FTSE 100 nears 8,000 ahead of US inflation numbers, Liberty Global takes Vodafone stake and TUI sales above pre-pandemic levels

“It might be stretching things to say love is in the air when it comes to the stock market, but the FTSE 100 is mounting a Valentine’s Day push toward the 8,000 level,” says AJ Bell Investment Director Russ Mould.

“All eyes will be fixed on Washington later as the US Bureau of Labor Statistics posts inflation numbers for January.

“The expectation is for another modest easing of inflationary pressures and anything more than this could provide a real boost to sentiment – though conversely a renewed move higher in the inflation rate could prompt heavy selling.

“In the UK record wage growth raised concerns the UK’s own inflation problems might prove stickier than feared ahead of the UK posting its own CPI numbers on Wednesday.

“However, the Bank of England will likely be hoping the lagged impact of a series of rate increases is yet to fully come through amid growing expectations a rate hike in March will be the last.”

Vodafone

“Consolidation is the name of the game in the telecoms sector and Liberty Global is taking a £1.2 billion bet that Vodafone is going to be an important cog in the system.

“By acquiring nearly a 5% stake Liberty Global is essentially getting its foot in the door should any new deals start to emerge. The company says the stake is only for investment purposes, but it’s got form in seeking optionality for potential deals.

“Liberty Global has been quietly sitting on a 9.9% stake in ITV for some time, while it also has positions in various telecoms and media groups including Virgin Media O2 and All3Media.

“As a standalone business, Vodafone has struggle to generate any notable sales and earnings growth in recent years, and its share price performance has been truly miserable. Slowly, other players are planting their flags by investing in Vodafone with the market expectation that they will try and extract some value from the business.

“Liberty Global has already done deals with Vodafone in the past, merging the two companies’ Dutch operations and selling some of its European interests to the UK business. It probably has a few ideas up its sleeve and realised it could have more influence by being a shareholder than sitting back and letting others get a seat at the table.

“Middle Eastern group e& already has a 13% stake in Vodafone and French investor Xavier Niel owns 2.5% of the business, so Liberty Global must join the queue of people eager to ‘have a chat’ about where Vodafone goes next.

“The company is certainly in a fragile place, with chief executive Nick Read having recently left the business. Its share price is down more than 50% over the past five years as the telecoms group has waded through treacle to try and make progress.”

TUI

“Investors may still be fretting about whether TUI’s recent momentum can be maintained but chief executive Sebastian Ebel has no qualms about flagging a ‘decade of significant growth’ for the company.

“Only time will tell whether this is hubris or justified confidence in the outlook for the business. TUI recently had its wings clipped, suffering the indignity of Jet2 overtaking it as the UK’s largest tour operator.

“A significant narrowing of losses as holiday sales moved back to pre-pandemic levels was encouraging. There doesn’t seem to be any doubt about the lasting appeal of an escape away on holiday, something which has arguably been strengthened by the pandemic when Covid restrictions prevented overseas trips.

“However, where there is more doubt is over holidaymaker’s capacity to spend, particularly as travel businesses push up their prices to cover their own spiralling costs.

“TUI and its rivals face a very delicate task in protecting their own profitability without puncturing demand.

“TUI and others have already benefited from capacity coming out of the market – notably the failure of Thomas Cook – but there are new competitive threats emerging with EasyJet’s package holiday business growing rapidly.”

These articles are for information purposes only and are not a personal recommendation or advice.