- FTSE 100 closes 78 points lower
- UK service sector slows in May, wage growth rises
- US markets seen lower after Independence Day
4.45pm: FTSE drops
London's main index was deep in the red at the close, losing 78 points to finish at 7,442 for a 1% loss on the day.
Stocks suffered heavy losses ahead of the US Fed minutes, noted IG's Chris Beauchamp.
"The optimism seen on Friday is now a distant memory, and stocks continue to lose ground following the return of US markets from their holiday. As we enter the summer period, it seems volatility will increase and the price action will become much more two-way, especially when earnings season begins next week," Beauchamp wrote.
"Fears persist that tonight’s Fed minutes will paint a more hawkish picture too, boosting the dollar and weakening stocks yet further.”
4pm: Pound flattens off after Gilts jiggle
As the FTSE dives lower, the pound has been roughly flat today at US$1.271.
Sterling had a wobble in the past few hours, with GBP/USD falling below 1.70 then rising above 1.73.
"Higher UK rates appear to be offering a modicum of support to the pound," said market analyst Michael Hewson at CMC Markets, after the UK government had to pay a rate of 5.67% to borrow £4bn.
This was at a gilts auction earlier today, with two-year government bonds sold at a coupon rate last seen in 2007, highlighting the rising cost of government borrowing amid soaring interest rates and volatile economic conditions.
Buyers of gilts are pricing in the likelihood of a 6% peak interest rate, following the largely unexpected 50-point rise to 5% in June.
"There has also been increasing speculation that the Bank of England may have to push rates above 6.5% to bring inflation under control, after this morning’s UK PMI numbers showed that rising wages were adding to higher costs even as input costs slowed," said Hewson.
"This comes across as overly excessive even with current levels of inflation, and would be enormously counterproductive. There is already plenty of evidence that shows disinflation is in the pipeline, which should help bring prices lower all on their own with rates at current levels."
The Footsie is down more than 80 points or 1.07% at 7,439, performing worse than the FTSE 250, which has levelled off at a 0.85% loss.
3.28pm: Tech stocks up, everything else down
Global stock indices are describing two stories right now: everything is in the red, apart from the 'super seven' US big tech giants.
The FTSE 100 and FTSE 250 are down 0.86% and 0.78% respectively, slightly lower since the Wall Street open, while European markets have lurched lower, led by France's and Italy's indices both falling over 1%.
Stateside, the Dow and S&P are both also in the red, down 0.36% and 0.11%, while the Nasdaq Composite is up 0.13%, with all of the seven largest companies in the green.
Providing a nice antidote to the tech theme, UK online grocery tech group Ocado Group PLC (LSE:OCDO) is the main blue-chip faller, down over 6%.
Facebook and Instagram owner Meta Platforms is in the lead, up 3.4%, with news that its rival to Twitter, Threads, is set to launch tomorrow in the US and UK.
3.16pm: Looking back
In June global stocks saw their second-best month of the year, according to financial intelligence firm Qontigo, which says this performance indicates "optimism about the global economy’s resilience and easing inflation concerns".
Hmm. Not everywhere, I would add.
It noted that the STOXX Global 1800 index surged 6.1% in dollars, contributing to a 15% gain for the year, while regional indices in Europe and America showed positive growth and volatility decreased with strong performance in the auto sector in particular
"Value investing outperformed while climate benchmarks and sustainability indices showed mixed results," it said.
Thematic indices focused on copper miners "stood out" while dividend and minimum variance strategies "faced challenges".
3.10pm: Drama in the Gulf
With Shell PLC and BP PLC (LSE:BP.) the biggest drags on the FTSE in terms of points today, we have a bit of drama on the high seas.
The US Navy has confirmed it prevented Iran from seizing two tankers in the Arabian Gulf after an Iranian navy vessel reportedly fired shots.
Chevron told news agencies one incident involved its Richmond Voyager, "very large" oil tanker, but there had been "no loss of life, injury, or loss of containment".
Iran nabbed a pair of oil tankers in a single week just over a month ago, a US Navy spokesperson said.
Earlier the British Navy reported shots had been fired in the area but did not mention which countries had been involved.
