- FTSE 100 heads back towards parity
- ONS report shows impact of strikes and pricing pressures
- Grafton Group dips after results
Shares in building materials distributor and DIY retailer, Grafton PLC, fell 2.3% after the group reported a 3.6% fall in pre-tax profits to £143.4mln and analysts suggested profit forecasts would have to be lowered.
Analysts at Peel Hunt said trading post the interims “has seen flat like for like performance, which likely implies double digit volume declines, in our view.”
“The UK saw a weak July trading period, not helped by the record temperatures and pick-up in holidays.”
“The group is guiding for diluted operating profit to in-line with the current consensus of £267m (which sits 5% below our estimate).”
However, the broker cautioned that this is contingent on the September to November trading period seeing the usual pick-up in demand.
“Given the macro-economic headwinds that continue to build, the risk to to these numbers clearly sits to the downside” Peel Hunt concluded.
11.55am: Strikes and pricing pressures seen in ONS report
The impact of strike action and growing inflationary pressures were clear to be seen in the latest weekly real time indicators published by the Office for National Statistics (ONS).
The figures showed that 6% of UK businesses were impacted by strike action in July 2022 with 28% of those affected saying their workforce were unable to perform their roles.
The strike action also fed through to fewer visits out according to Google (NASDAQ:GOOGL) Mobility figures while transactions at Pret a Manger also dropped in conjunction with the rail strikes.
Building pricing pressures on businesses were reflected with a net 44% of trading businesses reporting that the prices of goods or services bought had increased in July 2022 compared with June 2022, while 29% of businesses expect the prices of the goods or services they sell to increase in September 2022.
The System Average Price of gas rose by 20% in the week to 21 August 2022, increasing to 83% of the peak level seen on 10 March 2022.
11.30am: Footsie slips back
Shares in London shed their early enthusiasm and headed back towards parity with investors casting a cautious eye across the pond ahead of the start of the Jackson Hole economic symposium.
By 11.30am the FTSE 100 was trading 6.98 points to the good at 7,478.49 while the FTSE 250 tumbled 68.85 points to 19,236.38.
US stocks should provide some support later with markets expected to start higher on Thursday, recovering further after all three major averages ended positively on Wednesday to snap a three-session losing streak.
Futures for the Dow Jones Industrial Average were 0.3% higher in pre-market trading, while those for the S&P 500 gained 0.5% and contracts for the Nasdaq 100 added 0.6%. On Wednesday, the Dow rose 0.2%, the S&P 500 added 0.3%, and the tech-heavy Nasdaq Composite gained 0.4%.
Investors remain cautious, however, ahead of the start today of the Federal Reserve's Jackson Hole economic symposium, with Fed chair Jerome Powell scheduled to give the keynote address on Friday morning. Traders will be seeking more information about how the central bank will combat high inflation and if policymakers will cut rates when the current cycle is over.
Investors are also waiting for more economic data including the latest weekly jobless claims Thursday and the personal consumption expenditures (PCE) on Friday.
Richard Hunter, Head of Markets at interactive investor, commented: “The usual Thursday jobless claims number will give some further indications of a relatively tight labour market, while the Federal Reserve’s preferred measure of inflation, the Personal Consumption Expenditures index, will reveal the current state of play tomorrow. Following the last reading, the release could give further substance as to whether there is any additional evidence of inflation nearing or indeed hitting a peak."
"However," he added, "the highlight of the week for investors is the Jackson Hole symposium and in particular the latest comments from Fed Chairman Powell when he speaks on Friday. Investors have been bracing for a reiteration of the Fed’s hawkish tone in continuing to raise rates to combat rampant inflation. Indeed, despite some emerging signs of slowing economic growth, caused in part by the rate hikes already undertaken, the Fed is expected to maintain its dogged determination to rein in inflation at all costs, with the next hike in September expected to be one of 0.75%."
On the corporate front, shares of Nvidia shed 4.5% after-hours as it cut its third-quarter outlook after reporting below-forecast second-quarter numbers, while Salesforce shares fell 7% after it provided a disappointing forecast for fiscal 2023 although its second-quarter numbers beat forecasts.
Peloton (NASDAQ:PTON) will report its quarterly earnings before the bell on Thursday, along with Gap, Dollar Tree (NASDAQ:DLTR), and Dollar General (NYSE:DG). Ulta Beauty (NASDAQ:NASDAQ:ULTA), Workday and Affirm Holdings will release results after markets close.
10.40am: Harbour Energy powers ahead
Harbour Energy topped the FTSE 250 risers with shares surging 10% after it reported half year results.
