- FTSE 100 closes 14 points higher
- Dow Jones stays weak, other US indexes higher
- Dechra Pharmaceuticals weak after profit warning
4.45pm: FTSE 100 closes up in quiet start to the week
At the close, the UK's blue-chip index was modestly higher at 7,771 for a gain of 0.2% on the day.
CMC's Michael Hewson noted that it's been a cautious start to the week, with debt ceiling talks in the US set to restart later today.
"It’s been a fairly quiet, if slightly negative session for European equity markets today, with the FTSE100 modestly outperforming, as markets tread water ahead of the resumption of debt ceiling talks later this evening," Hewson commented.
"We’re seeing modest weakness in telecoms and energy being offset by a firmer performance from banks and the consumer discretionary sector."
By the UK close, the Dow Jones Industrial Average was down 0.2% at 33,358, while the S&P 500 was up 0.2% at 4,199 and the Nasdaq had gained 0.5% to 12,716.
3.40pm: Crude balancing
Oil prices were fairly steady as US debt ceiling uncertainty countered optimism over expected increased demand later in the year.
Brent crude futures was up 0.01% at $74.23, while West Texas Intermediate (WTI) futures rose 0.3%, to $71.75. Last week, both oil benchmarks gained about 2%, their first weekly rise in five, after wildfires shut in large amounts of crude supply in Alberta, Canada.
Talks to avert a US debt default were set to resume in Washington as the prospect of a default and resulting possible economic downturn and cooling of fuel demand continued to weigh on markets.
However, the International Energy Agency (IEA) warned of a looming shortage in the second half when demand is expected to eclipse supply by almost 2 million barrels per day (bpd) in its latest monthly report.
On Saturday, the Group of Seven (G7) nations pledged at its annual leaders' meeting to enhance efforts to counter Russia's evasion of the price caps on its oil and fuel exports "while avoiding spillover effects and maintaining global energy supply", but did not provide details.
3.25pm: On your bike
Mike Ashley's Frasers Group is reportedly in advanced talks to buy cycling goods specialist ProBikeKit (PBK) from THG, according to a Sky News report.
City sources told Sky News that Frasers is close to buying the stock and intellectual property assets of PBK from the online nutrition and beauty retailer, and a deal could be finalised and announced later this week.
The deal will not be material in financial terms for either party, but will come in the wake of THG deciding to close or sell a number of its non-core subsidiaries, Sky News said.
PBK, which sells cycling clothing and accessories produced by more than 100 specialist brands including Adidas, Raleigh and Michelin. was founded in 1998, and was bought by THG in 2013.
The acquisition of PBK is expected to be handled through Frasers' Evans Cycles subsidiary, which Frasers bought in 2018. Sky News noted.
3.10pm: Failure pays
Although the mood on Wall Street is cautious, US banking giant JPMorgan Chase has upped its annual forecast for net interest income following its acquisition of failed lender First Republic Bank, CNBC has reported.
In a presentation for its investor day, the lender said it now expected annual net interest income, excluding corporate and investment banking, to come in around $84bn, compared to previous guidance for $81bn.
The US banking sector has been roiled over the past few months after the failure of Silicon Valley Bank in March. First Republic became the second-biggest bank failure in America's history after US regulators stepped in to shutter the Californian lender at the start of May.
Most of First Republic’s assets were then sold to JP Morgan, which paid the Federal Deposit Insurance Corporation $10.6bn as part of the deal.
America's largest lender said it expects to take around 12 months to fully integrated First Republic which has $173bn of loans, $30bn of securities and $92bn of deposits.
2.50pm: Nerves across the Atlantic
The FTSE 100 index resumed its modest gains as the main US stock indexes started mixed and bond yields ticked higher with investors nervously awaiting news on the fraught US debt-ceiling negotiations.
President Biden and House Speaker Kevin McCarthy are due to meet later in the day in a last-ditch effort to reach a deal to avoid a default.
Around 20 minutes after the New York open, the Dow Jones Industrial Average (DJIA) was down 54 points, or 0.2% at 33,371, while the S&P 500 rose 0.2%, and the tech-dominated Nasdaq Composite added 0.6%.
