Morning Note: Market news and an update from electrical retailer AO World

Market News

Equity markets ended last week near record highs, with investors focused on the Federal Reserve’s upcoming policy decision. Donald Trump predicted a “big cut” from the Fed this week, but the real question for traders is how many more are coming. Divisions among Fed officials may result in multiple dissents, with some committee members favouring no change, while others are demanding a larger cut.

US and Chinese officials go into a second day of talks in Madrid on trade and the economy. They are expected to prepare for a potential meeting between Trump and Xi Jinping as soon as October.

In Asia this morning, equities were mixed: Nikkei 225 (closed); Hang Seng (+0.3%); Shanghai Composite (0.3%). China’s economic activity slowed more than expected for a second month with a sharp slump in investment. Industrial production expanded a less-than-estimated 5.2% in August from a year earlier. Retail sales and used home prices were worse than forecast.

The FTSE 100 is currently little changed at 9,281, while Sterling trades at $1.3590 and €1.1575. Sainsbury has been marked up by 5% following confirmation the company has terminated discussions with Jd.com regarding the sale of Argos.

There was no Treasury cash trading in Asia, with Japan closed for a holiday – the 10-year Treasury yields 4.08%. Gold trades at $3,640 an ounce, while Brent Crude is $67 a barrel.

France’s 10-year government bond yield pushed above 3.5%, its highest since early September, after Fitch Ratings cut the country’s sovereign credit rating to A+ from AA-, the lowest on record. The agency cited political instability and mounting debt.

Source: Bloomberg

Company News

Ahead of its AGM this morning, AO World has released a pre-close trading statement for the period from 1 April 2025 to 30 September 2025, the first half of its financial year to 31 March 2026. The business continues to perform strongly, and the company has adjusted its profit forecast to the top half of previous guidance range. The company has also announced its first-ever share buyback programme. In response, the shares have been marked up by 10%.

AO World is the European online electrical retailer supplying major and small domestic appliances and a growing range of mobile phones, AV, consumer electricals, and laptops. The company also provides ancillary services such as the installation of new and collection of old products and offer product protection plans and customer finance. The group’s B2B business supplies electricals and installation services in the UK. AO also offers tech refurbishment via musicMagpie.

In the last financial year, the company generated annual sales of £1.1bn, with repeat customers accounting for over 60% of orders. Looking to the medium term, the company is aiming to deliver a PBT margin of over 5%. In the longer term, AO is looking to take advantage of what it believes is a c. £28bn total addressable market.

During the latest half-year, group revenue is expected to be up by 13%. Within that, B2C Retail revenue is expected to increase by 11%. The company has reiterated its FY2026 revenue guidance of double-digit B2C growth and has updated its profit expectation, with adjusted PBT now expected to be £45m-£50m versus the previous guidance range of £40m-£50m.

The end September cash position is forecast to be c. £70m, with the Revolving Credit Facility of £120m to be undrawn. Given the strong cash generation and ongoing confidence in its future performance, the company is today announcing its intention to commence its first-ever share buyback programme of up to £10m.

Source: Bloomberg