LIVE MARKETS-Turning cautious on the British consumer

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TURNING CAUTIOUS ON THE BRITISH CONSUMER

Deutsche Bank research analysts are turning more cautious on the UK consumer, favouring more exposure to defensive food category and reducing exposure to more domestic cyclical sectors.

"The end of 2024 and early 2025 are likely to have been the sweet spot with real wage growth set to slow and fear of unemployment set to build from here," Deutsche Bank analysts say in a note.

The firm likes four main themes:

1/ More defensive food exposure given inflation benefits

2/ Generally higher income demographics given inflation impact

3/ Reduced exposure to UK domestic cyclical sectors like DIY

4/ Companies which continue to invest in volume led growth

Given those themes, its most preferred stocks are Tesco TSCO.L, M&S MKS.L, B&M BMEB.L and Dunelm DNLM.L.

Its least preferred are AB Foods ABF.L, Next NXT.L, Kingfisher KGF.L and Wickes WIX.L.

"We have had a constructive view on the more cyclical UK retail names but we are becoming more cautious on this for the remainder of 2025 and looking into 2026," DB says.

(Samuel Indyk)

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