Must read: UK emerges from recession, IAG, Rightmove

GLOBAL MARKETS

After the FTSE 100 hit a record high for the fourth straight session on Thursday, the UK index has opened higher yet again and is potentially on track to close at another all-time high.

Shares in Anglo American (LSE:AAL) are up on a report that Rio Tinto Registered Shares (LSE:RIO) is also considering a bid following BHP Group Ltd (LSE:BHP)’s rejected offer. M&A speculation is helping to keep Anglo shares supported at the moment.

Overnight, the Hang Seng in Hong Kong rallied to a nine-month high. Central bank speakers are also in focus today including the Bank of England’s Pill and Dhingra as well as the Federal Reserve’s Bowman.

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UK GDP 

According to the Office for National Statistics (ONS), the UK economy grew by 0.6% in the first quarter of 2024, outpacing analysts’ expectations for growth of 0.4%. 

This comes after two quarters of declines last year and ends 2023’s shallow technical recession. The services and production sectors grew by 0.7% and 0.8% respectively while construction fell by 0.9%. There was strength across services including retail, public transport and health, partly offset by weakness in construction because of the wet weather. 

The ONS said in March alone, the UK economy grew by 0.4%, up from 0.2% in February (which was revised higher from 0.1%) and 0.3% in January. March’s growth was ‘robust’, led by services, with wholesalers, health and hospitality performing well.

IAG 

International Consolidated Airlines Group SA (LSE:IAG) reported first-quarter operating profit of €68 million, beating analysts’ expectations for €49 million in what is usually a seasonally challenging quarter for the industry when demand for travel is weak. 

British Airways’ parent company said it delivered a very good first quarter and it is well positioned for the summer. It enjoyed strong demand including over the Easter holidays and has benefitted from strength in its core markets as well as lower jet fuel prices. 

Despite cost-of-living pressures, IAG echoed other airlines by highlighting the fact that demand for travel remains resilient. Clearly individuals and families are prioritising their summer holidays where they can, most likely at the expense of other discretionary spending. 

Last year the company restarted paying dividends after a three-year break having taken drastic steps to cut costs and restructure its operations after the pain of the pandemic when international travel ground to a halt. 

Shares in IAG have been rebounding – they have doubled off the lows in October 2022 and are up around 18% so far this year. Nonetheless the company’s share price is still reeling from Covid – it is down about 60% from the highs in January 2020. 

There are 13 buy recommendations versus 4 holds and zero sells on the stock from the analyst community, pointing to a positive overall outlook.

RIGHTMOVE 

Rightmove said it enjoyed a strong start to 2024, reiterating its full-year revenue and margin guidance. It upgraded its 2024 customer guidance numbers – it now expects growth of 2% versus its previous forecast for a slight decrease. Sales agreed between January and April were up 17% versus the same period last year. 

However, it said completion times remain lengthy and higher mortgage rates are stretching affordability for the average buyer. The chronic shortage of supply in the UK’s housing market means that mortgage rates have failed to lead to a significant sell-off in house prices, which would have given a boost to buyer demand, especially at the lower end. 

Rightmove clearly enjoyed a boost at the start of the year when mortgage brokers were engaging in a price war on the back of expectations of a slew of central bank rate cuts in 2024. However, amid the higher-for-longer interest rate backdrop, it looks like pressures on the housing market are enduring longer than Rightmove would like.

Nonetheless, 2024 is still proving to be more fruitful than the previous year and customer numbers appear to be picking up slightly.

Shares in Rightmove are under pressure today, wiping out most of this year’s gains, landing the stock flat year-to-date.