IAG share price dives ahead of H1 results next week

Liam Roche
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IAG share price dives ahead of H1 results next week

IAG Share Price

The IAG share price (LON:IAG) is down by 11.84% over the past month as ‘Freedom Day’ and the ongoing relaxing of restrictions failed to support the airline in a sustained way. IAG has struggled to gain any momentum since the middle of March, when its share price looked as though it might take off, amid what in hindsight proved to be blind optimism. Year-to-date the IAG share price is up by 13.59%, however, the uncertainty and lack of passenger numbers is cause for concern for the airline.

Covid-19

While the already delayed ‘Freedom Day’ was supposed to be the point at which things could return to normal, it has proved to be nothing of the sort. Especially for those with a desire to travel internationally.

With reports saying cases could rise to 100,000 a day in the UK without restrictions, many Brits are having to isolate. This is causing demand for flights to dive as more people are being told to self-isolate, while many are cancelling pre-booked vacations.

IAG is having to carry on paying its fixed costs and is subsequently losing out on revenue, which is becoming increasingly concerning to investors.

Finances

That leads on to the the company’s balance sheet and how it is effecting the IAG share price. Back in May, IAG posted a loss of £1.14 billion in Q1. At the time the company decided not to provide a guidance for the following quarter due to the uncertainty. They were proved right as uncertainty has persisted throughout the second quarter.

Investors could soon have a clearer indication of IAG’s current financial predicament. IAG’s half year results will be revealed in a week’s time and will provide a clearer indication of the company’s outlook. It is possible that investors are anticipating negative results which could already be factored into the IAG share price.

Sterling down as Delta variant concerns investors

Liam Roche
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Sterling down as Delta variant concerns investors

The pound was 0.25% lower against the dollar early on Friday morning

Sterling dipped on Friday as retail sales surpassed expectations, while uncertainty remains over rising Covid-19 cases and the impact on the UK economy.

The reaction was muted in the FX market “with both EUR and GBP trying to recover some of the losses against the dollar, testing the $1.18 and $1.38 resistance levels,” Jesús Cabra Guisasola, Associate at Validus Risk Management, said.

The pound has held relatively steady over the past week amid the threat of a wide selloff in a number of currencies due to concerns over the spread of the Delta variant.

At 1116 GMT, the pound was 0.25% lower against the dollar at $1.3739, and down by a similar amount versus the euro.

Retail sales jumped in June, as football fans eat and drank their way through the Euro 2020 football championship, following a slump in May. 

The Office for National Statistics revealed on Friday that month-on-month retail sales in the UK rose by 0.5% between May and June.

Commenting on GBP and EUR reaction to the latest PMI figures, Jesús Cabra Guisasola said: “While the Eurozone PMI composite came out higher than expected in July 60.6 (vs 60 estimated) and rising for the fifth consecutive month, PMI in the UK fell considerably and unexpectedly to 57.7 from 62.2 in June, compared to the consensus of 61.5.”

“On the UK side, the economic recovery has been stronger due to the success in its vaccination programme and new daily Covid-19 cases have been coming in lower during the past few days. However, it will be important to see if this is sustained in the long run given the reopening could help to spread the virus more rapidly.

“Meanwhile, risks continue to be on the table for the euro area with the delta variant spreading across the continent. Moreover, inflation has been well below the ECB’s target, which has provided some further support for the central bank to maintain its ultra-dovish tone and favourable financing conditions.”

UK retail sales see resurgence in June, boosted by Euros

Liam Roche
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UK retail sales see resurgence in June, boosted by Euros

UK retail sales up by 0.5% month-on-month

Retail sales jumped in June, as football fans eat and drank their way through the Euro 2020 football championship, following a slump in May.

The Office for National Statistics revealed on Friday that month-on-month retail sales in the UK rose by 0.5% between May and June.

The figure is 0.1% higher than the expansion expected by economists, according to a poll by Reuters.

Sales at food stores, which saw increases of 4.2%, were the biggest contributor to June’s figures. The ONS also said that they were directly linked to the Euro 2020 football championship, in which England reached the final but fell short at the final hurdle.

“June’s retail sales have picked up again following the dip seen last month, with the main driver coming from food and drink sales, boosted by football fans across Britain enjoying the Euros,” said Darren Morgan, ONS director of economic statistics.

