- FTSE 100 closes 28 points lower
- Wall Street holds firm as debt ceiling eyed
- Sage gains as upgrades follow strong interims
4.40pm: FTSE 100 closes lower
Today’s market session was more akin to "watching paint dry" with little in the way of strong direction in the underlying indexes, according to CMC's Michael Hewson.
The UK's blue chip index lost 0.4% on the day to finish at 7,723 points.
Commercial real estate stocks were a drag on the market, Hewson noted.
"Having seen its peer Land Securities post a loss yesterday due to lower portfolio valuations, British Land has followed suit posting a pre-tax loss of just over £1bn, as higher rates hit the value of its own property portfolio, sending the shares sharply lower. Rental income on the other hand posted a modest increase rising to £418m over the year. On guidance British Land outlined an expectation of annual growth between 2% to 4% for campuses and retail parks, and 4% to 5% for London Urban logistics."
3.55pm: Financial services cooperation
The European Union (EU) has moved forward with a delayed agreement with the UK to advance cooperation on financial services regulation as the two sides build on improved ties.
Brussels and London concluded a memorandum of understanding in March 2021 but it was never signed as relations soured over the overhaul of Northern Irish trade rules.
But that issue was resolved after the EU and Britain formally adopted another post-Brexit trade deal in March this year, known as the 'Windsor Framework'.
The European Commission took the first step by adopting a draft agreement on Wednesday which will need to be approved by the EU's 27 members. Member states could sign off on the deal at the next meeting of the bloc's finance ministers in June.
Once it is signed, it will create a framework for voluntary regulatory cooperation in the area of financial services between the EU and the UK.
3.35pm: Melrose guidance strong
Melrose Industries was another good gainer on Wednesday, with its shares up 5% after the FTSE 100-listed firm gave new higher guidance for 2025 as it held a Capital Markets Event.
The company, which is repositioning itself as a pure-play aerospace group, expects its 2025 adjusted operating margin to "materially" exceed previous expectations, with aerospace adjusted operating margin at between 17% and 18%, up from 14% previously.
The group said it will report in two divisions, with the adjusted operating margin for the engines arm seen at 28%, and the margin for Structures at 9%.
Total aerospace revenue for 2025 is expected to be £4bn, up from £3.4bn in 2023, while operating profit is seen at £700mln, versus £350mln.
Melrose, which last month spun out its automotive business into Dowlais PLC, set guidance for EBITDA at £870mln, up from £505mln in 2023, and for EBITDA margin of 22% versus 15%.
Free cash flow margin is expected to reach 12% in 2025 and long-term 15% rising to greater than 20%. From 2024 onwards, Melrose said this this will allow it to buy back between 5% and 10% of its market capitalisation a year, in addition to paying a progressive annual dividend.
Around 3.30pm. Melrose shares were up 5% at 490.40p.
3.15pm: Ford weighs in
Following on from Vauxhall, Peugeot, Citroen, and Fiat carmaker Stellantis NV's comments, rival autos giant Ford Motor Co has called for post-Brexit EU trade requirements on rules of origin for electric vehicles (EVs) to delayed until 2027 from 2024, saying tariffs will add pointless costs for consumers and slow the transition to electric.
"Ford is calling for current trade requirements to be extended to 2027, to allow time for the battery supply chain to develop in Europe and to meet EV demand," the US carmaker, which is investing £380mln to build e-motor capacity at an engine plant in Liverpool, said in a statement.
"Tariffs will hit both UK- and EU-based manufacturers, so it is vital that the UK and EU come to the table to agree a solution," the Ford statement said.
2.50pm: Good start after starts
The FTSE 100 index headed lower as the major US indexes started the day higher on hopes that political leaders would successfully negotiate a path forward on the country’s debt limit, although the opening gains were soon eroded.
Around 20 minutes after the New York open, the Dow Jones Industrials Average had added 59 points or 0.2% at 33,071, while the S&P 500 was also up 0.2%, and the Nasdaq Composite gained 0.1%.
Away from the debt ceiling, the latest US data showed April housing starts appearing to stabilse thanks to falling construction costs and a lack of existing homes, according to Pantheon Macroeconomics senior US economist Kieran Clancy.
