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Royal Mail slips 10%, FTSE 100 lower
Weaker mining stocks and the hit to sentiment from last night’s FedEx earnings warning caused the FTSE 100 index to fall 34.57 points to 7247.50.
Land Securities fell more than 3% from 21.4p to 597p after Goldman Sachs gave the retail lessor a sell rating and a new price target of 500p.
The FTSE 250 Index, back in bear market territory after falling more than 20%, fell another 120.33 points to 18,765.99.
Royal Mail fell 10%, or 25.3p, to 224.6p after the FedEx warning raised concerns about the prospects for the company’s Europe-focused GLS parcel delivery business. A cut in JP Morgan’s suggested retail price to 270p added pressure.
In the FTSE All-Share, shares in outsourcer Capita rose 0.6p to 26.15p after it announced plans to sell Pay360 in a deal with Access PaySuite, which values the payments business at around £150m.
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Retail sales are contributing to the recession picture
The sharp fall in retail volumes in August will fuel speculation that the UK is already in recession.
Sales volume fell in all major categories for the first time since July 2021, when all Covid restrictions on hospitality were lifted.
Volumes at non-food stores fell 1.9% for the month, with department stores down 2.7% and clothing stores down 0.6%. Online retailers’ sales volumes fell by 2.6% and grocery stores by 0.8%.
The latest somber update on the UK economy left sterling just above its recent 37-year low of around $1.14 today.
Capital Economics said: “Retail sales are likely to continue to struggle as the cost of living crisis hits harder in the coming months. But even so, the Bank of England will have to raise rates aggressively.”
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FedEx alert hits US market, FTSE 100 lower
A profit warning from FedEx after the closing bell in New York last night means traders are braced for a weak session when Wall Street reopens later.
FedEx shares fell nearly 17% in after-hours trading as the Memphis-based parcel delivery company withdrew its full-year earnings guidance it released in late June.
The move, which was accompanied by an acceleration of cost-cutting initiatives, came as earnings were reported to fall 21% for the first quarter of its fiscal year ended Aug. 31.
Chief Executive Raj Subramaniam said: “Global volumes declined as macroeconomic trends deteriorated significantly later in the quarter, both internationally and in the US.
“We are addressing these headwinds quickly, but given the speed at which conditions have been changing, the first quarter results are below our expectations.”
The Dow Jones Industrial Average slipped 0.6% and the S&P 500 fell 1.1% yesterday as expectations for a further 0.75% hike in US interest rates were bolstered by stronger-than-expected retail sales and jobless claims.
Futures markets are pointing to a further decline at the end of a disappointing week for US investors. In the UK, CMC Markets expects the FTSE 100 index to follow yesterday’s flat performance to open 40 points lower at 7242.
Rate hike expectations in the US have left the pound near its 37-year low of just over $1.14. Oil prices eased yesterday, leaving Brent crude at $91 a barrel.
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