Danni Hewson AJ Bell financial analyst, commented on the latest retail figures:

“The crisp aisle in my local supermarket told the tale writ large in the latest UK retail figures; the day England trounced Germany the shelves looked like they’d been ravaged by nacho-loving hordes. The surge in instore food sales helped give a nice little lift to the sector which had seen a fall-back last month as consumers flocked back to bars and restaurants.”

Data also revealed that spending on home improvement products has slowed down, as non-food shop sales falling by 1.7% in June.

On the other hand, automotive sales rose, as workers increasingly need to find a way to get in to the office, while other are travelling within the UK for the holidays.

“With life finding its new normal more people were filling up their vehicles either for the commute or for a pleasure jaunt, but salesare still down on pre-pandemic levels with hybrid working expected to keep a lid on the number of times drivers need to go back to the pumps,” said Hewson.

“What these figures do share with us is the fact that people are spending and they’re embracing every new opportunity that comes their way. Novelty, excitement, opportunity, all key factors after months of constraints. Whether new freedoms will tempt more people out or push people to stay away from busy indoor spaces is a difficult question to answer and savings can only be spent once.”

FTSE 100 set to end the week in the green

Liam Roche
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FTSE 100 set to end the week in the green

At the end of a tumultuous week, the FTSE 100 has managed to recover from all the weakness and is on track to end the five-day session marginally ahead. Less than a couple of hours into the morning session the FTSE 100 is up by 0.76% to 7,021, having opened the week at 7008.9.

“Investors who panicked when global markets took a dive on Monday may now be regretting their decisions to dump holdings,” said Russ Mould, investment director at AJ Bell.

“Commodity producers helped to drive up the FTSE 100 on Friday, supported by several unloved stocks starting to regain favour with investors including BT and Rolls-Royce.”

Up next week is the latest meeting from the Federal Open Markets Committee. The market will be eagerly watching for any signs of a change to US central bank policy. “Investors are worried that economic growth could be losing momentum, but equally inflation is affecting us all. The Fed is unlikely to make any major changes to its current stance, but the market will look for every little sign of what the central bank could do next,” Mould said.

FTSE 100 Top Movers

Heading up the FTSE 100 on Friday is Rolls-Royce (3.06%), Melrose Industries (2.59%) and Natwest (2.48%).

At the other end, Royal Mail (-0.79%), Avast (-0.72%) and Flutter Entertainment (-0.50%), are the bottom three companies on the UK index, albeit with narrow falls.

Vodafone

Vodafone said its sales increased during the last quarter as its consumer and business operations saw improvements.

While the telecommunications company is not yet at pre-Covid levels, it made €11.1bn during Q1.

Upon the update by the company, the the FTSE 100 company’s share price is up by 2.2% during the morning session on Friday.

Vodafone pulls in €11.1bn in revenue during Q1

Liam Roche
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Vodafone pulls in €11.1bn in revenue during Q1

Vodafone said much of its growth was down to growth in Europe and Africa

Vodafone (LON:VOD) said its sales increased during the last quarter as its consumer and business operations saw improvements.

While the telecommunications company is not yet at pre-Covid levels, it made €11.1bn during Q1.

Upon the update by the company, the Vodafone share price is up by 2.2% during the morning session on Friday.

Its revenue from services, where Vodafone makes most of its money, rose by 3.1% to €9.39bn. The company said this was down to growth in Europe and Africa.

Revenue generated from selling handsets recovered from Covid-induced disruptions, rising by 5.7%.

Russ Mould, investment director at AJ Bell provided context to Vodafone’s results announcement:

“Full year numbers from Vodafone in May really created a stink. It fell short on profit and gave investors the unpalatable message that it would have to increase spending on its network, putting a dividend which had already suffered a heavy cut in 2019 potentially back in the firing line. Growth targets also left the market feeling distinctly uninspired,” said Mould.

“While the bad smell has hung around the stock since then, Vodafone’s first quarter trading statement has acted as a bit of an air freshener as it reports revenue growth across its consumer and business segments.”

Nick Read, chief executive of Vodafone, commented: “I am pleased to report that we are back to service revenue growth in Europe, as well as Africa. This growth was broad-based within both Consumer and Business segments, with the vast majority of our markets contributing. This is a result of our commercial and operating momentum built over the past 3 years as part of our strategic transformation,” said Read

“In Europe, the operating and retail environment has not yet returned to normal conditions, but we are delivering a good service revenue performance. In our Business segment, we are seeing stronger growth with our public sector and corporate customers, whilst further building a pipeline of demand for our digital services, such as IoT, security and cloud.”

