- FTSE 100 opens in negative territory ahead of crucial central bank meetings this week.
- Cautious confidence is returning to the UK according to the Lloyds Bank Business Barometer.
- Ryanair posts record profits for the third quarter, boosted by pent-up demand for travel.
- Unilever names its new CEO as Hein Schumacher, the boss of a Dutch dairy giant
- US futures point to a lower open for Wall Street ahead of crunch Fed meeting
Caution About Interest Rate Decisions
Caution is reigning over markets at the start of a crucial week in terms of central bank policies, with decisions on interest rate hikes due. The FTSE 100 has opened down in early trade with commodity stocks lower as concern still swirls about the global economy and what the path of rate rises.
Cautious confidence is returning to the UK, driven by a much more upbeat reading for the wider economy, sentiment which has already been washing through financial markets and is set to continue in early trade today. The Lloyds Bank Business Barometer shows pessimism is ebbing away, as inflation is starting to trend lower despite the expectations of a fresh rate hike from the Bank of England on Thursday.
Overall confidence increased five points to 22% this month, with 46% of firms expecting stronger trading ahead. There are hopes that with this renewed optimism, firms will start investing to grow their businesses to help kick-start growth in the wider economy.
The fight for talent has been made a little bit easier for Ryanair Holdings plc (NASDAQ:RYAAY) and easyJet plc (LON:EZJ) who are both on standby to scoop up staff from Flybe which collapsed over the weekend.
Ryanair is flying high on pent-up demand for travel as people still wanted to satisfy their wanderlust over the last three months of 2022, despite the cost-of-living crisis raging. It pushed up profits to a record for the third quarter and there are no signs of sales slowing down. The numbers sailed past expectations, with profits jumping to EUR 211 million.
Spring and Summer bookings surged to record levels in the cold dark days of mid-January as people under blankets on the sofa dreamed of a spot on the sun lounger, and snapped up seats. Already tourists from Asia have started to return, fuelling demand and there are hopes that the growing optimism as infection rates slow, will see more high-spending travellers from China taking their seats, and buying the lucrative add-ons.
Unilever Names CEO
Unilever plc (LON:ULVR) has been managing to navigate through the turbulence pretty adeptly, and the appointment of a new CEO, Hein Schumacher has been greeted positively by the market, in expectation he will help steady the ship further. He’s the current CEO of the Dutch dairy and food giant, FrieslandCampina, so he’ll be seen as both a safe pair on hands and a fresh injection of ideas for the company.
Unilever has been proving resilient, by pushing record price hikes onto consumers but there will come a limit and brand pulling power alone won’t sustain this indefinitely. Already volumes are falling slightly and at the same time the company is having to spend hefty sums on marketing to keep products front and centre in customers minds.
Although rate rises are causing the US economy to slip up, hopes have come in flurries that it will still have a soft landing. But there is nervousness ahead of the crucial Fed meeting this week, and US futures reflect this with the S&P 500 expected to open lower.
The interest rate snowball is gathering speed, and its squashing down demand in its path. The core Personal Consumption Expenditures Price Index, increased 4.4% in December, the lowest rise since October 2021. Given that the Fed’s preferred measure is showing signs of slowing, and consumer spending fell again, the expectations are that a 0.25% rise is on the cards on Wednesday.’’
Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown