Graeme Wearden 

Asda sales fall as customers switch to supermarket rivals – as it happened

Asda, Britain’s third biggest supermarket group, posted a 5.3% decline in underlying sales in the three months to the end of June
  
  

An Asda store in West London, Britain.
An Asda store in West London, Britain. Photograph: Toby Melville/Reuters

European stock market close

And finally, London’s stock market has ended the day in the red, but up from its earlier lows.

The FTSE 100 has closed 22 points lower at 8144 points, down 0.27% today.

At one stage it was as low as 8064 points, a triple-digit drop, before recovering after the latest US jobless claims came in stronger than feared.

Insurance firm Beazley led the risers, up 10.7% after almost doubling its first-half profits to $728.9m this morning.

And that’s all for today. Goodnight! GW

Asda has also reported that its net debt was £3.9bn at the end of the second quarter of 2024, adding that it “remains fully committed to further deleveraging.”

Asda to invest £30m to increase staff levels

Asda also says its Executive Team has “a clear plan” to deliver a more consistent experience for customers.

It has three key priorities: customer satisfaction, enhanced product availability and a renewed trading plan.

Asda says:

First, the supermarket will increase its focus on, and invest in, enhancing availability across all categories, including 1,000 core grocery lines most important to customers. Asda expects to deliver material efficiencies to make replenishment processes easier, allowing more deliveries to be put straight to shelf.

Second, Asda is investing an additional £30m in colleague hours – to ensure a strengthened customer proposition. This investment will improve the replenishment of stock during opening hours in store; increase the number of colleagues on checkouts at the weekend; and provide a more effective cleaning programme in stores.

Updated

Asda sales fall as customers switch to supermarket rivals

Sales have fallen at UK supermarket chain Asda, as customers defect to larger rivals.

Asda, the UK’s third-largest supermarket chain, has reported a 2.1% drop in like-for-like sales in the first half of the financial year.

The decline accelerated in the last quarter, with underlying sales down 5.3% in April-June.

Michael Gleeson, the retailer’s finance chief, says Asda knows it needs to improve.

Gleeson says:

We continue to make progress by investing in bringing our quality and value offering to more customers across the UK, with Asda’s food price inflation trending lower than the market.

“We have made great progress over the last few years in transforming Asda into a diversified retail group, much of which is almost complete.

However, we also know that there are some areas where we can and need to improve. We have today set out clear and decisive action to deliver a more consistent customer experience – to match the uncompromising value we offer. We remain confident in the underlying strength of the Asda business as we execute our long-term growth strategy.”

Data provider Kantar reported last month that Tesco and Sainsbury’s both grew their market share in the 12 weeks to early July, to 27.7% and 15.3% respectively, while Asda held a 12.7% share.

Asda has also reported that its online sales grew over the latest quarter, with a 1.4% rise in online grocery and 3.9% jump in George.com sales.

Mohsin Issa, Asda co-owner, said:

“These results highlight a period of robust online performance and a record start to George’s Back-to-School campaign.

“As we move forward, we remain committed to maintaining our value credentials, enhancing the product offer, and executing our long-term growth strategy to build an even stronger Asda for our customers and communities.”

Asda was bought by the billionaire Issa brothers and their private equity partner TDR Capital in 2021. That takeover added more than £4bn of debt to the company’s books – debt servicing costs have risen due to the increase in interest rates since.

There has been change at the top recently; two months ago, Zuber Issa exited Asda, selling his 22.5% stake to TDR Capital to focus on his petrol forecourts business.

The early rally on Wall Street indicates today’s better-than-expected jobs data have eased worries of an imminent slowdown in the world’s largest economy.

Thomas Hayes, chairman at Great Hill Capital, says:

“Since the jobs report on Friday, everyone’s been nervous about a recession ... The claims came in lower than expected, alleviating some of the fear that the labor market was completely rolling over.”

Boeing is among the top risers on the Dow Jones industrial average, up 2%, despite concerns that its Starliner capsule may not be able to bring two astronauts back from the International Space Station.

That task could fall to SpaceX’s Crew Dragon – which would be a blow to Boeing.

New York stock market rallies

Newsflash: Wall Street has opened higher, as a week of rollercoaster market action continues.

The Dow Jones industrial average is up 215 points, or 0.55%, to 38,978 points at the open.

The broader S&P 500 share index is just over 1% higher, while the tech-focused Nasdaq is 1.4% higher.

Stocks are recovering some of their earlier losses in London too.

The FTSE 100 index is now down 47 points, or 0.6%, at 8119.

Shares were lower this morning, as investors caught up with losses on Wall Street yerterday.

Wall Street futures rally after jobless claims fall

The New York stock exchange likes today’s fall in jobless claims!

Wall Street futures have pushed higher, as investors digest the drop in new unemployment claims last week.

