Home Markets Lethargic start from the FTSE 100 as Russian oil is cut off and B&M warns of price pressures

Lethargic start from the FTSE 100 as Russian oil is cut off and B&M warns of price pressures

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Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown
  • FTSE 100 opens up just 0.2% as EU cuts off most Russian oil
  • Chinese economic data not as bad as feared
  • Value chain B&M sees sales fall 2.4%
  • Brent crude up to over $123

Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown:

“The FTSE 100 has got off to a lethargic start, opening up just 0.2%. This comes as EU leaders have agreed on a plan to block more than two-thirds of Russian oil imports. Given Russia currently supplies 27% of the EU’s imported oil and 40% of its gas, the FTSE’s tepidness is reflecting anxiety over supply. The UK is in a better position than some European countries when it comes to reliance on Russia for energy supply, but this doesn’t mean supply concerns will be completely glossed over. The move is likely to create a permanent hike in EU oil prices, and the cost of sourcing is going to rise.

Brent Crude has soared to $123.5 a barrel following this development, with prices the highest they’ve been in since early March. The upwards trajectory of the oil price may well have room left to run until a solid outline of how supply is going to be sourced.

China’s official manufacturing Purchasing Managers’ Index for May was 49.6, which is lower than the 50-point mark. The 50 milestone is what separates growth from contraction. Despite this, the Shanghai Composite and Hong Kong’s Hang Seng showed modest gains, largely pointing to the fact this data wasn’t as bad as feared, and shows an easing of COVID-19 restrictions in key cities.

The UK market has been left unimpressed by full year results from value chain, B&M. Sales are down 2.4% to £4.7bn compared to last year. While this is a reasonable increase compared to pre-pandemic levels, there are some remaining questions over inflation. The group warned of the wider pressures facing the retail industry as customers see their disposable income dwindle. While on one hand, struggling customers may be tempted to try a value name, on the other, B&M’s core existing customers may hold off buying the extra non-essential items the chain is famed for. The impossible task of mapping demand means despite a robust set of numbers, B&M’s share price was broadly unmoved in early open.”

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