- FTSE 100 ends down 27 points at 7,527
- Abrdn falls as assets under management drop
- Banks unnerved by Italian tax, Moody's downgrades
4:30pm: FTSE 100 finishes in red, again
London’s blue-chip benchmark finished in the red, again, with the FTSE 100 down 27 points or 0.36% changing hands at 7,527.
3:58pm: Deutsche cuts WPP, will take some time for confidence to return
WPP PLC (LSE:WPP) has fallen once more following last week’s profit warning with Deutsche Bank downgrading the stock to hold from buy.
Silvia Cuneo said the slowdown was due to a pull back in spend from technology clients in the US and delays in tech projects more broadly.
“We think it will take time to restore confidence on the stock; with lack of visibility on positive catalysts, a re-rating to WPP's long term average PE is unlikely to happen over the next 12 months in our view,” Cuneo said.
Deutsche cut EPS forecasts by 2023 by 7% and lowered its price target to 1,030p from 1,230p.
3:50pm: Lenders cutting mortgage rates
Nationwide Building Society, HSBC Holdings PLC (LSE:HSBA) and TSB Banking Group have announced interest rates on their mortgages will fall from tomorrow, as lenders continue to retreat from earlier hikes.
Following June’s lower-than-expected rise in inflation, lenders have increasingly been reducing interest on mortgages in the hope of a lower peak in UK base rates.
Having squabbled to lift rates in June in anticipation of the Bank of England’s 50 basis point hike to base interest, lenders are now pricing in a less-harsh peak in rates, analysts say.
More details here.
3.15pm: SEC slaps Wall Street banks with fines
Eleven Wall Street businesses have agreed to pay a total of $289 million in fines over messaging violations in the latest round of record-keeping charges filed by the US Securities and Exchange Commission.
The US regulator accused firms including Wells Fargo and BNP Paribas of “widespread and longstanding failures . . . to maintain and preserve electronic communications”, in a statement on Tuesday.
Wells Fargo units agreed to pay $125 millionto settle the cases and BNP will pay $35 million as part of a crackdown on poor record keeping by the SEC.
“Compliance with the books and records requirements of the federal securities laws is essential to investor protection and well-functioning markets,” Gurbir Grewal, director of the SEC’s enforcement division, said in a statement.
2:46pm: US markets weak as Moody's downgrade hits banks
US markets headed south at the open with banks rattled by news Moody's has downgraded a number of small to medium sized lenders.
Shortly after the opening bell, the Dow Jones Industrial Average was down 227.29 points, 0.6%, at 35,245.84, the S&P 500 slipped 29.74 points, or 0.7%, at 4,488.70 and the Nasdaq Composite was 111.11 points lower, 0.8%, at 13,883.28.
Banks weakened following the Moody's downgrades with State Street Corp down 3.3% and US Bancorp losing 3.9% while blue-chips were not immune with Bank of America losing 3.1% and Wells Fargo shedding 3.0%,
Eli Lilly jumped 13.2% as it raised guidance when reporting that second quarter net income nearly doubled to $1.76 billion from $952.5 million the year before on revenue of $8.31 billion, up from $6.49 billion. Adjusted EPS of $2.11 beat Street expectations of $1.98.
The firm said sales of its new diabetes and weight-loss drug Mounjaro had soared to $979.8 million.
The company now expects full-year revenue of between $33.4 billion to $33.9 billion, up from a previous forecast of $31.2 billion to $31.7 billion. Adjusted EPS guidance is now a range of $9.70 to $9.90 per share for the year, up from a range of $8.65 to $8.85.
Shares of AMC Entertainment Holdings Inc rode a "Barbenheimer bounce" after the theater operator reported its best financial performance since 2019.
Blockbusters such as Barbie and Oppenheimer along with the latest instalment of Mission Impossible, have packed in aisles in American theaters.
Second-quarter results from AMC exceeded expectations, driven by a 12% attendance increase and enhanced per-guest spending, sending shares 2.2% to the good.
But UPS fell 2.1% as it lowered guidance for the year “to reflect the volume impact from labour negotiations and the costs associated with the tentative agreement”.
The firm reached a pay deal last month with Teamsters, which represents 300,000 of its employees, after lengthy negotiations.
