NatWest retail offer abandoned, McDonald's sales hit and markets eye key central bank decisions

“This week is the kind of week no investor wants to be off on their summer holidays” comments Danni Hewson, Head of Financial Analysis at AJ Bell.

“With three central banks making interest rate decisions, and four of the ‘magnificent seven’ trying to demonstrate they still deserve the title, markets seem to have been enjoying the calm before the storm.

“After disappointment from Tesla and Alphabet, there’s a lot riding on big tech updates this week. Investors want stellar results and anything less will be a disappointment that will undoubtedly lead to further sell offs.

“This week could finally deliver a change in direction from the Bank of England, though it will be carefully considering the government’s stance on public sector pay.

“At the moment optimism is winning out with expectations solidly tipping over the 50/50 hurdle, with market believing that MPC members may be convinced the time has finally come to jump to the other side of the fence.

“But the Fed has the first roll of the dice and, though the CME’s Fedwatch tool clearly demonstrates that markets expect no change this time out, everyone will be paying close attention to those dot plots after having priced in at least one downward move next month.

McDonald's

“It’s been a tough tightrope for businesses to walk over the past couple of years as inflation nibbled at margins and increased borrowing costs further supressed consumer spend.

“The last quarter won’t be one McDonalds will want to dwell on.

“Sales have fallen for the first time since most of the world was forced into isolation and into our own kitchens back in 2020.

“Initially the fast-food giant muscled through the cost of living crisis, offering value for money for cash-strapped consumers looking to trade down.

“But inflation has steadily scraped away at household budgets and some of its lowest income customers have been forced to cut back or cut out entirely.

“Value has become crucial and that’s meant fewer people are taking a bite out of those big money items that pad the margins.

“Added to that headache McDonald’s has also had to deal with geo-political hot potatoes like boycotts in some middle eastern countries, plus the slow, slow return of consumer confidence in China.

“But whilst the golden arches are looking a little tarnished the fact that it’s operating margin forecast has remained unchanged demonstrates the business is optimistic that falling inflation and the lure of the brand will bring customers back.

Natwest

“Offering up what’s left of the government stake in the bank in a “Tell Sid” style campaign would undoubtedly have come with a significant discount, a discount that the government feels is unnecessary considering the bank’s recent performance and the interest in snapping up the shares by institutional investors.

“Whilst protecting the taxpayer is understandable and even laudable, the share sale could have been used as a valuable catalyst to get first time investors on board.

“Creating a teaching moment that could have changed the investing landscape for the better would have been exciting, although there are still other ways the government could boost the number of UK retail investors.”

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