FTSE 100 Live: Tesco profits fall, OPEC considers oil output cut

 (Evening Standard)
(Evening Standard)

Tesco’s half-year profits have fallen 10% as the supermarket giant grapples with the impact of “significant” cost inflation.

Alongside the decline in headline profits to £1.25 billion for the six months to 27 August, Tesco said its full-year performance will be towards the lower end of previous guidance.

On commodity markets, traders are braced for OPEC to announce a cut in production quotas in response to the weaker demand outlook.

Read more on Tesco’s results

FTSE 100 Live Wednesday

  • OPEC set to announce production cut

  • Tesco says customers “watching every penny”

  • FTSE 100 index rebound stalls

Opec agrees biggest production cut since Covid, oil price and shares in energy majors rise

15:57 , Michael Hunter

Opec and its allies have agreed the biggest oil production cuts since the pandemic, with the organisation representing crude exporters pledging to reduce supply by two million barrels a day.

Commodity and stock markets had expected cuts to be announced at Opec’s meeting in Vienna, but prices moved on the news of their size. Brent crude, the international benchmark oil price, rose by over a dollar to $92.80, a gain of over 1%.

Shell topped London’s FTSE 100, with its shares up 31p to 2371p, a rise of 1.4%. BP gained 3.8p to 458p, a rise of 0.9%.

Rallying oil majors helped offset overall losses on the top UK share index, which fell 58 points overall to 7,028.95, a rise of 0.8%. The biggest decliners were retailers after a trading update from the sector’s biggest name pointed to serious price competition ahead with consumers’ budgets under heavy pressure.

Tesco lost 8p to 203p after an initial rally for the stock failed to hold. Online grocer Ocado fell 47p to 460p, the biggest single loss in percentage terms at over 9%. Fashion chain Next lost 277p, or 6%, to 4750p.

New York stocks fall as big-name tech stocks and multinationals falter

14:53 , Michael Hunter

Wall Street’s S&P 500 ended a two-session rally in early Wednesday trade, with some of the biggest names on the index coming back under pressure as the dollar resumed its rally.

The broad stock index fell by almost 40 points to 3753.30, a drop of 1%. Tesla fell almost 4% and Paramount fell over 3%. Goldman Sachs was also down over 3%.

The index tracking the dollar against a range of currencies rose over 1% and above 111 points.

Weak run for floatations on London’s stock market carries on amid bleak economic outlook

14:37 , Michael Hunter

The supply of new companies coming to London’s stock market was weak in the third quarter of 2022, in line with the subdued condions for floatations throughout the rest of the year.

Analysis from EY found that activity in initial public offerings fell by 76% for the main exchange and the Alternative Investment Market, the launchpad for smaller companies.

There were eight IPO in the the period, six on the main market, raising almost £555 million, and two on AIM raising £11 million. The largest new listing on the main market raised over £548 million for Ming Yang Smart Energy. The largest AIM admission was Aurrigo International, which develops self-driving car technology and raised £8 million.

Scott McCubbin, EY’s leader for UK IPOs, called the market for flotations “challenging”, adding: “Ongoing geopolitical tensions and economic instability, compounded by inflationary pressures, have meant many businesses have delayed their IPO plans until they believe inflation has peaked and stability returns to the market.

“While the overall IPO outlook for the remainder of 2022 remains subdued, companies who may have paused their IPO are now re-evaluating those plans to ensure they can adapt to the new macroeconomic landscape and are ready for the recovery in 2023.”

Wall Street sets course for opening fall after dollar rally resumes

14:17 , Michael Hunter

The two-day advance the S&P 500 was expected to end in New York, with the dollar resuming its upward path on the currencies market.

Futures trade pointed to opening losses of almost 1% after this week’s rebound.

Twitters stock was also expected to pause for breath after its run higher on news during the previous session that Elon Musk’s bid for the social media site was back on. The shares were called down marginally for Wednesday’s open.

Pound back under pressure during Truss speech as dollar strength returns

13:31 , Michael Hunter

Sterling’s run higher faded into the start of the trading day in the US as the dollar resumed its advance on global markets and investors kept watch on signs of the direction of government policy from a keynote speech from the prime minister.

The turn around on global the global currency market came as Liz Truss was speaking to the Conservative Party Conference in Birmingham, where she repeated her commitment to low taxes and said her three priorities of the economy were “growth, growth and growth.”

In afternoon trade, the pound was down by 1.2% overall for the day at $1.1341, having been as high as $1.1495. The dollar index, which tracks the US currency against a range of others, was up 0.8% at 110.9.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said the prime minister “may have hoped that her triple promise of growth would have calmed markets further but with nothing new to offer the table, her words have not had the desired effect.”

She added: “For now she’s pledged commitment to her Chancellor, and has reiterated support for the independence of the Bank of England, but there was no mention of exactly when the independent forecast of her administration’s slash and spend policies would be made public.”

Britain now ‘most distressed’ major market within Europe

12:23 , Simon Hunt

The perilous economic condition of UK plc was laid bare today as a new report found Britain has replaced Germany as the most distressed major European market.

The UK has reached its highest level of corporate distress since August 2020, according to the Weil European Distress Index, amid 40-year high inflation, forecasts of a recession and a drop in the value of the pound.

Weaker investment and squeezed profitability are among the major drivers of distress in the UK, as firms recalibrate their earnings forecasts to cope with skyrocketing costs and a downturn in consumer purchasing power.

