FTSE 100 higher | Ocado squeezed by cost of living
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5pm: Market gains after rate rise
The FTSE 100 finished the day on an upbeat note, rising 94 points, or 1.3%, to 7,385, as investors absorbed the Bank of England’s anticipated rate rise.
Specialist lender OSB Group jumped 14%, the best mid-cap performer after announcing a total dividend of 26 pence per share, up from 14.5p paid out in 2020. But NatWest fell 3.9% and Lloyds Banking Group lost 1.2% despite being among those that will benefit from higher interest rates.
Ocado plunged 9.1% after the online grocery firm’s joint venture between Ocado Group and Marks & Spencer warned of slowing revenue growth and rising inflation (see below). M&S shares closed down 2.9%.
Commodity shares were higher on China stimulus hopes.
Danni Hewson, AJ Bell financial analyst, said: “The Bank of England proved itself a reliable companion for markets today delivering a rate rise that was neither too hot nor too cold. Looking at how sectors reacted to the news of a 0.25% hike it was clear investors had very much priced it in.
“Those high street banks which would usually get a boost from such a change actually fell with the exception of HSBC and Standard Chartered, but that probably had more to do with the legacy of an early surge in Asian markets.
“Retail was a mixed bag and many consumer-facing businesses – restaurants, pubs and gyms – actually enjoyed a little boost.
“This hike won’t act as a panacea, MPC members can’t just wave a magic wand and put that inflation gene back in its bottle, but it is another step and one likely to be followed by several more in the same direction.”
Shares in Cineworld slipped more than 4% even as the cinema chain forecast a better performance this year due to pent-up demand and a greater selection of films (see below).
7am: Ocado Retail
Ocado Retail, a joint online retail venture between Ocado and Marks & Spencer, said revenue for the 13 weeks to 27 February fell 5.7% on the same quarter last year as consumers felt the cost of living squeeze.
It said food price inflation and the effect on demand caused by the rising cost of living were hard to predict. Revenue growth for the full year is likely to be close to 10% and profit margins will tighten.
CEO Melanie Smith said: “Given that we are comparing a post-lockdown quarter this year with a lockdown quarter last year, this has meant that sales were down 5.7% in the quarter, not helped by the softening market overall, with smaller baskets offsetting the increase in the number of customer transactions in the quarter.”
Food courier service Deliveroo said it aimed to reach break even in core earnings in around two years’ time and predicted a 15-25% rise in the value of gross transactions on its platform this year, a slowdown from 70% in 2021 when it was boosted by lockdowns.
Adjusted core loss widened to £131 million last year compared to a loss of £11m in 2020, reflecting increased marketing spend and tech investment.
7am: National Express updates on Stagecoach bid
National Express has urged shareholders in Stagecoach to “take no action” as it claims the rival offer from German infrastructure fund DWS “materially undervalues” the company.
Stagecoach last week withdrew its support for a merger with National Express, which values Stagecoach at £445m and switched its recommendation to a £595m offer from DWS.
National Express today argued that its bid represents “a superior value creation opportunity” to DWS’s 105p per share.
Marshalls posted record sales and adjusted profitability in 2021, reflecting a continued demand for paving and aggregates. Internal guidance for the current year was now ahead of previous expectations.
The company saw a 26% year-on-year increase in revenues to £589.3m, while adjusted underlying earnings were up 86% at £107.1m, and adjusted pre-tax profits surged 180% to £76.2m. Adjusted earnings per share were a whopping 233% higher at 28.6p.
It proposes a final dividend of 9.6p – giving rise to a total dividend for the year of 14.3p per share.
Cinema operator Cineworld said it had delivered a resilient performance for the year to the end of December in a very challenging market, strengthening its liquidity position and continuing to demonstrate tight control over its operating costs and cash usage. The Group is in a good position to benefit from the expected industry recovery.
Group revenue came in at $1.8 billion (2020: $852.3m) and group adjusted EBITDA was $454.9m (2020: loss of $115.1m).
The Dow Jones, S&P 500 and Nasdaq indexes rebounded strongly, rising 1.55%, 2.24% and 3.7% respectively after the Federal Reserve raised the interest rate by a quarter-point and pointed to six more hikes in the forthcoming meetings this year.
Traders were encouraged by comments from Fed chairman Jerome Powell who pointed to a “strong economy” that is able to withstand the Fed’s tightening policy.
Hong Kong’s Hang Seng Index staged a staggering 22% rally, marking its largest ever single day gain as Chinese policymakers pledged to support the market.