Deutsche Bank (DBK.DE)
Deutsche Bank shares tumbled over 14% after a sharp increase in the cost of insuring the German bank’s bonds against the risk of default.
The selloff of Deutsche Bank shares came after the lender unexpectedly announced its decision to redeem some of its bonds early.
The tier two subordinated bonds, which mature in 2028, are now surging toward face value.
The German bank’s additional tier one (AT1) bonds, an asset class that hit the headlines this week after the controversial write-down of Credit Suisse’s (CS) AT1s as part of its UBS (UBS) rescue deal, also sold off sharply.
Stuart Cole, head macro economist at Equiti Capital, said: Deutsche Bank has been in the spotlight for a while now, in a similar way to how Credit Suisse had been. It has gone through various restructurings and changes of leadership in attempts to get it back on a solid footing but so far none of these efforts appear to have really worked.
JD Wetherspoon (JDW.L)
Pub chain JD Wetherspoon has seen its sales jump ahead of pre-pandemic levels as chairman Tim Martin said he looks forward to "ferocious" inflationary pressures easing up across the pub industry.
Wetherspoon reported a 5% increase in sales over the six months to 29 January, compared to the same period in 2019, and up 13% compared to the previous year.
Revenue rose to £916m ($1.1bn) in the period compared to £807.4m a year ago.
The firm reported a pre-tax profit of £4.6m compared to a loss of £26.1m last year. However, this is still a 90% drop from the £50m profit it racked in 2019, before the pandemic.
“Wetherspoons has been through plenty of ups and downs during its existence and always seems to be able to survive intact. Founder Tim Martin certainly isn’t afraid of having a grumble, but the company knows what the customer wants and is able to deliver time and time again,” AJ Bell investment director Russ Mould, said.
Charlie Huggins from the Wealth Club said: “Wetherspoon's commitment to low prices is keeping customers loyal, as evidenced by the robust like-for-like sales growth. These value credentials are critical, and should mean the group is better placed than many of its peers to weather a downturn in consumer spending.
“Profitability, however, remains well below pre-pandemic levels. Wetherspoon’s business model is heavily exposed to the rise in labour, energy and food costs. Unfortunately, it doesn’t have the pricing power to fully offset these cost pressures. In the current inflationary environment that means one thing — pressure on margins.”
The company behind Screwfix and B&Q revealed a sharp decline in profits from record levels achieved in the wake of the COVID-19 pandemic.
In the 12 months to the end of January adjusted pre-tax profit hit £758m, a reduction of more than 20%. This year it is expected to fall to around £633m.
Sales declined by 0.9% to £13bn. On a like-for-like basis, sales were 2.1% lower but 15.6% above pre-pandemic levels.
Shares in Kingfisher, which is listed on the FTSE 100 (^FTSE), slumped after it announced the 20% fall in adjusted pre-tax profit and were headed for a weekly fall of 5%.
Kingfisher, which maintained its total dividend at 12.40 pence a share, also announced new medium-term financial priorities, focused on growth, cash generation and higher returns to shareholders.
Travel agent Tui aims to raise €1.8bn by offering shares at a 40% discount, so it can pay down the huge debts it built up during the pandemic, when it had to be bailed out by the German government.
The company will offer 328.9 million new shares at a price of €5.55 per share, a sharp discount from market price.
As of the end of 2022, Tui’s net debt was €5.3bn.
“A big discounted fundraise at TUI is hurting the share price in the short term but in the longer term it may be the route to a more meaningful recovery for the travel operator,” AJ Bell’s Mould, said.
“Burdened with debts accrued during the pandemic, TUI has been constrained in its ability to invest for growth as the travel sector recovers. A brief update on trading suggested continuing momentum in bookings but far too much of the company’s cash is currently disappearing in interest payments.
“The question is whether the money raised will be sufficient. Shareholders may stomach the dilution once but if TUI is forced to come back with its begging bowl again before long it may receive short shrift.”
Market movers next week
Looking at the week ahead, investors will want to keep an eye out for Next (NXT.L) full-year results coming out on Wednesday 29 March.
"These full-year results will be benchmarked against the forecasts made in that trading update, while analysts and shareholders will also look out for any guidance from Lord Wolfson for the year to January 2024 and compare that with current consensus forecasts," AJ Bell's Mould and Danni Hewson, AJ Bell head of financial analysis, said.
Bellway (BWY.L) will release its first-half results on Tuesday 28 March, with few surprises expected after the company gave a detailed trading update in February.
"Shares in Bellway are trying to forge a rally from the autumn lows, but they are not making a very convincing job of it, and they still languish at less than half their pre-pandemic peak of early 2020. And as seems to be the case at many consumer-related firms, the shares are even losing momentum and starting to roll over again," Mould and Hewson said.
Also on Tuesday, Micron Technology (MU) reports on second-quarter results as investors are keen to track companies in the silicon chip sector.
"Disappointing earnings, cuts to capital investment budgets, ballooning inventories and fears of a recession have all weighed heavily," Mould and Hewson said.
"An upturn in trading and the SOX would potentially be a good sign for both the global economy and also global equities as the benchmark has an uncanny record of being a decent guide to investors’ risk appetite — it topped out six to nine months before the S&P 500 and FTSE All-World did so in 2000 and 2007, to herald two thumping bear markets, and then bottomed out before those headline indices did in 2002 and 2009, to signal the start of a new bull market."