Housing starts rose 2.2% in April to 1.401 million, slightly above the consensus expectation of 1.4 million, while building permits fell by 1.5% to 1.416 million, slightly below the expected 1.437 million.
“The bigger picture here is that residential construction is now stabilizing, after being a huge drag on fixed investment in 2022,” Clancy said.
“That said, any rebound in residential fixed investment will be swamped by a plunge in business capital spending; we expect total real fixed investment to fall by 4% and 3% in 2Q and 3Q, respectively.”
2.30pm: Checked in
Burberry could deliver fourth-quarter revenue growth ahead of the sector average, according to analysts at the Royal Bank of Canada who have hiked their target price for the luxury group to 2,400p from 2,200p, while retaining a 'sector perform' rating on the stock.
The analysts believe Burberry could achieve 14% growth compared to the sector average of 9% which, if delivered, “could mark an important milestone.”
Underlying improvements in the Asia Pacific market supported by China's reopening and momentum in South Korea and Japan, coupled with the EMEIA region continuing to benefit from local and inbound tourism, should aid revenue growth. Demand in the Americas, however, is expected to remain subdued, they added.
Burberry shares were trading at 2,533p, down 0.2%.
2.15pm: Digital assets "serve no useful social purpose"
The Treasury Select Committee has proposed bringing the trading of cryptocurrencies under existing gambling regulations, claiming that digital assets including bitcoin and ether offer “no intrinsic value and serve no useful social purpose, while consuming large amounts of energy and being used by criminals in scams, fraud and money laundering”.
In an extensive report filed to the House of Commons, the cross-bench committee, which exerts influence on policy, administration and spending, concluded that “cryptocurrencies pose significant risks to consumers, given their price volatility and the risk of losses.
How to regulate crypto has become a major source of debate across the UK, European Union and the US, which all have differing opinions on the matter.
In the Treasury Committee statement, member MPs warned of a “halo effect” if the government opts to regulate crypto trading as a financial survive “leading consumers to believe this activity is safe and protected, when it is not”.
“The events of 2022 have highlighted the risks posed to consumers by the cryptoasset industry, large parts of which remain a wild west,” said Treasury Committee chair Harriett Baldwin. “Effective regulation is clearly needed to protect consumers from harm, as well as to support productive innovation in the UK’s financial services industry.”
1.30pm: Some of London’s biggest movers
Risers
Chaarat Gold - up 26% to 11.2p: Shares shot up following a non-binding letter of intent and an indicative term sheet from Xiwang International for a potential equity investment of US$250mln.
Egdon - up 86% to 4.3p: Egdon shot up after becoming the latest in a long line of companies waving goodbye to the UK public market after agreeing to be taken over. The deal values the AIM-listed UK onshore oil producer and explorer at £26.6mln, or a 96% premium to its valuation at the close of play on Tuesday.
Fallers
Circle Property - down 65% to 3.5p: Shares more than halved in value after it confirmed the planned cancellation of its AIM listing and said it expects to return just over 4p per share to investors in September.
Watches of Switzerland - down 6% to 693p: The Rolex seller ticked lower after it said the “challenging trading environment” seen in the past half-year is expected to continue into the coming six months.
British Land - down 5% to 358p: Shares fell due to a slump in property valuations brought on by high-interest rates and broader economic concerns.
1.00pm: US futures point to gains on Wall Street
Ahead of the restart across the pond and the FTSE 100 has slipped narrowly into the red, down 9 points, at 7.741.
US stocks are expected to edge higher at the start on Wednesday after falls in the previous session as investors continue to eye developments in the negotiations between congressional leaders and President Joe Biden on the US debt ceiling.
In pre-market trading, futures for the Dow Jones Industrial Average (DJIA) were up 0.4%, while those for the S&P 500 gained 0.3%, and contracts for the Nasdaq-100 both added 0.2%.
Concerns over a potential US debt default weighed on Wall Street on Tuesday, with the DJIA posting a 1% drop, while the S&P 500 shed 0.6% and the Nasdaq Composite lost 0.2%.
The White House said that President Biden has directed staff to meet daily on the outstanding issues over the debt ceiling, and that the president has also cancelled the second leg of an upcoming international trip given the negotiations.
Treasury Secretary Janet Yellen, meanwhile, reiterated her warning that the government needs to raise the debt limit immediately as the country faces the possibility of defaulting as early as June 1.
