- FTSE 100 ends 41 points higher at 7,673
- Dow Jones hold firm, but Nasdaq Composite and S&P 500 lower
- Oil prices soar after Opec+ agrees production cut
4.45pm: Oil majors lift FTSE
The FTSE 100 ended higher, gaining 0.5% to 7,673, after Opec+ surprised the market with additional production cuts, boosting shares of energy companies.
“It has been a busy start to Q2, as markets scramble in the Opec+ production cut. Having finished the quarter with signs of slowing inflation, investors are now scrambling to react," commented IG's Chris Beauchamp. "The FTSE 100 has enjoyed one of the stronger starts to the year, kept in positive territory by BP and Shell, which have added more than 40 points to the index.”
Following a solid end to the first quarter of 2023, Beachamp said "it makes sense to expect stocks to keep moving higher."
"But first they have to navigate this week’s jobs data, plus the start of earnings season," he added. "While overall sentiment still remains stubbornly bearish, much more good news is now priced in compared to the end of the year. As a result, stocks are likely to consolidate for now as they look for a fresh bullish catalyst.”
By the London close, US stocks were mixed. Big gains in the likes of Exxon Mobil and Chevron lifted the Dow Jones Industrial Average 0.5% to 33,454, while the S&P 500 was 0.1% down at 4,106 and the Nasdaq Composite was 0.9% lower at 12,118 on concerns the production cuts will feed inflation, resulting in higher-for-longer interest rates.
3.55pm: What the Dickens
It could be a ‘Tale of Two Cities’ after trading updates from two investment banks in the Square Mile.
Numis Corporation said in its trading update on Monday that despite weaker overall investment banking markets, it delivered a resilient first-half performance, with revenue expected to be up 14% at around £64mln.
The AIM-traded firm said the outlook for mergers and acquisitions remained positive, with a record first half for advisory. However, the continued scarcity of UK capital market transactions resulted in lower investment banking revenues in the six months ended 31 March 2023, and equities revenues, which had a good start to the year, would be lower than the comparative period, due to both institutional income and trading businesses experiencing a weaker end to the half year.
Meanwhile, Peel Hunt said its revenue in the financial year that ended on 31 March 2023, will be in line with market expectations at about £82mln, down 39% from £131.0mln a year earlier.
The stockbroker and investment bank said it would be "marginally loss-making" in financial 2023, compared to market expectations of broadly break-even.
The revenue decline is due to an "uncertain global economic environment" hurting Investment Banking revenue, it noted, while capital markets activity was at "historic lows" throughout the recent financial year. Peel Hunt said costs increased as expected following its initial public offering, and it faces inflationary cost pressures.
In reaction, Peel Hunt shares were down 2.8% at 103p, while shares in Numis lost 0.4% to 214.50p in late afternoon trading.
3.30pm: Fadel seeking £7.5mln
Fadel Partners Inc has confirmed it plans to raise £7.5mln in its initial public offering (IPO) on the AIM market in London set for this Thursday, April 6, 2023, having been originally planned for late March.
The New York-based developer of media rights and royalty management software plans to offer 19,968,003 common shares at an issue price of 1.44p each, and expects a market capitalisation of £28.8mln on admission, with 19.7% of its total shares to be in public hands.
The company is led by chief executive officer, Tarek Fadel, who will own about 22% of pre-admission shares, while his brother Ziad Fadel owns about 14%, and the Fadel family trusts own 5.1%. They will own 16.5%, 10% and 3.8%, respectively, after the IPO.
Impact Fund by MEVP Holding SAL owns 40% currently and will own 29% after the IPO.
Fadel operates mostly in the US but also has operations in the UK, Lebanon, France, Canada and India. It provides two cloud-based services: IPM Suite for rights and royalty management, and Brand Vision for brand compliance and monitoring.
3.00pm: April not the cruelest month
Saxo’s market strategist, Jessica Amir has pointed out that April is historically the best month for equities, although money flows currently suggest clients are cautious
She commented: "April historical brings hope to markets, but clients are playing the defensive game, topping up their bond exposure in case of a recession. Across the entire industry $304 billion has flown in money market bonds over the last three weeks. This week’s economic data could be a catalyst for Q1 market darlings, such as high PE semiconductor stocks, to take a haircut. And why consumer spending stocks will be in focus."
