- FTSE 100 finishes 37 points lower
- US indexes look ahead to Fed meeting next week
- UK house prices could fall 10%, claims Moody's
4.45pm: FTSE closes below opening levels
The FTSE 100 closed out a choppy trading week on the wrong side of the 7,600 level, finishing at 7,562 points for a 0.5% loss on the day.
Next week's central bank meetings will add more drama to the mix.
“This week's surprise rate hikes by the RBA and BoC are unlikely to be replicated at next week's Fed, ECB and BoJ monetary meetings," Axel Rudolph, Senior Market Analyst at online trading platform IG. "Except for an expected 25 basis-point rate hike by the ECB to 3.50%, the other two central banks are likely to keep to the status quo. Nonetheless US inflation data may add some volatility to the mix.”
3.55pm: Negative bias remains
The FTSE 100 index approached the last half-hour of the trading week lower but above its worst levels for the day as US stock indexes all advanced amid hopes next week’s Federal Reserve policy meeting will see a pause in the recent trend of US interest rate hikes.
Michael Hewson chief market analyst at CMC Markets UK commented: “The FTSE100 has spent all this week trading either side of the 7,600 level, albeit with a slightly negative bias and on course for its third successive weekly decline.”
Today’s main FTSE 100 mover was Croda International which saw its shares drop sharply after the company issued a profit warning.
Hewson noted: “Croda said it expects pre-tax profit to come in between £370mln and £400mln due to a sharp drop in consumer care sales volumes from the same quarter a year ago due to customer destocking. This trend is expected to continue over the rest of the year, with the effects only likely to be modestly offset by the pass-through effects of higher prices.”
He added: “House builders are also lower after HSBC temporarily pulled all its mortgage deals to new borrowers due to high demand, while Nationwide announced it was increasing the rates on a range of its products. Taylor Wimpey, Barratt Developments and Persimmon are all on the back foot.”
But Hewson pointed out the likes of mid-cap UK oil firms EnQuest, Serica Energy and Harbour Energy edged slightly higher after the UK government confirmed that the energy price levy would continue until 2028. There was no real no impact on the share prices of blue chip giants BP and Shell, he added, even though they are lower on the day, given the low levels of UK profits both companies make.
3.30pm: Crude wavers
Oil prices were cautious on Friday afternoon as concerns over oil demand growth was balanced by the output cuts unveiled last weekend by Saudi Arabia.
UK Brent crude edged 0.1% lower at $74.63 a barrel, while US West Texas Intermediate was flat at $71.29.
Both crude benchmarks fell on Thursday but rebounded from a slump hit earlier in that session after the US and Iran denied a report by the Middle East Eye that they were close to a nuclear deal that could have brought Iranian barrels back to the market.
Oil prices had risen early in the week, buoyed by Saudi Arabia's pledge over the weekend to cut output, but pared gains on a rise in US fuel stocks and weak Chinese export data.
Expectations of tighter supply and higher demand as the United States enters the summer holiday driving season, are being offset by worries over a slow pickup in China's fuel demand.
Meanwhile, some analysts expect oil prices to rise if the Federal Reserve does not hike US interest rate hike at its meeting on June 13-14 next week.
3.15pm: Another call on Microsoft/Activision deal
Activision Blizzard has been given permission to intervene in Microsoft's legal battle with the UK anti-trust regulator over its decision to block its $69bn takeover of the ‘Call of Duty’ maker, Reuters has reported.
Microsoft is appealing against the Competition and Markets Authority's (CMA) decision to veto the deal to acquire Activision, which it did in April on the grounds it could hurt competition in the nascent cloud gaming market.
Activision has now been given permission to intervene in Microsoft's appeal at the Competition Appeal Tribunal, which is expected to be heard next month. That means Activision will also be able to make its case to the tribunal, Reuters said.
At a preliminary hearing in May, Microsoft's lawyers accused the CMA of being a global "outlier" for blocking the Activision takeover.
The US Federal Trade Commission has also blocked the deal, a decision which is also under appeal by Microsoft. But the European Union approved the Activision deal in May after it accepted remedies put forward by Microsoft that were broadly comparable to those it proposed in the UK.
2.50pm: Bull market for S&P 500
The FTSE 100 index remained weak, not far from session lows, as US stocks made a mixed start to the final session of the week, pausing after recording good gains on Thursday which saw the S&P 500 close at highs for 2023.
