- FTSE 100 set new intra-day peak of 7,906.58
- Nasdaq joins Dow in positive territory, S&P 500 still lower
- US payrolls leap by 517,000 in January
4.50pm: Records tumble
The FTSE 100 index reached new all-time records on Friday boosted by strength in its preeminent dollar-earnings constituents as the US currency got a boost from a much stronger-than-expected January US payrolls report which heightened expectations the Federal Reserve will remain hawkish on interest rates in spite of its more moderate comments on future hikes following this week's rate rise.
At the finish, the UK blue chip index was up 81.64 points, or 1.0% at 7,901.80 above the old closing high of 7,877.45 hit on 22 May 2018, but was below the new intra-day peak of 7,906.58 which had surpassed the previous intraday peak of 7,903.5 also hit on 22 May 2018.
Celebrating the achievements, Victoria Scholar, head of Investment, interactive investor, said: “Despite last year’s equity market volatility and a slowing global economy, the FTSE 100 is defying the doom and gloom, hitting an all-time high, surpassing its peak from before the pandemic in May 2018. The UK large-cap index has sharply outperformed the mid-cap FTSE 250 index over the last year which has been much more closely correlated to the UK’s economic and political uncertainty. The FTSE 100 is an outward-looking index which has enjoyed gains thanks to certain sectors which have benefitted from rising energy prices and interest rates."
She noted: “Increased demand for defence spending helped catalyse share price gains for BAE Systems, which is the second-best performer over a one-year period on the FTSE 100. Energy price inflation has helped oil and gas giants like BP, Shell and Centrica enjoy major share price gains, landing these companies near the top of the leader board. Commodity price inflation has provided a tailwind for miners such as Glencore and Antofagasta which are also benefiting from China’s dismantling of its covid-era restrictions.
“In the financial sector, Standard Chartered has outperformed the FTSE 100 amid the backdrop of rising interest rates which has boosted its earnings potential through higher net interest margins.”
4.25pm: Peak practiced
Commenting on the Footsie's new intra-day record, Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown said: "The FTSE 100 has clearly got its mojo back after a difficult period when investors appeared to have fallen out of love with UK assets. The make-up of the index, heavily weighted towards globally-focused commodities, utilities, financials and consumer giants is proving particularly attractive.
"Confidence has rebounded as investors eye up China’s reopening, which has helped commodity stocks amid expectations that demand will surge. The shift to renewables, which has accelerating partly due to the war in Ukraine, as nations wean themselves off Russian energy, will require huge resources of metals and minerals which should also provide longer-term demand."
"There are still worries which could erupt about ebbing consumer resilience in the months to come on both sides of the Atlantic," she added. "Britain might have avoided dipping into a recession in 2022, but one is still forecast to the economy this year, with the IMF warning that the UK will be the laggard among the G7. With the UK housing market set to turn from a quiver to a shiver as painful rate rises start to hit, consumer confidence, which has been inching up, may start to seep away again."
"However, the Bank of England is now forecasting that the recession won’t be as long or deep as it feared in the Autumn. Inflation is predicted to falling more quickly in many nations around the world which have been sideswiped by punishing price spirals. The United States has surprised in its resilience and given the international make-up of the FTSE 100, any indication that the world’s largest economy could avoid a hard landing, will be well-received by investors," Streeter concluded.
4.05pm: There she blows
How could I have been so pessimistic ... closing high, who cares, we have only gone and hit a new intra-day peak for the FTSE 100 index at 7,906.58.
With around half an hour of London trading to go, the blue-chip index has eased back from that but is still above the 7,900 level - up 82 points, or 1.0% at 7,902.
As a reminder, the FTSE 100 index reached a closing high of 7,877.45 hit on 22 May 2018, and its previous intraday peak of 7,903.5 that same day.
3.40pm: All-time closing peak to fall?
The FTSE 100 index is continuing to trade above its all-time closing high with around three-quarters of an hour of trading to go in London on Friday, and it could be about to finish above that level of 7,877.45 hit on 22 May 2018, although we have probably said that before.
