Morning Note: Market news and an update from Currys.
Market News
Ahead of this week’s US interest rate decision, the 10-year Treasury yield is back up to 4.30% as data continue to point to persistent inflation, causing traders to push back expectations for easing. A rate decision is also due in Japan tomorrow. In the UK, the Bank of England will probably resist signalling imminent rate cuts despite data expected to show inflation sinking to its lowest in more than two years.
US equity markets ended last week on a downbeat note: S&P 500 (-0.7%), Nasdaq (-1.0%). However, this morning in Asia, markets were firm: Nikkei 225 (+2.7%); Hang Seng (+0.1%); Shanghai Composite (+1.0%). China’s industrial production and fixed-asset investment in January-February exceeded estimates, rising 7% and 4.2% respectively. Retail sales were in line with expectations, while property investment fell more than projected.
According to Rightmove data, UK property asking prices are rising at their fastest pace in 10 months, up 1.5% £368.118, suggesting growing confidence among sellers. Sterling trades at $1.2742 and €1.1693, while the FTSE 100 is currently little changed at 7,734.
Brent Crude rose toward $86 a barrel, extending gains from last week as heightened geopolitical risks continued to spark supply concerns. Gold drifted to $2,153 an ounce.
Source: Bloomberg
Company News
Currys has this morning released a positive trading update and raised its profit guidance for the financial year to end April 2024. The company also provides an update on the takeover speculation surrounding the business. In response, the shares are up 4% in early trading.
Currys is a leading multichannel retailer of technology products and services, operating online and through 815 stores in eight countries. In the UK & Ireland, the group trades as Currys; in the Nordics under the Elkjøp brand and as Kotsovolos in Greece. As a result, the group is well placed to supply the technology that has become ever more central to people’s lives.
Today’s statement highlights that in the period since peak trading (i.e. the 10 weeks to 6 January), sales have been stronger than the group’s expectations.
Despite challenging markets, in UK & Ireland and Nordics, like-for-like sales are positive and gross margins remain robust.
Combined with continued strong growth in the Services business, which supports both stronger margins and Customers for Life, and strong cost discipline, the group’s adjusted profit before tax is now expected to be at least £115m. This is above the previous guidance of £105m-£110m.
The disposal of the Greece subsidy is on track to complete in the first half of April. As a result, the group will finish the financial year in a net cash position.
Over the longer term, Currys is still targeting at least a 3.0% adjusted EBIT margin, with a focus on sustainable free cash flow generation.
Currys also notes the announcement by Elliott Advisors on 11 March and the announcement by JD.com on 15 March 2024, stating that each of Elliott and JD.com, respectively, do not intend to make an offer for Currys, and that they are consequently bound by the restrictions under Rule 2.8 of the City Code of Takeovers and Mergers, meaning another approach cannot be made for six months. The board of Currys also confirms that no proposal has been received from JD.com.
Source: Bloomberg