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(Alliance News) - Stock prices in London were seen opening lower on Tuesday, with a US inflation reading in focus amid a backdrop of concern that central banks may begin tapering economic stimulus.
IG futures indicate the FTSE 100 index is to open 20.5 points, or 0.3%, lower at 7,047.93. The blue-chip index closed up 39.23 points, 0.6%, at 7,068.43 on Monday.
In early UK company news, there were mixed trading updates from the retail sector. JD Sports offered a somewhat cautious outlook despite a first-half sales hike. Grocer Ocado, which has been boosted by the pandemic, saw grocery sales ebb in its financial third quarter, while newly listed sofa seller Made.com posted "record" interim results.
The pound was quoted at USD1.3848 early Tuesday, up from USD1.3840 at the London equities close on Monday. The euro stood at USD1.1817, up from USD1.1807. Against the yen, the dollar was trading at JPY110.01, up from JPY109.95.
The number of people out of work in the UK remains above pre-virus levels but ticked down in the three months to July, according to estimates from the Office for National Statistics released on Tuesday.
The UK unemployment rate was reduced to 4.6% in the three months to July from 4.9% in the previous three-month period. However, the ONS noted the jobless rate still sits 0.6 percentage point higher than pre-pandemic levels.
The figure was in line with market expectations cited by FXStreet.
"May to July 2021 estimates show a continuing recovery in the labour market, with a quarterly increase in the employment rate, while the unemployment and economic inactivity rates decreased," the ONS explained.
The ONS added that average earnings during the period, including bonuses, were 8.3% higher, topping market consensus of 8.2% growth, but slowing from 8.8% in the three months to June. Stripping out bonuses, wage growth was 6.8%, in line with market estimates but off the pace of 7.4% in the preceding period.
Focus will also be on the US consumer price index reading at 1330 BST.
"Last week's US producer price data wasn't encouraging, with the factory gate prices accelerating to 8.3% in August from 7.8% printed a month earlier. The strong PPI read hints at the possibility of an unpleasant surprise on the CPI front at today's release, as well," Swissquote analyst Ipek Ozkardeskaya commented.
"Yet, of course, there is always room for a positive surprise in inflation figures as we are not done worrying about the global chip shortage, the slow logistics, firm energy and commodity prices, rising wages and rising Covid worries. Of course, rising Covid cases wouldn't be a headache for financial markets, if we weren't feeling the supportive hand of the Fed gently being pulled away due to the rising inflation."
According to consensus cited by FXStreet, the US consumer price index is expected to rise by 5.3% in August from a year before, slowing from a 5.4% annual inflation rate in July.
JD Sports said revenue in the first half to July 31 jumped 53% to GBP3.89 billion from GBP2.54 billion a year earlier, as bumper demand for sports apparel continued. Pretax profit surged to GBP364.6 million from GBP41.5 million.
Pretax profit before exceptional items multiplied to a record GBP439.5 million from GBP61.9 million a year earlier and GBP158.6 million two years prior.
"The group continues to demonstrate outstanding resilience in the face of numerous challenges arising from the continued prevalence of the Covid-19 pandemic in many countries, widespread strain on international logistics and other supply chain challenges, materially lower levels of footfall into stores in many countries after reopening and the ongoing administrative and cost consequences resulting from the loss of tariff-free, frictionless trade with the European Union," Executive Chair Peter Cowgill said.
Cowgill is "encouraged" by the start of the second half, though added that footfall remains "comparatively weak in many countries".
He added: "Assuming a prudent but realistic set of assumptions for the peak trading period ahead which take into account the absence of stimulus in the United States for the second half of the year, in addition to current industry-wide supply chain challenges, we presently anticipate delivering a headline profit before tax for the full year of at least GBP750 million."
Back in April, JD Sports had predicted headline pretax profit, meaning before exceptional items, to be GBP475 million to GBP500 million in the year to January 2022. Pretax profit by the same measure was GBP421.3 million in the year that ended this past January 30. This was down 4.0% from GBP438.8 million the year before.
There was no interim payout declared on Tuesday, but a "larger final dividend" could come, depending on JD's fortunes in the remainder of its financial year.
Fellow FTSE 100 constituent Ocado said revenue in its retail joint-venture alongside Marks & Spencer fell in the 12 weeks to August 29. Revenue dropped 11% annually to GBP517.5 million from GBP578.8 million.
Average orders per week rose 1.4% to 338,000 from 333,000 a year earlier.
"Over the first 6 weeks of the quarter, the business was performing in line with expectations, with revenue marginally down 1.8%," Ocado said.
It put this down to strong comparatives from a year earlier, when more virus restrictions were in force, benefiting the online-only grocer.
Also during the period, Ocado had reported a fire at a customer fulfilment centre following in London a collision between three robots.
Ocado added: "In the remaining seven weeks of the quarter, and due to the disruption caused by the fire, revenue declined by 19%. In addition to the need to cancel orders in the week following the fire, the temporary reduction in capacity reduced our ability to offer slots to new customers."
The disruption lost Ocado around GBP35 million worth of revenue, it said.
"Operating losses during the second half due to the business disruption, primarily lost orders, caused by the fire are estimated to be around GBP10 million as the CFC ramps back up to full capacity," the company added.
"Rising costs of labour, particularly for LGV and delivery drivers represent an increasingly important issue for the industry that may result in up to GBP5 million of impact to full year numbers, reflecting additional measures being taken to hire new staff including raising hourly rates and offering signing-on bonuses. We will be working to mitigate these costs as best we can."
Meanwhile, Made.com posted a 61% revenue hike in the six months to June 2021, a record half for the online furniture retailer.
Revenue rose to GBP171.0 million from GBP106.3 million. Its pretax loss slimmed to GBP10.1 million from GBP15.2 million a year earlier.
"I am very pleased with the progress made in the first half of the year, which is in line with the long-term goals set out at our IPO in June. We have continued to see strong and sustained consumer demand for our exclusive, design-led products and have gained significant market share with growth in all eight of our markets," Chief Executive Philippe Chainieux said.
"I am confident in the outlook for the full year and in Made's long-term growth."
Annual revenue is expected to rise by about 65% to GBP410 million.
In Tokyo on Tuesday, the Nikkei 225 ended 0.7% higher, continuing its recent bounce. The benchmark has surged in the wake of the announcement by Japan Prime Minister Yoshihide Suga late in August that he will not run for his ruling party's leadership, effectively ending his tenure and throwing wide open the race for the next premier.
The Nikkei hit an intraday high of 30,795.78 points, its highest since 1990.
Sydney's S&P/ASX 200 closed 0.2% higher. The Shanghai Composite was 1.4% lower. The Hang Seng Index in Hong Kong was down 1.6%.
Brent oil was quoted at USD73.98 a barrel early Tuesday, up from USD73.57 late Monday. Gold was quoted at USD1,792.68 an ounce, down slightly from USD1,795.77.
By Eric Cunha; ericcunha@alliancenews.com
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