- FTSE 100 closes 76 points lower
- Entain falls as warns it could face fine from HMRC probe
- US job vacancies rise
4.45pm: FTSE 100 closes at two-month low
The FTSE 100 sank further before the close to hit a two-month low at 7,446 points, a decrease of 1% on the day.
Worries about the Chinese economy have piled on the pressure for stocks, says Chris Beauchamp, Chief Market Analyst at online trading platform IG.
“First it was the stronger dollar hurting commodity prices. But now the FTSE 100 has the problem of slowing global demand, most notably in China," Beauchamp wrote.
"What started out as mainly a commodity rout this morning has broadened out to the rest of the index. A few more days like this will find the FTSE 100 back at the December 2022 and March 2023 lows around 7300, wiping out the gains made since 1 January.”
3.55pm: Chinese weakness weighs on markets
Weakness in China, and not the debt ceiling, appears to have put the skids under global markets, at least according to Michael Hewson, chief market analyst at CMC Markets.
“Early year expectations of a strong sustained post covid rebound has given way to concern that China’s economy is slowing sharply,” Hewson said.
“It’s not as if the signs of a weak economy haven’t been there, they’ve been apparent in factory gate inflation which has been stuck in negative territory since October of last year, with the fear that this could well be coming in our general direction.”
FTSE 100 is down 64 points to 7,458, near session lows of 7,454.
3.30pm: US job vacancies rise
A quiet day for UK economic data, but plenty to dig our teeth into across the pond.
The number of job vacancies unexpectedly increased by 358,000 to reach 10.1mln in April, surpassing market expectations of 9.4mln.
April’s figure represented a rebound from the previous month’s near two-year low and indicates a tight labour market which could pave the way for additional Fed interest rate hikes.
Interest rate decisions set by the Fed are usually followed elsewhere, with the Fed next making a decision in two weeks’ time again.
3pm: US stocks open lower
US stocks opened lower as traders continue to keep a close eye on the debt ceiling progress.
The Dow Jones was down 0.6% to 32,827 points, while the S&P 500 shed 0.49% to 4,185.
The tech-laden Nasdaq performed slightly better, but still in the red nonetheless, losing 0.14% to 12,999.
2.29pm: London performing better than Europe
London’s blue-chip index is showing signs of recovery, now only down 14 points to 7,507 points, or 0.19%.
FTSE 100 is however faring better than other European indices.
The Dax in German is down 0.72% to 15,794, while the CAC 40 is down nearly 0.9% to 7,143.
In Spain, the IBEX 35 is down 0.67% to 9,105.
1.57pm: Steel prices fall
Steel rebar futures were trading at CNY3,745 per tonne, approaching the three-year low of CNY2,460 hit last Thursday once again amid fresh concerns of low demand from China, the world’s top consumer.
China’s reopening from strict Covid lockdowns failed to trigger an economic recovery, while a second consecutive contraction in manufacturing in May also dampened the mood.
Shares in Rio Tinto were down 0.2% to 4,830p, BHP shed 1.3% to 2,219p and Anglo-American lost 0.35% to 2,257p.
Ferrexpo was also 0.8% to 93.5p.
1.30pm: London's movers
A quick glance at some of today’s risers and fallers and London.
Risers
Yu Group- up 26% to 580p
Shares in gas and electricity supplier Yü Group PLC surged after it announced “very strong growth” in revenue, profitability and cash generation and predicted results for 2023 would come in significantly above current market forecasts.
Tekmar Group- up 6% to 9.5p
Shares leapt after it announced the award of a “significant new contract” worth more than £5mln.
The technology and services provider for the global offshore energy markets said the contract is for the design and supply of Tekmar Group's flagship Generation 10 cable protection system product (CPS) and associated ancillaries.
B&M- up 8% to 511p
B&M reported a drop in annual profit despite a jump in revenue as margins were squeezed by the impact of rising costs.
