FTSE 100 gets another retail boost

At the close, the FTSE 100 came off its highs but still saw a 0.4% gain to close at 7,725 points. The focus now turns to tomorrow's US inflation figures.

Investors remain in an upbeat mood going into tomorrow's US inflation report, buoyed still by the December jobs report and the prospect of the economy being less squeezed by interest rates, according to OANDA's Craig Earlam.

For all the doom and gloom leading up to Christmas and the end of the year period, it would appear that while consumers are becoming choosier about where they spend their money, they are still spending it.

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Milder weather in January also appears to be helping sentiment, fuelling optimism that the start of 2023 might offer some respite from further increases in energy prices.

Last week Next surprised the markets with a positive pre-Christmas trading update. Today JD Sports has carried on that positive vibe with a similarly robust trading statement. The retailer said that it had enjoyed a better than expected second half of the year, with expected revenue growth of more than 10% during H2, with the pre-Christmas period seeing a total revenue rise of 20%, helped primarily by a strong performance in the US business.

Subsequently, expects to see group headline profit before tax to come in at just above the upper expectations of £985m. Like last week weve seen a positive correlation in the rest of the sector with Sports Direct owner Frasers Group getting a decent tailwind, along with Next which is also higher, after seeing a modest decline yesterday.

Having heard from the likes of Lidl and Aldi in the last few days that they had enjoyed a big jump in their pre-Christmas trading there was plenty of interest in how this consumer shift was likely to affect the likes of Sainsbury's and Tesco. Todays numbers from Sainsbury would suggest a retailer that has also performed well, not that you would know it with the share price slightly lower, despite Q3 total sales rising by 5.2%, with grocery seeing a rise of 5.6%. Christmas grocery sales saw an acceleration to 7.1%. On a like for like quarterly basis sales rose by 5.9%, with the Argos business generating a decent uplift as shoppers eschewed the flakiness of a strike-ridden Royal Mail service, by doing their grocery and Christmas shopping all at once.

This outperformance is expected to deliver full year underlying profit before tax at the upper end of the guidance range of £630m to £690m, despite concerns over price and margin pressures, which continue to act as headwinds. Despite this decent update, the shares are down for the second day in a row, although they are well off the lows of the day. The slight pullback of the last couple of days is probably more to do with some minor profit taking, and the fact that weve seen a 10% run higher to 9-month highs since the lows in December, with most of those gains coming in the first few trading days of this year.

Darktrace shares have slid to record lows, dipping briefly below its 250p IPO price after cutting its recurring revenue growth forecasts for the full fiscal year to between 29.5% and 31%, from its previous forecast of 31% to 34%. Management said they expect H1 revenue to come in at $258m, an increase of 35.2% from a year ago, while the number of customers has risen by 741 since the end of the last fiscal year to 8,178. The rate of customer growth in percentage terms does appear to be slowing, however it is still in the mid 20%.

Housebuilders have slipped back after Barratt Developments reported a slowdown in sales rates for the first half of the year, compared to a year ago. Last year saw a sales rate of 0.79 net private reservations per week. Todays numbers saw this come in at 0.44, with the housebuilder blaming the slowdown on the various political and economic uncertainties that played out during the back part of the trading period, along with increases in mortgage rates which slowed demand.

Direct Line shares have plunged after the company cut its dividend blaming higher claim costs over the last 12 months. The company blamed higher subsidence claims because of the hot weather in the summer as well as the cold weather in January and December of last year, which is expected to push total claims for 2022 to almost double the previous expectation of £73m, to somewhere in the region of £140m.

Not surprisingly this has triggered weakness across the sector with the shares of Admiral, Aviva and Legal & General also lower over concerns about similarly higher claim costs hitting their top and bottom lines.