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London open: Shares dip as M&S and Tesco fail to impress
London stocks dipped in early trade on Thursday as investors waded through a deluge of corporate news, with retailers in focus after updates from Marks & Spencer and Tesco failed to impress.
At 0855 GMT, the FTSE 100 was down 0.1% at 7,541.11.
Victoria Scholar, head of investment at Interactive Investor, said: “Markets are setting themselves up for a down day after a lacklustre start to the European open. The FTSE 100 is still managing to hold above critical support at 7,500 after closing at the highest level since January 2020 while GBPUSD is extending recent gains, closing in on key resistance at $1.38. Supercharged US inflation figures dampened risk appetite, resulting in a mixed picture overnight in Asia and softer trade across Europe.
“A slew of trading statements from Tesco, M&S, Persimmon and ASOS are spurring UK price action on Thursday while attention soon shifts to US earnings season which kicks off with the banks tomorrow.”
In equity markets, supermarket chain Tesco was in the red despite lifting annual profits guidance after better-than-expected third-quarter and Christmas sales.
Marks & Spencer fell even as the food and clothing retailer said it now expects annual profits of at least £500m after strong Christmas sales driven by outperformance in its food range. Fellow retailer Next was also in the red.
Countryside Properties tumbled as it announced the departure of its chief executive and said first-quarter trading had been below the board’s expectations.
Persimmon lost ground despite posting a jump in revenues, with peers Barratt, Taylor Wimpey and Berkeley also lower.
On the upside, Dechra advanced after the veterinary pharmaceuticals company said the full-year outlook was towards the upper end of management expectations as it reported a jump in first-half revenues.
Wood Group surged to the top of the FTSE 250 as the consulting and engineering company said it was selling its built environment division after a review and reported a fall in core profit.
Hays rallied after the recruiter said full-year operating profit was set to come in ahead of markets expectations following a record second-quarter quarter.
Shares of pub group Mitchells & Butlers fizzed higher after a well-received trading update.
Top 10 FTSE 100 Risers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Fresnillo Plc | +1.51% | +12.60 | 849.20 |
| 2 |  |
Direct Line Insurance Group Plc | +1.36% | +4.00 | 299.00 |
| 3 |  |
Prudential Plc | +1.35% | +17.50 | 1,316.50 |
| 4 |  |
Ocado Group Plc | +1.15% | +17.50 | 1,544.50 |
| 5 |  |
British American Tobacco Plc | +0.98% | +28.50 | 2,951.50 |
| 6 |  |
Imperial Brands Plc | +0.90% | +15.00 | 1,676.00 |
| 7 |  |
Carnival Plc | +0.88% | +12.80 | 1,474.20 |
| 8 |  |
Melrose Industries Plc | +0.83% | +1.40 | 170.40 |
| 9 |  |
Phoenix Group Holdings Plc | +0.70% | +4.80 | 689.80 |
| 10 |  |
Hiscox Ltd | +0.62% | +5.80 | 936.80 |
Top 10 FTSE 100 Fallers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Marks And Spencer Group Plc | -6.05% | -15.30 | 237.70 |
| 2 |  |
Next Plc | -3.72% | -298.00 | 7,704.00 |
| 3 |  |
Persimmon Plc | -2.90% | -76.00 | 2,545.00 |
| 4 |  |
Sage Group Plc | -2.56% | -21.00 | 798.80 |
| 5 |  |
Taylor Wimpey Plc | -1.98% | -3.20 | 158.60 |
| 6 |  |
Croda International Plc | -1.86% | -164.00 | 8,672.00 |
| 7 |  |
Tesco Plc | -1.85% | -5.40 | 286.85 |
| 8 |  |
Barratt Developments Plc | -1.75% | -12.00 | 673.00 |
| 9 |  |
Micro Focus International Plc | -1.68% | -7.60 | 445.30 |
| 10 |  |
Spirax-sarco Engineering Plc | -1.55% | -225.00 | 14,270.00 |
Europe open: Shares edge lower as Countryside Property slumps
European shares opened slightly lower on Thursday as inflationary pressures and the ongoing spike in Covid Omicron cases.
The pan-European Stoxx 600 was down 0.18% with most major regional bourses lower. Shares rallied briefly on Wednesday afternoon as US inflation data was not as bad as initially feared.
“US CPI came in at a 40-year high of 7% but market reaction was muted as it was largely in line, albeit the core reading was a bit higher than expected,” said Neil Wilson at Markets.com.
“In the end stocks rallied and the three major Wall Street indices ended higher, but the price action suggests ongoing uncertainty re the Fed and inflation.”
In Europe, governments worked to stymie the spread of the latest virus wave, with German Chancellor Olaf Scholz urging mandatory Covid-19 vaccinations for all adults, and the French Senate approving new measures including a vaccine pass.
Among equities, shares in British housebuilder Countryside Properties slumped 17% after the company said first quarter adjusted revenue and adjusted operating profit fell, and chief executive officer Iain McPherson would step down immediately.
UK retailers Tesco and Marks & Spencer were both lower, despite lifting annual profits guidance.
French consulting and software group Sopra Steria topped the benchmark index after the company said it would meet raised targets for 2021 and named a new chief executive officer.
