Today’s Markets: Stocks climb as focus shifts from inflation to slowdown

Companies

Barclays buys Kensington for £ 2.3bn

Barclays (BARC) has completed the purchase of Kensington Mortgages for £ 2.3bn as the troubled bank seeks to expand its footprint in the residential mortgage market. Kensington is a privately owned mortgage lender that holds a 0.4 per cent market share of the total UK mortgage market, with £ 11bn of loans under management. The company is entirely present in specialist niches – self-employed workers, young professionals, flexi-fixed term – and would complement Barclays’ Woolwich business, which caters mostly to the mainstream saver / borrower market.

The deal is interesting from an investor perspective in that it might be a sign that Barclay’s management will now pay more attention to its core lending business, after a year of dealing with distractions and mishaps at its perennially troublesome investment banking arm. The share price has underperformed and had been heading towards two-year lows prior to this deal being announced. Though the loan amounts aren’t material to the bank’s core balance sheet, it gives Barclays the opportunity to develop more specialist lending lines. JH

Cost of living hitting food spending

In bad news for the food retailers, the latest retail sales data from the Office for National Statistics’ (ONS) shows that consumers in Great Britain are cutting back on food spending as the cost of living crisis continues to bite.

Food store sales volumes fell by 1.6 per cent in May, said the ONS, with total retail volumes down by 0.5 per cent. This puts food volumes 2.4 per cent below pre-pandemic levels. The ONS said that “reduced spending in food stores seems to be linked to the impact of rising food prices and the cost of living”, with almost half of people recently surveyed by the statistics body saying that they bought less food in the last two weeks when shopping.

Silvia Rindone, UK&I retail lead at EY, said that “we are now seeing rising food prices and the cost of living begin to affect consumer spending at all levels of the socio-economic scale.”

Retailers have warned about the impact of the cost of living crisis and soaring prices on trading in recent updates and results. Tesco (TSCO) said that its retail sales fell by 1.5 per cent in an update to 28 May, while J Sainsbury (SBRY) spirit Marks and Spencer’s (MKS) have also flagged pressures on margins and volumes due to the inflation and cost environment. CA

Essentra boxes off £ 312mn sale of packaging arm

Components maker Essentra (ESNT) is to sell its packaging business to Austrian company Mayr-Meinhof for £ 312mn.

Essentra said it would use the proceeds to strengthen its balance sheet and to top up contributions to its defined benefit pension schemes.

Essentra placed two of its three divisions – packaging and filters – under strategic review last year with the intention of focusing on its core components business.

The three divisions are similar in size, although packaging is the largest. It contributed 38 per cent of the group’s £ 960mn of sales last year and held about 40 per cent of its total assets of £ 1.28bn.

The sale, which is expected to complete in the fourth quarter, does not include the packaging arm’s operations in India, which account for less than 1 per cent of its revenue. Options for this business are being assessed separately.

The review of its Singapore-based cigarette filters business is ongoing and Essentra said it would decide on the best use of its cash once this concludes, accounting for the need to maximize shareholder value “after allowing for sufficient flexibility of the components business to pursue value creating opportunities ”. MF

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