Later, US Navy spokesperson Timothy Hawkins confirmed the action. “The Iranian navy did make attempts to seize commercial tankers lawfully transiting international waters. The US Navy responded immediately and prevented those seizures,” he said.
Commander Hawkins did not report how the latest seizure, just off the coast of Oman's capital of Muscat, had been prevented.
"The vessel is operating normally. The safety of our crew is our top priority," Chevron said in a statement.
???? Shots fired at tanker in Gulf in interaction with unspecified security forces -UK
Refintiv ship tacking data shows the Richmond Voyager, a very large crude carrier managed by Chevron, matching the position and description provided by UKMTO and Ambrey.
Full Story →… pic.twitter.com/iLysU2HnbE
— PiQ (@PriapusIQ) July 5, 2023
2.51pm: Mixed US start filters out to FTSE and other global markets
London stocks have been dragged lower as Wall Street opened in negative mood after coming back after yesterday's 4 July holiday.
The FTSE 100 slumped another few points, down 64 for the day, or 0.86%, to 7,455.
Wider European markets are also in the red, with France's CAC 40 and Spain's IBEX 35 down 0.80%, followed by Germany's DAX, which is down 0.66%.
Among the main US indices, the Dow Jones is leading the declines, down 0.4%, but the tech-powered Nasdaq quickly erased its losses and was in positive territory within less than half an hour of the opening bell.
Among the tech giants, Apple, Amazon, NVIDIA and Meta Platforms were all in the green in early trades, with Microsoft marginally down and Tesla sliding 0.5%.
After reports yesterday that China plans to restrict exports of two key metals used to make computer chips - gallium and germanium - from the country, which is the world's biggest producer of the metals.
Chipmaker ASML was a notable faller, down 1.9%, with other semiconductor giants also in the red, with Intel down 1.3%, Qualcomm declining 1.7%.
On the Dow, the biggest fallers were Dow, Travelers, Intel, Boeing, Cisco and Caterpillar.
SHARES OF CHIPMAKERS DOWN ON CHINA CHIP MATERIAL EXPORT CURBS
— *Walter Bloomberg (@DeItaone) July 5, 2023
2.16pm: FTSE rout continues as rate worries continue
Lunchtime has not made traders any more optimistic, with the Footsie's losses increasing to 52 points, taking us to 7467.
Some are possibly reacting to a warning of risks that the Bank of England will have to push interest rates as high as 7% and trigger a “hard landing” for the UK economy to try and kill off inflation.
This scenario has been mooted by JPMorgan economist Allan Monks.
A hard landing for the economy "looks increasingly likely", he says.
JPMorgan's baseline forecast remains that the BoE's base rate will peak at 5.75%, but there is a risk that hikes as far as 7% will be needed if elevated wage growth continues to offset impact of rising mortgage rates, Monks said.
Worth noting, as it says in the copy, that JPM's base case is a 5.75% peak. But still grim this kind of number is even being contemplated.
You get to around 7% if you look at how high the mortgage interest burden could need to go and inflation expectations/core prices https://t.co/OAN8ItdjSt
— Tom Rees (@tomelleryrees) July 5, 2023
1.30pm: Market movers
Let's have a look at the main small and mid-cap movers around the market.
Risers
AIM-listed Glantus Holdings PLC (AIM:GLAN) skyrocketed over 85% after confirmation takeover talks were being held with US private equity investors.
Glantus said talks had been taking place with Accel-KKR over “a possible cash offer for [its] entire share capital”.
Tintra PLC (AIM:TNT) shares jumped 43% higher after the fin-tech group announced the full repayment and termination of a share placement deed with Fintech Leaders Fund (FLF).
FLF provided a prepayment of £2.6 million ($3.3 million) for Tintra shares back in December 2022.
Fallers
Shares in fashion retailer Quiz PLC (AIM:QUIZ) have lurched nearly 15% lower after the company reported challenging trading conditions amidst rising inflation.
Despite reporting a robust recovery for the year ending March 2023, with pre-tax profits of £2.3mln, a significant increase from approximately £800,000 a year earlier, Quiz has seen a downturn in sales recently.
