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Market report: Trading looking brighter this morning but high street inflation peaks

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Steve Clayton, Fund Manager at HL Select

Market report: Trading looking brighter this morning but high street inflation peaks

  • A positive start to trading thanks to strong after-hours earnings reports
  • Lloyds display good half-year figures, shrugging off recessionary fears
  • GSK raises its guidance for full year trading, with growth in Speciality Medicines
  • British Retail Consortium reports High Street inflation hitting a new peak of 4.4%

Steve Clayton, Fund Manager at HL Select:

“Wall Street set a downbeat backdrop last night with a drop of 1.15% for the S&P and a tumble of 1.87% by the tech-heavy NASDAQ index.  Despite this, future markets are indicating a positive start to trading on both sides of the Channel this morning, helped by strong after-hours earnings reports in the States from Microsoft, Google and Texas Industries Inc.

Results season is kicking off this week and today brings half-year figures from Lloyds Bank. They are shrugging off recessionary fears this morning, highlighting continued strong asset quality and what they see as a portfolio well positioned to withstand cost of living pressures. Lloyds have upped their guidance for the full year and reported 12% growth in net income and 139bps of capital generation. The dividend is raised by 20% to 0.80p. The stock surged 3% in early trading.

British American Tobacco reported a solid half-year performance, growing their New Category revenues by 45% and reiterating their commitment to growing the sterling dividend and longer-term cash generation targets.

GSK, the pharmaceutical company formerly known as GlaxoSmithkline, raised its guidance for full year trading. GSK, which recently divested its consumer health division, Haleon, said that it now sees revenues rising by 6-8% this year and profit growth of 13-15%. CEO Emma Walmsley highlighted strong growth in Specialty Medicines, with a record quarter for sales of their blockbuster Shingrix vaccine for Shingles prevention. Overall, half year operating profits were 26% ahead at constant currency rates.

Haleon reported too, its first update as an independent listed company and a member of the FTSE100 index. Their first half revenues grew by 13.4%, largely organic with growth driven mainly by volumes rather than price. The group now sees organic revenue growth for the full year between 6-8% with margins held flat as the benefits of operational progress are offset by inflationary pressures and charges linked to the Ukrainian conflict.

Inflation is rarely out of the news these days and today the British Retail Consortium reported that its measure of High Street inflation hit a new peak of 4.4%, sharply higher than a month ago. The BRC highlighted food inflation, running at 7.0% as the driver behind the overall increase. Within food, dairy products were the biggest contributors to the increase.”

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