“In May we announced, for the first time, our medium-term growth ambition. We have entered the year in line with this ambition, on track to deliver our guidance for the year, and with a continued focus to optimise our portfolio, to accelerate the delivery of shareholder value.”

Hotel Chocolat raises £40m to support ambitious growth plans

Liam Roche
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Hotel Chocolat raises £40m to support ambitious growth plans

Hotel Chocolat expects to see its sales jump as restrictions ease further

Hotel Chocolat, the British chocolatier, has raised £40m in a recent share placement as it eyes a new digital-based strategy.

The share placing, led by Peel Hunt and Liberum Capital, was reportedly oversubscribed.

“The £40m growth capital raised today will be invested in our fast-growing business, furthering our aim of becoming a global digital-led chocolate brand. I’m delighted that our issue was oversubscribed, demonstrating the support Hotel Chocolat enjoys with its investors,” said co-founder and CEO Angus Thirlwell.

Hotel Chocolat considers now to be an opportune time to raise funds as it expects to see its sales jump as restrictions ease further.

The company recently released a trading update suggesting its profits for the year to 27 June would surpass previous expectations.

Since the pandemic began, this is the second time that the retailer has raised money from its shareholders. In 2020, just before the UK’s first Nationwide lockdown, Hotel Chocolat confirmed a £20m placing.

At that point, despite the potential oncoming downturn, the placement’s purpose was to support the company’s growth strategy rather than to guard against financial distress.

Since then, Hotel Chocolat’s growth has predominantly come via digital channels.

The Hotel Chocolat share price (LON:HOTC) is down by 0.6% on Friday morning to 357.80p per share.

Euro strengthens as Lagarde pledges to persist with low rates

Liam Roche
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Euro strengthens as Lagarde pledges to persist with low rates

The announcement comes after the ECB raised its inflation target to 2%

The European Central Bank (ECB) committed to maintaining its low interest rates on Thursday, in addition to buying bonds, in an effort to move the eurozone economy away from slow-moving inflation.

Lagarde said in here press conference that the ECB will persist with negative interest rates until inflation reaches 2% well ahead of the end of its projection horizon and for the rest of the projection horizon.

“We did so to underline our commitment to maintain a persistently accommodative monetary policy stance to meet our inflation target,” ECB President Christine Lagarde added.

The Euro is down by 0.2% against the pound on the back of the announcement to £0.858525. While, after initially weakening, the Euro strengthened against the dollar by 0.19% to $1.18177.

The announcement comes shortly after the ECB set forward its updated strategy to raise its inflation target to 2%, where the central bank said it would be comfortable with inflation exceeding the target on a temporary basis.

Over the past ten years, inflation has fallen short of the ECB’s target, and this has been excacerbated by the

Commenting on the EUR/USD reaction to the latest ECB policy decision statement, Ben Carter, Analyst, Global Capital Markets at Validus Risk Management, said: “Much like the Fed, the ECB will be letting inflation run hot and are looking for prints of 2% “durably” for the rest of the projection horizon before considering any change in rates. Meanwhile, as expected, there were no changes in the PEPP program and this is looking like it will be a decision for later in the year, possibly the start of 2022, shifting the attention to the September meeting. With lots of talk around the Fed beginning to taper their purchases before year end, the EUR may struggle to gain any ground against the USD over the next few months as Lagarde comments that inflation has picked up but remains subdued.”

“Leading up to the decision, volatility in the EUR was subdued and EUR/USD traded below 1.18. Looking ahead, Lagarde’s dovish comments around inflation decreasing next year, due to significant slack in the economy, does not bode well for the EUR, while any rate hike certainly seems a long way off.”

BHP share price rises as miner strikes deal with Tesla

Liam Roche
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BHP Share Price

The BHP share price (LON:BHP) is up by 0.51% on Tuesday morning in London, as the mining giant confirmed it will be supplying nickel to Tesla. The news comes on the back of what has been a poor showing so far this week for the BHP share price, which is still down by 0.73% over the past five days.

Going back further, it has been a volatile 2021 for the FTSE 100 company. BHP has added 11% since the beginning of year. With news of the deal with Tesla, in addition to rumours over a bumper shareholder payout and a potential departure from oil and gas, now is a pivotal time for the company. Investors in the miner will be curious as to what the ongoings surrounding the firm mean for the BHP share price in the near-term and further ahead.