SIG PLC (LSE:SHI) tumbled 10%after predicting full-year operating profit would be “towards the lower end” of market expectations.
The supplier of specialist insulation and building products across Europe said market conditions remained challenging and variable, with notably softer demand in May and June, particularly in Germany and France.
1.03pm: US set to open lower after holiday; FOMC minutes later
US stocks are expected to return cautiously from the Independence Day break, with investors awaiting the publication of minutes from June’s Federal Reserve meeting and focused ahead to Friday's, always key, non-farm payrolls report.
In pre-market trading on Wednesday, futures for the Dow Jones Industrial Average (DJIA) were down 0.5%, while those for the S&P 500 and for the Nasdaq 100 also both shed 0.5%.
Markets were shut Tuesday for the Fourth of July holiday, and only traded for a half-day on Monday when the DJIA added just 10 points, or 0.03%, to end at 34,418, while the S&P 500 rose 0.1%, and the Nasdaq Composite gained 0.2% in the first session of the second half of 2023.
Monday's gains built on a strong start to 2023, which saw the Nasdaq Composite close out its best first half of the year since 1983, while the S&P 500 notched up its best first-half advance since 2019.
Much today will depend on the June Federal Reserve Open Market Committee (FOMC) meeting minutes, scheduled for release at 2.00pm ET, which could shed some light on the path for interest rate hikes going forward.
TickMill Group’s market analyst Patrick Munnelly commented: "The minutes of the Fed's June meeting, where interest rates were left unchanged, may provide some clues. Fed Chair Powell has indicated that the pause should be seen as a temporary break, and a majority of policymakers believe two more rate hikes may be necessary this year.
"Market expectations currently suggest an 85% probability of a rate hike on July 26th, but there is more scepticism about additional hikes afterward. While not much new information is expected from the minutes, the discussion details may shed light on the reasons behind the pause.
Market participants will also be keen to identify the factors policymakers will consider when deciding on a potential July rate hike."
Elsewhere, New York Fed President John Williams is expected to speak at 4.00pm ET at the 2023 Annual Meeting of the Central Bank Research Association (CEBRA) in New York City.
On the data front on Wednesday, May factory orders will be released around 10.00am, with economists forecasting a rise of 0.6%, which would be greater than the 0.4% increase the previous month.
12.50pm: Everything must go £5 on new Asos site
Asos PLC has launched a new sample sale website - where evrything costs just £5.
The UK website offers clothes, footwear and accessories from the retailer in what the firm said was a "last chance to buy fashion you love, at prices that don’t break the bank”.
Reports suggested shoppers were flocking to the site in search for bargains.
But the stock market was unimpressed with shares down 1.7% at 362.43p.
New boss, José Antonio Ramos Calamonte is in the midst of a turnaround plan at the retailer.
Perhaps with his new broom he is looking to shift some unwanted stock.
The FTSE 100 is now down 41 points, at 7,479.01, just off an earlier low of 7,470.50.
12.35pm: Center Parcs sale hanging in the balance - reports
The planned £4bn sale of Center Parcs is said to be hanging in the balance after a number of prospective bidders dropped out of the race amid a sharp downturn in private equity dealmaking.
The Times reported that first-round bids were due towards the end of June, with Brookfield Property Partners, which has owned Center Parcs since 2015, taking a handful of parties through to the second stage.
However, two of the favourites - CVC, the buyout group, and Blackstone, which sold the upmarket chain of holiday villages to Brookfield - are no longer in the running, according to a source close to the process.
Aermont, the owner of Pinewood film studios, is also understood to have withdrawn from the sales process, which is being run by Bank of America, Barclays and Eastdil Secured.
Antin, an infrastructure fund, is still involved, as is GIC, Singapore’s sovereign wealth fund, although it is thought that neither wants to own Center Parcs outright, preferring to find a partner.
12.02pm: JD Sports avoids fine after admitting price fixing
JD Sports Fashion PLC (LSE:JD.) will not be fined after co-operating with a competition probe into suspected breaches of competition law.
The UK’s Competition and Markets Authority launched an investigation in 2021 into suspected breaches of the law by Leicester City Football Club and JD Sports.