Food ingredients maker Chr Hansen rose after reporting quarterly organic revenue growth well above forecasts.
Swiss plumbing supplies firm Geberit was down 3% as it said increased uncertainty made it impossible to give a 2022 outlook for raw materials prices or the construction market overall.
US close: Stocks remain positive as consumer prices rise further
Wall Street kept their heads above water on Wednesday, as market participants digested December’s consumer price index reading.
At the close, the Dow Jones Industrial Average was up 0.11% at 36,290.32, as the S&P 500 added 0.28% to 4,726.35 and the Nasdaq Composite was ahead 0.23% at 15,188.39.
The Dow closed 38.3 points higher on Wednesday, extending gains recorded in the previous session following Federal Reserve chairman Jerome Powell’s Senate testimony on Tuesday.
“The sharp rise in the cost of living is one of the reasons why the US central bank has adopted a more hawkish position recently,” said Equiti Capital market analyst David Madden.
“Although it is worrying that costs are rising, at least the rate at which they are increasing seems to be cooling, after all, it was only a 0.2% rise.”
Madden also pointed to last week’s confirmation that the unemployment rate fell to 3.9% – the lowest level since the pandemic began.
“The impressive rebound in the labour market is also why the Fed is moving towards lifting rates.
“There are some concerns in the markets that rate hikes from the Fed might tip the economy into recession, which is part of the reason why stocks suffered at the start of the week.”
Powell’s comments boosted sentiment early in the session, after the Fed head telling the Senate Banking Committee that he anticipates interest rate increases in 2022, along with the end of the central bank’s monthly bond-buying programme in March and a reduction in asset holdings.
Those moves, he said, would likely be required to manage inflation amid the economy’s recovery from the Covid-19 pandemic.
However, Wednesday’s primary focus was the December reading of the Labor Department’s consumer price index, with the report revealing that the cost of living in the US increased a bit more quickly than expected last month.
According to the data, the headline US consumer price index rose at a month-on-month pace of 0.5% in December, which pushed the year-on-year rate of CPI inflation from 6.8% in November to 7.0% for December.
At the core level, which excludes the contribution made by food and energy prices, CPI was 5.5% higher on the year.
Also on the macro front, the Mortgage Bankers Association‘s weekly mortgage applications report revealed that loan application volume rose 2% compared with the previous week as mortgage rates moved to 3.52% from 3.33%, their highest level in over 12 months.
That could lead prospective homebuyers to think that affordability windows would close faster than initially expected.
In equities, satellite television provider Dish TV was up 2.8% as it emerged it was once again in talks with its AT&T-controlled competitor DirecTV.
The two subscription broadcasters have courted each other several times previously, being batted down by federal competition regulators.
Tesla was up 3.9% despite fresh security concerns over the electric carmaker’s technology, with a hacker and self-titled ‘security specialist’ claiming to have hacked into more than 20 Tesla cars, gaining some control over the vehicles.
On the downside, financial services firm Jefferies tumbled 9.3% even after it reported fourth quarter net income of $324.9m, up 6% year-on-year.
Pfizer ended the session down just 0.1% after it released research choosing that the administration of its ‘Prevnar 20’ vaccine for bacterial pneumonia at the same time as its Covid-9 jabs and booster produced the same response as the initial dosing regime.
Thursday newspaper round-up: Ovo, Hilco, EDF, HSBC
Ovo Energy is moving to cut a quarter of its entire workforce in an attempt to cut costs amid the growing industry crisis. The UK’s third-biggest supplier of gas and electricity is expected to announce the loss of 1,700 roles out of 6,200 as part of a voluntary redundancy scheme as soon as Thursday. Gas market prices last month reached an all-time high of £4.50 per therm, about nine times higher than this time last year. – Guardian
The restructuring group Hilco took a £25m dividend payment from the DIY chain Homebase in 2020 despite accepting at least £10.6m in government aid. The company, which bought Homebase for £1 in 2018 from its Australian owner, Wesfarmers, said it had accepted business rates relief for the Homebase chain on top of £10.6m in furlough payments and grants for the Bathstore chain, which was forced to close for many weeks under government high street lockdowns. – Guardian
EDF has announced a further delay to its flagship nuclear reactor project in France as it prepares to install the same design at power plants in Britain. The company said that fuel loading at its Flamanville 3 project in western France will be done six months later than previously planned, adding €300m (£250m) to the project’s cost, which now stands at €12.7bn. – Telegraph
HSBC has been accused of hypocrisy after it increased the cost of a charity bank account. The lender now takes a £5 monthly account fee from charities and has introduced charges of 0.4pc to pay in and withdraw cash – equivalent to £4 for a £1,000 donation. There is also a fee of 40p to deposit a cheque. Peter Catton, the treasurer at St Peter’s Church in Sicklinghall, Leeds, said the fees amount to 1pc of its income. – Telegraph
Property valuers responsible for making judgments underpinning trillions of pounds of land and buildings in Britain and overseas face tougher regulation after an independent review found evidence of conflicts of interest. CBRE, Savills and Knight Frank are among surveying firms that will have to employ a “valuation compliance officer” to ensure that valuations are made objectively and they will be governed by a new regulatory panel under plans announced today. – The Times
