Proactive Investors -
- FTSE 100 slips after bright start, down 4 points
- HSBC rises as profit trebles but BP (LON:BP) falls as buyback disappoints
- Housebuilders in the green as data shows rise in house prices
Food prices continue to rise but growth decelerating
UK shop price inflation saw a mild deceleration in April, according to data from the British Retail Consortium on Tuesday, but remained near record-highs.
Shop price inflation slowed slightly to 8.8% in April on an annual basis, from 8.9% in March. The BRC said this was above the 3-month average rate of 8.7%, however.
Against the month prior, shop price inflation decelerated to 0.2% in April from 0.8% in March.
"Overall shop price inflation eased slightly in April due to heavy Spring discounting in clothing, footwear, and furniture," said BRC chief executive Helen Dickinson.
"However, food prices remained elevated given ongoing cost pressures throughout supply chain. The knock-on effect from increased production and packaging costs meant that ready meals became more expensive and coffee prices were also up due to the high cost of coffee beans, as well as key producer nations exporting less."
Food inflation accelerated to 15.7% on an annual basis in April, from 15.0% in March. The BRC said this was above the 3-month average rate of 15.1%, and was the highest inflation rate in the food category on record.
But there was some good news. Harvir Dhillon an economist at the BRC said: “Food prices do look like they’re decelerating – seeing the slowest monthly growth since May 2022.”
Dickinson added: “We should start to see food prices come down in the coming months as the cut to wholesale prices and other cost pressures filter through.”
Victoria Scholar, Head of Investment, interactive investor said: “While inflation remains elevated, there are incipient signs that price pressures are starting to cool.”
“The hope is that food prices will come down in the months ahead, although it is more likely that price growth will just slow instead in the near-term as consumers continue to feel the squeeze from rising weekly food bills,” she added.
Meanwhile, after a bright start the FTSE 100 has slipped into negative territory, down 4 points.
HSBC beat expectations across the board
HSBC’s first quarter results have been well received with shares advancing 4.6%.
Jefferies noted the numbers were characterised by strong capital generation and a US$2.0bn buyback.
The broker said pre-tax profit, adjusted for gains on the SVB UK acquisition and the reversal of the impairment related to the French business, was 35% ahead of its estimates and 26% ahead of the consensus.
All lines were better, Jefferies pointed out, with revenue 10% ahead of its estimates on 2% better net interest income, 21% better non-interest income while costs were 5% lower.
Richard Hunter, Head of Markets at interactive investor felt the “relief from these results is palpable.”
He noted the “huge spike” in pre-tax profits saw the benefit of two tailwinds as outlined by Jefferies above.
But he added: “Even without the SVB UK and French adjustments, the figure is comfortably ahead of estimates.”
Matt Britzman, equity analyst at Hargreaves Lansdown (LON:HRGV) thought “investors should be reasonably happy with the restored quarterly dividend and US$2bn buyback that looks likely to be completed over the next quarter.”
“Whether this is enough to quell the voices of those adamant that splitting HSBC up is the best course of action for investors remains to be seen, but certainly, one gripe had been the lack of returns given the strong capital position,” he stated.
FTSE pushes higher, housebuilders climb on house price rise
The FTSE 100 made steady progress on Tuesday after the long weekend although oil major BP PLC slipped despite better than expected first quarter profits as a US$1.75bn share buyback disappointed the market.
At 8.15am London’s leading index was at 7,893.25, up 22.68 points, or 0.29%, while the FTSE 250 jumped to 19,507.34, up 82.20 poinys, or 0.42%.
Shares in BP were 3.7% lower after it announced a US$1.75bn buy back and said it expects to be able to deliver share buybacks of around US$4.0bn per year, at the lower end of its US$14-18 billion capital expenditure range.
The oil major said underlying replacement cost profit for the quarter totalled US$4.96bn, up from US$4.81bn in the fourth quarter but lower than US$6.25bn reported in the first quarter of 2022. City analysts had expected a profit of around US$4.3bn.
Heading the other way were shares in HSBC Holdings PLC (LON:HSBA) after its strong numbers.
First quarter profit trebled at the bank which reinstated the first quarter dividend and pledged a US$2bn share buyback.
Housebuilders received a boost from data from the Nationwide which showed a monthly increase in house prices for the first month in seven months.
Persimmon PLC (LON:PSN) soared 4.9%, Barratt Developments PLC (LON:BDEV) advanced 2.1% and Taylor Wimpey (LON:TW) rose 1.7%.