FTSE 100 higher ahead of ECB meeting, TikTok hit by cyber-attack, B&M, WH Smith and Inditex updates inject positivity into the retail sector and Centrica sees profits in line despite ‘normalised’ energy market

“The FTSE 100 moved higher on Wednesday with a broad spread of companies across multiple sectors enjoying solid gains,” says AJ Bell Investment Director Russ Mould.

“A recent fall in oil prices may not be good news for two big energy firms which bestride the index but for others it means a potential reduction in inflationary pressures and more scope for central banks to begin easing rates.

“The Bank of Canada and European Central Bank are expected to steal a march on the Federal Reserve and Bank of England by cutting rates over the next 24 hours. The market will also weigh US employment data and a reading from the services sector across the Atlantic.

“There are signs the US economy is starting to chafe under the relatively restrictive monetary policy it has faced for the last two-and-a-bit years. With inflation not proving too sticky there is scope for the Fed to start easing.

“Already under the glare of US politicians and regulators, Chinese video-sharing app TikTok will have done itself few favours as it falls victim to a cyber-attack. This may make it even harder for owner ByteDance to revive stalled IPO plans.”

Retailers: B&M, WH Smith, Inditex

“For all the negative talk about a washout year for retailers so far in 2024 and consumers being under the cosh from high interest rates, certain shopkeepers remain remarkably upbeat.

“B&M has reported results at the top end of guidance and is confident about the outlook. WH Smith is excited about its peak summer trading period and Zara-owned Inditex has delivered a bumper set of quarterly results.

“The combination of having a well-run business with a close eye on costs and efficiencies, together with offering products that customers deem to be good value for money or where there is limited competition, appears to be the magic formula for thriving in a sluggish market.

“B&M, WH Smith and Inditex are good representations of the retail sector as they target different parts of the market. Their achievements show the industry isn’t simply doing well in one or a handful of areas, success is more broad-based.

“B&M is pitched as being an affordable provider of general merchandise and appeals to individuals looking to get the most for their money. WH Smith exploits a captive audience, namely people who want something but cannot shop around as there are either few alternatives or they don’t have time if they are about to catch a plane or train. Inditex offers decent quality products aimed at the mass market.

“All three retailers have experienced pains in recent years but they’ve all come out of the other end smiling. However, that doesn’t mean life is going to be easy from now on.

“B&M’s results are notable for the lack of forward-looking commentary beyond opening new stores, focusing on operations and keeping prices low. WH Smith’s North American growth has ground to a halt which is worrying. It has rejigged product choices on the shelf and says early results have been encouraging. And Inditex is spending big to expand its logistics capabilities so there is execution risk for this initiative.

“What’s really interesting is how WH Smith is helping to revive the Toys R Us brand. It is slowly converting parts of its UK stores to house sections dedicated to toys under this retro name and it looks like the strategy is paying off.

“Many parents grew up with the Toys R Us brand as one of the main places they shopped as a child for the latest toys and playground crazes. Everyone loves a bit of nostalgia and affection towards the name could help lure people in, hoping to relive the olden days. This could also foster a new generation of shoppers who gravitate towards the brand for their toys.”

Centrica

“Usually when a company talks about returning to a more normalised environment that’s good news but for energy outfit Centrica it means the super-sized profits its wholesale operation enjoyed from a spike in commodity prices are a thing of the past.

“Hedging has helped shield the British Gas owner from the impact of a softer gas market in the first half of the year but the full impact is coming in the second half. In the circumstances there will be some relief the company still expects to meet full-year expectations.

“Centrica struggled before the energy crisis and moving forward we will find out if the business and current management can perform against a less helpful backdrop.

“Current boss Chris O’Shea has restored some stability to the group but he has been a lucky general and his record is not entirely unblemished – with the forced installation of prepayment meters creating controversy and drawing political fire.

“One lasting legacy of the energy price surge is an improved competitive position for British Gas which historically had been haemorrhaging customers to smaller rivals – many of which have now disappeared or are a shadow of their former selves.”

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