Market report

Primark margin shaved | HSBC | Taylor Wimpey

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5.30pm: London stays ahead

The FTSE 100 managed to remain in positive territory with investors pursuing a spot of bargain hunting helped by a good showing from Taylor Wimpey which initially lifted the housebuilding sector.

But it was the warning from Associated British Food’s that even at Primark’s prices would have to rise that really set the day’s tone, says Danni Hewson, AJ Bell financial analyst. Its shares spent the day nestled at the bottom of the pile along with numerous other retailers and consumer facing businesses.

“Value will be vital over the next months and the shopper is notoriously savvy,” she said. “Consumers will put off buying things they don’t need if the price isn’t right or if budgets don’t stretch. Price too high and people won’t buy, price too low and profits will be the victim.”

The FTSE 100 closed 5.65 points higher at 7,386.19.


7am: Primark margin lower

Primark

Primark is expected to raise prices as it sees a greater reduction in second half operating margin than previously expected.

It still anticipates adjusted operating profit in the second half will be ahead of the same period last year.

The business has seen an improvement in like-for-like sales and selling space at the end of this financial year will be 10% ahead of the selling space at the end of the 2019 financial year.

Total sales in the second half are anticipated to be ahead of the second half of the 2019 financial year, which was pre-COVID.


7am: National Express

National Express said it continues to believe that its proposed combination with Stagecoach, with at least £45 million of run-rate synergies, represents a superior value creation opportunity to the DWS offer.

Ignacio Garat, group chief executive, said he believes the company will benefit from the cost of living squeeze as travellers seek out low cost bus services.

Full story here


7am: Heathrow remains lossmaking

Heathrow will remain loss making in 2022 as COVID losses top £4 billion, said the company behind Britain’s biggest airport.

Despite increased outbound demand, Heathrow is not forecasting a return to profit and dividends this year.

Full story here


7am: Taylor Wimpey positive

Taylor Wimpey said the UK housing market remains healthy, underpinned by continued strong customer demand, low interest rates and good mortgage availability.

It said the recent increase in interest rates, from 0.5% to 0.75%, has not impacted customer appetite and the mortgage market remains competitive, with good availability of low-cost fixed rate mortgage products.

Net private sales rate for the year to 17 April 2022 was strong and it continues to see healthy levels of house price growth reflecting the strength of the market, that are offsetting labour and material cost inflation.

As at 17 April 2022, the company’s total order book value stood at approximately £2,972 million (2021 equivalent period: £2,808 million). This represents 10,957 homes (2021 equivalent period: 10,995 homes), excluding legal completions to date.

“Our focus remains on delivering our operating profit margin target of 21-22% and we expect to see further progress towards this in 2022,” said the company.

Jennie Daly takes over as CEO at today’s AGM, succeeding Pete Redfern who retires after 21 years with the company.


6am: HSBC profits fall

HSBC said first-quarter profits fell nearly 30% owing to higher-than-expected credit losses and inflation but the Asia-focused lending giant remained upbeat about its outlook.

The bank posted pre-tax profits of $4.2 billion for the three months ending 31 March, down 28% on-year, but beating estimates. Revenue declined 4% to $12.5 billion.

“The repercussions from the Russia-Ukraine war, alongside the economic impacts that continue to result from Covid-19, have pushed up the prices of a broad range of commodities, with the resulting increase in inflation creating further challenges for monetary authorities and our customers,” the bank said.


Global markets

The FTSE 100 was expected to open 75 points higher, offsetting a slice of the 141 points lost yesterday.

While Wall Street started on the back foot, Nasdaq led a recovery, finishing 1.3% higher, with the Dow Jones closing up 0.7% and the S&P 500 up 0.6%.

“Tech shares rallied strongly ahead on optimism over upcoming earnings numbers, starting later today with the release of Microsoft’s Q3 numbers and Alphabet’s Q1 numbers,” said market analyst Michael Hewson at CMC Markets.

Elon Musk’s agreed takeover of Twitter seemed to help the mood, with the social media group’s board happy to back to his $44bn bid.

Crude oil futures in Asian trading hours were edging higher after the week-long retreat on economic concerns and ongoing lockdowns in China reducing fuel demand in Asia’s largest economy.  

Front-month June ICE Brent futures were trading at $103.56/barrel (0600 GMT), compared to Monday’s settle of $102.32bn.

Last week’s warning from the IMF that the ongoing war in Ukraine would stall global demand growth continues to ripple through the market, with Brent prices down almost 10% since the report was released last Tuesday.



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