Ocado benefits from fewer bumps on the road

Ocado received a special delivery in the form of some upbeat broker commentary on Monday. Analysts at Exane BNP Paribas came away from its CEO conference last week with a feeling that the online grocer’s “outlook and market sentiment are now much better aligned”.

They believe Ocado is entering a “more settled phase”, having struggled since the pandemic to grow volume, and like the fact that it seems to be taking a “firmer grip” on capex and operating costs.

The analysts also detected a moment of self-realisation, saying that for the first time since the group listed in 2010, they feel that Ocado “is accepting that it is as close to perfection as makes sense to hope for in low-return grocery . . . When you are moving low-value groceries, the profit pool can only be so big.”

While Exane analysts made clear they had little sense that a big deal was in the wings, or that the earnings performance in Ocado Retail had strongly inflected, the bank was just relieved there was no more negative newsflow.

“The absence of further negatives is a positive,” they said as they raised their “sell” rating to “neutral”.

A rise of 14p, or 3.6 per cent, to 400 3/4p pushed Ocado to the top of the blue-chip leaderboard. It helped buoy the FTSE 100, which edged up 8.33 points, or 0.1 per cent, to 7,570.69 ahead of a busy week of interest rate decisions. The more UK-focused FTSE 250 gained 99.15 points, or 0.5 per cent, to 19,190.81.

Another big riser was Croda International. The chemicals group, which had sounded the alarm on profits on Friday, improved 168p, or 3.2 per cent, to £54.42. Positive passenger numbers from Heathrow gave a lift to Wizz Air, which flew 117p, or 4.3 per cent, higher to £28.42, while Tui gained 20p, or 3.6 per cent, to 571 1/2p. Carnival shares, which are listed in London and New York, jumped 115 1/4p, or 12.7 per cent, to £10.24 1/2 as a pair of Wall Street banks turned bullish on the cruise ship operator.

Shares in Kainos Group shot up to a two-month high of £13.61 having gained 77p, or 6 per cent, on the back of Stifel tipping clients to buy. The IT services group, which the analysts think had become too expensive over the last few years, has finally returned to a reasonable premium, they said.

On the downside, Segro was under pressure after Goldman Sachs ditched its “buy” recommendation amid concerns about a softer outlook for leasing demand. The FTSE 100 warehouse landlord was down 21 1/4p, or 2.7 per cent, to 779 1/2p. Investors also sold out of Great Portland Estates, which controls a portfolio of central London offices and retail property, on advice from Goldman, pulling its shares down 11 3/4p, or 2.4 per cent, to 472 1/2p.

London’s crop of heavyweight miners and energy giants dropped as investors tracked the drop in commodity prices and tried to gauge the Federal Reserve’s appetite for further interest rate rises, while concerns about the prospects for Chinese demand also weighed on sentiment. Fresnillo fell by 28 3/4p, or 4.2 per cent, to 648 3/4p. Anglo American slipped 40 1/2p, or 1.7 per cent, to £24.16 1/2 and BP lost 6 1/2p, or 1.3 per cent, to 462 3/4p.

Among London’s minnows, Concurrent Technologies was up 2 1/2p, or 3.7 per cent, to 71p after the company, which designs and makes computer products for the military, said it had bagged a contract worth about £1.25 million with an unnamed FTSE 250 company to supply a set of embedded systems for a UK national defence installation.

The price of a barrel of Brent crude fell by almost 4 per cent

Oil prices fell by almost $3 a barrel after analysts highlighted rising global supplies and concerns about demand growth before key inflation data and a Federal Reserve decision on interest rates tomorrow.

Brent crude, the international benchmark, was down 3.9 per cent at $71.84 a barrel in New York last night, the lowest since December 2021, and 1.1 per cent down since the start of the month.

West Texas Intermediate, the US benchmark, fell $3.05, or 4.4 per cent, to $67.12 a barrel.

Goldman Sachs cut its oil price forecasts, citing higher than expected supplies this year and through into 2024. The investment bank’s December crude price forecast now stands at $86 a barrel for Brent, down from $95, and at $81 a barrel for West Texas, down from $89.

US policymakers are expected to leave interest rates unchanged this month, but investors are concerned that rate rises are likely to resume next month, Robert Yawger, a UBS analyst, said.

The Fed’s rate rises have strengthened the dollar, making commodities denominated in the US currency more expensive for holders of other currencies and weighing on prices.