The shares of London-listed retailers were under pressure on Tuesday, after several issued profit warnings and UK economic data showed earnings continuing to fall behind inflation.
The US tech sector also was under scrutiny after a report that Apple plans to slow hiring growth amid concern about the economy. Streaming firm Netflix kick off the second-quarter earnings season for technology firms, reporting after the closing bell in New York on Tuesday.
The likely next move by the Bank of England was the subject of market debate, as UK jobs figures did little to cool expectations of more interest rate hikes.
The FTSE 100 was up 17.18 points, or 0.2%, at 7,240.42 midday Tuesday. The FTSE 250 index rose 66.28 points, or 0.4%, at 19,081.43. However, the AIM All-Share index was down 1.37 points, or 0.2%, at 884.60.
The Cboe UK 100 index was up 1.3% at 729.01. The Cboe measure of London large-caps was outperforming the FTSE 100 partly because it includes money transfer firm Wise, which was up 14%.
The Cboe 250 was up 0.5% at 16,633.13, and the Cboe Small Companies was up 0.4% at 13,213.69.
In mainland Europe, the CAC 40 stock index in Paris was up 0.1%, and the DAX 40 in Frankfurt was 0.2% higher.
‘Speculation that Apple may slow hiring and spending took a bite out of any market momentum overnight and set the tone for a weak start in London on a scorching Tuesday,’ AJ Bell analyst Danni Hewson commented.
Bloomberg reported the iPhone maker plans to slow hiring and spending growth in 2023 in some of its divisions to cope with a potential economic downturn.
Investor sentiment improved as the European morning session wore on, with Informa - on the back of affirming annual guidance - among those leading the way on the FTSE 100, rising 4.3%.
The banking sector was in the green, with Barclays up 1.7% and NatWest climbing 1.5%.
AJ Bell’s Hewson added that focus will now will be on US corporate updates. With the financial services sector out of the way, tech firms are next up, starting with Netflix.
‘The streaming service is widely expected to have lost subscribers for a second consecutive three-month period. The company is looking at changes to its model as it aims to win the market over, including a plan to place adverts on the platform for certain users and clamp down on password sharing,’ Hewson said.
Netflix shares were 1.5% higher in pre-market trade in New York.
The Dow Jones Industrial Average was called up 0.7% on Tuesday, and the S&P 500 and Nasdaq Composite both were pointed up 0.9%.
The pound was quoted at $1.2017 midday Tuesday in London, up from $1.1994 late Monday.
The UK unemployment rate remained unchanged in the three months to May, in line with market expectations, figures on Tuesday showed.
The jobless rate was 3.8%, the same level as in the three months to April, according to the Office for National Statistics. A year earlier, the unemployment rate had sat at 4.9%.
UK wage growth figures were less positive.
Average earnings including bonuses rose 6.2% on an annual basis, slowing from 6.8% in the reading for April and below FXStreet-cited consensus of 6.9%. Excluding bonuses, wages grew 4.3%, in line with consensus and picking up from 4.2% growth in April.
That means UK earnings by both measures continue to lag consumer price inflation, which ran at 9.1% in May.
Analysts at Lloyds Bank commented that speculation is growing on ‘whether [UK] interest rates may be raised by 50 basis points in early August rather than 25bp’.
A similarly hot eurozone inflation reading has put focus on the European Central Bank ahead of its interest rate decision this Thursday.
The eurozone annual inflation rate increased to 8.6% in June from 8.1% in May, confirming an earlier estimate, according to the latest data from Eurostat.
A year earlier, consumer price inflation stood at just 1.9%.
The euro stood at $1.0254 midday London time, up from $1.0167 at the European equities close on Monday and stretching its legs further above the parity mark, below which the single currency briefly fell last week.
Against the yen, the dollar was trading at JP¥137.59, down from JP¥138.17.
Brent oil was quoted at $105.21 a barrel midday Tuesday in London, down from $105.55 at the European equities close on Monday. Gold stood at $1,715.08, up from $1,709.33.
In London, Made.com shares tumbled 41%. The furniture retailer lowered guidance as consumer purse strings tighten. It also hinted at a potential fundraise.
‘Management is considering options to allow the company to strengthen its balance sheet,’ the company explained.
Gross sales in the first half of 2022 were 19% lower year-on-year, though up 55% from pre-virus levels.
‘Recent trading has been volatile, and the worsening of consumer confidence has impacted demand for discretionary big-ticket items, making new customer acquisition at financially attractive rates challenging,’ Made.com cautioned.
For 2022, Made now expects gross sales to fall by between 15% to 30%. It had previously expected an outcome ranging from flat sales to a 15% fall. Revenue guidance has been lowered to a range of a 9% fall to a 24% fall from between 8% growth and a 7% decline previously.
It also plans to cut back spending.
‘Areas of focus include looking at forward stock buying, warehousing and sourcing markets, and reviewing our operational structure and headcount,’ Made.com explained.
Similarly struggling on Tuesday was womenswear retailer In The Style. The AIM listing was 35% lower.
It reported an annual loss and gave underwhelming guidance for the year ahead. In the financial year that ended March 31, In The Style swung to a pretax loss of £1.5 million versus a £125,000 profit the year prior.
For financial 2023 as a whole, revenue is guided to be broadly flat. Stockbroker Davy notes this new guidance is significantly below the 15% revenue rise previously expected.
Hotel Chocolat was another consumer facing stock melting under selling pressure. The stock was down 51%.
While sales in the financial year that ended June 26 surged 37% to £226 million, the chocolatier expects a pretax loss, swinging from profit of £7.8 million.
The bottom line is largely due to impairment provisions - after a revised assessment of the probability of recovering £23 million of loans made to its Japan joint venture - and costs from the closure of retail stores in the US.
Moving in the other direction, country lifestyle retailer Joules was up 12% after saying annual profit will beat expectations, thanks to cost cutting.
On the up, however, Wise added 14%. It has kicked off its new financial year with growth in revenue and volumes.
In the three months ended June, the international money transfer service provider said revenue grew 51% yearly to £185.9 million from £123.5 million. Quarter-on-quarter, revenue was up 21%.
Transaction volumes were 49% higher yearly and 14% higher quarterly at £24.4 billion.
Wise left revenue guidance unchanged. It still expects annual growth of between 30% and 35% for financial 2023.
Tuesday’s positive update takes some pressure off a stock which has faced selling pressure since joining the London Stock Exchange.
Wise joined list back in July of last year, going down the route of a direct listing instead of a traditional initial public offering.
Since the end of its first trading, shares are down 55%. The firm remains under a cloud due to the tax affairs of its co-founder.
Wise in June had said the UK Financial Conduct Authority opened an investigation into Chief Executive Officer & Co-Founder Kristo Kaarmann after a tax breach.
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