Must read: UK inflation, rates, M&S shares surge, British Land

GLOBAL MARKETS

European markets are under pressure, with the FTSE 100 leading the charge down by 0.5%. RS Group (LSE:RS1) has sunk to the bottom of the basket following disappointing full-year results. 

UK public sector borrowing figures came in worse than expected in April – net public sector borrowing hit £20.5 billion, above the Office for Budget Responsibility's (OBR) forecast. 

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US futures are pointing lower after a positive session for Wall Street on Tuesday, with earnings from AI darling NVIDIA Corp (NASDAQ:NVDA) set to take centre stage.

UK INFLATION 

UK April CPI slowed to 2.3% year-on-year, down from 3.2% in March but higher than expectations for 2.1%. It is inching closer to the Bank of England’s 2% target, reaching the lowest level in nearly three years. However, it came in above expectations alongside core inflation and services sector inflation which were also both hotter than anticipated. 

The fall in this morning’s inflation figures was driven by a reduction in Ofgem’s energy price cap as well as cooling food and tobacco inflation, partly offset by slightly higher petrol prices. 

Today’s above forecast inflation figures could mean that the Bank of England waits a bit longer before carrying out the first rate cut. Reflecting this, the pound rallied to a two-month highs and traders have pushed back their forecasts for the first cut potentially from June or August to November, which is now also live. Only one rate cut is now being priced in for this year, down from two before today’s data.

MARKS & SPENCER 

Marks & Spencer Group (LSE:MKS) reported annual profit up 58% - underlying profit hit £716.4 million, beating analysts’ expectations, hitting the highest level in a decade. M&S enjoyed its twelfth consecutive quarter of sales growth. Annual sales rose 9.4% to £13.1 billion with food sales rising 13% and clothing and home sales up 5.3%. The company also improved its five-year cost savings objective from £400 million to £500 million. 

This is an excellent day for M&S CEO Stuart Machin who has helped spearhead an impressive turnaround for the 140-year-old retailer. M&S is the top gainer on the FTSE 100 today, rallying around 9% lifting the stock’s one-year gain to around 84%. Its turnaround plan is clearly working well – it has been revamping its store estate, focusing on its most profitable stores, and improving its clothing ranges with help from stylish advertising to boost perception of the brand. Its food division is always a winner and continues to enjoy impressive growth – M&S is now the second fastest growing supermarket in the UK behind Lidl, according to NIQ.

BRITISH LAND

Keith Bowman, Equity Analyst at interactive investor says: “Property group British Land has today detailed broad progress as it continues to focus down on campus complexities, retail parks and London urban logistics sites. Adjusted profit is up 2% at £268 million, so the annual dividend goes up 1% to 22.8p per share. While net tangible asset value per share is down 4.4%, that contrasts with the 19.5% slump suffered this time last year. Fully reported profit after tax is just £1 million but that compares to a loss of £1.03 billion a year ago, and management is hopeful of a more supportive economic environment over the next 12 months than we’ve seen over the last two years.   

Nonetheless, the tough economic backdrop including uncertainty over the timing of expected interest rate cuts cannot be ignored and the company’s property values are still falling. A ratio of group net debt to adjusted profit of 6.8 times warrants consideration, while a relatively recent move into urban logistical developments leaves it competing with more established players.

On the upside, the share price still trades at a discount to net asset value of 562p per share. Occupancy levels across its portfolio remain robust at 97%, it’s growing exposure to innovation and life science occupiers at its campuses, while 93% of its portfolio is now within its favoured area of retail parks, campuses, and London urban logistics. On balance, and while stubbornly high interest rates and reduced need for physical office and retail spaces are reason for caution, a discounted valuation and forecast dividend yield of over 5% leave analyst opinion pointing towards a cautious buy.