Whitbread helps power the FTSE 100 as US tech firms broaden out beyond the Magnificent Seven


The S&P 500 hit its 30th record high of the year on Monday and this is driving enthusiasm towards European and Asian shares. Tech stocks have driven the US market higher in recent days. The top performers include Broadcom, Apple, Adobe and Oracle, they are all higher by more than 10% in the past five days, Broadcom is higher by nearly 30% after reporting a strong set of earnings earlier this week. UK and European stocks have followed suit, and the Nikkei in Japan was higher by 1% on Tuesday.

Whitbread leads the way for the FTSE 100 as Germany is the star of the show

The FTSE 100 is higher on Monday but is lagging its European peers after some mixed corporate results. Whitbread has seen its shares surge 3.4% after it reported £739mn in sales for the first quarter. It reported a recovery in its UK business, and hotels and accommodation growth was flat vs. Q1 last year. However, Germany was the real star of the show, and it saw strong growth in sales of accommodation and food and drink of more than 5% on a like for like basis. The company has confidence in its full year outlook, it confirmed a £150mn buyback and it is continuing to apply cost efficiencies, including pivoting away from its unprofitable branded restaurant and bar business in the UK and towards more hotel rooms. This is a heady mix for investors, who are rewarding cost efficiencies and the promise of future profits that they may bring. However, this has ignited the ire of some workers who are threatening to take the company to a tribunal with the help of the Unite Union, who will be holding a protest at the company’s AGM later today. The company seems determined to power through this change, which is benefiting the company’s stock price. Germany is the current jewel in the crown for Whitbread and it may see a further boost this quarter after robust demand expected during the Euro 24 football tournament. Overall, this was a strong report, even if the company will likely face legal action from a large number of employees.

Ashtead: Sticking to the UK for now

There was not such good news for Ashtead, the heavy equipment rental company. It is the worst performer on the FTSE 100 so far on Tuesday after it reported revenue that was weaker than expected, and its forward guidance was disappointing. This is a toxic mix for a stock in the current environment, as investors are laser focused on corporate results and are willing to punish those who fall short. The upside is that the company did not mention anything about moving its listing to the US, where it does the bulk of its business. Prior to these earnings, the market had thought that it would follow the likes of Flutter and dual list its shares on the US market.

UK grocery sales of soup surge as summer disappoints

Elsewhere in the UK, grocery sales fell to their slowest pace in two years in the past month, according to Kantar. This comes at the same time as food prices have fallen sharply, and also the wet weather over the bank holiday weekends in May weighed on demand. The weather is also having a big impact on the type of products that consumers in the UK are buying. Suncare sales are down 25% YoY and the sales of soups, normally a winter staple, rose by 24%! Overall, sales growth was 1% in the past month.

US tech stock rally is more than just the Magnificent Seven

We take a look at the data to see if this assumption is true. On Monday, the same day that the S&P 500 made a fresh record high, only 12 companies made a 4-week high. However, on a longer-term basis, 46% of S&P 500 stocks are above their 50-day moving average. This has improved since last week and it is also higher than the FTSE 100, where 43% of stocks are above their 50-day moving average, which is a short-term momentum indicator. After the sharp sell off in European shares last week, only 34% of the Eurostoxx index is above its 50-day moving average. Thus, less than half of US stocks are basking in the S&P 500’s glory, but the figures suggest that the rally is not as narrow as some argue. However, there is no denying that there have been some massive gains for the tech sector so far this month, with Broadcom, Hewlitt Packard, Oracle, Adobe and Nvidia all registering double digit gains so far in June. While Nvidia regularly features in the top 10 best performing stocks, the recent rally has been driven by tech, but the tech sector rally has broadened out to include stocks that are not merely the magnificent 7, which is also worth noting.

French stocks update: Banking stock recovery continues

The French stock market has opened higher on Tuesday, after an attempt at a recovery on Monday. The good news is that the selloff in French banks has paused, and Société Generale and Credit Agricole rose on Monday, and they have continued to extend gains on Tuesday, as fears of a hard right government are tamed. The longer-term problem for French stocks aside from the upcoming election, is that the spread between French 10-year yields and German 10year yields remains elevated, even though French 10-year yields have been falling in recent days. The problem for France is that German debt is considered the safe haven in Europe, and French debt is in the process of being reclassified as less safe on the back of the potential election risks. Until the election is in the past, French stocks may remain elevated. 

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