The S&P 500 is now expected to jump 0.75% at the open, with Nasdaq futures up 1%.

Michael Brown, senior research strategist at brokerage Pepperstone, says the US jobless claims figures appear to have steadied some market nerves.

Stocks have popped in reaction, as dip buyers emerge for a third straight day, though the rapid nature by which gains fizzled out yesterday may be some cause for concern, particularly with the S&P remaining below its 100-day moving average.

Nevertheless, the rather sizeable equity, and Treasury, reaction to what is usually a glossed-over data release speaks to how the market continues to hang on the ‘growth scare’ narrative, with next week’s retail sales print the next jigsaw piece in further allaying concerns over an imminent US economic slowdown, which were sparked by last week’s poorer-than-expected labour market report.

Today’s jobless claims report shows the US economy is ‘solid’, says Heather Long of the Washington Post:

US jobless claims total falls

Newsflash: the number of Americans filing new claims for unemployment support has dropped, which may calm fears of an imminent US recession.

There were 233,000 fresh ‘initial claims’ for unemployment support last week – a proxy for the number of workers laid off.

That’s down on the previous seven days, when there were 250,000 initial claims, close to a one-year high.

Encouragingly, that’s also lower than feared – as economists had predicted 240,000 initial claims for last week.

Joseph Brusuelas, chief economist at RSM US, says this suggests the US jobs market is fairly healthy:

Updated

More competition news: the UK’s CMA has kicked off a formal merger inquiry into Amazon’s investment in the high-profile artificial intelligence start-up Anthropic.

The move by the UK’s competition watchdog comes as regulators take a closer look at the AI sector, and moves by Big Tech companies.

The CMA will look into whether Amazon’s partnership with Anthropic – which develops the Claude LLM and chatbot- has resulted in the creation of a relevant merger situation, and if it could lead to a substantial lessening of competition in the UK.

That partnership saw Amazon take a $4bn stake in Anthropic and sign a deal to become one of the startup’s cloud computing providers.

Last month, the CMA began a preliminary investigation into Google’s partnership with Anthropic.

British Airways to pause flights to Beijing

In the travel sector, British Airways is to halt flights to the Chinese capital.

BA says it will pause its route to Beijing from 26 October, but continue daily flights to Shanghai and Hong Kong.

It’s a surprise, as BA had only resumed flights to Beijing in June 2023, four times a week, after pausing early in the Covid-19 pandemic.

British Airways first flew to China in 1980, and last year described Beijing and Shanghai as “important routes”.

More landlords launched efforts to evict tenants in the second quarter of the year.

The Ministry of Justice reports that repossessions by landlords increased by 16%, compared with Q2 2023, from 5,950 to 6,927.

That was riven by an increase in landlord possession claims; they rose 9% year-on-year from 22,526 to 24,495.

The highest private landlord possession claim rates were found in London, with 7 of the 10 highest rates occurring in this region.

The MoJ reports:

Barking and Dagenham had the highest rate for private landlord claims (850 per 100,000 households owned by a private landlord), followed by Newham, and Redbridge, with 823 and 652 claims per 100,000 households owned by a private landlord respectively.

Charles Roe, director of mortgages at UK Finance, say lenders offer a range of support, so any mortgage-holders worried about their finances should get in touch:

“If you are worried about your finances, please reach out to your lender as soon as possible to discuss the support options available.

“Doing so won’t affect your credit score.”

UK Finance’s latest data also shows a 31% year-on-year jump in homeowner properties being repossessed.

It says 980 homeowner mortgaged properties were taken into possession in the second quarter of 2024, 8 per cent greater than in the previous quarter and 31% more than in Q2 2023.

In addition, 710 buy-to-let (BTL) mortgaged properties were also repossessed, which was 13% higher than in the previous quarter and a 51% annual jump.

Aza Teeuwen, portfolio manager at TwentyFour Income Fund, points out that repossessions are still low in historical terms:

“As expected, arrears are slowly increasing, but the actual repossessions are still very low compared to historical standards, which is mostly the result of active servicing done by the banks who are now, more than historically, working with their borrowers to bring them back on track.

After having enjoyed low mortgage rates for well over a decade, borrowers should not necessarily fear the new rate environment, as banks will have stress tested them on higher rates already. Many borrowers have already refinanced their mortgages in the recent 2 years at higher rates, and many of these should be expecting cheaper mortgages again.

Since the recent rate cut from the Bank of England, the popular 2- and 5-year fixed rates are over 2% cheaper than they were in 2022, with an increasing number of banks now offering 5 year fixed rate mortgages inside 4% again, improving affordability.”

Separate data from trade body UK Finance show that 96,070 homeowner mortgages were in arrears of at least 2.5% of their outstanding balance in April-June.

That’s a 17% increase on a year ago.

The number of buy-to-let mortgages in arrears jumped by 51% year-on-year, to 13,570.