Michael Hewson chief market analyst at CMC Markets UK said the company remains on track to meet its full year revenue target.
Hewson pointed out that “last year the company managed to generate annual revenues of $3.48bn, while this year it expects that to rise to $5.18bn” adding “today’s first half numbers show that the company is well on course to achieve that goal with H1 revenues of $2.67bn, with profits after tax rising to $984m, up from $87m a year ago, helped in some part by the weakness of the pound.”
The bulk of its revenue came from crude oil to the tune of $1.54bn, followed by gas which increased from $395mln to $970mln, with $857mln of that revenue coming from its UK gas assets.
Analysts at Peel Hunt said the results showed a “strong operating and financial performance” and said upgrades to full year forecasts are highly likely.
10.05am: FTSE near session highs
FTSE 100 maintained its positive progress taking its cue from strong trading in the US and Asia on Thursday morning as investors await the crunch Jackson Hole summit in Wyoming.
At 10.05am the lead index was trading 52.60 points higher at 7,524.11.
AJ Bell investment director Russ Mould said “There’s a lot riding on US Federal Reserve chair Jerome Powell’s address tomorrow.”
“Speculation is running so hot ahead of his remarks that it feels like even subtle variations in intonation could make a difference to jittery markets.”
“Investors appear to be factoring in a pretty aggressive stance from Powell already, anticipating rates going higher and staying there for longer to get inflation under control.”
“Any suggestion the Fed might ease up a bit would likely spark a very positive response in the markets, but if Powell goes the other way and is even more hawkish than many have been predicting, it could exacerbate the recent wobble in markets.”
9.20am: Car production rises in July
UK car production rose by 8.6% year-on-year to 58,043 units in July, growing for a third consecutive month, according to the Society of Motor Manufacturers and Traders (SMMT).
However, output remains 46.4% below pre-pandemic levels.
Mike Hawes, SMMT chief executive, said “A third consecutive month of growth for UK car production is, of course, welcome and gives some hope that the supply chain issues blighting the sector may finally be starting to ease.”
“But other challenges remain, not least energy costs which are increasing at alarming rates.”
“If we are to attract much needed investment to drive the production of zero emission vehicles, urgent action is needed to mitigate these costs to make the UK more competitive for manufacturing” Hawes commented.
Victoria Scholar, head of investment, interactive investor said, “the latest figures paint an encouraging picture that at least some of the headwinds could be starting to ease off.”
But she pointed out this month’s growth is flattered by last year’s comparables which captured the industry in 2021 when it on its knees post pandemic.
8.50am: FTSE 100 makes strong start
The FTSE 100 made a strong start to trading, recovering some of the ground lost in recent days, supported by gains in oil index heavyweights, BP PLC (LSE:LON:BP.) and Shell (LON:RDSa) PLC (LSE:SHEL, NYSE:SHEL).
A slight upward revision to quarter two GDP figures in Germany also provided support with GDP growth of 0.1% quarter-on-quarter, above consensus and the first estimate of 0.0%.
By 8.50am the lead index was trading 48.12 points higher at 7,519.63.
Victoria Scholar, head of investment, interactive investor said, “European markets have opened on a positive note with all major bourses in the green.”
“The FTSE 100 has broken above resistance turned support at 7,500 with CRH (LON:CRH) surging to the top of the UK index thanks to strong first half earnings.”
“The DAX is also enjoying gains after Germany’s economy unexpectedly grew in the second quarter with GDP rising 0.1% versus a preliminary flat reading.”
“Focus for investors turns to the Jackson Hole economic symposium in Wyoming for clues into the outlook for US monetary policy and central bankers’ views on how to curb inflation without inducing unnecessary economic strain.”
Shares in Hays (LON:HAYS) PLC (LSE:HAS) surged 7% as the international recruiter reassured shareholders that activity levels and KPIs remain broadly stable at strong levels.
The group also rewarded shareholders with a special dividend of 7.34p per share as it announced 32% like for like growth in net fees to £1,189.4mln for the 12 months to June 30th, 2022.
Operating profit rose 128% to £210.1mln with growth in all regions, including 24 country records.
AstraZeneca PLC (LSE:NASDAQ:AZN) announced a hattrick of approvals in Japan, with Tagrisso, Lynparza and Ultomiris all receiving extension to their labels helping push shares 1% higher.
CRH PLC (LSE:CRH) was another early riser with shares topping the FTSE 100 risers (up 4%) after the group reported 14% growth in sales at the half-way stage to $15.0bn with EBITDA of $2.2bn, 21% ahead of the first half 2021 reflecting a strong focus on commercial and operational initiatives which more than offset the impact of cost inflation.
