European equities were steadying on Tuesday, though with the FTSE 100 lagging the bunch despite a well-received trading update from blue-chip grocer J Sainsbury.
Things should heat up as the week progresses, however, with central bank meeting minutes and a monthly US jobs report in focus. Locally, investors are awaiting a UK services PMI at 0930 BST on Tuesday.
‘Yesterday's national holiday in the US ensured we had a quiet start to the week. During the course of the week things are likely to get more interesting though,’ said Commerzbank.
The FTSE 100 index was down 13.19 points, or 0.2%, at 7,219.46. The FTSE 250 index was up 96.38 points, or 0.5%, at 18,689.33. The AIM All-Share index was up 3.25 points, or 0.4%, at 878.27.
The Cboe UK 100 index was down 0.3% at 720.24. The Cboe 250 was up 0.5% at 16,260.87, though the Cboe Small Companies was 0.1% lower at 13,282.29.
In mainland Europe, the CAC 40 stock index in Paris was up 0.2%, while the DAX 40 in Frankfurt was up 0.6%.
The dollar was markedly stronger in early trade.
The pound was quoted at $1.2071 early Tuesday, down from $1.2114 late Monday. The euro stood at $1.0383, down from $1.0430. Against the yen, the dollar was trading at JP¥136.21, up from JP¥135.72.
Equities have a slew of PMI figures to digest, with numbers from Europe later this morning, as well as another 50 basis point hike from the Reserve Bank of Australia to kick off a key few days of central banking action.
The Reserve Bank of Australia lifted its cash rate target by a half-point to 1.35% from 0.85%.
‘Inflation is forecast to peak later this year and then decline back towards the 2-3% range next year,’ Governor Philip Lowe said.
‘Today's increase in interest rates is a further step in the withdrawal of the extraordinary monetary support that was put in place to help insure the Australian economy against the worst possible effects of the pandemic. The resilience of the economy and the higher inflation mean that this extraordinary support is no longer needed. The board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead.’
Lowe continued: ‘The size and timing of future interest rate increases will be guided by the incoming data and the board's assessment of the outlook for inflation and the labour market. The board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time.’
Later this week, minutes from the latest European Central Bank and US Federal Reserve meeting are released.
In London's FTSE 100, Sainsbury's was among the better performers in early dealings, up 2.3%. It said sales fell in the first quarter, lapping tough comparatives.
Sainsbury's said grocery sales in the first quarter ended June 25 fell 2.4% yearly ‘against last year's elevated Covid-19 driven levels’. On three years earlier, prior to the onset of the pandemic, grocery sales were 8.7% higher.
Total retail sales, excluding fuel, were down 4.5% yearly. Including fuel, they were down 4.0%.
Consumers in the UK have come under pressure from an inflation-driven cost of living crisis.
Sainsbury's Chief Executive Simon Roberts said the company is doing all it can to keep prices on shelves as low as possible.
‘We really understand how hard it is for millions of households right now and that's why we are investing £500 million and doing everything we can to keep our prices low, especially on the products customers buy most often. We're working hard to reduce costs right across the business so that we can keep investing in these areas that customers care most about. The progress we are making on improving value, quality, innovation and service is reflected in our improved grocery volume market share,’ Roberts said.
‘The pressure on household budgets will only intensify over the remainder of the year and I am very clear that doing the right thing for our customers and colleagues will remain at the very top of our agenda.’
Sainsbury's backed its profit outlook. It continues to expect an annual underlying pretax profit between £630 million and £690 million. It had reported underlying pretax profit of £730 million in financial 2022, so it expects a decline of as much as 14%.
In addition, the company said Kevin O'Byrne is to retire from his role as chief financial officer in March 2023, the conclusion of its financial year. It has promoted Commercial & Retail Finance Director Blathnaid Bergin as its new CFO, following a ‘thorough’ external and internal search. He joins the board on March 6 next year.
Dechra was up 2.3% after RBC raised the stock to 'outperform' from 'sector perform'.
Elsewhere, Moneysupermarket was up 3.6% after Liberum raised it to 'buy' from 'hold'.
Fashion retailer Quiz added 10%. It posted a sharp annual revenue hike but profit fell on the absence of one-off gains.
Revenue in the year ended March 31 surged 97% to £78.4 million from £39.7 million. Pretax profit fell to £800,000 from £6.0 million, however.
In financial 2021, Quiz benefitted from a £10.4 million gain stemming from a subsidiary disposal, as well as a £5.2 million gain from a ‘bargain purchase arising on acquisition’.
On an underlying basis, which does not include these gains, it swung to a pretax profit of £800,000 from a £9.6 million loss.
It has started the new year relatively strongly. Revenue in the three months to June 30 is up 62% annually and on a like-for-like basis is ‘consistent’ with levels seen before Covid-19 disruption.
Elsewhere in London, some price action from Monday's session endured on Tuesday.
nanosynth group added 28%, after a rise of some 55% on Monday. It had updated on plans to move to the heating, ventilation, and cooling market, after demand for face masks has waned.
AO World lost another 3.1%, after tumbling 18% on Monday.
AO had confirmed in a statement on Monday that it was aware that one of the third-party credit insurers which provides credit insurance to some of its suppliers had rebased their cover in May with respect to AO, reflecting post-Covid sales levels.
It followed a report in the Sunday Times which stated that Atradius, a credit insurer, cut its credit cover for the online retailer's suppliers.
Brent oil was quoted at $113.17 a barrel early Tuesday in London, down from $113.66 late Monday. Gold stood at $1,806.90 an ounce, down from $1,808.30.
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