Daily market update: FTSE 100 dips, US-Iran peace hopes, Pets at Home

The FTSE 100 started Wednesday on the back foot as a weak showing for energy and defensive stocks outweighed a continuing push higher for stocks in line to benefit from any peace deal between the US and Iran.

This meant the FTSE 100 meaningfully underperformed European and Asian markets which continued to rise on hopes for an end to the conflict in the Middle East.

Brent crude oil prices remain below $100 per barrel – a good barometer of how talks between Tehran and Washington are perceived to be progressing. Plus, government bond yields are in check at levels below their recent highs.

The hope will be that this is finally the week when a real breakthrough is achieved, but should negotiations fail then we could see market patience wear thin.

Even if an agreement is reached, it will take time to get energy infrastructure fully back online and shipments flowing through the Strait of Hormuz at anywhere near pre-war levels.

Pets at Home

There wasn’t too much to get the market’s tail wagging in Pets at Home’s latest results. Badly in need of some renewed pep, the company posted a big, albeit not unexpected, drop in profit.

Pets at Home’s retail business is really suffering from competition from non-specialist rivals like supermarkets, with their greater scale and ability to offer discounts, and also from consumers dialling back their spending on toys and treats for their feathered and furry friends.

Britons famously love their pets but in tough times, it’s no surprise nice-to-have items are on the back burner. The company is cutting costs and slashing prices in an effort to revive its retail fortunes and there was at least a return to growth for this part of the business in the second half of the year and a robust start to the current financial year.

The veterinary business proved resilient and the cloud hovering over this division from a probe by the competition authorities has largely dissipated at this point.

Under new CEO James Bailey the company has rebased the dividend and launched a meaningful share buyback and he will likely continue to pull on levers like the customer loyalty scheme which should help drive repeat business.

One area of growth could be insurance where the company has FCA approval for a ‘capital light’ offering which should launch later this year. It looks a sensible extension of the company’s existing services and should benefit from the customer sign-ups and data at its disposal.

Greencore

The first set of results since sandwich maker Greencore’s merger with Bakkavor at least provided some hints that the tie-up could end up being a winning combination, to rival tuna and mayo or ham and mustard.

However, the significant costs associated with the deal have scarred these results, leading to a first-half loss, and organic growth in Greencore’s legacy business was marginal at best.

Management flagged a subdued market environment and while the decision to exit the US and concentrate on the UK may be the right one in the long term, there is clearly concern Greencore might have to sell the operations across the Atlantic on the cheap to get a deal over the line.

On a brighter note, the Bakkavor integration is proceeding as planned and some of the group’s key categories like sandwiches, sushi and pizza are outperforming the wider grocery market. Margins also ticked higher, to suggest management are running a relatively tight ship.