Around 20 minutes after the New York open, the Dow Jones Industrial Average (DJIA) was down 22 points, or 0.1%, at 34,137, but the S&P 500 added 0.2%, and the tech-laden Nasdaq Composite gained 0.6%.
The S&P 500 is on pace for its fourth consecutive winning week, which would be the index's longest such streak since August 2022. The question is whether this summer will look like last summer for markets.
“It’s unclear whether this is a, let’s say, recession-theme position squeeze that potentially could whipsaw much like August of 2022 when you saw that last push higher in the S&P toward 4,300, or if this is something that’s sustainable,” Jason Hunter, head of technical strategy at JPMorgan, said Thursday on CNBC’s “Closing Bell.”
2.30pm: Odey links dropped
Schroders PLC and Canada Life have moved to cut back their dealings with the asset management businesses with links to Crispen Odey on Friday citing allegations of misconduct by the financier published by the Financial Times and Tortoise Media a day earlier, Reuters has reported.
Canada Life, an asset manager that oversees around £40bn of client funds in the UK, said it had suspended relationships with Odey Wealth Management, a unit of Odey Group, with immediate effect.
Schroders, which oversees more than £700bn, said it had sold its remaining investments in Odey Asset Management (OAM).
The Financial Times and Tortoise, in a joint publication on Thursday, reported allegations by 13 women that Crispin Odey, one of Britain's best-known hedge fund managers, had sexually assaulted or harassed them over a 25-year period.
Crispin Odey told Reuters on Thursday that the report was "a rehash of an old article and none of the allegations have been stood up in a courtroom or an investigation." Odey was cleared of indecent assault charges by a British court in 2021.
2.15pm: Mothercare loses CEO
Mothercare shares dropped on news its boss Daniel Le Vesconte has been ousted with immediate effect, bringing an end to his five-month spell in charge.
Le Vesconte became the retailer’s first CEO in two years when he was appointed in January this year. Chairman Clive Whiley and finance boss Andrew Cook will again take over CEO duties at the retailer, as they did before Le Vesconte’s arrival until a new boss is found.
Mothercare’s UK arm collapsed in 2019, while plans to focus operations abroad were scuppered by war in Ukraine and the subsequent suspension of business in Russia, which accounted for nearly a quarter of profits.
The firm's shares, down 30% in the year to date, lost another 11.1% to 5.00p.
1.25pm: A look at some of today’s risers and fallers
Risers
Amigo - up 135% to 0.76p: Shares surged in the mid-cost credit provider after it said it started a wind-down of its business in March. The decision to do so followed an “extensive but unsuccessful capital raise process,” while there remain “significant impediments” to new capital being made available.
Itsarm - up 80% to 0.4p: The renamed In The Style, shot up as it confirmed a date for its liquidation petition. The retail business was sold in March for £1.2mln (net £500,000 according to the company) but in May shareholders rejected one attempt to wind up the business and hand out whatever was left.
Shoe Zone - up 10% to 232p: Investors were clearly pleased with an upbeat trading statement which sent shares soaring. The shoe retailer said that since the release of half-year results in May trading “has exceeded expectations due to particularly strong recent trading through May and early June.”
Fallers
Croda - down 12% to 5,282p: Shares dropped after the speciality chemicals firm warned that lower sales volumes due to customer destocking will impact its profits in the current year.
1.0opm: Mixed start expected on Wall Street
US stocks are expected to start mixed on Friday, largely pausing for breath after strong gains in the previous session which saw the S&P 500 index notch up its highest close for 2023 and officially enter 'bull market' territory.
In pre-market trading, futures for the Dow Jones Industrial Average (DJIA) were down 0.2%, while those for S&P 500 futures fell 0.1%, but contracts for the Nasdaq 100 rose 0.1%.
On Thursday, the DJIA closed 168.59 points, or 0.5% higher at 33,833, its third straight day of gains, while the S&P 500 climbed 0.6% to just shy of a key 4,300 level threshold, and the tech-laden Nasdaq Composite rallied 1.0%.
The S&P 500 is on pace to record its fourth straight positive week for the first time since last August, with the broader index higher by nearly 0.3% as of Thursday’s close. The DJIA is headed for a second consecutive week of gains for the first time since April, up 0.2%.
On the other hand, the Nasdaq Composite is on pace to break a six-week winning streak, down slightly by 0.02%.
Investors were encouraged on Thursday by signs that a broader swath of stocks, including small-cap equities, were participating in the recent rally, although some market participants warned that those gains may not last given next week's Federal Reserve policy meeting.