Both Leicester City and JD Sports admit that they broke competition law by entering into an arrangement which limited competition in the sales of Leicester City-branded clothing, including replica kit, in the UK.
Michael Grenfell, executive director of enforcement at the CMA, said: "In this case we have provisionally found that Leicester City FC and JD Sports colluded to share out markets and fix prices - with the result that fans may have ended up paying more than they would otherwise have done."
Leicester City, which has just been relegated from the Premier League, has been fined £880,000 for its part after admitting breaking competition law.
But JD said by bringing the matter to the CMA's attention it was able to approach the CMA for leniency.
JD and the CMA subsequently signed a leniency agreement on June 30, under which the CMA has granted JD full immunity from any fines.
JD will continue to maintain complete and continuous cooperation with the CMA until the conclusion of its investigation.
The sports retailer stressed no current or former directors or senior management were involved in the offending conduct, which took place in 2018-2021.
It has taken a number of steps to strengthen its competition compliance programme and reaffirms its commitment to making the necessary resource available, internal and external, to ensure that this is embedded into its daily operations.
11.42am: AO World reaps rewards of decisive actions
The City took a generally positive view on AO World PLC (LSE:AO.) after the group’s annual results showed a swing to profit in the year to March 31.
Richard Hunter at interactive investor, commented: "Changing horses in midstream is no mean feat at the best of times, but AO World is showing signs that its decisive recent actions are beginning to take hold."
The online electrical retailer said that while revenue slipped 17% to £1.14 billion, down from £1.37bn a year earlier, the group returned a pre-tax profit of £7.6mln compared to a loss of £10.5mln before.
"AO's decision to streamline its business has so far paid off, given the shift back to profit," said Russ Mould at AJ Bell.
"It has closed operations in Germany, ended a trial with Tesco and ceased working with housebuilders, effectively saying it wasn't worth the time and effort."
An internal rejig of teams and a simplified product range are some of the other initiatives undertaken to right-size AO into a more profitable entity," he added.
"It's a good start, but the proof in the pudding will be sustained profit growth, and the market won't be able to judge its success until well into next year," Mould felt.
Hunter believes the company's decision to exit the German business was "difficult but necessary."
Analysts at Jefferies expect a return to top-line growth by the end of the coming financial year.
“With AO's profit potential proven, the next leg of the story should see the group look to return to top line growth while maintaining its P&L discipline.”
The broker increased its share price target to 100p from 90p and raised its 2024 financial year pre-tax profit forecast by 6% to £29.5mln. It has a buy rating on AO.
Peel Hunt kept a hold rating. “We anticipate limited changes to consensus, which is likely to remain at around GBP60 million of Ebitda and PBT of c. GBP30 million, although this implies some upgrades from lower end forecasts."
Shares were fairly muted in reaction trading down 0.3% at 80.58p although they are up 44% year-to-date.
Meanwhile, the FTSE 100 remains in the doldrums, down 38 points at 7,481.
11.10am: Keller soars as upgrades follow bullish update
Over in the FTSE 250 and shares in Keller soared 12% after forecasting full-year underlying operating profit would be "materially ahead" of market expectations, though the increase in earnings will be moderated by the latest interest rate hikes.
"Trading in the first half has remained strong and we anticipate a record performance in the period," the geotechnical engineering firm said.
Operational improvements in its North American foundations business have helped to recovery operating margins, and Suncoast is expected to deliver an improved performance despite lower production volumes.
Keller did note challenges from the "recessionary backdrop" in Europe, however, which is causing margin erosion and delays to some projects.
Analysts at Peel Hunt reacted by raising estimates and lifting the share price target on the stock to 1,110p from 1,070p.
The broker increased its pre-tax profit forecast for 2023 by 4% to £106mln (consensus £100mln) and for 2024 by 4% as well £120mln (consensus £108mln) “mainly on the back of higher expectations from the North American businesses.”
10.33am: FTSE 100 falls as wage growth rises in sector sector
The FTSE 100 has fallen to its lows for the session, down 46.32 points at 7,473.40 as the latest service sector PMI showed rising wages but an overall easing in the growth in prices charged by service providers.
