Stock prices in London opened lower on Wednesday, but Tesco shares rose amid a profit jump, while global investors were cautious over fears of ‘higher-for-longer’ US interest rates.
The FTSE 100 index opened down 6.35 points, 0.1%, at 7,463.81. The FTSE 250 was down 99.22 points, 0.6%, at 17,578.54, and the AIM All-Share was down 2.70 points, 0.4%, at 700.74.
The Cboe UK 100 was down 0.3% at 743.45, the Cboe UK 250 was down 0.7% at 15,271.62, and the Cboe Small Companies was down 0.1% at 13,389.82.
In European equities on Wednesday, the CAC 40 in Paris was down 0.4%, while the DAX 40 in Frankfurt was down 0.7%.
It was a largely sombre mood in global equity markets. Stocks suffered as US bond yields hit fresh highs, after robust jobs data from the States added weight to the case for the Federal Reserve to keep interest rates elevated. The latest outbreak of political instability in Washington didn’t help matters either.
Early in London, investors were also focusing on the UK’s latest company updates.
Managing to achieve some early gains was Tesco, up 2.9%.
Tesco said in the 26 weeks to August 26, pretax profit jumped to £1.22 billion from £396 million. Revenue climbed 5.0% to £34.15 billion from £32.52 billion a year before. The grocery chain reported strong sales across the group, with retail like-for-like sales rising 7.8%. Inflation eased over the period, Tesco said, also noting that volume and sales mix trends were ahead of expectations. It left its interim dividend unchanged at 3.85p per share.
It now expects to deliver between £2.6 billion and £2.7 billion retail adjusted operating profit for the financial year, and expects retail free cash flow for the year to be ahead of its medium term guidance.
In the FTSE 250, the focus was on Spirent Communications, which plunged 33%.
The automated test and assurance solutions provider cut its annual outlook, warning of a weak near-term order book. ‘The impact of negative operating leverage will very materially affect operating profit in this financial year,’ Spirent warned.
The uptick in Telecommunications orders seen over the second quarter ‘dissipated’ over the summer, and the expected rebound in September has not materialised. However, it saw strong growth in its non-telecommunications end markets.
For the nine months to the end of September, it expects revenue to be around 20% behind the prior year. ‘We do not see the year-on-year performance improving in the remaining quarter. We continue to effectively manage gross margin, which continues to track to plan,’ it added.
In the small-caps, Superdry surged 27%.
The British fashion company signed an intellectual property joint venture with Reliance Brands Holding UK, which is held by Superdry’s exclusive franchise partner in India. It also signed agreements for the sale of its IP assets, including the Superdry brand and related trademarks, in India, Sri Lanka and Bangladesh.
RBUK and Superdry will own 76% and 24% of the joint venture vehicle respectively. The consideration for the South Asia IP sales is £40.0 million, with Superdry to receive gross cash proceeds of £30.4 million. It will use these to strengthen its balance sheet and fund ongoing working capital requirements.
Superdry said it believes the deal with provide the best opportunities for future growth in the countries, with the South Asian IP only generating around 1.8% of total sales in the recent financial year.
In the US on Tuesday, stocks on Wall Street fell sharply, with the Dow Jones Industrial Average down 1.3%, the S&P 500 down 1.4% and the Nasdaq Composite down 1.9%.
Figures from the US Bureau of Labor Statistics showed the number of job openings increased 690,000 to 9.61 million on the last business day of August, from 8.92 million at the end of July.
The print came well above market expectations, which had been expecting the number of job openings to dip to 8.8 million at the end of August, according to FXStreet-cited consensus.
‘Although hirings and firings remained stable, the financial world was unhappy to see so many job opportunities offered to Americans as the data hinted that the US jobs market could be going back toward tightening, and not toward loosening. And that means that Americans will keep their jobs, find new ones, [ask for better pay], and keep spending,’ explained Swissquote Bank’s Ipek Ozkardeskaya.
‘That spending will keep US growth above average and continue pushing inflation higher, and the Federal Reserve (Fed) will not only keep interest rates higher for longer but eventually be obliged to hike them more,’ she continued.
Weighing further on sentiment is the ousting of US House of Representatives speaker, Kevin McCarthy, in a brutal, historic rebellion by far-right Republicans furious at his cooperation with Democrats on the government stopgap funding deal over the weekend.
Sterling was quoted at $1.2046 early Wednesday, lower than $1.2065 at the London equities close on Tuesday. The euro traded at $1.0453, down a touch from $1.0459. Against the yen, the dollar was quoted at JP¥149.10, down a touch versus JP¥149.22.
In Asia on Wednesday, equities were taking their cue from Wall Street. The Nikkei 225 index in Tokyo closed 2.3%.
Japan’s service sector continued to see a solid rate of expansion, survey data showed, though at a slightly slower pace. The au Jibun Bank services purchasing managers’ index fell to 53.8 in September from 54.3 in August. The composite PMI, which measures manufacturing and services, ticked down to 52.1 from 52.6.
In Shanghai, financial markets remained closed for Golden Week, while the Hang Seng index in Hong Kong was down 1.1%. The S&P/ASX 200 in Sydney closed down 0.8%.
Gold was quoted at $1,818.70 an ounce early Wednesday, lower than $1,824.87 on Tuesday. Brent oil was trading at $90.27 a barrel, slightly lower than $91.00.
The economic calendar has the latest services purchasing managers’ index prints from the EU, UK and US from 0900 BST.
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