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Pound dips as super Fed rate cut expectations slashed
The pound dipped to a three-week low against the US dollar on Monday, with the GBP/USD pair trading at 1.208 at the time of writing.
It comes amid a scaling back of the market’s expectations of a 50-basis-point rate cut from the US Federal Reserve later this month.
While an interest rate cut is all but a foregone conclusion, the jury is still out of whether a 0.25% or 0.5% cut is in store.
The latter’s odds have been reduced following a mixed US payrolls report last Friday
Higher interest rates are typically supportive of a currency’s value as they encourage traders to buy into the money markets to gain exposure to healthy yields.
The Fed is scheduled to make its next call on 17 September.
As for UK stocks, the FTSE 100 remains bullish in early afternoon trades and is currently trading 58 points higher at 8,238.
Brent crude forecasts slashed by Morgan Stanley (NYSE:NYSE:MS)
Morgan Stanley has lowered its Brent crude oil price forecasts, citing a weakening demand outlook similar to patterns observed during past recessions.
The bank now expects Brent prices to remain at $75 per barrel for all quarters in 2024, down $5 from its previous forecast for the fourth quarter.
Brent crude futures recently settled at $71.06 per barrel, marking their lowest level since December 2021.
Morgan Stanley noted that rising fuel inventories, weaker refining margins, and a drop in price spreads signal softening demand, which is consistent with prior periods of economic downturns such as the 2008 financial crisis and the COVID-19 pandemic.
Flutter’s FanDuel retains dominant position in US sports betting market
Paddy Power and FanDuel owner Flutter Entertainment PLC (LON:FLTRF)’s secondary share listing on the London Stock Exchange is well bid this Monday, with the stock adding 1.75% to 16,315p.
In a broker note, Jefferies analysts remarked that FanDuel continues to outperform its competitors in the US.
For August, FanDuel secured 42% of the gross gaming revenue (GGR), maintaining its dominance despite a slight year-on-year decline.
Its primary competitors, DraftKings and BetMGM, held 32% and 6% of the GGR share, respectively.
Jefferies noted that FanDuel's position allows it to benefit from the ongoing growth in the US online sports betting (OSB) market.
American Football remains the most important sport for US sportsbooks, generating 26% of OSB handle and GGR in 2023, noted analysts.
AIC floats idea of government-sponsored investment companies
The Association of Investment Companies (AIC) has proposed the creation of government-sponsored investment companies aimed at boosting UK economic growth.
According to a new paper titled ‘Making people better off’, these partnership funds could help achieve national goals such as the transition to net zero, regional economic growth, and the advancement of new technologies.
AIC proposes making the new National Wealth Fund a cornerstone investor in these funds.
Under the proposals, the shares of these companies would be listed on the London Stock Exchange, allowing both the public and institutional investors, including pension schemes, to participate.
Richard Stone, Chief Executive of the AIC, said: “Investment companies provide a tried-and-tested way of overcoming the practical challenges of investing in infrastructure and new technologies.
“Their permanent capital structure removes the need to redeem investors’ units when they want to sell and therefore facilitates stable, long-term decision-making.
“As well as offering permanent capital, investment companies have independent governance and offer liquidity through the stock market – a combination of features that could be attractive to pension funds, other institutions and the general public, as well as to the government.”
The AIC also put forward several policy recommendations, including abolishing stamp duty on investment company shares and creating a regulatory environment that fosters transparency and investment in scaling up companies.
Ryanair boss slams Gatwick ATC once again
Ryanair Holdings PLC (LON:0RYA)’s outspoken boss Michael O’Leary has renewed calls for Martin Rolfe, chief executive of air traffic controller Nats, to step down.
His plea follows another bout of weekend chaos at Gatwick in which at least 100 flights were cancelled, affecting around 15,000 passengers.
The cancellations were put down to staff shortages at Nats.
O’Lary called it “the latest in a long line of cock-ups” by the air traffic controller, which also saw easyJet (LON:EZJ) PLC, Wizz Air Holdings PLC (LON:WIZZ) and International Consolidated Airlines Group (LON:ICAG)-owned British Airways flights affected.
Nats has previously stated it was “working in line” with a staffing plan agreed alongside Gatwick after the firm took over air traffic operations at the airport in 2022.
“Airlines and passengers deserve better,” said O’Leary.
Ryanair’s Euronext-listed shares were off 2.2% on Monday.
The FTSE 100 in London remained 56 points higher at 8,237 at last count.
Hostmore shares collapse
Checking in on the small-cap space, Hostmore PLC (LSE:MORE)'s share price collapsed by over 90% after the restaurateur announced it would no longer pursue its planned acquisition of TGI Fridays.
Hostmore, which is the largest franchisee of the TGI Fridays restaurants, tabled a £177 million paper deal to effectively merge with the franchisor in April.
But it has walked away from the ambitious deal after TGI lost control of a key revenue stream, severely impacting its future earnings potential.
Time was called on talks after the American group was removed as the manager of TGIF Funding, the entity that controls the royalties from franchise agreements and intellectual property.
This was seen as central to the Hostmore transaction.
Hostmore is now valued at less than £1 million following the dramatic share repricing.
ASOS snubbed Shein
A weekend report from The Sunday Times disclosed that ASOS PLC (LON:ASOS) rejected an offer for its Topshop and Topman brands from Chinese fast-fashion giant Shein and Reebok owner Authentic Brands Group.
Notably, the Shein-ABG offer was reportedly £215.5 million- considerably more than the £118 million ASOS will get via the joint venture recently established with Danish multinational clothing business Bestseller.
Bestseller’s holding company Heartland, which was already a major ASOS shareholder, will control 75% of the joint venture with ASOS controlling the rest.
As part of the deal, ASOS will retain distribution rights for Topshop and Topman in exchange for a royalty fee.
The topshop.com web portal, which went offline in 2020 after the business went into administration before being acquired by ASOS in 2021, will relaunch within six months of the joint venture transaction closing.
Burberry shares plumb new depths
Burberry shares continue their terminal decline with another 5% knocked off the British luxury label this morning.
At 571p per share, it means Burberry’s valuation has retraced to lows not seen since November 2009- nearly 15 years ago.
Burberry is expected to leave the FTSE 100 at the next reshuffle on 23 September in place of insurer Hiscox Ltd (LON:HSX).
The company has hit roadblock after roadblock amid a sluggish global rebound in the luxury sector, a departing chief executive and a suspended dividend, all of which have led to a dramatic repricing of the stock.