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London open: Stocks steady after heavy losses; food prices fall
London stocks were steady in early trade on Tuesday following heavy losses in the previous session, as investors mulled the latest UK shop price data.
At 0840 BST, the FTSE 100 was flat at 7,509.33.
According to the latest shop price index from the British Retail Consortium and Nielsen, month-on-month shop price inflation fell to its lowest level in a year in September, with food prices falling for the first time in over two years.
The index, which measures price changes of 500 of the most commonly bought items in the UK, eased to an annual rate of 6.2% last month, down 70 basis points on August. This was below the three-month rolling average of 6.8% and the lowest level since September 2022.
The slowdown came as food-price inflation fell to 9.9% from 11.5%, and was significantly under the three-month average of 11.4%.
In month-on-month terms, food prices actually declined, which the BRC put down to “fierce competition” between retailers.
“Customers who bought dairy, margarine, fish and vegetables – all typically own-brand lines – will have found lower prices compared to last month. Households also benefitted from price cuts for school uniforms and other back-to-school essentials,” said Helen Dickinson, the BRC’s chief executive.
Looking ahead, Dickinson expects shop price inflation to continue to fall over the rest of 2023 but remained cautious due to a number of risk factors, including high interest rates, climbing oil prices, global shortages of sugar, as well as the supply chain disruption from the war in Ukraine.
“Retailers will continue to do all they can to support their customers and bring prices down, especially as households face being squeezed by higher energy and mortgage bills.”
In equity markets, luxury fashion brand Burberry was knocked lower by a downgrade to ‘sell’ at UBS.
High street bakery chain Greggs was also weaker as it said it expects to hit targets this year after a solid third quarter, with inflation beginning to ease, but lowered its guidance for net new site openings.
Outside the FTSE 350, fast fashion retailer Boohoo slid after saying it swung to a first-half loss and cutting its full-year revenue outlook. It pointed to a slower-than-expected volume recovery and the continued targeting of more profitable sales within labels.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Hsbc Holdings Plc | +2.05% | +13.10 | 652.90 |
| 2 |  |
Rightmove Plc | +1.70% | +9.40 | 563.80 |
| 3 |  |
Pearson Plc | +1.61% | +13.80 | 871.20 |
| 4 |  |
Standard Chartered Plc | +1.22% | +9.20 | 763.00 |
| 5 |  |
Prudential Plc | +1.16% | +10.00 | 870.20 |
| 6 |  |
Gsk Plc | +1.02% | +15.20 | 1,499.20 |
| 7 |  |
Flutter Entertainment Plc | +0.98% | +130.00 | 13,375.00 |
| 8 |  |
Auto Trader Group Plc | +0.95% | +5.80 | 618.20 |
| 9 |  |
Wpp Plc | +0.82% | +5.80 | 715.80 |
| 10 |  |
Centrica Plc | +0.77% | +1.15 | 150.45 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Burberry Group Plc | -2.90% | -55.00 | 1,838.50 |
| 2 |  |
Ocado Group Plc | -1.64% | -9.60 | 577.20 |
| 3 |  |
United Utilities Group Plc | -1.45% | -13.80 | 936.80 |
| 4 |  |
Sse Plc | -1.38% | -21.50 | 1,531.00 |
| 5 |  |
Fresnillo Plc | -1.35% | -7.20 | 527.80 |
| 6 |  |
Severn Trent Plc | -1.19% | -28.00 | 2,321.00 |
| 7 |  |
Bt Group Plc | -0.95% | -1.10 | 114.60 |
| 8 |  |
Ashtead Group Plc | -0.93% | -46.00 | 4,880.00 |
| 9 |  |
Kingfisher Plc | -0.88% | -1.90 | 214.60 |
| 10 |  |
National Grid Plc | -0.80% | -7.60 | 942.20 |
US close: Stocks mixed as bond yields surge on ISM data
US stocks finished flat on Monday despite a last-minute deal in Washington to avert a government shutdown, as bond yields surged on the back of yet more promising economic data.
The Dow Jones Industrial Average was 0.2% lower at 33,433, the S&P 500 finished flat at 4,288, while the Nasdaq gained 0.7% to 13,308.
“US markets slipped back […] as the news that a government shutdown has been avoided collides with the reality that a resilient US economy will probably mean US rates could well need to go higher,” said analyst Michael Hewson from CMC Markets.
