- FTSE 100 finishes 19 points higher
- US stocks up after big gains on Wednesday
- BT plans to cut around 55,000 jobs as profits falls
4.40pm: FTSE 100 in the green
After two straight days of losses, the FTSE 100 regained a bit of ground at Wednesday's close, finishing 0.3% higher at 7,742 points.
It appeared traders were unmoved by the BoE's comments earlier, according to OANDA's Craig Erlam.
"We heard from some Bank of England policymakers earlier as they were grilled by the Treasury Select Committee on quantitative tightening, among other things naturally. Bailey and colleagues were quite consistent in their messaging and it's probably what the Governor said on Wednesday that raised a few eyebrows as he insinuated that the UK could be seeing a wage-price spiral which could complicate returning inflation to 2%," Erlam noted.
"The members were still confident in their assessment despite repeated reminders of apparent past failures and markets seem unconcerned about the supposed wage-price spiral, continuing to price in one, maybe two, hikes this year. Things should become much clearer very soon."
3.55pm: Investec resilient
Investec shares rose nearly 3% after the investment firm reported a strong financial performance for the year ended 31 March 2023, despite a challenging macroeconomic backdrop,
The company saw its adjusted earnings per share increase by 25% to 68.9p, exceeding previous guidance. However, funds under management decreased by 4.5% to £61bn, primarily due to unfavourable market movements.
Revenue grew 14.6%, benefiting from higher global interest rates, loan growth, client acquisition, and increased client activity. However, fee and commission income were negatively impacted by unfavourable market movements, as well as a weakening macroeconomic environment.
Return on equity for the year was 13.7%, up from 11.4% in the prior year, while its return on tangible equity reached 14.7%, compared to 12.3%. Tangible net asset value per share remained relatively flat at 474.3p, while net asset value per share stood at 510p.
The group maintained a strong capital and liquidity position, and the board proposed a final dividend of 17.5p per share, resulting in a full-year dividend of 31p, within the group's payout range of 30% to 50%.
Investec returned about £780mln to shareholders in the full-year, comprising ordinary dividends, a share purchase programme to optimise the balance sheet, and the distribution of a 15% shareholding in Ninety One.
After the reporting period, Investec announced the all-share combination of Investec Wealth & Investment UK with Rathbones, aiming to create a leading discretionary wealth manager with around £100bn in funds under management and administration.
Investec shares were up 2.9% at 440.20p in late afternoon trading.
3.30pm: Oil dips
Oil prices were lower on Thursday after jumping in the previous session on optimism over US fuel demand, as traders eyed any signs of progress on talks to raise the US debt ceiling and mixed US data.
Brent crude was down 1.2% at $74.56 a barrel, while US West Texas Intermediate crude was down 0.9% at $72.20 a barrel.
Crude benchmarks rose on Wednesday after a sharp drop in US gasoline inventories due to demand reaching the highest levels since 2021, and on optimism surrounding negotiations over the US debt ceiling.
A debt agreement needs to be reached before the US government runs out of money to pay its bills, which could be as soon as June 1.
Also weighing on prices was the increased possibility of another interest rate hike by the Federal Reserve after data on Thursday showed initial jobless claims fell by more than expected last week, suggesting the US labor market remains tight.
3.15pm: EV battery questions remain
Chancellor of the Exchequer Jeremy Hunt has told manufacturers that the UK is committed to ensuring that the batteries needed to power electric vehicles (EVs) are produced domestically, in a presentation on Thursday.
"We are absolutely committed to making sure the UK is able to source onshore EV batteries that we need," Hunt said, according to a Reuters report.
Meanwhile, separately, the Reuters said the Business Secretary Kemi Badenoch and UK officials have said the problems for the car industry over a UK Brexit deal deadline can be resolved within a trade and co-operation agreement with their counterparts in Brussels.
Vauxhall's parent company Stellantis NV warned on Wednesday that it would be unable to keep a commitment to make EVs in the UK without changes to Britain's agreement with the Euro bloc.
A Number 10 spokesman said the UK wants to "work closely" with the EU on the problem and expressed optimism that a solution could be reached within the TCA.
Elsewhere, Reuters reported, that Prime Minister Rishi Sunak, while in Japan for the G7 summit, said the UK was in talks with the EU about how to address concerns relating to auto manufacturing "more generally".
Speaking to broadcasters on board the JS Izumo aircraft carrier in the Yokosuka naval base near Tokyo, the PM said: "It's something that car manufacturers across Europe, not just in the UK, have raised as a concern. And as a result of that, we are engaged in a dialogue with the EU about how we might address those concerns when it comes to auto manufacturing more generally."
2.50pm: Wall Street cautious
The FTSE 100 held its gains but stayed below the session peak as US stocks opened mixed as politicians progress negotiations on the country’s debt ceiling while investors digested new economic data.
Around 20 minutes after the opening bell in New York, the Dow Jones Industrials Average was 106 points, or 0.3% lower at 3,313, while the S&P 500 shed 0.1%, but the Nasdaq Composite added 0.2%,
On the economic data front, US initial jobless claims for last week fell to 242,000 from 264,000, below the consensus expectation of 251,000.
Pantheon Macroeconomics chief economist Ian Shepherdson said that fraudulent claims were likely still distorting the data.
“The headline claims numbers right now are hard to read because Massachusetts has reported a wave of large-scale fraudulent claims based on identity theft. Other states might also suffer from the same problem - Kentucky has acknowledged a problem - but we have no way of knowing for sure,” he said.
“The bottom line is that right now we don’t know for sure what’s happening to initial claims, but we do have plenty of other evidence - the Challenger numbers and the weakening NFIB hiring intentions measure are the two most important - that the labor market is weakening.”
Meanwhile, the May Philadelphia Fed manufacturing index rose to -10.4 from -31.2, above the consensus expectation of -19.9.
Pantheon Macroeconomics chief US economist Kieran Clancy noted the report was still consistent with a recession, and likely to drop back again before too lo
“The increase in the Philly Fed index also contrasts with the plunge in the Empire State index, another reminder to interpret monthly moves in the regional manufacturing surveys with a healthy dose of skepticism,” Clancy said.
2.30pm: Energy refunds ordered
Ovo Energy and Good Energy have been ordered to refund customers after regulator Ofgem found the pair had been charging households more than was allowed under its price cap.
Combined the suppliers were issued £4mln worth of fines, with £2.7mln set to be distributed between 18,000 households and £1.25mln placed in Ofgem’s voluntary redress fund.
Ofgem limits the amount energy companies can charge customers per unit of electricity and gas under its price cap, which sat at £3,549 from October to December on an annual basis and £4,279 between January and March, when the firms were found to have over billed.
Good Energy, alongside Octopus and E.ON, was already slammed with fines on Wednesday after failing to compensate customers who were owed money after switching suppliers.
Alongside £8mln worth of fines for the trio, Unite union cast fresh allegations that the UK’s power sector had been profiteering over the past year, claiming household bills sat £1,800 higher than needs be in 2022.
Ovo will refund customers up to £181, and Good Energy £109, following Thursday’s ruling, with each overcharging 10,987 and 6,966 households respectively.
2.15pm: Bricks and mortared
The UK might never see the house price gains over the past four decades ever again, the government’s official spending watchdog suggested today.
“The age of massive rises of house prices may be nearing an end", said David Miles, senior economist at the Office for Budget Responsibility.
Citing working from home and a slowdown in population growth, Miles said forces driving house price will be much weaker in future.
House prices have risen by around 91% since 2005, due, he said, to limited supply and a sharp fall in the real cost of narrowing.
1.30pm: A look at today’s fallers and risers
Fallers
BT - down 7% to 137p: Shares slumped after the telco unveiled plans to axe up to 55,000 jobs alongside a fall in pre-tax profits and an unchanged dividend.
Christie - down 13% to 130p: Shares tumbled after the company warned a chunk of revenue expected to be recognised in the first half of the financial year would be put back into the second half.
Future - down 15% to 880p: The media company reported lower operating profit, earnings per share and free cash flow at the half-year mark which sent shares lower.
