London pre-open: Stocks seen higher; shop price inflation ramps up

London pre-open: Stocks seen higher; shop price inflation ramps up

Sharecast – The FTSE 100 was called to open 30 points higher at 7,542.

CMC Markets analyst Michael Hewson said: “The last two days have seen markets in Europe struggle for direction albeit with a slightly negative bias, though much of this could merely be down to some concerns over China’s future Covid policy, as well as some month end profit taking, after several weeks of strong gains.

“US markets have also struggled, probably for similar reasons, but also perhaps with one eye on this week’s payrolls report and today’s speech from Fed chair Jay Powell.

“Today the main focus is set to be on today’s flash CPI from the EU, which could set the scene as to whether we get 50bps or 75bps when the ECB meets in just over two weeks’ time.”

On home shores, industry data showed that shop price inflation ramped up in November, leaving retailers braced for an increasingly difficult Christmas.

According to the latest BRC-NielsenIQ Shop Price Index, annual inflation was 7.4%, compared to October’s 6.6% and the three-month average of 6.5%. Annual food inflation surged to 12.4%, up from 11.6% in October, while non-food inflation was 4.8%, against 4.1% in October.

For many retailers, the weeks leading up to Christmas are the most important of the year, as shoppers splash out on big ticket items like furniture as well as presents and festive food.

But Helen Dickinson, chief executive of the British Retail Consortium, said: “Winter looks increasingly bleak, as pressures on prices continue unabated.

“Food prices have continued to soar, especially for meat, eggs and dairy, which have been hit by rocketing energy costs and rising costs of animal feed and transport. Christmas gifting is also set to become more expensive than in previous years, with sports and recreation equipment seeing particularly high increases.

“Christmas cheer will be dampened this year, as households cut back on seasonal spending to prioritise the essentials.”

Mike Watkins, head of retail and business insight at NielsenIQ, said: “With prices still rising, the cost of Christmas will be higher this year, and shoppers will be managing their budgets more closely than at any time since the start of the cost-of-living crisis.”

In corporate news, specialist media publisher Future reported a rise in full-year profits, driven by strong revenue growth and contributions from acquisitions.

The company said pre-tax profit rose 58% to £170m on revenue of £825m, up 36%. It expects “modest” earnings growth in 2023.

Elsewhere, Elementis (LON:ELM) said it had agreed to sell its chromium business to Yildirim Group for $170m.

Chief executive Paul Waterman said: “Whilst chromium has been a part of Elementis for many years, our strategic review concluded that the interests of all stakeholders would now be best served by a sale of the business.

“Our Personal Care, Coatings and Talc businesses are focused on developing advantaged, high-value products to drive revenue growth and margin expansion. Going forward, I’m confident the focused implementation of our Innovation, Growth & Efficiency strategy positions us to deliver on our medium-term financial objectives and generate significant shareholder value.”

Read more on Sharecast.com