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London open: Stocks in the black; Bunzl surges on profit upgrade
London stocks rose in early trade on Tuesday as traders returned to their desks after the long weekend.
At 0845 BST, the FTSE 100 was up 0.6% at 8,375.28.
Richard Hunter, head of markets at Interactive Investor, said: “After an extended Bank Holiday weekend, UK markets opened briskly with the premier index registering some early strength.
“The fresh round of conflicts in the Middle East had lifted the oil price over the weekend, which fed through to gains for BP and Shell, while the buying interest spilled over to commodities, lifting mining stocks such as Anglo American and Rio Tinto.”
Oil prices jumped following strikes over the weekend between Israel and Hezbollah and on news that Libya was set to pause production.
Investors were also mulling the latest retail industry data, which showed that shop prices in August experienced deflation for the first time since October 2021, with a decrease of 0.3%.
That marked a significant shift from the prior month’s slight inflation of 0.2%.
The drop brought the annual growth rate to its lowest level in nearly three years, according to the latest BRC-NielsenIQ Shop Price Index.
Non-food items saw the most significant deflation, with prices falling by 1.5% in August – a further decline from the 0.9% drop in July.
That was the lowest inflation rate in the non-food sector since July 2021.
Food prices, while still experiencing inflation, showed a marked slowdown.
Overall food inflation decreased to 2% in August from 2.3% in July, reaching its lowest level since November 2021.
Fresh food prices, in particular, saw a notable decline in inflation, dropping to 1% in August, down from 1.4% in July, the lowest since October 2021.
Ambient food inflation also decelerated slightly, falling to 3.4% in August from 3.6% in July, marking its lowest rate since March 2022.
“Shop prices fell into deflation for the first time in nearly three years,” said Helen Dickinson, chief executive of the British Retail Consortium.
“This was driven by non-food deflation, with retailers discounting heavily to shift their summer stock, particularly for fashion and household goods.
“This discounting followed a difficult summer of trading caused by poor weather and the continued cost of living crunch impacting many families.”
Dickinson said food inflation eased with fresh food prices, especially fruit, meat and fish, seeing the biggest monthly decrease since December 2020 as supplier input costs lessened.
“Retailers will continue to work hard to keep prices down, and households will be happy to see that prices of some goods have fallen into deflation.
“The outlook for commodity prices remains uncertain due to the impact of climate change on harvests domestically and globally, as well as rising geopolitical tensions.
“As a result, we could see renewed inflationary pressures over the next year.”
In equity markets, Bunzl surged to the top of the FTSE 100 after it lifted its adjusted operating profit guidance for the full year and announced a £250m share buyback.
Ocado ticked higher as it said operations have finally started at two customer fulfilment centres in Australia a year later than planned, as part of its partnership with retail chain Coles.
Harbour Energy gained after saying it expects to complete the acquisition of the Wintershall Dea asset portfolio in early September, versus previous guidance of early in the fourth quarter.
On the downside, Primark owner AB Foods was under the cosh after downgrades to ‘sell’ at Deutsche Bank and Morningstar. DB cut its price target on the stock to 2,190p from 2,290p as it said the company’s profit recovery phase has come to an end.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Bunzl Plc | +8.34% | +268.00 | 3,482.00 |
| 2 |  |
Woodside Energy Group Ltd | +3.90% | +52.00 | 1,386.00 |
| 3 |  |
Banco Santander S.a. | +3.86% | +14.00 | 377.00 |
| 4 |  |
Smurfit Westrock Plc | +2.70% | +92.00 | 3,496.00 |
| 5 |  |
Anglo American Plc | +2.44% | +55.00 | 2,305.00 |
| 6 |  |
Carnival Plc | +2.25% | +25.00 | 1,135.50 |
| 7 |  |
Investec Plc | +2.12% | +12.00 | 577.50 |
| 8 |  |
Wheaton Precious Metals Corp. | +2.06% | +95.00 | 4,700.00 |
| 9 |  |
Rio Tinto Plc | +1.82% | +86.50 | 4,848.00 |
| 10 |  |
International Consolidated Airlines Group S.a. | +1.50% | +2.70 | 182.40 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Associated British Foods Plc | -2.67% | -67.00 | 2,447.00 |
| 2 |  |
Scottish Mortgage Investment Trust Plc | -2.36% | -20.40 | 842.80 |
| 3 |  |
Taylor Wimpey Plc | -1.69% | -2.80 | 163.05 |
| 4 |  |
Jd Sports Fashion Plc | -1.51% | -2.25 | 147.00 |
| 5 |  |
3i Group Plc | -1.31% | -42.00 | 3,169.00 |
| 6 |  |
Barclays Plc | -1.15% | -2.65 | 227.80 |
| 7 |  |
Rolls-royce Holdings Plc | -1.12% | -5.60 | 493.30 |
| 8 |  |
Intermediate Capital Group Plc | -1.10% | -24.00 | 2,148.00 |
| 9 |  |
Schroders Plc | -0.97% | -3.40 | 345.80 |
| 10 |  |
Next Plc | -0.93% | -95.00 | 10,120.00 |
US close: Dow sets new record but markets finish mixed
US stocks finished in mixed fashion on Monday, but that didn’t stop the Dow Jones Industrial Average setting a new all-time closing high as sentiment continues to be lifted by expectations of an imminent cut to interest rates.
