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FTSE 100 Live: US inflation hits 7%, JD Sports, Dunelm and Sainsbury’s upgrade profits

·19-min read
 (ESI)
(ESI)

JD Sports Fashion, Dunelm and Sainsbury’s today followed Next by upgrading their profit guidance in the wake of Christmas trading.

Despite supply chain pressures over the festive period, JD said it produced an “extremely robust” performance and supermarket Sainsbury's reported that it grew market share. Homewares business Dunelm enjoyed a record second quarter, meaning profits for the financial year will be materially ahead of City expectations.

Their updates follow last week's positive update from Next and come ahead of tomorrow's scheduled statements from Marks & Spencer, Halfords and Tesco.

FTSE 100 Live Wednesday

  • Festive cheer for UK retailers

  • FTSE 100 higher as miners rally

  • US inflation figures due later

FTSE 100 ends at pandemic-era high

16:52 , Oscar Williams-Grut

The FTSE 100 has closed at its highest level since the pandemic began. London’s topflight index has ended the day up 53 points, or 0.7%, at 7544. That’s a level not seen since December 2019 when Covid-19 was almost unheard of in London.

Stocks have been buoyed by hopes of fresh stimulus in China after inflation data there showed prices are not running completely out of control. Hopes of a shot in the arm for the economy buoyed miners, with Antofagasta ending the day at the top of the index with a gain of 7.3%.

Oil was also in favour as brent futures neared $85 a barrel. That helped BP add 3% to its share price.

House builders were in the losers column ahead of updates tomorrow. Taylor Wimpey, which has an update out first thing, was the biggest faller of the day, down 4.8%. FTSE 250 rival Vistry sunk 4% despite saying it was on track to more than double profits this year.

That’s all from us on the blog today — join us again tomorrow.

Omicron impact on UK economy ‘modest’

15:31 , Oscar Williams-Grut

Economists are felling more optimistic about Omicron’s impact on the UK economy.

Last month Sanjay Raja, Deutsche Bank’s chief UK economist, said the Omicron wave would tip GDP growth into reverse. He still believes that but thinks the risk of him being wrong is rising.

Today he says: “We have updated our suite of high frequency data coming into the new year. Bottom line: the impact of Omicron looks modest at most. Our ‘faster data’ show limited falls in activity with most indicators hovering well above levels seen last winter.”

Bank of America also thinks the impact will be “small.” In a note out today, the bank says: “Our proprietary UK consumer confidence indicator has fallen three points since late November showing a modest impact from Omicron.”

‘Hear no evil, see no evil, speak no evil'

15:04 , Oscar Williams-Grut

More reaction from the City to this afternoon’s US inflation print.

Hinesh Patel, portfolio manager at Quilter Investors, says: “While inflation was predominantly feeding through from the automotive, energy and pandemic-hit sectors, this is now moderating which makes the 7% figure all the more startling. Healthcare and housing/rental costs are likely to push higher and means it has now become stickier than first feared.

“We are at an historical moment for markets and developed economies. The current levels of inflation haven’t been seen for 40 years outside of emerging markets, and the historical comparisons highlight it could become tough going for markets. We have seen asset prices crumble at lesser points before so investors will need to watch data and markets ever closer and allocate their portfolio appropriately.

“The gains seen in the last few years are very unlikely to repeat themselves given where inflation is sat, and as such diversification, active management and prudency are the key tools for investors to use now.”

David Roberts, head of the Liontrust global fixed income team, says: “The Fed will raise rates, and the Fed will reduce its balance sheet.

“Powell talks about avoiding “damage” to the US economy. With consumer price rises running three and a half times faster than the Fed mandate, it is no longer about avoiding damage. Rather, it is now an exercise in damage limitation. How and to what extent the Fed choses to do that will determine absolute and relative asset price performance for the remainder of 2022 – too aggressive and the economy stalls taking growth and short bonds with it, too passive and asset bubbles keep building to the detriment of value and longer dated bonds, at least in the short term.