Amir noted: "In Q1, the Economic Surprise Index hit a new high with data coming out better than expected, with inflation continuing to slow. So, we’ve seen the risk-on trade amplify. The Nasdaq 100 gained about 19% the quarter. While in Commodities, iron ore rose the most, 10%, outpacing gold, with as China’s reopening narrative gained pace with the Chinese government introducing more stimulus.
"In FX markets, the most talked about trade in Q1 was the Euro against the USD, with stubbornly high EU inflation giving the European Central Bank more room to hike than the Fed. In terms of the major equity themes, semiconductors have been driving markets higher, and are up 23% YTD. Nvidia shares are up 90% in three months."
Reflecting on the most transacted upon instruments by Saxo clients, the market strategist said Tesla has garnered the most buys on the Saxo platform. She noted: "The EV giant has been selling more EVs than expected and is coming up with new ways to save cost, such as building a battery plant in the US with China’s battery leader, CATL which can build lithium iron phosphate batteries cheaper, than traditional prior nickel-based batteries. Tesla’s also deploying $22 billion in cash to crank up production."
2.45pm: Oil gains lift Dow
The FTSE 100 headed back towards the day's high just short of the 7,700 level even as Wall Street made mixed early progress on the first session of the new week, month, and quarter.
Around 15 minutes after the New York open, the Dow Jones Industrial Average (DJIA) was up 223 points, or 0.7% at 33,497, while the broader S&P 500 index added 0.1%, but the tech-laden Nasdaq Composite shed 0.4%.
The DJIA was boosted as energy stocks tracked oil prices higher after OPEC+ surprised the market by cutting oil output, with Exxon Mobil up 4.4% and Chevron up 4.3% early on.
But FOREX.com market analyst Fiona Cincotta noted the tech-heavy Nasdaq was leading the declines as the move is seen as hurting Fed pivot bets.
“With oil prices up 6% so far, Goldman Sachs forecast Brent (crude) will be $95 per barrel by the end of the year, as the momentum for global oil is positive amid a strong recovery in China,” Cincotta noted.
As a result, she added, it could mean that inflation will take longer to bring back to the target level and will require more rate hikes from the Federal Reserve to cool.
“The markets are now reassessing the chances of a 25-basis point rate hike in May, with a 58% probability of the hike being priced in, up from 48% on Friday,” Cincotta said. “A dovish pivot, which the market was optimistically pricing in before the OPEC+ decision, with two rate cuts by the end of the year, is now looking even more unlikely.”
2.15pm: Glencore rebuffed
Canada’s Teck Resources, the country’s largest diversified miner, has rejected an unsolicited acquisition proposal from the FTSE 100-listed commodity trader and mining company, Glencore PLC.
The all-share bid contemplated Glencore offering 7.78 shares for each Teck Class B subordinate voting share, and 12.73 Glencore shares for each Teck Class A common share. The proposal represented a 20% premium as of March 26, according to Teck, and would be worth about $23.2 billion at Friday’s closing prices.
Teck said its board's rejection of the offer was unanimous. It noted that Glencore’s bid was to acquire the company and subsequently create two businesses, which would expose Teck shareholders to a large thermal coal and oil trading.
The Vancouver-based miner announced in February it was switching its name to Teck Metals Corp and spinning off its multibillion-dollar steelmaking coal unit into a new company - Elk Valley Resources Ltd. Teck had been weighing options for its metallurgical coal division for over a year, as the commodity is used in steelmaking, one of the most polluting industries.
1.30pm: A quick look at some of today’s movers in London
Fallers
D4t4 Solutions - down 14% to 177p: The AIM-listed data solutions company warned that full-year results are expected to be lower than management expectations due to project delays.
Risers
Burford Capital -up 31% to 991p: Shares in the London-based litigation firm soared after a US District Court found Argentina liable for failing to make a tender offer for their shares in majority state-owned Argentinian energy company, YPF. The court decided that Argentina is liable to Petersen Energia Inversora SA and Eton Park Capital Management for not making a tender offer for their shares in YPF in 2012 and that YPF was not liable for not enforcing bylaws against Argentina.