The yield on a 10-year Treasury note jumped 11.3 basis points to 4.692%, touching an earlier high of 4.707%, while the 30-year bond yield rose 9.4% to 4.797% – their highest levels since October 2007 and April 2010, respectively.
Over the weekend, the US government narrowly avoided a shutdown, passing a 45-day Continuing Resolution that shifts the funding deadline to 17 November. However, many felt like the short-term fix was inevitably kicking the can further down the road and that political brinkmanship would begin to heat up again soon.
“This clean bill excluded new funding for Ukraine, but also excluded Republican demands for outright cuts in spending or new spending for border security. More importantly, 90 House Republicans voted against it, setting up a potential showdown between Speaker Kevin McCarthy and the opposition from the right-wing of his party,” said analysts at TD Securities.
In economic data, the Institute for Supply Management’s manufacturing purchasing managers’ index increased from 47.6 in August to 49.0 in September, well ahead of the 47.7 consensus forecast and its highest since November 2022. However, this was still the 11 straight month under the 50-point mark which separates growth from contraction.
The sub-indices for new orders and employment both improved, with the employment gauge jumping into positive territory; while the decline in the prices paid sub-index deteriorated substantially.
Commenting on the data, analysts at Berenberg said: “There were broad based improvements across components of the […] survey that suggest the slump in manufacturing output may be close to bottoming out, while not indicating that a rebound in activity is imminent.”
Across the Pond, a raft of PMIs across the Eurozone showed that the contraction in manufacturing activity worsened last month. The headline single-currency area manufacturing PMI fell to 43.4, down from 43.5 in August and in line with the flash estimate.
Tesla misses forecasts
Electric car giant Tesla managed to finish up despite missing forecasts for quarterly deliveries as it reiterated its full-year target to deliver 1.8m vehicles in 2023. Deliveries totalled 435,059 in the third quarter, around 7% lower than the second quarter, as a result of downtime and planned upgrades at its factories.
Danni Hewson, AJ Bell head of financial analysis, said that the miss wouldn’t have come as a surprise to investors. “The miss was well signposted as factories were shut for improvements. Investors seemed happy enough with the company’s current strategy of cutting prices to stoke demand, whilst preparing new models to tempt buyers.”
Sector peer Rivian Automotive declined despite more than doubling its third-quarter deliveries compared with a year ago.
Coinbase shares were higher as the crypto exchange said it had obtained a Major Payment Institution license from regulators in Singapore.
SmileDirectClub saw shares drop more than 60% after the teeth-straightening company filed for Chapter 11 bankruptcy protection.
Tuesday newspaper round-up: Food prices, AI, Home Reit
Food prices dropped in the UK in September for the first month in almost two years, according to retail industry figures, offering consumers some respite amid the cost of living crisis. The British Retail Consortium (BRC) said price reductions for dairy, margarine, fish and vegetables and fierce supermarket competition helped to bring down the cost of an average food basket by 0.1% compared with the previous month. – Guardian
Employers who spy on staff have been threatened with fines by the privacy watchdog amid a rise in home working. The Information Commissioner’s Office (ICO) has said it will “take action” against companies that conduct “excessive” monitoring of workers following an uptick in bosses tracking calls, messages and keystrokes since Covid. – Telegraph
Artificial intelligence will eventually enable people to live to 100 and work just three-and-a-half days a week, the boss of Wall Street’s biggest bank has said. Jamie Dimon, chief executive of JP Morgan, made the forecast amid fears that generative AI technology could cause significant disruption to workplaces, with some even predicting that it poses an existential threat to humanity. – Telegraph
Further questions will be asked of the quality of Home Reit’s tenants after the self-styled “landlord for the homeless” collected only 3 per cent of rent due last month. In a monthly update, the company also warned that it expected more of its tenants to go bust. – The Times
Rising costs hit annual profits at Walker’s Shortbread, even as the family-owned biscuit manufacturer increased its sales at home and abroad last year. Growth was especially strong in Britain and the United States, with group turnover rising by 16 per cent to £164.6 million. Domestic sales increased by 23 per cent to £77 million, while exports rose by 10 per cent to £87.6 million, according to accounts filed for 2022. The company sells overseas in 100 markets. It also noted an uplift in travel retail sales as more passengers returned to airports. – The Times
