- FTSE 100 closes 25 points lower
- FirstGroup soars on better-than-expected results
- US unemployment claims rise
4.45pm: FTSE loses ground again
At the close, the FTSE 100 had lost 0.3% on the day to finish at a level 7,600 points, a second marginal slip.
While weaker US job data lifted Wall Street - implying another rate hike might not be needed - London's blue chips were held back by mechanical factors, according to IG's Chris Beauchamp.
“Given the swathe of ex-dividend names today it is not surprising that the FTSE 100 continues to struggle," Beauchamp noted.
“A recovery in the pound against the dollar has also hampered the index, putting it on the back foot against other indices that have shown signs of strength."
3.46pm: Shell expected to dish out more cash
Shell has been predicted by JP Morgan to make a commitment to hand more cash out to shareholders at its capital markets day next week.
Analysts predict chief executive Wael Swan will raise the proportion the oil and gas giant pays out of cash flow from operations (CFFO) to between 30-40 from 20-30% currently at the 14 June gathering.
In total, JP Morgan expects an emphasis on premium total shareholder returns (TSR) with a 10% dividend step-up, a base yield of 4.8% by 2025 and a total cumulative return over the next three years of 30% of the current market cap or around £46bn.
The US bank also expects Sawan to address issues such as its poor perceived operating efficiency and longer-term goals of oil and investment and longevity and its LNG plans.
Overweight is the investment view with a 2,950p price target.
Shell is currently up 0.8% to 2,312p, ahead of the broader FTSE 100 market, which is down 0.3% to 7,602.
3.13pm: FTSE 100 trading close to intra-day lows
London’s blue-chip index is trading close to intra-day lows, down 27 points, or 0.3%, to 7,598.
Across Europe, DAX in German is down 0.1% to 15,946, while IBEX in Spain lost 0.14% to 9,346.
CAC40 in France is the only major European index in the black, just about, up 0.09% to 7,209.
Across the pond, investors continue to digest US unemployment data, which looks to have been received positively by the markets.
Dow Jones gained 0.1% to 33,700, while the S&P 500 was up 0.08% to 4,270.
The tech-laden Nasdaq index added 0.27% to 13,140.
2.40pm: Job figures give Fed something to think about
US job figures will “definitely give the Fed something to think about” said Tom Hopkins, portfolio manager at BRI Wealth Management.
“This is the highest figure (261,000) since October 2021 suggesting mounting layoff announcements are starting to translate into job cuts and a sign that the US labour market may be softening as the Fed wants,” Hopkins added.
“The Fed meets next week to decide interest rates with the market currently pricing in a 68% chance of holding, with the balance predicting a 25-basis point rise.”
2.06pm: Aviva tipped as a 'buy'
Aviva is now in the operational improvement stage of its strategic change plan, according to Deutsche Bank.
Analysts maintained their buy recommendation on the stock.
“In the short-term, we believe the group is a beneficiary from higher market motor insurance pricing in the UK,” the broker said, where prices have closed the gap with claims inflation.
First half results, due for release this summer, should provide an opportunity for the management of the insurer to provide detail on further initiatives around improving the business.
Shares in Aviva were down 0.3% to 405p.
The FTSE 100 market was down 0.1%, or 9 points, to 7,615.
1.45pm: US unemployment at the highest level in 19 months
The number of Americans filing for unemployment benefits jumped to 261,000 in the week the 3 June, the highest figure since October 2021.
The figure was also well above market forecasts of 235,000.
It also marks the third consecutive week of increases, signalling the strength of the labour market may be beginning to fade.
FTSE 100 was down six points to 7,618.
1.30pm: London's movers
Let’s look at some of today’s movers in London.
Risers
FirstGroup- up 15% to 137p
Shares soared after the company reported better-than-expected results, a fresh share buyback and a much-improved dividend.
Liberum analyst Gerald Khoo said: "The results for the year to March 2023 were ahead of our forecasts and consensus across the board.
The bus and train operator announced an additional buyback of £115mln following receipt of proceeds resulting from its North America exit while a final dividend of 2.9p meant a more than trebled total payout for the year of 3.8p, up from 1.1p.
