Must read: FTSE 100, UK shop prices, JD Sports, Kering

Our head of investment rounds up the morning's big news.

GLOBAL MARKETS 

European markets have opened higher, with the FTSE 100 staging gains. Focus is on the European Central Bank forum in Sintra for clues into the outlook for global monetary policy. 

An encouraging speech from China’s Premier Li Qiang has lifted sentiment and boosted Asia-sensitive stocks on the UK blue-chip index including Prudential (LSE:PRU) and Standard Chartered (LSE:STAN). Shares in Wise Class A (LSE:WISE) have surged nearly 20% thanks to positive full-year earnings.

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UK BRC SHOP PRICE INDEX 

The British Retail Consortium’s shop price inflation hit 8.4% in June falling from 9% in May, which was the highest since records began in 2005. Food price inflation fell for the second consecutive month but remains at 14.6%, sharply above the headline rate of inflation. 

Last week’s inflation figures from the Office for National Statistics signalled that bringing down inflation is proving to be a lot more difficult than expected. Rishi Sunak’s goal to halve inflation by year-end looks less and less likely as the months go by, despite aggressive monetary tightening from the Bank of England which has caused shockwaves across the mortgage market. 

Supermarkets have been cutting prices lately in an attempt to lure in increasingly cost-conscious customers. Sainsbury (J) (LSE:SBRY) for example this week invested £15 million to cut prices on own brand items like pasta and jams. The highly price competitive German discounters, Aldi and Lidl have forced other UK supermarkets to participate in the fierce price competition, with any abstention putting the likes of Morrisons and Asda at risk of losing further market share. 

Supermarket executives will face MPs at the business and trade committee today responding to questions about soaring food price inflation, which has been exacerbating the cost-of-living crisis. 

Food businesses have been accused of ‘greedflation’, profiteering from inflation by failing to pass on falls in energy and other prices to consumers through lower prices. This is something companies like Sainsburys and Unilever (LSE:ULVR) strongly deny.

JD SPORTS 

In its AGM update, JD Sports Fashion (LSE:JD.) said its businesses in North America are experiencing some softening in trade in June. However, there are positive trends in the UK, Europe, and Asia Pacific.  The Board maintained its view that headline profit before tax and adjusted items for the year will come in line with current expectations for £1.04 billion.

JD Sports has sunk to the bottom of the FTSE 100, with shares down by over 4%, reflecting the retailer’s disappointing performance in North America driven by a sluggish growth backdrop in the United States and less demand from consumers for discretionary goods.  

Nonetheless, shares are still up over 8% in 2023, with most of the gains skewed towards the start of the year while recent months have been more challenging since the February peak.

KERING 

Kering SA (EURONEXT:KER) has acquired high-end French perfume label Creed. CFO Jean-Marc Duplaix said the luxury goods group is ‘attentive to M&A opportunities’. Creed perfumes retail for roughly between £150 to £250 per bottle and have become extremely popular. While the cost-of-living crisis might mean that many customers are unable to fork out thousands for a new expensive handbag, more affordable little luxuries like perfumes and make-up have become increasingly popular as a way to fulfil that desire to splash out. The deal will help Kering to expand in the beauty segment of the luxury market and add to its vast array of high-end brands more broadly including Gucci, Saint Laurent, Balenciaga and Bottega Veneta.

Shares in Kering had an extremely strong start to 2023 thanks to China’s economic reopening post covid, but the stock has been struggling since the March highs as the world’s second largest economy faces stumbling blocks.