Within homeowners, there were 34,420 in arrears of between 2.5% and 5% (the lighest arrears band) – 11% more than a year ago.

The number in arrears over 10% of their balance has risen 14% compared with Q2 2023, to 32,810.

This chart shows the process by which a mortgage possession claim can result in a property being repossessed:

More here.

Updated

UK mortgage possession claims hit five-year high

Claims by mortgage lenders to repossess a property have reached their highest level in five years, as households struggle to handle the impact of high interest rates.

New government data shows that mortgage possession claims increased by 34%, year-on-year, in the second quarter of 2024 – up from 3,991 to 5,343.

Mortgage possession claims occur when banks or lenders take homeowners to court before repossessing their home, because they have fallen behind on their repayments.

If granted by the courts, the defendant must vacate the property – although courts can grant a suspended order or no order at all.

The jump follows the increase in UK interest rates to a 16-year high of 5.25% last summer, where they remained until being trimmed to 5% this month.

That created a ‘mortgage timebomb’, as borrowers faced steep increases in mortgage payments when their old fixed-rate deals ended.

The Ministry of Justice says:

Both mortgage and landlord possessions actions have continued to rise in the current quarter. Mortgage claims have reached their highest volume since Q2 2019 and are now close to pre-Covid volumes.

However, repossessions are still sharply below their peak after the 2008 financial crisis – they hit 26,419 in April to June 2009, as global turmoil led to many families losing their homes.

The MoJ also reports that warrants – which allow a mortgage lender to regain possession of a property from a homeowner or tenant – are up 9% year-on-year, while repossessions by county court bailiffs jumped 29% from 660 to 854.

Updated

Gloom about global growth is weighing on the copper price again.

The most-traded September copper contract on the Shanghai Futures Exchange has closed down 1.1% today at 70,680 yuan (£7,769) a ton.

Three-month copper on the London Metal Exchange dropped by 0.5% in early trading, and has lost 5.4% so far this month.

JPMorgan sees 35% risk of US recession by end of this year

There’s a one in three chance of a US recession by the end of this year, JP Morgan analysts fear.

JPMorgan Chase & Co now sees a 35% chance that the US economy tips into a recession by the end of 2024, Bloomberg reports.

That’s up from 25% as of the start of last month, before weak data from the US industrial sector and a hiring slowdown worried economists.

JPMorgan economists led by Bruce Kasman told clients:

[Recent news] hints at a sharper-than-expected weakening in labor demand and early signs of labor shedding,”

The team kept the odds of a recession by the second half of 2025 at 45%.

Global markets settle into a yo-yo pattern

With volatility high, global markets are settling into “a yo-yo pattern” as volatility remains high, says Matt Britzman, senior equity analyst at Hargreaves Lansdown:

“Markets may have simmered down but this roller-coaster week isn’t over yet. UK markets opened lower in a move that unwinds a good chunk of yesterday’s gains.

Corporate earnings are starting to slow but there’s plenty for traders to get their teeth into.

Deliveroo hit two of its major financial milestones over the first half centred around positive free cash flow and profitability. Commentary suggested encouraging behaviour from those looking for a quick bite to eat, but second quarter volumes were weaker than expected across both the UK and international markets.

Elsewhere, Ladbrokes owner Entain delivered a good half and upped guidance, while Persimmon saw a boost from higher selling prices – more detailed comments below.

US futures point to a muted open today after major indices lost ground yesterday.

Gambling group Entain are also among the small group of risers in London this morning; its shares are up almost 10%.

Entain lifted its profit forecast for the year this morning. It now expects small growth in online net gaming revenues, having previously forecast a small decline, and an EBITDA profit of £1,040m-£1,090m.

Entain, which owns Ladbrokes, Coral and BetMGM, said its performance in the first half of this year was ahead of expectations, partly thanks to stronger than expected profit margins in the UEFA Euros mens football tournament.

European markets are a sea of red again.

This morning, the pan-European Stoxx 600 index has lost 1.2% as its choppy week continues, with Germany’s DAX down 0.95% and France’s CAC shedding 1.05%.

Banks and tech firms are leading the fallers on the Stoxx 600.

Elsewhere in the building sector, the merger of Barratt and Redrow has hit a snag.

The Competition and Markets Authority is concerned that the deal would create competition issues in the local area around a Barratt development in Whitchurch, Shropshire, which is close to Redrow’s development at Kingsbourne in Nantwich.

If the deal goes ahead, the CMA found that it could lead to higher prices and lower quality homes for homebuyers in this catchment area.

More broadly, though, the CMA does not have UK-wide competition concerns. It wants the housebuilders to offer proposals which address its concerns around the Whitchurch site.

Joel Bamford, executive director for mergers at the CMA, said:

Prospective homebuyers must not be disadvantaged as a result of deals like this one – with the potential loss of competition leading to even higher house prices or lower quality homes.

