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(Alliance News) - European equities made a slow start to Tuesday, with US inflation data in focus, while in London, retailers bookended the large-cap index.
Shares in JD Sports were in fashion after the athleisure company posted a record first half profit, while Ocado shares were singed as its grocery sales declined amid eased lockdown curbs.
The FTSE 100 index was down 28.85 points, or 0.4%, at 7,039.58. The mid-cap FTSE 250 index was up 17.31 points, 0.1%, at 23,793.04. The AIM All-Share index was down 3.20 points, 0.3%, at 1,282.53.
The Cboe UK 100 index was down 0.4% at 700.52. The Cboe 250 was up 0.1% at 21,566.28, and the Cboe Small Companies was down 0.3% at 15,492.13.
In mainland Europe, the CAC 40 stock index in Paris was down 0.7% and the DAX 30 in Frankfurt was 0.1% lower.
The pound rose to USD1.3861 early Tuesday, taking heart from a reduction in unemployment in the UK, from USD1.3840 at the London equities close on Monday. The euro stood at USD1.1827, up from USD1.1807. Against the yen, the dollar was trading at JPY109.99, up slightly from JPY109.95.
"US CPI inflation data are likely to be the key focus of attention for markets for the rest of the day. Higher commodity prices and supply chain disruptions, combined with recovering demand, have helped to push up global inflation rates this year. The US has seen by far the biggest rise so far, led by energy prices and used car prices (due to a shortage of new stock)," analysts at Lloyds commented.
"There are tentative signs that price pressures in some Covid-affected categories may have peaked. However, cost pressures related to supply bottlenecks overall remain elevated and the latest producer price data again a showed a larger than expected rise."
The UK's own inflation reading will be in focus on Wednesday.
Numbers on earlier Tuesday, meanwhile, showed 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.
During the period, job vacancies rose to more than 1.0 million for the first time since records began, according to the ONS. Lloyds explained said this could "potentially further fuel concerns about a worker shortage."
The UK is faced with a shortage of HGV, or heavy goods vehicle, drivers. It has led to economic concerns ranging from manufacturing component shortages to fears of empty shelves in supermarkets.
UK Transport Secretary failed to guarantee there will be enough lorries on the UK's roads this Christmas to deliver all presents in time.
Grant Shapps told the Commons it was "not in the hands" of the government to make that guarantee as he answered questions on the HGV staff shortage.
Ocado added to the tally of UK companies warnings of driver shortages. The online grocer and warehouse technology company's stock dropped 2.7% early Tuesday, the worst blue-chip performer.
"Rising costs of labour, particularly for [light goods vehicles] 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," Ocado cautioned.
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.
What's more, data from Kantar showed Ocado's sales in the 12 weeks to September 5 fell 1.5% annually to GBP516 million from GBP524 million. They were, however, 42% higher than pre-virus times.
M&S shares were 0.1% higher.
At the other end of the large-caps was JD Sports, its stock jumping 7.6%.
Revenue in its 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.
Interactive Investor analyst Richard Hunter commented: "JD retains a cautionary stance. Apart from the fact that the stimulus in the US will not be repeated, the company is mindful of the possibility of further restrictions being imposed on the back of the Delta variant. In addition, the supply chain challenges which are currently affecting so many industries are also in play."
Elsewhere among large-caps, BHP fell 2.0%. Barclays cut the stock to Equal Weight from Overweight.
In the FTSE 250, travel ticketing platform Trainline rose 1.8%. The company said ticket sales reached a new pandemic high, to 71% of pre-virus levels in its second quarter ended August 31.
Even more promisingly, in the UK alone, second-quarter ticket sales climbed to 95% of pre-virus levels and actually posted growth in August alone.
Group net ticket sales in the whole of the first half more than doubled to GBP1.00 billion from GBP358 million.
"It is reassuring to see demand for rail travel coming back strongly in all markets across Europe, following an incredibly tough period for the industry. While it remains unclear how long it will take for demand to fully return, we remain positive about the long term tailwinds for the industry, including the significant planned investment in rail capacity, particularly on high speed routes, and a growing awareness of the environmental benefits of travelling by train versus other less sustainable modes of transport," Chief Executive Officer Jody Ford said.
In Tokyo on Tuesday, the Nikkei 225 ended 0.7% higher, continuing its recent bounce. Sydney's S&P/ASX 200 closed 0.2% higher. The Shanghai Composite ended 1.4% lower. The Hang Seng Index in Hong Kong was down 1.4% in late trade.
Brent oil was quoted at USD73.91 a barrel early Tuesday, up from USD73.57 late Monday. Gold was quoted at USD1,793.40 an ounce, down slightly from USD1,795.77.
By Eric Cunha; ericcunha@alliancenews.com
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