Major UK stocks pulled away from intra-day lows on Wednesday but still closed in the red as investors were haunted by the return of inflation fears and the prospects of interest rate hikes coming sooner rather than later.
At the close, the benchmark FTSE 100 had fallen 0.46% at 7,091.90, while mid-caps faced even larger losses, with the FTSE 250 off 0.7% at 22,761.05.
Data earlier on Wednesday saw UK consumer prices rise 2.5% in June, ahead of expectations of a 2.2% increase. Sharper than expected cost of living increases have also been shaking investors across the pond too, where latest US consumer prices rose 0.9%, the largest gain in 13 years.
Value stocks trumped defensive names on the FTSE 100, with energy, banks and miners trying their best to move forward, while pharmaceuticals, tobacco and consumer goods acted as a drag on the index.
Inflation is good for commodity producers and stokes the fire for interest rate hikes, which benefits banks - hence explaining the top movers on Wednesday.
COMPANIES IN THE NEWS
Housebuilder Barratt Developments (BDEV) rallied 2.5% to 714p after it lifted its profit expectations as strong demand for homes led to an ‘excellent’ recovery of completion volumes.
Barratt’s adjusted pre-tax profit for the year to June is now anticipated to be marginally above the top end of the £860 million-to-£899 million range of market expectations.
Banking giant NatWest (NWG) nudged 1.4% higher to 204.6p as it welcomed a credit rating upgrade from Moody’s Investors Services, based on an assessment of its financial wherewithal.
Building materials group SIG (SHI) lost a bit of their earlier momentum but remained up, adding 1.5% to 48.66p, having upgraded its annual guidance after its first half sales jumped by a third.
SIG said its underlying operating profit for the year to December 2021 is now expected to be ‘ahead of previous forecasts’.
Travel hub food and beverage outlets operator SSP (SSPG) reversed 4% to 253.2p on the news CEO Simon Smith is to step down to pursue a new opportunity in a private equity backed business. Smith will leave the group at the end of 2021.
Meanwhile, SSP was at pains to point out that trading continues to recover, with third quarter revenues running at 27% of 2019 levels, improving to 42% of 2019 levels in the most recent weeks.
RETAIL STRENGTH
In the retail sector, homewares market leader Dunelm (DNLM) fell 4% to £13.83 despite news it expects full year pre-tax profits to come in at around £158 million, slightly ahead of the £149 million-to-£153 million consensus range, having seen a strong sales performance since reopening stores in April and a higher gross margin rate than anticipated.
Dunelm’s total sales in the fourth quarter ended 26 June more than doubled compared to the same period last year when stores were closed during the first coronavirus lockdown and were up 43.9% on the comparable pre-pandemic period in 2019.
However, the cushions-to-kitchenware seller also expects to return to a ‘normal trading calendar’ with three sale events each year, as opposed to two, which will lead to a margin headwind.
Online fashion retailer Boohoo (BOO:AIM) was largely flat at 291p as it announced an intriguing partnership with Debenhams and Alshaya in the Middle East.
Alshaya, which currently runs Debenhams stores in leading shopping malls, will have exclusive rights to operate the Debenhams stores and a local ecommerce platform in Kuwait, Saudi Arabia, UAE, Bahrain, Egypt, Oman and Qatar.
ELSEWHERE ON THE MARKET
Fund manager Liontrust Asset Management (LIO) advanced 1.2% to £19.74 as it reported a rise in quarterly net assets in the June quarter thanks to fresh fund inflows.
Emerging markets asset manager Ashmore (ASHM) narrowed earlier declines but stayed in the red, down 0.5% to 406.8p, despite reporting a rise in net assets for the June quarter thanks to strong inflows into the overlay, equities and external debt themes.
And Tullow Oil (TLW) ticked up 3% to 53p even as it downgraded its annual output guidance, citing the sale of assets in Equatorial Guinea and ‘first-half delivery’, as the oil company also forecast higher cashflow as crude prices recover.
Elsewhere, Portmeirion (PMP:AIM) recovered lunchtime losses to end the day up 0.7% at 661.75p as the homewares designer and distributor guided to 34% growth in first half sales to around £43 million.
Given sustained improvement in trading, the company also reiterated its intention to resume dividend payments this year.