In addition to tracking the debt ceiling negotiations, investors will also watch for data on housing starts and building permits on Wednesday.
TickMill Group’s market analyst, Patrick Munnelly commented: "US data is expected to shed light on the performance of the housing sector. March data revealed a notable decline in permits issued during that month, which is likely to have a dampening effect on housing starts activity in April, with a projected decline of 1.4%.
"However, when considering the broader picture, reports indicate low housing inventories and indications of stabilisation in home sales and prices. These factors suggest that the recent upswing in underlying activity may have room for further growth. Consequently, investors expect an increase in building permits for the month of April."
On the corporate front, retailers Target and TJX are both slated to report quarterly earnings Wednesday morning.
12.48pm: Cracks appearing at Watches of Switzerland
Shares in Watches of Switzerland Group PLC tumbled 6.7% after it said the “challenging trading environment” seen in the past half-year is expected to continue into the coming six months.
Russ Mould at AJ Bell noted: "Over the past 18 months, the market has taken the view that Watches of Switzerland is one of those companies which could not sustain the high levels of growth seen during the pandemic where many people splashed the cash because they were bored and stuck at home."
“The company continued to argue that the high level of success was not a one-off, and that it reflected a structural shift in the market whereby more people were collecting watches as well as the benefits of expanding geographically.
“Its latest update finally shows that cracks are appearing, hence why the share price has taken a dive," he added.
“In its defence, demand continues to exceed supply. What’s spooked investors is guidance for much slower growth in the new financial year as it flags that more challenging conditions may continue for the near-term," Mould added.
Peel Hunt noted the "market is relatively tricky," with interest-free credit "impacting margins."
"We were ahead of consensus but we think the average forecast will fall today (by about 5%)," the broker estimated.
Peel Hunt said although "the underlying picture is a good one," the share price performance "may come later rather than sooner though."
It has placed its price target and recommendation under review.
Mould added: "The trouble is that investors have seen other pandemic retail winners fall flat on their face over the past few years and they might worry that Watches of Switzerland’s latest update could be the first in a series of setbacks."
12.33pm: Harrods boss joins calls for rethink over VAT
The boss of Harrods has joined the calls urging the government to “stop burying its head” and rethink its removal of VAT-free shopping for overseas visitors.
Michael Ward, managing director of the luxury department store and the chairman of Knightsbridge Partnership, said: “We’re in the middle of a difficult time for the UK economy and the government should be seizing opportunities to grow. I think it might be time for them to wake up and smell the coffee.”
The government has been facing fresh calls from organisations, including VisitBritain, the luxury trade body Walpole and Heathrow airport, to restore tax-free shopping for overseas tourists.
They warn that London is losing tourism business to cities such as Milan and Paris.
The scheme, which allowed visitors from non-EU countries to recover the VAT on purchases bought within the trip, was abolished by the government when Britain left the EU on January 1, 2021.
This week Nigel Huddleston, the trade minister who is also a former tourism minister, urged businesses for more “data and information” on how the Treasury’s decision to scrap VAT-free shopping for overseas visitors is hurting the economy.
12.10pm: Ofgem fines three energy suppliers £8mln
Three energy suppliers have been made to pay compensation totalling £8mln for failing to supply a final bill on time to more than 100,000 households that had switched provider.
The energy regulator, Ofgem, fined E.ON Next £5.5mln, Octopus Energy £750,000 Good Energy £18,000.
The three suppliers also paid an additional £1.7mln fine towards a redress scheme that supports vulnerable consumers, of which E.ON Next paid £1.3mln.
This is the first time that the regulator has used its powers to crack down on companies that fail to provide a final bill on time since the requirement was introduced in 2020
11.30am: BoE Governor says "things are looking a bit brighter"
It's the turn of the Bank of England Governor Andrew Bailey now at the British Chambers of Commerce.
Bailey told business leaders that "things are looking a bit brighter than they did a couple of months ago".
He pushed back on claims that he was to blame for double-digit inflation, which remains more than five times the Bank's 2% target.
"I'd like to push back strongly against one argument you sometimes hear, which is that inflation is high because monetary policy was too loose in the past."
