Key events
Cineworld has reportedly launched talks with its commercial landlords, including Landsec and Legal & General, about plans to cut a quarter of its cinemas in Britain as part of a restructure plan.
Sky News is reporting that the property owners, which together own about 30 of its multiplexes, are in active discussions with Cineworld ahead of a hearing about its restructuring.
It is seeking rent reductions at 50 sites, and is hoping to convince a majority of credits to approve its proposals to shut 25 sites.
A number of landlords are said to be considering opposing the proposals, according to Sky. However, it is unclear whether that would be in sufficient number to block the restructuring plan.
It’s a sea of red across major indexes this morning, and while the FTSE 100 has pared some of its losses since the start of trading – having opened down 0.4% – it is still down 0.18%.
London’s blue chip index has been dragged down by Burberry (-3.5%) after yesterday’s profit warning and the shock departure of its CEO, as well as Rio Tinto (-3.2%), following a disappointing trading update.
Dan Coatsworth, investment analyst at AJ Bell, said
Burberry extended yesterday’s losses as investors continued to lose patience with the luxury goods company.
While it is getting a new boss this week, the scale of the challenge to fix the business looks large.
On miner Rio Tinto, he added:
Rio Tinto disappointed with its latest production update, with iron ore the biggest worry area after a weak quarter for output.
Experian’s update was generally fine but didn’t deliver the earnings upgrades needed to justify its premium stock rating, leaving investors a tad miffed.
It also didn’t help that chief operating officer Craig Boundy handed in his notice as he’s got a new job running McAfee.
Water companies Severn Trent and United Utilities are also weighing on the FTSE 100, with investors selling off their stock after regulator Ofwat said it was investigating the firms over sewage spills.
Julia Kollewe
Ocado CEO Tim Steiner held a media call this morning, after upgrading guidance at its technology arm, which sells warehouse robots to other retailers around the world.
While technology revenues climbed by almost 22% in the six months to 2 June, there have been concerns that clients, such as the Canadian supermarket Sobeys and Kroger in the US, were pausing the rollout of robotic warehouses.
Steiner explained that clients had based their rollout plans on trends seen during the Covid pandemic, when online shopping surged, but then fell back as shops reopened.
He brushed off investor concerns, saying “we expect to see a lot of long-term growth,” and added that the global shift to online shopping had resumed.
Steiner also said consumer sentiment was also improving, amid further easing of price inflation:
It’s definitely improved. Consumers are in a better position than they were this time about a year ago, when it felt like everything was constantly moving up at crazy levels, other than people’s incomes.
Grocery inflation is running at 1.6% now, below average wage rises. “Obviously consumers are still feeling the pinch”, Steiner added.
Commenting on whether Ocado would keep its stock market listing in the UK, he said:
The London market can be tough for some companies.
Obviously, we’ve got a very strong retail presence here in the UK with Ocado Retail, it’s a natural place for that business to be listed.
In the long term future as a global tech company, could you consider other markets? You could but we’re actually really focused at the moment on serving our clients well… And those efforts are really where we’re focusing our time and not on where we’re listed.
Steiner reckons that there is still demand for Ocado’s fast-delivery service Zoom, despite the demise of rivals such as Getir and Gorillas.
He said: “I do think that there is demand for ultra fast services.”
Czech billionaire Daniel Kretinsky has told the BBC he is committed to the Royal Mail’s obligation to deliver letters across the UK six days a week, if he succeeds in his £3.6bn takeover of the business.
That differs from what has been put in writing, with Kretinsky having previously committed to honouring the so-called Universal Service Obligation, but only for five years. Theoretically, that could mean the prospective new owner could walk away after that period.
But in an exclusive interview with the BBC, Kretinsky said:
As long as I’m alive, I completely exclude this, and I’m sure that anybody that would be my successor would absolutely understand this.
I say this as an absolutely clear, unconditional commitment: Royal Mail is going to be the provider of Universal Service Obligation in the UK, I would say forever, as long as the service is going to be needed, and as long as we are going to be around.
Kretinsky explained that the five-year written commitment was “the longest commitment that has ever been offered in a situation like this”.
Shareholders are expected to greenlight the deal in a vote held on 25 September.
Though the government also has a say over whether it goes ahead, meaning Kretinsky’s written and verbal obligations are likely to come under further scrutiny.
US retail sales due out this afternoon could bolster hopes for interest rate cuts by the Federal Reserve.
Ipek Ozkardeskaya, a senior analyst at Swissquote Bank says:
Retail sales in the US are expected to have fallen 0.2% in June.
Such weakness would back the Fed’s easing inflation story and further reinforce the expectation of a September Fed cut.
That is likely to add fuel to Fed chair Jerome Powell’s comments that inflation need not fall to 2% before cutting rates.
Ocado shares jump 18% after upped guidance, Kantar data
Some good news for Ocado that sent its shares surging 18% this morning.
