Interactive Investor

Must read: FTSE 100 rallies, UK shop prices, Pets at Home, Saga

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

30th January 2024 09:32

Victoria Scholar from interactive investor

      GLOBAL MARKETS 

      European markets have opened higher with the FTSE 100 leading the charge thanks to WPP (LSE:WPP), which has surged over 5% on a positive trading update ahead of its capital markets day today.

      Meanwhile, Diageo (LSE:DGE) has sunk to the bottom of the index after its first half sales fell short of expectations, and HSBC Holdings (LSE:HSBA) is facing a fine of £57.4 million for failing to protect customer deposits.

      Focus stateside later today will be on results from Alphabet Inc Class A (NASDAQ:GOOGL), Microsoft Corp (NASDAQ:MSFT), Snap Inc Class A (NYSE:SNAP), and Pfizer Inc (NYSE:PFE). It is shaping up to be a very busy week for markets with key earnings from US mega-cap tech as well as important central bank rate decisions from the Fed and the Bank of England.

      BRC SHOP PRICE INFLATION

      UK shop prices increased by 2.9% in January according to the British Retail Consortium, down sharply from 4.3% in the previous month. Food inflation fell from 6.7% in December to 6.1% in January, with rises in alcohol offset by a fall in the price of milk and tea.
       
      As the Bank of England prepares to decide on interest rates this week, today’s figures provide further confirmation that inflation in the UK is moving in the right direction. However, food price growth in particular remains sharply above where the central bank would like it to be. While the disinflationary trend provides support for the case for rate cuts this year, there are still several unknowns including the outlook for energy prices, and the turmoil in the Middle East, both of which could lead to an unwanted resurgence in inflation.

      PETS AT HOME

      Pets at Home Group (LSE:PETS) has cut its full-year profit forecast – it now anticipates underlying profit before tax of around £132 million versus its previous estimate for £136 million. Its vet business remains economically resilient given the essential nature of this service, with third-quarter revenue up 13.4% but other parts of its business are struggling.
       
      The cost-of-living crisis, elevated inflation and higher interest rates have squeezed household budgets, reducing discretionary spending in the economy on non-essential items. Individuals and families have been making cutbacks including on spending on their furry friends, with Pets at Home facing a drop in demand for its pet supplies, toys and accessories as a result.
       
      During the pandemic, pet spending boomed when foods, restaurants, and holidays were off limits and consumers had more time and spare income to devote to their pets. Shares in Pets at Home surged back then to reflect this trend but since the highs in September 2021, the stock has largely been trading downhill.

      SAGA

      Saga (LSE:SAGA) expects underlying profit to more than double versus the previous year, upgrading its guidance again. It also anticipates revenue growth of between 10-15%.
       
      Saga was hit hard during the pandemic during lockdowns when travel restrictions meant that cruises were entirely out of bounds. However, pent-up post-Covid demand continues to go from strength to strength long after the end of the pandemic. Saga described its Cruise and Travel businesses as having an ‘outstanding year’.
       
      Its insurance business however continues to drag on its performance, weighed down by the elevated inflationary backdrop and a drop in policy volumes. It said the dynamics in insurance remain ‘challenging.’
       
      Shares in Saga have surged as much as 7% at one stage this morning. Its year-to-date gain now stands at an impressive near 12% in under a month. However, longer term the stock has had an extremely challenging time – it is down around 90% over the past five years.

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