Weekly review

The FTSE 100 ended the week 156.61 points lower, closing at 7,387.94 on Friday.

Equity view

Insurance company Beazley said on Friday that 2022 had "started well", with both gross premiums written and premium rates on renewal business increasing in the first quarter. Beazley stated gross premiums written had increased by 27% to $1.22bn, while premium rates on renewal business increased by 17% year-on-year - ahead of 2021's 16% Q1 growth. Year-to-date claims were also said to be "better than expected" but cautioned that initial estimates of exposure to the Russia-Ukraine conflict, excluding aviation, would likely be somewhere in the vicinity of $50.0m net of reinsurance.

Promotional merchandise distributor 4imprint said it expected annual operating profit to be above forecasts as revenue was on track to hit a better-than-expected £1bn. The company on Friday said that total order counts in its primary North American business were 11% above pre-Covid pandemic 2019 levels. Average order values were 14% above 2019, resulting in overall demand revenue of 27% above the same comparative.

Spirent Communications hailed continued strong momentum in the first quarter on Friday, reporting solid growth in the order book and backing its full-year expectations. In the period from 1 January to the end of March, the company’s order book grew 18%, with strong growth in Hyperscalers and significant new 5G contract wins.

Holiday Inn-owner InterContinental Hotels Group said on Friday that it had seen "very positive trading conditions" in the first quarter, with travel demand continuing to increase in almost all of its key markets. InterContinental Hotels said first-quarter group revenue per available room was up 61% against 2021 levels and hit 82% of 2019's pre-Covid level, while average daily rate was 27% higher than twelve months earlier and in line with 2019.

British Airways owner IAG said it expected a return to profits in the second quarter after reporting narrower losses in the first three months of the year as demand continued to recover from the Covid pandemic. The company, which also owns Aer Lingus and Iberia, posted an operating loss of €731m compared with a loss of €1.07bn a year earlier. However, the figure missed estimates of a €510m loss, sending shares in IAG lower 8% lower.

Aerospace company BAE Systems said on Thursday that first-quarter trading was in line with expectations, with strong order intake and good operational performance being maintained throughout the period. BAE Systems stated full-year 2022 guidance across all metrics was unchanged despite ongoing pressures on its supply chains, delivery lead times, and people resourcing. Sales were projected to rise 2-4% year-on-year, while underlying earnings were seen growing 4-6% against 2021.

Hikma Pharmaceuticals cut guidance for its generics business on Thursday, citing a delay to a drug launch. The company noted that Jazz Pharmaceuticals now expects to launch a generic version of narcolepsy treatment Xyrem in late 2022 or possibly even January 2023.

UK retailer Next maintained annual guidance after first-quarter sales rose on the back of store re-openings as Covid restrictions eased. The company on Thursday said full-price sales in the 13 weeks to April 30 rose 21.3% against a weak comparative last year when its stores were shut during pandemic lockdowns. Store sales in the period were up 285%.

Housebuilder Barratt Developments said on Thursday that it was on track to meet its expectations for the year as it highlighted strong demand. In an update for the period from 1 January to 1 May, the company said forward sales were £4.38bn versus £3.70bn the year before. Net private reservations per active outlet per average week were 0.93, up from 0.83 a year earlier and Barratt delivered 4,625 total home completions during the period, down from 4,481 a year earlier. This took the total for the year to date to 12,692.

Investment group Melrose Industries said on Thursday that recent trading has been in line with full-year expectations, with its aerospace division experiencing continued growth. Melrose Industries stated that although like-for-like sales were up 6% in its aerospace unit, trading in its automotive and powder metallurgy wings remained constrained by supply, with combined like-for-like sales down 4%.

Bookmaker Flutter Entertainment saw group revenues grow in the three months ended 31 March as the number of average monthly players rose by 15% to 8.85m. Flutter said on Wednesday that total revenues had grown 5% year-on-year to £1.56bn, with sports revenue growing 4% to £930.0m and gaming revenues up 8% to £636.0m.

Luxury car maker Aston Martin Lagonda reported a rise in adjusted core earnings on Wednesday amid strong retail demand and announced the appointment of former Ferrari boss Amedeo Felisa as chief executive. Adjusted EBITDA increased for the three months to March 31 by 18% to £24.4m. Losses before tax widened to £111m from £42.2m.

HSBC said on Wednesday that it has launched its $1bn planned share buyback. The bank said Merrill Lynch has been appointed to conduct the buyback, in which a maximum of just over 2m shares can be repurchased. The buyback process will end no later than 31 August.

