Target triggers retail rout and sends stocks tumbling, National Grid posts £4 billion profit, EasyJet aiming for pre-pandemic passenger numbers and Royal Mail at a crossroads

“After the Walmart wobble on Tuesday, Target struck terror into the hearts of the US retail sector and was a big contributing factor behind the worst day for US markets since 2020 on Wednesday,” says AJ Bell Investment Director Russ Mould.

“The extent of the impact of inflation on these giants of American retailing has woken investors up, once again, to the huge impact surging prices are having on every facet of the economy.

“Combine this with hints from the US Federal Reserve about more aggressive interest rate hikes and it’s little wonder that stagflation fears – a slowing economy combined with inflation running hot – are stalking the markets once more.

“Against this backdrop the FTSE 100’s fall this morning looked pretty modest, the combination of commodity producers, stocks on lower valuations and generous dividends helping it to outperform other global markets.

“A business which continues to perform strongly is gas and electricity network National Grid with a big increase in underlying profit to £4 billion. What’s impressive or notable about this is it has been achieved despite record levels of investment as the company looks to support the transition away from fossil fuels.

“National Grid is less exposed to surging energy prices than some of its peers in the utility sector though as it is paid for providing capacity in the network rather than based on the price or volume of the power used, though its revenue is linked to inflation.

EasyJet flew higher to buck the negative market trend as it guided for a significant milestone before the end of the year. It thinks by the end of its financial year it will be flying almost as many passengers as it did pre-pandemic.

“For now demand for air travel remains strong as people who were pent up indoors during the pandemic have been desperate to get away. This also means EasyJet and other airlines can put up prices to mitigate the impact of rising costs.

“However, as cost of living pressures continue to bite, there has to be a limit to how much people can afford flights, even if it is priority for any spare cash they might have.

“For any number of reasons the airlines recovery from the pandemic is set to be bumpy at best for the foreseeable future.

Royal Mail had been making real progress with its turnaround plans, with the surge in parcel deliveries during the pandemic helping to lift a share price which had struggled since its 2013 privatisation.

“Now inflationary pressures are threatening to unpick that progress and have reignited troubles with its work force as talks continue to avert a potential nationwide strike.

“Pay increases can’t hope to keep pace with rising prices and demands for more flexibility from staff, including working Sundays, are unsurprisingly going down like a lead balloon.

“Chief executive Simon Thompson seems to be deliberately raising the stakes – describing the transformation of the company ‘at a crossroads’. The direction it takes next could determine whether the privatisation will ever be considered a success, particularly for long-suffering shareholders.”

These articles are for information purposes only and are not a personal recommendation or advice.