Our initial investigation found concerns specifically in one area in and around Whitchurch, the companies now have the opportunity to agree workable solutions which address our concerns rather than move to a more in-depth investigation.

Persimmon upbeat on homebuilding target

UK housebuilder Persimmon is aiming to build more than 10,000 new houses this year.

Persimmon has reported that it’s on track to complete 10,500 houses this financial year, which is at the top end of its previous guidance.

In the first half of this year, completions are up 5% at 4,445 to new homes.

Persimmon says it is encouraged by the Labour government’s plans, particularly around planning, adding:

Consumer confidence continues to improve leading to a strong pick up in enquiries and visitors, which will be further supported by the recent cut to the Bank of England base rate.

Shares in Persimmon are up 2.3%, making it a rare riser on the FTSE 100 in early trading.

FTSE 100 down 1%

As feared, stocks in London have fallen back with a bump.

The blue-chip FTSE 100 share index is down 92 points in early trading, a drop of 1.1%, to 8075 points.

That reverses more than half of Wednesday’s rally, which had taken the index back near its levels at the end of last week.

The smaller FTSE 250 share index is also down over 1%.

Shares in Deliveroo have jumped 6% at the start of trading as investors welcome the news that it made a profit in the first half of the year.

They’ve risen to 135.5p, meaning they’re also up around 6% so far this year.

But, those who bought shares in Deliveroo’s flotation three years ago are still facing a loss, having bought at 390p.

Deliveroo has also announced a new £150 million share buyback programme, which it says “reflects financial progress in the last year and confidence in the outlook”.

Deliveroo hits profit milestone in H1 2024

Delivery group Deliveroo has hit its goal of making a profit, at least for the first six months of the year.

Deliveroo has reported a profit of £1m for the first half of the financial year, up from a loss of £83m in H1 2023.

This looks to be its first half-year profit since the company floated on the stock market in 2021.

Will Shu, founder and CEO of Deliveroo, said changes such as improving its loyalty programme had helped:

“I am pleased with the performance we have achieved this half, which was driven by effective execution of our growth and profitability initiatives.

As a result, we reached two major financial milestones: positive free cash flow and positive profit for the period.”

Total orders rose 2% in the quarter, while the gross transaction value (GTV) of each order rose 5%.

Shu says:

Looking ahead, while there is continued uncertainty in the external environment, I am encouraged by the inflection we are currently seeing in consumer behaviour in many of our markets

Introduction: Markets remain jittery

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Market jitters have not abated, after a disappointing end to trading on Wall Street last night.

European markets are set to open with a bump, wiping out some of yesterday’s recovery.

Investors are anxious after a bright start on the New York exchange faded by the close last night. The S&P 500 index fell 0.77% by close of trading, having been up 1% in early trading after dovish noises from the Bank of Japan supported shares earlier on Wednesday.

That weakness has worried traders. Stephen Innes, managing partner at SPI Asset Management, sums up the mood:

The US stock market wobbled and wavered on Wednesday, ultimately fizzling out as the day’s recovery hopes melted away like a popsicle in the summer sun.

Nvidia and other tech behemoths kicked off the day with gusto but quickly lost steam as if deciding to take an unexpected afternoon snooze. This lethargy led to a broader market slump.

There remains anxiety that US policymakers may not pull off a ‘soft landing’, as they try to cool inflation without causing a recession. Geopolitical tensions are another worry.

Innes adds:

The potential for a broader U.S. economic slowdown, misaligned global monetary policies, and the bubbling geopolitical tensions in the Middle East cast long, ominous shadows across financial markets.

Furthermore, the U.S. political election looms, potentially turning the markets into more of a chaotic mosh pit than a graceful waltz.

Prepare for a potentially “Turbulent Thursday” and brace for what might become a “Frantic Friday.”

IT firm Super Micro Computer led the Wall Street rout, falling 20% after its latest results missed analyst expectations.

This has pushed stocks down in Asia, where Japan’s Nikkei is down 0.75% and South Korea’s Kospi has lose 0.7%.

European markets are set to open lower too:

The latest US weekly jobless claims data, due before Wall Street reopens, will set the mood. Economists expect around 240,000 new claims for unemployment benefit, down from 249,000 the previous week.

Kyle Rodda, senior financial market analyst at capital.com, explains:

Whether we see further volatility in the short term mostly depends on tonight’s US jobless claims number.

In a week lacking significant event risk, the jobless claims in the most critical piece of information the markets are likely to receive, especially given that the plunge in equities was stoked by data signalling the US labour market could be rolling over.

The agenda

  • 9.30am BST: UK mortgage and landlord possession statistics for April-June
    11am BST: Ireland’s inflation report for July

  • 1.30pm BST: Weekly US jobless claims

Updated

 

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