- FTSE 100 closes 8 points lower
- Wall Street closed for 4th of July holiday
- Sainsbury's lower despite backed guidance
4.45pm: FTSE dips below par
At the close, the FTSE 100 had lost its earlier momentum to finish at 7,520 points, just eight points below opening levels for a 0.1% loss on the day.
It was a fairly lackluster trading session, noted IG's Axel Rudolph.
“European equity indices did not benefit for long from a slightly positive Asian session as Australia kept its cash rate steady at 4.1%. European stock indices spent the day drifting lower in low volume as US markets were shut for Independence Day and as Germany's trade surplus narrowed to a five-month low."
3.45pm: Trading sideways
With around 45 minutes of trading to go in London, the FTSE 100 index remained close to opening levels, largely trading sideways, lacking much enthusiasm with US markets closed for the Independence Day holiday.
Michael Hewson, chief market analyst at CMC Markets UK commented: “Notable movers today have been the UK’s second biggest supermarket, Sainsbury’s which has slipped back despite reporting a solid set of numbers for Q1. Like-for-like sales excluding fuel rose 9.8%, with grocery sales seeing an increase of 11%.
“The one area of decline was in clothing sales which fell 3.7% with the supermarket reiterating its full-year outlook of underlying profit of between £640m and £700m. Fuel sales also fell 21.4%, however, the comparatives from the same quarter last year may have had a part to play here.
“The lack of a change to guidance comes across as somewhat cautious which may help explain today’s share price weakness, however, such caution is probably sensible given some of the criticism coming the sectors way with respect to accusations of greedflation, which is a helpful tool for politicians to distract from their own shortcomings."
Hewson added: “Banks have also slipped back as they come under pressure to raise savings rates at the same speed that they increase their lending rates. This has been a common refrain and something that the major banks have always been prone to, quick to cut rates on savings and slow to raise them. NatWest, Barclays and Lloyds are all lower.
But, he noted: “On the upside, Ocado shares have continued to get a fair wind in the wake of the recent announcement that they have hired Gregor Ulitzka as head of its European solutions business, joining from Amazon. With all the recent stories linking Amazon and Ocado investors appear to be putting two and two together, and perhaps coming up with five.”
3.20pm: Oil prices stronger
Oil prices were higher on Tuesday following a volatile session on Monday after further supply cuts by top exporters Saudi Arabia and Russia from August were countered by continuing demand worries due to a weak global economic outlook.
UK Brent crude was up 1.6% at $75.12 a barrel on Tuesday afternoon, while US West Texas Intermediate crude was up 1.3% at $70.71 a barrel.
On Monday, Saudi Arabia said it would extend its voluntary output cut of 1 million barrels per day (bpd) to August, while Russia and Algeria volunteered to lower their output and export levels for August by 500,000 bpd and 20,000 bpd respectively.
But countering that, business surveys on Monday showed a drop in global factory activity because of weak demand in China and Europe, and US manufacturing surveys also fell again in June.
Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA, commented: “Oil prices are rising again today after giving back all of Monday's early gains and more as the session progressed. Buoyed by the news of Saudi Arabia extending its voluntary one million barrel output cut by a month to August, alongside Russia cutting exports by 500,000 in the same month, Brent crude rallied more than 1% and looked on course to increase its winning streak to four sessions but that's not how it turned out.
“Now prices are rising again but remain shy of yesterday's peak and if it falls short today then doubts may grow around its ability to take the next step and even break above its recent trading range. That range has consolidated over the last couple of months but not to any significant degree that suggests a breakout is imminent, with prices recently fluctuating between $72 and $77.”
2.55pm: Apple appeal lost
Apple Inc has lost a case at London's Court of Appeal in a long-running patent dispute with Texas-based Optis Cellular Technology LLC, Reuters has reported.
Optis sued Apple in 2019 over its use of patents which Optis says are essential to certain technological standards, such as 4G.
London's High Court ruled last year that two of Optis' 4G patents were so-called standard essential patents and that Apple had infringed them.
Apple appealed against that decision in May, arguing that the two patents in issue were not essential to 4G standards and that it had not infringed the patents.
But its challenge was rejected by the Court of Appeal, with Judge Colin Birss saying in a written ruling that the High Court was "right to reject (Apple's) argument for non-infringement" and on the issue of the patents being essential.
Tuesday's ruling is the latest decision in the legal battle between Apple and Optis, which has prompted six separate trials and several appellate hearings in the UK alone.
2.35pm: Banks to be quizzed on savings rates
The heads of Lloyds, HSBC, NatWest and Barclays banks will meet the Financial Conduct Authority (FCA) on Thursday amid concerns that interest rates on savings are too low.
The City watchdog will press the banks on their savings rates and on how they communicate with customers, according to the Financial Times, which first reported the meeting.
Higher interest rates have led banks to put up mortgage costs sharply, but savings rates are not rising as fast.
A BBC report noted that HSBC said it has increased its savings rates "more than a dozen times since the beginning of last year, with every savings product seeing rates increased on multiple occasions during that time".
The BBC pointed out that UK chancellor Jeremy Hunt said it is an "issue which needs solving", at a time when many households are struggling with the soaring cost of living.
In a tweet, the chancellor said: "@TheFCA has my full backing to ensure banks are passing on better rates as they should be."
Increased interest rates must also be passed on to savers.@TheFCA has my full backing to ensure banks are passing on better rates as they should be. https://t.co/7JSWyEWewA
— Jeremy Hunt (@Jeremy_Hunt) July 4, 2023
2.15pm: Electric landmark
Toyota revealed it has made a technological breakthrough that will allow electric vehicles to run for 745 miles and be recharged within ten minutes.
The Japanese carmaker had already identified solid-state batteries (SSBs) as a way for EVs to achieve much longer journeys without a recharge but now says this breakthrough has significantly moved the timeline forward.
In a statement today, Toyota said it had simplified the production of the material for SSBs, clearing the way for their use in use in electric vehicles as soon as 2027.
SSBs are smaller, hold more charge and are less volatile than lithium-ion batteries, the current battery used in EVs and that contain a liquid electrolyte. However, they are trickier and more expensive to make.
1.30pm: Today's movers: Welsh gold glee for Alba, Restore slumps
Risers
Alba Mineral Resources PLC (AIM:ALBA) jumped almost 50% on news it has been granted the ecological permits required for the planned dewatering and associated exploration of the Lower Llechfraith workings, its primary target within the Clogau-St David's Gold Mine in north Wales. The company noted that the ecological permits granted at Clogau comprise a European Protected Species Licence (EPSL), Water Discharge Permit, and Water Abstraction (or Transfer) Licence, in relation to the dewatering and associated exploration of the Lower Llechfraith workings.
t42 IoT Tracking Solutions PLC (AIM:TRAC) saw its shares rally more than 9% after the supplier of tracking solutions for global shipping containers said it has won an initial contract from an international company.
Fallers
Restore Plc (AIM:RST) took a battering on AIM as signs of trouble in the upper ranks at the office-management group started to flash red. Effective immediately, and by “mutual consent”, Charles Bligh has stood down as the company's chief executive and board director, with senior independent director Jamie Hopkins taking the temporary mantle.
Aptamer Group PLC (AIM:APTA) is urgently seeking additional funding, an announcement that has triggered a 40% plunge in its share price. Although the life sciences company expects to report unaudited revenue of roughly £1.75mln for the year ended 30 June 2023 and anticipates around £2.2mln from 30 projects in FY24, the current cash balance stands at a meagre £0.2mln.
1.03pm: Thames Water fine adds to woes
Thames Water has been fined £3.3mln for a “reckless” incident in which “millions of litres” of undiluted sewage was pumped into rivers near Gatwick Airport in 2017.
A two-day hearing at Lewes Crown Court was told there was a “significant and lengthy” period of polluting the Gatwick Stream and River Mole between Crawley in West Sussex and Horley in Surrey on October 11, 2017.
Thames Water had pleaded guilty on February 28 to four charges relating to illegally discharging waste in October 2017.
This penalty comes as the utility giant, which serves 15 million households across London and Thames Valley, faces concerns over its future amid mounting debt.
12.34pm: AstraZeneca bounces back after heavy falls
AstraZeneca has moved to the top of the FTSE 100 risers list, a day after it held a similar position, but on the downside.
