London’s leading index did little to inspire investors on Tuesday, with attention firmly fixed on US bank earnings and tomorrow’s UK inflation data.
The FTSE 100 was up 3 points to 7,409 at 14.00 on Tuesday.
“After a decent showing on Wall Street last night, European markets were less enthusiastic with most of the major indices struggling to find direction,” said Danni Hewson, head of financial analysis at AJ Bell.
UK markets will be looking forward to the release of June’s UK inflation reading set for release tomorrow morning. Economists forecast the UK CPI inflation rate to fall to 8.2% in June from 8.7% in May.
There is a divergence in inflation rates in major global economies, and tomorrow’s reading will have implications for FX markets and the FTSE 100.
Ocado
Ocado was the standout FTSE 100 performed on Tuesday as the food retailer and technology company soared 16% after releasing a reasonably upbeat half-year report.
Group revenue grew 9% to £1.4bn as their technology solutions revenue surged 59%. After reporting an EBITDA loss in 2022, Ocado produced £16.6m EBITDA in the first half of 2023. This evidently pleased investors and worried Ocado’s short sellers.
“There are two ways of looking at Ocado’s results. The business has generated a small EBITDA profit versus market forecasts of a loss. Sales are up across all of its divisions and clients are busy opening new fulfilment centres or reaping the benefits of Ocado’s system through improved operational performance. Ocado even believes it could win contracts outside of the grocery sector for its technology,” said Danni Hewson.
“However, a bear would point to ongoing pre-tax losses for the group, continued slow pace in signing up new partners, and pedestrian gains in the total number of active customers for its UK retail operations.
“That life isn’t getting any worse for the company is enough to satisfy the market. Although what matters to most investors is whether Ocado remains a takeover target. Rumours that Amazon wanted to buy the business breathed new life into the share price in recent weeks but the retail giant has remained quiet on the speculation.”
FTSE 100 movers
Housebuilders were among the top risers ahead of tomorrow’s UK inflation data. If inflation falls more than expected, it lessens the need for further interest rate hikes – something housebuilders desperately need.
Persimmon, Taylor Wimpey and Barratt Developments were 4%-5% higher at the time of writing. Expect sharp moves in the sector as the stock market opens tomorrow if UK inflation comes in hotter than expected.
Telecoms stocks were out of favour, with Vodafone and BT slipping over 1%.