Daily market update: Equity markets higher, Whitbread, motor finance redress scheme

Equity markets pushed ahead in Europe despite oil prices creeping ever higher.

The exception was the FTSE 100 which held firm as energy and industrial sector gains were offset by weakness in consumer non-cyclicals and miners.

The oil market has been the place to watch closely since the start of March when the Middle East crisis unfolded. Oil below $100 is a relief signal, while higher than this level is concerning.

Brent crude rose 2.2% to $107.60 after the weekend’s setback to US-Iran peace talks dampened prospects for a near-term resolution to the conflict.

Brent has now risen by 25% over the past 10 days, illustrating a significant shift in market thinking towards the Middle East crisis. Oil had dropped quickly on 17 April amid hopes of a resolution to the war, but that weakness proved to be a short-lived blip.

Investors have been encouraged by corporate news flow over the past few weeks, leading to higher equity prices. However, it’s impossible to ignore what’s happening on commodity markets as higher oil for longer spells trouble for inflation, which in turn could act as a headwind for the economy.

Whitbread

Whitbread was the biggest riser on the FTSE 100 on talk it is shifting more to an asset-light business model.

Reports suggest it will sell one in five of its freehold hotel properties and lease them instead. It is increasingly common for hotel operators not to own the buildings in which they operate, and for Whitbread it would mean a big cash injection and a pot of money that could be returned to shareholders.

Whitbread has found life harder going in recent years, particularly in the UK, and needs to do something to win back the market’s support.

Motor finance compensation scheme

Having kicked the tyres and looked closely under the bonnet, it appears the motor finance industry has largely accepted the FCA redress scheme ahead of today’s deadline for legal challenges.

While the scheme did increase the average expected payout compared with initial indications, it did reduce the number of eligible loans. The likes of Lloyds, Vanquis, Barclays and the industry’s trade body look ready to put the affair in the rearview mirror and move on. Getting clarity feels as important as the favourability of the arrangements proposed by the regulator.

Of the other main players caught up in motor finance mis-selling, Close Brothers has given no indication it will challenge, and FirstRand is pulling off the road entirely as it announces plans to exit the UK motor finance space.

Lenders will be hoping an end is in sight. However, campaign group Consumer Voice – representing the interests of those on the other side of the scandal – intends to challenge the scheme.  

This could leave lenders in gridlock as the implementation of the compensation scheme is delayed, with the nightmare scenario that the whole thing is overturned and existing provisions dialled up.

This could also mean a delay in receiving payouts for households who are facing renewed inflationary pressures and could do with every penny they can get right now.