Stimulus hopes lift FTSE and InterContinental Hotels making tentative recovery

“Hopes of bi-partisan agreement on a US fiscal stimulus package helped stoke the fires of a market rally on Tuesday with the FTSE 100 now up 4% since the start of August and back firmly above 6,100,” says AJ Bell Investment Director Russ Mould.

“The index took its cue from this news and strong trading in the US overnight rather than backward-looking UK jobs data which, to the surprise of precisely no-one revealed a pretty bad picture through lockdown.

“The markets may well be keeping its powder dry ahead of the end of the furlough scheme in October, when the full scale of the unemployment crisis may be more apparent.

“The gold price lost a little shine and fell below $2,000 per ounce as risk tolerance increased with precious metal miners Polymetal and Fresnillo the top FTSE 100 fallers.”

InterContinential Hotels

“The market knew numbers from InterContinental Hotels covering lockdown would be bad, what seems more important for now is that they are improving.

“The company is clearly not out of the woods yet with less than half of rooms in its Holiday Inn and Crowne Plaza sites currently occupied.

“And while reluctance to travel among holidaymakers could eventually dissipate, there are suggestions at least of structural change in the realm of business travel.

“People are more comfortable with the idea of video conferencing rather than always having to do things face-to-face, they could well be looking for an excuse not to take a long flight, train or car journey for a couple of meetings of variable productivity. For hard-pressed businesses, cutting down on travel expenses may well be an attractive option too.

“This seems the most acute long-term challenge facing the group as we emerge from the crisis. InterContinental’s model sees it only own a handful of hotels and focus instead on franchising and managing premises.

“This means it is not lumbered with lots of fixed costs during a period when revenue has collapsed, however it also arguably means it has less control over how franchisees apply distancing and hygiene measures.”

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