UK stocks edged higher as investors waited for news from the Bank of England following last month’s surge in consumer prices.
Labour and material shortages together with rising energy prices are contributing to inflationary pressures, and while interest rates are expected to remain unchanged, the market will be looking for signs as to future bank policy.
At 8.45am the FTSE 100 index was up 24 points or 0.3% to 7,107 points driven by gains in industrial and consumer stocks.
Overnight, US markets rebounded with the S&P 500 and Nasdaq indices both adding 1% as energy and chip stocks went on a charge, while the Chinese market reopened higher as the threat of default at Evergrande seemed to recede.
Sterling remained firm against the US dollar at $1.3650 while Brent crude added to its recent gains with another 0.7% advance to $76.40, just shy of its July peak.
COMPANY NEWS
Consumer goods giant Reckitt Benckiser (RKT) reported that trading since its last update at the end of July was in line with expectations, and it was confident of delivering a small increase in like-for-like net revenues for the full year together with an operating margin of around 23%.
The company also confirmed the disposal of its Chinese infant formula and child nutrition business after a strategic decision in February by the new chief executive to focus on more attractive markets in North and South America. Shares ticked up 0.2% to £58.88.
Royal Mail Group (RMG) posted an upbeat trading update for the period to August, with domestic parcel volumes ‘re-basing at a significantly higher level than pre-Covid’ thanks to the surge in ecommerce since the pandemic.
As a result, the firm is predicting a higher operating margin in the second half and a full year margin of 8%, driven by a small increase in revenue growth. Shares traded sideways at 482p.
Pubs group Mitchells & Butlers (MAB) reported that like-for-like sales since full indoor trading resumed in mid-May were running at 97% of pre-Covid levels up to the middle of this month, with trading in the last eight weeks actually topping 2019 levels.
The firm noted stronger activity in its suburban and food-led pubs, particularly at the more premium end of the market, suggesting consumers are prepared to spend that bit more when they go out. Shares added 1.6% to 267p.
Rival pub group Fuller, Smith & Turner (FSTA) reported trading for the seven weeks to mid-September at 86% of pre-Covid levels, slightly weaker than Mitchells & Butler.
While its rural pubs and hotels had benefited from an increase in ‘staycations’, its central London pubs are only just seeing punters return as people return to office working. Shares dipped 1.2% to 722p.
Furniture retailer DFS (DFS) posted a 47% rise in full year sales to June to over £1 billion, and a 180% increase in pre-tax earnings to almost £100 million, as the pandemic drove strong customer demand for interior furnishings.
Growth in new orders was ‘significantly’ higher than revenues thanks to market share gains, and the firm ended the year with a much bigger order book which it will work through in the first half of this financial year. Shares rose 0.4% to 268p.
SMALLER COMPANY NEWS
Shares in financial services group Aquis Exchange (AQX) eased 0.8% to 712p after it reported a 37% increase in first half revenues to June thanks to an increase in membership and a higher level of monthly usage in terms of chargeable orders.
The firm’s share of pan-European secondary trading jumped from 4.5% a year ago to 5.8% and hit a new monthly record of 6.2% in July.
On the M&A front, the auction for waste management firm Augean (AUG) was won by infrastructure investment group Eleia with a bid of 372p per share, beating the 361p offer from Morgan Stanley Infrastructure Partners and ending the takeover race.
Social housing operator Civitas Social Housing (CSH), whose shares have slumped since the publication in August of a bearish note by a short seller - and have subsequently been relegated from the FTSE 250 index - issued a rebuttal of the allegations saying they were based on ‘factual inaccuracies, incorrect assumptions, erroneous comments and assertions which are not grounded in fact’.
The firm said it had ‘great confidence in the company's assets, revenues, business model and strategy’ and would publish a full a full response in due course. Shares dropped a further 2% to 93.3p.
Replacement window and door maker Safestyle (SFE) posted a 73% surge in sales to £73 million and a return to profit in the first half to June thanks to a recovery in volumes and a big improvement in gross margins.
Due to ongoing supply chain disruption and rising costs, the firm stuck to its full year guidance rather than raising forecasts. Shares climbed 4.8% to 54.4p.
Fuel technology firm Velocys (VLS) hit an important milestone, registering £8.2 million of revenues and £3.3 million gross profit from its first major commercial contract.
The company has a number of projects on the go in the US, the UK and Japan to produce sustainable aviation fuel with a fund raising planned for its Mississippi operation. Shares gained 2% to 5.1p.
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