FTSE 100 analysis: UK shop price inflation accelerates in May

FTSE 100 analysis: Where next for the UK 100?

The UK 100, which tracks the performance of the FTSE 100, is falling back toward the supportive trendline that can be traced back to mid-October this morning. Any slip below here would bring the 200-day moving average, currently at 7,530, back into play.

On the upside, a move back above 7,621, representing the level of resistance that has come into play on numerous occasions since the start of 2022, would allow it to target 7,710 to recapture the level of support that held firm for most of May before the index took a heavy tumble on hot inflation data last week. From there, a move above 7,800 is on the cards.

Top UK stock news

UK retailers such as Next (+1.1%), Currys (+1.1%), ASOS (-4%), Boohoo (+1%) and AO World (+4.4%) are on the radar today after the British Retail Consortium revealed shop price inflation accelerated to a record 9% in May from the 8.8% reported in April. That signals that inflation is becoming entrenched and failing to ease, especially after UK inflation came in higher than expected last week. Meanwhile, UK supermarkets like Sainsbury’s (+0.4%) and Tesco (+0.7%) are also worth watching after food inflation decelerated to 15.4% from 15.7% in April.

Czech billionaire Daniel Kretinsky, who leads Vesa Equity, told the Sunday Times that he has no intention of launching a takeover for Sainsbury’s or Royal Mail-owner International Distribution Systems (+1.7%). Vesa Equity already owns 25% of IDS and around a 10% stake in Sainsbury’s. He also said he would support the idea of spinning-off Royal Mail into its own listing.

Airline stocks could be active today following the problems with electronic passport gates in the UK over the bank holiday weekend, leading to long queues at Heathrow and other airports.

Unilever’s (-0.3%) chief financial officer Graeme Pitkethly has informed the board he plans to retire by the end of May 2024. The consumer goods giant has started a search for his replacement.

St James’s Place (+0.1%) has kicked off a search for a new chief executive to replace Andrew Croft, according to Sky News over the weekend. The wealth manager is thought to be working with headhunter Russell Reynolds Associates to find a new boss. An unnamed source said there was ‘no rush’ in finding a replacement.

We discovered over the weekend that WPP (+2.6%) is working with NVIDIA on developing a content engine that harnesses the US chipmaker’s AI capabilities to create advertisements faster, more efficiently and at scale. ‘Generative AI is changing the world of marketing at incredible speed,’ said WPP CEO Mark Read. ‘Our partnership with NVIDIA gives WPP a unique competitive advantage through an AI solution that is available to clients nowhere else in the market today. This new technology will transform the way that brands create content for commercial use, and cements WPP’s position as the industry leader in the creative application of AI for the world’s top brands.’

India’s top investigative agency, the Central Bureau of Investigation, has filed a criminal complaint that accuses BAE Systems (-0.4%) and Rolls Royce (-1.5%) of engaging in corruption over historic deals to supply fighter jets to the country, according to the Financial Times yesterday. The agency alleges that the firms engaged in a ‘criminal conspiracy’ between 2003 and 2012 to ‘cheat the government of India’ over deals to manufacture dozens of BAE’s Hawk aircraft that use Rolls Royce engines.

Meanwhile, the Times reported that Rolls Royce could cut 10% of its 30,000 non-manufacturing staff as part of its turnaround plan. That could be part of a plan to merge its non-manufacturing departments across its divisions.

Distributor Bunzl (-0.9%) said it has agreed to buy two safety businesses, one in Brazil and one in Spain. It said the deals mean it has bought 200 businesses since 2004. The Brazilian firm is named Leal Equipamentos de Proteção, which is a ‘high-margin business’ that made around £34 million in annual revenue in 2022. The Spanish business is named Irudek, which distributes safety equipment and made around £15 million in annual sales last year.

Softcat (-0.2%) issued a short trading statement this morning covering the third quarter that ended on April 30. ‘The company performed well during the period, delivering further year-on-year growth in gross invoiced income, gross profit and operating profit. The board is pleased with progress and anticipates the outturn for the full year will be in line with its current expectations,’ the firm said.

Whitbread (-0.4%) is considering selling part of its £700 million pub and restaurant arm that could see it divest its Beefeater steakhouse chain, according to The Telegraph. It is also exploring options for the wider division that also includes the Brewers Fayre pub chain. Talks are at an early stage and there is no guarantee a sale will happen, the report said.

Greencore (+1.2%), the maker of convenience foods, said revenue increased 20.1% in the six months to the end of March to £925.8 million, coming in ahead of the £903 million forecast. Adjusted pretax profit plunged 71% to £3.4 million due to tighter margins and higher financing costs. The firm said it has mitigated a ‘significant component’ of inflationary pressures and said it plans to ‘recover or mitigate the majority of the remaining expected in-year commodity inflation together with the lag in recovery from the first half’ before the end of the year. It has launched a new £10 million share buyback today and said it will update shareholders about its returns policy when it releases full year results later this year.

Bootmaker Dr Martens (-2.9%) has been downgraded to Sector Perform by RBC, which said it is facing several near-term challenges that don’t appear to be reflected in its guidance or in consensus figures. Analyst Piral Dadhania said there is potential for a deceleration and downside lingering over earnings, prompting estimates to be lowered. The price target was cut to 180p from 230p.

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