Market report

Aviva ‘well positioned’ | Mitchells & Butlers back in profit


5pm: London slides on inflation surge

London stocks closed lower on the back of UK inflation hitting a 40-year high in April of 9%.

After a steady start the FTSE 100 ended the session down 80.26 points 1.07% at 7,438.09, and the FTSE 250 was off 0.58%.

Sterling was also in the red, last trading 0.83% lower on the dollar at $1.2389, and slipping 0.25% against the euro to €1.1811.

On the stock exchange, Burberry eked out a gain of 0.03% after the luxury brand posted a rise in full-year profits and revenues, but said its full-year outlook hinged on how fast China bounced back from Covid-19 lockdowns.

Insurer Aviva was 2.06% higher after it reaffirmed annual guidance and reported an increase in general insurance sales to their best level in a decade.

AJ Bell investment director Russ Mould says “Insurer Aviva, which has been busily slimming down under chief executive Amanda Blanc, helped demonstrate its credentials as a honed corporate animal with strong first quarter trading including the best first quarter general insurance sales in a decade.

“For Blanc, who has made an impressive start to her leadership of the business, the low hanging fruit has now been picked and the underperforming operations sold off. She needs to work out how to maintain the momentum behind the business.”

7am: Aviva rises

Insurance and pensions group Aviva said it was on track to hit its targets following positive first quarter trading.

UK&I Life sales were up 2% to £8.4bn (Q121: £8.3bn) with growth in Annuities & Equity Release and Protection & Health partly offset by Wealth.

General Insurance gross written premiums (GWP) were up 5% in Q1 to £2.1bn, another record. UK&I GI GWP were up 3% to £1,347m and Canadian GI GWP rose 10% to £753m.

Chief executive Amanda Blanc said: “First quarter trading was positive.. we delivered healthy sales numbers across all our major business lines, with UK customer numbers up by over 100,000 in the last year to 15.4m, increasing our confidence that we can transform Aviva’s performance and grow.

“UK & Ireland Life sales are up 2%, and net flows into our Wealth business remained strong at £2.7 billion, despite market volatility. Our Advisor platform is now the number one in the market for net flows, and in Annuities and Equity Release we saw increased bulk purchase annuities volumes, written with good returns.

“We have also continued our momentum in General Insurance where we had our best first quarter sales in a decade, as more people were attracted to the strength of the Aviva brand and the quality of our products. Total General Insurance sales were up 5% to over £2 billion, driven by strong sales in commercial lines in both the UK and Canada.

“We remain very well positioned to benefit from the long term growth trends in our markets, and to meet our upgraded financial targets. This is underpinned by our strong capital position which benefits from rising interest rates. Our financial strength and market leadership give us confidence that we can successfully navigate the current uncertain economic conditions.”

7am: Mitchells & Butlers encouraged

Pubs chain Mitchells & Butlers posted profit before tax of £57m for the half year to 9 April against a £200m loss last time. Total revenue came in a £1.16bn (HY 2021 £219m). The operating profit was £121m (HY 2021 £132m loss).

Phil Urban, chief executive of the group, which includes the Horseshoe in central Glasgow and Sheep’s Heid in Duddingston, said: “We are encouraged by the improvement in sales trajectory through the first half of the year, having made progress in each of our markets, with our food-led businesses continuing to lead the way.

“The trading environment remains difficult.  Cost headwinds present a significant challenge to the industry, particularly those costs related to utilities, wages and food. In light of this, our teams have refocused their efforts on driving further efficiency and productivity gains through our Ignite programme. 

“In parallel, we are pushing forward with our capital investment plan which we are pleased to see delivering strong sales uplifts.

“The fundamental strengths of the business remain, and we are well positioned to continue on our trajectory of recovery following the pandemic.”

7am: Burberry

Fashion chain Burberry posted a rise in full-year profit but cautioned that its outlook for future trading is dependent on the rate of the recovery in its key Chinese market.

Adjusted operating profit was ahead of guidance, up 38% to £523m in the year to 2 April.

7am: Inflation soars

Inflation soared to a 40-year high of 9% in April as millions of households were hit by soaring energy bills.

Full story here

Global markets

Wall Street stocks closed sharply higher as investors responded positively last months’s retail sales data showing that Americans continued splashing out much more than expected.

At the close, the Dow Jones Industrial Average was up over 400 points or 1.34%, while the S&P 500 was 2.02% firmer and the Nasdaq Composite enjoyed a welcome resurgence, up 2.76%.

The upward surge followed Federal Reserve Chair Jerome Powell pledging to keep raising interest rates until inflation starts “coming down.”

Ten out of eleven sectors in the S&P 500 posted gains, as technology stocks and financials led the charge.

Markets initially moved higher amid a solid retail sales report and news that China could soon be taking steps to ease lockdowns in cities such as Shanghai, with optimism about reopening helping boost prospects for global economic activity.

The FTSE 100 index closed 53.55 points (0.7%) higher at 7,518.35 on hopes that China would ease its pandemic-related curbs, although strength in the pound following an upbeat employment report capped gains for the export-oriented benchmark index.

The pound was quoted at $1.2465 from $1.2250 at the London equities close on Monday. The pound reached an intraday high of $1.2498, its best level in roughly two weeks.

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