Gama Aviation (LSE:GMAA)- up 6% to 53.9p
Gama Aviation (LSE:GMAA)’s shares flew higher after it reported stronger profits and cashflow following the significant growth and improved profitability from Jet East, its US business aviation maintenance and repair operations.
Underlying group profit (EBITDA) jumped 94% to US$22.9mln as revenue rose 21% to US$285.6mln.
RWS Holdings (AIM:RWS)- up 13% to 258p
Shares surged higher on Thursday after the language translation specialist announced plans to return £50mln to shareholders via a buyback and held its guidance for the current year.
In its interim results statement, RWS posted revenue of £366.3mln for the six months ended 31 March 2023, a rise of 2.5% on the same period last year, while adjusted pre-tax profit dropped 10% to £54.4mln.
Fallers
PetroTal- down 4% to 40.2p
PetroTal sunk after it announced an illegal and violent river blockade against vessel providing services to the company’s operations in Peru.
1.00pm: Mixed start expected on Wall Street
US stocks are expected to start mixed on Thursday as investors eye next week's Federal Reserve policy meeting as the next market catalyst. particularly after yesterday's surprise 25 basis point rate hike by the Bank of Canada.
In pre-market trading, futures tied to the Dow Jones Industrial Average (DJIA) fell 0.1%, but those for the S&P 500 and the Nasdaq 100 were both essentially flat, down 0.05%.
On Wednesday, the DJIA ended 91.74 points, or 0.3% higher at 33,665.02, but the S&P 500 closed 0.4% lower, while the Nasdaq Composite dropped 1.3%.
In after-hours corporate action, GameStop shares dropped nearly 20% after the video games retailer fired its CEO Matthew Furlong and appointed Ryan Cohen as its executive chairman.
Overall investors seem to be in a holding pattern while awaiting the June 13 and 14 FOMC meeting amid uncertainty over whether the Fed may hike interest rates again. Economic signs suggest that inflation is inching down, even as it remains well above the central bank’s 2% target.
TickMill Group’s market analyst Patrick Munnelly commented: "Following the unexpected move by the Reserve Bank of Australia earlier this week, the Bank of Canada surprised the markets with a 25bps rate hike, this development prompted investors to revise their expectations for the US Federal Reserve's upcoming policy decisions and become concerned about the overall policy outlook.
"The general consensus suggests that the Federal Reserve will implement at least one more rate hike, however, the key question remains whether this will occur next week or in July. According to the CME FedWatch tool, the probability of a 25bps hike by the Fed next week stands at 36%, compared to 22% from the previous day."
US economic data due on Thursday morning include the latest weekly jobless claims and wholesale inventories.
12.42pm: Telegraph owners make last ditch bid to keep control
The former owners of The Daily Telegraph have tabled a proposal to restructure its debt to Britain's biggest high street lender in a last-ditch attempt to regain control of the right-wing newspaper, according to Sky.
Sky said the Barclay family submitted an offer to Lloyds Banking Group on Wednesday that would have entailed the bank writing off a portion of the roughly-£1bn it is owed.
Further details of the proposal were unclear, although sources said it had been rejected by Bank of Scotland, the Lloyds subsidiary which is owed the money.
Sky said the Barclay family is being advised by Houlihan Lokey (NYSE:HLI), the investment bank, on the situation.
A family spokesperson told Sky talks with Lloyds "remain ongoing".
12.31pm: Frasers picks up more Asos shares
Frasers Group, the owner of Sports Direct, has picked up more shares in troubled online retailer, Asos PLC.
The online fashion chain told the City that Frasers now owns 9.86% of Asos stock, up from 8.8%. On Tuesday, it revealed Frasers had bumped its holding up from 7.4%.
Asos is seen a possible takeover target and reports at the weekend linked it to an approach from Turkey's Trendyol, backed by Chinese e-commerce giant Alibaba.
CEO José Antonio Ramos Calamonte, who took over last summer, is trying to reinvigorate the firm which revealed a £291mln loss in the six months to 28 February after sales fell by 8%.
Last month, Asos went to the market to raise £80mln via a placing and retail offer and renegotiated a £275mln credit line.
Reports have also suggested suppliers have been winding back business with the company as credit insurers withdrew cover.
