FTSE dips as Sunak prepares to become PM, HSBC hit by shock finance chief exit, Premier Inn owner Whitbread seeing strong demand

“The FTSE 100 started the day modestly lower, below the 7,000 mark which has often acted as a floor for the index in recent times,” says AJ Bell Financial Analyst, Danni Hewson.

“Rishi Sunak is about to take over as PM and the first big question, at least as far as the markets are concerned, is will he keep current chancellor Jeremy Hunt in place? Not to do so could unsettle investors who are eagerly awaiting the 31 October announcement of fiscal plans and don’t need anything else to spook them before that.

“Once a real mid-cap star in the market, Genuit, previously known as Polypipe, is facing big blockages to its business which are disturbing the flow of profit. It’s the speed of the deterioration in outlook which will trouble shareholders, with weak trading over the last part of the third quarter enough to prompt the company to guide for profit to be at the lower end of expectations.”

HSBC

“Rising interest rates may be good news for banks but it’s all the other stuff which is causing them headaches right now.

“Concern about the impact of a slowing economy on bad debts and growth in the loan book is being exacerbated at HSBC by the departure of well-respected finance director Ewen Stevenson and the deteriorating situation in China.

“This explains HSBC serving up a better-than-expected set of third quarter numbers only to have the market effectively tell it to get stuffed.

“Stevenson had a good track record in his previous job helping to rehabilitate NatWest (formerly Royal Bank of Scotland) and shareholders will be disappointed not to have his steady hand at the tiller during the current turmoil.

“Stevenson’s departure may also make HSBC more vulnerable to pressure from its largest shareholder Ping An to break up the bank.

“HSBC’s fortunes are increasingly tied to China and the rest of Asia so Xi Jinping’s power grab, which has created concern in international markets, particularly if it means a continuation of hard-line zero-Covid policies, is not helpful for sentiment towards the bank.”

Whitbread

“Whitbread-owned Premier Inn has a pretty good proposition for the current times. Despite pressures on household budgets, people will still need to get away from it all and while a family room in a budget hotel might not be everyone’s idea of proper break it is definitely more affordable than jetting off to Spain or staying in an upmarket resort closer to home.

“The return of business travel is also helping the business and all in all, the first half results announced this morning were genuinely impressive.

“Clearly Premier Inn is doing better than the wider market and the German business, which faced a longer impact from Covid thanks to more onerous restrictions, is also showing signs of real improvement.

“The one fly in the ointment which seems to be preventing investors from getting too excited about any of these strengths is the surge in costs which Whitbread is facing. However, Whitbread has the financial resources to continue to invest in and grow the business despite these inflationary pressures.”

These articles are for information purposes only and are not a personal recommendation or advice.