"The headline is that even if we had had the benefit of full hindsight in the run-up to the war in Ukraine, and ample advanced warning – which for the record we did not, no one did – then in order to keep inflation at around 2%, we would have had to raise Bank Rate well into double digits, sending unemployment much higher than it is today, and we would have had to do so in the middle of the worst pandemic in more than a century."
"Monetary policy can't make the impact on real incomes go away I'm afraid," he added.
"We know that higher interest rates make things hard for many people too. But we’re conscious that high inflation always hits the least well-off the hardest. Our job is to make sure inflation is low and stable, so we have had to raise rates to bring inflation back down."
Bailey said the UK's labour market "remains very tight" despite data showing vacancies fell for the tenth month in a row in April.
10.52am: Chancellor weighs in on Microsoft row
The Chancellor Jeremy Hunt has weighed into the row over the blocking by the UK’s competition watchdog of Microsoft’s acquisition of Activision Blizzard.
Speaking to the British Chambers of Commerce the Chancellor said regulators should "understand their wider responsibilities for economic growth" after the Competition and Markets Authority blocked the deal.
“I think one of the reasons that companies like Microsoft and Google want to invest in the UK is because we have independent regulators that are not controlled by politicians and therefore they can be confident there will be a level of level playing field.”
“I would not want to undermine that at all, but I do think it's important all our regulators understand their wider responsibilities for economic growth.”
Hunt also defended his handling of the economy and public finances, saying there was "nothing automatic" about controlling inflation.
“There's a plan, we are going to stick to it.”
“The Bank of England has a role through monetary policy and interest rates, we support them 150pc with that,” he added.
The Footsie is holding just the right side of the line, up 2 points.
10.20am: Purplebricks sold for a quid
Shares in Purplebricks Group PLC plunged 43% after announcing it has been sold to rival estate agent Strike for £1.
The announcement comes a week after it said it was negotiating a possible deal with Strike, which at the time had said it did not intend to make an offer.
Earlier this month, the company revealed it has £9.1m in the bank and the board no longer expects to return to profit this financial year.
"The proposed sale is expected to deliver a small return to Purplebricks shareholders," the company said in a statement.
10.04am: Qatar's Sheikh Jassim makes late push for Manchester United
The race to buy Manchester United has taken another twist after Sheikh Jassim bin Hamad al-Thani made a dramatic fourth bid for the Red Devils, with an improved offer of no more than £5.5bn which includes the clearance of the £1bn debt and a fund solely for the club and surrounding community, according to reports.
More than two weeks have passed since Sheikh Jassim and Sir Jim Ratcliffe, the Ineos owner, each submitted what were supposedly final bids for United.
The Qatari banker’s offer then was close to £5bn for 100%, while Ratcliffe’s was thought to be for a stake of a little over 50%, leaving Avram and Joel Glazer, two of the siblings who collectively own a majority share, with a 20% stake.
But the Guardian reported that Sheikh Jassim’s intent on becoming United’s next owner moved him to increase his price by around £500mln while clearing the debt and creating a fund solely for the club and surrounding community as he seeks to become the Glazers’ preferred bidder. The family originally valued the club at £6bn after it went on the market.
9.41am: Business secretary to meet Stellantis bosses
UK business secretary Kemi Badenoch is set to meet with bosses from Stellantis – the maker of Vauxhall, Peugeot, Citroen and Fiat – amid concerns that the car industry will struggle to meet new Brexit rules over where parts are sourced, due in part to a weak domestic supply chain and surging inflation.
The carmaker said the rules could force it to shut some of its UK operations, putting hundreds of jobs at risk.
Those rules, which come into force next year, state that, unless manufacturers source 45% of the value of electric car parts from the UK or EU, their vehicles will be subject to a 10% tariff.
But Stellantis says carmakers are struggling to source those parts within the UK and EU.
That is due in part to a lack of UK battery plants and a strong domestic supply chain, while there have been speedier developments elsewhere. They are also being hit by a surge in the costs of raw materials.
9.13am: Experian slips on cautious outlook
While Sage is top of the FTSE 100 risers, Experian PLC sits top of the fallers with shares now down 5% at 2,157p on a more cautious outlook.
Shore Capital analyst Robin Speakman pointed out that for the financial year 2024 he had forecast a like-for-like growth of 7% against guidance provided today of 4% to 6%.
"A more cautious outlook then at this stage, but still good growth in the context of Experian’s performance over the past few years through the pandemic in achieving constant compounding growth," Speakman noted.
