There was a clear divergence between the FTSE 100 and US counterparts on Wednesday as the FTSE 100 was hit by corporate updates, and US equities recovered overnight losses.
After announcing full-year results, British Land and JD Sports were among the top losers. Melrose was the FTSE 100 top riser after the company said strength in their aerospace unit was reason enough to lift full-year guidance.
Melrose closed up 3.8%.
US debt ceiling
Debt ceiling fears gripped markets early Wednesday as the prospect of a US default grew closer. However, these fears subsided as US stocks opened and the S&P 500 rebounded from yesterday’s selloff.
“The first ever default on US debt is unthinkable and the likeliest outcome is an eleventh-hour deal but, as the beginning of June deadline for raising the debt ceiling signalled by US Secretary of the Treasury Janet Yellen draws closer, nervousness is likely to build,” said AJ Bell investment director Russ Mould.
“The extremely partisan nature of US politics is an obstacle to a deal as both parties seek to use the threat of the cliff-edge to secure concessions from the other side.”
US economy
As we reported yesterday, US economic conditions were back at the top of some investors’ concerns following weaker-than-expected data points this week.
The most significant were retail sales figures suggesting the US consumer was feeling the pressure of higher inflation and borrowing costs.
If US consumers hold back on spending materially, fear is it could tip the US into recession. Compounding poor US retail sales, major US DIY stores said they were seeing a slowdown in demand.
“A trio of unwelcome developments helped push down stocks on Wall Street, with April’s US retail sales coming in lower than expected, Home Depot results showed homeowners are putting off projects and Elon Musk saying Tesla would not be immune to the global environment,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
The FTSE 100 closed down yesterday due to soggy US data, and the selling persisted on Wednesday.
Although the FTSE 100 has suffered this week, the defensive nature of the index was demonstrated in the mild nature of selling. Indeed, most of the selling on Wednesday was stock-specific and there were few major movers.
JD Sports
Despite the doom and gloom around consumer spending, FTSE 100 retailer JD Sports is eyeing £1 billion profit for the year for the first time.
Demand for the latest trainers and designer sportswear has proved to be more inelastic than other consumer products and JD Sports expansion in recent years is paying off.
“JD Sports has raced ahead as the demand for the latest shoes and athleisure-wear shows little sign of abating. It’s expecting profit to exceed £1 billion for the first time this year,” said Susannah Streeter.
“Brand power is showing little sign of losing its prowess on the retail track with a pair of the new must-have trainers still proving a huge draw, despite pressures on budgets.
“As JD Sports has hurdled the cost-of-living crisis, pre-tax profit for the year to January came in at £991.4 million, ahead of guidance. It’s now ramping up new store openings, taking advantage of the renewed enthusiasm to browse in bricks and mortar shops once more.”
Despite to positive update, JD Sports shares closed down 3.7%.
British Land followed Land Securities in marking down the value of their portfolio due to economic uncertainty and flexible working trends. Britsh Land’s portfolio value fell 12% in the last year. However, their CEO was optimistic about the outlook for the coming year.
British Land closed down by 5%.