Proactive Investors -
- FTSE 100 well above the session low of 7,702.64
- Wall Street seen higher after above-forecast US jobs data
- British Airways (LON:ICAG) owner, IAG, raises profit guidance
Food for thought
Analysts at Barclays (LON:BARC) believe Tesco (LON:TSCO) PLC is the preferred option of the UK’s two remaining listed grocery retailers, trumping J Sainsbury (OTC:JSAIY) PLC to the top spot.
Following results from the pair in recent weeks, the Barclays analysts said it was time to compare. Tesco penned a 4% rise in free cash flow to £3.75bn, while Sainsbury’s recorded a 24% growth to £635mln. Underlying earnings before interest, taxes, depreciation, and amortization (EBITDA) sat at £4.25bn for Tesco and £2.14bn at Sainsbury’s meanwhile.
“We tend to see more upside potential in Tesco’s share price,” analysts noted, and “find that Tesco is generally cheaper on earnings-based measures”.
“Sainsbury generally offers a slightly higher free cash flow yield” though, they added.
Classing both stocks as ‘overweight,’ the Barclays analysts confirmed each supermarket was “performing relatively well in market share terms” and that there was potential for “sentiment on the UK grocery sector [to] improve later in 2023 as food inflation reduces”.
They reiterated price targets for both, pegging Sainsbury’s at 300p and Tesco at 320p against current share prices of 282.00p and 285.50p, respectively.
US jobs boost
The FTSE 100 index and US stock futures held their gains following data showing the US economy added more jobs than expected during April, a sign of continued strength in the labor market amid inflationary pressures.
According to new data from the Bureau of Labor Statistics, total non-farm payroll employment rose by 253,000 last month, above the 180,000 new jobs expected by Wall Street analysts.
The unemployment rate slipped to 3.4%, while analysts had expected a slight uptick to 3.6%.
Employment in professional and business services, health care, leisure and hospitality, and social assistance continued to trend up in April, the Bureau noted.
John Leiper, chief investment officer at Titan Asset Management, commented: “Really positive jobs number in April and a drop in the unemployment rate suggests the economy continues to hold-up better than expected. That’s also reflected in the average hourly earnings rate which rose 0.5% over the last month.
"This is good news for the economy and may push back recession forecasts. My main concern is that markets have been conditioned to view good news as bad news when it comes to tightening financial conditions in the ongoing battle against inflation. The pick-up in wage inflation could help feed that narrative. Let's see what the inflation number looks like next week… but I see risks skewed to higher-for-longer and I don’t buy into market pricing for a rate cut over the next few months.”
Some of the risers and fallers on the junior market
Mirriad Advertising PLC (LON:MIRI) enjoyed another 20% jump after announcing on Wednesday it had been chosen to collaborate with none other than Microsoft (NASDAQ:MSFT) to build a new application programming interface (API) for integrating the Microsoft Azure cloud-computing platform and its AI capabilities for various client-driven use cases.
Corcel PLC (LON:CRCL) shares rose 12.3% following news the firm has sold a 20% interest in its Mt. Weld Rare Earth Element project to Extraction Srl for A$1mln.
Tpximpact Holdings PLC (LON:TPXT) added 2.4% to 41.5p after the digital transformation consultancy said trading for the past quarter was at the higher end of previous forecasts and raised its guidance for the year ahead.
Bushveld Minerals Ltd (LON:BMNB) shares rose 18% after the firm revealed it has signed a non-binding term sheet to refinance its existing convertible loan note of approximately US$45mln due in November 2023.
Proton Motor Power Systems PLC (LON:PPS) saw its shares jump 2.3% to 10 after the company.5p revealed a contract from Shell (LON:RDSa) for a hydrogen-based power plant.
Aptamer Group PLC (LON:APTA) in the life sciences sector had a shocker on Friday. The developer of Optimer binders for the life sciences industry warned that its full-year revenues will be materially lower than expected, with its existing business pipelines taking longer than expected to convert, including licensing and royalty-based contracts, amidst market headwinds. Aptamer shares crashed more than 50% as a result.