Ocado Misses Out On UK Survey Boost For Grocers

LONDON (Alliance News) - Share prices in London were higher Tuesday at midday, sterling coming off one-year highs to allow the FTSE 100 to regain recently lost ground, while grocers were among the best performers in the large-cap index after positive UK supermarket data from Kantar Worldpanel.

"Yesterday's speech from Mark Carney, while broadly reiterating the shift in tone from last week, failed to add much more to the overall picture, and thus we have continued to see selling of cable, although without putting much of a dent in the uptrend," said IG chief market analyst Chris Beauchamp.

In a speech on Monday, delivered at the International Monetary Fund headquarters in Washington, Bank of England Governor Carney warned on inflationary pressures from Brexit, and re-emphasised that rates could be risen in the "coming months".

Carney said that "some withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainably to target", and any increases in interest rates would be "at a gradual pace and to a limited extent".

The pound was quoted at USD1.3496 midday Tuesday, up compared to USD1.3485 at the London equities close on Monday but down from a high of USD1.3619 reached earlier on Monday.

Beauchamp said the slight fall in sterling has given the FTSE 100 "breathing space" on Tuesday to recover the significant losses made on Friday, when London's large-cap index hit an intraday low of 7,196.58, its lowest level since late April.

The FTSE 100 index was up 0.3%, or 22.62 points, at 7,275.90 Tuesday midday. The mid-cap FTSE 250 index was up 0.4% at 19,509.48, and the AIM All-Share index was up 0.1% at 995.20.

The BATS UK 100 index was up 0.3% at 12,359.01 Tuesday midday. The BATS 250 was up 0.4% at 17,754.84, while the BATS Small Companies was slightly higher at 12,121.5.

Ocado was the second worst mid-cap performer, down 2.5%.

The online grocer said revenue rose in the third quarter of its financial year, and it is scaling up capacity at its customer fulfilment centres to meet growing demand, though this will add cost.

The online grocery delivery company said revenue in the 13 weeks ended August 27 grew to GBP344.5 million from GBP301.4 million the year before, as retail revenue rose to GBP312.7 million from GBP276.5 million.

Average orders per week increased to 254,000 from 219,000, although average order size decreased to GBP106.25 from GBP107.56.

The company said investments in its customer fulfilment centres in Andow and Erith will likely increase costs in the short term, but should allow the company to meet the "rapidly growing demand" for its services.

"The company stated it hasn't felt the impact of Amazon on its business yet, but I suspect the very mention of the American online retailer left investors feeling uneasy. Amazon will have access to the UK food market via its acquisition of Whole Foods, and at a time like this, that last thing Ocado needs is rising costs," said David Madden, market analyst at CMC Markets.

Meanwhile, FTSE 100-listed grocers J Sainsbury, Wm Morrison and Tesco were among the best large-cap performers, up 2.5%, 1.5% and 1.3%, respectively.

"Supermarket news has caused the big three to move higher, as Kantar's latest figures point to further improvement for the domestic UK supermarkets. Even so, the inroads made by Aldi and Lidl are still growing, something that should only accelerate as the wage squeeze goes on," said Beauchamp.

Of the UK's big four grocers, Tesco achieved the highest growth in sales in the 12 weeks to September 10, up 2.7% year-on-year, though its market share declined to 27.8% from 28.1%.

Morrison was in second place, with sales up 2.3% as its market share slipped slightly to 10.3% from 10.4%. Sainsbury's was third, with sales up 2.1% as its market share decreased to 15.7% from 15.9%.

Meanwhile, Ocado achieved 10% growth in sales, and its market share increased slightly to 1.4% from 1.3%.

German discounters Aldi and Lidl continued to demonstrate strong sales, with growth of 16% at Aldi and 19% at Lidl. The combined market share of the pair rose to 12.2% from 10.8%.

The FTSE 350 Food & Drug Retailers sector was the best performing sector, up 1.2% at midday.

Stagecoach was the best mid-cap performer, up 5.4% after Liberum raised the travel operator to Hold from Sell.

In Europe, the CAC 40 index in Paris and the DAX 30 in Frankfurt were up 0.1% and down 0.1%, respectively, at midday.

Survey data from the Mannheim-based Centre for European Economic Research/ZEW on Tuesday showed Germany's economic confidence strengthened notably in September.

The ZEW Indicator of Economic Sentiment rose by 7 points to 17.0 in September. The score was forecast to rise to 13. The current conditions index gained 1.2 points to 87.9 in September. The expected reading was 86.6.

"The German federal elections do not seem to have been a source of uncertainty," ZEW President Professor Achim Wambach said.

Germans will go to the voting booths on Sunday to elect the country's next government. Recent opinion polls have pointed towards little interest among the country's voters in changing the conservative-led government of Chancellor Angela Merkel.

The European Central Bank reported the euro area current account surplus increased in July on higher primary income.

The current account surplus increased to a seasonally adjusted EUR25.1 billion in July from EUR22.8 billion in June. Primary income more than doubled to EUR10.9 billion from EUR5.1 billion in June. However, the deficit on secondary income widened to EUR14.8 billion from EUR12.9 billion. The surplus on trade in goods fell to EUR26.4 billion from EUR28.1 billion a month ago. Meanwhile, the surplus on services increased to EUR2.6 billion from EUR2.4 billion.

The euro was quoted at USD1.1985 Tuesday midday, up compared to USD1.1938 at the London close on Monday.

Stocks in New York were called for higher open on Tuesday, with the Dow Jones Industrial Average, the S&P 500 index and Nasdaq Composite all pointed 0.1% higher.

US President Donald Trump is due to speak at the United Nations General Assembly in New York later on Tuesday, and markets will be watching to see if he makes comments which could further inflame recent tensions surrounding North Korea's missile tests.

Trump is expected to talk in "extremely tough terms about the North Korean menace and the threat it poses to our security and to all the nations in that room," a senior administration official told reporters.

The UN Security Council imposed fresh sanctions on North Korea a week ago over its nuclear and ballistic missile programmes, seeking to curb Pyongyang's sources of income in part by limiting oil exports to the country.

On Monday, Pyongyang said stricter international sanctions will only lead North Korea to speed up its nuclear programme.

"The increased moves of the US and its vassal forces to impose sanctions and pressure on the DPRK will only increase our pace towards the ultimate completion of the state nuclear force," a statement on North Korean state media said.

Also in the US, the Federal Open Market Committee begins its its two-day policy meeting later on Tuesday.

The meeting will conclude on Wednesday and the Fed will announce its decision, alongside economic projections, at 1900 BST. Chair Janet Yellen will host a press conference following this, at 1930 BST.

The Fed is expected to announce the commencement of its USD4.5 trillion balance sheet normalisation, while rates are to remain unchanged at between 1% to 1.25%.

"I feel the disruption and destruction caused by Hurricane Harvey and Irma combined with the debt ceiling looming, and the uncertainty over what the Fed make up will be, will force the US central bank keep their policy unchanged in December," said David Madden, market analyst at CMC Markets.

The economic events calendar for Tuesday also sees US housing starts at 1330 BST.