Risers
SRT Marine Systems - up 20% to 55p: Shares surged after the company announced it has signed a US$180mln (£145mln) contract with a national Coast Guard.
ImmuPharma - up 10% to 3.4p: Shares leapt after the FDA endorsed the company's proposal for a late-stage clinical trial for the treatment of chronic idiopathic demyelinating polyneuropathy (CIDP), a rare neurological disorder.
Aston Martin - up 14% to 264p: Chinese carmaker Geely upped its stake to 17% in Aston Martin which sent shares racing ahead.
1.05pm: Modest gains seen in the US
US stocks look set to start modestly higher on Thursday morning following strong gains in the previous session amid hopes that the US debt ceiling crisis would soon see a resolution.
In pre-market trading, futures for the Dow Jones Industrial Average (DJIA) were up 0.1%, while those for the S&P 500 added 0.2%, and contracts for the Nasdaq 100 also gained 0.2%.
All the major indexes ended sharply higher on Wednesday, with the DJIA closing up 1.2%, while the S&P 500 also rose 1.2%, and the Nasdaq Composite gained 1.3%. A rebound in regional bank shares also contributed to Wednesday’s rally with Western Alliance shares jumping more than 10%.
Investor sentiment rose after House Speaker Kevin McCarthy told CNBC’s 'Squawk Box' that he does not believe the US will default on its debt. President Joe Biden also stated in later remarks that he was confident lawmakers would come together to reach a deal and avoid a default.
On the economic front Thursday, investors will eye the latest weekly jobless claims numbers, as well as the Philadelphia Fed’s manufacturing survey for May, and existing home sales data for April.
TickMill Group’s market analyst Patrick Munnelly commented: "The initial jobless claims figures have shown an uptick of late, indicating a potential slowdown in the labour market.
The regional manufacturing surveys have exhibited volatility but have generally indicated a downward trend.
However, there is potential for an improvement in the Philadelphia Fed survey following last month's unexpectedly weak outcome."
He added: "There is a bevy of Federal Reserve speakers on deck today. Fed Vice Chair nominee Jefferson, a voting member with a neutral stance, will deliver a speech on the Economic Outlook.
Fed's Barr, another voting member with a neutral stance, will provide the second part of his testimony at the Senate Banking Committee. Additionally, Fed's Logan, who is a voter in 2023 and holds a neutral stance, will also deliver remarks."
Retail behemoth Walmart and China-based tech giant Alibaba are set to report corporate earnings before the opening bell on Thursday.
1.00pm: Prime Minister unveils £18bn of investment from Japanese firms
UK Prime Minister Rishi Sunak has unveiled investment from Japanese firms in the UK worth up to £17.7bn.
Hosting a business reception attended by bosses of companies including Nissan, Toshiba and Mitsubishi, Sunak hailed “a massive vote of confidence in the UK’s dynamic economy from some of Japan’s top firms”.
Japan is already the fifth largest investor in the UK, with investments worth £92bn.
Among the new investment is funding for offshore wind, low-carbon hydrogen and other clean energy projects from Marubeni, a trading conglomerate. The projects will include offshore wind in Scotland and hydrogen energy projects in Wales.
Mitsubishi Estate and Mitsui Fudosan, two of the largest real estate companies in Japan, are also confirming plans to invest £3.5bn in the UK, building offices, housing and life sciences laboratories.
The PM is in Japan for his first G7 summit of world leaders at which he is expected to announce a new defence partnership with the country
12.47pm: Asda accused of using "hire and rehire"
Asda has been accused of using “fire and rehire” threats to reduce pay for 7,000 staff as it restructures the business before a possible merger with EG Group in the UK.
The supermarket has told thousands of staff that they will lose location-based pay supplements and face lower hourly rates for working nights across 39 shops.
The GMB union has warned that the staff could be fired if they did not agree and that the restructuring was intended to help to pave the way for a £12bn merger with the Issa brothers’ UK petrol station business. Asda operates more than 300 of its own petrol stations.
Shop staff working on 22-hour contracts will lose £686 a year and staff on 37.5 hour contracts will lose £1,700, according to the GMB.
Asda has argued that overall pay will increase because it is also increasing hourly rates by 10% to £11.11 per hour in July.
