Early Morning Call: FTSE 100 opens higher amid Ocado, Bellway earnings reports

Equity market overview

Equity markets mostly rose yesterday, with only the Nasdaq ending the session lower. Fears of a banking crisis continued to ease, as First Citizens Bancshares agreed to acquire most of Silicon Valley Bank.

Overnight, indices traded higher in the APAC region. Australia’s S&P/ASX 200 lead gains as the country’s retail sales index rose 0.2% in February, compared to a revised 1.8% rise in January, beating median expectations of a 0.1% rise. Year-on-year (YoY), retail sales rose 6.4%.

With inflation at 7.4% in January in the country, this means that retail sales volumes are contracting against price increases. The market now awaits tomorrow's Monthly CPI indicator, forecast to ease to an annual rate of 7.1% in February.

Reserve Bank of Australia (RBA) chief, Philip Lowe has said the central bank was closer to pausing its rate increases. The central bank has already lifted rates by 350 basis points to an 11-year peak of 3.6%. The RBA decision is next Tuesday, 4 April.

Macroeconomics

A few macroeconomic indicators are expected this afternoon across the Atlantic.

At 1.30pm expect wholesale inventories and goods trade balance, followed half an hour later by the S&P/Case-Shiller home price and house price index, and at 3pm by the Conference board consumer confidence.

Earnings

Elsewhere on the equity markets Ocado's retail revenue rose 3.4% to £584 million in the first quarter (Q1). Average orders per week rose 3.6% and the average basket value came flat.

Bellway's revenue rose to a record level for the group, but reservation rate fell by 31.7%.

In the US, Walgreens Boots Alliance (WBA) is scheduled to post earnings for the second quarter (Q2) before the market open. Analysts expect earnings of $1.10 per share, on revenue of just over $33.5 billion. But over and above earnings, investors want to know more about the future of Boots. Some of them, as well as some WBA board members, want the group to prioritise the US market, and move away from traditional retail to focus on US private health care. This would mean either a spinoff of Boots or even a straightforward sale.

It is not the first time WBA has wanted to part with its UK branch. It tried to sell Boots for the first time in January 2022. The price tag was then £7bn, but Walgreens Boots Alliance did not find a buyer and decided to call it off five months later.

Tonight, after the close of the US markets, Micron Technology, an all-sessions stock on the IG platform, is poised to post a loss of 66 cents per share. Revenue is expected to continue declining to $3.74bn. Three months ago sales fell 41% to just over $4bn.

The semiconductor industry is still suffering from distortion originating from the Covid-19 pandemic. Orders soared during 2020 and 2021 to supply a technology boom, pushing Micron and other chip makers to produce more. Now, in the context of fears of a recession, they are left with excess inventories and are being forced to wind down their capital investment budget.

Commodities

Oil prices are easing this morning after a rally yesterday that took WTI and Brent over $72 and $77 respectively.

Oil prices rose at their fastest pace in four months, due to a conjunction of news. The acquisition of SBV by First Citizens Bank triggered a wave of optimism across asset classes. Also, according to an annual forecast by a research unit of China National Petroleum, China's crude oil imports are expected to rise 6.2% in 2023, as the world's second largest economy continues on its road to recovery.

New York Cocoa's rally continues. This is partly due to tight supplies from Ivory Coast, the world's largest producer of cocoa, where port arrivals have been running behind last year's pace. However, that rally might not last, as there is no production issue here. Ivory Coast expects a good mid-crop, and its neighbour and the world's second-largest producer Ghana is poised to produce a larger crop this season.