Daily market update: utilities, JD Sports, Shoe Zone, Currys

“Utilities did their best to prop up the UK stock market and they were helped by defence contractors once again being in vogue,” says Russ Mould, Investment Director at AJ Bell.

“Updates from Severn Trent and SSE were well received by the market. The utilities sector has found itself the centre of attention in recent months as investors look to avoid the drama associated with a global trade war and seek solace in defensive areas.

“Water company Severn Trent might lack the go-go growth associated with big name US tech stocks, but it is delivering the kind of performance many businesses can only dream of. Profits and dividends are going up, it is creating new jobs, and demand for its services is unaffected by any fluctuations in the economy.

“Renewable energy generator SSE is a bit less defensive as it is subject to shifting weather patterns, but the company remains upbeat.

“UK inflation coming in stronger than expected puts the Bank of England in a tricky situation. Central banks normally raise rates to fight off inflation, yet the Bank is in the early stages of a rate-cutting cycle. Markets are pricing in a 91.6% probability of no change to rates at the next meeting in June.

“While higher inflation was always on the cards given the jump in energy bills and companies passing on extra employment-related costs, it’s the scale of the jump that has surprised markets. The news caused a slight wobble on the more domestic-facing FTSE 250.”

JD Sports

“JD Sports has been given a right kicking by the market after a weak start to its new financial year and warning that tariffs could hit demand.

“Approximately 40% of JD’s sales come from the US and many products it sells are sourced from Asia, so it is in the firing line for tariffs. That means prices will inevitably go up and not all consumers will have the appetite or means by which to stomach these extra costs. They’ll simply make existing footwear last longer or opt for cheaper items.

“The tariffs situation should not be a surprise to the market, yet the fact JD has spelled it out in its results has clearly spooked some investors. It means the shares are now down around 8% year-to-date.

“JD has thrived on consumers’ willingness to load up on the latest footwear, with many people viewing trainers and sneakers as collectables rather than functional items. It has also capitalised on the athleisure boom, selling a wide range of fitness clothing to the mass market. There is a risk both of these trends run out of steam or at least go through a temporary moment of weakness as individuals reassess their spending choices.”

Shoe Zone

“Shoe Zone’s results have given investors the kind of sharp pain you get from blisters on your feet. It has swung from a profit to loss, the dividend has been scrapped, and the outlook remains gloomy amid low consumer confidence. Margins are falling and the net cash position has more than halved. Investors are voting with their feet by kicking the shares out of their portfolio.”

Currys

“Currys had already upgraded its earnings guidance in April, so today’s confirmation of hitting those profit expectations doesn’t provide any reason for the market to bid up its shares. The market has simply shrugged off what’s otherwise a reasonable update which shows Currys has been doing well and is in a decent shape.”

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