“Market reaction thus far? Nothing to see here....hear no evil, see no evil, speak no evil.”

Markets ‘dovish’ on US inflation

14:01 , Oscar Williams-Grut

Neil Wilson, chief analyst at Market.com, says: “US CPI rose in December by 7% year-over-year, the hottest in 40 years and in line with expectations. More pressingly, core month-on-month rose at a faster clip than expected, +0.6%, hinting there is no evidence of any meaningful cooling in inflation pressures.

“Many think the top is approaching but I just don’t buy it – the dynamics have changed unless the Fed goes bigger than it currently plans – 50bps hike in March would be a start.

“The absence of any upside surprise to the headline number left markets on a pretty even keel – NDX rose, the dollar declined – as investors seemed to lean on this not forcing the Fed into acting swifter/harder than is currently expected. Net reaction is dovish: yields lower with dollar, tech and Bitcoin are bid.”

US inflation hits 40-year high

13:41 , Simon Freeman

Annual inflation in the US has spiked to an eyewatering 7% - the highest rate of price increases since ET was playing at the box office in 1982.

Consumer prices rose 0.5% in December, a shade above forecasts of 0.4%.

Food, cars and clothes saw rapid gains.

The leap does not reflect well on the Whitehouse or the Fed which held the line that inflation would be transitory until recently.

Economists expect January’s figure to come in even higher, driven by rents and property prices.

That the surge came in much as expected means it may have already been baked in to share prices when trading opens.

Expectations of an interest rates rise are unchanged, with a hike expected in March.

Dan Boardman-Weston, at BRI Wealth Management, said: “This reading will put further pressure on the Fed to start tightening policy and the narrative around four rate rises this year is likely to be strengthened.

"Inflation will start falling from May/June as energy prices start to have weaker impact on the overall level of inflation.

"The economy is in a strong position at the moment and it should be able to cope with four rate increases.

"Whether the market will take tighter policy in its stride is another matter but our expectation is that the monetary policy induced volatility will abate and that the strength of the economy will positively impact markets.”

Pret bumps up staff pay

13:09 , Oscar Williams-Grut

Pret is raising wages for its staff as hospitality and retail firms battle to hang on to employees and attract new workers.

The sandwich and coffee chain told staff on Tuesday that 8,000 servers will get a pay increase from £9.40 to up to £10.15 per hour from April. 85% of staff will earn at least £10 an hour after the changes.

The mystery shopper bonus — a weekly perk paid to 80% of staff for good customer service — will rise by 25% to £1.25 per hour.

The move will cost Pret £9.2 million and marks the company’s biggest one-off investment in pay and benefits in its 36-year-history.

CEO Pano Christou said: “We’ve said all along that as our business recovered, we wanted to invest back into our people. Today, as we move into a new phase of our transformation strategy, I’m really pleased we’re in a position to do exactly that.

“After a difficult couple of years, it gives me so much joy to be able to give our hard-working Shop Teams this news. Crucially, when you combine our hourly pay, our 50% staff discount, and the Pret Mystery Shopper bonus, we’re proud to be one of the best employers in our industry.”

Read the full story.

Savills soars on upgrade

12:16 , Oscar Williams-Grut

Savills has said its profits are set to be "very significantly ahead of the upper end of its previous range of expectations" after an "extraordinarily strong" end to the year.

The property agent was buoyed by demand for warehouses and logistics space at the end of 2021 and says demand for Prime Residential London property is "clearly” improving. A reduction in discretionary spending on things like travel also helped.

Shares have shot to the top of the FTSE 250, up 98p — or 7.4% — at 1418p.

11:55 , Simon Freeman

Premier Inn owner Whitbread will raise room rates to counter sector inflation of up to 8% as the hospitality industry confronts staff shortages and supply chain snags amid lingering fallout from the pandemic.

Around £1.4 billion of the FTSE 100 group’s cost base — from wages and power bills to food — is vulnerable to looming price hikes but the firm hopes to largely offset those costs through higher prices, efficiency savings and estate growth.