UPS now expects revenue to be around $93 billion this year, down from previous guidance of $97 billion, while the adjusted operating margin will be 11.8%, down from earlier guidance of 12.8%.
In economic news, the US goods and services deficit was $65.5 billion in June, down $2.8 billion from the $68.3 billion recorded in May.
Imports fell by 1%, to $313 billion, including a $2.3 billion decrease in shipments of heavy-duty capital goods into the US. Exports were 0.1% down at $247.5 billion, partly due to a £500 million drop in the value of crude oil shipments.
2:10pm: Bellway could axe jobs as housing slowdown bites
The UK's housing sector is feeling the pinch of the Bank of England's relentless interest rate hikes, with the base rate last week hitting 5.25%, its highest level since April 2008.
Bellway PLC (LSE:BWY), one of the nation's leading housebuilders, has emerged as the latest casualty of this tightening monetary policy.
The Newcastle-based builder is contemplating significant structural changes, including the potential shuttering of its London partnerships and South Midlands divisions.
This restructuring could result in around 90 of its 3,000 employees facing redundancy.
The company attributes these measures to the prevailing market conditions, which have led to a deceleration in sales and a dip in housebuilding output.
1:32pm: Here’s a quick recap of the risers and fallers on the junior market today
Shares of PHSC (AIM:PHSC), a provider of health, safety, hygiene and environmental consultancy services and security solutions, surged 35% in the first hour of trading.
The spike was driven by the company's return to profitability and a 50% increase in its annual dividend.
TI Fluid Systems PLC (LSE:TIFS) soared 16% higher as the in-car coolant and fuel lines engineer sped past first-half forecasts for revenues and margins.
Kore Potash PLC (AIM:KP2, ASX:KP2, JSE:KP2) was on the back foot after the company announced a US$1 million fundraise along with new terms with its contractor for the Kola project in the Republic of Congo, amidst delay.
Shares were down 8% to 0.58p.
Shares in MyHealthChecked PLC (AIM:MHC), the consumer home-testing healthcare firm, fell 29% following its latest trading update.
The company reported first-half revenues of £2.5 million, a significant drop from £9.8 million in the comparable period last year, largely due to reduced demand for Covid tests.
1:00pm: Dow called lower on weaker banks but Eli Lilly set to fly
The downbeat mood looks set to extend across the pond with US stocks expected to open lower with banks under pressure after Moody’s downgraded ratings for a number of small to mid-sized US banks, and as weak trade data in China saw commodity prices fall.
In pre-market trading, futures for the Dow Jones Industrial Average (DJIA) were 0.6% lower, while those for the S&P 500 fell 0.6%, and contracts for the Nasdaq 100 futures were down 0.6%.
Joshua Mahony at Scope Markets said: “Equity markets look set for a somewhat downbeat day, with Asian declines feeding through to Europe and the US. Overnight data out of China brought selling pressure for energy markets and antipodean currencies, with exports posting the biggest decline since February 2020.”
Banks are under pressure in pre-market trading after Moody's cut credit ratings of several small to mid-sized US banks on Monday and said it may downgrade some of the nation's biggest lenders, warning that the sector's credit strength will likely be tested by funding risks and weaker profitability.
Moody's cut the ratings of 10 banks by one notch and placed six banking giants, including Bank of New York Mellon, US Bancorp, State Street and Truist Financial on review for potential downgrades.
Ahead of the opening bell, US Bancorp was called down 2.3% and 1.3% while blue-chips Bank of America and Wells Fargo were 1.5% and 1.2% lower respectively.
Another stock on the move ahead of the open is Eli Lilly which jumped 8.4% as it raised guidance after reporting second quarter net income nearly doubled to $1.76 billion from $952.5 million on revenue of $8.31 billion, up from $6.49 billion.
The firm reported a surge in sales of its new diabetes and weight-loss drug Mounjaro to $979.8 million sales.
Adjusted EPS of $2.11 beat Street expectations of $1.98.
The company now expects full-year revenue of between $33.4 billion to $33.9 billion, up from a previous forecast of $31.2 billion to $31.7 billion.
Adjusted EPS guidance is now a range of $9.70 to $9.90 per share for the year, up from a range of $8.65 to $8.85.