The Dow finished the day just 0.2% higher at a fresh peak of 41,240.52, extending gains recorded in the previous session after comments from Federal Reserve chairman Jerome Powell at the central bank’s Jackson Hole economic symposium indicated he thought now might finally be the time to look at cutting benchmark interest rates.
While Powell did not say when the Fed would look to cut rates, or by how much, traders seem to be convinced that the central bank will make a move at its September policy meeting.
Nevertheless, the S&P 500 fell 0.3% to 5,616.84, but remains just inches away from its record high, while the Nasdaq dropped 0.9% to 17,725.76 as chip stocks and the wider tech sector weighed heavily on the index.
Stephen Innes, managing partner at SPI Asset Management, said the mixed performance of Wall Street’s three main benchmarks “actually backs up the broader market rotation thesis”. He said: “As the tech giants take a breather, small-caps have seized the moment, basking in their time in the spotlight. It’s a healthy sign that the market’s not just a one-trick pony, and there’s still plenty of opportunity across the board.”
In macro news on Monday, US durable goods orders surged by 9.9% in July, according to the Census Bureau, well ahead of expectations of a 5.5% rise and erasing June’s 6.9% decline. It also marked the biggest monthly increase since May 2020.
Elsewhere, the Dallas Federal Reserve’s manufacturing business index improved to -9.7 in August, up from -17.5 in July, marking the lowest contraction level since January 2023.
Chip stocks drop
The semiconductor sector was out of favour on Monday ahead of Nvidia‘s hotly anticipated earnings report later in the week. Nvidia itself fell 2.3% during the session, having gained 21% over the past three weeks alone, and 163% so far this year. Arm, Micron and AMD also dropped.
Other heavyweights in the tech sector such as Microsoft, Amazon, Meta Platforms, and Tesla all “decided to hit the snooze button on their recent rallies”, said SPI’s Innes. “The bulls aren’t resting easy just yet; there’s a lot of nervous pacing as they question how much fuel is left in the earnings tank and whether the Fed’s rate-cutting spree will be enough to keep the broader Magnificent 7 from crashing back down to Earth with a thud.”
One notable faller was PDD Holdings, as US-listed shares of the Chinese ecommerce giant tanked 29% on the back of a worse-than-expected second-quarter report.
Tuesday newspaper round-up: Barclays, Mike Lynch, IBM
Ministers have been urged to intervene to prevent businesses struggling with gas and electricity costs from going bust, as bills are forecast to be 70% higher next year than before the energy crisis. A typical small business such as a pub, restaurant or independent retailer is paying more than £5,000 extra a year on bills than before the energy crisis that began in 2021, research by the forecaster Cornwall Insight shared with the Guardian shows. – Guardian
Barclays has bulked up its half-year bonus pool for the first time in three years, raising bankers’ hopes of bigger annual payouts after the lender formally scrapped the EU bonus cap this month. The bank put £675m towards its bonus pool in the first six months of 2024, according to Barclays filings. That is up from the £665m put aside for its staff bonus pot, which is made up of cash and shares, over the same period in 2023. That bonus pool will continue to be built up until the end of the year, with staff able to be paid up to 10 times their salary now that the EU cap has been set aside. – Guardian
Mike Lynch’s family faces a £3bn fraud battle against the US tech giant Hewlett Packard Enterprise, with the company’s long-running claim against the tech tycoon set to pass to his estate. Legal experts said Hewlett Packard Enterprise’s long-running case against Mr Lynch and his former chief financial officer Sushovan Hussain was likely to be transferred to the administrators of his fortune. – Telegraph
IBM is closing two of its divisions in China, the latest retreat of an American tech company from the world’s second largest economy, amid mounting tensions between the two superpowers. The company is understood to be closing two business lines that specialise in research and development and testing, which will affect more than 1,000 employees. – The Times
The water sector faces a “material risk” that it will fail to raise the £7 billion of equity needed to overhaul the country’s infrastructure and clean up waterways under Ofwat’s investment plans, the industry has claimed. Water UK, the trade body that represents the sector, will warn Ofwat, the regulator for England and Wales, this week that the watchdog’s provisional decision to cut back companies’ five-year spending proposals and limit bill increases is likely to “result in significant investability issues for the sector as a whole”. – The Times
