FTSE 100 close: Blue chip index sinks back into the red as IAG falls and Cineworld slumps
The FTSE 100 sunk back to close at 7,878.66 down 29.06 points or (0.37 per cent down, ending the week on another subdued note.
The FTSE 250, also closed lower at 19,696.53 or 93.96 down, or 0.47 per cent.
This week’s close marked a sharp contrast with the previous where the FTSE 100 breached the 8,000 mark for the first time.
“At one point the FTSE rose 0.3 per cent to 7,933, led by energy companies, banks and tobacco firms,” said Russ Mould, Investment Director at AJ Bell.
“It was a similar story on Wall Street last night, while Japan’s Nikkei 225 index jumped 1.3 per cent as Kazuo Ueda, incoming governor of the Bank of Japan, indicated he would maintain a loose monetary policy. Markets breathed a sigh of relief that there would not be a radical shift in strategy.
Mould said that with little corporate news on Friday, investors will be focusing on what might happen next week.
“On the US markets, we will get a good insight into consumer spending when retailer Target and drinks group Monster Beverage report on Tuesday. Home improvement group Lowe’s reports on Wednesday, so does discount retailer Dollar Tree.
“Lowe’s will be watched closely to see if the housing market downturn has had a negative impact on its earnings, or whether the property market woes have encouraged more people to stay put in their existing home and spend money doing it up instead. The signs aren’t good judging by Home Depot’s results earlier this week, where it warned of slowing demand for home improvement goods.”
International Consolidated Airlines
“‘It is better to travel than arrive’ could be a neat tagline for British Airways owner International Airlines Group – talking up the pleasures of air travel – instead, this stock market truism was underlined as shares in the company descended despite unveiling its first annual profit since the pandemic.
“Up more than 60% from its late September lows before today the stock had already enjoyed an extraordinarily strong run and while the latest results were encouraging there are areas of concern for investors.
“As a legacy of Covid, debt is highly elevated. This could make the market uncomfortable, particularly if there is any indication it is preventing IAG from making necessary investments in its business.
“The pledge to return to pre-Covid levels of profit in the next few years gives investors something to look forward to but also demands some patience – and there is no dividend to reward shareholders for sticking around.
“The purchase of the remaining Air Europa stake implies the company is not too constrained despite its hefty borrowings, and its brand power and the resilience provided by its size and longevity in the market should leave it well placed to benefit from a shake-up of the sector as less durable rivals are permanently grounded.”
Cineworld
“Is the end in sight for Cineworld as a listed business? The company has received various expressions of interest for parts of its estate, suggesting we could see a break-up of the group even though Cineworld has previously said it had no plans to sell individual assets.
“Cineworld has paid the price for being too aggressive with its growth ambitions, weighed down by significant debt when the pandemic struck and the subsequent reopening of the cinema industry being too weak to repair its finances. It has watched too many gambling films and played the wrong hand.
“Selling subsidiaries doesn’t mean it will be suddenly swimming in cash. Any interested party in Cineworld’s assets knows that the cinema group is desperate and so they are likely to pitch any offers at a low level.
“From where we stand today, two things look almost certain – one, that we won’t see a bidder for the whole business; and two, that shareholders will be left with nothing. Even if the company does sell some of its subsidiaries, the end game still appears to be a debt-for-equity swap whereby creditors take control of the business.”