Martin Beck, chief economic advisor to the EY ITEM Club said the news on inflation was "mixed."
He noted the survey reported that strong wage pressures emanating from a tight labour market were pushing up costs, which in turn were being passed onto consumers via higher prices.
"But while the costs and prices balances were again high relative to historical norms, they were lower than in recent months."
"If this picture is mirrored in the official data for wages and inflation, then it will allow the Bank of England to ease off the brakes," he felt.
"But it will take a little time for evidence of softer inflation pressures to emerge, so the EY ITEM Club thinks the rate rise cycle may not be over yet.”
Samuel Tombs at Pantheon Macroeconomics said: "The composite PMI is consistent with quarter-on-quarter growth in GDP in Q2 of about 0.3%, though we think a slightly weaker outturn is more likely, given that the composite PMI excludes the struggling construction and public sectors."
He felt the drop in the output prices balance to 59.8 in June, from 60.5 in May, modestly eases the pressure on the MPC to raise Bank Rate by a further 50bp next month.
But he thinks the MPC "will need to see price rises slow over a period of at least a few months before it is willing to call time on its hiking cycle."
He expects the BoE to lift rates by 25bp in August and September, before "standing pat in November."
9.55am: UK service sector slows, wage growth picks up
The UK service sector grew at its slowest rates since March amid a softer rise in new orders.
The S&P Global/CIPS UK Services purchasing managers’ index remained in growth for a fifth straight month at 53.7 in June, but down from 55.2 in May.
June data signalled a sustained but slower uplift in #UK #service sector activity (#PMI at 53.7; May: 55.2) as rising interest rates and concerns about the #economic outlook take their toll on customer demand. Read more:https://t.co/9NpeV9Xnag @cipsnews pic.twitter.com/lcByxoL5Vi
— S&P Global PMI™ (@SPGlobalPMI) July 5, 2023
The figure was in line with City expectations and unchanged from a ‘flash’ estimate.
Staffing levels expanded at the fastest pace since last September as improving candidate availability helped to boost recruitment but service providers recorded another sharp increase in their average cost burdens.
Rising salary payments offset falling energy and transportation bills, the report said.
Tim Moore, economics director at S&P Global Market Intelligence, said: "The service sector showed renewed signs of fragility in June as rising interest rates and concerns about the UK economic outlook took their toll on customer demand."
"Business activity increased at the slowest pace for three months, while the rate of new order growth eased further from April’s recent peak."
9.36am: Ofwat boss warns of price rises as defends role in Thames crisis
The boss of Britain’s water regulator Ofwat expects companies will have to raise prices to fund investment and pay for environmental improvements.
“We expect companies will request increases in bills,” David Black, Ofwat’s chief, told BBC Radio 4.
He defended the water watchdog’s role in the water crisis which has seen Thames Water and other companies take on huge amounts of debt.
He said generally it is fine to use debt financing to fund infrastructure investments, but when a company goes too far, they need to sort out their problems.
On Thames Water, he said: “Their performance needs dramatic improvement and we do think they need to sort out their finances. It is their responsibility to do that. “
Black condemned the “excessive” dividends paid by Thames Water to shareholders in the past, and the “excessive” executive pay packages.
“It is right to say that the dividend levels were excessive.”
“The excesses of executive pay also anger me,” he added.
9.20am: Pearson rises as UBS highlights A&Q potential
Shares in Pearson PLC (LSE:PSON) rose after UBS upgraded the educational publisher to buy from neutral with an increased share price target of 970p, up from 930p.
The upgrade helped propel the firm to the top of the FTSE 100 riser list, up 2.2% to 833p.
UBS noted Pearson shares are down 13% year-to-date, impacted mainly by disappointing financial year 2023 guidance and concerns around how generative AI could impact its higher education business.
But the bank sees “positive operating momentum in the business post Q1 results, and into Q2.”
“We think Assessment & Qualifications will outperform consensus expectations, potentially materially,” UBS said.
A&Q makes up around 54% of group EBIT and UBS has identified a number of strategic opportunities that imply A&Q could sustain growth at 6% p.a. in an “upside case.”