Industrials REIT - up 37% to 162p: Shares surged after it said it reached an agreement with Blackstone on the key financial terms of a final cash offer for the company. Under the terms, Industrials REIT shareholders will receive 168p per ordinary share in cash, representing a 42% premium to the closing share price on 31 March 2023, and a 40% premium to the one-month volume weighted average
1.00pm: Mixed start seen across the pond
The FTSE has come off its highs but remains comfortably higher, up 46 points, ahead of the restart in New York.
Wall Street looks set to open mixed as second-quarter trading gets underway, with investors digesting the decision by members of Opec+ to cut production in a week that culminates with the key non-farm payroll data for March.
Futures for the Dow Jones Industrial Average (DJIA) rose 0.4% in Monday pre-market trading, while those for the broader S&P 500 index were flat and contracts for the Nasdaq-100 shed 0.6%.
Oil prices jumped the most in nearly a year after a surprise announcement on Sunday by Opec+, which includes Russia, of an additional production cut of about 1.16 million barrels per day (bpd) of oil, on top of an earlier output cut of 2 million bpd. Benchmark Brent crude was up 5.5% early Monday to $84.28.
The Nasdaq Composite led gains on Friday, jumping 1.7% to 12,222 to take the tech-heavy index’s gains for the first quarter to 17%. The S&P 500 rose 1.4% to 4,109 for a quarterly gain of 7% while the DJIA added 1.3% to 33,274, ending the quarter flat.
“Markets finished a tough opening quarter on a positive note, boosted by signs of slowing inflation and in the absence of any further shocks from the banking sector,” commented Richard Hunter, head of markets at interactive investor.
“In the US, the Federal Reserve’s preferred inflation indicator, the Personal Consumption Expenditures index, rose by 0.3% in February, marginally less than the 0.4% expected. However, US markets have not yet been able to react to a subsequent announcement from oil producers that output cuts could be on the way," he added. This could reignite inflationary concerns and the oil price surged by some 5% on the news, although remaining down by 2.5% in the year to date.”
Ahead of the release of March’s non-farm payrolls report on Friday, today’s data dockets provide further manufacturing updates from the US, the UK, the Eurozone and China, said TickMill Group market analyst Patrick Munnelly.
“Today’s US ISM manufacturing report will likely remain sub 50 as with other major economies factory production remains short of the output seen in the services sector,” he added.
12.25pm: EY faces German audit ban - reports
EY has been banned from taking on listed companies as new audit clients in Germany for two years over flawed work for payments company Wirecard (ETR:WDI), according to reports in German business daily Handelsblatt and the Financial Times.
The ruling is set to be announced today by the country’s audit watchdog, Apas.
Citing people familiar with the matter, the FT said the Big Four firm and five current and former employees have also been fined up to €500,000 each.
The regulator did not come to any formal decision over whether EY acted with intent or with negligence, dodging a contentious question over the firm’s criminal and civil liabilities.
Wirecard (ETR:WDI) collapsed into insolvency in June 2020 in one of Europe’s largest postwar accounting scandals, after disclosing that half of its revenue and €1.9bn in corporate cash did not exist.
The Munich-based company had received unqualified audits from EY for more than a decade.
EY has lost several large audit clients in the wake of the scandal, including Commerzbank, DWS and KfW, and has not won any significant new mandates since then.
11.51am: Green shoots in manufacturing PMI?
Gabriella Dickens at Pantheon Macroeconomics felt while the “manufacturing sector is not out of the woods just yet, March’s PMI suggests that the downturn now is bottoming out.”
The PMI fell to 47.9 in March, down from February's seven-month high of 49.3 and the earlier flash estimate of 48.0. The PMI has stayed below the neutral 50.0 mark for eight successive months.
She highlighted that the new orders index rose back above 50.0 for the first time since May 2022 while manufacturers also were the most upbeat about the 12-month outlook since February 2022.
She did caution however that manufacturing output still was boosted in March by the firms working through order backlogs; this support won’t last much longer.
The EY ITEM Club agreed the rise in new orders and business optimism "suggest there may be some light at the end of the tunnel for the sector," but added current headwinds mean this is unlikely until the second half of the year.