The UK blue chip index still remains below the intraday peak of 7,903.5, also reached on 22 May 2018, but around 3.40pm was it ahead 66 points, or 0.9% at 7,886, having reached a session peak of 7,892.
The FTSE advance came as Wall Street put in a weaker performance after a batch of disappointing corporate earnings overnight from tech giants Apple, Alphabet and Amazon, and following very strong US jobs data which could boost the Federal Reserve hawks and lead to higher interest rates for longer. Adding to that, later US data saw the services ISM number jump from 49.6 (contractionary) to 55.2 (expansion), also way ahead of expectations
That scenario led equities to fall in New York but lifted the US dollar, a factor which provided the main strength for the UK benchmark, packed as it is with dollar-earning companies such as oilers and miners.
However, the sell-off on Wall Street has eased, with the Dow Jones Industrial Average now up 47 points or 0.1% at 34,101 points, while the S&P 500 and the Nasdaq Composite have both cut their losses to just 0.3% having been off over 1% each early on.
Ironically, it might be that rally by US stocks which curbs the enthusiasm in London and means a new record high is missed once again. We wait with bated breath ...
3.10pm: Mixed Strikes news
In a Britain locked into industrial strife, there was some good and bad news on Friday.
Reuters reported that around 1,500 ambulance staff in Wales who were due to go on strike on Monday have suspended those plans after receiving a pay offer from the Welsh government, the GMB trade union said.
The pay deal amounts to a one-off payment for 2022/23 in addition to an existing 4.5% pay rise, the union noted, adding that it would now have further negotiations with the devolved Welsh government. A larger strike on Monday of about 10,000 ambulance staff in England represented by the same union is still due to go ahead.
But Mick Whelan, the general secretary of rail union Aslef has said strikes by train drivers could continue through to 2026.
Speaking on a picket line as the majority of Britain's train services were cancelled on Friday due to further industrial action, Whelan told the PA news agency that train drivers have not had a pay rise in four years.
Train driver members of Aslef and the Rail, Maritime & Transport union walked out for the second time this week in their long-running dispute over pay and conditions, leaving large parts of the country with no train services all day.
2.50pm: Wall Street beats retreat
As expected, US stocks started Friday in the red after January’s non-farm payrolls job report blew away expectations, with the unemployment rate reaching the lowest level since 1969 at 3.4%.
The strength of the labor market has crushed investor optimism around the Fed’s next move, with any hope that the central bank may soon pause rate hikes swiftly abandoned.
ING chief international economist James Knightly said the employment data was a real surprise and difficult to explain.
“We have to just take that on the chin and say despite seven consecutive monthly falls in residential construction output, three consecutive falls in industrial production and consumer spending disappointing in November and December firms are still happy to hire,” Knightley said.
“Maybe the Fed will keep hiking for longer, but we will need to see the economy suddenly rebound to make this great job news continue," he added.
Around 15 minutes after the US market opened, the Dow Jones Industrial Average was down 65 points or 0.2% at 34,032 points, while the S&P 500 had lost 0.7% at 4,160, and the Nasdaq Composite shed 1.4% at 12,669 points.
But in London, the FTSE 100 index remained near session highs, ahead 77 points, or 0.7% at 7,877 supported by strength in dollar earners as the US currency rose after the data.
2.25pm: Tata looking at Spain and Britain for batteries
India's Tata Group is considering setting up a battery cell plant for electric vehicles (EV) in Spain or Britain, a source with knowledge of the matter told Reuters, as its carmaking unit seeks to boost supply chains in Europe.
Tata Motors' chief financial officer told Reuters last month its parent, Tata, was considering setting up plants in India and Europe to produce battery cells for EVs. In Europe, it would aim to provide batteries for its luxury Jaguar Land Rover unit, which has manufacturing facilities in Britain and Slovakia.
The company told Spain's government following talks late last year that it was considering the country and Britain as the two top locations for the plant, said the source, who declined to be identified due to the sensitivity of the issue.
