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HB Markets Breakfast Today including: Punch Taverns, Spirit Pub Company
Market opening: Investors jittery about North Korea’s political stability after the long-time leader Kim Jong II passed away could cause UK markets to open lower.
New York: The S&P 500 closed 0.3% higher on Friday, but ending the week 2.8% down as worries about the EU resurfaced with Fitch's downgrade warning to Italy, Spain and four other EU countries.
Asia: Concerns about North Korea's political stability and the future of its nuclear programme, following the demise its leader Kim Jong II, weighed on markets. The Nikkei closed 0.9% lower, while the Hang Seng was trading at -1.3% at 7.00 am UK time.
Continental Europe: Germany’s DAX 30 and France’s CAC-40 fell 0.5% and 0.9%, respectively on Friday, amid fresh concerns that the EU is probably heading into a recession in 2012.
UK small caps:The FTSE AIM All-share closed almost flat (-0.2%) on Friday.
Today's news
Efforts to tackle to Euro's debt crisis plod along
Fitch's scepticism about Eurozone leaders' ability to tackle the region's debt crisis will pressurise the ministers, who meet today to finalise the amount of individual bilateral loans to the International Monetary Fund (IMF). The leaders had agreed to bolster the IMF with €150bn with an additional €50bn expected from outside EU. They will also debate on the voting mechanism of the European Stability Mechanism (ESM), their permanent bailout fund. Meanwhile, the €33bn Italian austerity package was passed by the Chamber of Deputies and is expected to be approved by the Senate, the upper house, by 23rd December.
Quick action needed to curtail Euro damage - Draghi reiterates
European Central Bank President Mario Draghi said Eurozone leaders should move fast to make the European Financial Stability Fund (EFSF) operational to avoid escalating borrowing costs, while terming a US Fed-style quantitative easing package "counterproductive".
Breakfast Today is taking a holiday
Breakfast Today is taking a break for the festive season with our last issue of this year being published on 21st December. We will be back on 4th January 2012. We wish our readers a Happy Christmas and a prosperous New Year!
Company News:
Spirit (LON:SPRT)
UK based pub manager, Spirit Pub Company, released its interim results on Friday for the 16-week period ending 10th December 2011. Like-for-like sales from its managed pubs division grew 6.2% y-o-y driven by a 7.9% growth in food sales and a 6.1% growth in drink products. The leased pubs division saw a drop of 3.3% y-o-y in its net income, in-line with management expectations. The rollout of the flaming grill concept at 68 of its outlets accompanied by the mild weather during the period helped Spirit grow sales. As a continuation of its investment plan, the company refurbished 108 of its pubs during the period. In addition, the company repurchased £25m of its bonds at a cash cost of £20m and announced that it was on track to meet full year performance expectations.
Our view: The company has turned its focus to food based revenues by introducing concepts such as the flaming grill, which have proven a success. The company is seeing growth in sales even as competitors posted declines. However, with the UK economy going through uncertain times, discretionary spending by consumers is expected to be weak. In addition, the smoking ban and the increased competition from supermarkets has posed further challenges for Spirit.
UK based pub operator Punch Taverns announced its interim results for the 16-week period ending 10th December 2011 on Friday. The company reported that like-for-like net income from its core estate declined 1.5% y-o-y, while that from its non-core estates fell 10.4% y-o-y. Average net income per pub across all estates, however, rose 1.3% over the same period, benefiting from the disposal of non-core assets. Pubs in the south of the UK saw a growth in like-for-like net income, which was offset by a decline in the northern parts of the country. During the period the company sold 116 pubs for a total of £31m, and Punch Taverns plans to sell a total of 400 to 500 pubs by August 2012.
Economic News:
US CPI
Inflation in the US, measured by the consumer price index, was flat in November following a decline of 0.1% in October. Annual inflation rose 3.4% in November. A sharp drop in petrol prices outweighed a slight increase in food prices and helped restrict inflation. Core inflation expanded 0.2% in November following a 0.1% increase in October. Core inflation moved up 2.2% y-o-y in November.
Our view: Core inflation is only slightly above the Fed’s preferred range of 1.7–2.0%. Whilst the Fed did not make any changes to the existing programme in its latest policy meeting, perceived low inflationary pressure paves the way for more easy money in the new year.
Eurozone Trade balance
The Eurozone trade surplus narrowed to €1.1bn (€0.3bn on a seasonally adjusted basis) in October, the European Union's statistics bureau Eurostat reported on Friday. This was lower than September's trade surplus of €2.9bn (revised) but was slightly higher than consensus estimates of €1.0bn. Seasonally adjusted exports fell by 1.9% m-o-m in October after a 1.1% drop in September while imports fell 0.7% m-o-m in October after seeing a rise of 3.2% in September.
Our view: The adverse trade balance is an indication of tough times for the European economy. With a number of key Eurozone markets, especially China, also facing a slowdown, trade balance could further deteriorate in the coming months. However, the recent weakening of the Euro against major currencies can help offset some downside risk and make Eurozone exports more competitive.
EU Car registrations
New car registrations decreased 3.5% y-o-y in November to 1.03m vehicles, the European Automobile Manufacturers Association (ACEA) reported on Friday. This followed a 1.8% y-o-y decrease in October. Germany was the only country in the region which saw a growth with new car sales growing 2.6%. Major falls in new car sales was seen in Italy, France, Spain and UK, with declines of 9.2%, 7.7%, 6.4% and 4.2% respectively. For the January to November period, new car sales fell by 1.4% y-o-y.
