Market report

Oil price rises | Reach shares dip | Pets At Home strong


5pm: Oil price defies US move

The oil majors and London’s mining firms were among the day’s strongest performers as prices rose, despite the US releasing 50 million barrels in an attempt to induce a cut.

Michael Hewson, chief market analyst at CMC Markets UK, said: “The decision by the US in conjunction with other partners, to release 50 million barrels from reserves, starting in December has seen prices rise, as oil traders cover shorts, amidst an expectation that Opec+ might delay or reduce their December output hike in response.

“While this is probably not the response the Biden administration was expecting, it was also entirely predictable given that it was so widely telegraphed, and it’s not something that the US can repeat.”

Brent crude rose by 2.9% to 82.01 dollars per barrel when the London markets closed.

The FTSE 100 closed 11.23 points, or 0.15%, higher at 7,266.69 on Tuesday.

Compass led London’s blue chips after posting profits for the full-year which surpassed expectations. The world’s biggest caterer saw pre-tax profits more than double to £464 million in the year to 30 September from £210m the previous year. Shares moved 83p higher to 1,555.5p as a result.

White goods supplier AO World plunged lower after it said product shortages, price hikes and consumer belt-tightening are set to hit peak festive trading. Its shares fell by 17.8p to 106.2p as it sank to a £10m pre-tax loss in the half-year to 30 September.

Newspaper publisher Reach fell 23p to 279p after it reported a 3.5% decline in print revenues (see below).

9.30am: Air blown out of market

The air has been coming out of the market like a slowly deflating balloon over the last week or so but it has accelerated this morning, not helped by a sell-off in US technology stocks overnight, says AJ Bell investment director Russ Mould as the FTSE 100 slid 25.24 points to 7,230.22.

“This was linked to fears of more rapid tapering of financial stimulus and hikes to interest rates after Jerome Powell was re-nominated for another term as chair of the US Federal Reserve.

“The fourth wave of Covid being endured in parts of Continental Europe is prompting the reintroduction of restrictions and resulting civil unrest, threatening its economic recovery.”

7am: Reach ‘normalising’

Record and Express

Media group Reach, publisher of the Daily Record and Daily Express titles, said revenue is trading ahead of full year expectations, enabling digital investment.

In a trading update it said it had seen a more normalised pattern of year-on-year trading during H2, following the relatively soft H1 comparatives as it annualised the first COVID lockdown. Revenue has continued to grow and was up 1.2% overall in the period, with digital up 17.2% and print declines moderating further to 3.5%.

A strong digital revenue performance in the period was driven by yield expansion, supported by strategic delivery and a recovery in digital advertising versus 2020.  On a two-year basis, digital revenue growth remains encouraging, up by 39.0% for the year-to-date, with average page views growing by 30%.

There was a 3.5% decline in print revenues though the full year outlook for print has strengthened, driven predominantly by circulation which is on an improved two-year trajectory compared to H1. This reflects a combination of market recovery, strategic investment in availability, marketing, promotions and product enhancement.

Jim Mullen, chief executive, said: “Strategic delivery is transforming our prospects for growth and we’re progressing towards our goal of doubling digital revenue over the medium term.

“Registration numbers are strong, and advertisers are responding to our expanded portfolio of data-led products. Together with our efficient operating model, this is enabling us to invest further in digital content as we build a modern and inclusive media business.”

7am: Pets At Home

Revenue at the pet food and accessories chain Pets at Home grew 22.2% or 28.6% on a two-year basis in the half year to 7 October as it benefited from home workers acquiring animal companions.

Group underlying PBT grew 77.2% to £70.2m, with growth of 68.3% on a two-year basis.

“Speculation surrounding a private equity acquisition of Pets at Home remains high, especially after the completed deal for online competitor Zooplus,” said Ross Hindle, analyst at Third Bridge.

“Some commentators have suggested an acquisition of Pets at Home will mean the business being broken up, but given how the company derives much of its competitive advantage from its integration we’re hearing this would be costly and value-destructive.

“Our experts say that Pets at Home has brought together an effective omnichannel strategy, on-site veterinary practices, and a premium product range to capture a pet product sales boom.”

7am: Calnex: first dividend

Telecoms testing firm Calnex is paying a maiden interim dividend of 0.28 pence per share in line with the board’s intention to implement a progressive dividend policy in the year to 31 March 2022.

The Linlithgow-based company said it has experienced continued strong levels of trading in the first six months of the year and expects this trend to continue through the second half.

Full story here

7am: Devro trading ‘encouraging’

Scottish meat casings producer Devro said trading in the four months to the end of October has been encouraging, with constant currency revenue growth above that seen in H1 2021, reflecting the successful execution of its growth strategy delivering volume growth, higher prices and improved mix. 

Mature markets were strong with continued growth in North America and improved sequential trends in Continental Europe and UK & Ireland. Emerging market growth was particularly strong in Latin America and Middle East and Africa.

While the group is experiencing inflationary pressure this is being mitigated through pricing action and tight cost management.

The board’s expectations for the full year 2021 remain unchanged.

Global markets

Stocks in London were set to open lower as concern over growing cases of Covid-19 in Europe overshadows yesterday’s news that US President Joe Biden has confirmed incumbent Jerome Powell as chairman of the Federal Reserve.

The Dow Jones Industrial Average closed just 17.27 points higher. The S&P 500 ended down 0.3% and the tech-heavy Nasdaq Composite dived 1.3%.

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