He also highlighted further modest margin accretion is expected through the financial year.
"We expect to ‘shave’ our FY24 forecast assumptions accordingly," he said.
Shore Capital has a buy rating on Experian.
Steve Clayton, head of equity funds at Hargreaves Lansdown said the firm has "painted an outlook which although rosy is, to be honest, no better than that which the market was already expecting them to paint."
He also noted the group are exposed to the growth of lending appetite amongst US banks, for they sell them the data to identify the best consumers to target with credit offers.
"So, the recent struggles of US regional banks, following the collapse of SVB could hold Experian back a little in the near term," he suggested.
However, he believes that "short term noise like that can create opportunities for long-term investors."
Few UK stocks offer such direct exposure to the rising importance of data in the modern economy.
Meanwhile, the FTSE 100 has rallied and now stands just 6 points lower at 7,745.23.
8.47am: Sage advances as upgrades follow strong showing
Bucking the weaker market is Sage Group PLC which tops the FTSE 100 riser list, with shares up 3.4%.
Steve Hare, Chief Executive Officer, commented: "Sage performed strongly in the first half, accelerating revenue growth, increasing profitability and making further progress against our strategic priorities."
The accountancy software provider reported organic revenue in the six months to March 31 rose 10% to £1.09bn with underlying operating profit of £227mln, up 14%.
Shore Capital said revenue was modestly ahead of expectations while profit was around £11mln ahead of consensus.
Sage said it now expects organic recurring revenue growth for financial year 2023 to be in the region of 11%, driven by continued strength in Sage Business Cloud which ShoreCap noted was up from previous guidance of “more than 9%.”
“Altogether, these interim results are incrementally and comprehensively positive, affirming our buy stance,” Shore Capital analysts said.
The broker expects to nudge up its earnings estimates for the next two financial years, reflecting the better-than-expected organic growth and margins in the first half, and continue to believe Sage's organic revenue growth will accelerate materially over the next several years.
8.15am: Footsie weighed down by deadlock in US debt ceiling talks
The FTSE 100 fell back in early exchanges as US debt ceiling talks stalled sparking fears of a US default.
At 8.15am, London's blue-chip index was trading at 7,734.08, down 17.00 points, or 0.22%, while the broader FTSE 250 slipped to 19,198.57, down 74.15 points, 0.38%.
Mickey Levy at Berenberg feels the probability of default on government debt service remains "exceedingly low."
However, things could "get messy if the political skirmishing drags out, and there are risks of temporary delays in government payments of select obligations and/or a partial government shutdown that would affect some basic activities."
President Biden will cut short a major trip to Asia this week, returning Sunday to Washington to continue talks with Republicans to avert a potentially catastrophic debt default.
Back in London and shares in London Stock Exchange Group PLC (LSE:LSEG) fell 4.1% as a consortium including Thomson Reuters (NYSE:TRI) and Blackrock looked to sell a further £2.7bn stake in the bourse operator via a placing at 8,050p per share, below the current share price of 8,112p.
Experian (LSE:EXPN) also fell back after full-year revenue came in lower than City expectations. The credit checking operator reported growth in annual revenue despite a challenging economic backdrop reflecting growth in all regions but profits took a hit from a goodwill impairment charge.
The firm said revenue in the year to March 31 rose 6% to $6.59bn from $6.22bn the year prior in what the firm called a “year of very strong progress.” However, analysts had been looking for around $6.64bn. Experian shares slipped 4%.
Another share on the wane was JD Sports Fashion PLC (LSE:JD.) despite strong results.
The sports retailer forecast pre-tax profits in the coming financial year will top the £1bn mark for the first time as it unveiled forecast-beating numbers for current year.
Investors were rewarded as the firm more than doubled the dividend to 0.80p from 0.35p as the firm posted revenue of £10.13bn, up from £8.56bn.
Analysts at Peel Hunt said: “JD excelled in FY23 despite some tricky headwinds: £991mln was at the top end of expectations for pre-tax profit and cash is strong.
“Current trading is impressive,” the broker said and it plans to raises profit forecasts for the next two financial years by £20mln.
“The shares are cheap,” Peel Hunt said, reiterating a buy rating.
But shares, which are 28% higher year to date, took a breather, falling 2.2%.