2.30pm: "Monumental questions" about consumer energy bills
Consumer champion Martin Lewis has issued stark warnings that households will unlikely feel the benefit of the falling cap on energy prices, implemented by regulator Ofgem.
“In practical terms, people aren’t going to be feeling any real benefit,” he told the BBC’s Laura Kuenssberg over the weekend when asked about a predicted drop in the cap from July.
“They’re going to be paying the same that they were over winter, and next winter will be as expensive as the winter just gone," he added.
Last week, Cornwall Insight analysts forecast the cap, which determines how much suppliers can charge per unit of electricity and gas, will fall to £2,053 per year come July 1, down from £3,280 currently. Ofgem’s cap had risen to £4,279 on an annual basis between January and March, up nearly 290% from £1,104 when it was introduced in January 2019.
Gas, which determines electricity prices, has approached almost two-year lows this week, falling to £0.64 per British thermal unit, similar to figures recorded in June 2021, before an August 2022 peak of £6.40, according to Trading Economics.
However, predictions for the new price remain 80% higher than the £1,138 cap run by Ofgem in the summer of 2021, despite wholesale prices having fallen.
“We have monumental questions about consumer energy bills coming forward,” Lewis added. “They’re too expensive, they’re badly structured, there’s no competition in the marketplace.”
2.15pm: Legal moves
Law firms Allen & Overy and Shearman & Sterling plan to merge, the two announced on Sunday night, in a deal that would create one of the world's largest legal practices with combined global revenue of approximately $3.4 billion.
If approved by a vote of partners at both firms, the tie-up would be one of the largest law-firm mergers in recent years and result in a firm with around 3,900 lawyers across 49 offices worldwide.
The company created by merging London-based Allen Overy and New York-headquartered Shearman Sterling "will be the only global firm with US law, English law and local law capabilities in equal measure," the two firms said in a joint statement.
The proposed merger would create the third-largest integrated law firm in the world by gross revenue, the two firms said, with a $1 billion practice in the United States
The deal comes just months after Shearman & Sterling abandoned talks over a tie-up with transatlantic firm Hogan Lovells.
1.30pm: A look at some of London's movers
Polymetal - down 13% to 199p: Shares plunged on news that its Russian subsidiary, JSC Polymetal, has been placed on the US Specially Designated Nationals and Blocked Persons list (SDN).
Barryroe Offshore - down 52% to 0.88p: Shares fell as efforts to deliver a project off the Cork coast have been stifled by the leader of Ireland’s Green Party.
1.00pm: US markets seen flat ahead of resumption in debt ceiling talks
US stock indexes are expected to start flat to modestly lower on Monday as talks over the US debt ceiling enter a critical stage and interest rate worries remain.
President Joe Biden and House Speaker Kevin McCarthy are set to meet Monday to continue negotiations. Treasury Secretary Janet Yellen has said the US could default on its debt as early as June 1.
Meanwhile, analysts at Goldman Sachs (NYSE:GS) think the US Treasury Department is expected to run out of the cash necessary to fund the federal government’s obligations by June 8 or 9 unless the debt ceiling is lifted.
In pre-market trading, futures for the Dow Jones Industrial Average (DJIA) were 0.03% higher, while those for the S&P 500 slipped 0.01%, and contracts for the Nasdaq 100 futures lost 0.1%.
Wall Street ended lower on Friday, with the DJIA off 0.3%, while the S&P 500 lost 0.1%, and the Nasdaq Composite fell 0.2%. But over the week, despite the uncertainty in Washington, the DJIA added 0.4%, while the S&P 500 gained 1.7%, and the Nasdaq Composite climbed 3%.
Joshua Mahony, chief market analyst at Scope Markets commented: "With the US debt ceiling clock ticking ever louder, futures are eyeing a cautious start to the week on Wall Street with some modest downside pressures in play.
"On the basis that economic news is thin on the ground in the coming days whilst earnings season is drawing to a close too, any meaningful progress on the US political front will be very much in focus, with Janet Yellen having cautioned that the US could default on debt repayments as soon as the middle of next week.
