Miners on the front foot, the Restaurant Group slims down, and BMW’s mini boost

by | Sep 11, 2023

  • FTSE 100 opens higher as miners charge higher amid hopes on China.
  • The Restaurant Group shares rise after it confirms it is selling off Frankie and Benny’s and Chiquito’s chains.
  • Boost for electric car industry in the UK as BMW set to unveil production plans for electric mini in the UK.
  • US inflation in focus this week as economy shows labour market strength.
  • UK’s jobs market picture appears to deteriorate with demand for workers slowing according to BDO snapshot.

Susannah Streeter, head of money and markets, Hargreaves Lansdown:

‘’The FTSE 100 has opened on the front foot with miners leading the pack amid hopes that China’s economic troubles could be dissipating. New bank loans increased more than expected in August with mortgages in particular jumping sharply providing relief, given the property sector’s woes. The still weaker pound also helps boost multinationals’ overseas earnings as sterling has failed to gain significant strength against the dollar, amid forecasts the Bank of England will rein in further interest rate hikes.  There is some more hope around for Country Garden, the Chinese property giant groaning under a huge debt burden. Creditors will vote later on extending payments on eight more onshore bonds, after the real estate giant managed to finalise deals on other debt earlier this month. This tinkering while offering short-term relief, doesn’t solve the underlying issues but with bank lending activity rising more sharply than expected, relief is washing around the markets.

Confirmation from The Restaurant Group that it is off-loading a chunk of its outlets to Big Table Group has seen enthusiasm for its shares lift significantly in early trade. It’s been hard going for the Chiquito’s and Frankie and Benny chains, with consumers showing less appetite for middle of the range meals amid the cost-of-living crisis. Its Wagamama brand though with its Asian fusion menu has been hitting the spot with diners the other chains had found hard to reach. Shareholders are clearly hopeful that this significant shift in strategy with a leaner focus on Wagamama, concessions across travel hubs and its pub restaurants business will reap more consistent rewards going forward, without the drag of mid-market flab. The deal comes after the news that the chairman Ken Hanna is stepping down, which was another indication that the Restaurant Group was heading for a big change in direction.

There will be relief for thousands of car workers in the UK today as BMW is set to reveal the details of plans to build two new electric Mini models at its plants near Oxford. Concerns had been rising about the lack of infrastructure in the UK, particularly plants to build batteries, but funding from the government’s Automotive Transformation Fund has clearly helped clinch this deal. This will help secure the future for 4,000 employees who currently work at the plants, but there will be knock-on benefits across supply chains and also ancillary services which support the workforces in the region. News of the development may also help propel interest in EV ownership, given the iconic nature of the mini brand here in the UK.

While China attempts to keep its head above deflationary waters, the US is still in a hot air balloon scenario with strong demand in the economy risking keeping inflation elevated. With the number of Americans applying for unemployment benefits unexpectedly falling to the lowest level in 7 months , it’s adding to expectations that the Fed could raise rates again later this year after another pause this month. The latest inflation snapshot due on Wednesday will be closely watched for signs that the price spiral is still proving stubborn, particularly as fuel costs are expected to have crept up. Brent Crude is still trading around $90 a barrel, with small fluctuations amid concerns about demand waning in China, but with Saudi Arabia and Russia extending cuts until the end of the year, supply constraints are keeping the upwards pressure on.

Sterling has ticked up slightly against the dollar but is still hovering around $1.25 levels it’s not seen since June. While the jobs market stays strong in the States, it appears to be weakening further in the UK, adding to expectations the Bank of England won’t hike rates as high. The latest research from accountancy firm BDO  showing demand for workers in August slowed for the second consecutive month in August. The bitter interest rate medicine, hiking borrowing costs for many households and businesses is clearly putting off expansion plans for more firms and downwards pressure on wage growth could follow. Tomorrow’s key labour market snapshot from the ONS will give a fuller picture for the month but this report on hiring intentions casts light on the potential trajectory of the jobs market further down the line.’’

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