Tata was attracted by Spain's allocation of European Union pandemic relief funds to promote EV and battery manufacturing, and its status as a member of the EU, unlike Britain following its departure from the bloc, added the source, Reuters said.
2.15pm: Initial comments on strong US jobs data
John Leiper, chief investment officer at Titan Asset Management, remarking on the latest US unemployment figures, said: "There is a huge disparity between market pricing and the commentary coming from central banks. Yes, you could make the case that Jerome Powell was a little more dovish than expected but he was very clear that his intention is to keep rates higher for longer until the job is done, and that simply isn’t the case yet.
"Today’s employment data might catalyse a reversion in this apparent dichotomy. The January employment numbers came in way stronger than expected and y-o-y average hourly earnings and weekly hours worked also came in above expectations. The stronger the economy the greater the likelihood the Fed continues to hike rates, beyond 5% and current market pricing. Bond yields are spiking and equity futures are selling off on the news, which follows weaker-than-expected earnings for big tech yesterday."
Tom Hopkins, portfolio manager at BRI Wealth Management, noted: “Today’s reading is more evidence that the US labour market continues to run extremely tight and implies that jobs growth remains strong. The biggest contributors to this jobs growth being sectors such as hospitality, leisure, business services and healthcare.
"In my opinion, this gives the Fed more of a runway to continue edging interest rates up. Whilst today’s data is surprising, I do expect unemployment to begin creeping up over the coming months. We’ve seen a lot of US companies preparing for an economic slowdown in the recent earnings season and firms (particularly in the technology sector) continue to lay off large numbers of staff, clearly this will take time to filter down into the numbers.”
Srijan Katyal, global head of Strategy & Trading Services at the international brokerage ADSS said: “Adding 517,000 new jobs in January marks yet another month that the US jobs market has beaten estimates, and in a spectacular fashion. It underscores the strength of the US economy in this moment - but there will certainly be questions as to how sustainable this jobs market is. With so many job losses across the tech sector, caution is the key word over how long this size of report can be retained in the near future.
“Having just raised rates by 25 bps, the Fed will be factoring in this strong jobs data for their next rate increase. A solid jobs market will support the high inflation that the Fed has been fighting with record interest rate hikes.“In the forex market, the dollar immediately had a bounce in its major pairs including EURUSD, GBPUSD, and USDJPY. The data may be less positive for stocks & indices however, as despite stronger numbers, the earnings & outlook for three of the very biggest stocks - Apple, Amazon and Alphabet – remains mixed.”
1.55pm: FTSE gets boost as US jobs beat forecasts
Markets around the world have been boosted as the US jobs market continued to show strength despite inflationary pressures and rising interest rates, adding 517,000 non-farm payroll jobs in January, according to new data from the US Bureau of Labor Statistics.
The figure far exceeded market expectations for 185,000, and was more than double the number of jobs added in December which was 223,000. The unemployment rate came in at 3.4%, below the expected 3.6%.
AvaTrade chief market analyst Naeem Aslam said that today's NFP figures were a "mind-blowing number," adding that the reading was so good that many had to check the reading twice to make sure that there was nothing wrong there.
"The data has confirmed that the US labor market is not only strong but it is robust, and concerns about recessions are unnecessary," he said.
"In terms of market reactions, the initial reaction has been negative as traders are concerned that the Fed may adopt a more hawkish monetary policy given the strength of the labour market and their target of inflation reading. However, the reality is that today’s number is good for the US economy and this is likely to encourage traders to back riskier assets once the dust settles," Aslam noted.
Futures for the three major US indices fell further into the red following the release of the jobs report, with the Dow Jones Industrial Average down 0.6% at 33,908, while the S&P 500 shed 1.1%, and the Nasdaq Composite dropped 1.7% in pre-market trading albeit after strong gains in the previous session.
But the FTSE 100 index held firm, up 27 points, or 0.3% at 7,847.
