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Ahead of US inflation numbers on Thursday, markets were relatively upbeat with a good showing on Wall Street last night which spilled over into a positive sentiment among investors in European stocks, said AJ Bell investment director Russ Mould. 

“It helped that a speech by Federal Reserve chair Jerome Powell yesterday didn’t contain any shocks which would cause investors to worry about markets even more,” he said.

The FTSE 100 closed 34.38 points higher at 7,728.87, driven by strength in miners and banks and despite a big sell-off in the insurance sector following a profit warning from Direct Line (see below), down 54.05p (23.26%) to 178.45p which then spooked investors in Admiral.

JD Sports finished 9.65p (6.85%) higher at 150.5p on the back of an upbeat trading statement (see below) which helped drive renewed interest in the retail sector and extended a trend that gathered pace last week when Next said it had experienced a good Christmas.

Next and B&M enjoyed share price gains, while investors bid up shares in mid-caps Currys, Marks & Spencer and ASOS.

Newspaper publisher Reach nosedived 28.35p (25.91%) to 81p after experiencing a big downturn in advertising.

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JD Sports

JD Sports shares closed 9.65p (6.85%) higher at 150.5p after the leisurewear group said it expected annual profits to be at the top end of expectations. Revenues grew by more than a fifth over the Christmas period.

It posted total revenue growth for the 22 weeks to 31 December of more than 10%, compared with growth of 5% for the first half.

The performance in these businesses through the Christmas period, both in stores and online, was “particularly impressive”, it said, with total revenue growth over the six-week period to 31 December 2022 of more than 20%.

Zainab Atiyyah, retail sector analyst at Third Bridge, says: “Expect JD Sports margins to remain under pressure for some time as customers forgo discretionary purchases and trade down, more promotional activities are required.”

“This is a massive opportunity for JD Sports to leverage their own brands and build their value proposition.”

“Average selling prices across the sector look set to increase in 2023 in response to higher input costs and consumers expecting to pay more.”

“Management at JD Sports will be closely watching how Adidas and Nike are growing their direct-to-consumer channels.”

“Our experts are watching the Frasers Group as they rapidly improve their multi-channel presence. Flannels and Sports Direct are also important competitors for the JD portfolio.”

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Sainsbury’s

Christmas and Q3 grocery volume performance at the supermarket group was ahead of the market for the third consecutive year.

General Merchandise growth was stronger than expected, reflecting market share gains.

Profits are expected to be towards upper end of guidance range £630m to £690m.

John Moore, senior investment manager at RBC Brewin Dolphin, says: “Sainsbury’s traded strongly during the key Christmas period, with profits expected to be at the upper end of guidance – despite the supermarket being among the least favoured FTSE 100 companies among analysts.

“Notable within the results is that grocery sales are 19% above pre-pandemic levels and Argos has helped add sales, and no doubt footfall, in the more integrated click-and-collect model the company has adopted. However, the backdrop for consumers is expected to darken in 2023, and there are several hints at this in today’s statement.

“That said, Sainsbury’s is reasonably well placed in terms of the balance of its business offering and still has levers to pull in property – which could be sold and leased back – and further cost and efficiency savings, giving it the opportunity to keep pace with competitors and reinvest in product pricing.”

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Barratt

The house builder said the first half of the financial year has seen a marked slowdown in the UK housing market, but said the business remains “fundamentally strong, both operationally and financially”. 

Full story here

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Reach

Shares in newspaper group Reach plunged 28.35p (25.91%) to 81p after it said it was targeting further savings of at least £30m to help mitigate the impact of macro pressures, and warned on profits.

Full story here

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Direct Line

Insurer Direct Line said it was cancelling its final dividend for 2022 after it took a hit from claims related to severe cold weather and increases in motor inflation.

It currently expects total weather claims of around £140m for 2022, versus its previous expectations of £73m.

Chief executive Penny James said the board no longer expects to declare a final dividend for 2022.

“The board recognises the importance of the dividend to our shareholders, and continues to take actions to restore balance sheet resilience and dividend capacity as a priority, consistent with our track record of delivering returns for shareholders,” she said.

“Despite the impact of these external factors, we continue to make good progress, including enhancing our technological capabilities, introducing new products and improving our efficiency. We have taken actions to respond swiftly to further inflation in motor claims and will continue to navigate market volatility as it arises.”

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Eserv

An Aberdeen-headquartered industrial technology and software specialist has secured funding to ramp up its international growth.

Eserv has sealed the deal, for an undisclosed sum, with Vespa Capital. It will also allow the firm to expand the capabilities of its 3D digital technology, AS-TEG.

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Global markets

Comments by a Federal Reserve official, who suggested a soft-landing for the US economy is possible, helped calm sentiment.

Also, Fed Chair Jerome Powell used a bankers’ conference in Stockholm on Tuesday to focus on the importance of central bank independence rather than give more clues about monetary policy.

In New York on Tuesday, the Dow Jones Industrial Average rose by 0.6%, the S&P 500 by 0.7% and the Nasdaq Composite by 1.0%.