MARKET REPORT: Inflation fears take a bite out of Upper Crust owner

SSP Group was a major faller in the mid-caps as an investment bank warned the industry could be hit by surging inflation.

Shares in the Upper Crust and Ritazza owner slumped 6.3 per cent, or 15.5p, to 229.1p after analysts at Deutsche Bank downgraded the stock to ‘hold’ from ‘buy’ and lowered their target price to 265p from 333p, noting that the company’s ‘strong exposure’ to the European market left it susceptible to the volatility arising from the war in Ukraine.

The bank also said surging inflation may hit demand for travel and therefore SSP’s business in airports and other transport hubs while pushing up the cost of food and wages.

Deutsche Bank said in the current environment SSP was ‘at risk’ of being affected by lower customer numbers and rising costs, the latter of which it might not be able to fully pass on to consumers. 

Looking at the bigger picture, analysts warned that ‘strong downside risks’ have emerged since the war between Russia and Ukraine began, sending inflation soaring. 

They predicted the only way to counter rising prices was through ‘aggressive interest rate hikes’ in the second half of this year and in 2023.

However, they warned that such moves ‘could trigger a recession’ next year or in early 2024.

The bleak assessment of the global economy kept the market mood subdued in London as traders returned from the Easter break. 

The FTSE 100 dipped 0.2 per cent, or 15.1 points, to 7601.28 and the FTSE 250 was down 0.8 per cent, or 159.44 points, at 20962.17.

The war in Ukraine kept optimism muted amid reports that Russian forces had begun an offensive in the east of the country.

Stock Watch – Ideagen

Shares in Ideagen were volatile following talk of a possible takeover offer.

After the market closed last Thursday for Easter, private equity firm Cinven confirmed it was considering a bid for the AIM-listed firm, which develops software to help companies comply with regulations and manage risk.

Ideagen said it has yet to receive an offer from Cinven. 

Under City rules, it will have until 5pm on May 12 to table a formal bid. Ideagen shares fell 5.1 per cent, or 13p, at 240p.

 

 

The mood was not helped by the International Monetary Fund (IMF), which downgraded its forecasts for global economic growth as the war in Eastern Europe and new Covid-19 lockdowns in China hit the supply and demand for commodities, oil and gas.

Hargreaves Lansdown analyst Sophie Lund-Yates said there were ‘growing concerns of recession’ in financial markets, adding that rising interest rates during a slowdown in economic activity would make for ‘very difficult’ economic conditions.

Consumer goods weakened amid fears inflation was denting consumer spending. Unilever was down 0.2 per cent, or 7.5p, to 3421.5p, Dettol maker Reckitt Benckiser sank 1.8 per cent, or 106p, to 5950p and Guinness owner Diageo fell 0.3 per cent, or 11.5p, to 3952p.

However, the conflict in Eastern Europe was continuing to support oil prices, with Brent crude hovering around $110 a barrel after spiking late last week.

Shares in Shell topped the FTSE 100 leader board in early trading, rising 1.6 per cent, or 36p, to 2228p as BP gained 0.4 per cent, or 1.6p, to 401.05p.

The two stocks were boosted by target price hikes from JP Morgan, which raised Shell to 2850p from 2700p and BP to 500p from 480p.

Broadcaster ITV dropped 3.6 per cent, or 2.78p, to 74.24p after being downgraded to ‘sell’ from ‘hold’ by analysts at Berenberg, who also slashed their target price on the stock to 64p from 128p.

Pharma giant GlaxoSmithKline flagged that daprodustat, its drug to help treat anaemia caused by chronic kidney disease, had been submitted for approval to the US Food and Drug Administration. 

The shares were down 0.8 per cent, or 13.4p, to 1759.6p. Rival AstraZeneca also reported developments in its pipeline as the FDA granted priority review for its Enhertu lung cancer drug. Its stock dipped 0.3 per cent, or 36p, to 10500p.

Newsagent WH Smith slipped 3.5 per cent, or 53.5p, to 1463.5p after its greeting card website Funky Pigeon suffered a cyber-attack.