Proactive Investors -
9.45am: Mixed bag for retailers
Amid a host of companies updates, a number of retailers stand out.
ASOS PLC has accelerated by 14.7% despite a hefty fall in sales in the run-up to Christmas, hit by falling consumer confidence, what it called "disruption in the delivery market" and a strong performance the previous year as online shopping boomed during the pandemic,
But investors seemed to like its plans for £300mln of cost savings.
Victoria Scholar, head of investment at interactive investor said: “Asos reported UK sales during the final four months of 2022 down by 8%, blaming weak consumer sentiment while overall revenue dropped by 3%. The online retailer outlined a cost savings and profit optimisation plan including around a 10% reduction in staff costs, which it says will have an impact of over £300mln in the full-year 2023. Investors are cheering these plans, sending shares higher by around 15% in today’s trade...
"Even after today’s jump, shares in Asos have still slumped by more than 70% over the last year and are down more than 90% over a five-year period, highlighting how Asos still has a long way to go to restore investor confidence.”
Meanwhile Marks and Spencer Group PLC (LON:MKS) are 2.02% lower despite a strong sales performance over Christmas, after disappointment it is not raising its profit guidance.
UBS said: "While the trading was robust, we believe that buyside was looking for an upgrade that hasn't materialised today
"Marks' outlook talks about inflationary pressures impacting both consumers and business as they take action to structurally reduce costs and reinforce customer proposition. Despite the strong performance, Marks cited clear macro headwinds ahead and underlying cost pressures and reiterated the profit guidance at the November interim results."
Elsewhere Halfords Group PLC (LON:HFD) has gone into reverse, down 22% after it cut its profit forecast from £65mln-£75mln to £50mln-£60mln. This follows profit warnings in June and November last year.
AJ Bell investment director Russ Mould said: "Just when it looked as if Halfords was turning a corner and leaving its problems in the rear-view mirror, along comes another bundle of issues which knock its earnings trajectory off track.
"The key problems are weakness in cycling and consumer tyres along with a shortage of skilled technicians hurting its motor service.
“The latter is a frustrating situation for the company. Demand for motoring services is very strong, but to not be able to capture all the potential business due to labour issues is frustrating...
“The cycling market has slumped since a boom period in the early stages of the pandemic when people were desperate to buy any form of two-wheeled bike they could...
"Many people who bought bikes in the pandemic have now lost their desire to meander along the country’s roads and thus the second-hand market is awash with cut-price products.”
9.08am: Vodafone higher after executive changes
Vodafone Group PLC (LON:VOD) has been lifted by news of a couple of structural changes, following Nick Read's departure as chief executive last month.
These include Aldo Bisio, chief executive of Vodafone Italy, becoming group chief commercial officer as well, and Vodafone Spain joining the company's Europe cluster.
Vodafone said the changes came as the telecoms group worked to "accelerate our commercial performance and drive shareholder value."
Its shares are up 3.02%.
8.40am: Ex-divs fail to spoil optimistic mood
Premier Inn owner Whitbread PLC (LON:WTB) is also helping to push the leading index higher.
Its shares are up 2.98% after it reported a strong third quarter performance, with like for like sales up 18.3% with a strong rebound from its German business.
Centrica PLC is still leading the way after its update, 5.19% higher.
So the FTSE 100 is up 43.78 points or 0.57% at 7768.76, despite a handful of major companies going ex-dividend.
These included B&M European Value Retail SA, down 4.45%, SSE PLC (LON:SSE), 1.95% lower and The Sage Group PLC (LON:SGE), off 1.23%.
8.15am: Markets move higher but mixed response to trading updates
Leading shares are heading higher ahead of the key US inflation figures.
The FTSE 100 is up 28.30 points or 0.37% at 7753.28 in early trading.
Michael Hewson, chief market analyst at CMC Markets UK, said: "Optimism over today’s US inflation numbers has helped drive a positive start to 2023 for both European and US markets so far this year...
"Sentiment in Europe has also been helped by the recent milder weather which has fuelled optimism that the start of 2023 might offer some respite from further increases in energy prices."
