FTSE 100 higher as market awaits big US announcements later this week, Fuller’s hit by rail strikes and Saga to sell underwriting arm

“The FTSE 100 ticked higher on Monday without suggesting it would threaten the all-time high which it briefly flirted with before a sell-off at the end of last week,” says AJ Bell Investment Director Russ Mould.

“The big economic announcements come on Thursday and Friday as the US releases GDP figures for the fourth quarter and core inflation numbers from the world’s largest economy are also released.

“These will offer insight into two key and related factors which are grabbing the market’s attention right now. First, will the US avoid a deep recession and second, will inflation ease sufficiently to allow the Federal Reserve to ease up on interest rates before it has inflicted too much pain on businesses and consumers?

“Tomorrow the focus will be on PMI data from the US, Europe and the UK. Always a useful leading indicator given how on top of the economic backdrop the purchasing managers surveyed must be to get their decisions right.

“Transport and infrastructure names were, appropriately enough, helping to get the UK market moving at the start of the week. Balfour Beatty continues to impress under market Mr Fix-it Leo Quinn as it snared a £1.2 billion contract to deliver a package of works linked to the proposed Lower Thames Crossing while National Express secured new rail franchises in Germany.”

Fuller, Smith & Turner

“Rail strikes have been a curse to the hospitality industry and pubs group Fuller, Smith & Turner is the latest to be hurt by travel disruption. With a large presence in London and the South-East, Fuller’s has seen a £4 million hit to sales directly attributed to various rail strikes since October 2022.

“Normally picking up business from commuters seeking a drink after work or tourists enjoying its premium-end pub offering, disruption to trains going in and out of the capital meant it was up to locals to keep the tills ringing, and that wasn’t enough to keep earnings on track.

“With more train strikes on the cards, there is little that Fuller’s can do apart from hope there is an imminent resolution to the fight over transport worker pay.

“There is a chance of catching up with some of the lost earnings later this year. The King’s Coronation in May will add another bank holiday to the calendar and give the public a reason to get out of the house and celebrate with friends and family, a day that is likely to be a major tailwind for Fuller’s earnings.

“But beyond that event, the pub company will be hoping for lots of sunny weather in 2023 so that its beer gardens are full. It will also hope that the UK doesn’t fall into a nasty recession so that people can still afford to go to its pubs or feel confident enough to spend money on a pie and a pint.”

Saga

“Over 50s travel, leisure and insurance group Saga has run aground in recent years as its cruise business struggled in the pandemic and as a series of managerial and operational mis-steps have knocked it off course.

“In theory the business should be on to a winner by targeting a relatively affluent demographic which is growing in size but the 90% fall in the shares since listing in 2014 speaks to how badly this opportunity has been messed up. As it seeks to fix a balance sheet which is looking a bit creaky, the company is planning to sell its insurance underwriting business.

“Much of this function was offloaded to third parties a while ago anyway so this feels like quite a logical move, but how much the company might raise through any sale and how much of a dent it would make in a £700 million-plus debt pile is open to question.”

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