The company said in the first nine weeks of the new financial year, B&M UK LFL sales have run at 8.3%, France and Heron have continued their trading momentum and it expects full-year adjusted EBITDA to be higher year-on-year.
Fallers
Purplebricks- down 19% to 0.51p
Purplebricks announced that Lecram Holdings has withdrawn its bid proposal and does not intend to make a move for the online estate agency.
The company revealed the 12th-hour bid approach from Lecram, one of its top investors, at the end of last week although it said it continued to favour an alternative approach from Strike Ltd, unveiled two weeks ago.
1.02pm: Weak restart expected across the pond
Wall Street is likely to open lower as a weekend agreement between US President Joe Biden and House Speaker Kevin McCarthy to raise the country’s debt ceiling, now at $31 trillion, goes before the US House of Representatives for debate and an expected vote.
Futures for the Dow Jones Industrial Average fell 0.2% in Wednesday pre-market trading, while those for the broader S&P 500 index shed 0.3% and contracts for the Nasdaq-100 also declined 0.2%.
The main US indexes were mixed at the close on Tuesday, with inflation and interest rate concerns also weighing on the market ahead of non-farm payroll data on Friday. The DJIA lost 0.2% to finish at 33,043, the S&P 500 was flat at 4,206 and the Nasdaq finished 0.3% ahead at 13,017 points as a rally in NVIDIA’s shares buoyed other tech-sector stocks.
“With the White House and Republican leaders agreeing a deal on the debt ceiling at the weekend markets are now obsessing about whether the deal will get the necessary votes to pass into law, as partisan interests line up to criticise the deal,” commented Michael Hewson, chief market analyst at CMC Markets.
“With the deadline for a deal now said to be next Monday, 5th June a vote will need to go forward by the end of the week, with ratings agencies already sharpening their pencils on downgrades for the US credit rating.”
The US data docket for today is relatively light, with two notable releases, according to TickMill Group market analyst Patrick Munnelly.
"First, the JOLTs survey will offer detailed information on the employment market developments in April, providing valuable insights into job openings, hires, and separations," Munnelly said.
"Secondly, the Federal Reserve will release its Beige Book, which compiles anecdotal reports from various sectors of the economy. This report offers qualitative information on economic conditions across different regions of the United States. It provides further insight into the effectiveness of previous rate hikes and allows policymakers to gauge the overall state of the economy."
12.35pm: Eurozone outlook remains fragile
The outlook for eurozone financial stability remains fragile, the European Central Bank reported in its May Financial Stability Review on Wednesday.
In its six-monthly report, the ECB referred to "weak macro-financial conditions and unexpected stress in the banking sectors of some mature economies."
It highlighted the recent failures of three US regional banks and the takeover of Switzerland's Credit Suisse Group AG (NYSE:CS) by its competitor UBS Group AG (NYSE:UBS) in a deal backed by the Swiss government.
These events had "invited closer scrutiny of bank exposure to long-term fixed income securities, the stability of wholesale uninsured deposit funding and latent business model challenges," the ECB said.
They had also "prompted more general concerns about bank resilience in an environment of higher interest rates," it said.
But it added that the tensions were short-lived, as eurozone bank fundamentals remained solid, and prompt regulatory intervention had contained spill-overs from other economie
12.25am: Entain keen to resolve HMRC investigation
Entain Chair Barry Gibson is hoping to resolve the HMRC probe into the company as as possible.
Speaking after this morning's announcement Gibson said: "We are keen to achieve a resolution to what is an historical issue relating principally to a business that was sold by the Group nearly six years ago."
He pointed out the betting operator has been through a period of "extraordinary transformation" since then, and has taken decisive action to be a best-in-class, responsible operator with outstanding corporate governance.
"The Board and leadership teams have been overhauled, 100% of our revenue is now from regulated or regulating markets, and our business model, strategy and culture have been reviewed, analysed, and stress-tested."
"We will continue to work closely with both the CPS and HMRC to ensure that this matter can be concluded as soon as is practical,” Gibson added.
