AM update: Dollar weakens, Costa profits down, gold up

The US dollar weakened overnight as uncertainty washed about over the appointment of US Federal Reserve chair Janet Yellen – who may replace her, if anyone – early in February. Yellen has presided over ultra-low interest rates and and recently announced an unwinding off the massive stimulus program the Fed commenced almost a decade ago. 

But there are increasing differences in tone and emphasis – especially about inflation – between her and Donald Trump. Will Trump re-hire Yellen for another four years, or pick someone more sympathetic to his views on red tape and stock market growth? Yellen's appointment/re-appointment is a big deal for markets, which always prefers the devil they know. 

At a little after 7am sterling was trading +0.07% higher against the dollar at 1.3212 while the euro was up +0.03% at 1.1236. Elsewhere gold saw something of a comeback, up +0.23% to 1,280.66. The Nikkei, up +0.50% to 21,805, notched up another end-of-day gain, making for 16 consecutive daily rises. 

Today, a quiet day for economic numbers. That changes tomorrow with a UK Q3 GDP update and a torrent of other numbers including US new home sales and mortgage applications, US oil inventories plus the Ifo business climate survey from Germany. 

• UK FTSE 100 7,524.45 +0.02%
• Dow 23,273.96 -0.23%
• S&P 500 2,564.98 -0.40%
• Nasdaq 6,586.83 -0.64%
• Nikkei 225 21,775.10 +0.38%
• DAX 13,003.14 +0.09%
• CAC 40 5,386.81 +0.27%
• Gold 1,282.80 +0.15%
• Oil WTI 52.00 +0.19%

Profits smell good for Costa owner Whitbread

First off, a look at Whitbread, owner of Costa and Premier Inn. Half-year revenues climb more than +7% to £1.6bn with pre-tax profits leaping from £263.6m to £316m. Things don’t smell quite so good on the coffee front though: while Costa sales climbed +9.1% profits were down almost -10% to £59m, not helped by rising coffee prices and the weaker pound. 

All-important like-for-like Costa sales – which strips out new opens – were up +0.6%. Despite some short term economic uncertainty Whitbread says it expects to meet expectations for the full year. Although it remains cautious "we are confident that ongoing disciplined allocation of capital and focus on executing our plans will deliver long term growth in earnings and dividends and a strong return on capital.”

Whitbread is hiking the interim dividend to 31.4p. Whitbread shares have lagged the wider market, up just +3.8% in the last 12 months. 

Coffee profits slip for Costa but sales remain solid: Shutterstock

Carpetright like-for-like sales up

Another retail bellwether next – Carpetright. In a trading update this morning Carpetright says like-for-like sales inched up +0.8% with total group sales rising +1.8% helped by a +2.1% shove from hard flooring. Chief exec Wilf Walsh says that while he expects first half profits to be below that of last year, sales in Europe and the UK have improved in recent weeks.

"Sales in our Rest of Europe business have been equally volatile, but we have been encouraged by more recent like-for-like sales growth, in part reflecting the strong post-refurbishment performance of the 25 rebranded stores we have now completed.”

While Carpetright's share price is up +19.1% year-to-date at 180.00p, over the last 12 months its share price is down more than -16%.  

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