Daily market update: FTSE 100 plays catch up, Kingfisher, Melrose

The FTSE 100 was playing catch up to European counterparts on Tuesday after progress on a potential agreement between the US and Iran.

However, continued doubts about the potential for a deal and an overnight pre-emptive US strike on Iran mean any euphoria is being kept in check. It’s telling that other European indices dipped slightly after the gains they enjoyed yesterday when trading in London was suspended for the bank holiday.

The big gainers on the UK stock market include miners, retailers, housebuilders and real estate stocks.

Oil prices have ticked higher once more but remain below the psychologically important $100 per barrel barrier. Having moved substantially lower, government bond yields were pretty steady as markets continue to assess the potential trajectory of inflation and interest rates.

Kingfisher

The market has reacted with considerable relief to the latest update from B&Q-owner Kingfisher as it sticks with full-year guidance, suggesting demand is proving resilient despite a tricky environment.

Blaming the weather for weak trading is often seen in the ‘dog ate my homework’ category of excuses by the market, but the fact it has not forced any downgrades means Kingfisher has kept investors on side.

Like-for-like sales did slide in its first quarter to reflect the soggy and chilly start to spring, but there were some bright spots alongside the clouds in the trading statement.

Among the areas of positivity is the continued strong growth in the Screwfix business. Kingfisher, like several of its peers, is pursuing trade customers who are often more reliable and consistent sources of revenue than ordinary consumers. That’s because materials and tools are not a nice-to-have for them but essential to their day job.

This strategy is paying off in spades as the company makes market share gains. These sales could become increasingly important as pressures on consumer spending build, although as well as putting people off DIY projects, the do-it-for-me work on which its trade buyers rely may also suffer against a difficult backdrop.

Melrose Industries

When considering the risks facing GKN Aerospace owner Melrose, few investors would have had a potential explosion at a Californian manufacturing facility on their bingo card.

The incident, which developed over the long weekend, involving a storage tank at the facility may not have caused ‘injuries, leaks or contamination’ but has resulted in significant evacuation orders and wider disruption to the surrounding community.

Keeping everyone safe is obviously more important than any future financial impact but the crisis is particularly unhelpful at a time when Melrose is already under pressure thanks to the impact of the Iran war on the aviation sector.