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MARKET WRAP: FTSE edges higher, GBP strengthens, oil slips lower

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Key Points

FTSE 100 closing price of 7,563.2 (+0.15%)
Homebuilder struggles continue as Countryside plunges
Retail names in focus after Sainsbury’s, M&S results
GBP/USD hits highest since 29th October
Crude edges lower after recent gains
Nat Gas declines despite big storage draw
Bitcoin holds above $43,000

By Samuel Indyk

Investing.com – The FTSE 100 finished marginally higher on Thursday with homebuilders again under pressure as they have been for much of the week after the UK ordered the industry to come up with a full-funded plan to fix the cladding crisis.

Thursday’s weakness came amid trading updates from Persimmon (LON:PSN) and Countryside Properties (LON:CSPC). Countryside shares fell over 20% and the CEO left the business after a disappointing quarter that missed the Board’s expectations.

Retail names were in focus after both Marks and Spencer (LON:MKS) and Tesco (LON:TSCO) provided trading updates following the Christmas period. M&S shares were lower despite reporting an 18.6% increase in total UK sales during the quarter. The company said it now expected full-year profit before tax of at least £500 million but there are still headwinds that the company is facing.

“Inflation will squeeze the amount of cash shoppers have to spend and with the discounters already drawing up battle plans to scoop up budget conscious shoppers, Marks and Spencer is going to have to think carefully about the one part of the business that’s been holding everything else up,” AJ Bell Financial Analyst Danni Hewson said. “Whilst consumers will still walk through the doors to pick up those nice to haves they might well only do so after they’ve done the bulk of their shopping elsewhere.”

Tesco shares also edged lower despite a profit upgrade following the Christmas period. The supermarket chain said it expects retail operating profit to be slightly above the top end of the previous £2.5-2.6 billion guidance range. Despite the small drop in shares, interactive investor Head of Markets Richard Hunter is mostly upbeat on the company’s prospects.

“The company remains the one which the pack continue to chase, and in investment terms remains the comfortably preferred play in the sector,” Hunter said. “While the weight of market expectation is a potential downside to the price, boosted by another Christmas cracker the market consensus of the shares as a strong buy is unlikely to be troubled.”

In FX markets, GBP was resilient to the (past) goings-on in Downing Street with GBP/USD touching its highest level since 29th October amid broad USD weakness. Some of UK Prime Minister Boris Johnson’s own MPs have called on him to resign but all eyes will turn to the report, which is expected to be released next week, to determine whether Johnson broke any guidelines after attending a “garden party” at 10 Downing Street in May 2020.

WTI and Brent crude futures edged lower after the recent gains took the benchmarks near two-month highs. The less severe illness caused by the Omicron COVID variant has supported crude prices in recent weeks, despite case numbers at record highs across the world. On the supply side, Libya’s oil output rose to 963,000 barrels per day, according to Bloomberg. The OPEC member had seen production decline in recent weeks following bad weather, the closure of ports and an offline pipeline.

Natural Gas Futures reversed almost all of Wednesday’s rally despite a decline of gas in storage in the US. The Energy Information Administration said working gas in storage fell 179 Bcf from the previous week. Total stocks were 199 Bcf less than last year at this time and 72 Bcf above the five-year average of 2,944 Bcf.

After dropping below $40,000 on Monday, Bitcoin traded back above $44,000 on Thursday.

“That swift 10% rebound is nothing by Bitcoin standards and if it can break $45,500, we could see another sharp move higher as belief starts to grow that the worst of the rout is behind it.,” OANDA Senior Market Analyst Craig Erlam said. “It looks like a fragile rebound at the moment but a break of that resistance could change that.”

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MARKET WRAP: FTSE edges higher, GBP strengthens, oil slips lower

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