- FTSE 100 down 32 points
- Primark owner ABF boosted by update
- Housebuilders see shares subside
10.00am: Direct Line dips
Direct Line Insurance Group PLC (LSE:DLG) has seen its shares drop after an 8.1% fall in annual premiums.
It said trading was broadly in line with expectations despite challenging market conditions, but its shares are down 2.23%.
Rival Admiral Group Plc (LON:ADML) is 3.35% lower.
But National Grid PLC (LON:NG.) has added 1.34% to 968.6p after analysts at JP Morgan began coverage with an overweight rating and a price target of 1150p.
9.42am: Coca-Cola (NYSE:KO) bottler sees shares fizz
On a fairly downbeat day so far, Coca Cola HBC AG (LON:CCH) has seen its shares fizz up.
They have added 3.12% after the bottler reported a 19.6% rise in third quarter revenues, excluding Russia and Ukraine.
Chief executive Zoran Bogdanovic said: "On the back of our strong period of trading, and whilst remaining conscious of the broader macroeconomic and geopolitical risks across our regions, we are upgrading our 2022 comparable EBIT guidance to €860mln-€900mln [from €740mln-€820mln]."
Victoria Scholar at interactive investor said: " This positive upbeat from the soft-drinks bottler suggests that Coca-Cola HBC is relatively well positioned to navigate headwinds from the cost-of-living crisis and rising cost inflation. Its offering continues to attract strong demand even in the face of rising costs, suggesting that HBC can uphold margins by passing on its additional cost burden through higher prices.
"The onset of war in Ukraine in February sent shares sharply lower by almost 50% from the peak in January until the trough in March. Since then, shares have been attempting to regain ground, rallying by around a third off the first quarter lows and they are enjoying a solid boost in today’s session too.”
8.51am: Oil dips as optimism over China reopening fades
Oil prices are edging lower after recent gains partly due to talk that China may ease its pandemic restrictions.
Brent crude is down 0.2% at US$97.67 a barrel while West Texas Intermediate has slipped 0.41% to US$91.41.
Craig Erlam, senior market analyst at Oanda, said: "Oil prices are easing a little on Tuesday, a day after Brent crude came within a whisker of US$100 again. It's traded below this major psychological level since July but recent developments have propelled the price higher again, up more than 20% from the September lows.
"OPEC+ had a big hand to play in that but speculation around China's zero-COVID-19 commitment may also be a factor in recent gains. That said, those rumours still haven't been confirmed and in fact, outbreaks in Guangzhou and other major cities have led to increased restrictions
"It may be a little early to get carried away with speculation, especially when any significant change in policy would represent an enormous shift from the status quo. Still, the performance of Chinese stocks suggests there's a belief that there's no smoke without fire, which may also be enabling the continued rise in crude."
Michael Hewson at CMC Markets UK said: "Optimism over a possible China reopening gave way to the reality that any prospect of that was likely to be months away. The latest China trade data also pointed to a weak economy, although oil imports showed strong gains in October. This by itself shouldn’t have come as too much of a surprise given that winter is coming, and China would probably want to look at building up its winter storage capacity."
8.39am: Persimmon (LON:PSN) warns on fewer completions
Housebuilders are proving a drag on the market, after a disappointing update from Persimmon PLC (LSE:PSN).
Victoria Scholar, head of investment at interactive investor, says, “Persimmon has warned it expects few completions next year versus this year, sending shares to the bottom of the FTSE 100. The housebuilder said rising interest rates and economic uncertainty are impacting mortgage lending and customer behaviour. However, Persimmon says it is on track to deliver its previously guided range for full-year completions of between 14,500 and 15,000 homes."
Persimmon shares are down 7.97% while Taylor Wimpey PLC (LON:TW.) is down 3.4%, Berkeley Group Holdings PLC (LSE:BKG) has fallen 2.74% and Barratt Developments PLC (LON:BDEV) has lost 2.52%.
Overall the FTSE 100 is now down 32.85 points or 0.45% at 7267.14.
8.23am: Shoppers face annual £682 jump in grocery bill
The cost of buying food and drink continues to soar, with grocery price inflation hitting a new peak, according to the latest figures from Kantar.
While total supermarket sales rose by 5.2% in the 12 weeks to the end of October - the fastest rate of market growth since April 2021 - four week grocery price inflation jumped by 14.7%, the highest since Kantar began tracking prices in 2008.
Fraser McKevitt, head of retail and consumer insight at Kantar, said: “Yet again, we have a new record high figure for grocery price inflation and it's too early right now to call the top.
"Consumers face a £682 jump in their annual grocery bill if they continue to buy the same items and just over a quarter of all households [27%] now say they’re struggling financially, which is double the proportion we recorded last November. Nine in ten of this group say higher food and drink prices are a major concern, second only to energy bills, so it’s clear just how much grocery inflation is hitting people’s wallets and adding to their domestic worries.”
Own label sales jumped by 10.3% over the latest four weeks, as shoppers manage their budgets while the branded goods market grew far more slowly at 0.4%.
Unsurprisingly in the circumstances, the discounters led the way. Aldi was the fastest growing retailer in the last 12 weeks, increasing its sales by 22.7% year on year to now hold a 9.2% market share. Lidl boosted sales by 21.5% to take its market share to a new record high of 7.2%.
J Sainsbury PLC saw sales up 3.3% and Tesco PLC (LON:TSCO) 3.1%.
Shoppers are also being slow to stock up for Christmas, but the World Cup could boost sales.
