Morning Note: Market News and an Update from Walmart.
Market News
The 10-year US Treasury yield traded around 4.7% on Friday after rebounding sharply in the previous session amid concerns that the government’s plan to reduce borrowing costs may provide only a temporary solution. The 30-year yield also climbed to around 5.25%, nearly erasing the earlier decline. The dollar slipped against all its Group-of-10 peers before US manufacturing PMI data that may give investors more insight into the health of the world’s biggest economy.
Gold continued its recent rally (currently $4,560 an ounce) as investors turned to safe-haven metals amid heightened volatility across currency and bond markets. Gold remains supported by robust investment demand and continued central bank purchases, particularly from China.
Brent crude trades at $93.50 a barrel and is on track to post a second consecutive weekly gain, rising more than 5% so far this week. The gains came as the US-Iran conflict showed no signs of abating, with the two sides locked in a dispute over the Strait of Hormuz.
US equities traded lower last night – S&P 500 (-0.9%); Nasdaq (-1.0%) – with Walmart (see below) a disappointment. The mood in Asia was more mixed this morning: Nikkei 225 (-0.3%); Hang Seng (+1.1%), Shanghai Composite (flat); Kospi (+0.9%). China is planning new fiscal support policies amid a growth slowdown.
The FTSE 100 is currently 0.2% higher at 10,765, while Sterling trades at $1.3650 and €1.1670. UK consumer confidence has risen to two-year high – the closely watched GfK measure of sentiment rose two points to -14, the best reading since Labour returned to power. Note, however, that consumer confidence in the UK has been negative for more than 10 years, with the last positive reading in January 2016. Elsewhere, the latest borrowing figures from the ONS showed the government’s budget deficit hit £1.8bn in July. This was worse than the balanced budget expected by the market and underlines the challenge faced by the Chancellor ahead of his first Budget.
Company News
Yesterday lunchtime, Walmart released results for the three months to 31 July 2026, the second quarter of its financial year to 31 January 2027. Growth in the US was below the market expectations due to the impact on consumer sentiment of higher fuel costs. Although the company has raised its guidance for the full-year, the outlook for the current quarter came in below the market forecast. The market’s response to the subdued report was to mark down the shares by 9%.
Walmart operates more than 10,900 stores and numerous e-ecommerce websites under 46 banners in 19 countries. In the face of strong competition, the group’s strategy is ‘to lead on price, invest to differentiate on access, be competitive on assortment, and deliver a great experience’. This means the company can often weather economic storms better than others. As the largest importer of container goods in the US, Walmart is heavily exposed to tariffs and has been raising prices in response.
During the three months to the end of July, total revenue increased by 5.1% on a constant currency (CC) basis to $186.4bn. eCommerce sales were up 23% globally, led by store-fulfilled pick-up & delivery and marketplace, while global advertising sales were up 38%. Membership fee revenue grew 17% globally.
In the US, comparable sales increased by 2.6% (ex-fuel) to $125.3bn. Growth was below the 3.8% market forecast as customers spent less on each shopping trip due to inflation and higher gasoline prices tightening budgets. The result was made up of a 1.5% increase in transactions (i.e., volume) and 1.1% rise in average ticket (i.e., price). The latter was well below the 3.1% price increase seen this time last year. Continued strong momentum in eCommerce and broad-based share gains were partially offset by 125 bps headwind to comp sales from pharmacy deflation related to new maximum fair price regulation.
Sam’s Club, the trade business, generated revenue of $22.1bn, up 4.4% in comparable terms (ex-fuel), led by grocery and general merchandise.
Outside of the US, the International business grew by 7.9% at CC to $33.7bn, with broad-based strength across markets.
The group’s gross margin rose by 96 basis points to 25.4%, primarily boosted by tariff refunds, with adjusted operating income up 17.4% at CC to $9.2bn. Setting aside the tariff impact, underlying operating income growth was at the top end of the group’s 7%-10% guidance range as the group kept a tight rein on costs. Adjusted EPS was up 19.1% to 81c, versus the market forecast of 74c.
Global inventory was up 6.0% to $61.6bn, due to strategic initiatives and inflation. Free cash flow fell by $1.4bn to $5.5bn driven by a $2.8bn increase in capital expenditures to support the group’s omnichannel growth strategy. Net debt ended the quarter at $45.7bn. Excess cash is being returned to shareholders through dividends and buybacks. During the quarter, the group bought back $5.1bn of its shares, leaving $25.1bn of its $30bn repurchase authorisation. Earlier in the year, the annual dividend was increased by 5% to $0.99.
Guidance for the financial year to January 2027 has been nudged higher, driven by growth in the e-commerce division. Consolidated net sales growth of 4%-5% at constant currency (vs. 3.5%-4.5% previously). Operating income growth is now expected to be 7.0%-8.5% (vs. 6%-8% previously), while adjusted EPS is expected to come in at $2.80-$2.87 (vs. $2.75-$2.85 previously). The outlook reflects the continued prioritisation of remaining tariff refunds into price investments. For the current quarter, net sales and adjusted operating income are expected to grow by 3.0%-3.75% and 2%-4%, respectively, both slightly below market expectations.
