Markets Defused is an easy-to-understand and straightforward recap of the day’s most engaging business and stock market news.
- National Grid and SSE boosted by UK’s new power ‘superhighway’
- Sainsbury upped market share, UK grocery inflation saw new spike
- GBP jumped versus Dollar and Euro on softer UK jobs
- Home Depot investors can’t be shocked by profit warning
- Roger Federer’s On Holdings rallied despite supply issues
- Tencent Music hit as social business dragged
National Grid and SSE boosted by UK’s new power ‘superhighway’
Investors in National Grid PLC (LSE:NG.) and SSE PLC (LSE:SSE) each saw their shares trade up 1% on Tuesday, rising to 989p and 1,896p respectively, after the British authorities greenlighted a so-called “electric superhighway” project.
It will see high volumes of renewably generated power transmitted between Scotland and England.
Ofgem approved the project, called the Eastern Green Link 2 (EGL2), which will be a subsea electricity transmission project connecting Peterhead in Scotland with Drax in Yorkshire.
Its predicted to cost £4.3 billion and is being described as the largest ever single investment in the UK's electricity transmission infrastructure. The project will comprise a 507-kilometer-long high-voltage direct current (HVDC) cable capable of carrying enough renewable electricity to power two million homes.
EGL2 will be built as a joint venture between National Grid and SSE and its scheduled to be operational by 2029 as part of the UK's effort to modernise its electricity grid and support net-zero targets.
It is one of 26 critical energy projects said to be in the process of being fast-tracked by Ofgem.
Sainsbury upped market share, UK grocery inflation saw new spike
J Sainsbury PLC (LSE:SBRY) was a standout name amongst British supermarkets on Tuesday, gaining market share – but most headlines around the sector’s monthly survey data centred on a new spike in prices.
Grocery price inflation rose for the first time in 17 months, increasing by 1.8%, over the four weeks to August 4, 2024. The increase in grocery prices was primarily driven by the rising costs of vitamins, minerals, fruit juices, and chocolate, according to retail market researcher Kantar.
At the same time, the UEFA Euro 24 football and the Olympics were said to be factors in a surge of spending on alcohol and snacks.
An estimated £10 million was spent on beer across the counter in the UK on the weekend of the Euros final, Kantar noted, meanwhile, Wine sales also rose by 35% on the day of the Olympics opening ceremony.
Over at Sainsbury’s, the UK’s second largest supermarket – behind Tesco (Tesco PLC (LSE:TSCO)) saw its largest market share gain since 1997, increasing from 14.8% to 15.3%.
Kantar noted a competitive landscape among supermarkets has it said has led to an increase in promotions and discounts – nevertheless, price inflation was still forced higher.
GBP jumped versus Dollar and Euro on softer UK jobs
The British Pound surged past $1.28 on Tuesday after the UK's unemployment rate unexpectedly declined.
At $1.2825, GBP was up 0.46% against the dollar and was up 0.25% at €1.1707 against the Euro.
The Office for National Statistics reported that the unemployment rate fell to 4.2% in June, surprising economists who had anticipated an increase to 4.5%. This marks the first drop in the unemployment rate since December.
Alongside the falling unemployment rate, Average Earnings grew by 5.4%, surpassing expectations of 4.6%. However, this was a slight deceleration from the previous growth rate of 5.7%.
The stronger-than-expected jobs data has been taken as a potential signal that speculated future interest rate cuts by the Bank of England may not be so necessary.
Attention will turn to key inflation data scheduled for release on Wednesday.
Home Depot investors can’t have been shocked by Tuesday’s profit warning
Home Depot (Home Depot Inc (NYSE:HD, ETR:HDI)) investors were well braced, with the share up slightly in New York, despite downgraded forecasts for full-year sales and profit.
Consumer demand for home improvement projects has weakened amidst higher interest rates and broader economic uncertainty, the DIY retailer highlighted (somewhat unsurprisingly).
The company noted that higher mortgage rates and persistent inflation have led customers to delay major home improvement projects, further impacting sales.
Home Depot reported a 3.6% decline in US comparable sales for its second quarter, which was notably worse than a 2.5% drop predicted by Wall Street analysts.
Customer transactions decreased by 1.8%, and the average amount spent by customers also declined.
Revenue came in at $43.18 billion, a shade above the $43.06 billion predicted by Wall Street, whilst earnings per share was reported at $4.60 which similarly outperformed the market estimate.
Home Depot said it now expects to see annual comparable sales to fall by 3% to 4%, a significant downgrade from its previously estimated 1% decline. It also expects earnings per share to decrease by 2% to 4% for the year, compared to earlier forecasts that eyed slight growth.
Roger Federer’s On Holdings rallied, putting front-foot forward despite supply issues
Shares in On Holding AG (NYSE:ONON), the sports shoe company made famous by brand ambassador and shareholder Roger Federer, were on the front foot in Wednesday’s early deals after reporting financial results.
Sale for the second quarter totalled 567.7 million Swiss Francs (CHF), and was up some 27.8% compared to the same trading period last year and was ahead of market consensus of CHF 561.6 million.
The company pointed to tight stock volumes as a drag on its sales performance, especially in its direct-to-consumer business.
Earnings (adjusted EBITDA) rose 45% to CHF 90.8 million, compared to a forecast of CHF 85.9 million, though gross profit margin was slightly short of analyst expectations pitched at 60.1%.
On kept an upbeat guidance forecast, but did not upgrade. It currently estimates it will increase net sales by at least 30% this year, which would take it to CHF 2.26 billion. Whilst it said it expected gross profit margin to reach 60%.
In New York, On Holdings shares pushed around 4% higher to $41.12 – despite beginning pre-market trade on the back foot. Roger Federer’s footwear brand is up nearly 50% in 2024, having begun the year priced at around $26 per share.
Tencent Music hit with social segment dragging on financials
Tencent Music Entertainment Group (NYSE:TME) stock fell more than 10%, in Tuesday’s early deals, after it reported lower revenue for its second quarter.
It would’ve been an otherwise upbeat operating performance but for increased regulatory scrutiny over streaming in China, which resulted in a sharp drop in revenue from live streaming features.
TME’s revenue for the quarter amounted to $999 million (RB 7.16 billion), and was down for the fourth quarter in a row. At RMB 1,07, earnings per share was below a market forecast pitched at RMB 1.10.
Online music services performed well, however, with revenue up 27.7% to $746 million (RMB 5.42 billion) thanks to a 17.7% increase in paying subscribers - which reached 117 million.
Its social entertainment segment saw a significant 42.8% decrease in revenue, however, as Tencent’s saw the discontinuation of several live-streaming features due to rule changes in China.
The New York listed ADR securities are still some 50% higher in 2024 to date.