1.25pm: A few of the top risers and fallers on the junior market today
Petro Matad Limited (AIM:MATD, OTC:PRTDF): Down 30% to 2.88p following the Mongolian oil company’s latest equity fundraising. Close to 200 million new shares were added to the free float at a discounted price of 2.5p each plus a further 20 million shares in a retail offer for a combined US$6.5mln (£5.3mln) in capital raise.
Conroy Gold and Natural Resources PLC (AIM:CGNR, OTC:CGDNF): Up 18% to 15p after assay results from a drill hole have provided further evidence of continuity between the Clontibret gold deposit and the Corcaskea gold target in Ireland
88 Energy Ltd (AIM:88E, ASX:88E, OTC:EEENF): Up 11% to 0.67p following yesterday’s news that the Alaska-focused oil exploration company announces its plan to raise up to A$12.0mln through a share placing to strengthen its balance sheet and provide sufficient capital to fund the planned Hickory-1 well at Project Phoenix.
Morses Club PLC (AIM:MCL): down 40% to 0.47p on confirmation that the sub-prime lender will cease public trading on February 10
1.00pm: US markets seen lower after tech disappointment
Wall Street is likely to open lower as disappointing quarterly results from Apple, Amazon and Alphabet halt a rally in tech stocks and as investors await the first non-farm payrolls (NFPs) report for 2023 that is expected to show a softening in the US labor market.
Futures for the Dow Jones Industrial Average fell 0.4% in Friday pre-market trading, while those for the broader S&P 500 index dropped 0.9% and contracts for the Nasdaq-100 shed 1.6%.
The Nasdaq jumped 3.3% to 12,201 on Thursday, buoyed by a 23% surge in Meta Platform’s share price after the company announced a $40 billion share buyback with its quarterly results. The S&P 500 added 1.5% to 4,180, hitting its highest point since August, but the Dow closed 0.1% lower at 34,054.
“After a generally strong showing from US markets, sentiment soured slightly after the closing bell,” commented Richard Hunter, head of markets at interactive investor.
“Big tech shares were at the centre of attention, with the Nasdaq index building on an extremely strong start to the year,” he added. “(With) hopes of cooling inflation and a retreat from aggressive interest rate hikes, there has been something of a return to growth shares, having suffered a difficult time last year as the value trade became the focus of investor activity.”
While Meta lifted sentiment across the sector, Hunter said some of the strength may unwind following disappointing updates from Apple, Amazon and Alphabet after the closing bell on Thursday.
“The next piece of the economic jigsaw will follow this afternoon with the release of the latest non-farm payrolls data,” Hunter added.
The NFPs, out at 8:30am Eastern Time before the market opens, are expected to show the US economy added 185,000 jobs in January, down from 223,000 the previous month, in what would be the lowest reading for two years. At the same time, unemployment is expected to tick up slightly to 3.6%, with hourly wage inflation remaining flat.
“Such a reading would add fuel to the fire that the end of the Federal Reserve aggression is nearing, although any sharp positive deviations would unsettle investors and prompt a rethink around the central bank’s next move,” Hunter said
12.35pm: Nationwide to restrict payments to Binance
UK building society Nationwide said payments to Binance will remain restricted until further notice as it continues to review and monitor the situation.
UK BANK NATIONWIDE SAYS WE RESTRICT CARD PAYMENTS MADE TO THE CRYPTOCURRENCY FIRM BINANCE - WEBSITE
NATIONWIDE SAYS USERS CAN STILL WITHDRAW MONEY FROM BINANCE INTO THEIR NATIONWIDE ACCOUNT - WEBSITE
— Breaking Market News (@breakingmkts) February 3, 2023
In a statement the lender said: “Our number one priority is, and always will be, keeping you and your money safe.”
“This is why we have taken the decision to restrict card payments made to the cryptocurrency firm Binance. This follows similar action from other providers, media coverage and regulatory uncertainty.”
Customers will still be able to withdraw money from Binance into their Nationwide account.
12.24pm: BCC urges Government to tackle recruitment crisis
The Government is being urged to help firms recruit workers after research from the British Chambers of Commerce (BCC) showed employers are facing huge problems attracting staff.
Four out of five of 5,600 businesses surveyed by the BCC said they had faced issues recruiting in recent months.
Hospitality firms were top of the list of those most likely to face challenges when recruiting, followed by manufacturers and construction, although the public sector was also finding it difficult to take on staff, the BCC said.
????️Alex Veitch: “Today’s findings reveal that businesses face the highest level of recruitment difficulties on record.
“Instead of seeing any easing of our tight labour market, the issue only continues to head in the wrong direction."
????Read our QRO: https://t.co/ESSZ73OwPj
— BCC (@britishchambers) February 3, 2023
Investment in training remains low, according to the report, with fewer than one in four firms surveyed having increased their investment plans over the last three months.
The BCC’s director of policy and public affairs, Alex Veitch, said: “Today’s findings reveal that British businesses are facing the highest level of recruitment difficulties on record.”
“Instead of seeing any easing of our extremely tight labour market, this issue only continues to head in the wrong direction.”
“While the government will be celebrating their apprenticeship programme next week as part of National Apprenticeship Week, we urge them to use this time as an opportunity to take a hard look at the reality of how the system is actually working for businesses and apprentices.”
11.43am: Provident Financial falls after downgrade
Shares in Provident Financial (LSE:PFG) PLC fell 1.8% as Peel Hunt slashed its price target by 22% to 293p and downgraded its rating to ‘hold’ from ‘add’.
The broker predicted an increase in provisioning charges reflecting new accounting rules as “the largely unsecured nature of the group's receivables together with the non prime nature of the borrower base translates into high expected loss rates.”
“We note these provisions are accounting driven and do not reflect arrears that to date have remained low and stable” Peel Hunt added.
Analysts at the broker has cut EPS estimates by 3% for 2022 and by 39% for 2023 but expect them to stabilise and strengthen in later years as the larger book generates high income.
“The bigger concern is that PFG is accelerating growth into a downturn with a relatively high risk book.”
“Unlike many of its peers it has not tightened credit criteria as the macro outlook has worsened, which is a key reason why its growth has been so material,” the broker added.
“We view the risk profile of the group as having significantly increased,” the broker concluded.
11.00am: FCA targets "fin-influencers" and social media in new crackdown
The Financial Conduct Authority (FCA) has warned tech companies and social media influencers to do more to prevent consumers from losing their money to scams.
Britain’s financial watchdog said it forced firms to amend or remove 8,582 promotions during 2022, 14 times as many as in 2021.
In a report released today, the FCA pointed out social media remains a major focus for the regulator’s work in combatting misleading promotions.
Social media remains a major focus for our work in combatting misleading promotions.
This year, we'll continue to put the pressure on people using social media to illegally promote investments, which put people’s hard-earned money at risk https://t.co/NfnVdIEWm4
— Financial Conduct Authority (@TheFCA) February 3, 2023
It has worked with several big tech companies to change their advertising policies to only allow financial promotions that have been approved by FCA-authorised firms, it stated but added, “more needs to be done by tech companies to protect consumers”.
The regulator is also concerned about ‘Fin-fluencers’ – those with large social media followings who post about financial assets, and said it has already acted against several social media influencers over the past year.
Sarah Pritchard, executive director for markets at the FCA, said: “Our expectations remain the same. Financial promotions must be fair, clear and not misleading.”
“What has changed is the FCA’s approach. By drawing on better technology, we’re finding poor quality or misleading ads quicker.”
“And where we find them, we’re stepping in to make firms improve them or remove them entirely.”
10.20am: UK PMI data consistent with "mild recession"
Samuel Tombs, chief UK economist at Pantheon Macroeconomics said the UK’s services sector PMI remained “consistent with a mild recession in the first half of this year, despite the modest upward revisions to most of the components between the flash and final estimates.”
He stated: “On past form, the composite PMI points to a 0.2% quarter-on-quarter contraction in real GDP in Q1, if it holds steady for the rest of the quarter.”
He noted this number does not cover the retail, construction or public sectors, all of which will struggle in quarter one in his opinion.
“Households demonstrated last year that they are more willing to reduce their expenditure on goods than on services in response to the squeeze on their real incomes,” he commented.
“In addition, the construction sector will be hit hard by the surge in borrowing costs, while output in the public sector will fall in Q1 after it was boosted in Q4 by the rollout of Covid booster jabs.”
Tombs said he sees “just as much downside as upside risk to this forecast.”
He also predicted “that the sharp fall in households’ real incomes in April, driven by a jump in energy prices, will ensure that GDP falls at a faster rate in Q2 than in Q1.”
On rates Tombs said he expects the Bank of England to leave them unchanged next month although “a final 25bp hike cannot be ruled out.”
9.40am: UK services PMI falls for fourth month in a row
Not such good news from the UK’s services PMI which fell further in January although there were some signs of optimism.
The headline seasonally adjusted S&P Global/CIPS UK Services PMI registered 48.7 in January, down from 49.9 in December, and below the neutral 50.0 threshold for the fourth consecutive month.
“UK service providers started the year with another slight reduction in business activity, which survey respondents mostly attributed to subdued business and consumer spending,” the report said.
????????Faced with subdued business and consumer spending, #UK service providers started the year with another slight reduction in business activity that was the sharpest in 2 years (latest #PMI at 48.7; Dec: 49.9). Read more: https://t.co/2WLC9TJ63A @cipsnews pic.twitter.com/Z3uS05RyC1
— S&P Global PMI™ (@SPGlobalPMI) February 3, 2023
But business activity expectations for the next 12 months nonetheless improved considerably since December as softer input cost pressures and improving energy market trends appeared to have boosted output growth projections.
The survey showed that operating expenses increased at the weakest pace since August 2021, helped by lower fuel bills.
However, many survey respondents reported sharp rises in staff wages due to tight labour market conditions, alongside higher utility bills.
Tim Moore, economics director at S&P Global Market Intelligence said: “January data pointed to the weakest service sector performance for two years as cutbacks to business and consumer spending resulted in a fourth consecutively monthly reduction in output levels.”
"However, the downturn in service sector output remained relatively shallow at the start of 2023.”
“Encouragingly, new order volumes moved closer to stabilisation and export sales picked up in January, which contributed to a marginal upturn in overall employment numbers,” he noted.
9.26am: Eurozone business activity grows for first time since June 2022 - PMI
Business activity in the eurozone has returned to growth, according to a new survey that boosts hopes that Europe can avoid a recession.
S&P Global reported that its final Eurozone composite PMI rose to 50.3 in January, up from December’s 49.3 and slightly estimates of 50.2.
This is the first time since June that the index has been above 50 points, indicating activity increased.
After upbeat numbers from Italy, even France and Germany services and composite PMIs were revised 0.1/0.2pts up.
That has led to a positive revision for Eurozone too:
- Services PMI 50.8 (est 50.7)
- Composite PMI 50.3 (est 50.2)
Eurozone economy is under recovering pic.twitter.com/MZdR2SCgZ5
— Mario Cavaggioni (@CavaggioniMario) February 3, 2023
The services PMI at 50.8 was also ahead of forecasts of 50.7.
Companies reported higher levels of business activity and stronger jobs growth, while new orders fell at a slower rate than previously.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “A resumption of business output growth, even marginal, is welcome news and suggests that the eurozone could escape a recession.”
“With price pressures down markedly in recent months, supply constraints easing and near-term energy market worries alleviated by subsidies, lower prices and a warm winter, business confidence has also lifted higher, adding to hopes that the upturn will gather steam in the coming months.”
“However, it remains too early to completely disregard recession risks,” he stressed, adding, “the impact of higher interest rates on economic growth has yet to be fully felt, and many companies are relying on backlogs of previously placed orders, accumulated during the pandemic, to sustain growth.”
