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FTSE 100 Live: Retail sales lower despite Jubilee boost, Snap disappoints

·11-min read
 (Evening Standard)
(Evening Standard)

Retail sales volumes fell in June despite food buying for the Jubilee celebrations, official figures revealed today.

The fall of 0.1% was driven by weaker fuel sales as a record high for pump prices affected demand. The Office for National Statistics also downgraded May’s figure to 0.8% lower and said the proportion of sales online fell to its lowest level since March 2020.

Fears of an advertising spending slowdown sent shares in Facebook owner Meta Platforms and Twitter lower after Snapchat owner Snap reported weaker-than-expected second quarter results last night.

FTSE 100 Live Friday

  • Retail sales lower despite Jubilee food boost

  • PMI activity figures add to euro weakness

  • JD Sports Fashion on track to match profits record

  • Twitter shares slide after revenue drop

Nasdaq opens lower after disappointing earnings from social media giants

15:05 , Simon Hunt

The Nasdaq opened lower in New York today led by disappointing earnings figures from social media giants Twitter and Snap as they wrestle with dwindling revenues from a soft online advertising market.

The Dow Jones opened higher, led by a 5% climb in credit card company American Express, after it posted upbeat second-quarter earnings with revenues of $13.4 billion topping analyst expectations by almost $1 billion.

The dollar and the euro made gains against the Russian ruble after the Russian Central Bank unexpectedly lowered interest rates by 150 basis points to 8%. Interests rates in Russia were raised to as high as 20% in February to mitigate against the economic fallout from Russia’s invasion of Ukraine.

Twitter shares slide after revenue drop

13:35 , Simon Hunt

Twitter shares fell 2.8% in premarket trading after the social media firm reported an unexpected drop in revenue, amid a weakening sales from advertising.

The company posted second quarter sales of $1.18 billion, significantly below the $1.32 billion analysts had expected, according to Refinitic data.

The firm is the latest social media business to feel the effects of a slowdown in the advertising market. Yesterday, Snap shares plummeted 25% last night after the social media firm missed revenue expectations and warned it faces “incredibly challenging” conditions.

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Watchdog tells six high street banks to tighten up after breaking rules on customer information

13:18 , Simon Hunt

Metro Bank, Lloyds and NatWest are among six high street banks have broken rules about the way they provide information to customers prompting action from the Competition and Markets Authority.

The problems range from overcharging for overdrafts at Metro Bank to failure to keep up-to-date records about closed branches and cashpoints at NatWest. Lloyds had out-of-date information on part of its website about interest rates on overdrafts and also published incorrect service quality rankings. Metro Bank has pledged to refund the customers affected.

The CMA said all six were making changes to their operations to comply with the rules, which were set out under the an order it made in 2017.

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Watchdog gives go-ahead to BT and Discovery merging sports businesses

13:02 , Simon Hunt

BT and US entertainment giant Warner Bros Discovery got the go-ahead from the UK’s competition watchdog today for the merger of two of their sports businesses.

The two firms agreed a £633 million merger between BT’s TV sports unit and Discovery’s Eurosport, which covers the Tour de France, above, in May, but the Competition and Markets Authority decided to subject the agreement to scrutiny, fearing it could reduce competition in the UK market.

After completing its initial probe, the CMA revealed it will not progress onto a more in-depth “phase 2” investigation, paving the way for the deal to go ahead. That will allow the firms to shoulder the increasingly costly burden of Premier League football rights, and to bid for other big sport deals.

In July, Amazon and the BBC broke BT’s stranglehold on Champions League rights, though the telecom giant retains the lion’s share.

Homeserve hails progress as Checkatrade adds members

12:08 , Simon Hunt

Homeserve, the domestic repairs and improvements business snapped up by Canadian investor Brookfield Asset Management for £4.1 billion in May, has boosted its Checkatrade rating site to almost 50,000 members.

In advance of its AGM today the company said trading had been “in line with expectations”. The rating site now has 47,000 members. Homeserve said that the steady climb was despite a seasonal “moderation” in demand for its services in the UK due to warmer weather.

Updating its shareholders on the progress of the Brookfield takeover, Homeserve said that the two parties were making good progress on submitting the regulatory and competition notifications and pre-notifications required to complete the transaction. It is due to close in the fourth quarter of this year.

For the period between April 1 and July 21 the firm said its membership business in EMEA and North America had “continued to make good progress” with policy levels and retention rates remaining strong and customer service levels remaining high.

Homeserve shares were steady at 1177p today.

Germany slowdown causes fresh Euro fall

10:21 , Graeme Evans

Europe’s recession fears deepened today to leave the under-pressure euro heading back towards US dollar parity.

Following yesterday’s boost from the European Central Bank’s first interest rate hike in a decade, the single currency lost ground again after flash PMI readings for July from across the continent showed weaker-than-expected levels of activity.

This included in Germany, where a reading below the 50 threshold at 48 represented the first negative figure since December and the worst in over two years. Both the services and manufacturing sectors of Europe’s biggest economy registered declines, leading to a disappointing 49.4 for the wider eurozone.

The euro dropped by about 0.75% to below $1.02 as traders continued to take shelter in the safe haven of the US dollar. The currency pairing reached parity last week, before a shift in sentiment caused by the end of negative rates in the eurozone and signs that the US Federal Reserve is less likely to hike by a full percentage point next Wednesday.

The pound, which has strengthened this week on speculation of a more aggressive rates rise by the Bank of England, weakened 0.5% to $1.195. This reflected the latest subdued figures from the UK economy, with the manufacturing PMI registering a two-year low but the overall PMI reading still comfortably in the growth zone.