Martin Beck, chief economic advisor to the EY ITEM Club also highlighted input cost inflation cooled further on the back of better resource availability and lower commodity prices.
He noted evidence that lower cost pressures are starting to feed through to customers, with prices charged inflation also slowing.
This reinforces his view that inflation peaked at the end of 2022 and should fall at speed in 2023.
11.12am: Burford soars as court win boosts credibility
Shares in Burford Capital soared 27% after a US District Court for the Southern District of New York found Argentina liable for failing to make a tender offer for their shares in majority state-owned Argentinian energy company YPF (NYSE:YPF) SA.
The London-based litigation finance, risk management and asset recovery company, said that the court decided that Argentina is liable to Petersen Energia Inversora SA and Eton Park Capital Management LP for not making a tender offer for their shares in YPF (NYSE:YPF) in 2012, and that YPF (NYSE:YPF) was not liable for not enforcing bylaws against Argentina.
The claims related to Argentine government-controlled energy company YPF (NYSE:YPF), of which a majority of 51% was renationalised in 2012 after having conducted an initial public offering.
Burford explained: "In other words, the ruling was a complete win against Argentina with respect to liability, with the quantum of what we expect to be substantial damages yet to be determined, and a loss against YPF (NYSE:YPF). However, no additional damages would have been payable had YPF also been found liable."
Peel Hunt said while damages have yet to be decided they realistically look to be US$2.0-3.2bn (Burford’s share), with interest potentially adding up to a further US$2.6bn.
The broker said “this win is a big support for Burford’s investment case, helping to prove out its IRRs and its credibility.”
“Whilst we think investors should ascribe more than just book value to the shares, this will do as a first step, and still provides attractive upside for this non-correlated business,” it added.
The broker has upped its price target to 1,270p from 1,000p and reiterated a buy rating.
10.44am: Consumers cut discretionary spending as bills mount
More than half of UK consumers have cut back on discretional spending since the start of the year, with nearly two-thirds choosing to reduce the amount they spend on eating out, according to research from KPMG.
The survey of 3,000 consumers also found that 49% plan to spend less on non-essentials now that energy bill support payments have come to an end, while 30% will use their savings to cope.
Telecoms providers have imposed above-inflation bill rises of up to 17% on many account holders from April. Of the people surveyed by KPMG, 51% said they would be paying more for their broadband from this month, while 49% said the same for their mobile plan.
So far this year, 55% of consumers have reduced their non-essential spending, the research showed, in particular on dining out (63%). The cost of utilities bills was cited as the main reason.
Of those surveyed, 36% had switched to cheaper retailers to save money, 37% had been buying more own-brand and value products in supermarkets, 33% were buying fewer items, and 11% said they were using credit more.
Back in the markets and the FTSE 100 is holding close to session highs, up 56 points, at 7,688.
Oil majors BP and Shell continue to lead the way while financials are performing strongly. Prudential is 2.3% higher while the banks are also enjoying a good day, with Barclays, Lloyds, HSBC and NatWest up 2.1%, 2.1%, 2% and 1.4% respectively.
9.50am: UK manufacturing continues to contract - S&P PMI
The UK manufacturing sector fell back into contraction territory in March, as output declined following a slight increase in February according to the S&P Global/CIPS manufacturing PMI.
The PMI fell to 47.9 in March, down from February's seven-month high of 49.3 and the earlier flash estimate of 48.0. The PMI has stayed below the neutral 50.0 mark for eight successive months.
Market conditions remained subdued overall, as new export business decreased and overall new order books posted only fractional growth.
????????#UK’s manufacturing registered a sustained and stronger contraction in March (#PMI at 47.9; Feb: 49.3) as output was scaled back in response to subdued market demand. Read more: https://t.co/M2fL67nl2S pic.twitter.com/lDBdzNpGfp
— S&P Global PMI™ (@SPGlobalPMI) April 3, 2023
However, there was positive news on the price and supply fronts as cost inflation eased and average supplier lead times improved to the greatest extent in survey history.
Rob Dobson, Director at S&P said: “UK manufacturing production fell back into contraction at the end of the opening quarter, as companies scaled back production in response to subdued market conditions.”
