Burberry Sales Rise On Asia Rebound, FTSE 100 Relinquishes Some Recent Gains

Published on
  • Burberry Q1 sales jump 19% on rebound in Asia, offsetting declines in the Americas
  • US Federal Trade Commission throws another legal hurdle at Microsoft’s bid to close $69bn Activision deal
  • FTSE100 opens down 13 points as hopes for a soft economic landing help buoy the index for the week as a whole
  • Supply disruptions and a tightening global market pushes Brent crude up to $81 a barrel

Burberry Q1 Sales Jump

Burberry Group plc (LON:BRBY) has reported a 19% jump in retail revenue for its first quarter, as the luxury giant proves it’s still very much flavour of the month overall. Underneath the hood, things aren’t quite as rosy as they might appear though.

A large reason for the uplift stems from a rebound in demand from Asia and especially mainland China, after restrictions this time last year dented performance. European tourists also helped tow the top line in a big way. This increase helps to mask an 8% drop in the Americas, where a reduction in domestic spending was only partially offset by people spending abroad.

One reason for this is likely to be the tougher economic conditions across the pond. The US is depleting its savings at a faster rate than other areas, reducing consumers’ sense of resilience and therefore willingness to spend on non-essentials.

While luxury names are usually able to stand up to economic pressure more than other names, Burberry may well find its position in the luxury hierarchy isn’t quite as high as ultra-luxury names, leaving it slightly more vulnerable.

FTC Throws A Hurdle At Microsoft To Acquire Activision

In yet another high-stakes twist for Microsoft, the US Federal Trade Commission is appealing against a ruling that Microsoft can continue with its $69bn takeover of video game developer Activision Blizzard. This is only the latest chapter in a protracted saga, which has seen Microsoft have to appease the UK’s CMA too – a dispute only laid to rest in recent days.

The latest challenge comes just days before the important 18 July deadline, which is the point at which both parties in the deal can walk away. The deal itself won’t make or break Microsoft, but the intellectual property assets and potential for growth are substantial, the larger question is one of true value over price.

FTSE 100 Opens Down 13 Points

The FTSE 100 has started its final trading day of the week on a subdued note, following days of consecutive gains. The UK’s economic data for May has raised hopes we’re on track for a softer landing after the economy didn’t shrink as much as predicted.

This has buoyed mining stocks in particular, because economic health helps underpin demand for the precious materials needed for infrastructure and products. While the recent gains are welcome, ups and downs can’t be ruled out as policymakers continue to grapple with soaring inflation.

The UK’s inflation problem is especially stubborn, meaning the level of heat that may need to come out of the economy could send a chill through markets in the short term. The reasoning behind the slight dip seen today is likely to stem from apprehension around the start of US earnings season, with important economic bellwethers JPMorgan Chase & Co, Wells Fargo and CitiGroup all reporting half year numbers today.

The FTSE’s reliance on financials means trends in the US banks will be seen as a preview for what may to come for the UK market in the coming weeks.

Brent Crude Pushes Higher

Supply disruptions, including Libya’s second-largest oil field being in the process of shutting due to protests, a production halt in Nigeria, and slowing Russian flows, have helped push Brent crude into its third week of gains.

A barrel of the black stuff will now set you back $81, although this is still sharply down on the price a year ago. The oil price is going to remain a slippery beast while macroeconomic and geopolitical tensions run high, with shocks in either direction unable to be ruled out.”

Article by Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown