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FTSE 100 faces big week

by LLB Editor
17th Jul 23 10:44 am

It’s a big week for markets as the next quarterly reporting season moves into top gear. While US stocks have done extremely well in the first half of 2023, companies are going to have to pull a rabbit out of the hat if they are to sustain this momentum.

Danni Hewson, head of financial analysis at AJ Bell, said: “There is a big risk corporates will report decent quarterly numbers but then pour cold water over proceedings with a more cautious outlook. After all, cost pressures are still front and centre, and there is the prospect of slower revenue growth ahead.

“In addition to the big banks, we have numbers from Tesla, Netflix, ASML, IBM, Johnson & Johnson, Philip Morris, American Express and Schlumberger – which combined will tell us a lot about the state of consumers and businesses.

“The FTSE 100 slipped 0.2% to 7,420 as markets opened for the new trading week. Dragging the index down were shares in miners and energy companies, suggesting nervousness around commodity markets and the global economy.

“Weighing on sentiment were weaker-than-expected GDP figures from China, coming in at 6.3% in the second quarter versus a consensus of 7.3%.

“China is a major consumer of commodities and disappointing economic indicators typically drive down shares in miners and oil companies for fear that demand for metals, minerals and energy products will be lower than previously hoped.

“A weak showing in the Americas for Swiss luxury goods group Richemont surprised investors. Its Asia Pacific sales have bounced back as activity in mainland China, Hong Kong and Macau picked up. However, the Americas suffered from lower wholesale sales and sluggish retail numbers. Richemont’s woes had a negative read-across to other luxury goods stocks, with Burberry slipping 1.2% and LVMH falling 3.1%.

“It’s a difficult environment in which to sell sofas as consumers are loath to splash out several thousands of pounds unless absolutely necessary. DFS is keeping its head above water and taking market share from rivals in this tricky market, but the outlook remains fragile. It is battening down the hatches with further cost savings and reduced capital expenditure.

“Importantly, consumers haven’t stopped spending completely, they are just being more selective. Lower-priced items are proving to be more resilient, which might explain why fast-food group Tortilla Mexican Grill has grown revenue and guided that its full-year results should hit market forecasts. Sometimes, when the backdrop is gloomy, all it takes is a quick treat to improve the mood and Tortilla’s products seem to do the trick.”

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