Asda plans to implement the changes in November and is offering compensation payments to affected staff.
12.15pm: Water companies say "sorry" for sewage spills
Water companies in England have apologised for repeated sewage spills and pledged to invest £10bn this decade in an attempt to quell public anger over pollution in seas and rivers.
The companies will triple their existing investment plans to plough funds into the biggest modernisation of sewers “since the Victorian era” to reduce spills of overflowing sewage into England’s waterways.
Industry body Water UK said the plans will cut the number of overflow incidents by up to 140,000 each year by 2030, compared with 2020.
Environment Agency figures earlier this year showed there were a total of 301,091 sewage spills in 2022, an average of 824 a day.
Water UK, which represents 25 companies across the UK, issued an apology on behalf of its English companies and said the public was “right to be upset about the current quality of our rivers and beaches”.
The FTSE 100 continues to make headway, up 43 points.
11.45am: Burberry's slips on concerns over strength of recovery in China
Burberry Group PLC (LSE:BRBY) continues to rival BT for the unwanted gold medal position at the top of the FTSE 100 fallers list.
Garry White, chief investment commentator at Charles Stanley (LSE:CAY), said: “China’s recovery after it scrapped Covid-19 restrictions in December appears to be losing steam – this matters for Burberry as the Asian nation is its most significant market."
He highlighted recent data showing a slowdown in industrial production and retail sales in China and noted as a result, JPMorgan lowered its Chinese GDP growth target for 2023 to 5.9% from 6.4% and Barclays cut its forecast to 5.3% from 5.6%.
"Should the Chinese economic recovery continue to stutter, its new financial year could present more challenges for Britain’s most high-profile fashion house," he suggested.
Russ Mould at AJ Bell noted having a wealthy clientele is an advantage in the current economic climate but doesn't "mean Burberry is immune from an economic downturn."
"We’ve seen in recent months signs of cracks in the luxury goods market. Diamond prices have been falling, so too the value of second-hand luxury watches as the market is flooded with supply," he noted.
“The fact Burberry hasn’t lifted its guidance for the new financial year after reporting such a strong set of results, and reference to it being ‘mindful’ of the macroeconomic and geopolitical environment, appear to have been the trigger for some investors to take profits in the stock, with the share price falling more than 6% on the latest news."
“Investors want companies to consistently beat expectations and if they can’t do that, they will look elsewhere in the current market," he reckoned.
Shares fell 6.2% to 2,364p but remain 14% higher year to date and 49% higher on a 12-month view.
The FTSE 100 shows no signs of slowing down, up 51 points at 7,774.
11.35am: Lloyds AGM disrupted by climate protestors
The annual general meeting of Lloyds Banking Group PLC (LSE:LLOY) has become the latest high-profile gathering of shareholders to be disrupted by climate protestors.
The bank was been forced to suspend the livestream of the meeting in Glasgow twice within the first 10 minutes, after climate protesters interrupted chairman Robin Budenberg’s opening remarks.
Climate protesters have also staged a demonstration outside of the SEC Armadillo in Glasgow, alongside staff union Unite - which is separately concerned about the company’s decision to force staff to spend at least two days a week in-office.
Unite members protest outside the Lloyds Banking Group AGM over management attack on vulnerable staff. New working hours scheme disproportionally impacts women, carers and the disabled working at Lloyds Banking Group.#workinghours #compressedhours @LBGplc pic.twitter.com/PfYtBmnZAi
— UniteFinanceSector (@Unite_Finance) May 18, 2023
11.20am: MPs grill BoE Governor over quantitative tightening plans
Bank of England Governor Andrew Bailey is speaking once more, this time to MPs on Parliament’s Treasury Committee.
The committee is looking into the likely impact of the BoE's quantitative tightening (QT) programme, selling government bonds, on economic growth and whether it will bring inflation down.
Bailey told MPs that he does not believe the Bank’s balance sheet will return to its levels before the financial crisis, even once it has conducted its QT programme.
The Banks' balance sheet grew to around £1trn in the pandemic as asset purchases increased to £895bn in a bid to prop up the shutdown economy.