UBS is forecasting 5% growth in the division, up from 3% before, and above the market consensus of 3-4%.
But it has identified four strategic opportunities for A&Q with a combined c£550mln revenue potential.
These are: Pearson VUE expands its number of partners if supervised assessments replace coursework; US student assessment recovers to its peak market share; clinical benefits from an increasing number of US public schools conducting mental health assessments; and EdExcel increases its number of students from international markets.
Forecasts for Higher Education remain cautious “but there is upside risk if new leadership can deliver improvement in market share in line with guidance,” UBS added.
8.47am: FTSE 100 falls, L&G eases despite confident outlook
The FTSE 100 remains in the red, down 29 points, after the weak data from China.
Victoria Scholar at interactive investor said: "European markets have opened lower with just a handful of stocks on the FTSE 100 in the green as risk-off sentiment grips global markets after disappointing data from China."
Legal & General Group PLC (LSE:LGEN) fell 2.0% despite stating "confidence" in achieving its five-year ambitions is unchanged.
The FTSE 100-listed firm said a transition to a new accounting method will not hurt its "strategy, solvency or dividends". The IFRS 17 accounting standard for insurers was ushered in at the start of 2023.
"It only impacts the reporting of our annuity and protection businesses, changing the timing of recognition of earnings from these products but not the quantum," L&G said in a statement.
The insurer said it is on track to generate £8bn to £9bn of capital for the period between 2020 to 2024.
L&G said it has transacted GBP6.8 billion worth of pension risk transfer transactions year-to-date.
"There has been a step-up in the number of pension schemes approaching the insurance market, alongside an increase in GBP1 billion+ transactions, with several more such pension schemes intending to complete transactions this year,” L&G said.
“The pipeline for 2023 is the largest we have seen and we are on track for one of our busiest years ever."
8.28am: SIG tumbles after forecasting low-end profit
SIG PLC (LSE:SHI) tumbled 10% after predicting full-year operating profit would be “towards the lower end” of market expectations.
The supplier of specialist insulation and building products across Europe said market conditions remained challenging and variable, with notably softer demand in May and June, particularly in Germany and France.
Underlying operating profit is expected to be around £33mln in the year to June 30, with early impact of productivity initiatives partially offsetting demand weakness and inflationary impact on operating costs.
“Whilst timing of demand recovery remains uncertain, H2 profit is expected to benefit further from the ongoing productivity initiatives,” SIG said.
The firm said revenue of £1,424mln, would be flat on year-on-year, reflecting volume declines offset by input price inflation.
8.15am: Footsie slips as weak Chinese figures weigh
The FTSE 100 tumbled in early exchanges as figures from China showed the economic recovery may be running out of steam.
Susannah Streeter at Hargreaves Lansdown: “’There are fresh concerns about the global economy powering down as data from China’s service sector underlines how tepid the post-pandemic recovery has become, just as trade tensions between Beijing and Washington ramp up.”
At 8.15am, London’s blue-chip was down 18.96 points, 0.3%, at 7,500.76 while the FTSE 250 dipped 75.91 points, 0.4%, to 18,457.88.
In China, the Caixin China General Services PMI, which assesses a range of business conditions including output and orders, fell to 53.9 in June from 57.1 in May.
Asian-focused stocks weakened. Prudential fell 1.7%, Standard Chartered eased 0.8% and HSBC shed 0.9%.
The more uncertain outlook for China put pressure on oil prices with Brent crude falling 0.5% to US$75.89/barrel.
Legal & General fell 2.0% despite stating its "confidence" in achieving its five-year ambitions are unchanged.
The insurer said a transition to a new accounting method will not hurt its "strategy, solvency or dividends".
It said it is on track to generate GBP8 billion to GBP9 billion of capital for the period between 2020 to 2024.
AO World rose 3.8% after it reported a return to profit in the 12 months to March 31.
The online electrical retailer said it was confident of hitting its 5% EBITDA ambition in the short term and returning to top line growth in the medium term.
Peel Hunt said the numbers were in line with expectations and it doesn’t expect forecasts to alter significantly.
