The FTSE Finish Line - July 15 - 2024
Burberry Hits A 14yr Low Weighing On Risk Sentiment
London stocks experienced a decline on Monday due to lower commodity prices and political uncertainty in the United States, which dampened risk appetite. Luxury retailer Burberry also suffered, plummeting to a 14-year low after cancelling its dividend payment. The FTSE 100 index dropped by 0.6% and the FTSE 250 by 0.5%. Despite copper prices holding steady, industrial metal miners saw a 1.3% drop, partly due to political uncertainty in the U.S. following an assassination attempt on presidential candidate Donald Trump, which affected global markets.
Swati Dhingra, a member of the BoE's interest rate-setting committee, stated that it is improbable for British inflation to sharply increase and recommended the central bank to lower borrowing rates. Investors are currently estimating a little over a 50% probability of a rate reduction at the August meeting. Additionally, Robert Walters' stock dropped by 6% following the company's report of a decrease in quarterly net fees due to macroeconomic and political uncertainties.
Burberry, a UK-based luxury brand, saw its shares plummet to a 14-year low, dropping nearly 18% and making it the worst performing stock on the FTSE 100 in 2024. This decline followed the announcement of CEO Jonathan Akeroyd's immediate departure and the suspension of dividend payments. The company also reported a 21% decrease in Q1 underlying sales and anticipated an operating loss in H1. Joshua Schulman, former boss of Michael Kors, will take over as the new CEO. Burberry's brand repositioning has made progress, it still needs further improvement to compete in the luxury market. Since Akeroyd took on the role of CEO in April 2022, the stock has fallen by approximately 47%. Significant efforts are required to compensate for years of underinvestment in the brand. The stock's year-to-date decline stands at around 48%, the highest among FTSE 100 companies, with a recent drop of 16.4%.
UK-based Ocado experiences a significant drop in its stock value after a brokerage firm downgrades its rating. The online grocer and technology group's shares plummet by 9.5%, placing them at the bottom of London's midcap index. The brokerage, Bernstein, has lowered the company's rating from "outperform" to "underperform" and has also reduced its price target from 1000p to 260p. Bernstein suggests that Ocado should explore the possibility of going private in a grocery deal and take measures to decrease its cash burn. The company's online demand has not recovered following the pandemic, and its partnerships with supermarket chains have been delayed or put on hold, negatively impacting its value. The brokerage highlights the real and significant liquidity challenge that Ocado faces, including existing debt refinancing and the need for additional cash in the near future. If the current trend continues, the stock is projected to end a nine-session streak of gains. As of the last close, the stock has declined by approximately 49% since the beginning of the year.
Technical & Trade View
FTSE Bias: Bullish Above Bearish below 8225
Above 8363 opens 8500
Primary support 8000
Primary objective 8023
5 Day VWAP bullish
20 Day VWAP bullish
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!