CRH said it expects to report full year EBITDA in the region of $5.5bn against what it said is “a continually challenging cost environment.”
Shares in Greatland Gold PLC (LON:GGPL) (AIM:GGP, OTC:GRLGF) fell 9.7% after it announced that it had raised between $30mln to $35mln through an oversubscribed placing at an issue price of 8.2p per share.
8.10am: London in upbeat mood
Shares in London made a positive start to trading on Thursday, with the FTSE 100 pushing back above 7,500, supported by gains in oil index heavyweights, BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL).
By 8.10am the blue chip index was trading 45.23 points to the good at 7,516.20 with the FTSE 250 up 63.13 points to 19,368.25.
Investors will have one eye on some important economic data in Europe and the US while the Jackson Hole Symposium also gets underway today.
Richard Hunter, head of markets at interactive investor, commented: “The FTSE 100 opened firmly, erasing losses from the previous session, and despite the headwind of seven stocks being marked ex-dividend.”
“In early exchanges, the oil majors gained some inevitable support after the oil price rise, while more broadly mining stocks made ground after some more recent pressure.”
“The broad based nature of the early gains is more suggestive of bargain hunting rather than a return to risk-on sentiment, with the end of the week announcements more likely to be the main drivers of near-term sentiment.”
7.30am: Firm start expected in London
The Footsie is set make a strong start to trading on Thursday following gains in the US on Wednesday and in Asia overnight although investors will have an eye on some key economic data in Europe and the US while the Jackson Hole Symposium also gets underway today.
Spread betting companies are calling the FTSE 100 up by around 45 points.
Michael Hewson chief market analyst at CMC Markets UK said “The Jackson Hole Symposium gets underway today with the main focus expected to be on Federal Reserve chairman Jay Powell’s speech which markets have become increasingly nervous about over the past few days, and which has seen bond yields move sharply higher in the expectation he will deliver a hawkish message.”
“The symposium will be closely scrutinised for evidence of the Federal Reserve’s intent with respect to its September meeting, 50bps or 75bps, as well as the intent of other central banks more broadly at a time when inflation expectations are surging against a backdrop of concern over the risks of overtightening monetary policy at a time, when the challenges facing the global economy are numerous” Hewson commented.
In Europe, the German IFO business survey will be monitored closely and is not expected to be good news with a further fall expected in August’s reading.
In London, CRH reported 14% growth in sales at the half-way stage to $15.0bn with EBITDA of $2.2bn, 21% ahead of the first half 2021 reflecting a strong focus on commercial and operational initiatives which more than offset the impact of cost inflation.
CRH said it expects to report full year EBITDA in the region of $5.5bn against what it said is “a continually challenging cost environment.”
Recruitment agency, Hays PLC (LSE:HAS), rewarded shareholders with a special dividend of 7.34p per share as it announced 32% like for like growth in net fees to £1,189.4mln for the 12 months to June 30th, 2022.
Operating profit rose 128% to £210.1mln with growth in all regions, including 24 country records.
Alistair Cox, chief executive, said "With macroeconomic uncertainties increasing, we are closely monitoring our activity levels and KPIs, which remain broadly stable overall at strong levels.”
Building materials supplier, Grafton Group PLC (ISE:GFTU), announced 12.2% growth in revenues to £1,153mln in the six months to June 30, 2022, although adjusted operating profits fell 4.4% to £151.1mln in the period.
The results reflected excellent progress in its distribution businesses in Ireland and the Netherlands although volumes and profitability was lower in Selco relative to last year’s exceptional performance.
Gavin Slark, chief executive officer commented “Though potential macro-economic headwinds remain, Grafton is uniquely placed to outperform given its leading market positions, geographic diversity and the relative resilience of its core repair, maintenance and improvement market.”
7.00am: London set to open higher
Shares in London are set to open higher following gains in Asia overnight and as US stocks also ended the day in positive territory although investors will have one eye across the pond as the Jackson Hole symposium of central bankers begins.
Spread betting companies are calling the lead index up by around 22 points at the open.
US stocks ended on a positive note as selling pressure faded and commodity prices held steady in a quiet trading day.
By the closing bell, the S&P 500 climbed 0.3% after the benchmark index fell for three straight sessions, closing at 4,141 points. The Dow Jones Industrial Average added 60 points, or about 0.2%, to finish at 32,969 and the Nasdaq Composite gained 0.4% to close at 12,432.
In London results are due from Hays, CRH and Grafton, while stocks going ex-div will take 6.61 points off the FTSE 100.
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