FTSE higher after Fed rate hike, Deliveroo and Cineworld up despite big losses, Ocado hit by margin warning

“The FTSE 100 eked out some gains Thursday morning after the US Federal Reserve moved to raise interest rates for the first time since 2018,” says AJ Bell Investment Director Russ Mould.

“The Fed could not really have telegraphed the move any more if all its representatives had been holding quarter point raise banners everywhere they went for the last few weeks so it wasn’t really a surprise to see investors take the news in their stride.

“The Bank of England is also widely expected to raise its own rates later. However, from here things arguably get trickier for central banks.

“The impact of the war in Ukraine on both global growth and inflation remains highly unpredictable. Central bankers can’t both bring inflation under control and provide a soft landing for economies and markets which have been shaken by the conflict. In fact they may well struggle to do either.

“It may not win them many plaudits but simply doing the least bad job possible might be the best they can hope for.

“Cineworld may have warned on its ability to sustain its huge debt pile and chalked up blockbuster losses but the main event for the market seemed to be the surge in revenue resulting from big releases like No Time to Die and the latest Spiderman film.

“The company is on the edge though, and it has to hope that an admittedly quite strong movie slate brings in the punters in their droves or its situation could rapidly deteriorate, particularly if it loses an appeal over a huge fine linked to pulling out of the acquisition of Cineplex.

“Another firm which is firmly in the red is Deliveroo as it battles hard in the cut throat takeaways market. For now shareholders seem encouraged by the company’s ambition and the greater the scale, the better the business should perform.

“However, there is a danger that the cost of living crisis pushes ordering in from an affordable treat for most households to something only more affluent families can afford to do regularly, putting pressure on Deliveroo’s growth.”

Ocado

“For the most part it’s been pretty tough going for Ocado since the heady days in September 2020 when it reached all-time highs of close to £30 per share.

“Back then it had been a beneficiary of lockdown and the enforced need to do grocery shopping online.

“This was seen as a big driver, not only for its own groceries service but also for its solutions platform sold to global supermarkets lacking their own viable internet-based offering.

“However, that excitement gave way to mounting disappointment as the company failed to sign up new clients, ironically blaming the pandemic restrictions which had helped act as a calling card for its services in the first place.

“Whether it was a ready excuse or genuine obstacle, Ocado’s argument was that being unable to easily fly around the world made it tricky to ink deals.

“A patent squabble with Norway’s Autostore and a robot fire at its own facility in south-east London took further shine off what had been, until then one of the market’s real emerging stars.

“More recently, Ocado has had some more positive headlines, notably winning convincingly the latest leg of its court battle with Autostore and signing a new agreement with an existing client to provide its platform solution in Poland.

“Today’s trading update covers the UK-based Ocado Retail arm – now a joint venture with Marks & Spencer. While this venture has been a success for both parties, the pressure on margins from rising inflation looks to be a growing issue and will not help Ocado at group level given the solutions business remains heavily loss-making.”

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