Around 10% of its 30,000 employees are currently off work in the latest sign of the staffing crisis still being caused by the pandemic.

More details here

Vistry on track to double profits

11:45 , Oscar Williams-Grut

Vistry — which was formed through the merger of Bovis Homes and parts of Galliford Try in early 2020 — said it was on track to more than double profits this year thanks to Britain’s property boom. Pre-tax profits are set to be £345 million, up from £143.9 million a year earlier.

The business put the jump down to an increase in completions and sales, as well as soaring house prices. Vistry’s average purchase price rose by 6% in a year.\

Vistry “expects to deliver a significant step up in profits and returns” this year, the company said, flagging the possibility of share buybacks or a special dividend. It promised an update on the impact of the cladding remediation plans on its bottom line once full details were given by the government.

Shares dipped 10.5p, or 0.9%, to 1152.5p.

Read more, including CEO Greg Fitzgerald’s thoughts on the government’s new cladding proposals, here.

Company getaways spawn a unicorn

11:44 , Simon Freeman

Travelperk has raised $115 million in a new funding round which values the business trip start-up at $1.3 billion.

General Catalyst and previous backer Kinnevik led the Series D round which takes the total amount raised by the London-based company to $409 million in six years.

Gillian Tans, former CEO of Booking.com, and GC’s Joel Cutler will join the board.

Travelperk, which manages flights, hotels and car rental for corporates, has seen revenue exceed pre-pandemic levels as business travel bounces back.

CEO Avi Meir said reaching unicorn status was “both a dream and a milestone”.

Record quarter — and year — for page group

11:27 , Oscar Williams-Grut

Page Group has become the second recruiter in as many days to report record performance, with profits surging in the final quarter of 2021.

Gross profits jumped by 55% to £246.8 million in the fourth quarter, with record-breaking performance in 17 countries. That helped Page Group post a record quarter as a whole and pushed it to a record year.

CEO Steve Ingham said: "Productivity is at record levels, up 25% on Q4 2019. This is driven by improved trading conditions, a shorter time to hire facilitated by video interviewing, investments in new systems, wage inflation and improvements in fee rates as a result of the high demand and short supply of candidates.”

Shares rose 5.5p, or 0.9%, to 639.5p.

Read more.

Miners lead FTSE 100 higher

10:37 , Graeme Evans

The jitters of recent sessions were put to one side today as hopes of extra support for China's economy ensured mining giants powered the FTSE 100 index higher.

BHP shares added 3.5% and Glencore traded near to its highest level in four years as lower-than-expected inflation figures for December raised hopes that Beijing will have room for further monetary policy stimulus.

The sight of iron ore prices at their highest level since mid-October also enabled Rio Tinto shares to improve 3% or 145p to 5446p, while the commodity sector lift-off extended to BP and Royal Dutch Shell as their shares gained almost 2%.

The progress meant the FTSE 100 index returned to its highest level since early February 2020, with a gain of 57.23 points to 7548.52.

The return of risk appetite extended to the tech sector after yesterday's reassuring comments from US Federal Reserve chairman Jerome Powell on the fight against inflation.

Scottish Mortgage Investment Trust rose sharply for a second successive session and investors dumped more defensive stocks to leave Severn Trent and Croda International both 1% cheaper.

The FTSE 250 index rose 70.30 points to 23,098.17, with AI cyber security business Darktrace up another 5% or 19.2p to 441.2p after yesterday's positive trading update.

Trustpilot also improved 4% or 11p to 289.8p as the consumer review platform reported 2021 revenues ahead of expectations at $131 million (£96.3 million), representing growth of 24% at constant currency terms. Peel Hunt has a price target of 470p, with its focus now on the potential for upgrades alongside annual results.

Among FTSE 250 fallers, road infrastructure business Hill & Smith dropped 22p to 1722p as the Government paused the building of new smart motorways until more safety data is available.