The heavy falls on Monday came after a disappointing update on a lung cancer drug.
Analysts at Citi remain positive. They said while the results may not be the "home run in absolute benefit that investors hoped for, we anticipate dato-DXd will likely secure approval given a HR <<0.8 and an overall better tolerated adverse event profile than taxotere."
The broker maintained its US$12bn preak global sales estimates and 'buy' rating.
Deutsche Bank was less upbeat, moving the stock to 'hold' from 'buy'.
It's analysts said the result is "clearly underwhelming in several important respects," and places question marks over the potential for the drug.
"There is still plenty to like about the AZN investment case but we think it's likely to take a breather for the remainder of 2023 at least and cut to hold," the bank said.
12.18pm: China's tit-for-tat move could spark fresh inflationary pressure
The threat posed to supply chains by the deepening trade war between the US and China could speak fresh inflationary pressure across the globe, according to Hargreaves Lansdown.
Exports of gallium and germanium, of which China is a major producer, will require a license from August 1, according to a guideline issued by the Ministry of Commerce & China Customs on Monday.
The final recipient of the exports and the purpose of their use will have to be specified, the text said.
The need to "preserve security and national interests" was the reason for the measures, it said.
"China's move to restrict exports of some rare earth metals, used in highly sought-after products such as semi-conductors, appears to be a tit-for-tat move, in response to US curbs on the sales of chips which are in high demand for AI capabilities," Hargreaves Lansdown's Susannah Streeter.
"Coming just days before Janet Yellen, the US Treasury Secretary is due to visit Beijing, the [Chinese] policy is likely to have been designed to put pressure on the US to release its current export bans and drop further curbs which are expected," Streeter said.
"China is the dominant producer of the metals and exported 25% more Gallium last year, compared to 2021 – it’s the base ingredient for made gallium arsenide which is used in the electronics industry," explained HL's Streeter.
With China accounting for some 80% of both global gallium and germanium production according to a European Commission report in 2020, it would take "considerable time" for any other producers to ramp up production sufficiently.
"[A shortage] could set off fresh inflationary pressures in industries which had been enjoying some respite as supply chain pressures eased", Streeter said.
11.41am: BAE Systems wins £870mln Typhoon contract
BAE Systems has won a £870mln contract from the Ministry of Defence to deliver a new radar to enhance the RAF's Typhoon fighter jet fleet and strengthen the aircraft’s control of the airspace whilst providing cutting-edge electronic warfare capabilities.
The contract will see further development of technology and integration work on the European Common Radar System Mk2 radar by BAE Systems and Leonardo UK. The work is expected to lead to initial flight testing in 2024.
The contract is part of the UK Government announcement made in July 2022, to invest £2.35bn in the continued technology advancements in Typhoon capabilities, as recognition of its long-term role supporting national security and defence priorities.
"Typhoon is a fantastic aircraft which continues to provide crucial support to defence and security operations around the world, including NATO air policing in Eastern Europe," said Andrea Thompson, managing director – Europe & International at BAE Systems’ Air Sector.
BAE said the Typhoon programme supports more than 20,000 jobs across all regions of the UK every year, contributing £1.4bn to the economy annually.
11.16am: Haleon mulls sale of Nicotinell - Bloomberg
Haleon is exploring a potential sale of some smoking cessation products, including the Nicotinell brand of nicotine gum, patches and lozenges, according to Bloomberg.
Citing people familiar with the matter, Bloomberg said the Weybridge, Surrey-based consumer healthcare products company is working with an adviser to identify potential suitors for the Nicotinell brand.
Bloomberg sources said the business is attracting interest from both investment firms and consumer companies and could be worth up to US$800mln in a sale, as Haleon reportedly seeks to offload non-core businesses.
Victoria Scholar at interactive investor thinks “Haleon appears to be pursuing a streamlining strategy to focus on its biggest, most profitable brands and selling its non-core holdings to avoid the risk of becoming a jack of all trades, master of none.”
Shares were steady at 321p, up 0.1%. Deutsche Bank cut its target price on the stock from 350p to 340p while Barclays lowered its target price on Haleon from 400p to 378p,
Barclays is positive on the stock. "Haleon appears to be building an enviable track record of top-line delivery, and we reiterate our overweight stance," it said.