It has since shrunk to £880bn as quantitative easing (QE) has been unwound.
Asked why the BoE decided last September to embark on QT, Bailey explained that the Bank wants to adjust its balance sheet so that it has headroom to do whatever it might need to do in the future.
It does not want its balance sheet to simply get larger after every economic shock.
But, the governor insists he does not “envisage” the BoE’s balance sheet returning to where it was before the financial crisis.
The key reason is that has created a stock of cash reserves owned by commercial banks which sits on the liability side of the BoE’s balance sheet, he said.
There is “no question” that the banks will need to hold larger cash reserves to ensure prudential stability, and the UK is not alone in this, Bailey explains.
Deputy Governor Sir Dave Ramsden said the pace of quantitative tightening may increase, adding he cannot see its pace slowing.
Interesting from Bank of England deputy governor Dave Ramsden speaking to @CommonsTreasury just now. He reckons that the next year of quantitative tightening is unlikely to be less than the current £80 billion a year, and may be a bit more. MPC decides in September.
— David Milliken (@david_milliken) May 18, 2023
10.40am: Barclays to hire 200 bankers in France as London struggles with Brexit fall-out
Barclays is planning to hire 200 new traders in Paris in a fresh blow to the City of London in the wake of Brexit.
The high street lender said it expects to increase its workforce in the French capital by around two-thirds over the next two to three years as it increasingly becomes Europe’s main business hub.
Barclays Europe chief executive Francesco Cecato said he believed the bank could generate enough business to add around 200 more employees in Paris from 2025 to 2026. It currently employs around 300 people in the French capital.
Cecato told Bloomberg: “The need for trader hiring on the continent is clear. Europe needs to develop its capital markets to reduce dependence on banks, so we have the opportunity to grow over the next few years.”
"In the US, we would not be surprised if there are around 500 people working for Barclays in Paris," he said.
It comes after the European Central Bank told lenders they will have to base staff in the EU if they are responsible for significant trading activity on the continent after Britain leaves the bloc.
Goldman Sachs (NYSE:GS) moved into a new 9,000-square-metre Paris headquarters last year, having more than doubled its workforce in the country in recent years.
The debate over Brexit continues to hit the headlines. On Wednesday, carmaker Stellantis warned it may be forced to close its Ellesmere Port factory unless ministers manage to renegotiate a key part of the UK’s Brexit deal with the EU.
Electric vans made at the Cheshire site by the Vauxhall owner will face tariffs of 10% when exported to mainland Europe from next year because they will not contain enough locally sourced parts, the company said.
Mike Hawes, the chief executive of the industry body SMMT, explained: "The rules of origin for batteries pose a significant challenge to manufacturers on both sides of the Channel, with the prospect of tariffs and price increases which discourage consumers from buying the very vehicles needed to achieve climate change goals.
The Labour leader Sir Keir Starmer told Sky News the UK needs an "improved" Brexit deal and that his party would seek "a better deal than the one that we've got' to bolster the country's trading relationship with the EU.
9.56am: Citi downgrades M&S
Bucking the firmer market were shares in flagship UK retailer Marks & Spencer PLC.
Shares dipped into the red after investment bank Citi lowered its rating to neutral from buy and trimmed its price target to 170p from 175p.
“Whilst we continue to view M&S's transformation positively, we also continue to expect the demand environment to deteriorate across 2023 and into 2024,” the broker said.
Citi said the lower price target reflected a higher tax assumption leaving them on 10x March 2025 estimated EPS.
The broker pointed out the shares have gained more than 10% since its Match upgrade hence the downgrade.
No stopping the FTSE 100 which has notched up a half-century this morning, up 51 points to 7,774.
9.44am: Christie tumbles as deal delays push revenue back into second half
Another share price in the red is Christie Group PLC (AIM:CTG) after the company warned a chunk of revenue expected to be recognised in the first half of the financial year would be put back into the second half.
In a statement, the company said a "culmination of recent unprecedented conflation of market timings, caused by the coincidental sale of exceptionally large portfolios of Dental, Pharmacy and Care Home assets on unit by unit bases, is expected to result in a more pronounced second-half weighting to its full-year performance than previously anticipated."
