Daily market update: Japan trade talk, Sainsbury's, SSE, National Grid

“Asian markets saw mixed fortunes as investors waited for updates on trade talks and Trump’s tax-reduction bill,” says Dan Coatsworth, Investment Analyst at AJ Bell.

“The Nikkei 225 fared worst as it looked as if relations were strained between the US and Japan, which doesn’t bode well for tariff negotiations.

“Donald Trump took to social media to moan about Japan’s reluctance to import US-grown rice and said Japan would get ‘a letter’. He was referring to previous comments about certain countries being informed in writing about higher tariff rates before the 90-day pause ends on 9 July.

“The next few days are going to be testing times for governments in many parts of the world as they try to hammer out trade deals with the US. Some might buckle and give in to Trump’s demands, others will stand their ground and not be railroaded by a deal that is heavily weighted in the US’s favour.

“European markets were more bullish, including a 0.2% rise in the FTSE 100 to 8,781 thanks to strength in utilities, energy producers, miners and banks.

“Housebuilders retreated after disappointing housing data from Nationwide which said average UK prices fell by 0.8% month-on-month in June. Housebuilders have been pinning their hopes on a more robust property market driven by lower mortgage rates. Changes to stamp duty in April might have simply caused a short-term blip in activity and it certainly doesn’t look as if the property market is going into a major decline.”

Sainsbury’s

“After years of being too expensive for lower-income households and not posh enough to woo wealthier individuals from Waitrose, it’s clear Sainsbury’s has finally found its groove. Its latest trading update shows a business in fine health, with robust sales growth across the board.

“Its value range appeals to cash-strapped shoppers looking for a bargain while more affluent people are gobbling up its Taste the Difference premium range. Product innovation is paying off as shoppers are tempted by new products alongside weekly favourites.

“Importantly, the non-food side of its business is looking stronger after a wobbly patch. Clothing sales outperformed the broader market and Argos has benefited from the sunny weather, with garden furniture and barbeques likely to have been in strong demand.

“Rival supermarkets will be looking at Sainsbury’s performance with some concern. If Sainsbury’s is doing well, it means other grocers might not be doing as well. Sainsbury’s is taking market share and that means rivals will need to pull their socks up. This is a highly competitive industry and grocers need to be on their toes at all times.”

SSE / National Grid

“Utility companies are in a constant battle with regulators over five-year pricing controls. These companies spend a considerable amount of money on upgrading infrastructure and they expect to be able to make a decent return on that investment. There is often a mismatch between what the regulator allows them to charge and what the utilities believe is fair.

“SSE is not happy with the current proposal from Ofgem regarding the next electricity pricing cycle. The utility doesn’t see eye to eye on the draft regulations, saying it doesn’t factor in true costs and implies it won’t result in adequate cash flow for the business.

“It’s perfectly normal for utilities to fight their corner until the eleventh hour. National Grid has issued a tamer response compared to SSE but is still pushing for better incentives.

“Investors seem encouraged by SSE and National Grid standing their ground and demanding more, given the share price rise in both companies on the news.”