US inflation in focus, latest supermarket data sees Morrisons lose ground and Ocado sales drop

“The FTSE 100 failed to back up Monday’s strong gains and saw modest losses on Tuesday as unemployment dropped to its lowest level since 1974, but wages still failed to keep pace with rampant inflation,” says AJ Bell investment director Russ Mould.

“Rising prices will be in focus this lunchtime as the US posts its CPI reading for August. July’s figures were a key factor in driving a mid-August rally in stocks, before Federal Reserve chairman Jerome Powell poured cold water on hopes of a ‘dovish pivot’ on interest rates, so this latest update is likely to garner plenty of market attention.

“Forecasts are for this measure of inflation to have dipped month-on-month and if instead prices have ticked higher once again it could knock markets off course.

“Posh mixers seller Fever-Tree regained a bit of fizz despite evidence of rising costs impacting on profit. The market would not have expected any different and some evidence that the brand has pricing power may have helped investors take a constructive view on the results.”

Supermarkets

“The latest Kantar data on the supermarkets made for grim reading for Morrisons which lost its status as the UK’s fourth largest supermarket to Aldi in what feels like a symbolic moment.

“The appeal of the German discounters continues to grow as household budgets are increasingly squeezed. This presents a challenge to Tesco and Sainsbury’s too.

“The fact that Aldi and Lidl offer not only bargain prices but also decent quality products and produce makes the established players jobs much harder.”

Ocado

“Ocado’s latest update on its UK retail business provides further evidence of the current cost-of-living pressures and also offers a reminder that web-based businesses are exposed to rising energy costs just like their bricks and mortar counterparts.

“It seems a long time ago that Ocado was riding high in the pandemic as there was a sudden acceleration in the shift to people buying groceries online.

“What really hits the model for a web-based weekly shop is when people start putting less in their virtual baskets.

“These smaller baskets cost just as much to deliver and so margins suffer. This is exacerbated for Ocado by the surging price of electricity, fuel and dry ice.

“Given Ocado’s UK operations are now a joint venture with Marks & Spencer it’s no surprise to see shares in the latter dragged lower too.

“The fortunes of the wider Ocado group have long been seen as being tied to its ability to sell its out-of-the-box online groceries solution Ocado Smart Platform to overseas grocery chains.

“However, investors have been starved of much news here with few new sign-ups to the platform. Ocado had previously blamed the pandemic and an inability to hold face-to-face meetings as a reason contract awards had slowed. An excuse which won’t wash any longer.”

These articles are for information purposes only and are not a personal recommendation or advice.