Shares remain down 2.3% after the company, which owns Coral and Ladbrokes, warned it could face a substantial fine or even prosecution from the ongoing investigation into its former Turkish businesses.
11.56am: Oil price falls after Chinese data, ahead of Opec + meeting
The oil price remains under pressure hit by concerns about the strength of the global economy and ahead of a key meeting on Sunday with mixed messages coming from two of the group’s leading players.
The price of Brent was down a further 2.2% today to $72.11 while West Texas Intermediate declined 2.3% to $67.91.
The 13 members of Opec and 10 other oil-producing countries, known as Opec+, will meet on Sunday in Vienna to decide on production policy.
The oil cartel in April decided to cut production from this month to the end of this year in a bid to bolster oil prices.
Last week, Saudi Arabian Energy Minister Prince Abdulaziz bin Salman, the de-facto leader of OPEC, seemed to suggest a further cut could be on the way.
He told Bloomberg: “Speculators, like in any market they are there to stay, I keep advising them that they will be ouching, they did ouch in April, I don't have to show my cards I'm not a poker player ... but I would just tell them watch out."
But Russian deputy Prime Minister Alexander Novak said he expected no new steps from OPEC+ in Vienna, according to Russian media reports.
"There is no secret that Saudi Arabia wants oil prices as high as possible. However, will a June intervention make any difference to the likely downward trajectory of oil prices in the next few months, just as happened after the surprise April output cut?" Stephen Innes of SPI Asset Management said.
"Russian oil is the biggest wild card in the oil market,” Innes said.
“While Opec could remain highly compliant with its threat to cut, the ongoing dynamic concerning Russian supply is a bearish risk for oil," he added.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, pointed out that Russia may not follow OPEC’s output cuts, in which case the internal conflict may prevent the cartel from reducing supply in a way to give a jolt to oil prices.
“There is little chance that we see the kind of discord like back in 2020, as the Ukrainian war strengthen the ties between two allies,” she felt.
“But any Russian veto could materially reduce OPEC’s power of hit on oil prices,” she added.
11.34am: Oil majors weigh, Pubs boosted by HSBC upgrades
Heading to midday and the FTSE 100 remains subdued, down 17 points.
Leading the fallers is Ocado Group PLC (LSE:OCDO) which is down 3.8% ahead of its expected demotion from the FTSE 100 in the quarterly reshuffle.
The online food retailer is expected to be replaced by engineer, IMI PLC (LSE:IMI).
In the FTSE 250, upstream energy company Capricorn Energy, Africa and South America-focused exploration firm Tullow Oil, and oil and gas industry services provider Hunting are primed to be axed with shares down 1.3%, 3.1% and 2.0% respectively.
Elsewhere, oil majors BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL) slipped 2.8% and 2.1% as the oil price continued its recent slide. The price of Brent was down a further 2.2% today to $72.11 while West Texas Intermediate declined 2.3% to $67.91.
The weak data from China has sparked fears of reduced demand for commodities while markets remain divided on whether OPEC+ will cut production during a meeting on June 4 .
Mining firms were also on the downside with Anglo American shedding 1.4% and Antofagasta 1.3%.
In the FTSE 250, JD Wetherspoon was boosted by an upgrade by HSBC to buy from hold with a target price of 940p, lifting shares 3.2%, while a similar move by the same broker lifted Mitchells & Butler PLC 1.8%.
But Drax PLC topped the FTSE 250 fallers, down 5.7% after Ofgem opened an investigation into its reporting under the Renewables Obligation scheme.
11.05am: Business confidence dips in May, according to Lloyds
Business confidence fell by five points in May to 28%, the first fall in three months, according to the Lloyds Bank Business Barometer.
However, confidence levels remain in line with the barometer’s long-term average and firmly above last November’s low of 10%.
The first decline since February was led by moderate falls in both firms’ own trading prospects and their optimism regarding the wider economy.
