FTSE runs out of breath while Associated British Foods soldiers on despite difficult backdrop

“After a decent start to the week, come Friday and the FTSE 100 had run out of breath, falling 0.2% to 7,305. Only the basic materials sector was able to muster any gains, led by BHP and Rio Tinto,” says Russ Mould, Investment Director at AJ Bell.

“UK growth nearly stalled in October, according to new GDP data, and that’s before Omicron struck. The big drop in people visiting pubs, bars and restaurants doesn’t bode well for the idea that we’re all rediscovering our freedom post-lockdown. Perhaps this catalyst has now played out and people are yearning for the warmth of their home during the autumn and winter instead.

“Rising energy, food and general merchandise prices have put pressure on family finances so this Christmas may be disappointing for many retail and hospitality operators.

“Against a difficult backdrop, Associated British Foods looks to be doing its best to deal with supply and cost inflation issues. Perhaps most important to its share price is the progress with Primark, where margins are better than expected and it seems confident on having enough stock for the important festive season.

“But there remains a risk with tightening Covid measures which means that recent Primark success is perhaps not enough to trigger any upgrades to earnings forecasts. Investors are certainly not bowled over by the trading update as the shares remain in limbo.

“Sterling was halted in its tracks by the disappointing GDP numbers, slipping 0.05% to $1.3216. In the commodities market, Brent Crude retreated 0.15% to $74.31 per barrel.”

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