Daily market update: FTSE 100 slumps, gilt yields rise, Greggs, Wickes

Drama and turmoil on both sides of the Atlantic helped put the FTSE 100 firmly on the back foot on Tuesday.

Comments from Donald Trump that the Iran-US ceasefire was ‘on life support’ saw investors wobble in Asia and Europe – with the sell-off in the UK market exacerbated by domestic political events.

The 30-year gilt yield, which is sensitive to political gyrations, extended yesterday’s gains to briefly top 5.8% as bond markets react to the increasingly perilous position of prime minister Keir Starmer.

As well as the general uncertainty created by this leadership crisis, the fear stalking gilts is that his replacement might be less committed to the fiscal rules set out by Starmer and his chancellor Rachel Reeves.

Gilts will remain sensitive to any political development throughout the day, with a crunch cabinet meeting in view.

The geopolitical backdrop doesn’t help – with Trump’s comments on the fragile peace between the US and Iran helping to stoke oil prices once again.

In London, domestic-facing stocks, including banks fell while traditionally defensive names were in demand.

Greggs

It’s been a while since Greggs could stand tall and prove to the market that business hadn’t gone stale. While not strong enough to warrant upgrading full-year guidance, Greggs’ latest trading update is still reassuring, particularly after a long period of dragging its heels.

There is an element of reviving old tricks with the new chicken roll. Greggs pulled a blinder when it originally launched the vegan sausage roll, luring people into its shops with a sense of curiosity and then hooking them in for repeat visits. It was the talk of the town.

Thanks to the power of social media, it has once again ‘gone viral’ with content creators racing to give their thoughts on its new variation of a meat product wrapped in pastry. Despite many reviews implying it is bland and lacks any flavour, the chicken roll has once again acted as a magnet to get people into Greggs’ stores.

Equally important is the fact life isn’t getting any worse for Greggs. It is sticking with cost inflation expectations which is interesting given the negative implications of the Middle East conflict on aspects like food ingredients costs and energy prices.

Another stab at international expansion is also interesting, albeit not quite setting up shop on the high street in a foreign country. Instead, Greggs is going down a less risky route of opening an outlet inside Tenerife airport. That looks like an ideal place to dip its toe into new waters, with hungry travellers not fussy about what they buy in an airport, and holidaying Brits happy for some home comforts.

Greggs’ previous foreign efforts didn’t last long. The company originally announced in 2003 that it was ‘taking buns to Belgium’ which is a bit like a foreign retailer setting up shop in Newcastle to sell sausage rolls. Locals will always prefer their homegrown offering and even the simple task of creating a sweet bun was going to be an uphill struggle for Greggs in a foreign land.

It was a much smaller business at the time and has arguably gained considerable experience since then.

Rolling out sites in foreign transport hubs looks ideal – the big unknown is whether that market is already well served or whether there is any space for it to occupy. There will already be plenty of operators entrenched in those markets.

On the Beach / Wizz Air

There’s good news for holidaymakers who haven’t got anxiety over the prospect of last-minute flight cancellations if there isn’t enough fuel. Wizz Air says it is slashing prices to stimulate demand during an uncertain period for the airline industry.

On The Beach also says there is more competitive pricing in the holidays market, which suggests there are bargains to be found. However, they might not last long. On The Beach says booking activity has picked up more recently. Packaged holiday providers and airlines will only resort to discounts when demand is weak, and they’ll mark up prices in a flash once they gain more confidence.

It's a surprise to see On The Beach reinstate profit guidance, having previously withdrawn it as the Middle East conflict unfolded. There is still considerable uncertainty around jet fuel supplies and oil prices remain high, which is putting pressure on consumers and questioning their ability or willingness to splash out on holidays.

The profit guidance is significantly below market expectations, hence the negative share price reaction. Analysts had pencilled in £35.5 million pre-tax profit for the year, yet On The Beach now expects between £18 million and £25 million. That’s a wide range and the bottom end of guidance is effectively half of what the market thought the company would make.

Vodafone 

In the stock market it’s often said that it’s better to travel than arrive, hence why shares in Vodafone dipped on robust-looking full-year results after a strong rally in the past 12 months.

The numbers were at the top end of guidance as CEO Margherita Della Valle pointed to strong prospects after shedding underperforming parts of the business and driving a consolidation of its UK operations.

Further revenue expansion is expected for the current financial year although the growth outlook could be characterised as solid rather than spectacular.

Vodafone’s largest market Germany continued to demonstrate it had shaken off the impact of regulatory headwinds although performance remained subdued amid subscriber losses.

The big growth is being delivered in less mature markets in Africa where its Vodacom operations are chalking up double digit increases in service revenue.

After years of going nowhere in stock market terms, Vodafone has been rewarded for its strategic progress over the past year. Today’s market reaction is a reminder it cannot sit on its laurels.

Wickes

The value of Wickes’ trade customers – who tend to be more consistent in their purchases – was in evidence in the company’s latest update.

Wickes committed one of the stock market’s cardinal sins as it attributed a weak showing among ordinary punters to the weather as heavy rainfall put households off outdoor DIY projects. This meant like-for-like sales for its retail arm and the group were in negative territory.

In fairness, the company is continuing to gain market share in interior categories like paint, tiling, flooring and timber and the company sounded a positive note on the outlook despite uncertainty hitting consumer sentiment.

The do-it-for-me trend still seems in evidence with decent demand for the design and installation services alongside the strong showing for its TradePro offering pitched at the professionals.

In a show of confidence Wickes is pressing ahead with plans for the rollout of new stores and a refit and refresh of existing outlets.