Deutsche rates Haleon at 'hold'.
10.38am: Bank has no choice but reduce demand to tackle inflation
The Bank of England should not be blamed for tackling inflation and its choice is between a mild recession in the short term or a deeper downturn in future, an adviser to the chancellor has said.
Karen Ward, a managing director at JP Morgan Asset Management and a member of Jeremy Hunt’s seven-strong economic advisory council, said that “ultimately, the Bank of England has no choice but to bring down demand”.
Writing in The Times today, Ward said the “sad reality” of the UK’s inflation situation was that the central bank “faces the choice of being unpopular today by delivering a mild recession, or being deeply unpopular in the future by having to create a deep recession”, adding that it “should not be blamed for doing its job”.
The BoE is facing mounting pressure tame inflation, which remained at 8.7% in May, while core inflation, which strips out volatile energy and food prices, rose to its highest level in 31 years.
In response, the Bank increased interest rates by 50 basis points to 5%.
9.52am: JP Morgan upbeat on Centrica and Drax
JP Morgan has placed Centrica and Drax on positive Catalyst Watch ahead of interim results, both on July 27th, helping push shares higher.
“We expect both companies to report strong earnings & cash flow, and provide updates on capital allocation priorities,” the broker said.
The investment bank estimates Centrica will have >40% of its current market cap in net cash by the end of 2024 even after having bought back £550mln worth of shares by the end of 2023 and paying £380mln in dividends between today and the end of 2024.
On Drax, it thinks the shares continue to trade at a “significant discount to fair value,” despite “what we see as a clear message from the government that Drax power station will be supported beyond March 2027 subsidy expiry.”
It pointed out the government is due to publish its biomass strategy before Parliament’s summer recess which it expects will set out, among other things, how Bioenergy with Carbon Capture and Storage (BECCS) could be deployed in the UK, which should mean investors “turn more positive on the outlook for Drax.”
JPM raised its price target for Centrica to 150p from 140p.
Shares in Centrica rose 1.3% and Drax by 0.8%.
9.47am: Informa gains as Citi highlights value
Informa is another stock to be given a nudge by analysts today.
Citi has increased its price target and raised forecasts for the firm "to reflect the positive impact of M&A, as well as strong underlying trading, as represented in the recent upgrade to FY guidance."
The broker said: "Even if this, to a degree, reflects catch up - note that our new EPS forecast for 2023E at 40.3p is higher than consensus (39.6p), but only by c. 2% - we think the near-term risk/reward tilts favourably, and we open a 30-day positive catalyst watch."
Citi said the key point is that "we think consensus forecasts of 1H revenues/profits are materially too low given the timing of the event schedule, which should help growth/drop through in June."
It reckons the results will catalyse a broader discussion about the scope for further earnings upgrades as the year progresses.
It reiterated a buy rating but increased its price target to 850p from 720p.
Shares rose 0.6% to 732.40p while the FTSE 100 is now up 3 points.
9.28am: Five-year fixed mortgage tops 6% as squeeze continues
Mortgage continue to edge higher with the average 5-year fixed residential mortgage rate hitting 6.01% today, up from 5.97% on Monday, according to new data from financial data provider Moneyfacts.
Mortgage rates: Average five-year fix rises above 6% https://t.co/iImnMT0bDn
— Home Estate Agents (@HomeinUrmston) July 4, 2023
That’s the highest level since last November, when mortgage rates had been driven up by the mini-budget chaos last autumn.
Shorter-term mortgage rates also continue to push higher. The average 2-year fixed residential mortgage rate has jumped to 6.47%, up from 6.42% on Monday.
9.02am: Dunelm out of fashion at RBC
Top of the FTSE 250 fallers is home furnishings outfit, Dunelm.
Shares tumbled 6.8% to 1,044p after RBC Capital Markets downgraded the stock to 'underperform' from 'sector perform'.
”With cost of living pressures persisting, unfavourable movements in the UK housing market and only a moderate store expansion story, we think that growth will be more difficult to come by now,” the broker said.
