Daily market update: FTSE 100, gold, Sainsbury's, Dunelm

“The FTSE 100 was lower in early trading after selling in the US overnight and despite gains for Asian indices,” says AJ Bell Investment Director Russ Mould.

“Discussions between the US and Japan on trade and noises that China might be open to its own negotiations on trade helped improve the mood music in Asia.

“Elsewhere, Taiwanese chip manufacturer TSMC provided some reassurance as it posted strong growth and, probably more significantly, said it had not seen any changes in customer behaviour off the back of tariffs. Whether that will continue to be the case and whether the situation deteriorates remains an open question.

“Federal Reserve chair Jerome Powell gave a pretty gloomy assessment at an event in Chicago – warning of rising prices and unemployment which sounds very much like a warning of the dreaded stagflation.

“Gold continued to set new records as investors reached for its safe haven credentials, although precious metal miner Fresnillo saw its shares fall in London as they traded without the rights to its latest dividend.

“Other drags on the UK’s flagship stock index included industrial names as concern around the unpredictable trade policy in the US continues to bubble away under the surface.

“BP could face a testy AGM later with major shareholder Legal & General calling for the immediate departure of chair Helge Lund. While he has already announced plans to stand down within a year, that isn’t good enough for Legal & General given the failed strategy he has presided over.”

Sainsbury’s

“When Asda fired the opening salvos in a UK supermarket price war in mid-March the markets immediately sat up and took notice and the latest updates from Tesco and now Sainsbury’s suggest this was the right call.

“Like Tesco, Sainsbury’s wants to equip itself to protect its competitive position, hence its guidance for flat profit in the coming year as it looks to offer customers value for money.

“The main winners in a price war would ultimately be shoppers, however, there were enough positive takeaways in the results to provide some cheer. The ‘food first’ strategy under Simon Roberts is clearly yielding real benefits with a healthy increase in the dividend providing shareholders with real sustenance.

“There is also a chance that Sainsbury’s and Tesco are being overly conservative and Asda’s big talk doesn’t translate into anything meaningful so there is scope for both to surprise on the upside.

“The main disappointment for Sainsbury’s continues to be Argos, with its laggard status raising questions about its long-term future as part of the group. If food really does come first then offloading Argos would allow it to focus and potentially invest more in its core proposition.”

Dunelm

“Given the uncertain backdrop, investors will be thrilled with soft furnishings firm Dunelm’s third-quarter trading.

“With retail it is really important to get the basics right and with its new ranges, Dunelm is stocking products which people want at a price they’re willing to pay. A continued store roll-out and improvements to its digital offering are also helping.

“For now, this seems to be cushioning Dunelm from the impact of escalating macro-economic uncertainty, which could be an obstacle to households loosening the purse strings.

“A roll-out of self-service tills should help boost efficiency as the company looks to contend with rising costs associated with changes to the national living wage and employer national insurance contributions in last year’s Budget.

“The business continues to face the tricky task of replacing Nick Wilkinson, who announced plans to step down in February. There was no update on this process in today’s update and Wilkinson is sticking around until a successor is appointed.

“A 57% share price advance since his tenure began in 2018 is no mean feat given the challenges the retail space has faced in that time and he has been particularly instrumental in transforming the company’s online strategy.”

These articles are for information purposes only and are not a personal recommendation or advice.