Insurance company Direct Line reported lower gross premiums for the first quarter as new rules on pricing practices impacted results. The company on Wednesday said overall premiums fell 2.4% to £734m, as revenues decreased across its motor, home, and rescue businesses.

Pub chain Wetherspoons posted a dip in third-quarter sales on Wednesday as it warned over rising costs but said it expects to break even this year as sales improve slowly. In the 13 weeks to 24 April, like-for-like sales fell 4% versus the same period in 2019, while year-to-date LFL sales were down 6.2%. In the last two weeks of the period, LFL sales were "slightly positive", it said.

Facilities manager Mitie Group has acquired 8point8, a British design and construction services provider for mobile telecommunications tower infrastructure, for £10.0m in cash, funded through existing facilities. Mitie said on Tuesday that with the growing demands of the UK's 5G rollout, the addition of 8point8 to the group was expected to be accretive to earnings. For the 12 months ended 31 December, 8point8 generated combined revenues of £18.3m and pre-tax profits of £600,000, with gross assets of £6.2m. Revenue was also expected to "grow significantly" over the next three-to-five years as the mobile telecoms industry replaces the currently installed Huawei infrastructure with a full 5G network.

Avast said it expected annual revenue to slow and margins to be squeezed amid a "challenging global backdrop". Organic revenue rose 3.6% to $230.8m in the first quarter as adjusted earnings before interest, tax depreciation and amortisation fell 4.3% to $127.9m.

East Europe-focused budget airline Wizz Air reported a 542% annual rise in April passenger traffic and said it had added new routes from Cardiff and Luton in the UK. The carrier flew more than 3.6 million passengers last month against 564,634 in April 2021, with a load factor of 83.4% compared with 59.2% a year earlier.

Plus500 said it performed very well against its main targets so far in the current financial year and had made more progress against its strategic goals. The online trading platform said it would continue to invest in growth through spending on projects and acquisitions. In a trading statement before its annual general meeting Plus500 said it had bought back about $105m shares in the year to date, reflecting a preference for buybacks from some of its major investors.

Card Factory said on Tuesday that it swung to a full-year profit, with revenues boosted by a recovery in store trading following the easing of Covid restrictions, as it struck an upbeat note on the outlook. In the year to 31 January 2022, the retailer swung to a pre-tax profit of £11.1m from a loss of £16.4m the year before, with revenues up 28% at £364.4m. This was driven by a steady recovery in store performance following the easing of lockdown restrictions, alongside an online performance "significantly ahead" of pre-pandemic levels, it said.

Economic news

UK construction sector growth slowed in April as rising costs and economic uncertainty dented demand, according to a survey released on Friday. The S&P Global/CIPS construction purchasing managers’ index fell to 58.2 from 59.1 in March, marking the worst rate of growth since January but coming in above expectations for a reading of 58.0. A reading above 50.0 indicates expansion, while a reading below signals contraction.

UK house prices grew 1.1% month-on-month in April to another new record, according to Halifax's house price index, but the rate of house price growth was projected to slow as incomes remained squeezed. The average UK house price rose to £286,079 in April, marking a tenth consecutive monthly rise, the longest run since 2016. The rate of annual growth fell slightly to 10.8%, down from 11.1% in March, though Halifax said this partly reflected the strength of the market 12 months ago.

Retail footfall strengthened last month, industry data showed on Friday, as good weather and Easter encouraged consumers to head to the shops. According to the latest BRC-Sensormatic IQ Footfall Monitor, total UK footfall decreased by 13.1% in April compared to the same month three years earlier, pre-pandemic. The figure was better than the three-month average of -15.1%, while in March, footfall fell 15.4% year-on-three-years.

The Bank of England hiked interest rates to 1% on Thursday - the highest level in 13 years - as it looks to tackle surging inflation. The Monetary Policy Committee lifted the key Bank Rate from 0.75% in what was the fourth consecutive rate rise, with six of the nine members voting for a 25 basis points increase, while Jonathan Haskel, Catherine Mann and Michael Saunders were in favour of a 50 basis points hike.

Growth in the UK service sector slowed last month, a closely-watched survey showed on Thursday, as cost pressures built. The S&P Global CIPS UK Services PMI Business Activity Index was 58.9 in April, ahead of both consensus and the flash estimate, of 58.3. It was, however, down on March’s 62.6 and the softest rise in activity since January.

Private new car registrations improved slightly in April but still remained well below pre-Covid levels as demand continued to be impacted by a sharp decline in real incomes and ongoing supply chain disruptions. Registrations increased from the 61,900 recorded in March to 64,900 last month, according to the Society of Motor Manufacturers and Traders, above April 2021's 61.900 print but short of April 2019's 67,800.

