City Index | Jul 30, 2019 11:58
The FTSE is holding up this morning unlike its European peers, which are all trading in the red with Milan’s FTSE MIB hit the worst and the DAX coming under pressure from weaker earnings from Lufthansa (LON:0H4A) and Bayer (LON:0P6S).
The London index is being sustained by a rally by BP (LON:BP) after the oil giant reported flat earnings as a rise in the company’s output balanced out a decline in the oil price during the second quarter.
Miners and other oil firms are also on the rise with Rio Tinto (LON:RIO) leading the way. However, utility firm Centrica (LON:CNA) slipped to the bottom of the index as the departure of the company’s chief executive triggered a 10% decline in share price.
The market’s reaction to Centrica’s Iain Conn stepping down has been magnified by investors’ concerns that the company will continue to lose money as it did in the first six months this year, when it reported a £446 million loss following gains in 2018.
The pound is beginning to look scarily cheap, trading down at $1.2161 in early activity this morning, with investors positioning themselves for a rocky few months before the next Brexit deadline.
On current count sterling is having the worst month since October 2016 as it has lost 4.3% so far since the beginning of the month. Investors’ main concern remains a hard no-deal Brexit which has the potential to pull the economy into chaos.
Boris Johnson’s new cabinet did little to alleviate those fears, taking a hard-line with Europe on forthcoming negotiations.
Oil has been rising for the last four trading sessions and is trading up 0.85% this morning as traders are betting that an expected Fed rate cut later this week would give the US economy a shot in the arm and so boost domestic oil demand.
The oil market certainly needs an area of growth for prices to move higher because a slowdown in emerging market economies and in Europe is keeping demand in those regions stagnant or lower.
This is an outstanding profit result from Greggs PLC (LON:GRG), which has kept the sales momentum going by offering its customers the food they want, where they want it and when they need it.
Innovative products like vegan sausage rolls are just part of the success story at Greggs. The business is also benefiting from increased investment in the quality of its entire food and beverage range, more efficient production lines and well-targeted store openings.
As a slight negative, input cost guidance has been raised for the year and management also expects to spend more on improving the business than previously planned.
Fortunately, Greggs is generating enough cash to easily cover heavier spending, while still having enough in the pantry to reward investors with a tasty special dividend.
The big question, of course, is for how much longer Greggs can keep growing sales at such impressive rates.
Management has admitted that the current pace of growth can't last forever. But new drive-through, click-and-collect and evening meal initiatives, combined with a continued roll-out of stores at train stations and airports, provide the ingredients for sustainable solid growth.
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Written By: City Index
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