Confidence jumped in the South East but fell in other UK regions and nations, hiring intentions moderated slightly while firms’ wage and own pricing expectations continued to be elevated.
Manufacturing and retail confidence gains were offset by pullback in services.
Firms’ assessment of strong trading prospects for the next twelve months fell for a second consecutive month, from 55% in April to 49% in May, but remain above levels seen earlier in the year (27% in January).
Optimism about the wider economy fell by six points to 22%, as 48% of companies (down from 53%) were more positive while 26% (up from 25%) were more negative.
Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said: “As the economic environment remains challenging, compounded by stubborn inflation and higher wage pressures, business confidence has dipped slightly this month as firms feel cautious about the wider economy and their own trading prospects.
10.50am: WE Soda lifts London with plans for IPO
The London stock market received a boost today with news that WE Soda, the world’s largest producer of soda ash intends to list in London.
The UK-based company, which has two production sites in Turkey, is targeting a $7.5bn valuation which would catapult it straight into the FTSE 100.
The company said it is planning to apply to list on the premium segment of the London Stock Exchange. The group’s valuation is expected to be as high as $8bn, which would place it in the FTSE 100.
Soda ash – or sodium carbonate – is a key industrial component used in processes such as glass-making, as well as in the production of lithium carbonate for electric vehicle batteries and the manufacture of powdered detergents.
In 2022, WE Soda generated $838mln of adjusted core earnings on $1.8bn of revenue.
Meanwhile, the FTSE 100 has stabilised, down 13 points, recouping most of its early falls.
9.51am: B&M leaps after encouraging results
B&M European Value Retail SA (LSE:BME) tops the FTSE 100 risers after its annual results with shares jumping 6% to 500p.
Shore Capital’s Eleonora Dan described the results as “ positive,” with the UK in-line, Heron Foods performing well and strong double-digit growth at B&M France.
She said the margin decline was as expected while EBITDA of £573mln was in line with consensus.
“Considering the current macro environment, these results are encouraging,” Dani continued, although she thought the inventory decline would not be well received.
Dani added: “We believe investors will be eager to learn more about the underlying trading performance of the Non-Food division and gain a clearer understanding of the FY24F guidance beyond the vague statement of it being "higher than".
ShoreCap has a hold rating on B&M.
Liberum said the results were “strong” with cash generation remaining impressive.
The outlook remains optimistic with management highlighting the accelerating UK store opening pipeline and continued multi-year growth opportunities in France and Heron (UK), the broker noted.
Liberum sees scope for consensus forecasts to edge higher and reiterated a buy rating.
Jefferies said the numbers confirmed an EBITDA delivery within the narrowed guided range while current trading highlights a resilient start to the new fiscal year, with 23/24 EBITDA guidance 'higher than in 22/23' potentially slightly ahead of sell-side estimates.
Jefferies rates B&M underperform.
9.40am: Abrdn set for more buy backs after Indian sale
Abrdn PLC (LSE:ABDN) could make a share buyback after selling shares in Indian insurance firm HDFC Life Insurance Co Ltd.
The Edinburgh-based fund manager said its Mauritian business aMH06, had sold 35.7mln shares in HDFC Life for around £198mln.
Abrdn said it was committed to returning a significant proportion of capital generated from stake sales by way of share buybacks and that a further announcement will be made in due course.
The share sale means aMH06 has no remaining shareholding in HDFC Life.
Shares eased 0.4% to 203.80p.
9.28am: French inflation falls more than forecast
French inflation has eased by more than expected to reach its lowest level in a year, raising hopes that the ECB’s interest rate rises can soon end.
Consumer price rises in the eurozone’s second largest economy eased to 6% in May from 6.9% in April, better than the 6.4% forecast by economists.
The figure was driven by weaker price gains across sectors including energy and follows a larger-than-expected fall in Spanish inflation yesterday. Germany will release its numbers later today.
ING Economics said the good news "is that the fall in inflation is now visible in all consumer categories."
