Market report

Nat Express holds Stagecoach terms | Greggs pressure

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5pm: FTSE closes higher

London stocks defied a fall elsewhere in Europe to make solid gains, despite wider concerns over a slowdown in consumer activity in China.

The commodity sector rescued the blue chip index which ended the day up 46.65 points, or 0.63%, at 7,464.8 points.

The German Dax decreased by 0.67% by the end of the session, while the CAC 40 in France was down 0.49% 

In London, Vodafone shares made gains after confirming that Emirates Telecommunications Group had bought a 9.8% stake in the company for £3.6bn. Shares in Vodafone finished the day up 2.24p at 120.06p.

The biggest risers on the FTSE 100 were Fresnillo, up 33.4p at 756.8p, Glencore, up 15.65p at 477p, Phoenix, up 17p at 633.8p, Antofagasta, up 34p at 1,382.5p, and GSK, up 43p at 1,798.4p.

Fast food seller Greggs dipped after it warned it was facing pressure from soaring costs and could therefore pass further increases on to customers. Shares declined by 10p to 2,160p despite highlighting that sales jumped by more than 27% over the past 19 weeks as it continues its post-pandemic recovery.


2pm: National Express will not budge on Stagecoach

National Express

National Express will not change the terms of its bid for transport operator Stagecoach, insisting it is superior to the offer from rival bidder DWS.

The bus and coach operator last year agreed a merger with Stagecoach and reiterated that its all-share combination was still a better choice for shareholders and the offer was now final.

It once again urged investors not to take action in relation to the £595 million offer by German investment fund DWS, which gatecrashed the deal and whose bid, however, has already been backed by Stagecoach’s board. 

National Express said it will give shareholders 0.36 of its shares in exchange for each Stagecoach share – an offer that was initially worth £370m, but has since increased to £490m as National Express’s share price rises.

DWS said it had secured 30.4% acceptances for its takeover, unchanged from recent updates.


Noon: London back in black

The FTSE 100 index was back in positive territory by midday, reclaiming all the ground lost in the morning, though poor economic data from China continues to weigh on investor sentiment.

China’s retail sales slumped to their lowest in two years, while factory output plunged, official data showed, capturing the dismal economic fallout from Beijing’s zero-Covid policy.

The world’s second-largest economy has persisted with strict virus measures, choking global supply chains as dozens of Chinese cities – including key business hub Shanghai – grapple with restrictions.

The FTSE 100 index was up just 3.39 points at 7,420.58. The mid-cap FTSE 250 index was down 39.98 points, or 0.2%, at 19,881.86.


7am: Greggs pressures

Greggs

Fast food retailer Greggs said like-for-like sales in company-managed shops over the first 19 weeks of the year grew by 27.4%, but admits the figure “is flattered” by comparison with restricted trading conditions in the same period of 2021. 

A more accurate comparison is the most recent ten weeks to 14 May when trading has averaged 15.8%. Greggs expects this figure to continue to normalise as its starts to compare with more robust trading periods in 2021.

Sales levels in larger cities and in office locations continue to lag the rest of the estate but transport locations have shown a marked increase in activity in recent weeks. 

Sales of hot food and snacks are showing particularly strong growth, with chicken goujons and potato wedges proving popular.

Total sales in the 19 weeks to 14 May 2022 were £495 million (2021: £378m). 

In the first 19 weeks of 2022 the company opened 49 shops, including 18 with franchise partners.  Six shops closed, leaving a total of 2,224 shops trading at 14 May (comprising 1,831 company-managed shops and 393 franchised units).

In a statement, the company said: “We have made a good start to 2022, with sales in line with our plan and a strong pipeline of new shop acquisitions ahead. 

“Whilst considerable uncertainties remain, we are in line with our plan and the board’s expectations for the full year outcome remain unchanged.”

Ross Hindle, analyst at Third Bridge, said: “The group will struggle to increase prices while still maintaining its value-for-money proposition in the market. Savoury and breakfast products are the most likely to be priced higher.

“Our experts expect Greggs’ EBIT margin to continue to be under pressure over the months to come, given input costs and how delivery is taking a bigger share of sales.”


6am: Ryanair struggles to forecast profit

Ryanair posted a €355 million loss in the 12 months to end-March 2022 and said it was looking for a return to “reasonable profitability” this year.

Full story here


6am: Saudi Aramco

Saudi Aramco’s profits surged by 82% in the first three months of the year, as the world’s biggest company capitalised on soaring crude oil prices. 

The state-backed firm’s quarterly income of £32.2 billion was a record since shares floated in 2019, with profits significantly higher than the £17.7bn for the same period last year. 

The company declared a £15.3billion dividend, to be paid next quarter. 


Global markets

Oil and gas companies are expected to come under early pressure after Chancellor Rishi Sunak said he still has not ruled out a windfall tax on the energy crisis’ big earners. On Tuesday, Labour will call for a parliamentary vote on the issue.

Investors cashed in profits as Brent crude oil futures fell $1.66 at $109.89 a barrel early today, while US West Texas Intermediate (WTI) crude futures dropped $1.55 to $108.94 a barrel.

Both benchmarks, which jumped about 4% on Friday, earlier climbed by more than $1 a barrel, with WTI reaching its highest since March 28 at $111.71.

Naohiro Niimura, a partner at Market Risk Advisory said the imminent ban by the EU on Russian oil and slow increase in OPEC output, should see oil prices remain close to the current levels until they head lower late this year due to weakening global demand.

China processed 11% less crude oil in April than a year earlier, with daily throughput falling to the lowest since March 2020.

China’s jobless rate rose to 6.1% in April, the highest level since the 6.2% peak seen in the early part of the Covid-19 pandemic in February 2020.

It comes as widening lockdowns led to a sharp slowdown in activity for the world’s second largest economy. Official figures also show retailers and manufacturers were hit hard.

Investors were spooked by an 11.1% fall in monthly retail sales (double the figure predicted) and a 2.9% drop in industrial output (against a prediction of a modest gain).



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