"As for the economic calendar, Tuesday’s flash PMI readings appear to offer little cause for concern, although the release on Wednesday of the FOMC meeting minutes will inevitably be closely followed as the market looks for clues as to what the Fed is thinking may happen next."
The first-quarter corporate earnings season is also winding down, but there are a few notable reports in the coming days, with Zoom Video on Monday and Lowe’s and Dick’s Sporting Goods on Tuesday. Traders will also be keeping an eye on JPMorgan Chase’s investor day on Monday.
12.38pm: PacWest offloads $2.6bn property loan portfolio
Back in the US and Californian bank PacWest Bancorp has offloaded a $2.6bn portfolio of loans to real estate investment group Kennedy Wilson, just weeks after it said it was looking at narrowing its focus to its core community banking business.
In a filing, the regional bank which has seen its shares plunge around 75% in 2023 in the wake of the US banking crisis, said the sale of 74 loans was “consistent with the previously announced strategy" to pursue strategic assets sales.
A further six loans worth $363mn could be added to the deal.
The news boosted shares in pre-market trading with shares up around 3.5%.
12.10pm: Sainsbury targets leading brands for online fashion push
Sainsbury’s is planning on launching an online marketplace for high-street fashion brands, applying pressure on department stores such as Marks and Spencer.
The Times newspaper claims the grocery giant is pitching to brands such as Jigsaw and White Stuff about selling through its website and 60 of its stores.
Sainsbury’s is said to be flexible in its terms of conditions with brands and is offering a lower commission rate than John Lewis, which charges 40%.
Shares in the grocer were 1% lower at 278.30p while the FTSE 100 has slipped narrowly into red, now down 2 points
11.50am: Meta plans to appeal €1.2bn data transfer fine
The record fine handed out to Facebook-owner Meta Platforms Inc (NASDAQ:FB) risks carving up the internet into silos, according to Sir Nick Clegg, Meta's president of global affairs.
Meta has said it would appeal the Irish decision which has led to it being fined a €1.2bn and told to stop sending European users' data to the US in a spying row.
Ireland’s Data Protection Commission, which oversees the General Data Protection Regulation, on Monday handed down the fine for Meta, saying that Facebook had violated its rules requiring platforms to ensure data transfers from Europe to the US have appropriate safeguards in place.
Describing the move as "flawed" and "unjustified," the company also promised to "immediately" seek a suspension of the banning orders, saying they would cause harm to "the millions of people who use Facebook every day".
Clegg, the former UK deputy Prime Minister, said the data-transfer curbs risk carving up the internet "into national and regional silos, restricting the global economy and leaving citizens in different countries unable to access many of the shared services we have come to rely on".
11.07am: Standard Chartered and HSBC rise after analyst briefings
Asia-focused stocks sit top of the risers in the FTSE 100 after gains in Asian markets.
Standard Chartered PLC (LSE:STAN) is up 3.3% and HSBC Holdings PLC (LSE:HSBA) is also higher, gaining 1.5%, after well-received presentations to City analysts in Asia over the past two weeks.
Barclays said: “We came away from our two weeks in Asia - meeting investors, policymakers, and management - with greater conviction in an improving outlook for growth, earnings and capital returns at both banks.”
“Despite complex geopolitics, valuation for HSBC in particular is highly attractive," analysts at the bank said.
HSBC is one of Barclays' "key" overweight ratings across European banks.
10.41am: Restaurant Group urged to spin off Wagamama
Shares in Restaurant Group PLC (LSE:RTN) rose 3.1% after an activist investor called on the group to spin off its Wagamama restaurant chain.
The Sunday Telegraph reported the news which comes as the embattled management team is expected to be questioned about pay and performance at the annual meeting this week.
TMR Capital, the Floride-based hedge fund which took a small stake this month, has approached the group, which also owns Frankie & Benny’s and Chiquito, with proposals to sell off all its businesses except Wagamama.
The fund wants the group to expand Wagamama before taking it private in a sale.
Meanwhile, the FTSE 100 has slipped back from earlier highs but remains firmly in the green up 18 points. It earlier hit an intra-day high of 7,783.40.
9.51am: Micron hit by Chinese ban
Shares in Micron Technology Inc are around 6% lower in pre-market New York deals after China ruled its products posed “serious network security risks”.
