London midday: Stocks stay up as Bunzl surges

(Sharecast News) - London stocks were still firmer by midday on Tuesday, with Bunzl surging ahead after a profit upgrade. The FTSE 100 was up 0.3% at 8,349.61.

Russ Mould, investment director at AJ Bell, said: "The FTSE 100 got off to a strong post-Bank Holiday start, lifted by its healthy contingent of resources companies.

"Index heavyweights BP and Shell were higher as heightened tensions between Israel and Lebanese militant group Hezbollah, along with outages in Libya, saw oil prices surge back above $80 per barrel. Commodities traders will be watching closely to see if the apparent step back from the brink by both parties holds for now.

"This week is likely to be dominated by Nvidia results and a second estimate of US second-quarter GDP. Federal Reserve chair Jerome Powell's virtual confirmation there will be a rate cut at the next meeting in September means the debate now is whether it will be a 25-basis point or 50-basis point cut."

On home shores, investors mulled the latest retail industry data, which showed that shop prices in August experienced deflation for the first time since October 2021, with a decrease of 0.3%. That marked a significant shift from the prior month's slight inflation of 0.2%.

The drop brought the annual growth rate to its lowest level in nearly three years, according to the latest BRC-NielsenIQ Shop Price Index.

Non-food items saw the most significant deflation, with prices falling by 1.5% in August - a further decline from the 0.9% drop in July. That was the lowest inflation rate in the non-food sector since July 2021.

Food prices, while still experiencing inflation, showed a marked slowdown.

Overall food inflation decreased to 2% in August from 2.3% in July, reaching its lowest level since November 2021.

Fresh food prices, in particular, saw a notable decline in inflation, dropping to 1% in August, down from 1.4% in July, the lowest since October 2021.

Ambient food inflation also decelerated slightly, falling to 3.4% in August from 3.6% in July, marking its lowest rate since March 2022.

"Shop prices fell into deflation for the first time in nearly three years," said Helen Dickinson, chief executive of the British Retail Consortium.

"This was driven by non-food deflation, with retailers discounting heavily to shift their summer stock, particularly for fashion and household goods.

"This discounting followed a difficult summer of trading caused by poor weather and the continued cost of living crunch impacting many families."

Dickinson said food inflation eased with fresh food prices, especially fruit, meat and fish, seeing the biggest monthly decrease since December 2020 as supplier input costs lessened.

"Retailers will continue to work hard to keep prices down, and households will be happy to see that prices of some goods have fallen into deflation.

"The outlook for commodity prices remains uncertain due to the impact of climate change on harvests domestically and globally, as well as rising geopolitical tensions.

"As a result, we could see renewed inflationary pressures over the next year."

In equity markets, miners gained amid rising copper prices, with Anglo American and Rio Tinto both up.

Bunzl rose the top of the FTSE 100 after it lifted its adjusted operating profit guidance for the full year and announced a £250m share buyback.

Russ Mould said: "Renowned as being one of the more mundane businesses on the UK market, Bunzl's results have excited investors and reminded them that boring can be best sometimes. The company has announced a bumper buyback and unveiled a double-digit increase in its dividend.

"This might seem somewhat at odds with its first-half results which saw revenue decline modestly, however this headline obscures a recent pick-up in performance not just in the latter part of the first six months of the year but also in the weeks since. The operating margin is also up and cash generation is reliably strong.

"Bunzl supplies things that companies need to do business but do not actually sell to customers, such as takeaway cups for coffee shops or door mats for hotels and offices.

"Acquisitions have always been a significant component of Bunzl's growth strategy and the company's latest deal, its eighth of the year, takes its 2024 spending to £650 million.

"Individually, these are not huge transactions but easier to swallow purchases which the company has demonstrated over time it can bring into the Bunzl fold without major disruption to the wider group."

Easyjet, Wizz Air and BA owner IAG flew higher after Ryanair boss Michael O'Leary said fare falls had levelled out.

Mining giant BHP advanced as it reported a bigger-than-expected increase in full-year underlying profits, helped by record volumes of iron ore and higher copper output, but warned of an "uneven" recovery in China.

Ocado nudged higher as it said operations have finally started at two customer fulfilment centres in Australia a year later than planned, as part of its partnership with retail chain Coles.

Harbour Energy gained after saying it expects to complete the acquisition of the Wintershall Dea asset portfolio in early September, versus previous guidance of early in the fourth quarter.

On the downside, Primark owner AB Foods slumped after Deutsche Bank downgraded the shares to 'sell' from 'hold' and cut the price target to 2,190p from 2,290p as it said the company's profit recovery phase has come to an end.

Market Movers

FTSE 100 (UKX) 8,349.61 0.26% FTSE 250 (MCX) 21,211.62 0.10% techMARK (TASX) 4,877.62 0.36%

FTSE 100 - Risers

Bunzl (BNZL) 3,456.00p 7.53% easyJet (EZJ) 472.90p 5.58% Smurfit Westrock (DI) (SWR) 3,508.00p 3.06% Anglo American (AAL) 2,299.50p 2.20% Rio Tinto (RIO) 4,844.50p 1.74% BP (BP.) 436.25p 1.62% Entain (ENT) 650.60p 1.53% Whitbread (WTB) 2,889.00p 1.44% BT Group (BT.A) 137.65p 1.32% International Consolidated Airlines Group SA (CDI) (IAG) 181.85p 1.20%

FTSE 100 - Fallers

Berkeley Group Holdings (The) (BKG) 5,020.00p -3.55% Barratt Developments (BDEV) 532.20p -3.55% Scottish Mortgage Inv Trust (SMT) 838.20p -2.90% Persimmon (PSN) 1,658.00p -2.79% Taylor Wimpey (TW.) 161.55p -2.59% Vistry Group (VTY) 1,361.00p -2.44% Associated British Foods (ABF) 2,463.00p -2.03% JD Sports Fashion (JD.) 146.40p -1.91% B&M European Value Retail S.A. (DI) (BME) 445.00p -1.66% Rolls-Royce Holdings (RR.) 491.80p -1.42%

FTSE 250 - Risers

Harbour Energy (HBR) 301.10p 7.19% Wizz Air Holdings (WIZZ) 1,355.00p 6.69% Baltic Classifieds Group (BCG) 276.50p 6.14% Energean (ENOG) 971.00p 4.41% IP Group (IPO) 43.35p 3.83% Ithaca Energy (ITH) 132.20p 3.61% Diversified Energy Company (DEC) 979.00p 3.38% Network International Holdings (NETW) 397.80p 3.32% Sirius Real Estate Ltd. (SRE) 99.50p 2.52% Investec (INVP) 579.00p 2.39%

FTSE 250 - Fallers

Helios Towers (HTWS) 119.20p -3.09% Patria Private Equity Trust (PPET) 568.00p -2.41% Bellway (BWY) 3,052.00p -1.86% SDCL Energy Efficiency Income Trust (SEIT) 61.70p -1.75% Grainger (GRI) 243.50p -1.62% Watches of Switzerland Group (WOSG) 407.20p -1.59% Genuit Group (GEN) 459.00p -1.50% Just Group (JUST) 146.20p -1.48% Bloomsbury Publishing (BMY) 714.00p -1.38% Allianz Technology Trust (ATT) 358.00p -1.38%