9.02am: Non-farm payrolls "the next piece of the economic jigsaw"
FTSE 100 has made a cautious push into positive territory now, up 7 points, although the mood may be subdued ahead of the non-farm payrolls figures in the US which will give a further indication as to the health of the US jobs markets which has so far proved robust.
Richard Hunter, Head of Markets at interactive investor, said: “The next piece of the economic jigsaw will follow this afternoon with the release of the latest non-farm payrolls data.”
“The current consensus is that 185000 jobs will have been added in January, as compared to 223000 the previous month, in what would be the lowest reading for two years.”
“At the same time, unemployment is expected to tick up slightly to 3.6%, with hourly wage inflation remaining flat.”
“Such a reading would add fuel to the fire that the end of the Federal Reserve aggression is nearing, although any sharp positive deviations would unsettle investors and prompt a rethink around the central bank’s next move” he suggested.
Ahead of that and as Neil Wilson at markets.com commented the “clutch of soft earnings update from the US pricked some of yesterday’s giddy optimism that rates are close to peaking.”
Wilson was referring to results from Amazon, Apple and Alphabet which all disappointed sending shares in all three lower after the market close in New York.
Back in London and B&M European Value Retail SA (LSE:BME) remained at the top of the FTSE 100 risers following the Deutsche upgrade (see 8.30am update) while oil majors BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL) were also higher providing support.
But housebuilders were a weak feature with Persimmon PLC (LSE:PSN), Berkeley Group Holdings PLC (LSE:BKG), Barratt Developments PLC (LSE:BDEV) and Taylor Wimpey PLC (LSE:TW.) all lower as uncertainties over the state of the housing market persist.
8.30am: Deutsche rejigs retail ratings, upgrades M&S and B&M, cuts ASOS, Kingfisher, Wickes and Pets at Home
Deutsche Bank has taken a closer look at the world of retail and altered its ratings and price targets for a number of leading lights in the sector.
On the up were B&M European Value Retail SA (LSE:BME) and Marks and Spencer Group PLC (LSE:MKS), both upgraded to ‘buy’ from ‘hold’ but heading the other way were ASOS PLC (LSE:ASC), Kingfisher PLC, Pets at Hone Group PLC and Wickes Group PLC (LSE:WIX) which were all moved to ‘hold’ from ‘buy’.
Shares in B&M rose 1.6%, M&S by 1% but ASOS slipped 3.8%, Kingfisher and Wickes fell 2% and Pets at Home dipped 1.9%.
Elsewhere, WH Smith PLC (LSE:SMWH) remained a ‘buy’ and Boohoo Group PLC (AIM:BOO) a ‘hold’.
The bank noted 2022 ended on a surprisingly good note for retailers and, whilst 2023 is unlikely to be a great year for consumers, the outlook is getting noticeably “less chilly.”
“In addition to a less bearish view on the consumer outlook the inflationary pressures in cost of goods sold are set to reverse to a tailwind as we look into 2H and into 2024” Deutsche analysts wrote.
“Operating cost inflation likely remains the biggest challenge facing the sector but with energy costs falling it is largely wage inflation that has to be managed” the broker suggested.
Price targets for B&M rose from 460p to 580p, Marks & Spencer from 145p to 210p, ASOS from 800p to 950p, Kingfisher from 275p to 260p, Pets at Home from 310p to 355p, Wickes Group from 150p to 160p, boohoo from 36p to 50p and WH Smith from 1690p to 1870p.
8.15am: FTSE 100 subdued, Centrica continues to take the heat
FTSE 100 made a subdued start to the day pausing for breath after yesterday’s strong gains.
At 8.15am London’s lead index was down 3 points at 7,817 while the FTSE 250 slipped 100 points to 20,514.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown noted yesterday’s optimism was specifically on “renewed hope we’ve reached peak inflation, which will cement central banks’ ability to pause interest rate hikes.”
But the mood was dented after the US markets closed last night when earnings from a number of big players in the tech industry disappointed.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank noted “today will probably not be as fantastic as yesterday, as Apple, Amazon and Google announced earnings after the bell yesterday, and they all disappointed.”