The Cyberspace Administration of China on Sunday announced that the company, which is the biggest US maker of memory chips, “posed significant security risks to China’s critical information infrastructure supply chain”.
As a result, it ordered “critical national infrastructure operators” to stop purchasing products from Idaho-based Micron.
The US commerce department said it strongly opposed the action which it said had “no basis in fact”.
“This action, along with recent raids and targeting of other American firms, is inconsistent with the PRC’s assertions that it is opening its markets and is committed to a transparent regulatory framework,” the commerce department said.
9.27am: Citi thinks BT's asset quality is improving, adds to European Focus List
Shares in BT have gained 2% in early dealings as the stock rallies following hefty falls which followed last week's results and massive job cuts.
The broker notes that the telco is doubling down on its strategy of building and connecting fibre to the Home (FTTH) at pace and not limiting that to any free cash flow targets, which as a result are coming under some pressure.
"But this is temporary and in the meantime BT is delivering EBITDA growth, despite opex headwinds which should partly reverse from FY25," it said.
As such the asset quality is improving, core earnings are well supported and growing, while capex is at its peak and way above any other major European telco due to BT's rapid deployment and full transparency on investment, Citi explained.
"We reiterate our buy rating and also place BT on Citi’s European Focus List," the broker said.
8.55am: FTSE climbs, Rolls-Royce boss has a dig at past failings
The FTSE 100 has continued its positive start to the day now up 25.44 points to 7,782.31.
Sophie Lund-Yates at Hargreaves Lansdown said: "The continuation of positive momentum comes ahead of important talks in the US. President Biden is due to speak to Republican House Speaker Kevin McCarthy today, for another round of talks surrounding the raising of the debt ceiling.
"This comes just under two weeks before an important deadline. The general sense is that a solution will be found before boundaries are crossed, but markets will remain highly sensitive."
Rolls-Royce Holdings PLC (LSE:RR.) is a firm feature, up 1.1%, as the market digests more comments by its new CEO.
Tufan Erginbilgic continued to express his ambition to drive the company forward despite having a further dig at previous management. Erginbilgic, who in January shocked staff and investors by referring to Rolls-Royce as a “burning platform”, was scathing about how its power-systems division had been run.
In an interview with the Financial Times he claimed the division had been “grossly mismanaged” in recent years, pointing out that margins at the subsidiary, which makes diesel and gas engines for ships and trains, had fallen in 2022 even though revenues had risen.
Costs had not been kept under control. “That’s mismanagement,” he said.
HL's Lund-Yates said: "It’s certainly true that Rolls Royce needs a firm hand if it’s going to be moulded back into full health, and there will be corners of the market who agree with taking a hard line. More important to investors though will be an ironclad plan and execution of strategy to plug the holes in margins."
8.17am: FTSE makes modest gains
The FTSE 100 has made steady progress in early exchanges on Monday ahead of further talks in the US to resolve the deadlock in debt ceiling talks.
At 8.15am, London's blue-chip index stood at 7,771.61, up 14.74 points, or 0.19%, while the FTSE 250 was little changed at 19,296.18, up 7 points.
Richard Hunter, head of markets at interactive investor said: "While the likelihood of what would be a financially catastrophic default is considered low, investors remain on edge and will continue to be so the longer the talks progress."
UK house prices hit a new record high in May as the housing market continued to defy pessimistic forecasts at the start of the year, figures on Monday showed.
Rightmove's house price index showed the average price of property coming to market jumped by 1.8%, £6,647, to set a new peak of £372,894 as sellers responded with increased pricing confidence.
Tim Bannister, Rightmove's director of property science, suggested one reason for this increased confidence "may be that the gloomy start-of-the-year predictions for the market are looking increasingly unlikely."
Dechra Pharmaceutical PLC shares slipped 5.5% to 3,450p after the firm warned de-stocking would mean operating profit will be below previous guidance.
The FTSE 250-listed firm, which is holding talks with private equity outfit EQT regarding a possible 4,050p per share bit, said de-stocking in the US had now spread to the UK.
