Market report

Unilever will not raise bid | Inflation at 30-year high


5pm: Unilever will not raise offer

Unilever has announced it will not raise its £50 billion bid for GlaxoSmithKline’s consumer health arm after the pharma giant rebuffed the latest of three approaches in December.

The household products group has battled a plummeting share price and investor exodus this week after reports emerged of the FTSE 100 firm’s three offers for the business last year. Its shares closed down 0.6%. 

Stocks in London ended mostly higher on Wednesday following upbeat company trading updates, highlighted by luxury fashion house Burberry, shrugging off a sharp rise in UK inflation.

The FTSE 100 index closed 26.11 points higher at 7,589.66. 

Pearson closed up 4.4% after the education publisher said it made “great progress” in the fourth quarter.

At the other end of the index, British Airways owner International Consolidated Airlines ended down 3.4% after BA was among the airlines cancelling US flights because of 5G safety concerns.

The action is in response to fears that the activation of the C-band strand of the mobile phone service near US airports on Wednesday could disrupt planes’ navigation systems. Boeing 777s are thought to be particularly at risk of being affected.

9am: Stocks fall on inflation data

Stocks fell in London as UK inflation leaped to its highest level in nearly three decades in December (see below), making a February interest rate hike increasingly likely. The FTSE 100 was off its early low and was trading just under five points lower at 7,558.70.

Fashion retailer Burberry rallied after it reported a 5% rise in third-quarter revenues driven by an acceleration in full price sales.

Educational publisher Pearson also gained as it raised annual profits guidance, driven by its assessment and qualification business.

The stationer and travel agent WH Smith was higher after a well-received trading update.

Pub chain JD Wetherspoon ticked up despite warning it would swing to an interim loss.

See trading updates below.

7am: Inflation rises

Money - own pic

Inflation increased to 5.4% in December – a 30 year high – from 5.1% in November, the Office for National Statistics said.

Chancellor Rishi Sunak said:  “I understand the pressures people are facing with the cost of living, and we will continue to listen to people’s concerns as we have done throughout the pandemic.

“We’re providing support worth around £12bn this financial year and next to help families with the cost of living. We’re cutting the Universal Credit taper to make sure work pays, freezing alcohol and fuel duties to keep costs down, and providing targeted support to help households with their energy bills.”

However, the latest data adds pressure on the Bank of England to raise interest rates again next month.

The biggest impact came from food and drink, followed by restaurants and hotels and furniture and household goods.

The Bank of England last month became the world’s first major central bank to raise interest rates since the start of the Covid-19 pandemic.

7am: Wetherspoon

JD Wetherspoon

Chairman of pubs chain J D Wetherspoon, Tim Martin, said: “As mentioned in our update on 13 December 2021, the uncertainty created by the introduction of plan B Covid-19 measures makes predictions for sales and profits hazardous.”

The company will be loss-making in the first half of the financial year, but hopes that, with the ending of restrictions, improved customer confidence and better weather, it will have a much stronger performance in the second half.

Mr Martin noted that it registered more than 50 million customer visits in the second half of 2020, when pubs were permitted to reopen, and there were no outbreaks of the Covid virus among customers, as defined by the public health authorities, during this time.

Sales in the second quarter were affected by the “Plan B” restrictions announced by the government in December. In the 12 weeks to 16 January 2022, like-for-like sales decreased by 15.6% and total sales by 16.6%.

7am: Omega CEO quits

Colin King has stepped down after six and a half years as chief executive of Scottish medical testing firm Omega Diagnostics.

Full story here

7am: Burberry

Luxury retail brand Burberry said its annual profit would beat market expectations as its full-price sales accelerated in the third quarter, driven by a strong performance in outerwear and leather goods and a material improvement in Asia and Europe.

The company said its adjusted operating profit for the year to 3 April would rise by about 35% at constant exchange rates.

Analysts had forecast an average a rise of 19% to £472m.

7am: Galliford Try

Civil engineer and construction group Galliford Try said it was performing well, with trading in line with expectations.

In a first half update it said the order book stands at £3.5 billion, up from the £3.3bn reported in the final results statement in September.

Recent project wins include its share of the £7bn Department for Education 2021 Construction Framework and the £55 million Galashiels Community Campus for the Scottish Borders Council.

Chief executive Bill Hocking said: “We have made strong progress on our strategic objectives.  Our recent acquisition of nmcn’s water business, fully aligned to our strategy, offers a significant opportunity to the group and our water sector and related clients.”

7am: WH Smith

Stationer and travel agent WH Smith said it expected a resumption in the recovery of its travel markets over the coming months.

The company said revenue for the 20 weeks to 15 January was 85% of the sales during the corresponding period in 2019.

Chief executive Carl Cowling said: “We are well placed for the key trading period in travel this summer and the ongoing recovery in our markets. He added that the company’s high street and online businesses had performed well.

Group revenue had touched 90% of 2019 levels in November before falling to 87% in December as the spread of the Omicron variant took hold.

Retail sales

Prince St retail shopping

Total Scottish retail sales in December increased by 15.6% compared with December 2020, when they had decreased by 16.6%, but were down 13.0% compared with December 2019.

Paul Martin, partner and UK Head of Retai at KPMG, said: “December’s figures are still behind pre-pandemic levels they do show a marked improvement on the previous year. 

“Food sales in particular were the stand out performer during the festive period, with sales growing 1.2% compared with December 2020 and 4.5% compared with the same month in 2019.”

David Lonsdale, director of the Scottish Retail Consortium, said: “The recovery of sorts in Scottish retail sales has been stymied for several months now and remains more sluggish and persistently weaker than across the UK as a whole.

“Last month’s trading rounded off a tough final quarter of the year for the industry in Scotland, which is concerning. It reinforces the urgent need for a retail recovery plan from government – more certainty over the future easing of Covid restrictions including the rescinding of the work from home order, grants for shops as Wales is offering, and a short-term shopper stimulus plan.”

Global markets

US stocks retreated across the board, dragged down by rising US bond yields and concerns over the course of the economy.

The Nasdaq 100 led losses on Wall Street, plummeting 2.57% amid widespread tech weakness.

The S&P 500 plunged 1.84% to its lowest level since December 2020 and the Dow Jones dropped 1.7%, pulled back by a sharp fall in Goldman Sachs’ shares, which fell 7% after worse-than-anticipated Q4 financial results.

Asia followed the US into negative territory, though the falls in China were muted. Japan’s Nikkei dropped 2.8% while Hong Kong’s Hang Seng and the Shanghai Composite moved 0.4% lower.

Leave a Reply

Your email address will not be published. Required fields are marked as *

This site uses Akismet to reduce spam. Learn how your comment data is processed.