“Although total new orders saw a fractional increase, this followed on from a nine-month sequence of contraction and suggests that order book levels remain low overall.”
9.15am: Capita confirms cyber attack
Capita PLC (LSE:CPI) has confirmed it was hit by a cyber attack on Friday which plunged its IT infrastructure into meltdown.
The outsourcing company said the incident primarily impacted access to internal Microsoft Office 365 applications causing some disruption to services.
“The issue was limited to parts of the Capita network and there is no evidence of customer, supplier or colleague data having been compromised,” the firm said.
The company added it has restored Microsoft Office 365 access to employees and is making good progress restoring remaining client services.
Capita employs 52,000 people in Britain, Europe, India and South Africa. In the UK, its government contracts include delivering “digital, logistical and support services for all of England's primary care practitioners working in the NHS; GPs, dentists, opticians and pharmacists”
It also handles recruitment for the British army, maintenance at the UK’s Submarine Training Centre, fire and rescue operations for the Ministry of Defence and Transport for London’s road-charging system.
8.55am: Cineworld falls as drops plans to sell UK and US businesses, launches restructuring
Cineworld Group PLC (LSE:CINE) shares tumbled over 20% after the ailing cinema chain has announced a debt restructuring package with its biggest lenders that will help bring it out of Chapter 11 bankruptcy proceedings.
Under the proposal, the lenders will reduce the debt pile by US$4.5bn and receive equity in the reorganised group, provide new debt of US$1.5bn; and backstop an US$800mln equity rights issue. Existing shareholders are likely to get nothing.
Cineworld has also dropped plans to sell its businesses in the US, UK and Ireland after failing to find a buyer. It said it is continuing to look at offers for its Rest of the World business.
But “as previously announced, it is not expected that any sale transaction would provide any recovery for holders of the Company's equity interests,” Cineworld said.
Chief Executive Mooky Greidinger said: "This agreement with our lenders represents a 'vote-of-confidence' in our business and significantly advances Cineworld towards achieving its long-term strategy in a changing entertainment environment.
The company entered Chapter 11 in September, weighed down by US$8.8bn in debt and lease liabilities.
Shares in Cineworld fell 21% to 2.29p in London in early exchanges on Monday.
Meanwhile, the FTSE 100 continues to motor ahead, now 7,687.20, up 55.46 points, or 0.73%.
8.17am: Oil majors lead FTSE higher
The FTSE 100 made strong early progress as oil stocks jumped after the surprise cut in oil production announced by members of Opec+.
At 8.15am London’s lead index was up 35.27 points, or 0.46%, at 7,667.01 while the FTSE 250 made more modest progress at 18,949.01, up 20.71 points, or 0.11%.
Brent crude is trading 5.3% higher at US$84.10 while West Texas Intermediate is 4.9% to the good at US$79.43.
Saudi Arabia said it will implement a “voluntary cut” of 500,000 b/d, or just under 5% of its output, in “co-ordination with some other Opec and non-Opec countries”, in an attempt to boost prices amid fears of weaker demand.
Russia, also a member of Opec+, said it would extend its existing 500,000 b/d production cut until the end of the year. Moscow’s reduction was first announced in March in retaliation for western countries’ moves to impose a price cap on its seaborne oil exports.
The move sent shares in oil majors BP PC and Shell up sharply, both moving 4.4% higher in early exchanges.
Deutsche Bank said: “It will take some time to see exactly how much this impacts global prices as demand concerns linger, but this is another potential factor exerting upward pressure on inflation after largely being an ameliorating factors this year. “
Shares in Cineworld PLC collapsed 33% after the ailing cinema chain announced a debt restructuring package with its biggest lenders that will help bring it out of Chapter 11 bankruptcy proceedings. Existing equity investors are likely to get nothing.
Under the proposal, the lenders will reduce the debt pile by US$4.5bn and receive equity in the reorganised group; provide new debt of US$1.5bn; and backstop an US$800mln equity rights issue.
Heading the other way were shares in Industrial REIT Limited which soared 38% after Blackstone agreed a takeover of the UK commercial property company worth over £500mln.
Anglo American PLC (LSE:AAL) was also a firmer feature, up 0.5% as Barclays upgraded the stock to overweight from equal weight and lifted its price target to £32.50 from £29.00.