“So it’s not surprising that the US futures are in the red this morning, and Nasdaq futures are leading losses” she pointed out.
Shares in all three heavyweights fell after hours in New York.
On a quiet day for corporate news, regulator Ofcom said it has launched a consultation on BT Group PLC (LSE:BT.A)'s Openreach broadband pricing plans, though its initial assessment was that the proposals were not anti-competitive.
Centrica PLC (LSE:CNA) extended its losses, down 2%, as it continued to attract unwelcome headlines after the damning investigation by The Times which found that debt collectors working for British Gas broke into customers' homes to fit prepayment energy meters.
The industry regulator, Ofgem, has asked energy companies to suspend the forced installation of prepayment meters following the report.
Ofgem has asked all suppliers to review the use of court warrants to enter the homes of customers in arrears.
It said firms must get their "house in order".
Provident Financial (LSE:PFG) PLC fell 1.74% as Peel Hunt downgraded the company to ‘hold’ from ‘add’ while upgrades to ‘buy’ Marks and Spencer PLC and B&M European Value Retail SA (LSE:BME) by Deutsche Bank supported their shares, up 1.8% and 2%, respectively.
7.46am: Bank's Huw Pill says important not to raise rates too high - Times Radio
Bank of England chief economist Huw Pill said today it was important not to raise interest rates too high, noting they had already increased by a large amount and the full effects of that had yet to register on the economy.
"It's also important that we enguard against the possibility of doing too much," Pill told Times Radio.
*BOE'S HUW PILL: MUST `GUARD AGAINST' DOING TOO MUCH ON RATES
*BOE'S HUW PILL: QUIT A LOT OF IMPACT OF RATE RISES YET TO HIT pic.twitter.com/lTi7y7yzEc
— Michael Brown (@MrMBrown) February 3, 2023
Pill’s comments come a day after the UK’s central bank rose interest rates by 50 basis points to 4%, its 10th increase in a row.
7.28am: BT's full-fibre plans not anti-competitive - Ofcom
Some good news for BT Group PLC (LSE:BT.A)’s this morning as Ofcom has said its initital assessment is that the telco's full-fibre pricing plans, are not anti-competitive.
But the industry regulator has launched a consultation on the proposals that Openreach intends to introduce from 1 April 2023.
“We have carefully assessed Openreach's offer - taking into account the interests of consumers, as well as the impact on competitors and retail broadband providers,” Ofcom said in a statement.
“Our provisional view is that we should not intervene to prevent Openreach from introducing Equinox 2.”
“We consider the offer is not anti-competitive and is consistent with the rules we consulted on before introducing them under our market review in 2021.”
“In our provisional view, the proposed offer is consistent with our primary strategic goal of promoting investment in high-speed networks to deliver fast, affordable broadband to people and business across the UK.”
Ofcom said it was now inviting responses to the consultation by the close of business on 4 March 2023 with a final decision expected before the end of March 2023.
“We are also alive to the concerns of some market participants that Openreach's practice of amending its full-fibre prices could act as a barrier to competitors' entry and expansion in the market,” the regulator said.
7.00am: Big tech disappoints - Footsie set for subdued start
FTSE 100 is expected to open slightly lower on Friday, after strong gains yesterday, following mixed numbers from a number of leading US tech heavyweights last night.
Spread betting companies are calling the lead index down by around 4 points.
Investors are still digesting the moves by the Fed, Bank of England and ECB on interest rates and also have an eye on US non-farm payrolls figures due later today.
"Today's European open looks set to see a modestly softer open after some weakness in the wake of last night's earnings numbers from Amazon, Alphabet and Apple," CMC Markets analyst Michael Hewson commented.
After the US markets closed results saw shares in Amazon lose 5.1% after hours in New York, while Alphabet gave back 4.6% and Apple fell 3.2%.
Back in London and no major corporate announcements are in the diary but there are a batch of services PMI readings from the UK, US, EU, and Germany due.