McKevitt said: “This time last year two million consumers had already bought their festive Christmas pudding. We’ve seen 32% fewer shoppers doing that this time around, suggesting people are not trying to spread the cost of their purchasing – at least not in October. This Christmas is going to be a bit different of course, with the men’s football World Cup kicking off on 20 November. The novelty of two home nations playing for the first time in nearly 25 years should generate a lot of excitement and could boost sales at the tills depending on when the games fall. Beer in particular does well when the football is on. During the 2018 men’s World Cup, the number of shoppers buying beer to enjoy at home tripled on the day of England’s first match against Tunisia. The evening games for the 2022 tournament will likely generate the biggest sales including England’s match against the US on 25 November.”
8.10am: Footsie nervous at the open but Primark owner moves higher
Leading shares have made a downbeat start, with investors nervous about the US midterm elections and key inflation figures from across the pond later this week.
The FTSE 100 is down 44.39 points or 0.61% at 7255.60 in early trading.
The latest British Retail Consortium figures showing UK retail sales growth slowed in October to 1.2% year-on-year versus 1.8% in September has not helped sentiment.
But Primark owner Associated British Foods PLC (LON:ABF) is bucking the downward trend. Its shares have added 3.78% after full year profits rose 48% and despite the firm warning of increased costs at the same time as an expected downturn in consumer spending.
Richard Hunter, head of markets at interactive investor said “The depth and breadth of the group offering has resulted in an annual performance which has largely defied the difficulties of the wider economic backdrop, boosting the shares in early exchanges.
"Unfortunately, September’s profit warning on prospects for next year is still ringing in investors’ ears. An outlook which incorporates further cost inflation, some ongoing supply chain pressures and, in particular, an increasingly cash-strapped consumer all look likely to weigh on the numbers to come."
Back with the US mid-terms, and Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown (LON:HRGV), said: ‘’The control of US Congress hangs in the balance today as the mid-term elections are set to take place, but already the markets appear to be pricing in a Republican victory. Although the final polls pointed to an increasingly competitive political landscape, worries about the economy are looming large in this campaign, hinting that there could be trouble for Democrats in the Congressional race and in the fight for seats up for grabs in the Senate, especially with Joe Biden remaining unpopular.
"Stocks expected to benefit from a Republican administration largely rose on Monday with pharmaceutical companies receiving a boost amid expectations a US Congress with at GOP majority may roll back or at least not impose fresh legislation aimed at lowering prescription drug prices. Shares in defence firms such as Lockheed Martin (NYSE:LMT) have also risen sharply on hopes that there could be a faster acceleration in military spending if Republicans gain seats in a dramatic fashion. Energy stocks have continued their climb with investors speculating that policies encouraging greater oil and gas exploration would be brought in if Republicans managed to clinch control of the House and the Senate. Exxon (NYSE:XOM) shares lifted a further 1.1% adding to gains of almost 80% year to date.
"If Democrats do pull off a turnaround and hold sway, it is likely to boost the fortunes of green energy providers given the expectations that more legislation prioritising solar and other cleaner forms of energy would be brought in. Already Joe Biden has seen his stimulus plan to boost spending on America’s creaking infrastructure watered down and there are forecasts tax revenue allocated to future projects could also be hit, if the Democrats don’t manage to cling onto power."
7.46am: Dollar on back foot against Sterling as mid terms gear up
A lot of noise is being made about the mid-term elections in the US, but regardless of outcome, fiscal policy is unlikely to be affected; the Federal Reserve will charge along with its inflation-driven rate hikes whether the chambers turn red, blue or gridlocked.
But the greenback weakened in anticipation of the result anyway, with GBP/USD adding 1.5% in yesterday’s session.
Cable has drawn back 0.4% to US$1.147 in this morning’s Asia session, with no clear path laid out for the day.
GBP/USD: A bullish opportunity amid mid-terms furore? – Source: capital.com
However, Michael Wilson, the top-ranked strategist at Morgan Stanley (NYSE:MS), expects an equities rally if polls prove accurate and the Republicans secure at least one chamber.
That could come at the expense of the Dollar Index (DYX), which at 110.54, is already weaker against the five-day period.
Today could be an opportunity for euro bulls to push EUR/USD back above parity – where it’s temptingly close – should sentiment turn against the greenback.
Parity was briefly touched toward the end of yesterday’s session, but the bears pushed the pair back down to its current exchange price of US$0.999.
Sterling is currently going for 87.09p against the euro after a bearish performance yesterday following a monthly fall of -0.4% in the Halifax House Price Index.
Today’s economic calendar is pretty clear, apart from Euro Area retail sales which are expected to show a -1.5% decline year on year.
7.06: Investors in subdued mood
FTSE 100 is expected to make a weak start on Tuesday with investors in a subdued mood looking ahead to the US mid-term elections where the Republicans are expected to make gains.
Spread betting companies are calling the lead index down by around 30 points.
Michael Hewson, chief market analyst at CMC Markets said: “With the polls in the US pointing to the Republicans winning at least one of the US legislatures, which would be a catalyst for the political gridlock over the next two years and thus stymieing the ability of politicians to pass any legislation that could impact negatively on business.”
However, this didn’t stop US markets rising with Dow Jones Industrial Average up 426 points, or 1.31%, at 32,829, the S&P 500 up 37 points, or 0.97%, to 3,807 and the Nasdaq Composite up 89 points, or 0.85%, to 10,565.
In London a number of results are due. Associated British Foods PLC (LSE:ABF) full-year will be a mix of cost-of-living issues and soaring expenses balanced by a positive outlook statement and capital allocation, according to Shore Capital.
Persimmon PLC’s trading update will see plenty of focus on sales rates so far in its second half, especially in October as it will be the first housebuilder to report on this period.