Joshua Mahony, chief market analyst at Scope Markets commented: "The S&P posted a record closing high for the year last night so a degree of profit taking off the back of this wouldn’t be unexpected, although once again bets regarding next week’s Federal Reserve rate call are swinging back towards there being no change.
"There’s also an overhang of fear that the US economy may yet slip into recession and again that could lead to a more erratic underlying market as we move on into the summer season. With economic data for the day looking thin on the ground, sentiment is going to dominate and with that theme of strong gains having been dominant over the last couple of weeks, some opportunistic profit-taking would be of little surprise."
On the corporate front, DocuSign shares jumped 5% in after-hours trading on Thursday after the electronic agreements firm beat analysts’ first-quarter expectations on the top and bottom lines.
12.30pm: Fed likely to pause but going to be close
ING Economics thinks the Federal Reserve will leave rates unchanged at next week's meeting despite market pricing shifting massively over recent weeks,
But, it said, "there will be some dissent and a shock inflation reading could make it a very close decision."
Either way, the Fed will leave the door open to further rate moves, ING reckons.
"Next Tuesday’s CPI report could see pricing move even further in favour of a hike - currently the consensus is for core CPI to come in at 0.4% month-on-month, but if we get a shock 0.5% that could be sufficient to convince enough FOMC members to vote for a hike," ING added.
"If they do hold rates steady, as we predict, it is likely to be a hawkish hold with the door left open to further rate hikes if inflation doesn’t slow – July is clearly a risk," in ING's opinion.
"We certainly acknowledge the risk that they hike rates 25bp, especially if Tuesday’s inflation data surprises to the upside, but doubt they will intensify the language on rate hikes so the 'hawkish hike' scenario in the table above looks unlikely," the Dutch bank concluded.
11.55am: Shoe Zone soars on upbeat trading
Shoe Zone PLC (AIM:SHOE) pleased investors with an upbeat trading statement which sent shares soaring.
The shoe retailer said that since the release of half-year results in May trading “has exceeded expectations due to particularly strong recent trading through May and early June.”
“This is a combination of strong early demand for summer products and lower container rates contributing to improved margins,” the firm said in a statement.
Shoe Zone now expects adjusted pre-tax profit for the year October 2, to be not less than £10.5mln.
Shares soared 12.4% to 236p.
11.23am: UK house prices could fall 10% claims Moody's
Moody's, the leading credit ratings agency, has warned UK house prices could fall as much as 10% over the next two years as high inflation and soaring mortgage rates trigger a correction in the housing market.
In a report, Moody’s said: "The combination of less affordable mortgages and high inflation putting a dent in incomes will trigger a correction in the UK housing market."
"The relatively large share of short-dated or variable-rate mortgages exposes the existing stock to tightening monetary policy."
"Strong fundamentals such as a robust labour market, tight underwriting standards and housing supply shortages will prevent more severe credit implications."
Moody’s thinks the correction in UK house prices will be more pronounced than in many other advanced economies because the UK has a high proportion of variable or short-term fixed mortgages, compared to other countries such as Germany, the US or France.
Buy-to-let landlords, who hold 8% of the UK private housing stock, will also influence house prices if a large number choose to sell.
Moody’s explained: "To be eligible to refinance, landlords must comply with regulatory requirements to ensure rental income is sufficient to support mortgage payment costs. Landlords can pass on these costs to tenants, but for an average mortgage, this would mean raising rents by close to 20%, according to BOE estimates. Rents are currently increasing by around 5%."
10.55am: US faces "mini stagflation" claims Goldman exec
The US may yet avoid a recession but still faces the possibility of “mini stagflation,” Goldman Sachs Group president and chief operating officer John Waldron said at the Bloomberg Invest conference.
“This is the best predicted recession that hasn’t happened yet and may not happen,” Waldron said. “I often ask myself late at night, Can we actually have a recession with 3.5% unemployment? Seems unlikely."
One outcome the firm is preparing for is a “mini stagflationary scenario,” he said. “That’s not going to be a called a recession, but that’s not going to feel great” because it “could persist for a while where you just get sluggish growth.”
Many economists have been predicting a recession is coming as the Federal Reserve aggressively raises interest rates to slow the economy and counter rising inflation.
US companies announced more layoffs in the first five months of 2023 than in all of last year, and applications for US unemployment benefits jumped last week to the highest level since October 2021.
Goldman itself is gearing up for further jobs cuts with reports another 250 posts are set to be axed.