"Furthermore, business forecasts for selling prices fell sharply in May, particularly in the industrial and construction sectors, but also in services."
"Inflation in services should therefore continue to weaken over the coming months," ING added.
9.15am: WH Smith shares rise on strong trading
WH Smith PLC (LSE:SMWH) said it continued to perform strongly across all key travel markets as it approaches the peak trading period.
In a statement, the retailer said total travel revenue in the 13 weeks to May 27 was up 31% versus the prior year meaning expectations for the full financial year have “modestly improved.”
In its Travel business, the UK division continues to perform strongly, driven by category expansion, a focus on average transaction value, the success of InMotion, the travel essentials one-stop-shop format and the ongoing recovery in passenger numbers.
In the 13 week period, Travel UK total revenue was up 24% on last year.
Total revenue in the North America division was up 26% on last year while the Rest of the World division performed “extremely well,” with revenue up 79% on last year.
The firm said: “We are very well positioned for further growth across our Travel markets in the current financial year and beyond.”
Richard Hunter, head of markets at interactive investor, commented “The travel business remains the driving force behind WH Smith’s fortunes and with the peak summer season approaching, the group is setting out its stall in anticipation.”
Shares rose 1.8% to 1,556p.
8.50am: Entain could face "substantial" fine from Turkish probe
The FTSE 100 remains lower, down 36 points, after the weak data from China with Entain PLC (LSE:ENT) leading the fallers.
The betting operator said it is likely to face a “substantial financial penalty” when the outcome of a four year probe into its former Turkish business concludes although prosecution can not be ruled out.
The owner of Coral and Ladbrokes said it was in deferred prosecution agreement (DPA) negotiations with the Crown Prosecution Service (CPS) and is working towards achieving a resolution of the ongoing HMRC investigation.
The HMRC began an investigation into the group's former Turkish-facing online betting and gaming business, which it held from 2011 until it was sold in 2017, in November 2019.
In July 2020 it widened the scope of the investigation and was examining potential corporate offending by an entity (or entities) within the group.
Entain said that the HMRC investigation, which is ongoing, includes a review of its former Turkish-facing business and acknowledges that historical misconduct involving former third party suppliers and former employees of the group may have occurred.
The FTSE 100-listed firm said it is not possible to say how the investigation will conclude.
Prosecution remains a possibility but the group is seeking to conclude DPA negotiations with the CPS.
“While the Company cannot say at this stage what the consequences of the investigation will be, it is likely that they will include a substantial financial penalty which is yet to be determined. The Company cannot identify reliably at this stage the size of any financial penalty.”
8.17am: FTSE slips on weak Chinese data
The FTSE 100 tumbled in early exchanges as weak economic data in China sparked concerns the economic recovery in the country was running out of steam.
Investors were also nervous ahead of key votes in the US as President Joe Biden attempts to get the debt ceiling agreement, passed.
At 8.15am, the FTSE 100 stood at 7,476.02, down 46.05 points, or 0.61% while the FTSE 250 slipped to 18,705.16, down 102.21 points, or 0.54%.
Susannah Streeter at Hargreaves Lansdown said: “’Growth slowdown fears have accelerated as the latest data from China shows a faltering recovery, knocking back sentiment on markets.”
“Investors have been unnerved by the snapshot showing the Chinese manufacturing sector contracted again in May, while activity across services also slowed for the fourth month in a row.”
“Far from being the powerhouse which will offset America’s slowdown, China’s economic recovery from the pandemic is looking more precarious.”
B&M European Value Retail SA (LSE:BME) rose 2.8% despite reporting a fall in annual pre-tax profit.
But the retailer reported encouraging current trading figures and said revenue and profit would be higher in the current financial year.
Analysts at Shore Capital said: “considering the current macro environment, these results are encouraging.”
Heading the other way was Prudential PLC (LSE:PRU), hit like other Asia-focused stocks by the weak Chinese data but also by the news its CFO had resigned after a code of conduct breach.
