LONDON MARKET OPEN: Tepid trade as housebuilders weigh on FTSE 100

(Alliance News) - London's FTSE 100 tread water in early dealings on Tuesday, with housebuilders on the back foot, and little movement elsewhere during what is expected to be a muted day for global markets due to a thin data calendar and a US holiday.

Restore and Aptamer struggled on the AIM market, meanwhile. Restore warned on profit, while Aptamer cautioned on its funding requirements.

The FTSE 100 index opened up just 0.31 of a point lower at 7,526.95. The FTSE 250 was up 10.59 points, 0.1%, at 18,518.33. The AIM All-Share was also up by just 0.31 of a point at 754.00.

The Cboe UK 100 and Cboe UK 250 were largely unchanged at 750.75 and 16,195.13, respectively. The Cboe Small Companies was flat at 13,663.35.

In European equities, the CAC 40 in Paris and the DAX 40 in Frankfurt were each 0.1% higher.

"Today, the US will be off due to Independence Day holiday, but the rest of the world will continue digesting the latest news and get positioned for the FOMC minutes due Wednesday and a series of US jobs data between Thursday and Friday. While the potential for further hawkish pricing for the Fed seems limited, there is a good chance of a dovish readjustment in the case of soft jobs data," Swissquote analyst Ipek Ozkardeskaya commented.

The Reserve Bank of Australia left its key interest rate unchanged Tuesday, with Governor Philip Lowe saying that while inflation had "passed its peak" the economic outlook remained uncertain.

The decision comes after monetary policymakers last month hiked the benchmark rate 25 basis points to 4.1% – its highest level since May 2012.

Lowe on Tuesday cited "uncertainty surrounding the economic outlook" as one reason the board decided to stand pat this month.

"This will provide some time to assess the impact of the increase in interest rates to date and the economic outlook," he said.

Government figures released last week showed the headline rate of inflation dropped to 5.6% on-year in May, from 7.3% – an improvement but still well above the RBA's target range of between 2% and 3%.

Whilst inflation in Australia has already peaked, it is still "too high" and will remain so "for some time yet", Lowe said. Some further monetary policy tightening may be required, he continued.

In Sydney, the S&P/ASX 20 rose 0.5%. The Nikkei 225 in Tokyo, fresh from hitting a 33-year closing high on Monday, fell 1.0% on Tuesday. It is still up 28% year-to-date. In China, the Shanghai Composite ended flat, while the Hang Seng in Hong Kong was up 0.6%.

The pound traded at USD1.2695 on Tuesday morning in London, up from USD1.2675 late on Monday afternoon. The euro edged up to USD1.0908 from USD1.0905. Against the yen, the dollar fell to JPY144.40 from JPY144.59.

In London, housebuilders were among the worst large-cap performers. Persimmon dropped 1.9% and Taylor Wimpey gave back 2.0%. FTSE 250-listed Vistry and Redrow fell 2.2% and 1.6%.

JPMorgan placed Taylor Wimpey and Vistry on negative catalyst watch. It also cut Persimmon to 'neutral' from 'overweight'.

Sainsbury's fell 1.7%. It reported an improved first-quarter, with grocery sales on the up, and its Argos arm also delivering.

The London-based grocer said in the 16 weeks to June 24, total retail sales excluding fuel grew 9.2% annually. The figure excludes fuel.

Also excluding fuel, like-for-like sales climbed 9.8% on-year.

Fuel sales alone fell 21%. Grocery sales rose 11%, while general merchandise sales improved 4.0%, helped by a 5.1% climb in the Argos arm alone. Clothing sales fell 3.7%, however.

"We are putting all of our energy and focus into battling inflation so that customers get the very best prices when they shop with us, particularly now as household budgets are under more pressure than ever. Food inflation is starting to fall and we are fully committed to passing on savings to our customers," Chief Executive Simon Roberts said.

interactive investor analyst Richard Hunter noted the firm faces competition on the supermarket aisles, as well as in the eyes of investors, with Tesco still the darling name in the retail sector.

"Indeed, the market consensus of the shares as a sell, with Tesco the preferred play in the sector, highlights something of a gulf between the two. It also reaffirms that while there is much to like within this latest release, there is also much to do for Sainsbury to regain anything like its previous share price levels," Hunter added.

Elsewhere in London, Dunelm dropped 4.9%. RBC cut the stock to 'underperform' from 'sector perform'.

On AIM, Aptamer tumbled 41%. The developer of the optimer binders said it is targeting a reduction in operating cash outflow to below GBP3 million for the year ending June 30, 2024, halving from GBP6 million from financial 2023.

It eyes being cash flow positive in financial 2026, but noted this would require annual revenue of GBP6 million, some way above the GBP1.8 million it achieved in the year just gone.

Its June-end cash balance was GBP200,000.

"In addition to trading income in July, further funding will be required in the short term in order to continue as a going concern. The directors are actively reviewing all possible financing options that are in the best interests of the company and its shareholders and continue to take steps to carefully manage its working capital," Aptamer cautioned.

Restore fell 29%. It announced a profit warning and said its chief executive has departed with immediate effect.

Charles Bligh has stood down by "mutual consent", the London-based provider of digital and information management and lifecycle services said. Senior Independent Director Jamie Hopkins becomes interim CEO. Chair Sharon Baylay-Bell has become executive chair, also with immediate effect.

Restore said its technology arm has continued to suffer a "reduction in demand for certain service lines". As a result, Restore said adjusted pretax profit in 2023 will be lower than the GBP31 million that is expected. Adjusted pretax profit in 2022 amounted to GBP41.0 million, so it expects a decline of roughly a quarter or more.

It expects to make cost savings of GBP4.5 million in 2023, however.

Restore said: "We continue to focus on structural cost savings in staff and supplier input costs, and these programmes are delivering the targeted results. With actions already taken and further planned steps in early Q3 we expect to reduce permanent staff by 230. These roles are across senior managers, sales, support functions and operations."

Brent oil fell to USD75.24 a barrel early Tuesday, from USD75.92 on Monday. Gold faded to USD1,926.34 an ounce on Tuesday morning, from USD1,927.00 on Monday.

By Eric Cunha, Alliance News news editor

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