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Inflation uptick could disturb market calm - analyst
Inflation likely picked up in July, paving the way for officials to report the first uptick of the year this week, according to analysts.
Following two consecutive months of inflation readings in line with the Bank of England’s 2% target, expectations are for consumer prices to have risen by 2.3% in July... Read more
With the Office for National Statistics set to firm up the figures this Wednesday, AJ Bell analyst Russ Mould said the return of stable trading conditions could be short-lived.
“The current calm may not last long,” he said on Monday, pointing to inflation data in the UK, as well as figures on both prices and retail sales from the US this week.
An increase for July would deal a blow to hopes the Bank of England could cut base interest for a second time later this year, after the first reduction in four years earlier this month.
It would also come after global stock market turbulence last week, caused by fears over the US economy on poor jobs data released earlier in the month.
Gas prices at eight-month high, oil set for further rise
Gas prices hit their highest level in eight months after soaring on Monday morning over fears around Russian pipeline supply.
UK natural gas futures climbed by 5.3% to 101.7p per British thermal unit throughout the morning, reaching their highest since early last December.
Tom Roberts, chief executive of data firm Xterna Group noted the rise prompted concern over prices for the upcoming winter.
“The focus seems to be on geopolitics in general at the moment, yet these gas-intensive countries are consuming record levels of gas,” he said.
Though European countries have moved to ditch Russian gas since the start of the Ukraine war in favour of Asian stocks, confirmation that the latter had launched a counteroffensive near the crucial Sudzha intake point has stoked supply fears.
Oil prices also jumped on Monday morning, with Brent and West Texas Intermediate up 1.1% and 1.2% respectively.
“The immediate market concern will be attacks on Iran’s oil supply and infrastructure,” Commonwealth Bank of Australia (ASX:CBA) analyst Vivek Dhar commented.
“We see Brent oil futures trading between US$75 and US$85 a barrel in the short term.”
FTSE 100 holds gains but JD Sports slips
JD Sports Fashion PLC (LON:JD) fell over 4% after facing a downgrade by Deutsche Bank (ETR:DBKGn) analysts on Monday morning.
Deutsche Bank lowered the fashion retailer’s rating from ‘hold’ to ‘sell’ and downgraded its share price target from 115p to 110p as it continued to dispute its guidance and free-cash-flow yields.
The broker said its forecasts for the sports clothing group’s earnings are nearly 6.5% lower than the bottom end of guidance… Read more
“Whilst we see potential for positive surprise in gross margin, as promotional intensity eases, subdued overall category spend tampers our enthusiasm,” Deutsche Bank said.
Shares slipped 4.2% on the downgrade, placing JD as the FTSE 100’s biggest faller ahead of Sports Direct (LON:FRAS) owner and peer Frasers Group PLC.
BT Group PLC (LON:BT) remained the biggest climber on the index, up 6.7%, after announcing India’s Bharti was to become one of its major shareholders.
Overall, the FTSE 100 ticked up 30 points to 8,198.
10.39am: Heathrow slams government charge for costing passengers
Heathrow has claimed a £10 charge on those from certain countries has cost it 90,000 passengers since being introduced.
The electronic travel authorisation (ETA) system has hit competitiveness since being introduced last year, the UK’s largest airport argued on Monday.
This sees connecting passengers without UK residents or a visa charged £10 to pass through British airports and was introduced by the former government in November.
“This is devastating for our hub competitiveness. We urge government to review the inclusion of airside transit passengers,” Heathrow said in a statement.
Those from Qatar, Bahrain, Kuwait, Oman, the United Arab Emirates, Saudi Arabia and Jordan are all required to pay the charge currently, with this set to expand to other nationalities in autumn.
Burger King returns to profit as expansion pays off
Burger King has revealed it returned to profit in the UK last year aided by a string of new restaurant openings.
Operating profit came in at £13.4 million for 2023, the fast food chain reported on Monday, against a £20.7 million loss a year earlier.
This came as 18 new restaurants were opened across the UK, with a further 10 being remodelled.
Revenue ticked up 30% to £381.8 million over the year, while sales climbed 3% on a like-for-like basis.
Chief executive Alasdair Murdoch noted the improvements reflected the “strength” of the Burger King brand, alongside ongoing demand for its “affordable food offering”.
Burger King added trading over the first half of 2024 had been “resilient” as sales ticked up 5%.
“[This was] split equally between the existing estate and contribution from new site openings,” Murdoch said, and “was also supported by a significant improvement in profitability from a strong operational cost focus”.
BoE official warns work not done on inflation as rate expected to rise
Britain's efforts to put a cap on inflation are far from over, a Bank of England official has warned, as official data this week is expected to show prices rising faster once again.
External Monetary Policy Committee member Catherine Mann said Monday that the UK must not be “seduced” into thinking inflation had been contained.
This comes after inflation remained in line with the Bank of England’s 2% target over the past two months.
Mann highlighted surveys implying companies were set to hike wages and prices over the coming year, adding “I’m looking at a problem for next year”.
She told the Financial Times: “Some people at the bottom got quite a bit of an increase [in pay], rightfully so, but the ones above them didn’t. Which means next year they will.”
The Office for National Statistics is set to update on inflation over the course of July later this week.
Economists are expecting consumer prices to have risen by 2.3% during the year to July, which would mean inflation had started to build pace once again.