“We anticipate limited changes to consensus, which is likely to remain at around £60mln of EBITDA and pre=tax profit of c.£30mln, although this implies some upgrades from lower end forecasts.”
Keller Group was another share on the rise, soaring 6.2%, after stating it expects its full-year underlying operating profit to be "materially ahead" of market expectations, though the increase in earnings will be moderated by the latest interest rate hikes.
"Trading in the first half has remained strong and we anticipate a record performance in the period," the geotechnical engineering firm said.
7.53am: BoE considers forcing foreign banks to replace branches with subsidiaries
The Bank of England is considering plans to force more international banks to set up subsidiaries in the UK, according to a report in the Financial Times.
The move could reduce the thresholds requiring foreign banks with corporate business in the country to set up subsidiaries, with their own capital and liquidity.
The BoE is considering it as part of a review of the dramatic collapse this year of Silicon Valley Bank, according to the FT.
Subsidiaries, such as the one SVB had in place in London, enable local regulators to seize control of failing banks rather than leaving their fate to the discretion of their parents’ supervisors.
But compelling more banks to set up such units is likely to be unpopular with the industry, since full-blown subsidiaries are more expensive than merely maintaining branches in the UK, the report added.
7.41am: Topps Tiles backs guidance as sales growth remains strong
Topps Tiles PLC (LSE:TPT) backed full-year guidance after reporting sales growth remains strong.
“We remain confident that adjusted profit before tax in the second half will be materially higher than the first half, and that we will perform in line with market expectations2 for the year as a whole,” the company said in a statement.
In a trading update for the 39 weeks to July 1, the retailer said sales remained strong in the financial third quarter rising 4.4% year-on-year.
Sales at Topps Tiles remained robust, growing 2.5% on a like-for-like basis with gross margin improving as inflationary pressures eased and shipping costs fell.
The sales performance within the Online Pure Play brands remained “excellent,” with sales growth in excess of 60% in the third quarter, led by Pro Tiler Tools.
Topps Tiles took action to improve performance in its commercial business, Parkside, and has taken a £0.4mln restructuring charge.
But it believes the unit is well positioned for future growth.
7.28am: AO World back in profit, confident of hitting targets
AO World PLC (LSE:AO.) swung into profit for the full-year, despite a drop in revenue, and predicted a return to top line growth in the coming financial year.
The strong performance over the year illustrates the excellent progress against the group's plan to pivot the business to focus on profit and cash generation, it said in a statement.
The online electrical retailer reported a pre-tax profit of £7.6mln in the year ended March 31 compared to a loss of £10.5mln the year prior.
Revenue dipped 17% to £1.14bn from £1.37bn while EPS improved to 1.13p from LPS of 0.75p.
Adjusted EBITDA doubled to £45mln from £23mln.
The firm said it was confident of hitting its 5% EBITDA ambition in the short term and returning to top line growth in the medium term.
Chief Executive John Roberts, said: “he significant improvement in our profit performance speaks for itself and has been achieved by focusing on our core strengths and simplifying our operations.”
AO said revenue was in line with its plan, “driven by actions taken to remove non-core channels and loss-making sales, also reflecting weak consumer sentiment attributed to cost of living pressures.”
7.03am: FTSE seen lower ahead of PMI prints
The FTSE 100 is expected to make a muted start to proceedings ahead of a slew of service sector PMI readings.
Spread betting companies are calling London’s blue-chip index down by around 11 points. The index of London large-caps had closed down 7.54 points, or 0.1% at 7,519.72 on Tuesday.
US markets were closed for Independence Day while in Asia markets fell following a slowdown in the Caixin services purchasing managers' index in China which eased to 53.9 points in June from 57.1 in May.
In China, the Shanghai Composite was down 0.5%, while the Hang Seng index in Hong Kong was down 1.3%. The Nikkei fell 0.5% in Tokyo.
After the London close there will be the minutes from the latest Federal Open Market Committee meeting.
"Tonight's minutes may offer up further clues as to the Fed’s thinking when it comes to why they think that two more rate hikes at the very least will be needed by the end of this year," CMC's Michael Hewson noted.
Back in London, and aside from the service sector PMI print, updates from AO World and Topps Tiles will provide an early focus.