The insurer said James Turner had resigned after an investigation into a Code of Conduct issue relating to a recent recruitment situation.
The insurer said it sets itself high standards and Turner "fell short on this occasion."
Shares in Entain PLC (LSE:ENT) weakened 3%. The company announced that it is seeking a deferred prosecution agreement (DPA) with the Crown Prosecution Service, which is likely to include a "substantial financial penalty".
The potential offences relate to historical business activities in Turkey.
Peel Hunt thinks the negative outcome is likely to be limited to a monetary payment.
The broker said while the amount involved in unlikely to be material, the “uncertainty is likely to weigh on the share price.”
“We believe that today's announcement reflects that investigation progressing towards a conclusion,” it said.
7.58am: Prudential CFO steps down over code of conduct breach
Prudential PLC (LSE:PRU)'s CFO, James Turner has resigned, after an investigation into a Code of Conduct issue relating to a recent recruitment situation.
The insurer said it sets itself high standards and Turner "fell short on this occasion."
Ben Bulmer will succeed Turner. He is currently CFO, Insurance and Asset Management, having previously served as Chief Financial Officer of Prudential Corporation Asia.
7.51am: B&M profit falls as margin squeezed
B&M European Value Retail SA (LSE:BME) reported a drop in annual profit despite a jump in revenue but forecast a higher profit in the year ahead.
In the 52 weeks to March 25, group revenues totalled £4.98bn, up 6.6% from £4.67bn the year prior but statutory pre-tax profit fell to £436mln from £525mln with statutory diluted earnings per share of 34.7p, down from 42.1p).
The retailer said it had weather the major economic headwinds and cost pressures well delivering strong sales growth and market share gains.
Nonetheless, the results showed margin pressures with adjusted EBITDA margins falling 174 basis points to 11.5% during the period from 13.2% before.
B&M said UK fascia revenue increased by 4.0% year-on-year, driven by one-year like-for-like revenue increase of 0.7% and the increase in space through new store openings.
Sales in France increased by 22.1% while sales in Heron Foods increased by 18.1%.
The company said in the first nine weeks of the new financial year, B&M UK LFL sales have run at 8.3%, France and Heron have continued their trading momentum and it expects full year adjusted EBITDA to be higher year-on-year.
Alejandro Russo, Chief Executive, said: “We expect to grow sales and profits in FY24, despite economic uncertainty."
7.00am: FTSE 100 seen lower after falls in Asia
The FTSE 100 is expected to open lower on Wednesday after Asian markets fell after weak manufacturing data in China.
Spread betting companies are calling London’s lead index down by around 27 points, below the 7,500 mark.
China's manufacturing activity shrank in May for the second successive month, official figures showed, the latest sign that the country's economic recovery is losing steam.
The official manufacturing purchasing managers’ index came in at 48.8 for May, compared with 49.2 in April, according to the National Bureau of Statistics.
The non-manufacturing PMI, which covers activity in the service sector and industries such as construction, was 54.5 in May, below the previous month’s figure of 56.4.
In Tokyo, the Nikkei 225 fell 1.7%. In China, the Shanghai composite was down 0.7% while in Hong Kong the Hang Seng tumbled 2.5%.
US equities closed Tuesday mixed with a further jump in AI-related stocks boosting the Nasdaq, while blue chips were held back by nerves ahead of a number of votes to approve the US debt ceiling deal brokered over the long weekend.
The agreement cleared its first big legislative hurdle in a House of Representatives committee on Tuesday, as lawmakers rushed to whip votes in support of the agreement and avert a default.
On Wall Street, the Dow Jones Industrial Average fell 50.56 points, or 0.2%, to 33,042.78. The S&P 500 ended flat at 4,205.52 and the Nasdaq Composite gained 41.74 points, 0.3%, at 13,017.43.
Back in London and retailers will be an early focus with updates from B&M European Value Retail and WH Smith.