The online-only retailer upgraded its annual guidance, saying its key tech solutions division would achieve “mid-teens” EBITDA margins in the current financial year. That is up from previous guidance of over 10%.
Kantar data also showed Ocado remained the fastest growing grocer for the fifth month running, with sales up 10.7% over the 12 weeks to 7 July.
It now has a hold on 1.8% of the market, up 0.1 percentage points compared with the same period last year.
That was faster than discounter Lidle, which saw a 7.8% jump in sales, taking its market share to 8.1%.
Ocado shares jumped as much as 18% at the start of trading, and are now up a slightly less exuberant (but still impressive) 11%. That’s good news for a stock that had lost about 55% of its value so far this year.
Julia Kollewe
The water regulator for England and Wales is taking action against four more water companies including Severn Trent and United Utilities over sewage spills, just days after being accused of showing “contempt” to customers over the latest water bill price rises.
Ofwat said it had served formal notices on Dŵr Cymru Welsh Water, Hafren Dyfrdwy, Severn Trent and United Utilities asking them to provide evidence for its investigation into companies’ wastewater management in England and Wales.
The regulator has looked at the firms’ environmental performance and data about how often they spill from storm overflows. It said this had heightened its “concerns that these companies may not be fulfilling their obligations to protect the environment and minimise pollution”.
This means Ofwat is now taking enforcement action against all 11 water and wastewater companies in England and Wales over sewage pollution. Once it has fully investigated, it will publish its findings and where appropriate take action over any breaches of legal obligations.
Investigations into Anglian Water, Northumbrian Water, South West Water, Thames Water, Wessex Water, and Yorkshire Water began two years ago and are ongoing. Southern Water remains subject to enforcement monitoring after a record £126m fine in 2019 over “shocking” failures at the company’s sewage treatment sites that polluted rivers and beaches in southern England.
Read more here:
Kantar: UK grocery inflation falls to 1.6%, lowest level in nearly 3 years
Grocery inflation has dropped to its lowest level since September 2021, according to fresh data from market research firm Kantar.
Food inflation fell 1.6% in the four weeks to July 7, down from 2.1%, with toilet tissues, dog food and butter accounting for the largest fall in prices over the period.
However, prices have continued to rise for items including vitamins, supplements, fruit juices and deodorants.
But overall, falling price inflation helped fuel sales of branded products by 3.6%, outpacing grocery stores’ own-label products, which grew at 2.7%.
Easing price growth also coincided with the fastest rise in monthly footfall so far in 2024.
People made 2% more trips to the supermarket over the four-week period than they did a year earlier, Kantar said.
And, of course, the men’s Euros football tournament helped fuel purchases of beers crisps and snacks on match days though low alcohol beer sales soared on weekdays as Britons celebrated in relative moderation.
Fraser McKevitt, head of retail and consumer insight at Kantar, said:
England’s hopes might have been dashed on Sunday, but there was still some cause for celebration in the grocery industry.
Football fans drove beer sales up by an average of 13% on the days that the England men’s team played, compared with the same day during the previous week.
Sales of crisps and snacks also got a boost, up by 5% compared with the month before.
With many matches played on “school nights”, though, some Britons chose moderation. Spending on no and low-alcohol beer soared by 38% on matchdays.
European markets are open for trading and major indexes are all in the red this morning:
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EUROPE’S STOXX 600 DOWN 0.5%
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GERMANY’S DAX DOWN 0.6%
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BRITAIN’S FTSE 100 DOWN 0.4%
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FRANCE’S CAC 40 DOWN 0.6%
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SPAIN’S IBEX DOWN 0.7%
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EURO STOXX INDEX DOWN 0.6%,
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EURO ZONE BLUE CHIPS DOWN 0.6%
Introduction: Fed chair Powell hints rates may be cut before US inflation target hit
Good morning, and welcome to our live coverage of business, economics and financial markets.
The long wait for US interest rate cuts could soon be over.
Federal Reserve chair Jerome Powell has dropped hints that the central bank will not need to see inflation hit its 2% target before cutting interest rates.
Speaking at the Economic Club of Washington DC, Powell said:
The implication of that is that if you wait until inflation gets all the way down to 2%, you’ve probably waited too long, because the tightening that you’re doing, or the level of tightness that you have, is still having effects which will probably drive inflation below 2%.
Instead, he explained that policymakers are looking for “greater confidence” that price inflation is striding towards that figure:
What increases that confidence in that is more good inflation data, and lately here we have been getting some of that.
Traders are currently betting on at least two rate cuts before the end of 2024, starting in September. That could result in a drop in the main federal funds rate, from its current range of 5.25% to 5.50%.
Fed policy makers are next set to meet on July 30-31, though they are expected to hold interest rates steady.
The agenda
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11:45am BST: Bank of America Q2 , Morgan Stanley Q2
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1:30pm BST: US retail sales for June