Asos shares were 0.6% higher at 350p. They are down 34% year to date.
A 10% stake would give Frasers the power to block a statutory compulsory share purchase after any takeover offer.
12.22pm: Jobs market showing signs of strain
The resilient jobs market is showing signs of slowing down with wage demands easing, according to latest figures.
The closely watched survey of the jobs market, carried out for KPMG and the Recruitment and Employment Confederation, found that wage inflation slowed and there was a drop in permanent staff employment in May.
The labour market has so far defied the pressure from rising interest rates, with unemployment staying close to record lows and companies complaining of a shortage of workers that has helped to drive up wages.
But today’s figures from the REC found that vacancies fell for the third consecutive month in May, while the number of candidates applying for a job was at the highest average since the pandemic hit in 2020.
Hiring activity remained subdued, hit by concerns around the economic outlook and delayed decision-making, leading to a marked fall in permanent appointments.
Claire Warnes, partner at KPMG UK, said that businesses were delaying hiring decisions and often opting to retain temporary employees rather than hire permanent staff.
“The jobs market remains subdued, with the latest survey results showing dampened hiring activity amid ongoing economic concerns,” Warnes said.
12.05pm: Entain sees £50mln boost from NZ, 365 deals
Entain PLC (LSE:ENT) expects its recent acquisitions of TAB New Zealand and 365scores to boost EBITDA by £50mln by 2025.
The owner of Ladbrokes and Coral updated investors following presentations from Entain's senior management regarding the two recently acquired companies.
In a statement, Entain said these opportunities are expected to deliver a combined EBITDA of around £15-20mln in financial year 2024 and around £50mln in financial 2025 for the group, implying a 2025 EBITDA multiple of 5x for both transactions.
Entain sees significant opportunity to enhance the offering and improve engagement for New Zealand customers and grow the online sports betting market from the TAB NZ deal with the New Zeland betting market of approximately NZ$600mln today, expected to grow by c.35% over five years.
At 365scores, Entain sees an opportunity to drive further growth both directly, as well as more widely for Entain's brands through enriched data and marketing analytics.
Shares in Entain rose 1.3% to 1,296p while the FTSE 100 was 4 points lower at 7,620.
11.25am: Eurozone economy stagnating
Some reaction to news the eurozone has edged into recession.
Bert Colijn, Senior Economist, Eurozone at ING Economics pointed out: "These declines are so minimal that current economic circumstances are better described as broad stagnation."
"Overall, the eurozone economy is very much back to muddling through, as monetary policy starts to weigh more heavily on activity, post-pandemic spending fades and the energy crisis looms," he thought.
He felt: "The decline of 0.1% in both the fourth and first quarters is so minimal though, and the labour market is so strong that it’s hard to argue that this is a recessionary environment."
He thinks a quick rebound in the second quarter is unlikely.
"With May survey data being weak across the board, it is likely that we only get a modest uptick after the two quarters of downturn," he felt.
10.43am: Eurozone slips into recession
The eurozone has fallen into recession, new data shows, after first quarter growth was revised down slightly.
Eurostat said that GDP across the euro area shrank by 0.1% in the first quarter of this year, downgraded from a previous estimate that the economy stagnated.
Euro area #GDP -0.1% in Q1 2023, +1.0% compared with Q1 2022 https://t.co/CybdBFvQxH pic.twitter.com/jkkFXaUBaC
— EU_Eurostat (@EU_Eurostat) June 8, 2023
That follows a 0.1% contraction in GDP in the fourth quarter of last year, meaning the eurozone has shrunk for two quarters in a row – the standard definition of a recession.
European markets shrugged off the numbers with the Cac 40 up 0.2%, and the Dax in Frankfurt up 0.1%.
Both are outperforming the FTSE 100 which is down 10 points at 7,613.
10.06am: Government blocks Royal Mail plans to axe Saturday deliveries
Royal Mail’s hopes of ending Saturday deliveries have been delivered a blow by ministers as regulators investigate whether to fine the company for breaching its obligation to deliver six days a week.
Royal Mail, owned by International Distributions Services PLC (LSE:IDS), had warned that its poor financial performance will continue unless ministers let the company abandon Saturday letter deliveries.
