Daily market update: Middle East, Whitbread, Hays, Revolution Beauty, Frasers

“Central banks are in a ‘wait and see’ mood with regards to interest rates, despite broad concerns about a weaker economic outlook,” says Russ Mould, Investment Director at AJ Bell.

“The Fed kept US rates unchanged at its meeting yesterday and the Bank of England is expected to do the same with UK rates later today.

“This won’t be a shock to markets as it’s too early to assess the true impact of tariffs and their economic impact, meaning central banks will probably sit on their hands until more data is available.

“Markets have plenty of other things to focus on, namely the Middle East conflict which shows no sign of easing. Equity markets were in the red across Europe and most of Asia as investors were spooked by the escalating conflict and the negative read-across to inflation.

“Oil prices have shot up in recent days and any disruptions to Middle East supplies could put them even higher and stoke inflation.

“Remember that central banks fight inflation by putting up interest rates, not cutting them, which muddies the water in terms of trying to second guess what will happen next to borrowing costs. Rates staying higher for longer is bad news for investors and so the more intense the Middle East conflict gets, the greater the potential for increased market volatility.

“The FTSE 100 fell 0.5% to 8,796, with only 16 stocks in positive territory. BP and Shell were the only ones to rise by more than 1% as their earnings should benefit from further strength in the oil price. Crude jumped another 1% to $74.21 per barrel.”

Whitbread

“How much does it matter if you’re doing better than the wider market and still struggling? That’s the question in front of the market as Whitbread updates on its first-quarter trading.

“The Premier Inn owner has a proposition which is relatively affordable and reliable – anyone booking a room knows what they are going to get and that is a key selling point.

“However, the key revenue per available room metric is still trending negative for its domestic business thanks to the weak backdrop for the UK hotels market as a whole amid an uncertain economic backdrop.

“With visibility limited, all the company can do is control what it can and hope that it comes out of this difficult period with its competitive position enhanced thanks to weaker players and independent operators falling by the wayside.

“Whitbread needs to keep things running as efficiently as possible so it can keep prices low to attract business and leisure customers.

“The latest trading statement reflects the company’s rejigging of its food and drink operations – with Whitbread converting several sites into hotels and selling others. Sales were down significantly for this part of the business.

“Investors will be pleased about the progress being made in Germany, where its operations are enjoying strong growth, albeit from a lower base than in the UK, and where it remains on track to achieve a maiden profit in 2026.”

Hays

“Hays’ share price slump implies the jobs market is going from bad to worse. So much bad news was already priced into the stock, and the shares have now taken another leg downwards on a worrying trading update.

“Companies are clearly worried about the economic outlook and they’re reluctant to take on full-time staff, potentially not replacing anyone lost to natural turnover. At the same time, individuals are worried that if they move job they’ll be in the ‘last in, first out’ firing line if companies look for new cost savings.

“The combination of low permanent vacancy levels and individuals unwilling to look for new roles is the worst thing that can happen to a recruitment agency like Hays. Recruiters get paid commission for placing candidates into roles, and deal flow looks thin on the ground.”

Revolution Beauty / Frasers

“Revolution Beauty has faced many challenges in recent times and while it is upbeat about long-term prospects, it recently flagged the need to raise new money. That led to the revelation a few days later that an undisclosed party was interested in potentially buying the company, leading Revolution Beauty to put itself for sale.

“Frasers subsequently confirmed it was running the numbers on the business with a view to potentially making an offer. It obviously didn’t like what it saw and the retail giant has now pulled out of the bidding process.

“There are two possible scenarios to consider. One is that Frasers has found some skeletons in the closet and is betting on Revolution Beauty going bust, which would mean it could potentially buy the business at a much cheaper price out of administration. The other is that Revolution Beauty needs a significant amount of money to dig it out of a hole and Frasers simply isn’t prepared to make that investment.

“This is all pure speculation, but Frasers’ withdrawal has clearly spooked investors in Revolution Beauty given how the shares fell nearly 10% on the news.

“Frasers was one of two obvious buyers – the other being Boohoo which owns 29% of Revolution Beauty. Boohoo is trying to fix its own problems and its investors might not welcome the acquisition of Revolution Beauty just at the point where the mothership is finally getting back on its feet.”