FTSE 100 poised for 7300 as inflation rears its head

Tuesday, 10th January: Food retailers and miners sent the primary index closing +0.52%(7,275.47) on a successive 9 day record-equalling close last achieved in January 1987. This came as earnings season started to take hold in the UK & companies reflected on Christmas trading periods, whilst sterling remained under pressure from both the euro and the dollar dipping as low as €1.1413 and $1.2112 shortly after the open. Sterling attempted a fight back throughout the day but remains notably weaker than levels seen only 48 hours ago. Miners on the whole rallied as UBS & Barclays re-rated a raft of peers as good prospects, but were also helped higher by the dollar-earner factor.

Morrisons rang in the new year in gleeful fashion as they celebrated their strongest results in seven years. The supermarket posted a 2.9% rise in like-for-like sales for the nine weeks to 1 January. Total sales were also on the up, 2% higher despite closing 23 supermarkets. Analyst had been bullish on the stock, following early signs that the turnaround plan instigated by Chief Exec David Potts was working. Mr Potts has attempted to reposition the supermarket by slashing prices in order to compete with the discounters, and improving its product & premium ranges to encourage customers into stores looking for treats, rather than going to competitors. Morrisons was set to close 3.77% higher on the news.

Market researcher Kantar Worldpanel reported a return for inflation in the grocery market after more than two years of falling prices. Groceries were clocked at rising 0.2 percentage points during the period on a like-for-like basis, a clear knock-on effect from the Brexit-induced sterling depreciation for the twelve weeks leading up to Christmas. The typical household spend hit £365 in December, £52 more than the average month as consumers spent £480m more in the month versus December 2015. In general fish and butter became more expensive, as eggs and bacon became cheaper.

At the close, European indices were up as the FTSE 100 finished +0.52% , the CAC 40 +0.01% and the DAX 30 +0.17%.

Leave a Reply