It argued that the decline of letters means its current programme of deliveries is financially unviable.
However, business minister Kevin Hollinrake told the company today that the Government has no plans to review its so-called universal service obligation.
"We currently have no plans to change the minimum requirements of the universal postal service as set out in the Postal Services Act 2011 (the Act), including 6-day letter deliveries," he said.
"Postal services have long played, and continue to play, a key role in our society," he added, noting "the ability to send and receive letters and parcels is important both socially and economically."
"This is particularly true for consumers who might be more vulnerable, such as those who are geographically or digitally isolated from their friends and family."
9.46am: Storm clouds gathering over property market - RICS
The Royal Institution of Chartered Surveyors (RICS) is warning that expectations of further interest rate rises from the Bank of England may put renewed downward pressure on the market in the months ahead.
RICS Senior Economist, Tarrant Parsons said: "“However, it seems storm clouds are gathered, with the UK’s stubbornly high inflation likely undermining the recent improvement in activity by prompting the Bank of England to take further action through interest rate rises, leading to higher mortgage rates and ultimately reducing affordability and buyer demand."
Parsons warned that expectations of further interest rate hikes will hit demand and affordability.
RICS’s monthly health check on the property sector found some improvement in market conditions during May, with the first rise in new instructions since early 2022. House prices continue to fall in much of England, although Scotland and Northern Ireland have witnessed an uplift.
Derren Nathan, head of equity research, Hargreaves Lansdown said the report "mirrors the gloom seen in yesterday’s house price data by Halifax although there were a few glimmers of hope."
"The fall in buyer enquiries was the lowest seen over twelve months although was still down 18%. The rate of decline in agreed sales also fell sharply," he noted.
Yesterday, Halifax reported that house prices experienced their first annual fall in more than a decade last month.
9.35am: Citi warms to Rio Tinto, JPMorgan upgrades Clarkson
Positive comments from analysts at Citi and JPMorgan Chase have boosted shares in Rio Tinto PLC (LSE:RIO) and Clarkson PLC (LSE:CKN).
Citi has placed Rio on its buy list, upgrading from neutral. Although the broker's commodities team thinks the recent strength in steel and iron ore prices in the past week are unlikely to be sustained it still thinks hopes for a stimulus in China will support the stock.
"We see clear upside risks regarding potential China stimulus and there has been 3 months of underperformance by the iron ore names," Citi said. Shares in Rio rose 1.1%.
Shares in the FTSE 250-listed Clarkson PLC (LSE:CKN) jumped 5.8% to 3,140p after JPMorgan upgraded to overweight.
The investment bank feels the firm is "heading in the right direction," and increased its share price target to 3,840p from 3,740p. It did cut its current financial year EPS estimate by 11.4% but increased the following year by 21%.
Meanwhile, the FTSE has edged 8 points lower.
9.15am: Crest Nicholson warns more rate rises will dent confidence
Crest Nicholson Holdings PLC shares are under pressure, down 3.4%, at 241p, after the housebuilder reported profit plunged 60% as the housing market reeled from the autumn “mini” Budget.
The company flagged the risk of a further downturn if interest rates keep rising.
“If interest rates continue to rise, and remain elevated for a sustained period of time, this will undoubtedly start to impact demand and confidence again,” said Peter Truscott, chief executive.
The FTSE 250 group reported adjusted pre-tax profits of £20.9mln in the six months to the end of April, down from £52.5mln the year before. Home completions fell nearly a fifth to 894.
Analysts at Peel Hunt noted the group has guided to financial year 2023 adjusted pre-tax being in line with market consensus of c.£74mln assuming market conditions remain stable.
"We are currently sat at c.£84mln so need to cut our figures by c.£10mln at least, with a trim to our margin and volume assumptions," the broker added.
8.52am: FTSE little changed, bond yields rise, close to 'Truss' levels
The FTSE 100 was little changed in early exchanges but UK two-year government bond yields hit their highest level since last September's "mini-budget" turmoil under former PM, Liz Truss.
At 8.52am the blue-chip index was 2 points lower at 7,622.
Worries over further increases in borrowing costs prompted a continued sell-off of government bonds after the surprise rate increases in Australia and Canada this week as the central banks continue to wage war against inflation.
