Daily market update: Ocado, EasyJet, Frasers, DFS, TSMC

“Having seen a rapid retreat from the briefly attained 9,000 mark earlier this week, the FTSE 100 made steady progress on Thursday to put this milestone level back within reach,” says AJ Bell Investment Analyst Dan Coatsworth.

“Financial stocks were among the gainers, while specialist distributor Diploma led the way as it lifted its full-year target for organic growth.

“A mixed and messy set of UK jobs numbers saw the pound make some modest progress. The numbers will be closely watched by the Bank of England as its policymakers weigh their next decision on rates after this week’s uptick in inflation.

“While payroll employment fell for a fifth consecutive month in June, there was a significant downward revision to the previous estimate for the number of payrolled staff cut in the previous month. Even though wage growth for the three months to the end of May eased, it remains elevated.

“It all adds up to a tricky backdrop for the Bank to navigate as it looks to plot a course for rates, particularly given the evidence of renewed inflationary pressures. For now, the markets continue to price in a rate cut in August.”

Ocado

“Ocado shares have rocketed after it reported a big jump in earnings and gave an optimistic outlook. But once you strip away an accounting adjustment from its joint venture with Marks & Spencer, the underlying business still isn’t making money.

“Shareholders have been waiting longer than a Royal Mail delivery for Ocado to be profitable. The company is determined to turn cash flow positive in 2026 and that is the big milestone to achieve. It has spent ages setting up warehouses for clients which is an upfront cost. What the market really wants is the longer-term cash flow benefits.

“To Ocado’s credit, it continues to win new contracts for its warehouse robotics solutions, but the pace of these wins remains slow. Ocado’s proposition is not unique and large swathes of the grocery industry already have a process in place to support online orders. That means Ocado will have to offer something extra special to stay ahead of the game.”

EasyJet

“The post-pandemic trend of people prioritising a week in the sun over almost anything else looks to be tailing off – something confirmed by EasyJet’s third-quarter results.

“For now, passenger numbers are solid, but people are leaving it longer to book and are more price-driven than before thanks to economic uncertainty. As a result, EasyJet remains reliant on late summer bookings to fill unsold seats and the market will be weighing the risk that last-minute demand does not come through at the level necessary to get flights close to capacity.

“This headwind is being compounded by an increase in fuel costs and the impact of French strike action, with these factors prompting downgrades to earnings estimates.

“On the flipside, investors will be reassured that the heightened tensions in the Middle East only seemed to have a passing impact on demand. The company’s foray into package holidays, which began in 2019, also seems to be paying off nicely based on the increase in guidance for this part of the business.”

Frasers

“It’s a tough time to be a retailer, particularly in the UK where employment-related costs have gone up and consumers remain reluctant to splash the cash freely. Against that backdrop, it’s encouraging to see Frasers report a pick-up in trading.

“Whereas the Frasers of old was all about pile ‘em high, sell ‘em cheap, modern Frasers is a different beast. As well as the bread and butter of Sports Direct, it has successfully branched out into more premium wares while also expanding internationally. A buy now, pay later service is proving to be a big hit and it continues to sign up new partners.

“Investors remain wary about near-term prospects, given the share price reaction to the results. The company also strikes a cautious tone as it recognises there are still plenty of headwinds to overcome.

“Strategically, Frasers remains as ambitious as ever. Recent activities outside of the UK imply it is laying the foundations for the next chapter of its global domination plan.”

DFS

“After battling a period where consumers were reluctant to make big ticket purchases, DFS is sitting comfortably with better-than-expected earnings.

“Anyone finding cash down the back of their sofa over the past few years might have spent that money on experiences rather than material goods. However, there is only so long someone can put up with tatty furniture, so the taps haven’t completely turned off for DFS.

“It has spent a long time looking at cost efficiencies and making sure the business runs as smoothly as possible as fewer orders come through the door. There are now signs it might be past the worst as second-half orders were up 10% year-on-year. It means DFS is in a good position to prosper once the market backdrop improves.”

TSMC

“The latest quarterly numbers from contract chip manufacturer TSMC demonstrated the AI arms race being pursued by global tech companies is still motoring ahead.

“Growth is genuinely eye-catching with quarterly profit hitting a record high, illustrating the benefits TSMC enjoys thanks to its dominant market position.

“The continuing risk for TSMC is that this rapid expansion could be slowed by the Trump administration’s trade policy as it threatens to impose significant reciprocal tariffs on Taiwan, together with existing export controls on the sale of tech to China.

“News that TSMC clients Nvidia and AMD had received government assurances this week allowing them to ship products to China is a positive development in this regard.

“While AI-related business continues to go great-guns, TSMC is exposed to potential order cuts from smartphone and PC customers amid broader economic uncertainty.”