But UPS is heading south, with shares down around 5% after it lowered guidance for the year “to reflect the volume impact from labour negotiations and the costs associated with the tentative agreement”.
The firm reached a pay deal last month with Teamsters, which represents 300,000 of its employees, after lengthy negotiations.
UPS now expects revenue to be around $93 billion this year, down from previous guidance of $97 billion, while the adjusted operating margin will be 11.8%, down from earlier guidance of 12.8%.
12:32pm: IWG mulls switch to US listing - The Times
Could IWG PLC (LSE:IWG). the flexible office group, become the next big departure from the London stock market?
The board of the FTSE 250 company, formerly known as Regus, has confirmed that it is looking at switching IWG’s reporting currency to dollars and adhering to US accounting standards, according to The Times.
Moving its stock market listing from London to New York is also under consideration, said Mark Dixon, IWG’s founder, although he said that a move was not imminent.
Switching currencies and accounting standards “are just completely practical considerations”, Dixon said, given that two-thirds of IWG’s revenue is in dollars or dollar-related currencies. The “volatility in sterling” over the past year has also added to the case for reporting in dollars instead.
“As for moving the listing, that is something the board is thinking about all the time,” Dixon said. “Most of our customers, most of our users and most of our revenue are from the US; it’s not that there’s a problem with the UK market, it’s that the US may be a more appropriate market.”
The firm earlier reported record six-month system-wide revenue of £1,679 million, growth of 14% year-on-year, and Ebitda £198 million, up 48% driven by revenue momentum and cost discipline
11:56am: British Gas owner could return £4.5 billion by 2026
British Gas owner, Centrica PLC (LSE:CNA), could return up to £4.5 billion to investors by 2026, according to research from Barclays.
The broker made the prediction after running the numbers on Centrica’s cash flow and debt in the years ahead.
“With infrastructure cashflow of around £1 billion covering the £1 billion dividends through to 2026, we estimate annual net cash rising by c.£500 million per annum after dividends, reaching a net cash position of £3.5 billion by December 2026.”
“Return of this cash together with the £1 billion dividend payout would result in £4.5 billion returned to shareholders, or a return of 60% of the current market capitalisation by December 2026,” Barclays added.
The broker has raised its price target to 200p from 160p It sees sustainable earnings in core division of around £800 million from 2026 equivalent to EPS of 11-12p.
Barclays rating of overweight remains unchanged.
11:11am: Margin miss expected but priced in at Smith & Nephew - UBS
Smith & Nephew PLC (LSE:SN) held firm against a falling market as UBS took the stock off its sell list, upgrading to neutral, despite predicting margin at the medical technology company will fall short of guidance.
The Swiss bank explained this outcome is now one that is being increasingly expected by analysts.
"We expect S&N to miss its 2023 and 2025 margin guides as they both imply record levels of margin expansion despite a recent track record of poor delivery and growing challenges in its Ortho business (40% of group revenues). However, sellside consensus expectations have come down and are now below the 2023 guide whilst our reverse discounted cash flow analysis and conversations with investors suggest that most expect the 2025 guide to be pushed out," UBS commented.
Thus, UBS believes Smith & Nephew's likely margin disappointment is already priced in.
Upgrading the stock to neutral from sell, UBS set a new share price target of 1,150p, up from 1,040p.
10:41am: Has Wilko found a night in shining armour?
Has embattled retail chain, Wilko, found a saviour?
Sky News is reporting interest from Gordon Brothers, which has backed British high street names including Laura Ashley.
Sky says talks with Wilko's advisers are ongoing about a potential deal.
Exclusive: Gordon Brothers, the specialist retail investor which owns Laura Ashley, is considering a bid to rescue Wilko, the ailing family-owned general merchandise chain which is teetering on the brink of administration with up to 12,000 jobs at risk. https://t.co/snM9X5oAIm
— Mark Kleinman (@MarkKleinmanSky) August 8, 2023
Sources said that an offer could involve Gordon Brothers providing funding to the general merchandise retailer to implement a restructuring that would involve significant numbers of store closures and job losses.
Last week, Wilko confirmed that it was filing a notice of intention to appoint administrators, putting as many as 12,000 jobs at risk.
