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“Parts of Asia rallied on Wednesday including a 2.1% rise in China’s SSE Composite, driven by tech and healthcare stocks. However, Japan’s Nikkei 225 fell 1.2% with utilities and basic materials among the sectors out of fashion,” says Russ Mould, Investment Director at AJ Bell.
“The FTSE 100 was flat at 6,125 as strength among consumer goods companies including Reckitt Benckiser and Unilever was offset by weakness in healthcare and oil stocks.
“Investors were waiting for the latest interest rate decision from the US Federal Reserve. Chair Jay Powell has already made it clear that the American central bank is in no rush to raise interest rates from their record low of 0.25%, but he has been equally forthright that he has no desire to take rates into negative territory."
Next
“It’s a pleasant surprise to see Next beat its best expectations for trading and this is testament to its strong qualities as a business.
“A cynic might suggest that it was too pessimistic in its scenario planning back in April, just like many other companies which have set the bar very low for their second quarter earnings period.
“Whether that’s true or not, arguably the new guidance for earnings is given on a stronger footing. Next has now had enough time to see how the retail sector will operate under the new social distancing regime.
“It must fine-tune operations to make them more efficient in this new world, as well as find ways to get people to keep buying its products which may not be straightforward given the likelihood of rising unemployment.
“Interestingly the business has benefited from lower levels of returns, which is being echoed by other retailers. Previously it was common for someone to buy two sizes of an item and return the one that didn’t fit. What’s now happened is that customers are buying more items such as childrenswear and homeware that tend to have lower return rates, and less of the stuff they’d normally send back like dresses and formalwear. Lockdown restrictions also deterred customers from taking items back to shops.
“Next’s shop-based sales have accounted for a much greater proportion of overall revenue since June and have been responsible for driving overall sales in July, with online sales seemingly flat during the month.
“It could take some time for people to get used to wearing masks in shops and an initial reluctance among many people to go to the high street because of this factor may work against Next. This suggests the online channel could account for a greater proportion of its sales in the near-term.”
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