Waldron said: “We are running the firm tighter, we are being more cautious."
10.15am: Amigo shares more than double
Shares in Amigo Holdings PLC (LSE:AMGO) have more than doubled after signing an exclusivity agreement with Michael Fleming to explore finding and completing a debt investment in the company or its subsidiaries.
The exclusivity period runs until September 6 and sent shares up 115% to 0.70p on hopes that Amigo could avoid a wind-down.
Shareholders were expected to be wiped out by the planned liquidation, which came after Amigo said it had not received enough interest from potential investors to raise the £45mln it had been seeking.
9.44am: Retail sales fall for first time in two years - BDO
The cost of living crisis is hurting the high street, figures from business advisory firm, BDO showed today.
Total like-for-like retail sales in the four weeks to May 28, combining in-store and online, fell by 1.5% overall compared with last May, turning negative for the first time in more than two years.
Online sales fell by 3.3%, one of the lowest results recorded outside of the pandemic, while in-store sales rose by just 1% across the month.
Total LFL sales were negative in three out of four weeks in May, with low and negative sales across all categories and channels.
BDO suggested the month’s three public holiday weekends may have contributed to reduced spending, as consumers potentially prioritized holiday or experiential spending over retail shopping.
Sticky inflation may have also played a part, the survey reported.
Footfall growth was positive throughout May, exceeding +3.0% growth in every week except for week two, which was possibly affected by festivities marking the Coronation of King Charles III, BDO reported.
9.25am: Hammerson gains on double upgrade
Hammerson PLC (LSE:HMSO) climbed 2.0% boosted by news of a double upgrade by investment bank, Barclays.
The bank thinks current management "has largely done the right things."
Post the inherited equity issuance in 2020, it has written down and continued to dispose of assets and looked to conserve cash, Barclays noted.
Barclays explained it was a "painful transition, not helped by Covid," which supported its previous cautious stance.
But now is the time to turn more constructive, the broker said, upgrading its rating to 'overweight' from 'underweight' with a 30p price target target.
Shares rose to 26.5p per share and are up 9% year to date.
9.12am: Windfall tax to be suspended if energy prices drop
Shares in a number of oil and gas producers climbed after news the government has introduced a price floor for the windfall tax on the industry, arguing that it is necessary to support investment and boost the country’s energy security.
The tax rate, which was raised to 75% last year at the peak of the energy crisis, will revert to the pre-crisis level of 40% if oil and gas prices fall below their long-term average under the so-called Energy Security Investment Mechanism.
In a statement, the Treasury said the windfall tax would remain until March 2028 but that the tax rate would fall if the average oil and gas prices fall to, or below, a set level for two consecutive three-month periods.
The floor has been set at $71.40 for crude oil and £0.54 a therm for gas.
Both would need to average below that level for two consecutive quarters to trigger the reduction in the tax rate.
Shares in Harbour Energy rose 3.6%, Ithaca Energy firmed 3.5% and Serica Energy gained 2.2%.
8.45am: Croda profit now seen around 13% below prior consensus
Shares in Croda remain in the doldrums, down 11%, topping the FTSE 100 lower.
Jefferies noted the chemicals company has indicated full-year pre-tax profit of between £370-400mln for 2023 which is around 13% below the current consensus of £439mln (Jefferies forecast is £440mln).
The broker pointed out the first half "appears likely to be light" versus consensus expectations at £143mln for the first 5 months. Jefferies said the first-half consensus expectation was £207mln.
Jefferies noted continued destocking throughout the first half in Consumer Care with sales volumes still down double-digit through the first half despite easier comparatives in the second quarter.
Overall, margins have not improved sequentially against the broker's hopes for a 300bps improvement, which implies around £20mln lower first half earnings.
The FTSE 100 remains just the wrong side of the line, down 6 points.
Tesco PLC (LSE:TSCO) shares eased 0.5% after coming under fire for not providing enough information on price labels on its Clubcard loyalty card, a practice consumer group Which? argues could be against the law.
Which? complained to the Competition and Markets Authority (CMA), suggesting a lack of unit pricing per 100g or 100ml on Clubcard labels could be a “misleading practice”.
8.15am: FTSE 100 edges lower
The FTSE 100 edged lower in early exchanges with signs of further stress in the housing market as HSBC pulled mortgage deals at short notice while shares in Croda International PLC (LSE:CRDA) sank after warning destocking continued to hurt trading.
At 8.15am, London’s lead index was down 6.18 points, at 7,593.56, while the FTSE 250 eased to 19,061.94, down 45.61 points, or 0.24%.