“As such, we see greater upside potential in travel (SSP, WH Smith, Dufry) and Discount (AB Foods, B&M Value Retail) given strong topline momentum and meaningful expansion for these names.“
RBC still views Dunelm “as a well-managed business with a strong position in the UK homewares market.”
Alongside the rating downgrade, RBC has cut its price target to 1,000p from 1,300p.
8.53am: FTSE 100 flat, JP Morgan warms to Centrica and Drax
The FTSE 100 continues its muted start to proceedings, down just 1 point.
But despite the subdued overall picture a number of stocks are on the move, up and down.
Heading upwards, shares in Centrica rose 0.8% and Drax climbed 1.7% after JP Morgan placed both stocks on positive Catalyst Watch ahead of interim results.
Informa rose 0.7% after analysts at Citi reiterated a buy rating with an increased price target of 850p, up from 720p.
But Dunelm remained top of the FTSE 250 fallers, down 5.2%, after the RBC downgrade.
Sainsbury remains a weak feature despite a broadly well-received trading update.
Sophie Lund-Yates at Hargreaves Lansdown said: “Sainsbury’s has come out the gate swinging, insisting that its efforts to keep prices low have seen shoppers buying a higher number of items, with first-quarter sales rising over 9%.”
But she did caution: “The financial year is still in its infancy though, and the questions of demand and margins may have dimmed but they’re certainly still present.”
8.37am: Restore plunges after warning, CEO leaves
Not a good morning for shareholders in Restore. Shares are now down 30%, extending earlier falls, after a profit warning and news its chief executive is standing down.
The firm is now forecasting 2023 pre-tax profit of around £31mln. Broker Peel Hunt notes this compares to its forecast of £41.0mln and consensus of £41.2mln.
"Ahead of management conversation, we will withdraw estimates, target price and our recommendation," the broker said.
The company said that the price of recycled shredded paper has significantly fallen in the past month with this trend anticipated to continue into the second half.
Charles Bligh is to stand down as chief executive with Jamie Hopkins assuming the position.
The FTSE 100 is now up 2 points.
8.23am: Housebuilders fall as JP Morgan highlights risks to estimates
UK housebuilders have fallen in early exchanges after JP Morgan reiterated its cautious stance on the sector, downgraded Persimmon and placed Taylor Wimpey and Vistry on negative catalyst watch.
Persimmon was the biggest faller in the FTSE 100, down 1.7%, while Taylor Wimpey, Barratt Developments and Berkeley fell 1.6%, 1.0% and 1.0% respectively.
In the FTSE 250, Vistry fell 2.1%, and Redrow eased 1.9%.
The investment bank notes valuations are still above October 2022 levels and “we see incremental downside risks to estimates.”
“Potential softening in sales rates from here, given the uncertainty on rates, puts the 2024E volume recovery in jeopardy while scope for affordability-led average selling price declines still remain,” JPM Morgan said.
The bank has downgraded Persimmon to neutral, with a new price target of 1,090p, “as our previously expected volume recovery in ‘24E could now prove vulnerable and our revised PT implies only 6% upside potential.”
“Furthermore, with one of the largest downside to ‘24E consensus, we place Taylor Wimpey and Vistry Group on Negative Catalyst Watch into H1 updates,” the bank said.
Berkeley Group remains its preferred play in the sector.
The bank cut its target for Barratt (neutral) to 390p from 430p, for Bellway (overweight) to 2,200p from 2,780p, Crest Nicholson (underweight) to 150p from 200p, Redrow (underweight) to 370p from 440p, Taylor Wimpey (neutral) to 94p from 130p and Vistry (underweight) to 580p from 740p.
8.13am: FTSE flat, housebuilders hit by cautious JP Morgan comments
The FTSE 100 opened slightly lower as in what may be a muted trading session with US markets closed for Independence Day.
At 8.15am, London’s blue chip index edged lower by 3.88 points to 7,523.38 while the FTSE 250 was little changed at 18,507.26.
Shares in Sainsbury eased 1.8% despite a solid-looking trading update.
The UK’s second-largest retailer said said in the 16 weeks to June 24 like-for-like sales were up 9.8%, and excluding fuel were up 9.2%.
Sainsbury’s continues to expect financial year 2023/24 underlying profit before tax of between £640mln and £700mln and to generate at least £500mln of retail free cash flow.
