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HB Markets Breakfast Today including: Betfair, SuperGroup, Thomas Cook Group
The markets
Market opening: UK markets are set to continue their downward trend after Fitch downgraded five EU banks.
New York: The S&P 500 closed 1.1% lower for the third straight day after Germany issued a statement saying the solution to the debt crisis requires "patience", indicating the crisis may prolong.
Asia: Investors shed risky equities after Fitch downgraded five European banks, and also due to concern that France could lose its AAA rating. The Nikkei closed 1.7% lower, while the Hang Seng was trading at -1.9% at 7.00 am UK time.
Continental Europe: European indices continued to exhibit weakness. Germany's DAX 30 closed 1.7% lower while the French CAC-40 dropped 3.3% yesterday.
UK small caps:The FTSE AIM All-share lost 2.3% yesterday.
Today's news
Five European banks downgraded
Fitch downgraded the long-term issuer default ratings on five bank and banking groups: France's Banque Federative du Credit Mutuel and Credit Agricole, Finland's OP Pohjola Group, Denmark's Danske Bank A/S and Netherlands' Rabobank Group citing exposure to faltering Eurozone countries and the Euro crisis. Except Danske, which has a negative outlook, the outlook for others is stable. Separately, Bloomberg reported Federal Reserve Chairman Ben Bernanke saying in a closed door meeting that the US Fed does not plan to aid European banks.
Yield spread between Germany and Italy widens
The Euro crisis has encouraged ultra-cautious investors to choose low risk over returns, as indicated by the increasing yield spreads between German and Italian debts. Germany sold €4bn two-year bonds at 0.29%, while Italy was able to offload €3bn five-year benchmark papers at a new record of 6.47% (still below the 7% mark breached in the secondary markets, just after the EU summit concluded). Meanwhile, German Chancellor Angela Merkel and Bundesbank chief Jens Weidmann called for patience saying it would take years to sort out the region's debt problems and an immediate relief shot would not suffice. This endorses the European Central Bank (ECB)'s decision to not interfere in bond markets.
Company News:
Online sports betting exchange, Betfair reported H1 2012 results for the period ended 31st October 2011 yesterday. Underlying revenues increased by 1.5% y-o-y to £191.3m. Pre-tax profits improved by 43.1% to £20.6m. Core revenues increased 12% y-o-y to £170.3m in Q2 2012. The company said the start of the football season and greater adaption of its mobile application helped boost sales. The company reported a 16.6% y-o-y increase in average revenue per user (ARPU). The 1.1% y-o-y decline in UK revenues was offset by a 6.0% increase in revenues from Europe. The management proposed an interim dividend of 3.2p per share.
Thomas Cook (LON:TCG)
Thomas cook released annual results for the year ending 30th September 2011 yesterday. Revenues increased by 10.3% y-o-y to £9.8bn. Thomas Cook blamed the turmoil in Egypt and Tunisia and the floods in Thailand for the weak sales. The company took an exceptional charge of £573m of which £428m was attributed to balance sheet review and resulted in a £398.2m loss before tax. Operating losses amounted to £266.6m. In a bid to turnaround the company's UK operations, the management announced plans to close 200 stores, including the closure of 75 stores previously announced, after their leases expire in the next two years. The company expects to earn £110m in profits per year at the cost of £60m over the next three years. The fleet size will also shrink from 41 to 35. The company delayed the release of its results until it secured a much needed £200m credit line from its lenders in November.
SuperGroup reported results for H1 2012 ended 30th October 2011 yesterday. Group revenues increased to £136.1m from £90.3m, a jump of 50.7% y-o-y. However, underlying pre-tax profits declined to £13m from £13.5m, after the company took a £4.0m hit to write off a part of the estimated £8.8m in losses that arose from the malfunctioning of its new warehouse management system. The management said that the system has now been fixed. Twelve new stores were added during the six month period and the company planned to open eight more by April 2012.
Economic News:
UK ILO unemployment rate
The unemployment rate in UK remained unchanged at 8.3% in October, the Office of National Statistics reported yesterday. The number of people unemployed rose by 128,000 in the three months to October to 2.64m. The claimant count rate, a more up to date indicator, held steady at 5.0% in November. The number of people seeking unemployment benefits increased by 3,000 to 1.6m.
Eurozone Industrial production
Industrial production in the 17 nation Eurozone fell 0.1% m-o-m in October following a 2.0% m-o-m decline in September, Eurostat reported yesterday. Industrial production rose at an annual rate of 1.3% in October compared to a 2.2% increase in September. 0.9% decline in energy output, 0.8% m-o-m fall in intermediate goods and a 0.4% slump in production of durable goods weighed on the index, which was supported by a 1.2% m-o-m rise in output of capital goods, and a 0.6% m-o-m increase in production of non-durable goods. Analysts' has expected industrial production to be flat m-o-m, and rise 2.1% y-o-y in October.
US MBA mortgage applications
Mortgage applications in the US increased 4.1% in the week ending 9th December 2011, according to the Mortgage Bankers Association (MBA). The increase was aided by a 9.3% w-o-w surge in refinancing activity, which now accounts for 79.7% of all mortgage applications, up from 76.0% the previous week. Mortgage applications for new purchases, however, decreased 8.2% w-o-w.