Richard Hunter, head of markets at interactive investor said: "Investors in the UK were non-committal at the open, with marginal gains coming through as a nod to the reasonable sessions seen in the US and Asia."
Shares in Croda tumbled 11% after the firm forecast full-year 2023 pre-tax profit would be between £370mln and £400mln which could be around 50% lower than the £780mln the chemicals company made in 2022.
It said customer destocking in consumer and industrial end-markets is now expected to continue into the second half year while momentum was moderating in crop protection.
Network International jumped 6% to 384p after it accepted a £2.2bn bid approach from Canadian asset manager, Brookfield, valuing each share at 400p.
Shares in Network rocketed in April after a 387p per share bid proposal from a consortium comprising CVC Advisers and Francisco Partners Management.
But Brookfield trumped this days later with a 400p per share approach, the terms of which have now been agreed.
There were also signs of further stress in the UK mortgage market. Lender HSBC Holdings PLC (LSE:HSBA) temporarily withdrew all its loans with only hours’ notice, last night.
HSBC has removed all its residential and buy-to-let products for new customers, with deals becoming available again on Monday.
Hammerson PLC (LSE:HMSO) climbed 2.5% as Barclays upgraded to overweight from underweight lifted its price target to 30p from 25p.
7.38am: HSBC pulls mortgage deals, Nationwide ups rates
Signs of further stress in the UK mortgage market. Lender HSBC Holdings PLC (LSE:HSBA) temporarily withdrew all its loans with only hours’ notice, last night.
HSBC has removed all its residential and buy-to-let products for new customers, with deals becoming available again on Monday.
Nationwide and HSBC the latest. Av 2 year fix now 5.8%. pic.twitter.com/a1r7WJDXtJ
— Merryn Somerset Webb (@MerrynSW) June 9, 2023
Products and rates for existing customers were still available, though.
An HSBC spokesperson said: "To ensure that we can stay within our operational capacity and meet our customer service commitments, we occasionally need to limit the amount of new business we can take each day."
“Our broker products will be available again on Monday, June 12.”
HSBC originally set a 5pm deadline for securing new deals yesterday, but after experiencing “significant demand”, at 3.45pm it pulled all the remaining deals immediately, reported George Nixon at The Times.
Nationwide Building Society, the country’s second-largest lender, has already pushed up borrowing costs too – increasing its fixed-rate mortgage deals by up to 0.25 percentage points.
Among Nationwide’s changes, it said two, three and five-year fixed-rate deals for people with a 5% deposit will increase by between 0.01 and 0.20 percentage points, with rates starting from 4.69%
7.30am: Network International accepts £2.2bn bid
Network International Holdings PLC (LSE:NETW) kicks Friday off with news it has accepted a £2.2bn bid from Brookfield Asset Management (TSX:BAM.A) Ltd.
The offer from the Canadian asset manager values each Network share at 400p, an enterprise value multiple of around 15.7 times EBITDA for the financial year ended December 31, 2022.
Network said it considered the terms “fair and reasonable,” while Brookfield said it considered Network to be a strong strategic fit.
Shares in Network rocketed in April after a 387p per share bid proposal from a consortium comprising CVC Advisers and Francisco Partners Management.
But Brookfield trumped this days later with a 400p per share approach, the terms of which have now been agreed.
Brookfield is a leading global alternative asset manager with more than US$825 billion of assets under management across real estate, infrastructure, renewable power, private equity and credit.
7.00am: FTSE 100 called higher after US gains
The FTSE 100 is expected to open higher on Friday after strong gains in the US as a rise in weekly jobless claims calmed nerves that the Federal Reserve might make a surprise rate rise next week.
Spread betting companies are calling London’s lead index up by around 10 points.
In New York, the Dow Jones Industrial Average closed up 168.59 points, or 0.5%, at 33,833.61. The S&P closed up 26.41 points, or 0.6%, at 4,293.93. The Nasdaq Composite up 133.63 points, or 1.0%, at 13,238.52.
A weaker-than-expected inflation reading in China should support sentiment with the consumer price index rising 0.2% on-year, below forecasts for growth of 0.3%.
CMC Markets analyst Michael Hewson said the inflation report "raises the prospect of further easing from the Chinese central bank".
Asian markets were higher. In Tokyo, the Nikkei 225 was up 1.7%. In China, the Shanghai Composite rose 0.1%, while the Hang Seng in Hong Kong added 0.5%.