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The pound today dipped to a fresh 37-year low after retail sales volumes fell by more than expected in August.
The 1.6% month-on-month decline reported by the Office for National Statistics, which compared with City forecasts for a fall of 0.5%, was driven by a broad range of sectors as price pressures intensify.
On the 30th anniversary of Black Wednesday, the poor retail update kept up pressure on sterling at below $1.14.
FTSE 100 Live Friday
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Retail sales slide hits sterling
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FedEx profits warning as volumes fall
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Markets under pressure, Royal Mail shares slide
US futures hit two-month low after FedEx profit warning
13:35 , Simon Hunt
Futures slipped to two-months lows on Wall Street this morning after investors were spooked by a profit warning from delivery giant FedEx.
Nasdaq futures were down 1%, while S&P futures fell 0.8%.
Yesterday, FedEx missed analyst expectations on sales and profits and said it would withdraw its previous financial forecasts, as it expected sales to worsen in the months ahead. The announcement sent shares in the delivery firm sliding more than 16%, one of the highest single-day drops in its history, and pushed share prices down at rivals UPS and Amazon 7.1% and 2.6%.
“Last night’s profit warning from FedEx won’t have helped sentiment,” said AJ Bell’s Russ Mould.
“As another stock which is a classic bellwether for economic activity, the delivery group said it expected business to weaken further, which might explain why Royal Mail’s shares dived 10% this morning as investors fear it too has weak near-term prospects.”
Recession fears grow as number of businesses going bust rises in August
12:43 , Simon Hunt
A sharp rise in the number of companies going bust has stoked fears about a UK recession and the threat posed to the economy by inflation and the cost-of-living crisis, especially to small businesses.
Official government figures for August reveal that almost 2,000 registered companies became insolvent in the month in England and Wales, up 43% from 2021 and a rise from pre-pandemic levels in 2019 of 42%. It was also the third-highest monthly number recorded since January 2019.
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Naked Wines calls in founder and former CEO after shares get trampled
11:50 , Simon Hunt
After a share-price slump and a sudden, board-level resignation sent a chill through shares in Naked Wines this week, its former CEO is coming back to help it dress up revised “operational and financial plans”.
Rowan Gormley also has some skin in the game. He is a material shareholder in the Norwich-based tipple-by-subscription company which he founded in 2008, holding a stake of almost 3%. The South African entrepreneur was also the CEO of Majestic Wine after it bought Naked Wines.
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Capita shares bounce after £150 million fintech disposal
10:51 , Simon Hunt
Shares in Capita surged 9% to 28p this morning after the professional services company announced the sale of its fintech business Pay360 in a £156 million deal.
It’s the latest in a suite of disposals by the company as it seeks to slim down operations and pay off large sums of debt.
Capita finished last year ahead of its disposals target, having made over £700 million from sales of its services brands including pocketing £115 from IT consultancy Trustmarque in March 2022 and £40 million from software business AMT Sybex in December 2021. The firm had racked up over £1 billion in net debt by the end of 2020.
FedEx warning hits Royal Mail, downgrade for Land Securities
10:14 , Graeme Evans
Royal Mail shares came under more pressure today as investors reacted to a profits warning by delivery giant FedEx.
The US company, widely regarded as a bellwether for the global economy, withdrew full-year results guidance after reporting weaker-than-expected volumes internationally as well as in its home market.
The update raised fears over the outlook for Royal Mail’s Europe-focused GLS parcels delivery business, which has been a strong performer at a time when the strike-hit UK postal operation is expected to be materially loss making.
FedEx shares slumped 16% after Wall Street’s closing bell on Thursday and Royal Mail dived more than 10% or 25.7p to 224.2p, leaving the FTSE 250-listed stock at its lowest level since September 2020.
Analysts at JP Morgan reflected the uncertain outlook by cutting their recommendation on Royal Mail shares to ‘neutral’ with a lower target price of 270p.
The gathering economic storm clouds also meant a big fall for shares in property giant Land Securities after Goldman Sachs placed a “sell” recommendation on the Piccadilly Lights and Cardinal Place shopping centre owner.
The US bank cut its target price to 500p, causing shares to fall 29p to 589p at the top of the blue-chip fallers board. The wider FTSE 100 index dropped 8.58 points to 7273.49, with this resilient performance owing much to the 2% rise for heavyweight AstraZeneca after it reported two potential drug approvals in the EU.
The FTSE 250 index, which is back in bear market territory after a drop of more than 20%, fell another 0.6% or 115.66 points to 18,770.66. In the FTSE All-Share, Capita rose 0.6p to 26.15p following a deal to sell payments business Pay360 for about £150 million.
Royal Mail slides 10%, FTSE 100 lower
09:02 , Graeme Evans
Weaker mining stocks and the blow to sentiment from last night’s FedEx profit warning meant the FTSE 100 index dipped 34.57 points to 7247.50.
Land Securities fell more than 3%, off 21.4p to 597p, after Goldman Sachs gave the retail landlord a “sell” recommendation and new 500p target price.
The FTSE 250 index, which is back in bear market territory after a drop of more than 20%, fell another 120.33 points to 18,765.99.
Royal Mail slumped 10% or 25.3p to 224.6p after the FedEx warning raised fears over the outlook for the company’s Europe-focused GLS parcels delivery business. A cut in JP Morgan’s price recommendation to 270p added to the pressure.
In the FTSE All-Share, shares in outsourcer Capita rose 0.6p to 26.15p as it announced plans for the sale of Pay360 in a deal with Access PaySuite that values the payments business at around £150 million.
Retail sales add to recession picture
08:20 , Graeme Evans
The big decline in retail sales volumes for August will add to speculation that the UK is already in recession.
Sales volumes fell in every major category for the first time since July 2021, when all Covid restrictions on hospitality were lifted.
Non-food stores sales volumes fell by 1.9% over the month, with department stores 2.7% lower and clothing stores down 0.6%. Sales volumes for online retailers declined by 2.6% and food store volumes by 0.8%.
The latest gloomy update on the UK economy left sterling just above its recent 37-year low at around $1.14 today.
Capital Economics said: “Retail sales will probably continue to struggle as the cost of living crisis hits harder in the coming months. But nonetheless the Bank of England will still have to raise interest rates aggressively.”
FedEx warning hits US market, FTSE 100 lower
07:46 , Graeme Evans
A profits warning by FedEx after last night’s closing bell in New York means traders are braced for a weak session when Wall Street reopens later.
FedEx shares slumped almost 17% in after-hours trading as the Memphis-based packages delivery company withdrew full-year results guidance issued at the end of June.
The move, which has been accompanied by an acceleration in cost reduction initiatives, came as it reported a 21% fall in earnings for the first quarter of its financial year to 31 August.
Chief executive Raj Subramaniam said: “Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the US.
“We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first quarter results are below our expectations.”
The Dow Jones Industrial Average lost 0.6% and the S&P 500 fell 1.1% yesterday as expectations for another 0.75% rise in US interest rates were reinforced by stronger-than-expected retail sales and jobless claims figures.
Futures markets are pointing to another decline at the end of what’s been a disappointing week for US investors. In the UK, CMC Markets expects the FTSE 100 index to follow yesterday’s flat performance by opening 40 points lower at 7242.
Rate rise expectations in the US have left the pound back near to its 37-year low of just above $1.14. Oil prices weakened yesterday to leave Brent crude at $91 a barrel.
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