Our head of investment rounds up the morning's big news.
After falling to a near three-week low on Wednesday, the FTSE 100 is hovering around the flatline as European markets oscillate between gains and losses to start the session.
In a mega day for corporate results, banks are in focus with earnings from Deutsche Bank and Barclays (LSE:BARC) on a week marked by turmoil in the US mid-cap banking sector with First Republic Bank (NYSE:FRC) tumbling again on Wednesday.
Focus turns to first quarter US GDP figures out later today for clues into the strength of the world’s largest economy.
Shares in Meta Platforms (NASDAQ:META) soared almost 12% after-hours following first quarter earnings which saw revenue increase for the first time in four quarters. Earnings per share, revenue and daily active users also came in ahead of analysts’ expectations while guidance for the current quarter also outpaced expectations. However its reality labs division continues to nurse heavy losses.
Beijing’s unwind of its anti-Covid lockdown measures has provided a tailwind to Facebook and Instagram’s parent company thanks to demand from advertisers in China looking to capitalise on the release of post-pandemic pent-up demand. Meta has been focusing on the ‘year of efficiency’ with heavy job cuts to control costs after last year’s ‘tech wreck’ reality check for the sector.
Shares in Meta fell sharply last year but have been rebounding since the lows late last year, up by over 110% during the past six months. Investors have been returning to US growth stocks this year as the Fed approaches the peak of this rate-hiking cycle and as the headline rate of inflation eases stateside.
Unilever (LSE:ULVR) reported first-quarter underlying sales up 10.5% to 14.8 billion euros, ahead of expectations for 14.12 billion euros. Underlying sales rose by 10.5%, beating forecasts for +7.57% and it is expecting full-year growth at least at the upper end of its guided range for 3-5%.
The consumer goods giant behind brands such as Dove, Domestos, and Hellmann’s has been raising prices to offset the cost inflationary backdrop, with quarterly price growth at 10.7%. This echoes a broader theme across the sector with Nestle SA (SIX:NESN), Procter & Gamble Co (NYSE:PG), Reckitt Benckiser Group (LSE:RKT) and Danone (EURONEXT:BN) all passing on additional cost to pressures to consumers via higher prices in an attempt to preserve margins.
The consumer staples sector, mostly selling essential goods, is viewed as a relative safe-haven within the equity space to navigate the economic storm clouds. As a result, Unilever has managed to outpace the FTSE 100 in 2023 up over 6% versus the UK index up less than 4%.
However the big risk for Unilever is that amid the cost-of-living crisis, price sensitive individuals and households trade down to unbranded, cheaper supermarket substitutes instead, weighing on volumes. So far Unilever’s price increases have been successfully offsetting weaker demand with revenue outpacing forecasts.
Sainsbury (J) (LSE:SBRY)’s reported full-year underlying pre-tax profit of £690 million versus £730 million year-on-year. However it issued upbeat guidance for profit to hit between £640-700 million this year, ahead of analysts’ forecasts for £631 million with at least £500 million of retail free cash flow.
Sainsbury’s is facing pressure both on the demand and supply side of the equation. Rising bills for food, energy and wages are putting pressure on operating costs, while demand is also struggling amid the squeeze on household budgets and the fall in real wages across the UK. Nonetheless the outlook is starting to look more positive amid hopes that cost inflation will ease this year.
With the fiercely price competitive Germany discounters Aldi and Lidl, Sainsbury’s has no choice but to keep prices low in order to preserve market share, rather than passing on additional cost pressures to consumers. Sainsbury’s remains the UK’s second largest supermarket after Tesco whereas Aldi overtook Morrisons to enter the Big Four last year.
Earlier this month Sainsbury’s began offering lower prices to its Nectar loyalty card holders as it looks to lure customers away from Tesco’s Clubcard scheme.
Sainsbury’s has been a stock market winner so far in 2023, rallying by over a quarter since the beginning of January, sharply outperforming the wider market as well as rival Tesco which is up by around a fifth.
Taylor Wimpey (LSE:TW.)’s total order book value stood at £2.38 billion on 23rd April, rising from £2.15 billion in the first two months of the year. The housebuilder reiterated its full year guidance and continues to expect 2023 completions of between 9,000 and 10,500. CEO Jennie Daly said, ‘we have seen continued recovery in demand’.
The housing market has been under pressure following the chaos around the mini-budget last September which sent mortgage rates sharply higher. Since then, with political and economic order somewhat restored, mortgage rates have started to ease while hopes that the Bank of England is near the peak of its rate hiking cycle has also helped drive an improved outlook for the sector. Spring also tends to be an upbeat selling season for the housing market and expectations are for build cost inflation pressures to ease this year.
Year-to-date Taylor Wimpey is up 20%, reflecting the improving trajectory for the housing market with the ongoing shortage of housing supply, also supporting the sector.”
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.