Markets take Syrian air strikes in their stride

European markets were broadly trading on higher ground early on Monday, after a positive session in Asia overnight. Investors, although cautious appear to be taking the West’s bombing against Assad’s regime in their stride. 

The air strikes are bring seen as a one off, which is giving the markets hope that a further escalation of the political tense situation is unlikely. Furthermore, given the overwhelming support on a global level for the attacks, Russia and Iran, Syria’s principal supporters are unlikely to retaliate meaning investors haven’t resorted to the risk off trade.

A de-escalation of fears over the situation in Syria has seen oil sell off as traders book profits following last week’s rally. Crude jumped over 8.5% in the previous week, taking the price close to a 3 ½ year high, as oil supplies are particularly vulnerable to geopolitical tensions in the Middle East. 

Yet whilst oil is seen giving back some of last week’s gains we expect the price to remain elevated as supply disruption is still a very real possibility.

Oil pares last week’s gains

The softer oil price following the easing of fears of a Russian or Iranian retaliation over the weekend bombings of Syria is weighing on oil majors on the FTSE this morning. 

Given the heavy weighting of the oil majors, the FTSE is seen lagging behind its European counter parts, trading marginally lower in early trade against the Euro Stoxx and Dax which are both trading over 0.1% higher.

Calls for Whitbread to demerge won’t go away

Costa Coffee and Prermier Inn owner Whitbread topped the FTSE leader board, jumping over 6% following revelations that US hedge fund Elliiot Advisors had built up their stake to 6% in the Whitbread last week. 

This aggressive move by the Elliot Advisors is particularly relevant given the hedge funds ambition for the demerger of Whitbread’s businesses. This is not the first time that Whitbred has come under pressure to demerge, with US hedge fund and 3.4% stake holder Sachem Head Capital Management also reportedly having discussed the move with Whitbread. 

These calls for breaking up the group are not going to just disappear, despite CEO Alison Brittain previously claiming the timing was not right – mid course through a restructuring plan, she has since said that the group is open to a restructuring. Following the revelation by Elliot’s Whitbread share price has picked up from a 5 month low to an 11 month high.

High Street remains under pressure

The difficulties faced by the UK high street showed no signs of letting up in March as figures released showed that the number of shoppers hitting the high street dropped by the steepest amount since 2010. 

Disruptive weather conditions coupled with the continued squeeze on the consumers from rising prices and slower wage growth, left shopper with little motivation to hit the shops. A 6% fall in shoppers was recorded, which will be felt by retailers which are already under pressure. 

Furthermore, it was not just the high street that suffered, e- commerce was also lower for the first time in 10 months another sign of the falling confidence of the UK consumer. Whilst retailers on the FTSE were taking the news in their stride, with the sector trading 0.1% higher, the outlook for retailers remains challenging.