UK shares jump on positive inflation data, housebuilders and property firms soar, Dunelm pleases with results

“UK shares enjoyed a strong start to the day after a surprise fall in UK inflation data. The FTSE 250 index jumped 1.3% to 18,667, led by housebuilders, builders’ merchants and property companies,” says Russ Mould, Investment Director at AJ Bell.

“Weaker inflation fuels the argument that interest rates no longer need to go up, or at least not by much more. That would be positive for property-related companies as well as retailers because consumers would, in theory, no longer face additional pressures on their finances.

“The FTSE 100 displayed similar trends, with housebuilders and property groups soaring, while the likes of B&M, JD Sports and Next were in demand.

“We could still get another rate rise from the Bank of England tomorrow, but the latest inflation data increases the chance that a further rate hike could be the last in the current cycle.

“Later today we’ll get the US interest rate decision from the Federal Reserve, where it may decide to keep rates on hold.

“Wall Street was in the red last night, suggesting some nervousness on behalf of investors ahead of the Fed announcement.”

Dunelm

“Dunelm’s results illustrate a well-run business successfully navigating headwinds and delivering positive results for customers and shareholders. Although profits and margins fell in the full-year period, management remain upbeat about the company’s prospects. As far as investors are concerned, the future is more important than the past.

“Cost pressures are easing in parts of the business and the company continues to find new ways to launch value-for-money products. It is even lowering prices on certain products as input costs fall – that is a sign of a company which cares more about the customer than simply making as much money as possible.

“The demise of Wilko presents an opportunity for Dunelm to increase market share in home décor, selling affordable mirrors, picture frames and plant pots. If it can lure former Wilko customers into its stores, there is a good chance it can tempt them to buy other products, and then become fully-fledged Dunelm converts.

“Importantly, Dunelm believes profit growth will be driven by selling higher volumes of products. Many companies are growing earnings simply by jacking prices up, but that is a risky strategy as customers will get to a certain price point before looking elsewhere for a cheaper option. Dunelm prefers to focus on keeping products at good value price points.”

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