Chief Executive Simon Roberts said: “Food inflation is starting to fall and we are fully committed to passing on savings to our customers. “
Zoe Gillespie, investment manager at RBC Brewin Dolphin, described the update as “resilient.”
“In an environment that many feared would lead to customers trading down, the supermarket continues to grow sales and its guidance for the year is largely unchanged,” she noted.
“With a relatively strong balance sheet, excess cash flow, and growing market share, Sainsbury’s looks well placed among its peers,” she thinks.
Shares in housebuilder Persimmon slipped 1.8% as JP Morgan downgraded to underperform with a 1,090p price target.
The broker placed Taylor Wimpey, down 1.5%, and Vistry fell 2.1% on negative catalyst watch.
Dunelm slumped 4.6% as RBC moved the stock to underperform with a 1,000p price target.
Another share heading south was Restore after the firm warned that pre-tax profit would be lower than previously expected at around £31mln for the year.
The company said that the price of recycled shredded paper has significantly fallen in the past month with this trend anticipated to continue into the second half.
Charles Bligh is to stand down as chief executive with Jamie Hopkins assuming the position. Current Chair, Sharon Baylay-Bell, has agreed to become executive chair, also with immediate effect.
Restore shares plunged 26% to 60.60p.
7.44am: Wizz Air passenger numbers fly high
Another airline updating on traffic numbers is Wizz Air.
The budget airline said carried 5.3mln passengers in June, a 22.5% increase compared to June 2022, at a load factor of 92.2%.
For the 12 months to June, Wizz Air carried 54.2mln passengers, 49% higher year-on-year, with the load factor 89.4%, up 7.6 percentage points.
The firm announced the addition of 10 new routes to its Albanian network adding nearly 100 extra weekly flights to its winter schedule.
7.38am: RyanAir flies record number of passengers in June
More strong figures from the airline industry. Ryanair flew a record 17.4mln passengers in June, its highest for a single month and a 9% increase from a year earlier.
The previous traffic record of 17mln was set in May.
The Irish airline, Europe's largest by passengers carried, cancelled more than 900 flights, affecting some 160,000 customers, mainly due to air traffic control strikes last month.
Flights were on average 95% full in June, unchanged on a year earlier.
7.23am: Sainsbury's backs guidance, food inflation starting to fall
J Sainsbury backed its full-year guidance as it reported inflationary pressures were starting to ease.
Chief Executive Simon Roberts said: “Food inflation is starting to fall and we are fully committed to passing on savings to our customers. “
After facing accusations of profiteering Roberts stressed: “Prices on our top 100 selling products are now lower than they were in March, against a market where prices have gone up.”
The food retailer said in the 16 weeks to June 24 like-for-like sales were up 9.8%, and excluding fuel were up 9.2%.
The firm reported continued strong grocery momentum, with sales up 11%, with a return to volume growth and strengthening market share.
General merchandise sales rose 4%, with Argos sales up 5.1%, with strong consumer electronics sales offsetting weaker early Summer seasonals performance.
Sainsbury’s continues to expect financial year 2023/24 underlying profit before tax of between £640mln and £700mln and to generate at least £500mln of retail free cash flow.
7.02am: FTSE 100 set to edge lower
London’s blue chips are expected t nurse modest losses when trading starts Tuesday with US markets closed for Independence Day and Asian markets mixed.
Spread betting companies are calling the FTSE 100 down by around 10 points.
“Today’s European session looks set to be a quiet one with the US off for the 4th July holiday, and little in the way of economic data ahead of tomorrow’s services PMI numbers for June which are likely to make for better reading from an economic resilience point of view,” said Michael Hewson at CMC Markets.
The index of London large-caps closed down 4.27 points, 0.1%, at 7,527.26 on Monday.
In an abbreviated session on Monday, US markets closed little changed despite weak manufacturing figures.
Tesla and Rivian were the star performers after better-than-expected production numbers.
The Reserve Bank of Australia left its key interest rate unchanged Tuesday, with Governor Philip Lowe saying that while inflation had "passed its peak" the economic outlook remained uncertain.
Back in London, and the early focus will be an update from food retailer J Sainsbury.