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“It feels like fears over inflation have returned with a vengeance this week as central bankers increasingly struggle to mask their own nervousness about rising prices,” says Danni Hewson, Financial Analyst at AJ Bell.
“Still UK stocks have put on their happy face this morning. Travel and hotel stocks trading firmly higher as traditional holiday destinations Ibiza, Majorca, Menorca and Formentera are added to the UK’s amber list and demand for staycations continues to surge.
“Investors may be hoping for a number which is neither too hot nor too cold when the US reports retail sales figures later. If the reading is a lot higher than expected then there will be concern that the world’s largest economy is overheating but if the data is much weaker then there will be fears the recovery from the pandemic is being knocked off course amid mounting infection rates linked to the Delta variant.
“US reporting season is already in full swing and next week should kick off in earnest in the UK too – helping to give the markets some sense of direction as it continues to navigate the twin threats of inflation and Covid-19.”
Burberry
“There’s a lot to like about today’s trading update from fashion label Burberry but perhaps the biggest plus point is the fact it is attracting new younger customers. This has positive implications of the long-term prospects of the business.
“With this, plus good growth in traditionally strong areas like trench coats and handbags powering first quarter sales to pre-pandemic levels it’s a wonder investors aren’t more enthused.
“Perhaps this reflects some disappointment that despite a seemingly very strong start to the year guidance for the 12-month period remains unchanged and concern that the company is facing some hefty headwinds in terms of movements in the foreign exchange markets.
“A pall has been cast over Burberry by the impending departure of Marco Gobbetti who, notwithstanding the pandemic, has done a good job of reviving the company’s fortunes with a move up the luxury food chain.
“Investors will be crossing everything that Gobbetti isn’t followed out the door by top designer Riccardo Tisci who has helped drive a rejuvenation on the creative side of the business.
“The performance of the European part of the business is also disappointing when compared with a strong showing in the Americas and Asia.
“Burberry will be hoping that the return of international tourism provides a renewed catalyst for sales growth given its traditional reliance on Asian tourists buying from flagship stores in Europe.”
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