But the report quoted "insiders" as saying the the chances of Gordon Brothers reaching a deal to rescue Wilko were "relatively low".
10:18am: Barclays boost for Beazley, sees close to 40% upside
Top of the FTSE 100 risers is Beazley PLC (LSE:BEZ) supported by an upbeat note from Barclays which sees around 40% upside from the current share price.
The broker has a 700p share price target and an overweight rating, compared to today's 520p price.
"We expect Beazley to show its best year so far in 2023, and continue to grow at attractive margins since the strengths of the business - ie cyber - are underpinned by secular demand."
"The 5.2x P/E 2024 seems too cheap to us, with implied 5.0x P/E multiple for its industry-leading Cyber business," Barclays added.
"We believe Beazley's current P/E multiple does not adequately reflect the unique nature of its cyber proposition - which we view as a secular growth opportunity in a cyclical industry," the broker added.
9:54am: Glencore earnings miss City forecasts
Glencore PLC (LSE:GLEN) remains in the doldrums hit by a double whammy of weak economic data from China and below forecast first-half results.
The miner reported first half Ebitda of $$9.4 billion, a 50% drop year-on-year, and below the consensus of $10. billion as earnings in its industrial arm fell expectations.
Broker Jefferies said the decline in Industrial Ebitda from $15.0 billion to $7.4 billion can be mostly attributed to a decline in realized coal prices and lower cobalt prices, although higher costs were a factor as well, leading to $1.1 billion of the year-on-year decline.
The bak explained marketing Ebit fell 52% year-on-year to $1.8 billion but was in line with "our expectation and is still tracking to hit the guidance of $3.5-4.0 billionfor the year, which would mark the fourth consecutive year above the long-term guidance range of $2.2-3.2 billion."
AJ Bell's Russ Mould said: “If you wanted clear evidence that the resources market has normalised since the disruption created by Russia’s invasion of Ukraine last year then the halving of profit seen in Glencore’s results are it.
“The diversified mining and commodity trading company has also not been helped by a slower than expected post-Covid recovery in China – one of the world’s thirstiest consumers of resources."
Shares fell 3.8% to 439.50p.
9:40am: IHG results top forecast as travel rebound continues
The owner of the Holiday Inn and Crowne Plaza hotel chains , Intercontinental Hotels Group PLC (LSE:IHG), has bucked the weaker market after its half-year results as the rebound in travel continues.
Russ Mould at AJ Bell said: “Holidays remain a priority as people continue to look to get away using their stretched finances and it feels telling Holiday Inn operator InterContinental Hotels expects a full recovery from the pandemic by 2025 as it reports a notably big increase in profit.”
“The company’s franchise-based model means it can expand capacity to meet returning demand without requiring lots of fresh capital,” he thinks.
Analysts at UBS explained revenue of $2.2 billion was above its $2.1 billion forecast and in line with consensus while adjusted profit of $479 million was above the $446 million consensus.
The Swiss bank said “reported results bolstered by a system fund gain of $87 million and $18 million exceptional profit.
The broker reiterated its neutral rating but added: “We think the results will be supportive for the shares.”
Peel Hunt said positives from the results "include the benefits of the extensive technology upgrades, which started before - and were completed during - the pandemic.”
But it did "not see today’s message of steady progress from the new CEO as a driver of upside."
9:10am: Italian banks rocked by windfall tax
Over in Europe now and shares in Italian banks have been rattled after the Italian government backed a 40% windfall tax on lenders’ profits for the remainder of 2023.
Italian deputy Prime Minister Matteo Salvini told a press conference on Monday that the 40% levy on banks’ extra profits, amounting to several billion euros, will be used to cut taxes and offer financial support to mortgage holders.
The FTSE MIB in Rome fell 1.4% to 28,152.19 with banks nursing heavy losses.
BPER Banca shares plunged 11%, Banco BPM shed 7.8%, Intesa Sanpaolo was down 7.2%, UniCredit dropped 5.4%, Banca Monte dei Paschi di Siena SpA declined 6.4% and Finecobank was down 7.4%.
Under the one-off levy, Italy will tax 40% of banks’ net interest margin, a measure of income banks derive from the gap between lending and deposit rates.
