Must read: FTSE 100, record food prices, Royal Mail, boohoo's crash

If it's not one thing, it's another at the moment, and so it is today with a range of macroeconomic and company news adding to post-budget blues. Our head of investment has the latest.

GLOBAL MARKETS 

Risk-off sentiment is gripping equity markets, with European bourses opening in the red and the FTSE 100 down heavily. There are only two or three stocks trading in the green on the UK index, while almost all stocks are under pressure. Rolls-Royce Holdings (LSE:RR.), Ocado Group (LSE:OCDO) and Legal & General Group (LSE:LGEN) are trading at the bottom of the FTSE 100 each down by more than 5%. 

Overnight, China’s internationally traded yuan fell to the lowest level on record against the US dollar, on the back of a strengthening greenback. Asian equities had a tough session, with the Hang Seng index shedding more than 3%, while the Hang Seng Tech index nursed even heavier losses.

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Oil prices are trading lower with WTI and Brent crude shedding more than 2% each, pressured by the strength of the US dollar and concerns about global demand.

POUND STERLING 

The pound is on the back foot once again, with GBP/USD trading down by over 0.5%, dipping below $1.07 as the downtrend continues after yesterday’s brief respite. Part of the weakness has been driven by demand for the greenback, with the US dollar index hitting a fresh 20-year high on the back of rising US treasury yields. 

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On top of that, the IMF’s open critique of the UK government’s fiscal plans are weighing on the pound. In an unprecedented move, the fund said the UK’s measures ‘will likely increase inequality’, suggesting the government should ‘re-evaluate’ its tax measures. Opposition leader Kier Starmer said the IMF statement shows just what a ‘mess’ the government has made. 

This is adding to existing concerns among traders and investors about the Chancellor’s debt-dependent tax cutting agenda, as well as the worrying trajectory for UK inflation and economic growth.

ROYAL MAIL 

The UK’s Communication Workers Union (CWU) has called for a further 19 days of strike action against Royal Mail (LSE:RMG) amid a dispute over pay. According to the trade union, which represents 115,000 postal workers, these strikes will be held across October and November, adding to the existing strikes planned for September into October. 

Industrial action continues to plague Royal Mail as the two sides remain in stalemate. The latest walkouts will threaten the service in the critical run up to the festive season and during the all-important Black Friday / Cyber Monday period, resulting in losses of £1 million a day, according to Royal Mail.

The dispute is dragging on and on, having kicked off early this summer and will have a negative impact on its next set of financial results in November. Royal Mail is also dealing with rising costs on the back of inflation, as well as the long-term structural decline in letter volumes. Shares have plunged almost 50% over the last six months.

BRC SHOP PRICE INDEX 

According to the latest BRC-NielsenIQ price index, UK food prices rose at their fastest pace on record in September, up 10.6%, jumping from 9.3% in August. Fresh food also hit a record hit up 12.1% in September versus 10.5% in the previous month. 

The war in Ukraine has sharply increased prices of sunflower oil, wheat and fertiliser which have contributed to food price inflation. Non-food inflation also increased on the back of rising transport costs. This year’s depreciation of the pound has also made imports from abroad considerably more expensive, adding to pressures on households and businesses. This week’s plunge in sterling could add to inflationary pressures facing the UK, and add to the conundrum facing the Bank of England on how to tackle it.

BOOHOO 

Boohoo Group (LSE:BOO) has downgraded its full-year 2022-23 outlook. The fashion brand has reduced its earnings margin guidance from 4-7% to 3-5% and cut its revenue expectations from ‘low single digits’ to a fall, sending shares sharply lower. Net revenue slumped by 10% in the first half of the year with international revenues down by 17% with forecasts for a similar rate of revenue decline in the remainder of the financial year. 

The cost-of-living crisis and stiff competition for the fickle fashion consumer are taking their toll on the fast fashion online brand. Boohoo is struggling with weakening consumer demand as the UK economy heads towards a recession.  It has also been grappling with increasing return rates perhaps as consumers now have less money to spend on discretionary items like fashion. 

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Boohoo has been trying to lure customers through aggressive discounting, offering up to 75% off in their sales at the moment. However, by reducing prices to compete with the likes of PrettyLittleThing and Primark, margins are likely to suffer. Shares in Boohoo have had a torrid time lately, shedding more than 85% over the last year.

BURBERRY 

Burberry Group (LSE:BRBY)’s chief creative officer Riccardo Tisci is stepping down following his spectacular London Fashion Week catwalk reveal this week. Daniel Lee is taking over as CCO having been creative director at Bottega Veneta from 2018-2021. 

These are big boots to fill following Tisci’s departure after a successful near five-year tenure as creative officer. He helped Burberry to compete with the top tier luxury brands and widened the brand’s appeal to more diverse audiences. Lee brings a wealth of experience having worked at Bottega Veneta, Celine and Balenciaga. 

This is the latest in a major C-suite shake-up for the trench coat maker, having appointed a new CEO Jonathan Akeroyd in March and after its CFO Julie Brown announced last week she plans to step down in April. 

Investors are cheering the appointment of Lee as CCO this morning, with the stock up by almost 3%. He is taking over at a time when the brand is in a strong position after a highly successful catwalk show at London Fashion Week this week.

However, Burberry may face a challenging time ahead, with slowing global growth which could weigh on consumer demand from its key markets including China. So far this year, the share price performance has been relatively resilient given the pressures from China’s Covid lockdowns, cost inflation, supply chain bottlenecks and the backdrop of stock market volatility.