Market report

Russia overhangs market | WH Smith | Ted Baker | Persimmon


5pm: Miners hold up FTSE 100

Russia’s decision to halt supplies of gas exports to Bulgaria and Poland cast a shadow over markets, with miners doing their best to keep the FTSE 100 index in positive territory.

It closed 39.42 points, or 0.5%, higher at 7,425.61. The mid-cap FTSE 250 index ended down 54.35 points. The CAC 40 index in Paris closed up 0.5%, while the DAX 40 in Frankfurt ended up 0.3%.

CMC Markets analyst Michael Hewson stated “It appears that Russia is striving to create division by cranking up the pressure on European countries to pay in roubles or risk being cut off.

“The FTSE 100 is outperforming, largely due to a rebound in metals prices, led by gains in the likes of Anglo American, Rio Tinto and Antofagasta, after a strong recovery in Chinese markets.” 

Lloyds Banking Group reported a rise in first quarter pre-impairment profit (see below) and noted that the outlook for the UK economy “remains uncertain”, but the lender still upgraded its guidance for all of 2022.

Russ Mould, investment director at AJ Bell, said Lloyds’ first quarter update reveals a lot about the state of the UK economy.

“The country has been getting back on its feet, which is reflected by an increase in lending and savings deposits for Lloyds. However, the outlook is less than rosy.

“It’s serious when a bank talks about proactively contacting customers that could be facing financial troubles to offer help and guidance.

“This is quite a different tone from a company whose key messages were recently focused on expansion into wealth management – i.e. helping the rich to look after their money.

“The bank doesn’t want bad debts on its books, but neither does it want customers to be in trouble, so it is in its own interest and of society to help people manage their finances during this cost of living crisis. Lloyds is in a strong position financially to weather any storm but many of its customers won’t be.”

7am: Lloyds Banking Group

Lloyds said underlying profit before impairment was up 26% to £2bn in the first quarter, driven by strong net income growth.

It was down 14% from a year earlier after accounting for a £177m charge related to possible defaults linked to the cost of living crisis.

Full story here

7am: Persimmon

House builder Persimmon said it has had an encouraging start to 2022 with trading in line with expectations and private average weekly sales rates running c. 2% higher year on year.

Demand for new homes continues to outstrip supply with good levels of customer enquiries and cancellation rates remaining at low levels.

Dean Finch, Group Chief Executive, said: “We continue to expect to deliver volume growth for the full year 2022 of around 4-7% of 2021 levels, with resilient industry-leading margins.”

7am: M&G seeks new CEO

M&G is on the hunt for a new chief executive after John Foley announced his intention to retire.

The search will be led by chair Edward Braham.

Mr Foley will continue in his role until a successor is in place.

Full story here

7am: WH Smith

WH Smith said it had successfully navigated the business through the pandemic and that its recovery is well underway. It said it is well positioned to benefit from new store opening opportunities in the global travel market.

Total Travel revenue in the eight week period to 23 April 2022 at 114% of 2019. There is a new store pipeline of over 125 stores.

Headline profit before tax and non-underlying items came in at £14m (2021: loss of £19m)

Total Travel trading profit was £10m (2021: loss of £28m). High Street trading profit came in at £26m (2021: £24m).

7am: Ted Baker bid interest

High street fashion chain Ted Baker said that after putting itself up for sale it has now received a number of non-binding proposals from potentially interested bidders.

The board is inviting a focused selection of such parties to enter into a due diligence process under which the company will provide information on its business.

Global markets

Markets European gas prices surged higher yesterday after Russia announced that it would cut gas flows to Poland and Bulgaria, given that these buyers failed to agree to pay for Russian gas in roubles.

A concern for the EU market, as well as global gas markets is whether Russia will escalate further by cutting supplies to other European countries. 

On Wall Street, any upbeat expectations were dashed by a widespread sell-off triggered by mounting economic worries.

At the closing bell, the S&P 500 plunged 2.81% weighed by a 12% slump in the Tesla share price, with most sectors in the index down except energy.

The Dow Jones fell 2.38%, closing at its worst level since mid-March, dragged down by a steep decline in global consumer bellwether Nike. Meanwhile, the Nasdaq 100 plummeted 3.87%, re-entering into bear market territory and setting a new 2022 low amid widespread tech weakness.

There was no specific trigger for the rout, other than growing fears that the US economy is headed for a downturn on the assumption that the Fed’s aggressive tightening cycle in response to soaring inflation will strangle growth and undermine corporate profits in the future. Risk aversion was evident in the bond market, with Treasury prices higher across the board.

Asian stocks indices were mostly falling too. Japan’s Nikkei shed 1.25% whilst Hong Kong’s Hang Seng rebounded to trade in positive territory, up 0.5%.

The Shanghai Composite, meanwhile, rallied by more than 2%.

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