Surging commodity prices, and retail therapy push FTSE100 to 23-month highs

With markets on the front foot already after Fed chief Jay Powell’s comments yesterday, and this morning’s softer than expected Chinese inflation numbers, today’s US CPI numbers have done little to change sentiment, despite coming in at their highest levels in nearly 40 years, at 7%. 


Perhaps there is a sense that this morning’s China numbers, which slid back more than expected on both CPI and PPI in December, could be a leading indicator that global inflationary pressures might be starting to diminish. That seems a little premature, however with US CPI coming in as expected, it’s a compelling narrative on a day when the mood is positive, and long term yields have dropped back.

European markets have continued to push higher, with the FTSE100 once again outperforming, as it continues its 2022 outperformance, rising to another post pandemic peak and a 23-month high, with the basic resource sector helping to drive the bulk of today’s gains, as surging nickel and copper prices help to drive advances in the likes of Antofagasta, BHP and Anglo American.  

It’s also been a decent day for the retail sector, driven by a solid performance leading up to and including the Christmas period.

It’s important not to underestimate the importance of this key period for retailers and despite the doom and gloom in respect of supply chain disruptions, rising staffing costs, and energy prices, today’s reports from the retail sector have been solid

Coming as they have after some decent numbers from Next last week, today’s numbers show that for all the doom and gloom surrounding the UK economy, and the current restrictions, consumers have been remarkably resilient. That resilience will be sorely tested in the months ahead in the face of rising prices, as well as the scheduled tax rises that come due in April.

Starting with today’s Q3 numbers from Sainsbury, we’ve seen more good news following as they have on a decent performance in the first half of this year, helping to push the shares to a six-week high early on, after full year guidance for underlying pre-tax profit was upgraded to £720m, up from £660m.

Since August, the shares have been on the slide despite a business that remains in the shadow of Tesco, who are due to report tomorrow, and having to fend off the likes of Morrison and Asda for the title of the UK’s number 2 supermarket. Not only that, but Sainsbury is also having to take the fight to the young upstarts of Aldi and Lidl. 

On a two-year basis grocery sales were up by 6.6%, although the business continues to struggle on the general merchandise front, which includes the Argos business. Total retail sales were up by 1.4% from 2019 levels and down 5.3% year on year.

Helping to push the FTSE250 higher, homeware retailer Dunelm saw a record performance in its latest quarter, with Q2 sales rising 13%, from a year ago to £407m, although digital sales slipped 8% from a year ago. This decline in digital sales shouldn’t be a surprise given that footfall at physical stores was lower a year ago, due to various restrictions. This outperformance in Q2, helped boost H1 sales to £796m, pushing the shares to a three-month high and to the top of the FTSE250. Profit before tax for the first half is expected to come in at £140m, up from £112m a year ago, with management expecting that full year profit will be materially ahead of market expectations.

JD Sports has had a bit of a rollercoaster of a day, with shareholders celebrating the fact that full year profits were expected to come in at £875m, well above consensus of £810m. The shares initially jumped to a one month high, however the gains proved to be somewhat short-lived, with the shares quickly giving up their intraday gains. This seems a rather odd reaction and could well be down to management’s caution over the profit outlook for 2023, which they expected to be in line with this year’s number, although that is still ahead of market consensus.

We’ve seen a lacklustre response to Premier Inn owner Whitbread’s latest Q3 numbers which showed that trading through the period had been resilient, particularly in the UK, while its German operation saw occupancy levels slip due to much tougher restrictions in December.

Total UK sales were 3.1% ahead of 2 years ago, although food and beverage sales were down 11.1%, due to several onsite restaurants offering limited services, or being closed due to Covid restrictions or staffing issues.

Accommodation levels as far as Premier Inn have been resilient, while the German hotel operation saw occupancy levels of 59.9% during Q2, although this dropped to 36.4% in December due to tighter restrictions. On the outlook, management expects RevPAR rates in the UK to recover to pre-Covid levels later in the year, which would suggest that there is plenty of room for the share price to recover back to the sorts of levels we saw in the middle of last year. 

In signs that on-line delivery is getting even more competitive Just Eat shares initially fell sharply after Q4 orders missed estimates, coming in at 273.7m below estimates of 295.3m.

This knee jerk reaction of selling the shares proved to be a little premature given that this was still a decent performance, by any standard, with a rise of 14%, while Gross Transaction Value (GTV) saw a rise of 18% at €7.3bn, with the company maintaining its full year guidance.

Consequently, the shares didn’t remain in negative territory for very long, given that over the last 12 months they have lost over 50% of their value.

Over the year orders rose by 33% to 1.1bn worth €28.2bn, coming in at the lower end of its expected €28bn to €30bn range. Full year order growth, excluding its recent acquisition of Grubhub, came in just above 40%, just below its 45% target.   


US markets opened higher after December CPI came in as expected at 7%, with core prices rising by 5.5%. Despite concerns that markets might be getting ahead of themselves a bit, there appears to be some relief that CPI didn’t come in hotter, especially with PPI for December due tomorrow.

For now, there is a sense after yesterday’s Powell comments, that while the Fed may look at raising rates in the coming months, there may well be an abundance of caution when it comes to looking at balance sheet reduction.  

Basic resources are leading the sector gainers, led by the likes of Caterpillar which makes mining equipment, while tech stocks are also doing well led by Microsoft.

We have the latest Federal Reserve Beige Book later this evening and this should give valuable insights into how US businesses are coping with higher costs in terms of energy prices and wages, supply chain disruptions, and how much of a headwind they are proving to be to business activity in general.


Despite US CPI coming in at 7% and its highest level since June 1982, the US dollar has slipped back, hitting its lowest level against the euro since 15th November, and a two-month low against sterling.

While the headline number was a strong one, and core prices rose more than expected to 5.5%, there had been a concern the number might have come in much higher. There was also some relief that the biggest component of the rise was in used car sales which saw an increase of 3.5%, a trend that is likely to be temporary in nature and act as a drag on the numbers when prices start to fall back.

Whatever the interpretation, these numbers more or less make it odds on, the Fed will raise rates when they meet in March. In an ideal world they would probably prefer to act sooner rather than later given they are due to meet in two weeks’ time, however they won’t have finished tapering by then.  

The biggest gainers against the greenback have been the commodity currencies with the Norwegian Krone leading the way, while the Australian dollar is also doing well on the back of stronger metals prices, with copper hitting its highest level since 22nd October last year. Nickel prices have also been surging, hitting a ten year high earlier today.  


Crude oil prices have continued to edge higher, with Brent hitting a two month high, despite API data showing that demand was starting to look a little weak, as gasoline inventories came in higher than expected.

Base metals prices are also looking strong, with nickel prices hitting their highest levels in 10 years, while copper prices hit their highest levels since October last year. Both of these metals are key components in the renewables story and there has been increasing concern supply won’t be able to keep up with demand.  

The lack of follow through in US 10 year yields, as well as a weaker US dollar, is continuing to support gold prices which look set to retest their January peaks above $1,830. 

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