Daily market update: BP, Shell, tariffs, Halma, Tesco, Poundland

“Having narrowly missed closing at a new record high last night, the FTSE 100 held firm at the market open as strength in energy and tech was offset by weakness in banking shares,” says AJ Bell Investment Director Russ Mould.

“Escalating tensions between the US and Iran helped oil prices to a two-month high and gave heavyweight stocks BP and Shell a lift. Precious metal miners were also in demand as investors sought out safe-haven gold-related stocks in the hope of protection against renewed uncertainties in the world.

“Wall Street spluttered yesterday, even as US consumer price inflation came in lower than expected. American factory gate prices will be in focus later on. Comments from Donald Trump that he would set universal tariff levels within two weeks added to trade concerns and also led to mixed trading in Asia on Thursday.

“Health, safety and environmental solutions group Halma confirmed its status as one of the unsung heroes of the London market with its latest set of impressive results as revenue reached record levels. The company is not resting on its laurels with strong cash flow being reinvested into the business to support future growth.”

Tesco

“Competitive pressures continue to intensify in the grocery sector as supermarkets fight for more customers. Tesco has successfully fought off discount rivals Aldi and Lidl and protected its dominant UK market position, yet at no point can it take its foot off the pedal. The moment Tesco relaxes is the point at which rival operators pounce on the opportunity to eat some of its lunch.

“Its first quarter trading update implies that Tesco is still at the top of its game, achieving moderate but resilient sales growth and continuing to grow its market share. There’s clear momentum in the business with sales of its premium products doing well, plenty of product innovation, non-food sales look encouraging, and it is now selling clothes online.

“The sunny weather will have helped get people out of the house and drive additional footfall to its stores. Blue skies will have also driven sales in picnic and barbeque products, perhaps why Tesco has flagged strong sales of fresh food.

“Tesco is offering good quality products at a competitive price and that’s what really matters to shoppers. The Clubcard loyalty scheme provides an important insight into shopping trends so Tesco can make targeted promotions and ensure it stocks the food people want. Clubcard also acts as a mechanism to give shoppers some money off, another tool in its armoury to win the grocery wars.

“The only weak spot is Bookers which is suffering from a structural decline in tobacco sales and its Best Food Logistics distribution arm not doing as well in supplying products to big-name restaurants and fast-food chains. There’s not a lot it can do about tobacco, but the weak showing from Best Food Logistics will need examining.”

Poundland

“Reports suggest a rescue deal for Poundland will be confirmed imminently with investment firm Gordon Brothers set to take on the troubled discount chain for the inevitable nominal fee of £1.

“This is likely to be the precursor for a major restructuring of the discount chain and is almost certain to result in hefty job losses as stores are shuttered. Reports suggests a new owner may need to contend with millions of pounds in unpaid business rates too.

“Poundland has become an increasing financial burden for its Polish owner Pepco so its decision to sell is unsurprising. The impact of changes to employers’ National Insurance contributions and the living wage in last year’s Budget have undoubtedly had a negative impact on Poundland, like many of its retail peers.

“The business has also seen the competitive environment become increasingly challenging in discount retail – with far more outfits operating in its territory than when it launched 35 years ago.

“Efforts to launch larger stores and move more into the groceries space don’t appear to have worked. Taking on stores in the wake of the collapse of Wilko doesn’t appear to have paid off either and whether the brand still resonates sufficiently with shoppers to rebuild after a period of consolidation is open to question.”

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