7.58am: JD Sports sees current year profit above £1bn after record year
JD Sports Fashion forecast pre-tax profits in the coming financial year will top the £1bn mark for the first time as it unveiled forecast-beating numbers for current year.
The sports retail chain reported profit before tax and exceptional items for the year to January 28 of £991.4mln, a record figure and ahead of City forecasts, and up from £947.2mln the year prior.
For 2023-24 it forecast £1.03bn - in line with current average consensus expectations.
Investors were rewarded as the firm more than doubled the dividend to 0.80p from 0.35p as the firm posted revenue of £10.13bn, up from £8.56bn.
The company was reassured with trading to date in the new financial period with growth in organic sales at constant exchange rates of more than 15% after 13 weeks.
7.48am: Experian revenue rises but profit falls
Experian (LSE:EXPN) PLC reported growth in annual revenue despite a challenging economic backdrop reflecting growth in all regions but profits took a hit from a goodwill impairment.
The credit checking agency said revenue in the year to March 31, 2023, rose 6% to $6.59bn from $6.22bn the year prior in what the firm called a “year of very strong progress.”
This was below City expectations of $6.64bn.
Brian Cassin, Chief Executive Officer, commented: “We delivered very strong results in FY23, reflecting a combination of new business wins, new products and expansion into higher growth markets.
“We saw growth in every region, in many cases outperforming our underlying markets substantially.”
But pre-tax profit of $1.17bn was down from $1.45bn reflecting a non-cash charge for the impairment of goodwill of $179mln in EMEA, a decrease in net gain from associate disposals of $89mln and an increase to the fair value of contingent consideration.
EPS fell to 0.84 cents from 1.27.5 cents but the dividend was increased 6% to $54.75.
7.30am: Blackstone and Thomson Reuters to offload further stake in London Stock Exchange
London Stock Exchange Group PLC (LSE:LSEG) reported that an investor consortium including US buyout firm Blackstone and Thomson Reuters (NYSE:TRI) are selling 33mln shares in the data firm.
The disposal will be conducted via a placing to institutional investors and a separate offer to retail investors at a price of 8,050p.
The placing was upsized from 28mln million shares as announced yesterday and will raise around £2.7bn.
At the end of January, the lock-up arrangements governing Blackstone and Thomson Reuters (NYSE:TRI)' indirect shareholding in LSEG no longer applied to around 66mln shares and in March the consortium sold 28mln shares at 7,150 per share.
The two firms became LSEG shareholders when they sold financial data firm Refinitiv to the bourse operator in 2021.
The remaining 5.1mln shares are subject to a 90-day lock-up.
Barclays Bank PLC, Citigroup, JP Morgan and Merrill Lynch are acting as joint global coordinators and joint bookrunners in connection with the placing.
7.00am: FTSE 100 seen lower as US debt ceiling talks stall
Good morning. The FTSE 100 is expected to open lower after US stocks fell as talks over the US debt ceiling failed to make a breakthrough.
Spread betting companies are calling London’s lead index down by around 20 points.
On Wall Street, the Dow Jones Industrial Average fell 336.46 points, or 1.0%, to 33,012.14. The S&P 500 shed 26.38 points, 0.6%, at 4,109.90 points while the Nasdaq Composite declined 22.16 points, 0.2%, at 12,343.05.
US House Speaker Kevin McCarthy said much work remained in negotiations to raise the federal borrowing limit and avert a potentially catastrophic credit default, with the deadline for agreement just days away.
President Biden will cut short a major trip to Asia this week, returning Sunday to Washington to continue talks with Republicans.
In Asia, the Nikkei 225 was 0.8% higher after earlier reaching a 33-year high of 30,115.32.
Japan's economy grew faster than expected in the first quarter, official data showed, helped by a recovery in inbound tourism after pandemic border restrictions were lifted.
Back in London and the early focus will be on updates from Experian (LSE:EXPN), JD Sports and Watches of Switzerland.
Ascential PLC (LSE:ASCL) is another stock to watch after Sky News reported its consumer data business, WSGN, has attracted the interest of a private equity firm advised by the former head of the Daily Mail's parent, Sky News reported on Tuesday.
The business is understood to be valued at more than £700mln, with Apax Partners, another buyout firm, among the rival bidders to BC Partners.