7.51am: Oil prices surge after Opec+ move
Oil prices have surged after Saudi Arabia and other members of the Opec+ group announced surprise oil production cuts of more than 1mln barrels a day on Sunday.
Brent crude is trading 5.4% higher at US$84.17 while West Texas Intermediate is 4.9% to the good at US$79.43.
Saudi Arabia will implement a “voluntary cut” of 500,000 b/d, or just under 5% of its output, in “co-ordination with some other Opec and non-Opec countries”, it said, in an attempt to boost prices amid fears of weaker demand.
Russia, a member of Opec+, said it would extend its existing 500,000 b/d production cut until the end of the year. Moscow’s reduction was first announced in March in retaliation for western countries’ moves to impose a price cap on its seaborne oil exports.
The move was unusual as it was been announced outside a formal Opec+ meeting but follows heavy declines in oil prices in the last month following the turmoil in the banking sector.
Michael Hewson at CMC said the decision "could well see the economic boost offered by the recent fall in energy prices start to reverse if this morning’s surge in oil prices gains traction and starts to head towards US$100 a barrel."
"At such a fragile stage of the recent recovery in optimism, it’s hard to imagine a riskier strategy, even as prices hit their lowest levels in 15 months in the wake of the banking scare last month," he added.
He noted it now appears that OPEC+ would prefer prices to be close to US$90 a barrel than US$80, "which might be ok for them, but could make inflationary pressures for everyone else much harder to subdue."
7.41am: UK extends timeframe for NatWest sale
The UK government has extended the time during which it intends to sell part of its stake in Natwest Group PLC to August 2025, two years later than originally planned.
Under the arrangement, managed by Morgan Stanley (NYSE:MS), the Treasury aims to sell up to, but no more than, 15% of aggregate total trading volume in the company at a price the government considers fair value.
So the government has received around £3.7bn under the plan and still owns 41.5% of NatWest.
The UK government took control of the bank, previously known as Royal Bank of Scotland Group, during the 2007-08 financial crisis.
7.34am: WANdisco CEO and CFO step down
WANdisco PLC's co-founder has stepped down as an ongoing probe into the company's finances showed revenue had been vastly overstated.
However, the data activation platform firm stressed the departure of David Richards, who is also chief executive, was not connected to the findings to date of the independent investigation. WANDisco said CFO, Erik Miller, was also leaving the business effective today.
WANdisco reported the investigation is progressing well concentrating on purchase orders and related revenue and sales bookings reported by one senior sales employee.
Initial findings show recognised revenue of US$14.9 million for the financial year 2022 are false and that sales bookings of US$115.5 million are also false.
As a result, revenue for the year to December 31 2022 should have been US$9.7mln as compared with not less than US$24mln guided in January and bookings should have been US$11.4mln compared with $127mln.
Ken Lever will become Executive Chairman pending the appointment of a new chief executive, which will commence shortly. WANdisco has named Ijoma Maluza as interim CFO.
WANdisco said the results of the independent investigation to date continue to support the initial view that the irregularities are as a result of the actions of one senior sales employee.
7.00am: FTSE 100 set for a bright start
The FTSE 100 is expected to start the week on the front foot despite a new survey which showed growth in the Chinese manufacturing sector came to a halt in March.
Spread betting companies are calling London’s lead index up by around 20 points.
The Caixin manufacturing purchasing managers' index fell to a neutral reading of 50.0 points from the eight-month high of 51.6 in February. The reading was below market expectations for March of 51.7.
Brent crude futures surged about 7% to above US$85, hitting its strongest levels in a month after OPEC+ announced a surprise production cut of more than 1mln a day.
Stocks in the US closed sharply higher on Friday with the Dow Jones Industrial Average up 1.3%, the S&P 500 up 1.4% and the Nasdaq Composite up 1.7%
In Asia on Monday, the Nikkei 225 index in Tokyo was up 0.5%. In China, the Shanghai Composite rose 0.6%, while the Hang Seng index in Hong Kong slipped 0.5%.
Monday's economic calendar has a slew of manufacturing purchasing managers' index readings, including for the eurozone at9.00am BST, the UK at 9.30am BST, and the US at 3.45pm BST.