London’s long-awaited Crossrail project was finally given an official opening date on Wednesday, although commuters will still need to wait for full-line through service. Transport for London (TfL) said that, subject to final safety approvals, the Elizabeth line would open on 24 May, initially as three separate services.

The number of mortgage approvals in the United Kingdom, an indicator of future borrowing, was broadly flat month-on-month in March at 70,700, according to the Bank of England. March's print, which was only slightly down from the 71,000 recorded in February and still above the 12-month pre-pandemic average, comes as approvals for remortgaging rose to 48,800 and net borrowing of mortgage debt rose from £4.6bn in February to £7.0bn in March.

Prices in UK stores rose at their fastest pace for more than a decade in April as high energy prices and the war in Ukraine pushed up costs for suppliers and retailers, an industry survey showed. Shop price inflation accelerated to an annual rate of 2.7% in April from 2.1% in March - the highest rate since September 2011, the British Retail Consortium said.

The UK manufacturing sector picked up in April, industry research showed on Tuesday, but confidence tumbled as inflationary pressures continued to mount. The S&P Global CIPS UK Manufacturing Purchasing Managers’ Index was 55.8 in April, up from 55.2 in March and above both consensus and the flash estimate, of 55.3. The PMI - a weighted average of five sub-indices - has now risen for 23 consecutive months.

International events

German industrial production fell more than expected in March amid supply chain issues, according to figures released on Friday by Destatis. Production slumped 3.9% on the month following a revised 0.1% increase in February, undershooting expectations of a 1% decline. On the year, industrial output slid 3.5% in March following a revised 3.1% jump the month before.

New unemployment claims rose to 200,000 in the seven days ended 30 April, according to the Department of Labor, up from a revised print of 181,000 in the previous week for the highest reading since mid-February. On a non-seasonally adjusted basis, initial claims slipped 7,164 week-on-week to 196,962, with marked declines in California and Ohio.

Activity in China’s services sector suffered its second-largest drop on record in April amid tightening Covid restrictions, according to figures released on Thursday. The Caixin services purchasing managers’ index fell to 36.2 from 42.0 in March, undershooting consensus expectations for a reading of 40.0. This marked the steepest contraction since February 2020, when the index slumped to 26.5.

German factory orders fell more than expected in March as foreign orders slid, with the war in Ukraine taking its toll, according to figures released on Thursday by Destatis. Orders slumped 4.7% on the month following a revised 0.8% decline in February, missing expectations for a more modest 1.1% decline. On the year, factory orders were down 3.1% in March following a revised 4.3% increase the month before.

The Federal Reserve followed through on its recently accelerated timeline for tightening policy but indicated that even faster rate hikes were unlikely. As expected, the Federal Open Market Committee raised its target range for the Fed funds rate by 50 basis points to between 0.75-1.0% and said that from 1 June it would begin running-off debt instruments from its $8.9trn balance sheet at a monthly pace of $47.5bn.

News surfaced on Tuesday of the Roman Catholic Pope's efforts to try to convince the Kremlin to end the fighting in Ukraine, but to no avail as of yet. At the start of the war, Pope Francis took the unusual step of visiting the Russian embassy before the Holy See with that aim and roughly three weeks later the Vatican's top diplomat was instructed to petition for a meeting in person with President Vladimir Putin.

Private sector employment in the US rose less than expected in April, according to the latest data from ADP. Employment increased by 247,000 from March, versus expectations for a 390,000 jump. Meanwhile, the total of jobs added in March was revised from 455,000 to 479,000.

Eurozone retail sales softened in March, official data showed on Wednesday, missing forecasts. According to Eurostat, the European Union’s statistics office, the volume of retail trade eased 0.4% compared to February, when it increased by 0.4%. Most economists had been looking for a fall of just 0.1%.

The European Union is to ban all Russian oil imports, it was announced on Wednesday, as it looks to tighten sanctions against Moscow in response to the war in Ukraine. Addressing the European Parliament, European Commission president Ursula von der Leyen said a "complete ban" on seaborne and pipeline crude and refined Russian oil would be introduced in the coming months.

Australia's central bank on Tuesday lifted interest rates for the first time in more than a decade, an intervention days before the country goes to the polls in a national election. The Reserve Bank of Australia lifted its official cash rate to 0.35% from the record low 0.10% it had hovered at since November 2020 amid the Covid pandemic. It was larger than the 0.15% rise expected and the RBA also signalled more rises to come.