Early Morning Call: Tesco maintains profit expectations, Halfords cuts profit before tax guidance
More gains for global indices with Europe expected to open marginally higher ahead of critical US inflation data.
Equity market overview
European equity markets opened in positive territory, after a similar performance in the US and Asia-Pacific region.
In Australia, trade surplus widened in November as imports pulled back from record highs. Surplus on goods and services rose to A$13.2 billion, well above forecasts of A$10.5 billion. Exports slipped 0.4% while imports dropped 1.5%.
In China, consumer price index (CPI) rose by 1.8% in December year-on-year (YoY), faster than the 1.6% annual gain recorded the previous month, and matching economists' expectations. Factory gate prices declined for a third straight month.
Producer price index (PPI) fell by 0.7% in December YoY, after declines of 1.3% in September and October. Economists had expected a 0.1% decline.
Economists expect inflation to continue to accelerate in the first quarter (Q1), as China lifted Covid lockdowns last month.
In the US, consumer price index is expected to rise by 6.5% in December YoY, after 7.1% in November. Core CPI is forecast to rise by 5.7% YoY, after 6% the previous month.
Also, at 1.30pm, we await initial jobless claims. The market anticipates 215,000 new claimants for last week.
Elsewhere on the equity market, Tesco kept its full-year (FY) profit guidance after reporting stronger than expected Christmas sales.
Halfords Group revenue grew 38.3% in Q3 and +12.6% LFL versus FY20 reflecting strong sales in motoring and needs-based categories, but overall revenues were impacted by softer than expected cycling and tyre markets.
The labour market remains tight according to the group, and it has been unable to recruit enough skilled technicians which will limit growth of higher margin sales during the important upcoming Q4 MOT peak. As a result, Halfords cut its FY23 underlying profit before tax guidance to £50 million to £60m.
Elsewhere in Europe, LVMH shares rose to an all-time high yesterday, comforting Bernard Arnault's place as the world's richest man. Investors welcomed the reshuffle of top management, where Arnault made sure to tighten his family's grip on the luxury group.
After the recent nomination of his son, Antoine as head of the family' holding company, his daughter Delphine has been appointed to lead Christian Dior.
The Japanese yen has been rising since yesterday evening against all major currencies on expectations that the Bank of Japan (BoJ) will review the side effects of its monetary easing. According to an article published in Yomiuri newspaper, the BoJ will review the side effects of its monetary easing at its policy meeting next week and may take additional steps to correct distortions in the yield curve.
The EIA recorded its largest crude inventory increase since February 2021 last week.
Crude oil stocks rose by 19 million barrels as refiners are slow to restore production after a winter storm that shut operations.
If refinery utilisation rates rose by 4.5pp to 84.1%, they remain behind the 92.2% recorded only three weeks ago.
US gasoline stocks rose by 4.1 million barrels, while distillate stockpiles fell by 1.1 million barrels. The announcement, however, had little impact on oil prices.
Prior to the EIA news, Brent and WTI were rising on expectations of a fast Chinese recovery, as Beijing issued higher fuel export quotas for local refiners.
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