Susannah Streeter, Senior Investment and Markets Analyst at Hargreaves Lansdown:
“Falling oil and copper prices have seen miners and energy giants slip in trading on the FTSE 100 pushing the index into the red but it’s a signal that some of the supply pressures and higher costs weighing on companies are set to ease. Oil prices have dipped to their lowest level in almost six weeks after US stockpiles increased, with forecasts that American producers are ramping up production. Higher inventories of copper in warehouses are also easing concerns about a tight supply of the metal, which was having big implications for the progress of green energy projects, not least the adoption of electric cars given how copper hungry EVs are.
“Royal Mail topped the FTSE 100 leader board with a big bag of revenues, increasing by 7.1% year on year for the first half. Long term recovery for the company looks to be signed sealed and delivered but planned cost savings will still need to stamp out inflationary pressures going forward. House builders are building up to big gains again today, as exuberance around the hot property market continues. Barratt Developments, Persimmon, Taylor Wimpey and Berkeley Group had increased by more than 3% by midday. They are cementing Wednesday’s rise following ONS data which showed another surge in house prices by 11.8% in the year to September. Investors are shrugging off warnings from the European Central Bank about how a bubble is being blown in the Eurozone property market particularly in Germany, Austria and the Netherlands. Ultra-low rates have fuelled a surge in interest in new homes and a race for more space, so far traders don’t seem unnerved by concerns problems could also be piling up in the UK for the future.
“Worries that high covid rates across the Eurozone could act as a drag on economic growth and dent consumer confidence do though seem to be playing on minds with the airline industry struggling to recover from recent falls. Warnings from Jet 2 today that a price war with rivals could dent profits into next year, even though bookings were stronger, also dragged down shares in Ryanair. A combination of cheap tickets and subdued demand is the last thing airlines need right now, as they count on a spring bounce.
“Investors hoping that Carlyle might prove the knight in shining armour to scoop up Metro Bank at an attractive price have been left sorely disappointed after the private equity group walked away from a deal, sending the share price sliding 18%. The challenger was launched to take on the might of the big boys in banking retail, and despite a confident start it has been weighed down with problems, not least accounting issues. But it’s Metro’s real estate footprint which may have proved a cost which stuck in the craw of Carlyle. While other challenger banks have focused on apps and an online presence, Metro has also been locked into long leases in city centres, at a time when footfall in once busy streets has struggled to recover. With other banking upstarts gaining market share, Carlyle may be tempted to look elsewhere, particularly at a time when expected rising interest rates creates the opportunity for banks to increase their earnings substantially. Although there is an outside chance that fresh bidders could come through, for now Metro Bank says it’s still confident in its standalone strategy. But it’s going to be a challenging time ahead for the challenger bank, with the era of open banking spawning many more FinTech entrepreneurs to launch ventures which could steal market share.”