- RICS warns of storm clouds for the UK housing market.
- FTSE 100 opens flat after losses on Wall Street.
- US stocks dip as Canada follows Australia with rate hike.
- Brent Crude stays below $77 per barrel.
- Mitie replaces COVID contracts to deliver record revenue.
- M&G opens broadly flat after Q1 results.
Derren Nathan, head of equity research, Hargreaves Lansdown:
‘’The monthly report by the Royal Institution of Chartered Surveyors (RICS) mirrors the gloom seen in yesterday’s house price data by Halifax although there were a few glimmers of hope. The fall in buyer enquiries was the lowest seen over twelve months although was still down 18%. The rate of decline in agreed sales also fell sharply. The report warned that “storm clouds are gathered’’, with the UK’s stubbornly high inflation undermining the recent improvement in activity by prompting the Bank of England to take further action through interest rate rises. This is leading to higher mortgage rates and ultimately reducing affordability and buyer demand. The banking sector appears to expect this with many banks and building societies already introducing products with higher interest rates. It also noted that proposed regulatory changes were seeing landlords leave the market putting lettings supply under pressure.
The FTSE 100 was largely unmoved at the open, after nearly 2% of gains over the last five days. US stocks were broadly down yesterday, most evident in a 1.29% fall in the tech-heavy NASDAQ composite which is still up over 25% year to date. The S&P 500, which reflects the wider US economy fared a little better, giving up 0.38% on the day, but note that gains this year have been more modest at just 11.59%. American investors have been delivered a reminder that further tightening is still on central bankers’ minds as their northerly neighbours at the Bank of Canada followed hot on the heels of their Australian counterparts with a surprise rate hike. The Fed is set to meet again next week. Overnight most major Asian indices were also down.
The tug of war between tightening oil production and demand concerns continues with Brent crude prices flat today at just under $77 per barrel.
In company results, outsourcing heavyweight Mitie packed a solid punch with full year results surpassing the Board’s expectations, as it managed to rise to the challenge of replacing almost £450m of short-term and higher margin Covid-related contract revenue. Record revenue of $4.1bn was up slightly over last year with underlying operating down a little to £162m. Long-term drivers towards increased outsourcing play into Mitie’s favour. But single digit margins don’t leave much room for revenue slippage. Mitie’s hopeful its efficiency drive can more than offset inflationary headwinds and reading in between the lines price discipline is high up on the boardroom agenda. Analysts are forecasting a return to profit growth this year and at 11x earnings the valuation doesn’t look too demanding.
M&G reports on the first three months of its financial year.
Matt Britzman, equity analyst at Hargreaves Lansdown:
“There wasn’t anything too exciting to take away from M&G’s first quarter results. The transformation programme continues, with a renewed focus on the Asset Management and Wealth businesses. We’re supportive of the narrowed focus, as net inflows have been hard to come by in recent years. Good momentum from Wholesale Asset Management is a plus, it’s been an area of weakness over recent years and is helping to offset some expected outflows from institutional clients. There’s plenty left to do, and while management remains upbeat about the dividend policy, the prospective yield of 9.9% looks frothy.”