In London, banks were broadly lower with Lloyds Banking Group PLC (LSE:LLOY) down 0.5%, Barclays PLC (LSE:BARC) off 0.6% and HSBC Holdings PLC (LSE:HSBA) off 0.3%.
8:55am: Glencore slides as net income more than halves
The FTSE 100 remains the wrong side of the line although losses are modest, down 13 points at 7,541.
Heading the risers is Beazley PLC (LSE:BEZ), up 2.3% at 514.50p, after Barclays reiterated an overweight rating and 700p price target.
But Abrdn PLC (LSE:ABDN) continues to fall, now down 6.3%, after its half-year results showed a hefty outflow of funds leading to a drop in assets under management.
Glencore PLC (LSE:GLEN) was down 2.6% after it reported interim profit tumbled due to underperforming Marketing and Industrial businesses, although the miner declared a special dividend and announced another share buyback.
Net income plunged by 62% to $4.57 billion from $12.09 billion a year earlier while Ebitda of $9.39 billion was down from $18.92 billion previously.
WPP PLC (LSE:WPP) continued to slip in the wake of last week’s profit warning, down a further 1.4% to 799.20p.
Deutsche Bank took the advertising agency off its buy list, downgrading to hold from buy.
Over in the FTSE 250, TI Fluid Systems leapt 16% after boosting its dividend as profit jumped, boosted by light vehicle production volume growth.
Pre-tax profit more than trebled to €58.9 million from €19.8 million a year prior while revenue advanced 13% to €1.77 billion from €1.56 billion.
The dividend was more than doubled to 2.30 euro cents per share from 1.00 cents a year prior.
8:17am: FTSE 100 lower as Chinese economy splutters
The FTSE 100 slid in early exchanges after weak trade figures in China raised fears over the strength of the world’s second largest economy, while in the UK wet weather kept shoppers off the high street.
At 8.15am, London’s blue-chip index was down 18.76 points, 0.3%, at 7,535.73 while the FTSE 250 was little changed at 18,854.96.
Exports in China declined by 14.5% year on year in dollar terms, the steepest fall since the outset of the coronavirus pandemic in February 2020, while imports tumbled 12.4%.
Michael Hewson at CMC Markets said: “With numbers this poor it surely can’t be too long before Chinese policymakers take further steps to support their economy with further easing measures, however, there appears to be some reluctance to do so at any scale for the moment, due to concerns over capital outflows.”
Mining firms fell back on the news on concerns of lower demand for resources. Anglo American PLC (LSE:AAL) dropped 1.5% and Antofagasta fell 0.9%.
Back in the UK and growth in retail sales eased in July hit by the wet weather.
According to the latest British Retail Consortium and KPMG sales monitor, sales rose 1.5% on-year last month, below the three-month average growth of 3.5%, and less than the 2.3% growth reported a year earlier.
Paul Martin, UK head of retail at KPMG, said: "As the storm clouds came out, shoppers retreated, with like for like sales growth a dismal 1.5% up in July."
"Furniture and food & drink were the best sellers, whilst the wet weather meant no need to restock summer wardrobes.”
Samuel Tombs at Pantheon Macroeconomics said the "heavy rainfall appears to have weighed on retail sales in July.”
But he expects the pull back in spending in July to be just a “blip, given the outlook for a recovery in households’ real disposable income in the second half of this year.”
Abrdn PLC (LSE:ABDN) slipped 4.4% after what John Moore, senior investment manager at RBC Brewin Dolphin, called a “real mixed bag,” of results.
Revenue and profit rose, and the share buy-back programme was doubled but assets under management fell 1% due to net outflows.
The owner of Holiday Inn, Intercontinental Hotels Group PLC (LSE:IHG) fared better with shares up 1.0% after its numbers.
Broker Peel Hunt said IHG has clearly recovered from the pandemic.
“Positives include the benefits of the extensive technology upgrades, which started before - and were completed during - the pandemic.”
“However, IHG’s share price has performed well into this set of results, and we do not see today’s message of steady progress from the new CEO as a driver of upside,” it added.
7:56am: Wet weather keeps shoppers at home in July
UK retail sales were hit by the wet weather in July, which hit clothing sales, numbers on Tuesday showed.