The yield on the 10-year gilt rose to 4.278% and the yield on the 2-year gilt to 4.579.
In equities, Rio Tinto rose 1.1% as Citi upgraded to buy, while a firmer oil price supported BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL).
NatWest Group PLC (LSE:NWG) firmed 0.5% as JPMorgan placed the lender on its Catalyst Watch with a positive view, while Lloyds Banking Group PLC (LSE:LLOY) edged 0.1% lower as the investment bank put it on Catalyst Watch, with a negative view. Barclays PLC (LSE:BARC), up 0.7%, remains JPM’s favoured UK banking play, rated overweight.
Vodafone PLC slid 5%, giving up yesterday’s gains, as investors await the terms of its deal with Hutchison.
In the FTSE 250, FirstGroup jumped 14% after better than expected results, a fresh share buy back plan and a jump in the dividend.
Liberum’s Gerald Khoo said: “The results for the year to March 2023 were ahead of our forecasts and consensus across the board.”
“Relative to our estimates, the main areas of outperformance were Rail and interest costs. However, this should not detract from the performance in Bus, where margins showed further improvement,” he added.
8.15am: FTSE 100 little changed, FirstGroup and Wizz Air advance
The FTSE 100 edged higher in cautious early trading as investors eye central bank monetary policy calls next week after the surprise rate rises in Australi and Canada this week.
At 8.15am, London’s lead index was up 10.76 points, or 0.1%, at 7,635.10 while the FTSE 250 was little changed at 19,154.37.
On Wednesday, the Bank of Canada defied expectations and lifted its benchmark rate, following in the footsteps of the Reserve Bank of Australia earlier this week.
"With the Federal Reserve, ECB, and Bank of Japan due next week and this week's hikes pointing to further interest rate pain, bets about a Fed pause next week are being taken off the table over concern the Fed may well follow suit," said CMC Markets' Michael Hewson.
The Fed will announce its decision on June 14. The ECB and the Bank of Japan will follow a day after.
Investors see a 69% chance that the US central bank will skip raising interest rate in its June meeting but will hike in July, according to the CME's Fedwatch tool.
Wizz Air Holdings PLC (AIM:WIZZ) flew 3.5% after forecasting a return to profit in the new financial year.
The budget airline operator expects a net profit of €350mln to €450mln in the current financial year, subject to the absence of adverse events such as an incremental impact from the war in Ukraine or delivery delays.
For the financial year ended March 31, 2023, Wizz Air posted an reported loss of €535mln, narrowed from the €642mln a year earlier.
Revenue per available seat kilometre jumped to €3.98, a 33% increase on the year earlier, while Wizz Air also had a load factor of 87.8%, up from 78.1%.
FirstGroup PLC (LSE:FGP) surged 10% after its annual results beat expectations.
Liberum said results were “better than expected,” reflecting a clear margin recovery in Bus and surprising strength in Rail, within the Open Access andancillary service areas.”
“Net cash was also better than we had forecast, with the dividend also well ahead of our assumptions and the share buyback plan extended by £115mln.”
The broker has a buy rating on and raised its price target to 180p from 165p.
7.57am: Wizz Air to fly back into profit in new financial year
Wizz Air Holdings PLC (AIM:WIZZ) said it expects to return to profit in the new financial year after posting a loss in the year to March, 2023.
The budget airline operator expects a net profit of €350mln to €450mln in the current financial year, subject to the absence of adverse events such as an incremental impact from the war in Ukraine or delivery delays.
"This guidance is dependent on the revenue performance for the all-important summer period as well as the second half of F24, a period for which the company, like most airlines, currently has limited visibility," it said.
For the financial year ended March 31, 2023, Wizz Air posted an reported loss of €535mln, narrowed from the €642mln a year earlier.
Revenue per available seat kilometre jumped to €3.98, a 33% increase on the year earlier, while Wizz Air also had a load factor of 87.8%, up from 78.1%.
7.49am: FirstGroup backs guidance after annual profit tumbles
FirstGroup PLC (LSE:FGP) backed current year guidance despite challenging trading conditions as it reported a drop in full-year revenue and profitability.
