Stocks in Europe are a little lower today as traders await the Federal Reserve update at 7pm (UK time), and the press conference will follow at 7.30pm (UK time). Interest rates are tipped to be kept on hold. It says a lot about the resilience of the equity markets that they have only retreated a little in light of yesterday’s major rally. In recent weeks there has been increasing chatter the Federal Reserve will lay the ground work for rate cuts later this year, and that has assisted stock markets. Given that US unemployment is at a 50-year low, and earnings are outstripping inflation, the Fed might catch out some dealers, and deliver a more neutral update, and should that be the case, we might see stocks pullback from the recent highs.
Berkeley Group (LON:BKGH) posted a 20% drop in full-year pre-tax profit to £775.2 million, which was at the upper-end of market expectations. The firm confirmed that annual revenue ticked up by 4.1%. Houses sold increased by 4.5% and the average selling price rose by 3.1%. Like others in its sector, Berkeley Group have been hit by higher costs as operating expenses increased by 5.2%. Skill shortages and higher building material costs continue to weigh on the industry. Berkeley anticipate that next-year’s profits will decline by approximately one-third, but even if that is the case that should equate to earnings in excess of £500 million. It is clear the boom times are over for now, but the company is likely to remain in robust health. The stock started-off higher on the day, but has since dropped into the red.
Whitbread (LON:WTB) issued a downbeat first-quarter update this morning. Like-for-like revenue per available room in the UK dropped by 6% and the company cited tough competition and a weakened consumer climate for the poor performance. Total UK accommodation sales slipped by 1.5% in the three month period. Even though the company holds a cautious outlook for the UK market, it is still planning on adding between 3000 and 5000 rooms in the UK. The firm can’t fill its existing rooms, so why is it seeking to expand. On the bright side, the new hotel in Hamburg is performing better-than-expected, and the group has plans to keep expending in Germany.
Clydesdale and Yorkshire Banking Group (CYBG) (LON:CYBGC) shares are in demand after the group said it expects to make an extra £50 million in savings from the acquisition of Virgin Money (LON:VM). Keep in mind, the finance house originally expected to make savings of £150 million, and now that target has been upped to £200 million. The bank re-affirmed its 2019 guidance, and the cost savings should help to recoup the £1.7 billion that CYBG paid for Virgin Money last year. The group still aims to be a disruptor to the old guard that have dominated the high street for generations.
Saga (LON:SAGAG) shares fell to an all-time low after the group said the tour business will continue to be hit by political uncertainty in the UK. The company warned that margins will be impacted by ‘competitive discounting’ – this has been a common theme in the travel and retail sectors. Attractive deals to get clients in the door only benefits the consumer, and ends up hurting the shareholder. Saga expects to post an operating loss of approximately £3 million for the cruise division in the first-half.
GBP/USD is a little firmer this morning as the UK inflation forecast met economists’ estimates. The CPI rate slipped to 2% from 2.1%, and the core reading dipped from 1.8% to 1.7%.
EUR/USD bounced back a little in the wake of yesterday’s sell-off, as short covering kicked-in.
We are expecting the Dow Jones to open 30 points higher at 26,495 and we are calling the S&P 500 up 4 points at 2,921.