By contrast, corporate distress in France remains below the long-run average due to the impact of government subsidies implemented earlier in the year which have capped electricity price rises to just 4%.

Neil Devaney, Partner at Weil, said: “Consumer confidence was already at an all-time low ahead of the recent fiscal response that triggered turmoil in the markets and the pound to fall to historic levels.

“With borrowing costs set to rise steeply in the coming months, and real incomes expected to fall further, the outlook for UK businesses looks extremely challenging.”

FTSE 100 slips, Hyve up on 12% on events recovery

10:23 , Graeme Evans

Shares in events group Hyve have rallied 12% after it said the pace of its recovery from pandemic disruption had "surpassed expectations".

Two of the largest events in the group’s calendar have just taken place, with the Autumn Fair for the home, gift and fashion industry at Birmingham’s NEC significantly outperforming previous editions.

Hyve’s Groceryshop event in Las Vegas also reported revenues more than 40% higher than its largest pre-Covid edition after attracting more than 3,000 attendees.

Chief executive Mark Shashoua said: “It is clear that our business has now almost fully recovered from the turbulence of the last two years.”

Hyve shares were 800p prior to the pandemic, only to fall as far as this week’s 50p as fears over the impact of a global recession added to ongoing investor caution.

The former FTSE 250-listed stock rallied 12% or 6p to 56p today, but analysts at Citi have a target of 210p after Monday’s debt refinancing also boosted confidence.

Topps Tiles was another All-Share stock in demand today as the retailer bucked recent City pessimism by revealing a better-than-expected finish to its financial year.

Like-for-like sales were 1.2% lower in the three months to 1 October, but this was against tough year-on-year comparatives as the home improvement chain rounded off a second successive year of record annual sales.

Profits will now be towards the top end of expectations, causing shares to jump 2p to 43p. Broker Peel Hunt, which has a price target of 60p, said: “September sales and the order book give confidence in a steady autumn.”

The updates from Hyve and Topps provided some cheer during an otherwise lacklustre session for markets after the strong gains seen earlier in the week.

British Land, Ocado and BT Group were among stocks back under pressure as the FTSE 100 index retreated 78.91 points to 7007.55.

The FTSE 250 index, which jumped 3% on Tuesday as traders revised their bets on futures interest rate rises, fell 1.3% or 231.48 points to 17,590.67. Road infrastructure firm Hill & Smith posted the biggest gain, lifting 31p to 1002p following a deal to buy a California-based solar lighting and traffic management business for £22.2 million.

FTSE 100 retreats, Tesco shares higher

08:37 , Graeme Evans

European markets have pared some of this week’s gains, with the FTSE 100 index down 0.5% or 36.13 points at 7050.33 and the FTSE 250 index 39.46 points lower at 17,782.69.

Tesco rose 2.8p to 212.8p after it reassured investors with its interim results, while shares in rival Sainsbury’s lifted 1.1p to 181.7p. The biggest riser in the top flight was pest control firm Rentokil Initial, which improved 11.4p to 506.2p.

Elsewhere in the FTSE 100 index, property firms were under more pressure after Land Securities fell 8.6p to 521.4p and British Land dropped 6.4p to 348.1p.

The FTSE 250 index was led by road infrastructure firm Hill & Smith after it announced the acquisition of a California-based solar lighting and traffic management business for £22.2 million. Shares lifted 23p to 994p.

Tesco says customers “watching every penny"

08:03 , Simon English

Tesco saw profits for the half-year top £1.3 billion and upped its dividend to shareholders, figures that come at a sensitive time amid a cost of living crisis that has seen many more people turn to food banks in order to survive.

The UK’s biggest supermarket was deemed to have handled the Covid pandemic well, like rivals keeping the nation fed in the toughest of conditions.

Sales in the last six months rose 6.7% to £32.5 billion. It today pledged to “support customers though relentless focus on value”.

People are “watching every penny” as they try to make ends meet in difficult economic times.

Chief executive Ken Murphy said: ““We know our customers are facing a tough time and watching every penny to make ends meet.  That’s why we’re working relentlessly to keep the cost of the weekly shop as affordable as possible, with our powerful combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices, together covering more than 8,000 products, week in, week out.  We’re also investing significantly in our colleagues, with a further boost to pay announced today for our UK stores..”

Tesco shares are down 16% this year. They will open trading today at 211p.

FTSE 100 rally stalls, OPEC production cut due

07:58 , Graeme Evans

Brent crude remains above $90 a barrel as traders await today’s OPEC decision on whether to cut production in response to weakening demand.

Reports suggest the meeting in Vienna will consider reducing output by as much as two million barrels a day, the biggest such move since the peak of Covid-19.

Brent was near $80 a barrel early last week but has bounced in anticipation of the cut to monthly production quotas, with the price today at $91.55 a barrel.

For European stock markets, the biggest two-day rally since the early days of the pandemic is expected to be followed by a mixed session of trading,

The FTSE 100 index jumped 2.6% to 7086 yesterday, but IG Index is forecasting a fall of 25 points when trading resumes in London.

Cyclical sectors led the gains in Europe on Tuesday as traders revised their bets on futures interest rate rises.

There were few signs of a pivot in the approach of New Zealand’s central bank, however, as policymakers raised rates overnight by 0.5% and warned of more to come.