Interactive Investor

Must read: Federal Reserve, oil, JD Sports slumps, Topps Tiles

Our head of investment rounds up the morning's big news.

4th January 2024 09:40

Victoria Scholar from interactive investor

      GLOBAL MARKETS

      After the FTSE 100 hit a two-week low on Wednesday, the UK index has opened higher amid broader gains across Europe. Retail is in focus, with Next (LSE:NXT) at the top of the FTSE 100, while JD Sports Fashion (LSE:JD.) has plunged to the bottom, highlighting how a two-speed retail sector is separating the winners from the losers. 

      In the latest FOMC minutes, Federal Reserve officials suggested interest rate policy could ‘remain at a restrictive stance for some time’, a blow to those hoping for a rate cut as soon as March.  The Nasdaq fell for the fourth straight session, but futures are pointing to a slight bounce back today. 

      Oil prices are trading higher today, with Brent crude and WTI up by over 1% each. Both closed higher by around 3% on Wednesday logging the largest one-day percentage increase since November. Concerns about tensions in the Red Sea and a shutdown of an oilfield in Libya have added to supply worries. Plus, API US crude oil inventories figures saw a bigger than expected drawdown, also supporting positive price action.

      JD SPORTS 

      JD Sports has issued a profit warning, sending shares sharply lower. The company expects full-year profit before tax and adjusted items of £915-935 million, down from previous estimates for around £1.04 billion. 

      Pressures from the cost-of-living crisis have dampened consumers’ appetite to spend on retail. As a result, JD Sports has been forced to offer more promotions and discounts which are eating away at its margins. The sports retailer is also grappling with increased cost pressures amid the elevated inflationary backdrop and unseasonably mild weather conditions, hurting demand for warmer winter clothing. 

      While December is typically a strong month for consumer spending over the festive period, January and February look set to be even more challenging as shoppers rein in spending, focusing on paying off debts and increasing savings instead after the Christmas blowout. 

      Shares in JD Sports have plunged by more than 20% today and are on track for their biggest daily drop on record, wiping out almost a quarter of the company’s market cap. After a strong performance for its shares in the final quarter of 2023, today’s price action has erased those gains and more in a painful day for its investors. 

      Until now it has felt like JD Sports has been successfully navigating the pressures from the cost-of-living crisis. But today is somewhat of a reality check, highlighting that sports goods demand is waning and it is hurting the big players in the space.

      TOPPS TILES 

      Topps Tiles (LSE:TPT) reported quarterly like-for-like sales down 7.1%. It expects group 2024 profits to be weighted towards the second half. Pressures on homeowners from higher mortgage rates and elevated inflation have hurt consumer spending on home improvements, particularly after the Covid-era DIY boom. Despite this, Topps Tiles says its cash flow remained strong in the quarter and says it is well positioned to respond to market conditions. 

      Shares in Topps Tiles have plunged by 6% today in a weak start to the year, landing the stock up just 1% over the past year in a disappointing performance for investors.

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