FTSE 100 Live October 6: Natural gas at record high, Tesco bullish as profits rise
he global energy crisis continues to be the main concern of markets after a sharp rise in UK natural gas futures has heightened fears of significant inflationary pressures this winter.
The price remains above 300p per therm, or the oil equivalent of $ 200 per barrel. European markets were scared by the developments, with the FTSE 100 index expected to open lower today.
Supermarket giant Tesco, however, encouraged investors, reporting a sharp rise in half-year profits as well as expectations for a better-than-expected overall fiscal year.
FTSE 100 lower
The FTSE 100 index is down 1%, down 68 points to 7009.04 as the uncertain week for global markets continues.
Major slaughterers include Next, which gave up its recent gains to fall 2.5%, and beverage giant Diageo with a 2% drop.
Tesco shares jumped 5%, up 12.15 pence to 265.15 pence as chief executive Ken Murphy announced a £ 500million share buyback program along with better interim results provided that.
The strong performance pushed shares of rival Sainsbury’s above the 300p threshold, having already risen sharply this week on the back of speculation about further consolidation in the supermarket sector. Shares were up 3.7p to 303.1p.
The UK-focused FTSE 250 index is down 216.06 points to 22,514.59, down 1%. Recruitment firm Page Group rose 6% after raising its profit forecast for the year to around £ 155million.
Tesco shares surge on profit leap, promise a good Christmas
TESCO raised its profit forecast and today launched a £ 500million share buyback, pleasing the city and easing pressure on chief executive Ken Murphy.
Until today, at least, the city was not sure Murphy had a blueprint for the UK’s biggest grocer. The share buyback plan should at least reassure investors that they intend to return excess capital to them.
The retail industry is going through unprecedented changes due to Covid and the rise in internet shopping, Murphy said.
Murphy says today that Tesco has been reoriented – it wants to serve customers, shareholders and make the planet “a little better every day”.
The British pound stabilized at 1.36 after last week’s swing against the US dollar.
However, analysts at Deutsche Bank are warning today of the impact that supply chain shortages in sectors like manufacturing will have on the value of the pound.
In a note titled “ManuFractured”, the Deutsche Bank team points out that recent industry surveys show weaker export orders, higher producer prices, and worse supply chain constraints than peers. industry.
Deutsche Bank has said it fears the consequences if lost production is replaced by imports from abroad, weakening the UK current account and the pound sterling. “We remain short GBP,” concluded the bank.
Holiday giant TUI plans to appeal to shareholders for 1.1 billion euros (£ 937 million) in a fundraiser that will help it refinance and repay government loans.
The move follows TUI’s improved performance during the peak summer season, with more than 2.6 million customers booking vacations in July and August. Bookings in recent weeks in Germany and the Netherlands have also surpassed 2019 levels.
The fundraiser, in which the shareholders of the FTSE 250 listed company will be offered 10 new shares for 21 existing shares, is fully subscribed and supported by the major shareholders of TUI.
TUI Executive Chairman Friedrich Joussen said: “We want, we can and will return to the path of economic strength. We are working tirelessly on it. The capital increase is an additional step. We want to repay government loans quickly. ”
Barclays Bank Ireland, Bank of America, Citigroup, Deutsche Bank and HSBC act on the capital increase.
UK natural gas futures continue to rise at nearly 330p per therm today, after hitting an all-time high yesterday in an intensifying global energy crisis.
Brent crude also hit a three-year high at nearly $ 83 a barrel, as global gas supply shortages are forcing industry buyers to turn to oil instead.
The price of oil has risen more than 50% so far this year, but natural gas is now reportedly trading at an oil-equivalent price of over $ 200 a barrel.
The surge in natural gas – or “bit-gas” as one trader called it due to recent price similarities to the cryptocurrency bitcoin – threatens to hurt economic recovery if it results in spike in inflation , then higher interest rates.
Deutsche Bank research analyst Jim Reid called yesterday’s move in the UK natural gas market above 300p “astonishing”, noting that the 19.5% rise was the largest daily percentage increase for over a year and represented an overall jump of 183.3% since the start. August. The situation was little different for European prices.
The main impact of rising energy prices appears to be inflationary at the moment, rather than a decline in consumption or investment activity. However, analysts fear that the longer the situation persists, the greater the risk of impact on economic output in the coming months.
The Reserve Bank of New Zealand has responded to rising inflation by raising interest rates for the first time in seven years, making it one of the first major countries to cancel the support put in place during the pandemic. The overnight movement had been largely integrated by traders.
Asian markets fell overnight, with opening calls suggesting a weak session in Europe. The FTSE 100 index is expected to open around 45 points lower at 7,030, reversing the gains seen yesterday.