The currency market movements provided the main interest for traders in a session when the FTSE 100 rose 24.40 points to 7294.91, up from 7159 on Monday morning.

Ocado led the risers board, lifting 34.8p to 788p as shares in the grocery warehouse robotics business erased the losses seen yesterday after reporting a £211 million half-year deficit.

The results season picks up pace next week, but positioning ahead of Thursday’s figures from Barclays left the lender 1.3p lighter at 157.5p. Other fallers included Standard Chartered and stocks from the paper and packaging sector after declines for Mondi, DS Smith and Smurfit Kappa.

The FTSE 250 improved 78.74 points to 19,787.98, having yesterday outperformed Europe’s leading benchmarks with a gain of 1.6%. Big risers today included fast fashion business ASOS, which cheered 4% or 40p to 1163p.

City Comment: Trouble for the City as Aim loses allure

10:16 , Simon English

All year the City has been blighted by a lack of new stock market floats.

Now it is getting worse.

Not only are no new companies coming to market, old ones are departing.

Stanley Gibbons leaving Aim, as we report today, isn’t of itself a disaster but it is telling.

The company and its largest shareholder Phoenix Asset Management, think the benefits of being on Aim don’t remotely equal the costs.

You could say that Stanley Gibbons is an old and indeed old-fashioned business that was hardly the future of London in any case.

Except that two days ago Abcam, a properly pioneering biotech, said it was also quitting Aim to focus on its New York listing on Nasdaq.

That’s a blow both to London and to the government’s efforts to make the UK a life sciences superpower.

SoftBank has just paused talks about listing its Arm division in London, citing political turmoil. US politics are hardly any less turbulent however and the New York float is still on.

The worry is that all those bankers and brokers that were so busy at the height of Covid – and fine work they did too – are metaphorically and later actually redundant.

Goldman Sachs is already warning of job cuts. Rivals are privately adopting a wait-and-see approach while admitting that if things don’t turn soon, axes will inevitably have to fall.

These things have momentum in either direction. Just now, the Big Mo is moving against the City.

Miners lift FTSE 100, Beazley 11% higher

08:57 , Graeme Evans

Gains for heavyweight stocks in the mining and energy sectors today left the FTSE 100 index in positive territory.

BP, Glencore and Rio Tinto are among those 1% higher as London’s top flight rose 7.24 points at 7277.75, which compares with 7159 at the start of the week.

Specialist insurer Beazley led the FTSE 250 index after its interim results showed its best operating ratio performance since 2015, driven by better-than-expected claims trends.

Shares jumped 11% to 527.5p, their highest level since the start of the pandemic, as fellow Lloyd’s of London firm Lancashire Holdings also improved 3% or 11.8p to 413.4p.

The FTSE 250 was 0.2% or 39.82 points lower at 19,669.42, having surged 1.6% yesterday.

JD on track for another record year

08:43 , Simon English

JD SPORTS is defying woes on the high street and a wider collapse in consumer confidence to leave it on track for another year of profits towards £1 billion.

The self-styled King of Trainers said ahead of its annual meeting today that sales are running about 5% ahead of last year.

That means profits should be “in line with the record performance” of a year ago when it made £950 million in profit.

That comes even while the business is without a permanent CEO. Kath Smith is the interim boss following the acrimonious departure of Peter Cowgill, the executive chairman who had built the business into a FTSE 100 giant.

There was a row over corporate governance amid claims Cowgill had too much power.

New chairman Andy Higginson, a distinguished retailer, is leading the process to find a new CEO.

The statement today noted that the “three-month intensive programme of works to address priority issues on governance and regulatory compliance matters is progressing as anticipated”.

Food demand limits retail sales downside

08:35 , Graeme Evans

The 0.1% month-on-month fall in retail sales volumes in June wasn’t quite as bad as the City’s 0.3% forecast, supported by a 3.1% rise in food sales as people stocked up for Platinum Jubilee celebrations.

However, less time was spent shopping for other items and higher prices also affected demand. This meant clothing sales fell by 4.7% and household goods by 3.7%, while fuel sales dropped by 4.3% due to the impact of record pump prices.

Paul Dales, chief UK economist at Capital Economics, thinks other areas of consumer spending were not so weak.

He said: “Some people will have used the extra-long Jubilee bank holiday weekend to spend more time in pubs and restaurants.

“Even so, we think that the surge in inflation will lead to a 3% fall in real household disposable incomes this year and another 2% decline next year. As a result, a recession now feels inevitable.”

Tech stocks under pressure after Snap results

07:52 , Graeme Evans

Social media groups Meta Platforms and Twitter were among tech stocks sharply lower last night after the owner of Snapchat reported weaker-than-expected sales and earnings.

Snap posted quarterly earnings of $7 million ($5.85 million), down from $152 million the previous year, and declined to give guidance for the current period due to uncertain operating conditions.

Its shares tumbled 27% after Wall Street’s closing bell and caused Facebook owner Meta Platforms to fall 5% and Twitter by 2% as the update fuelled concerns about the health of the online advertising market.

The tech-focused Nasdaq has rallied over the past three sessions for a gain of more than 5% but is expected to open lower today.

European markets were mixed yesterday after Russian gas exports resumed through the Nord Stream pipeline at reduced levels.

The session also saw the European Central Bank raise its benchmark interest rate for the first time in a decade, by 0.5% rather than the 0.25% previously thought.

The FTSE 100 remained close to its opening mark but the Stoxx Europe added 0.5% and the FTSE 250 surged 1.6% after some strong updates, including from Frasers Group and Moneysupermarket.

CMC Markets expects the FTSE 100 index to open seven points higher at 7277.

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