The market believes recent figures may lead to a more measured approach by the US Federal Reserve to rate rises, despite hawkish comments from some Fed members earlier this week.
Hewson said: "The belief that a pivot is coming may also have something to do with the dire predictions of the likes of the IMF last week, and earlier this week by the World Bank, who both warned the global economy was on a razors edge, and at risk of sliding into a prolonged recession
"[But] if core prices were to come in higher than expected we could see a sharp correction lower for stocks and a sharp rebound in the US dollar, and a shift in focus back to 50bps in February.
"It’s also important to remember, as was the case in Australia yesterday, that inflation doesn’t fall in a straight line, after annual CPI there jumped more than expected from 6.9% in October to 7.3% in November, which in turn could prompt the RBA to be more hawkish next month after they slowed the pace of their rate hikes two months ago.
"This is what should concern Fed officials the most, and what markets appear to be forgetting in their pricing of the Fed’s next move.
"It’s also important to remember given how markets front run any indication of a shift in policy, that Fed officials might look to err more towards doing too much than too little, and as such might be tempted to overtighten in order to get inflation falling sustainability towards the 2% target."
British Gas owner Centrica PLC has climbed 5.35% after it raised its earnings forecast after a strong performance and appointed Russel O'Brien as its chief financial officer. O'Brien was most recently treasurer at Shell (LON:RDSa).
Centrica said it now expected full year adjusted earnings per share of more than 30p, compared to its forecast in November that earnings would be at the top end of a 15.1p to 26p range.
Housebuilder Persimmon PLC (LON:PSN) has put on 0.66% although it warned of weaker sales in the second half.
Matt Britzman, Equity Analyst at Hargreaves Lansdown (LON:HRGV), said: “Persimmon has followed in the footsteps of rival housebuilder Barratt, warning of a material slowdown in demand over the fourth quarter as consumers battle higher mortgage costs. This fed through to lower sales rates, higher cancellations, and a hefty drop in forward orders. Though, it must be said, a lot of that was largely expected...
"The good news for Persimmon and indeed a lot of the sector is that balance sheets are robust, strong cash position provide plenty of shelter as we enter a more challenging phase of the cycle.”
Meanwhile a positive Christmas update from Tesco PLC has prompted some profit taking, and its shares are down 0.82%. It also cautioned there were challenging - that word again - conditions ahead.
7.00am: Positive start expected
Another bright start is expected in London as the FTSE 100 continues its strong start to 2023 with investors hoping today’s key US CPI figures will show a softening in pricing pressures across the pond.
Spread betting companies are calling London’s blue-chip index up by around 18 points.
“Today is the most important day of the trading week, in terms of economic data release, as the US will reveal its latest CPI update, and it could be a make-or-break moment for the market sentiment,” according to Ipek Ozkardeskaya, senior aalyst at Swissquote Bank.
“Consumer price inflation in the US probably eased to 6.5%, from 7.1% printed a month earlier.”
“Beyond the headline figure, the core inflation should be closely watched, and should also ease enough to spur Fed doves. The core inflation fell to 6% at last release, from a peak of 6.6% printed for October, and is expected to fall to 5.7% at today's release.”
Aside from the CPI numbers there will be plenty for investors to digest today with a hefty batch of trading updates from a number of City heavyweights due.
The UK’s largest food retailer, Tesco PLC (LON:TSCO), Marks and Spencer Group PLC (LON:MKS), DFS Furniture PLC (LON:DFSD), ASOS PLC and Halfords Group PLC (LSE:HFD) are amongst those expected to update on their fortunes.
Away from the retailers and housebuilder, Persimmon PLC (LSE:PSN), will also update on trading following yesterday’s downbeat statement from Barratt Developments PLC (LON:BDEV).
Across the pond and US markets pushed higher into the close with the Dow Jones Industrial Average up 268 points, or 0.8%, to 33,972, the S&P 500 up 50 points, or 1.28%, to 3,970, and the Nasdaq Composite up 189 points, or 1.76%, to 10,932.