The firm said there had been a delay to lead times prompting a backlog of transactions.
"In view of this deal congestion and other factors, the group believes that some output from its own transactional pipeline that had been expected to be recognisable as revenue in H1 will now be postponed into H2."
The company said it had already previously indicated that the overall full-year performance was already expected to be second-half weighted.
It also stressed expectations for the full year to December 31 2023 remain unchanged.
But investors ran to the hills sending shares down around 13%.
9.30am: Petrofac soars after jv nets $1.5bn contract
Petrofac Limited (LSE:PFC) shares jumped 13% after a joint venture it is leading won a $1.5bn contract from STEP Polymers for a petrochemical engineering, procurement and construction project.
Petrofac's share of the contract is valued at over $1bn.
The firm said in a statement that "this is a significant downstream project, which will form part of the Arzew Industrial Zone, located west of Algiers, supporting Algeria’s energy strategy."
The award broadens Petrofac’s portfolio within the petrochemical sector and builds on its 25-year track record in Algeria, it added.
Tareq Kawash, Petrofac’s Chief Executive, said: “We are proud to be supporting our customer to deliver this strategic project."
"Algeria is a core market for Petrofac and we are committed to supporting the long-term delivery of critical infrastructure as the country plays an increasingly important role as a major energy producer and moves into major petrochemical projects.”
9.22am: Rolls-Royce upbeat after "game changer" test of energy-saving jet engine
Rolls-Royce Holdings PLC (LSE:RR.) reported "successful" testing of a new fuel-efficient aerospace engine, culminating "many years work" alongside the UK and European Union.
The FTSE 100-listed jet engine maker said promising testing of its UltraFan technology is a "game changer".
"This is a historic moment for Rolls-Royce – it's the first time in 54 years the aero-engine manufacturer has tested a brand-new engine architecture and is proof of what can be achieved when industry and governments work together," Rolls-Royce said in a statement.
The firm said UltraFan delivers a 10% efficiency improvement compared to its current Trent XWB, which is already the "most efficient large aero engine in service".
Chief executive Tufan Erginbilgic said the technology will also be key in the journey to net-zero.
"The UltraFan demonstrator is a game changer – the technologies we are testing as part of this programme have the capability to improve the engines of today as well as the engines of tomorrow.”
“That is why this announcement is so important – we are witnessing history in the making; a step-change in engine efficiency improvement.”
“When combined with sustainable aviation fuels, more efficient gas turbine engines will be key to hitting the industry's target of net-zero flight by 2050. Today we are closer to achieving this ambition," Erginbilgic said.
Shares in Rolls-Royce fetched 155p in early exchanges, up 1.9%.
9.12am: Convatec tops FTSE 100 risers after raising revenue guidance
Leading the FTSE 100 risers is Convatec Group PLC, the medical products and technologies company that raised guidance for organic revenue growth for 2023.
Shares in the Reading-based firm jumped 3.5% on the news.
“Given the good organic growth so far this year against tough comparatives coupled with the improving momentum and confidence in the outlook, we now expect organic revenue growth for 2023 to be between 5.0% and 6.5% (previously 4.5%-6.0%),” the company said in a statement ahead of its AGM.
For the the four months ended April 30, 2023, revenue increased by 3.1% on an organic basis, the company said.
In Advanced Wound Care, organic growth was mid-single digit, with a strong performance in Global Emerging Markets and good growth in Europe and North America, the latter supported by a strong contribution from ATT.
In Ostomy Care, organic growth compared to the same category last year was mid-single digit, with strong growth in Global Emerging Markets, good growth in North America and key European markets.
In Continence Care, organic growth was mid-single digit while in the Infusion Care business, organic growth was flat for the first four months, due to the phasing of customer orders and strong prior year comparators, as anticipated.
8.49am: Footsie advances but Burbery out of fashion
The FTSE 100 continues to make strong progress, now up 35 points at 7,758.
But BT remains friendless, down 8.9%, after announcing massive job cuts at the business alongside flat revenues and lower pre-tax profits.
