Stock prices in London were mostly lower at midday on Wednesday, though the FTSE 100 edged into the green on the back of a strong interim performance from Tesco.
The FTSE 100 index was up 4.90 points, or 0.1%, at 7,475.06. The FTSE 250 was down 16.30 points, or 0.1%, at 17,661.47, and the AIM All-Share was down 4.80 points, or 0.7%, at 698.64.
The Cboe UK 100 was flat at 745.83, the Cboe UK 250 was down 0.3% at 15,347.42, and the Cboe Small Companies was flat at 12,976.44.
Tesco was the top blue-chip performer in London, up 3.9% at midday after upping its full-year profit outlook as its interim profit surged.
Tesco said its pretax profit jumped to £1.22 billion in the 26 weeks to August 26, from £396 million the year prior. Revenue climbed 5.0% to £34.15 billion from £32.52 billion.
Looking ahead, the supermarket said now expects to deliver between £2.6 billion and £2.7 billion retail adjusted operating profit for the financial year. Previously, Tesco said it has expected it to be ‘broadly flat level’ at about £2.5 billion.
Analysts at Shore Capital upgraded its pretax profit forecast for Tesco by 3% in the wake of the results but added that, if the supermarket’s momentum can be sustained into a gradually improving UK consumer economic backdrop, more upgrades should follow.
‘Tesco is a very well-oiled machine, pressing all the right buttons around price, assortment, promotion, availability, and general service standards. That consistent execution is being noticed by shoppers and supports robust market share performances,’ Shore said.
In the FTSE 250, Spirent Communications was the index’s worst-performing stock, tumbling 31% after it cut its annual outlook, reporting a weak order book and a slow summer period.
The automated test and assurance solutions provider said for the nine months to September 30, it expects revenue to be around 20% behind the prior year.
Spirent explained this was because the uptick in its Telecommunications orders seen over the second quarter ‘dissipated’ over the summer, and the expected rebound in September did not materialise due to delays in customer expenditure and technology investments.
Elsewhere in London, Superdry jumped 28% after it announced it will establish an intellectual property joint venture in India in collaboration with Reliance Brands, a company that partners with clothing firms and luxury goods sellers.
The clothing retailer said it will sell its intellectual property assets, including its brand and related trademarks in India, Sri Lanka and Bangladesh to the joint venture vehicle for £40.0 million.
Superdry will hold a 24% stake in the JV, with Reliance Brands holding the remaining 76%. Superdry anticipates gross proceeds of £30.4 million from the sale.
Moving away from stocks, fresh data on Wednesday revealed that the UK service sector activity hit an eight-month low in September.
The headline seasonally adjusted services PMI business activity index registered 49.3 points in September, down from 49.5 in August. This was better than the flash estimate of 47.2.
This marks the second consecutive month that the reading has been below the 50.0 point mark. It was also the lowest level recorded since January.
‘Reduced volumes of service sector activity were attributed to sluggish business conditions, heightened risk aversion among clients and downward pressure on demand in the wake of rising borrowing costs,’ S&P said.
The UK seasonally adjusted composite PMI - a weighted average of the UK’s manufacturing and services PMIs - posted 48.5 points in September, down slightly from 48.6 in August but higher than the earlier flash estimate of 46.8.
‘The UK economy is still showing signs of strain and the impact of interest rate rises are having an effect. Consumers are concerned by the higher cost of living and expenses continuing to rise especially fuel costs and are reining in spend accordingly,’ said John Glen, chief economist at the Chartered Institute of Procurement & Supply.
In European equities on Wednesday, the CAC 40 in Paris was up 0.4%, while the DAX 40 in Frankfurt was up 0.2%.
Stocks were upbeat despite new data showing that the volume of retail trade in the eurozone fell in August from July. The seasonally adjusted volume of retail trade decreased by 1.2% month-on-month in the eurozone, compared to a 0.1% decline in July.
Bert Colijn, senior eurozone economist at ING, said the ‘large drop’ does not bode well for third-quarter gross domestic product.
‘After a few months of stagnation, it looked like the downward trend in retail sales had stopped. August data put an end to that hope, as the 1.2% month-on-month drop has put us back on track with the previous declining trend,’ he explained.
‘After two months of sales data for the third quarter, things are not looking good for the contribution to GDP growth. If retail sales were stable in September, quarterly growth in retail trade would be -0.8%. With eurozone data continuing to surprise to the downside, a downturn in economic activity remains a real risk for the short-term.’
Stocks in New York were seen largely higher. The Dow Jones Industrial Average was called up 0.1%, the S&P 500 index up 0.1%, and the Nasdaq Composite down 0.1%.
The pound was quoted at $1.2136 at midday on Wednesday in London, up from $1.2065 at the London equities close on Tuesday. The euro stood at $1.0510, higher against $1.0459. Against the yen, the dollar was trading at JP¥149.10, lower compared to JP¥149.22.
Brent oil was quoted at $89.32 a barrel at midday in London on Wednesday, down from $91.00 at the London equities close on Tuesday. Gold was quoted at $1,822.88 an ounce, lower against $1,824.87.
Still to come on Wednesday’s economic calendar, there are two PMI prints for the US service sector at 1445 BST and 1500 BST.
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