In the early hours of today’s trading session, Tesco’s share price is up by 2.5 per cent. The current move to the upside is also looking aggressive, with a likelihood that we may see the bullish trend continuing throughout the day.
Despite the performance of the past three trading sessions, which has seen Tesco’s share price surge by more than 5 per cent, the case against long-term continued growth for the company is strong.
First, the rising cost of living is causing many people in the UK to cut their spending. In a recent report released by the Office for National Statistics, a staggering 35 per cent of Brits indicated that they had cut their spending on food and essentials due to the rising cost of living. This is a key indicator of falling sales across the retail industry, which is bound to continue affecting Tesco’s share price.
Going into the future, the prospect of an improving economy and a falling inflation rate is also not looking likely to be in the offing. In another study carried out by Goldman Sachs, they predicted that the inflation rate in the UK could top 22 per cent next year.
This is more than the current inflation rate reported in July, which was over 10 per cent. The increasing competition in the retail industry is also likely to play a role in the next few weeks, which may see Tesco losing its market share and dominance.
Therefore, while an investor looking to have a stake in the company for just a few days and then sell his shares may find the recent price surge as a signal to get into the markets, long0-term traders have tended to be cautious. There is a high likelihood that we may see the Tesco share price dropping further down and hitting the 242 demand level within the next few weeks.
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