The “trading environment during the period January to April has been more volatile and challenging than in February when the firm reported its interim results,” Dechra said.
BT shares rallied 1.3% after falling heavily in the wake of Thursday’s results and job cuts announcement.
Citi has placed the telco on its European Focus List and reiterated a buy rating.
NatWest Group PLC (LSE:NWG) held firm after news it had bought back a chunk of shares from the Treasury reducing the Government’s stake in the lender below 40% in a £1.26bn deal.
Shore Capital’s Gary Greenwood said “this transaction was anticipated by us and reflected in our forecasts, which are therefore unchanged.”
He has a 'buy' rating on the high street bank and a 405p price target.
7.55am: Dechra warns de-stocking to hit profit
Dechra Pharmaceuticals PLC (LSE:DPH) has warned its full-year operating profit will be below current guidance after de-stocking by a number of wholesalers.
The FTSE 250-listed firm said the trading environment during the period January to April has been more volatile and challenging than in February when the firm reported its interim results.
In the US, Dechra said that “the impact of the now widely reported de-stocking by US wholesalers has been deeper and longer than initially expected and had a material impact on Q3 performance, although there are encouraging signs that this is now re-bounding.”
The company said a similar de-stocking pattern has also been experienced in the UK during April 2023, due to certain wholesalers managing financial year-end inventory levels, although order patterns are beginning to show signs of normalising.
In the rest of Europe, the market appears to be slowing in response to the changing macro-economic environment and country specific dynamics.
As a result, Dechra expects full-year underlying operating profit will be below £186mln, the guidance given in February.
Nonetheless, the company is confident it “remains very well positioned to continue to grow over the medium and longer term despite the unprecedented and, by nature, short-term trading headwinds.”
Dechra added talks with EQT continue regarding a possible all-cash recommended offer of 4,070p.
The deadline for any bid is June 2.
7.45am: House prices hit record high in May
UK house prices hit a new record high in May as the housing market continued to defy pessimistic forecasts at the start of the year, figures on Monday showed.
Rightmove's house price index showed the average price of property coming to market jumped by 1.8%, £6,647, to set a new peak of £372,894 as sellers responded with increased pricing confidence.
The 1.8% monthly increase is the biggest of the year so far, and significantly higher than the historic average May rise of 1.0%, Rightmove said.
Tim Bannister, Rightmove's director of property science, suggested one reason for this increased confidence "may be that the gloomy start-of-the-year predictions for the market are looking increasingly unlikely".
"What is much more likely is that the market will continue to transition to a more normal activity level this year following the exceptional activity of the pandemic years," Bannister said.
7.31am: NatWest buys back £1.26bn stake from Government
NatWest Group PLC (LSE:NWG) has bought back around 469mln shares from the Treasury further reducing the Government’s stake in the bank.
In a statement, the high street lender said it had agreed the off-market purchase of 469.mln shares at a price of 268.4p each in a deal worth £1.26bn.
The shares represent around 4.95% and means HM Treasury now holds a 38.69% stake in the bank.
The off-market purchase is expected to settle on May 24.
NatWest intends to cancel 336mln, of the purchased shares and hold the remaining 133mln in in treasury.
It explained holding the shares in treasury may provide the company with additional flexibility in the management of its capital base.
NatWest said the transaction would have reduced the company's CET1 ratio of 14.4% as at March 31 2023 by 71 basis points.
7.00am: FTSE seen higher, debt ceiling talks to resume
The FTSE 100 is expected to modest progress when trading for the week begins ahead of further debt ceiling talks in the US.
Spread betting companies are calling London’s lead index up by around 5 points.
US President Joe Biden will meet with Republican House Speaker Kevin McCarthy on Monday for another round of talks on raising the US debt ceiling less than two weeks before a key deadline to avoid a disastrous default, officials said.
In Asia, markets were mixed. The Nikkei 225 index in Tokyo continued its recent strong run, up 0.8%. In China, the Shanghai Composite was down 0.1%, while the Hang Seng index in Hong Kong was up 1.1%.
Back in London and house prices hit a new record high in May, as the housing market continued to defy pessimistic forecasts at the start of the year, figures from Rightmove showed.