Tesla

BHP confirmed on Thursday that it reached an agreement with Tesla for the car maker to supply nickel, as well as working alongside the company to reduce carbon emissions along the battery supply chain.

“Demand for nickel in batteries is estimated to grow by over 500 per cent over the next decade, in large part to support the world’s rising demand for electric vehicles,” BHP Chief Commercial Officer Vandita Pant said in a statement.

Tesla confirmed last month that it expects to spend more than $1bn per year on battery raw materials from Australia due to the country’s reliable mining sector.

BHP reiterated its claim to be one of the most sustainable and lowest carbon emission nickel producers across the world.

Nickel and copper could be two key commodities in de-carbonising the global economy. Therefore this move could prove to be beneficial to the long-term outlook of the BHP share price.

Dividend

Investors will be paying attention to BHP’s dividends ahead of its result statement on 16 August. In positive news for shareholders, Berenberg, the broker, is expecting a sizeable payout.

Berenberg is forecasting a dividend payment of $3.05, up from US$1.20 the year before, which would be a yield of around 10%.

“We believe this is achievable given our forecast US$4.5bn reduction in net debt over FY21 to US$7.5bn, which remains well below the US$12- 17bn guidance range,” Berenberg said in a note.

Additionally, in further positive news for curious investors, Berenberg set a 2,700p price target for the BHP share price.

Oil and Gas

BHP has been weighing up the possibility of selling its oil and gas assets, as the miner looks to focus itself on commodities better suited to the future. With pressure coming from investors, climate campaigners and the Paris climate agreement, the mining giant considers now a good time to review its oil and gas operations.

On the other hand, there is a financial incentive to invest in the industry in the shorter-term, due to the lack of investment. With investors and major companies increasingly focused on ESG concerns, an opportunity has been left behind.

While most of its revenue comes from iron ore and nickel, the company has a decision to make, which could upset its shareholders and the BHP share price.

Bitcoin climbs as Musk makes a series of revelations

Liam Roche
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Bitcoin climbs as Musk makes a series of revelations

The digital currency has now traded above the £23,000 mark for the last 24 hours

Bitcoin climbed higher on Wednesday as Elon Musk made a series of revelations regarding his rocket company SpaceX, bitcoin and a potential u-turn by Tesla.

The digital currency has now traded above the £23,000 mark for the last 24 hours as the billionaire mogul divulged for the first time that SpaceX holds bitcoin.

He also said at the ‘B’ Word Conference, alongside JackDorsey and Cathie Wood, that Tesla would consider accepting bitcoin as a payment method again after the electric car maker famously stopped doing so, citing concerns over the energy consumption of the digital currency.

Musk said he personally owned bitcoin, ether and dogecoin as his tone was generally positive around bitcoin, despite previously outspoken tweets.

“We’re not selling any bitcoin, nor am I selling anything personally. I would like to see bitcoin succeed,” he said.

Musk appeared to respond to detractors who accused him of manipulating the price of crypto for his own personal gain. However, he reaffirmed his loyalty to bitcoin and reiterated the fact that he continues to have skin in the game. “If the price of Bitcoin goes down, I lose money. I might pump, but I don’t dump,” Musk said.

Earlier in the year, a number of Tesla investors and environmental campaigners criticised the car company’s decision to accept bitcoin payments.

The Tesla share price closed 0.79% down yesterday following the virtual conference.

The fall-out drew attention to the ESG credentials of bitcoin. While some said it incentivises the production of renewable energy, others bemoaned that its consumption was akin to that of a small nation.

Next shares, Zenova IPO and an African growth story with Alan Green

UK Investor Magazine
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Next shares, Zenova IPO and an African growth story with Alan Green

This week’s UK Investor Magazine Podcast with Alan Green covers Next shares (LON:NXT), the Zenova Group (LON:ZED) IPO and an under appreciated African growth story in AirTel Africa (LON:AAF).

The FTSE 100 has suffered bouts of volatility over the last week as COVID cases rise globally and concerns about inflation persist. We question whether we could see more meaningful downside in markets in the third quarter and look at the potential buying opportunities in such a circumstance.

Next shares gave a boost to the FTSE 100 following a strong trading update that demonstrated the successful shift to online sales during the pandemic. With such bumper sales figures, it does raise the possibility it is simply a result of pent up demand that diminishes through the rest of 2021.

We discuss Zenova Group – which popped higher on its IPO – and what the future holds for the innovative fire protection company.

Finally there is attention paid to a very fairly priced African growth company that may have flown under the radar.

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