What to watch: May survives, Primark bucks slump, and Premier Inn owner promises cash return

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Theresa May survives leadership challenge

UK stocks and the pound were marginally lower on Thursday morning after prime minister Theresa May survived a challenge to her leadership late on Wednesday.

May beat a vote of no confidence in her government by 325 votes to 306.

Britain’s FTSE 100 (^FTSE) was down by 0.4% after almost an hour of morning trade. The pound was down by 0.04% against the euro to €1.12 (GBPEUR=X) at the same time and down by 0.02% against the dollar to $1.28 (GBPUSD=X).

Connor Campbell, a senior market analyst with SpreadEx, said: “The pound appears to be in wait and see mode.”

Investors feel that recent political events increase the chances of a softer Brexit and a delay to exiting the EU. Chancellor Philip Hammond told business leaders on a call this week that the government’s new Brexit proposal could include a backstop to prevent a no deal Brexit.

However, Brexit optimism is being restrained by the fact that Labour party leader Jeremy Corbyn refused an offer to engage in cross-party talks on Wednesday night. It suggests that a political compromise over Brexit may not be forthcoming.

Primark bucks weak market

Primark owner Associated British Foods (ABF.L) said on Thursday its budget high-street chain saw a “modest decline” in like-for-like sales in the 16 weeks to 5 January, although total sales lifted 4% as it opened more stores.

It said total sales rose 1% in the UK, with trading better than it expected over the Christmas trading season. Despite the modest decline in global like-for-like sales, profits were “well ahead” at Primark thanks to a higher operating profit margin.

Overall, AB Foods – which also owns a sugar business and grocery business including Twinings and Ovaltine – saw group-wide revenues rise 2% on a constant currency basis in the 16 weeks.

Shares in Associated British Foods were up by 5%.

Premier Inn-owner promises cash return

Premier Inn-owner Whitbread (WTB.L) said it plans to hand the majority of its near-£4bn windfall from the sale of Costa Coffee to shareholders.

Whitbread CEO Alison Brittain said on Thursday: “We intend to return a significant majority of the net cash proceeds to shareholders, although the exact amount, timing and method will be determined following discussions with stakeholders, including our shareholders, pension fund and debt providers.”

The company launched a £500m share buyback programme on Thursday. The news came as Whitbread posted third-quarter sales growth of 2.5% and backed its full-year guidance.

Whitbread said it remains “cautious on UK environment next year given uncertainty and higher inflation.”

It said the “UK environment remains subdued and sustained inflation continues to be a significant challenge.” Shares were down 1.9%.

Housing market weakest since 1999

The UK’s housing market is the weakest since 1999, according to the Royal Institute of Chartered Surveyors (RICS).

RICS said sales expectations for the next three months were — 28%, the lowest level since it began monitoring activity in 1999. The reading is the difference between respondents predicting a rise in sales and those predicting a fall.

The number of agreed sales, new inquiries, and new instructions all declined in December.

European markets

European stock markets were lower. Germany’s DAX (^GDAXI) was down by 0.5%, France’s CAC 40 (^FCHI) was down by 0.2%, and the Euronext 100 (^N100) was 0.1% lower.

Asian markets were in the red. Japan’s Nikkei 225 (^N225) closed down by 0.2%, Hong Kong’s Hang Seng index (^HSI) was down by 0.5%, and China’s benchmark Shanghai Composite (000001.SS) was down by 0.4%.

What to expect in the US

US stock futures were pointing to a lower open. S&P 500 futures (ES=F) were down by 0.3%, Dow Jones Industrial Average futures (YM=F) were down by 0.3%, and Nasdaq futures (NQ=F) were down by 0.4%. The VIX volatility-tracking index (^VIX) was up by 4.1%.