The FTSE 100 flirted with gains on Tuesday as commodity shares rallied on strong iron ore prices and a respectable set of results from BP.
Miners dominated the FTSE 100 top risers on Tuesday with Glencore, Antofagasta, Rio Tinto and Anglo American rising between 2%-3.5% in early trade.
News China are going to push back green targets on steel production helped Iron Ore break through $150/t and provided a boost to the outlook of mining profits.
BP reported its highest profit on more than a decade and announced a $4bn share buyback programme which saw its shares rise over 1%. However, analysts pointed to the possibility of taxes on oil firms to help tackle the cost of living crisis as reason to be cautious around major energy companies.
“BP followed Shell by reporting bumper profits but both companies probably wished the timing didn’t coincide with the rise in the UK energy price cap which piles pressure on households already facing a cost of living crisis,” says Russ Mould, investment director at AJ Bell.
“The UK Government has ruled out a windfall tax for the oil and gas sector for now, but the threat of a legislative intervention hangs in the air given the contrast between voters struggling to heat their homes and two of Britain’s biggest companies announcing such strong results and billions in giveaways to shareholders.”
Ocado
Ocado shares sank 10% after pre-tax profits accelerated on higher development costs despite a 7.2% increase inn full year. revenue to £2.5bn.
“As household incomes are stretched thinner than they have been in a very long time, more premium options like M&S and Ocado food may find themselves rubbed off shopping lists. Ocado’s core retail operation was a natural beneficiary of lockdowns, as the world shifted to online shopping. A reasonable portion of that increased demand should be permanent. However, Ocado is also battling against very strong comparatives from the pandemic, and growth looks lacklustre. It’s positive it can stoke more impressive levels of growth, but this may well prove more challenging in an inflationary environment,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.
“The real driver of subdued market sentiment comes from commentary around Ocado’s Solutions business. Enormous amounts are being funnelled into building out the Ocado Smart Platform and Customer Fulfilment Centres.”