Trading On margin

Crude Oil Rally Bolsters FTSE 100 Gains; Bunzl leads the pack despite improved margins

The FTSE 100 index early Tuesday was supported by its two big oil producers, BP and Shell, as the London market returned from a long holiday weekend with crude prices back above $100 on barrel.

The FTSE 100 index rose 43.63 points, or 0.6%, to 7,470.94 early Tuesday. The mid-cap FTSE 250 index gained 42.99 points, or 0.2%, to 19,212.71. The AIM All-Share Index rose 0.52 points, or 0.1%, to 897.30.

The Cboe UK 100 index rose 0.8% to 747.04. The Cboe 250 rose 0.4% to 747.04 and the Cboe Small Companies was flat at 14,017.94.

In continental Europe, the CAC 40 in Paris was up 0.6%, while the DAX 40 in Frankfurt was up 0.5% on Tuesday morning.

Brent crude was trading at $104.31 a barrel early Tuesday, down from $99.59 late Friday.

Shares of Shell rose 2.2%, while peers BP rose 2.1%.

They helped offset Bunzl’s losses, down 3.3% at the open. Shares of the London-based distribution company fell despite raising its full-year margin outlook.

Revenue for the first half of 2022 rose 16% to £5.65 billion, from £4.87 billion a year earlier. Revenues were driven by product cost inflation and continued volume recovery in the core business, as well as growth in acquisitions.

“The core business delivered very strong revenue growth in North America, Continental Europe and the UK & Ireland, driven by high product cost inflation. This was complemented by a recovery in volumes in continental Europe and the UK & Ireland, due to the reduced level of Covid-19 related restrictions compared to the previous year,” Bunzl said.

Pre-tax profit improved 7.6% to £296.6m from £275.7m.

Bunzl said inflation was “somewhat supportive” of margins, although the reduction in Covid-19 sales meant they narrowed further to 7.3% from 7.5%. Still, Bunzl now expects its operating margin for the full year to be above historical levels and slightly below 2021.

Shore Capital said investors will likely focus on the impact of inflation, energy costs and logistics on Bunzl’s margins. However, overall the broker saw the announcement as “an excellent set of results…at first glance”.

On AIM, Joules shares fell 8.6% as the retailer insisted it would continue its “positive” talks with Next over a possible investment, despite Sky News reporting over the weekend that the talks were at a standstill.

Sky News said it learned the two companies were not close to agreeing terms for an investment by Next, and that the FTSE 100-listed retailer had not been given enough financial information to allow him to make a formal offer to the board of directors of Joules.

There were also doubts that Next wanted to proceed with a deal at 33p per share or more given that Joules shares closed at 25.5p on Friday. The stock has fallen 82% since the start of 2022 and shares had closed at 33p the day before the companies confirmed they were in talks over the potential equity investment.

The move, if it materializes, will see Next inject around £15m into Joules, the AIM-listed company said earlier in August, noting that the price would be “not lower than Joules’ current market price. “.

Joules said Monday, “There is no certainty that these discussions will result in an agreement, and further announcements in this regard will be made as and when appropriate.”

Shares of Next rose 1.7%.

The pound was listed at $1.1713 early Tuesday, below $1.1764 at the London stock close on Friday.

The euro was trading at $0.9996 early Tuesday, flat against $0.9997 late Friday. The single currency found some support after the European Central Bank‘s chief economist said it should continue to raise interest rates at a “steady pace”.

Raising interest rates in ‘not too slow not too fast’ increments was important because of the ‘great uncertainty’ surrounding future inflation as war in Ukraine and soaring energy prices rock eurozone, ECB chief economist Philip Lane said in a speech. in Barcelona.

Influential ECB board member Isabel Schnabel called on policymakers to show ‘resolve’ in tackling inflation in a speech at the central bank’s annual symposium in Jackson Hole this week last.

Against the yen, the dollar was quoted at 138.58 JP¥, down from 137.31 JP¥.

In Asia on Tuesday, the Japanese Nikkei 225 index closed up 1.1%. In China, the Shanghai Composite index ended down 0.4%, while the Hang Seng index in Hong Kong fell 0.4%. The S&P/ASX 200 in Sydney closed up 0.5%.

Gold was quoted at $1,733.41 an ounce early Tuesday, lower at $1,736.54 on Friday.

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Date of issue: August 30, 2022