The bus and train operator said in the 52 weeks to March 25, revenue fell 15% to £4.76bn from £5.59bn the year prior while pre-tax profit tumbled to £128.7mln from £654.1mln.
FirstGroup highlighted group adjusted attributable profit which more than doubled, to £82.1mln ahead of expectations, up from £36.2mln.
First Bus revenue increased to £660.0mln from £570.0mln, more than offsetting the reduction in government funding, which decreased by £42.8mln to £86.5mln. Operating margin improved in the second half to 7.9% despite ongoing inflationary pressures.
“Although the economic and industrial relations backdrop remains challenging, current trading and our outlook for FY 2024 is in line with our expectations,” FirstGroup said in a statement.
At First Bus, further sequential progress is expected in the new financial year while First Rail financial performance is anticipated to be in line with expectations despite the TPE contract not being extended.
In May, FirstGroup lost the TransPennine Express national rail contract shares which was taken back under government control.
7.30am: M&G reports assets under management flat in first quarter
M&G PLC (LSE:MNG) reported progress on delivering its targets in the first quarter although its financial performance was broadly flat.
Andrea Rossi, Group Chief Executive Officer, said: “At Full-Year Results we identified three priorities for the Group: maintain financial strength through capital discipline, simplify the business, and deliver profitable growth focusing on Asset Management and Wealth.”
“I am pleased to say we have made good progress on each of those fronts and are on track to deliver on our ambitious targets.”
First quarter assets under management at the London-based fund manager were flat at £344bn in the three months to March 31 compared to £342bn at the end of 2022 while the solvency 11 ratio edged higher to 200% from 199%.
Net client inflows of £0.4 billion absorbed expected redemptions from UK institutional clients that were triggered in September 2022 by the 'mini-budget crisis', which were highlighted at the full-year.
After returning to net client inflows in 2022, momentum in Wholesale Asset Management accelerated further, with net client inflows of £1.0 billion in the quarter and continued strong investment performance.
Wealth and Other Retail & Savings delivered net inflows of £0.3 billion, driven by strong investment performance.
M&G said 200 staff had accepted voluntary redundancy as it looks to achieve its cost savings targets.
7.13am: FCA cracks down on crypto marketing
The Financial Conduct Authority is introducing some "tough" new rules for marketing cryptoassets meaning crypto firms must ensure that people have the appropriate knowledge and experience to invest in crypto.
The new advertising rules will come into play on October 8.
Those promoting crypto must also put in place clear risk warnings and ensure adverts are clear, fair and not misleading.
As part of these measures, the UK watchdog said that "refer a friend" bonuses will be banned.
Sheldon Mills, executive director of Consumers & Competition, said: "It is up to people to decide whether they buy crypto. But research shows many regret making a hasty decision. Our rules give people the time and the right risk warnings to make an informed choice.
"Consumers should still be aware that crypto remains largely unregulated and high risk. Those who invest should be prepared to lose all their money.
"The crypto industry needs to prepare now for this significant change. We are working on additional guidance to help them meet our expectations."
The FCA said it is also consulting on additional guidance setting out expectations of firms advertising crypto to UK consumers. Those wishing to have their say will have until August 10 to respond, it added.
7.00am: FTSE 100 seen slightly lower
The FTSE 100 is expected edge lower after a mixed showing in the US after the surprise rate increase by the Bank of Canada.
Spread betting companies are calling London’s lead index down by 8 points.
Canada's central bank, which had been expected to leave the overnight rate unchanged for the third meeting in-a-row, lifted the benchmark rate by 25 basis points to 4.75% from 4.50%. It did not pencil in more hikes to come, however.
In New York, the Dow Jones Industrial Average closed up 91.74 points, 0.3%, at 33,665.02. The S&P 500 fell 16.33 points, or 0.4%, at 4,267.52 and the Nasdaq Composite slipped 171.52 points, or 1.3%, at 13,104.90.
In Asia, the Nikkei 225 fell 1.2%, despite better-than-expected growth numbers. In China, the Shanghai Composite was 0.7% higher, while the Hang Seng index in Hong Kong was up 0.4%.
Back in London, and the early focus will be updates from Crest Nicholson, FirstGroup, M&G, Mitie and Wizz Air.