Subdued mood as Fed crunch meeting begins and mixed basket of retail results
- European indices open lower and FTSE 100 is flat after falls in Asia amid nervousness ahead of Fed meeting.
- Investors wait for eurozone inflation numbers for clues as to high long rates will stay elevated
- Crude oil prices stay high, with Brent Crude trading around $95 a barrel amid forecasts of lower US shale production.
- Mixed basket for retail as Ocado shows resilience, Kingfisher signals further profit fall and Moonpig keeps guidance intact
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “Sentiment is subdued as the Fed begins the crunch two-day meeting and investors await the decision on interest rates and clues about how long they will stay elevated. Eurozone inflation numbers will be closely watched later, after the ECB hiked rates again to a record level of 4%. The battle against inflation still hasn’t been won, and there will be fresh skirmishes ahead especially if recent disinflationary forces ease off, which means higher rates to are likely to settle in for the long haul particularly in Europe and the UK.
Oil prices are still staying stubbornly high, with the benchmark Brent Crude creeping up further, hovering around $95 a barrel as concerns wash around about just how tight supply will be over the coming months, particularly if China’s economy stops stumbling and gets on a more even footing. Forecasts from the US Energy Information Administration that shale production is set to fall for a third month in a row in key regions is adding to the upwards pressure on oil prices.
There’s been a mixed basket of retail results in the UK highlighting some resilience amid the tough retail environment. Ocado’s customers are finally putting more items into virtual trollies, with volume growth returning, progress which has helped boost the share price in early trade.
Kingfisher, the owner of B&Q has had to deal with disappointing sales in France and Poland with lower consumer confidence weighing on enthusiasm for DIY amid a tougher trading environment. As interest rates reach record levels in the eurozone pushing up borrowing costs, shoppers appear to be tightening their belts further, leading the company to downgrade its annual profit forecast by 7%. This is clearly a disappointment especially as profits were already expected to be sharply down on last year, and shares fell almost 6% at the open. But Kingfisher has been able to flex some diversified muscles, geographically and in terms of its penetration of a different area of the building trade through the Screwfix brand. Underlying sales in the UK and Ireland were 1.7% higher, helped by Screwfix, a popular choice for contractors as well as homeowners, unscrewing a bigger market share. This ability to whet the appetite to ‘get someone in’, if you can’t ‘do it yourself’ should provide resilience for the brand, especially as the trend for home make overs is unlikely to wane over the longer term.
E-card and gift retailer Moonpig has underwhelmed after reiterating its full-year outlook and shares have flown lower. It’s still expecting revenues to grow modestly, at low single digit levels, and investors still appear concerned about the ongoing cost-of-living crisis weighing down demand for personalised cards and gifts.. Although its revenue wings were clipped last year after consumers shifted to buying lower cost gifts, the company has shown more resilience of late with big events like Mother’s Day proving a draw for personalised cards, but it doesn’t look like sales will be set for a major boost over the next few months.”