Market report: Interest rate optimism wanes and Mr Kipling maker raises profit forecast

Susannah Streeter, head of money and markets, Hargreaves Lansdown: “A subdued session looks set to bed in after the enthusiasm sparked by the dip in inflation. Cautiousness about the trajectory of interest rates in the United States is edging back in after retail sales didn’t slow by as much as expected. Consumers are still showing enduring resilience, even as lockdown savings are whittled away, leading to some speculation a rate cut move from the Fed will be further off than earlier hopes. China’s fragile housing market has loomed back into focus, after data showed new home prices in 70 major cities across the vast country fell for the fourth month in a row, dipping 0.3% month on month. Hopes for a significant trade breakthrough from talks between Joe Biden and Xi Jinping haven’t materialised, despite some limited progress in healing the relationship. But the meeting has underwhelmed, with Chinese stocks largely falling as investors cast an eye back to domestic economic problems.

Oil prices dip lower

 Oil prices have fallen back as a slowdown in demand collides with a large uptick in production, pushing energy giants lower in early trade. Brent Crude fell to $80 a barrel after the Energy Information Administration released data indicating that crude stockpiles in the United States rose by 3.6 million barrels last week, more sharply than expected. Production is pumping in the US, just as concerns continue to swirl about sluggish demand for industrial fuel in China. The effect of Saudia Arabia and Russia’s production cuts have largely ebbed away and hopes are much higher about the avoidance of a wider conflict in the Middle East. Worries that outflows from the region may be disrupted have eased as diplomatic debate moves onto Israel’s plans in Gaza following the ground invasion.

Premier Foods raises profit forecast

Exceedingly good prices appear to have enticed shoppers to Premier Foods’ larder of brands, such as Mr Kipling cakes, as the manufacturer passed on lower costs of ingredients to its customers. Its promotional prices have been lowered across a stack of its brands, including Batchelors Super Noodles. Shoppers, who’ve been battling painful grocery price rises for so long, seized the opportunity to buy favourite products at cheaper prices. Branded sales rose 15.8% in the first half of the year, while profit margins were maintained leading the company to forecast that full year trading profit will be 10% ahead of last year.

There was also impressive double-digit growth in new product categories of 21%, as Premier Foods moves into ‘healthier’ ranges, with the Ambrosia porridge pots proving to be a winning recipe and the acquisition of the Fuel10K brand should give it more clout amid competition for the breakfast market. The company is also making inroads in its international expansion, building distribution in the United States and gaining further market share in Australia. Investors initially reacted with a trolley-full of optimism, sending shares up by more than 4% in early trade, before dipping back slightly.”