According to the latest British Retail Consortium and KPMG sales monitor, sales rose 1.5% on-year last month, below the three-month average growth of 3.5%, and below the 2.3% growth reported a year earlier.
UK retail sales grew a dismal 1.5% in July as shoppers retreated as the storm clouds came out. ????️ ????️
Paul Martin explains the full results in @the_brc #RetailSales Monitor:
— KPMG UK (@kpmguk) August 8, 2023
Paul Martin, UK head of retail at KPMG, said: "As the storm clouds came out, shoppers retreated, with like for like sales growth a dismal 1.5% up in July."
"Furniture and food & drink were the best sellers, whilst the wet weather meant no need to restock summer wardrobes, with all categories of clothing falling into negative sales territory, in what is usually a busy month for clothing retailers."
Martin said this was leading to discounting by retailers as they try "to get shoppers through the door."
July's rise was the weakest year-on-year growth in retail sales since August 2022, according to the BRC. Retail sales had risen 4.9% on-year in June.
BRC chief executive Helen Dickinson said: "The slowing pace of retail price inflation fed through into slower sales this July. Spend was further depressed by the damp weather, which did no favours to sales of clothing, and other seasonal goods.”
7:50am: Abrdn doubles share buy-back
Abrdn PLC (LSE:ABDN) doubled its share buy-back programme after reporting a mixed bag of numbers at the half-year in what it called a challenging macro environment.
The Edinburgh-based fund manager reported a 4% increase in net operating revenue to £721 million in the six months to June 30 with growth in Adviser and Personal offsetting lower revenue in Investments, while adjusted operating profit of £127 million was 10% higher than a year ago.
Pre-tax loss on an IFRS reported basis narrowed to £169 million from £326 million.
But assets under management fell 1% to £496 billion reflecting net outflows of £4.4 billion during the period.
The cost/income ratio improved marginally to 82% from 83% a year ago and abrdn said it was on track to deliver £75 million cost savings.
It added that it was close to completing its initial £150 million share buyback, announcing an extension of another £150m, bringing the programme to £300m.
The dividend was left unchanged at 7.3p.
7:30am: IHG revenue and profits jumps on travel rebound
The owner of Holiday Inn, Intercontinental Hotels Group PLC (LSE:IHG), has reported strong growth in revenue and profit as the rebound in travel continued.
Group revenue in the half-year results to June 30 totalled $2.23 billion, up 24% up from $1.80 billion the year before with operating profit of $584 million, up 62% from $361 million last time.
First half revenue per available room (RevPar) rose 24% year-on-year, with 17% growth in the second quarter, driven by particularly strong growth in Greater China, up 94%, reflecting the lifting of travel restrictions.
Elie Maalouf, chief executive officer, said: “Travel demand is very healthy, with RevPAR improving year-on-year across all our markets and exceeding 2019 pre-pandemic peaks for four consecutive quarters.”
“In the Americas and EMEAA regions, leisure demand has remained buoyant and business and group travel continued to strengthen, while in Greater China, demand has rebounded rapidly.”
7:00am: FTSE 100 called lower as Chinese exports plunge
London’s blue-chips are expected to open in the red on Tuesday as a survey showed the wet weather hit UK retail sales in July and after weak Chinese trade data.
Spread betting companies are calling the FTSE 100 to open down around 28 points after closing down points 9.88 points at 7,554.49 on Monday.
China’s exports and imports fell more sharply than expected in July adding to concerns that growth in the world’s second-largest economy is slowing.
Exports declined by 14.5% year on year in dollar terms, the steepest fall since the outset of the coronavirus pandemic in February 2020.
Imports tumbled 12.4%, the biggest decline since a wave of infections hit the mainland in January and one of the worst in recent years.
Back in London, and according to the latest British Retail Consortium and KPMG sales monitor, retail sales rose 1.5% on-year last month, below the three-month average growth of 3.5%. Sales growth eased from 2.3% a year earlier.
July's rise was the weakest year-on-year growth in retail sales since August 2022, according to the BRC. Retail sales had risen 4.9% on-year in June.
On the corporate front, updates are expected from Glencore, Intercontinetal Hotels, IWG and abrdn.