Frontier Developments, whose best-selling video game titles include Planet Zoo and Jurassic World Evolution, skidded 25% on AIM despite reporting a 33% rise in half-year revenues and its best ever December sales performance.

The sell-off came amid disappointment that it is pushing the release of Warhammer Age of Sigmar into the 2024 financial year, a move it said will ensure game quality. The resulting cut to 2023 expectations meant shares fell 436p to 1336p, although analysts at Liberum remain supportive with a price target of 2700p.

Christmas cheer for the High Street as Brits splashed out

09:40 , Simon English

THERE was an injection of Christmas hope for the high street today when three top retailers reported strong results as pandemic-weary Brits treated themselves over the festive season.

Sainsbury’s bumped up profit forecasts for the year by fully £60 million to £720 million as working from home increased eating from home, with customers splashing out on high end party food and champagne.

read more here

Portmeirion weathers supply chain storm

09:30 , Graeme Evans

Portmeirion, whose homeware brands include Spode, Royal Worcester and Pimpernel, has raised its guidance for annual profits to at least £7 million after an “excellent” Christmas period.

The upgrade came despite global supply chain disruption meaning a later than usual start to the festive trading period. The season finished very strongly, however, particularly in the US market.

The 9% increase on current City profit forecasts is based on expectations for 2021 sales of at least £104 million, some 12% ahead of the pre-Covid level in 2019.

Chief executive Mike Raybould said: “Each of our core markets of the UK, US and South Korea have grown well in 2021.” Portmeirion's AIM-listed shares rose 9% or 55p to 675p.

Panmure Gordon today lifted its price target from 920p to 1020p and said solid supply chain management ensured that Portmeirion was not only able to meet strong demand but also take market share from competitors.

Analyst Sanjay Jha added: “This outperformance can only be described as blowout execution against every imaginable supply chain disruption.”

Retail shares rally, mining stocks higher

08:29 , Graeme Evans

Shares in Sainsbury's and JD Sports Fashion are up 3% and 2% respectively after their strong Christmas trading updates.

China's lower-than-expected inflation figure and yesterday's reassuring comments from Federal Reserve chairman Jerome Powell also benefited mining stocks as the FTSE 100 index lifted 0.5% to 7528, its highest level since February 2020.

BHP and Antofagasta rose 1.5% and BP is up by more than 1%.

It was a similar story in the FTSE 250 index, which climbed 0.6% or 136.76 points to 23,164.94. Dunelm led the way with a jump of 7% or 103p to 1443p, while there was a further momentum for Darktrace as shares added another 20p to 442p.

Dunelm upgrades profits guidance

08:12 , Graeme Evans

Dunelm continues to be one of UK retail's strongest performers, with total sales of £407 million for the quarter to 25 December being 13% higher than a year earlier and 26% stronger than two years ago.

Digital sales are double the same period prior to the pandemic, but store sales have also been “particularly encouraging”.

Dunelm added: “Growth was broad based, across nearly all our product categories, with a very strong performance in furniture reflecting better availability and extended ranges. With our stores fully open, our seasonal ranges also performed well.”

Given the strong performance, it now expects profits for the first half of its financial year to be approximately £140 million, up from £112 million last time and £84 million in 2020.

As long as there’s no significant Covid-related disruption, the company said full-year profits “will now be materially ahead of market expectations”.

Retailers upbeat on a busy morning

08:01 , Oscar Williams-Grut

It’s a busy morning for corporate updates today. Most of the companies putting out trading updates have been upbeat about Christmas, particularly among businesses in the retail sector. Here’s a selection of early headlines:

— Sainsbury’s has bumped up profit forecasts for the year by £60 million to £720 million after reporting grocery sales up 6.6% compared to the same period two years ago over Christmas. They are down 1.1% on a year ago when consumers had much less choice about where to shop due to Covid restrictions.

JD Sports has upgraded profit forecasts after a strong Christmas. Annual profits are now expected to be at least £875 million, ahead of current market expectations averaging £810 million.

