London’s FTSE 100 was fractionally higher early on Tuesday afternoon, with Ocado its best-performer, while Bank of America climbed in the wake of so far well-received quarterly results in New York.
Gains for the FTSE 250 were more convincing than its blue-chip counterpart in London. Darktrace was by far the best of the bunch there.
The FTSE 100 index inched up 6.98 points, 0.1%, at 7,413.40. The FTSE 250 was up 121.68 points, 0.7%, at 18,526.11, and the AIM All-Share was up 2.10 points, 0.3% at 751.41.
The Cboe UK 100 was marginally lower at 738.88, the Cboe UK 250 was up 0.6% at 16,258.68, and the Cboe Small Companies was up 0.3% at 13,460.07.
In European equities on Tuesday, both the CAC 40 in Paris and the DAX 40 in Frankfurt were marginally higher.
Sterling was quoted at $1.3118 early Tuesday afternoon, higher than $1.3080 at the London equities close on Monday. The euro traded at $1.1259, higher than $1.1231. Against the yen, the dollar was quoted at JP¥138.22, down versus JP¥139.11.
In New York, the Dow Jones Industrial Average is called up 0.1%, the S&P 500 flat and the Nasdaq Composite down 0.1%.
‘With limited corporate and economic news flow on Monday along with that weaker-than-expected Chinese GDP print, the fact Wall Street managed to advance modestly yesterday is worthy of note. Futures suggest that momentum may be lacking ahead of Tuesday’s open, although with a slew of announcements expected, price action is unlikely to be short lived for long,’ Scope Markets analyst Joshua Mahony commented.
‘US retail sales prints for June will be closely followed as there’s a risk we could see this move into a contraction phase, something that would have the potential to rattle sentiment.’
The economic calendar has retail sales data for the US at 1330 BST, followed by a US industrial production print at 1415 BST.
Retail sales are expected to have risen 0.5% on a monthly basis in June, according to FXStreet cited consensus.
On the corporate front, there will be results from the likes of Goldman Sachs, Netflix, Tesla and Johnson & Johnson later in the week.
Mahony added: ‘Critically it will be those consumer discretionary plays including Tesla and Netflix who are both slated to report on Wednesday that will arguably have the potential to inject some real volatility into the market, especially if the propensity to spend is suffering.’
Bank of America shares shot up 0.7% during pre-market dealings in New York.
It said revenue in the second quarter of the year increased 11% to $25.20 billion and net income surged 18% to $7.41 billion.
‘We delivered one of the strongest quarters and first half net income periods in the company’s history. Continued organic client growth and client activity across our businesses complemented beneficial impacts of higher interest rates and produced an 11% increase in revenue. We continue to see a healthy US economy that is growing at a slower pace, with a resilient job market,’ Chief Executive Brian Moynihan said.
In London, updates from online grocer Ocado and cybersecurity firm Darktrace impressed.
Ocado said revenue in the half-year ended May 28 increased 8.6% to £1.37 billion from £1.26 billion a year earlier. Ocado’s pretax loss widened to £289.5 million from £211.3 million.
The stock jumped 15%.
Ocado reported earnings before interest, taxation, depreciation, amortisation, impairment and exceptional items of £16.6 million, swinging from a loss of £13.6 million a year prior, however.
Looking ahead, Ocado backed yearly guidance. It expects mid-single digit revenue growth in Ocado Retail and a ‘marginally positive’ Ebitda at the unit.
AJ Bell analyst Danni Hewson commented: ‘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. However, a bear would point to ongoing pretax 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. Amazon is already a master at robotic-led warehouses so one has to wonder why it would need to buy Ocado. Yes, it wants to be bigger in the food sector – but it could just become a technology customer rather than buy Ocado outright if it wanted to take advantage of the systems.’
Darktrace surged 19% after sharing that Ernst & Young completed its independent review.
The cybersecurity firm brought in the accountants to conduct a third-party probe into its financial processes in February, after falling under scrutiny from short-seller Quintessential Capital Management. Quintessential had criticised Darktrace’s management and said it was ‘sceptical’ about its growth figures.
‘Neither management, nor the board consider EY’s report to have any impact on Darktrace’s previously filed public company financial statements nor to change their belief that those financial statements fairly represent Darktrace’s financial position and results,’ Darktrace said on Tuesday.
Grant Thorton’s audit for its prior results remain unchanged.
Darktrace also updated on recent trading, reporting year-on-year revenue growth of at least 31% in the financial year to June 30. It raised guidance for adjusted Ebitda margin to 22% from 19% previously. Looking ahead to financial 2024, it expects a ‘first half stabilisation’ which will then be followed by a ‘second half re-acceleration’.
Wise climbed 2.7%. The London-based money transfer firm, said revenue in its first quarter ended June 30 rose by 29% year-on-year to £239.5 million from £185.9 million.
Volumes increased in this first quarter by 16% to £28.2 billion from £24.4 billion year-on-year, ‘driven by a growth in active customers’.
London-listed housebuilders were also on the up on Tuesday, ahead of key UK inflation data. Persimmon rose 4.0%, Taylor Wimpey added 3.3% and Barratt climbed 2.9%.
The data may be indicative of the Bank of England’s next move. An upside surprise may prompt Threadneedle Street to hike by 50 basis points again, putting more pressure on mortgage rates.
Analysts at Davy commented: ‘Tomorrow’s UK CPI release is expected to show inflation falling back to 8.2% in June and core inflation steady at 7.1%. However, recent CPI out-turns have consistently beaten forecasts. Hence, June’s CPI data will likely bolster expectations that the Bank of England will hike by 50 basis points on August 3rd.’
Ahead of Wednesday’s reading, numbers from Kantar showed UK grocery price inflation calmed once again.
Kantar said grocery price inflation ebbed to 14.9% in the four weeks to July 9. It is the fourth-successive month the annual rate of grocery price rises has abated in the UK, and Kantar noted the latest slowdown in inflation, fading from 16.5% the prior month, is the most significant since its peak of 17.5% in March.
Gold was quoted at $1,963.14 an ounce early Tuesday afternoon, higher than $1,952.33 on Monday. Brent oil was trading at $78.82 a barrel, lower than $79.11.
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