Also out of fashion was Burberry Group PLC (LSE:BRBY) where shares slipped 5.6% despite the luxury retailer reporting an uptick in full-year profits as its fourth-quarter sales rebounded thanks to the easing of coronavirus pandemic restrictions in China.
Adjusted operating profit grew by 21% to £624mln in the year to 1 April 2023, while revenues jumped to £3.09bn from £2.8bn.
Burberry plans to return £400mln to shareholders by way of a buyback this year “in line with capital allocation policy.”
Heading the other way was Premier Foods with shares pushing 3.4% higher after the company revealed a solid 13% boost in adjusted pre-tax profit, to £137.2m, for the year ending April 1.
The Mr Kipling cakes and Ambrosia rice maker producer reported an 11.8% rise in group revenue, backed by robust growth of its brands.
The results and outlook statement were well-received in the Square Mile. Peel Hunt reiterated its 'buy' recommendation while nudging up its sales and profit forecast by 2%.
Royal Mail owner, IDS, remained in negative territory, down 2.5%.
Liberum pointed out while the FY loss was smaller than feared, with both divisions ahead of expectations, no dividend is to be paid.
“We have doubts about the aim to fully offset the recent two-year pay deal with the agreed working practice changes,” the broker said.
It also pointed out GLS guidance is below consensus, reflecting new strategic initiatives, and capex is to be higher.
“We see downside risks to consensus estimates on balance,” Liberum said reiterating its sell recommendation and 135p target price.
8.15am: FTSE rallies but BT and IDS tumble
FTSE 100 rallied in early trading although the fortunes and share prices of two of the UK’s best known names took a turn for the worse as investors digested news of a loss of £1bn at Royal Mail and massive job cuts at BT.
At 8.15am, London's lead index stood at 7,764.85, up 41.62 points, or 0.54% while the FTSE 250 advanced to 19,291.85, up 76.40 points, or 0.40%.
Equities in London took heart from improved confidence that a resolution to US debt ceiling talks could be made.
Deutsche Bank noted: "Risk appetite returned to markets over the last 24 hours as investors grew more optimistic that a resolution would be reached on the US debt ceiling."
"We didn’t actually get much in the way of concrete developments, but negotiations are continuing and the mood was lifted by the fact that all the major players reiterated they want to avoid a default."
US President Joe Biden said he is "confident" a deal can be reached with Republican leaders to avert a potentially catastrophic US debt default, which could come as early as June 1.
In London, there was plenty for investors to digest.
BT Group PLC (LSE:BT.A) tumbled 8.5% after the UK telco announced plans to axe up between 40,000-55,000 jobs which would be up to 42% of its current 130,000 workforce.
Philip Jansen, BT chief executive said it would make the FTSE 100-listed firm a “leaner business with a brighter future.”
It follows job losses by rival operator Vodafone Group PLC (LSE:VOD) earlier this week.
The news came as the company unveiled marginally lower revenue and a drop in profitiability with growth in Openreach more than offset by declines elsewhere.
Elsewhere, Royal Mail owner International Distributions Services PLC (LSE:IDS) swung into the red as strike action at Royal Mail saw reported losses at its postal delivery business top £1bn.
IDS also took an impairment charge of £539mln as the carrying value of Royal Mail reduced to £900mln given the current risk backdrop and ongoing industrial dispute.
But it is targeting a return to profitability in Royal Mail over the remaining two year of the recently agreed pay deal with a return to adjusted operating profit (before voluntary redundancy costs) in 2024-25. IDS shares fell 2.8%.
But motoring in the other direction were shares in Aston Martin Lagonda Global Holdings PLC (LSE:AML) which roared 19% higher after the luxury car maker announced a £234mln investment from Geely Holding, a Chinese automotive group.
It forms part of a new agreement between the two companies that "seeks to support Aston Martin's growth and vision to be the world's most desirable ultra-luxury British performance brand," the company said.
7.58am: BT to cull up 42% of its workforce
BT Group PLC (LSE:BT.A) is to cut between 40,000 to 55,000 jobs by the end of the decade as it looks to cut costs and become a “leaner business with a brighter future.”
This would mean a reduction of up to 42% in its current workforce of 130,000.
