It's a busy day both here and in the States, with plenty of significant share price movement. Our head of investment rounds up the big news stories.
European markets have opened flat, with the FTSE 100 managing to eke out a very modest gain. British Airway’s parent company International Consolidated Airlines Group SA (LSE:IAG) is flying at the top of the UK index. Meanwhile, BAE Systems (LSE:BA.) is staging gains after it was reported that Germany and the US are planning to send tanks to Ukraine.
UK producer inflation fell to a nine-month low, with factory gate prices rising by 14.7% in December versus 16.2% in November with petroleum equipment helping to drive the figure lower. Month-on-month, producer prices rose by 0.8% in December, the biggest drop since April 2020.
Australia’s annual inflation rate hit 7.8% in the fourth quarter of 2022, topping analysts’ expectations to reach the highest level since the first quarter of 1990, driven by higher food and fuel prices.
Wetherspoon (J D) (LSE:JDW) reported a 13.1% jump in like-for-like sales in the 25 weeks to 22 January versus the same period a year ago and 0.7% lower than the same period pre-pandemic. Free cash flow is expected to be much higher than profits because of its sale of interest rate swaps in 2022, resulting in a cash inflow of around £170 million. It also sold 10 pubs and opened two during the period, resulting in a cash inflow of £2.9 million. Net debt stands at £745 million, £60 million lower than before Covid.
Tim Martin has long campaigned about what he sees as an unfair tax policy differential between supermarkets versus pubs and restaurants. The former pay zero VAT on food sales whereas the latter pay 20% allowing supermarkets to subsidise the consumer price of beer, undercutting pub chains like Wetherspoons.
Wetherspoons had a tough time during the pandemic when pubs and restaurants were forced to close. But the pub chain has benefited from the post-pandemic return to pub culture, the football World Cup and the Golden Quarter’s key festive drinking season. Headwinds from inflation remain with the elevated costs of energy, wages, food, and drinks.
While shares are down more than 45% over the past year, the stock has been regaining ground over the past month, staging a rally of around 9%.
FOX, NEWS CORP
Media mogul Rupert Murdoch and his son Lachlan Murdoch have abandoned plans to merge their broadcast and publishing businesses, Fox Corp Class A (NASDAQ:FOXA) and News Corp Class A (NASDAQ:NWSA). The two empires originally spit in 2013 but it was suggested last year that they may join forces once again. It is understood that several major shareholders opposed the merger, with News Corp commenting that it was ‘not optimal’ at this time in a statement released on Tuesday. Perhaps the deal was also an attempt at succession planning by the 91-year old Murdoch resulting in pushback from stakeholders.
Shares in News Corp have gained around 25% since the news was first reported in October, which would have made it more expensive for Fox to participate in the merger, potentially another factor as to why the deal has been dropped. Shares in Fox have also had a strong start to the year, rallying by more than 8% since the beginning of January.
Meanwhile, News Corp is also in talks to sell its stake in the real estate business Move to CoStar for around $3 billion. Move was acquired back in 2014 in an attempt to help News Corp diversify.
Microsoft reported a mixed set of results, with earnings per share beating expectations, but revenue missed. Sales guidance for the current quarter also came in below analysts’ forecasts, with the tech giant aiming for between 50.5 billion and 51.5 billion dollars in fiscal third quarter sales, partly because of foreign currency effects.
Microsoft’s Intelligent Cloud business just about managed to beat expectations but only modestly, with revenue up 18%. It is facing a 1.2 billion dollar bill to pay for its 10,000 job cuts announced last week as part of a wider trend within the tech sector to make staff cutbacks amid the economic downturn.
While shares initially rallied after-hours, the stock closed the post-market session lower as investors weighed up improved earnings and strength in its cloud division against disappointing revenue guidance.
After a tough 2022 when Microsoft shed around 30%, the stock is trading roughly flat so far this year, underperforming Apple Inc (NASDAQ:AAPL) and Amazon.com Inc (NASDAQ:AMZN) which are up by more than 12% each as well as the Nasdaq 100 which has enjoyed a strong start to 2023.
Amazon workers are staging their first ever UK walkout today in Coventry in a dispute between members of the GMB Union and the tech giant over pay and conditions. Workers want to be paid £15 an hour and are currently offered between £10.50 and £11.45 depending on location. Amazon employees are adding to the slew of worker walkouts across the UK in many industries as inflation eats away at take-home pay.
In August, Amazon offered workers a measly 50p per hour pay increase. The two sides are in a stalemate with workers struggling with the cost-of-living crisis which is reaching boiling point, while Amazon has been trying to slim down its costs with little desire to increase them.
While Amazon fared extremely well during the pandemic thanks to the e-commerce boom and surge in parcel deliveries, the return to physical stores post Covid along with soaring inflation meant 2022 was a tough year for tech all round. Earlier this month, CEO Andy Jassy said he was planning to axe around 18,000 jobs to weather the tough economic times, a move that has helped to instil confidence among investors, reflected by its shares which are up by more than 12% year-to-date in stark contrast to last year’s slide.
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