Sainsbury’s drags as FTSE 100 dips on interest rate malaise 

Although losses weren’t overly severe, the FTSE 100 was lower again on Wednesday as investors await further insights into where interest rates will go in the near future and Sainsbury’s dragged on the index after a mixed Christmas trading update.

The FTSE 100 was down 0.2% at the time of writing.

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“The FTSE 100 dipped on Wednesday off the back of downbeat sessions from Asia and the US last night,” said AJ Bell investment director Russ Mould.

“The market is still trying to work out if central banks are going to under-promise and over-deliver on interest rates cuts or if they really mean it when they say any such move is still some way off.”

Markets will digest the latest round of US CPI data tomorrow, which promises to set the tone for equity trading going forward. There is also an element of profit-taking in London’s leading index after a robust end to 2023 and a lack of fresh catalysts to send stocks higher.

News that the World Bank foresees slower growth due to geo-political influences didn’t help the bull case for London’s leading stocks as worries about global growth dented sentiment.

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“With the World Bank forecasting that geo-political crises will drag global growth back to the slowest pace since the pandemic, there is little momentum for the internationally focused FTSE 100,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown

Sainsbury’s

This week is a busy one for festive trading updates with all major FTSE 100 grocers reporting festive trading. Sainsbury’s released their Christmas trading figures on Wednesday and disappointed shareholders with weak non-food sales.

The performance of food and grocery sales during the period is of paramount importance for investors. Sainsbury’s did well in this area. Food sales rose 9.3% in Q3 and 8.6% over the Christmas period.

However, it was the non-food sales that proved to be the headache for traders and shares fell over 5%. Christmas General Merchandise and Clothing declined, suggesting the group’s focus on food was at the expense of other areas of the business.

“Sainsbury’s has a ‘food first’ strategy and the big question from its Christmas trading update is whether management is guilty of neglecting the other parts of the group,” said AJ Bell’s Russ Mould.

“Non-food sales were very disappointing, implying that Sainsbury’s is either leaving areas like clothing and Argos’ general merchandise offering to wither away or it simply isn’t pushing the products that people want.

“Sainsbury’s partially blames tough comparative figures from the previous year, yet it does feel as if Argos, in particular, has been bumped down the list of priorities for the group since Simon Roberts took over as chief executive.

“One has to question if the Argos brand is still the right fit for the grocery seller over the long term. If food is the priority, would the shop floor space currently occupied by Argos concessions be put to better use?

“Many fashion retailers suffered from the wrong kind of weather in 2023 to support the stock on their shelves. The sector has also been awash with promotions to shift items, meaning retailers have had no choice but to cut their prices if rivals are offering similar goods more cheaply. Naturally this is bad for margins. Sainsbury’s has been exposed to both factors.

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