Market report

Inflation rises | Royal Mail ‘needs flexibility’ | Netflix gains


5pm: London dips at close

The FTSE 100 opened higher this morning but drifted below the water line to close 341.97 points lower at 7,264.31.

Baillie Gifford’s Scottish Mortgage Investment Trust ended the best performer, up 4.8%, tracking a rise in high-profile US technology stocks in which it invests.

Accountancy software company Sage Group was 2.2% higher after Citigroup raised it to ‘neutral’ from ‘sell’.

Online grocer Ocado Group clawed back some recent losses to close 2.7% higher.

On Wall Street, Netflix was up 3.3% after the streaming services provider posted a rise in second-quarter earnings, hailing the success of smash hit ‘Stranger Things’, and the loss of fewer subscribers than anticipated.

It said 970,000 global paid users unsubscribed in the second quarter, having shed 200,000 in the first quarter. However, this was better than the 2 million loss it had originally guided for.

7.10am: Inflation rises

Inflation in June jumped to 9.4%, its highest level since February 1982, from 9.1% in May. Food inflation is running at 9.8%.

Grant Fitzner, chief economist at the ONS, said: ‘The increase was driven by rising fuel and food prices, these were only slightly offset by falling second-hand car prices.

“The cost of both raw materials and goods leaving factories continued to rise, driven by higher metal and food prices respectively.

“These increases saw raw materials post their highest annual increase on record, with manufactured goods at a 45-year high.”

Chancellor Nadhim Zahawi said: “Countries around the world are battling higher prices and I know how difficult that is for people right here in the UK, so we are working alongside the Bank of England to bear down on inflation.”

Anna Leach, CBI deputy chief economist, said: “This data underscores the need to give people more control over their energy bills: through speeding up planning decisions for electricity infrastructure and creating a national effort to help households better insulate their homes.”

Helen Dickinson, chief executive of the British Retail Consortium, said: “In the face of rising pressures in supply chains and operations, retailers are doing all they can to absorb as much of these costs as possible and look for efficiencies in their businesses.

“Retailers are expanding their value ranges to offer the widest variety of goods to those most in need, providing discounts to vulnerable groups, and raising staff pay. Until inflation is brought to heel however, it will be a difficult road ahead for households and businesses in the UK.”

See also: Bank governor warns of half-point interest rate rise

7am: Royal Mail

Royal Mail said revenue fell 11.5% year on year in the first quarter, reflecting a slowdown in parcel and Covid test kit deliveries.

As the company faces industrial action it said it made an adjusted operating loss of £92 million, “reflecting inflexibility in the cost base to adjust to lower volumes and disappointing performance on delivery of further efficiencies”.

The company emphasised the need “to act now to make the most of our new infrastructure, find more flexible ways of matching resource to workload and ensure we have a more agile and sustainable relationship with the CWU.”

It said it is now “moving ahead with actions where we do not need further union agreement, notably revisions and Scan-in Scan-out (SISO) in Delivery.”

The outlook for FY 2022-23 is a weaker parcels market and lower than anticipated efficiency savings in-year.

“Provided progress can be made on above actions, now likely to be around breakeven at adjusted operating profit level, excluding any impact from industrial action.”

The holding company will be renamed  International Distributions Services to reflect the group structure of two separate companies (Royal Mail and GLS).

7am: Artisanal Spirits Company

The Artisanal Spirits Company, the owner of The Scotch Malt Whisky Society,  said sales were up by c.25% to almost £10m in the half year to the end of June (H1 2021: £7.9m), including a stand-out performance in China with revenue up by over 50%.

Full story here

Global markets

Streaming service Netflix was the standout performer on Wall Street with the shares up 8% after hours despite losing 970,000 subscribers in the third quarter.

However, this was regarded as a win as analysts had forecast 2m departures. Earnings beat predictions while revenues rose 9% year-on-year to $8bn.

For this quarter, Netflix guided to revenues of $7.84bn up 5% from this time a year ago but lower quarter-on-quarter.

The figures, along with forecast-beating numbers from Halliburton and Hasbro, helped Wall Street stocks close in positive territory.

At the close, the Dow Jones Industrial Average was up 2.43%, the S&P 500 added 2.76% and the Nasdaq Composite jumped 3.11%.

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