Group (LSE:CPG) at the top of the UK index. The pound is appreciating against the US dollar and the Japanese yen ahead of the Bank of England’s rate decision tomorrow. 

New York Fed President John Williams suggested it is premature to conclude that the rate hiking cycle is over in the US. He said, "we haven’t said we are done raising rates" adding "if additional policy firming is appropriate, we’ll do that." This comes ahead of closely watched US inflation data due later today, which will provide clues into the extent to which monetary policy stateside has been successfully taming inflation.

• Invest with ii: Top ISA Funds | FTSE Tracker Funds | Open a Stocks & Shares ISA

Meanwhile, the $31.4 trillion US debt ceiling deadline is drawing closer as President Joe Biden and lawmakers agree to further talks. 

Later today, Google will host its annual I/O developers conference in California, with AI likely to be the key topic of discussion.

JD WETHERSPOON 

Wetherspoon (J D) (LSE:JDW) reported a 12.2% increase in third-quarter (13-week period to 30 April 2023) like-for-like sales versus 2022 and a 9.1% jump versus pre-pandemic. 

The pub chain said Easter week sales were the highest-ever and sales in the current financial year are likely to reach a record high. Wetherspoons said the first bank holiday was ‘exceptionally strong’, but the Coronation weekend suffered from a quiet Saturday, possibly because of greater spending in supermarkets instead of pubs. Year-to-date Wetherspoons has opened three pubs and closed 21, resulting in a net cash inflow of £4.7 million. 

Chairman Tim Martin said Covid restrictions have had "more profound and longer-lasting consequences" than most predicted. He also said that inflation "remains a more intractable issue."

Wetherspoons has been battling with a softening consumer and rising costs amid the backdrop of labour, energy and food inflation. These have been putting further pressure on the business after the pain of the pandemic when lockdowns meant pub chains were forced to close. To offset these headwinds, Wetherspoons has been focusing on streamlining its trading estate, with 21 pub disposals and a further 30 pubs on the market. 

Last year was extremely tough for Wetherspoons which saw its shares fall sharply and it recorded a £26.1 million loss. However, since the lows in the final quarter of 2022, shares have been in a cheerier mood with the stock up over 70% year-to-date as Covid drifts to the rear-view mirror, its pub disposals generate cash inflows, and thanks to growing hopes that inflation will finally start to ease.

UBER 

Uber Technologies Inc (NYSE:UBER) is launching flight bookings within its UK app. According to the Financial Times, it is unveiling a domestic and international flight booking tool which will launch in the coming weeks. It comes after Uber recently announced a new feature allowing customers to book Eurostar tickets.

Uber is test driving flight booking in the UK, a key market for the ride hailing app outside the US borders. CEO Dara Khosrowshahi clearly has ambitious plans to shift Uber beyond just taxis and food delivery, with the goal of becoming a travel ‘super app’, servicing all travel needs for the consumer at competitive prices. There are cross selling opportunities whereby Uber could offer taxi or food delivery discounts to air travel or Eurostar customers, enticing users to remain within the app’s ecosystem. 

After last year’s tech sector sell-off which punished Uber, shares have been regaining ground since the summer trough last year with Uber up more than 60% in the past 12 months and up over 50% year-to-date.

COMPASS 

Compass reported half-year underlying operating profit of £1.05 billion versus £744 million year-on-year. It also raised its forecasts for full-year profit, revenue, and margins. Plus, it is returning cash to shareholders through a share buyback programme of up to £750 million. 

The food catering business has benefitted from the restoration of economic normality post Covid. Food services demand has sharply increased thanks to a revival in events as well as the return to offices and universities. On top of that, given the sluggish macroeconomic backdrop, businesses are increasingly outsourcing their catering needs rather than hiring more staff, allowing companies to keep costs low and remain nimble in case of further economic pressures, boosting demand for Compass’ outsourced services. 

Shares in Compass are trading higher today, extending their one-year gains to over 30%.