Global equity markets were quiet on Tuesday with US cash bond and equity markets closed for the Independence Day holiday.
The FTSE 100 was up 2 points to 7,530 at the time of writing. US futures markets were open but were little changed.
After yesterday’s sell-off, a slight rebound in AstraZeneca shares helped offset weakness in Sainsbury’s and UK banks. Some UK housebuilders were softer after being downgraded by JP Morgan.
“Earlier this year housebuilders were breathing a sigh of relief as the surging mortgage rates seen in the wake of the mini-Budget eased. That’s no longer the case amid sticky UK inflation and the prospect of higher rates for longer,” said AJ Bell investment director Russ Mould.
“Ahead of a string of updates from the sector, negative commentary from investment bank JPMorgan is putting the likes of Persimmon and Barratt Developments on the back foot.”
Persimmon and Barratt Developments were down 0.3% and 0.1%, respectively.
UK banks
UK banks were weaker after the FCA summoned them to discuss low savings rates. Savings rates have failed to keep up with rising interest rates, and banks’ practices are being scrutinised.
Barclays, HSBC, Lloyds and NatWest will meet with the FCA this Thursday.
“The FCA’s approach will be particularly interesting as its new “Consumer Duty” framework comes into force at the end of July 2023 and will empower the FCA to set higher and clearer standards of consumer protection across the financial services sector and require firms to put their customers’ needs first,” said Gareth Mills, Partner at law firm Charles Russell Speechly.
“How they enforce those requirements is likely to form a large basis of this week’s discussions with the big banks”.
Sainsbury’s
Sainsbury’s was one of the FTSE 100’s top fallers on Tuesday despite reported strong sales growth in the first quarter. The supermarket said reducing prices to compete with budget supermarkets had helped volumes rise.
“Sainsbury’s has come out the gate swinging, insisting that its efforts to keep prices low have seen shoppers buying a higher number of items, with first-quarter sales rising over 9%,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.
“This comes at a time when chatter about unfair profiteering from the big supermarkets has reached fever pitch. This supermarket giant has spent a great deal on reducing prices, especially around Aldi price match campaigns and the introduction of Nectar prices.”
This investment in winning market share may sacrifice margins for the full year, and shares fell 2%.