The telco said the reductions which include both employees and third-party contractors would be completed between 2028 and 2030.
Philip Jansen, Chief Executive said: “By continuing to build and connect like fury, digitise the way we work and simplify our structure, by the end of the 2020s BT Group will rely on a much smaller workforce and a significantly reduced cost base.”
The news came as the company unveiled marginally lower revenue and a drop in profitability with growth in Openreach more than offset by declines elsewhere.
In the year to March 31, BT reported revenue of £20.68bn, down 1% from £20.85bn a year prior and a 12% drop in reported pre-tax profit to £1.73bn from £1.96bn due to increased depreciation from network build.
Adjusted EBITDA of £7.9bn was up 5% due to growth in Openreach and Consumer offset by a decline in Enterprise.
A final dividend of 5.39p was paid bringing the full-year dividend to 7.70p, flat year on year.
The firm said customer demand in Openreach for FTTP extremely strong with orders in the financial year up 70% on the previous year with record net adds of 395,000 in the fourth quarter taking the customer base to around 3.1mln.
For the new financial year, BT forecast revenue and EBITDA growth on a pro forma basis, a capital expenditure excluding spectrum of £5.0bn-£5.1bn and normalised free cash flow of £1.0bn-£1.2bn.
Jansen said: “We have delivered our outlook for FY23: this year we've grown both pro forma revenue and EBITDA for the first time in six years while navigating an extraordinary macro-economic backdrop.
“Over the last four years we have stuck firmly to our strategy and it's working.”
7.39am: Royal Mail owner, IDS, swings into the red
International Distributions Services PLC (LSE:IDS) swung into the red as strike action at Royal Mail saw reported losses at the postal delivery business top £1bn.
On a reported basis the FTSE250-listed firm posted revenue in the year to March 31 of £12.04bn, down 5.3% from £12.71bn a year prior alongside an operating loss of £748mln compared to a profit of £577mln before.
This comprised a reported loss in Royal Mail of £1.04bn compared to a £250mln profit before and a profit at its logistics arm GLS of £296mln, down from £327mln.
IDS said on an adjusted basis Royal Mail operating loss of £419mln compared to a £416mln profit before due to industrial action, an inability to deliver planned productivity improvements, lower test kit volumes and a weaker online retail market, partly offset by actions to cut costs.
GLS adjusted operating profit of £348mln, was up 1.8% year-on-year and slightly ahead of consensus, the firm said.
IDS took an impairment charge of £539mln as the carrying value of Royal Mail reduced to £900mln given the current risk backdrop and ongoing industrial dispute.
But it is targeting a return to profitability in Royal Mail over the remaining two year of the recently agreed pay deal with a return to adjusted operating profit (before voluntary redundancy costs) in 2024-25.
At GLS revenue growth year on year is expected to be in the 3% to 5% in the new financial year.
No dividend was paid.
7.00am: FTSE 100 set to open higher
Good morning. The FTSE 100 is expected to make headway on Thursday after US markets rallied on optimism that the US will avoid a government default after policymakers appeared to edge closer towards a deal in Washington.
Spread betting companies are calling London’s lead index up by around 22 points.
"US markets...finished their session strongly higher, taking their cues from comments from US President Biden expressing confidence that a deal would ultimately be agreed, confidence that was echoed by House Republican leader Kevin McCarthy" said CMC’s Michael Hewson.
On Wall Street, the Dow Jones Industrial Average jumped 408.63 points, or 1.2%, to 33,420.77. The S&P 500 gained 48.87 points, 1.2%, at 4,158.77, while the Nasdaq Composite advanced 157.51 points, 1.3%, at 12,500.57.
US President Joe Biden said he is "confident" a deal can be reached with Republican leaders to avert a potentially catastrophic US debt default, which could come as early as June 1.
Asian markets followed the US higher. In Tokyo, the Nikkei 225 index was up 1.7%, in China, the Shanghai Composite rose 0.6%, while the Hang Seng index in Hong Kong gained 0.9%.
Back in London and the early focus will be updates from BT, Burberry, easyJet and National Grid on another bumper day of company news.