— Dunelm has flagged bumper Christmas and improving margins. The homewear retailer says online sales are now double pre-Covid levels and it is investing in new digital partnership to double down on the trend.— Vistry — the house builder formed by the merger of Bovis and Galliford Try — is on track to more than double profits this year as Covid disruption fades and after a property market boom in 2021. CEO Greg Fitzgerald hails “excellent year” for the house builder, with “no significant impact from Covid-related absence to date”. It “expects to deliver a significant step up in profits and returns in FY22.”

— Irish homebuilder Cairns has “significantly upgraded” guidance for the year and launches €75 million buyback after “strongest ever” six months.— Building materials group Grafton says it’s on track to make record profits ahead of market forecasts as inflation leads to bumper sales. Revenue up around 25% to £2.1 billion.

— A day after rival Robert Walters said the same, recruiter Page Group says it has had a record trading period, with gross profits up 55% in the fourth quarter. Its CEO Steve Ingham says: “This is driven by improved trading conditions, a shorter time to hire facilitated by video interviewing, investments in new systems, wage inflation and improvements in fee rates as a result of the high demand and short supply of candidates.” Full year profit forecasts have been upgraded.

— Savills profits set to be “very significantly ahead of the upper end of its previous range of expectations” after an “extraordinarily strong” end to the year. The property agent has been buoyed by demand for warehouses and logistics space. It says demand for Prime Residential London property is “clearly coming back.”— Vimto maker Nichols has warned that the shrinking value of the out-and-about drinks market means it will take an accounting hit in its next set of annual results. Nichols is set to take a goodwill write-down, as “out of the home” drinks sales remain a third lower than they were pre-pandemic.

— Sir Martin Sorrell’s S4 Capital has struck its first deal of 2022 after averaging one a month last year. Operating company Media.Monks is merging with California’s 4 Mile Analytics. Exact terms aren’t disclosed, as usual. S4 says trading remains strong, with businesses continuing to grow faster than the wider market.

— Topps Tiles says higher shipping costs are squeezing its margins and staff absences due to Omicron are biting. Despite that, it leaves forecasts unchanged.

— DFS says forecasts remain unchanged after good Christmas.

Sainsbury profits jump on Xmas cheer

07:37 , Simon English

Sainsbury today celebrated a strong Christmas, as customers treated themselves to party food and champagne.

Online sales doubled compared to pre-pandemic two years ago and clothing sales were up 38% on the same basis in the 16 weeks to January 8.

That allows the grocer to bump up profit forecasts for the year by £60 million to £720 million.

The shares should jump when trading opens at 8am.

CEO Simon Roberts said: “I am really pleased with how we delivered for customers this Christmas. More people ate at home and our significant investment in value, innovation and service led to market share growth.”

He added: “The backdrop was challenging.”

Read more here

US inflation figure set to reach 7%

07:34 , Graeme Evans

Inflation figures are today set to show a jump in December's US consumer prices index to 7%, up from the 39-year record of 6.8% set the previous month.

A rate sharply higher than 7% is likely to re-ignite Wall Street jitters over the outlook for earlier-than-expected hikes in interest rates.

Federal Reserve chairman Jerome Powell yesterday told the Senate banking committee that the central bank will “use our tools to get inflation back”, but admitted that price pressures will last well into the middle of this year.

Wall Street currently expects the Federal Reserve to start hiking interest rates from March, with as many as four increases forecast for 2022.

But there was some reassurance in Powell's testimony that it may take a while yet for policymakers to consider the right approach to reducing the Fed's balance sheet.

This helped calm markets ahead of today's inflation figure as the tech-heavy Nasdaq climbed 1.4% and the S&P 500 lifted 0.9%, breaking a sequence of five consecutive declines.

There was further encouragement when China's inflation rate fell to 1.5% in December, from the 15-month high of 2.3% the previous month.

European markets look set to open higher as a result, with yesterday's 46 points rise for the FTSE 100 index likely to be followed by a further gain of 44 points to 7535.

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