- FTSE 100 slips into negative territory, down 10 at 7,253
- Housebuilders knocked by Crest Nicholson warning
- Rising oil price gives BP and Shell a lift
4:40pm: FTSE 100's early rally peters out
The FTSE 100 closed in the red, failing to hold onto strong opening gains as the buyer's strike in August runs on.
At the close, London's lead index was down 4.61 points, 0.1%, at 7,257.82.
Housebuilders bore the brunt of the losses after a profit warning from Crest Nicholson and a survey from Rightmove showing the biggest monthly fall in house prices since 2018.
Taylor Wimpey, Berkeley Group, Persimmon and Barratt Developments all fell sharply.
Crest Nicholson slipped 11% after it warned of trading conditions had worsened over the summer months, prompting analysts to pare back forecasts for profit from the previous consensus of £73 million to the firm’s new estimate of around £50 million.
Heading the other way were BP and Shell boosted by a rising oil price while upbeat comments from Jefferies gave food retailer, Tesco a boost.
Among London's small-caps, Fulcrum Utility Services plummeted 64%.
The Sheffield, England-based provider of utility infrastructure services said it has proposed to de-list from AIM, having reviewed the advantages and disadvantages of being listed on the London exchange.
Better news for the City came from a report on Sky, suggesting a new listing, RTOP, was on the way with details set to be announced as soon as Tuesday.
3.55pm: Shell whittles down bidders for North Sea gas fields
Shell PLC (LSE:SHEL, NYSE:SHEL) has whittled down bidders for its southern North Sea gas fields to three final contenders, according to people with knowledge of the matter, Bloomberg reported.
Perenco SA, Ithaca Energy PLC and newcomer Viaro Energy Ltd have bid for a package of UK assets that includes the Leman Alpha hub, the Clipper field and the Bacton gas terminal, the people said, asking not to be identified discussing private information.
The assets may be valued at around $600 million to $800 million, one of the people said.
Ownership of North Sea fields has changed substantially in the past decade as oil majors largely withdraw from the aging basin. Assets have been snapped up by private equity-backed firms, smaller exploration and production companies and a handful of new players.
3.22pm: M&S loses its technology boss
Marks and Spencer Group PLC (LSE:MKS) confirmed its technology boss Jeremy Pee will be stepping down to return to Canada just over six months after his role at the retailer was expanded.
Having driven the development of M&S’s digital click-and-collect scheme, Pee also introduced the Sparks loyalty programme and added in-store screens for clothing returns all in a five-year tenure, having become chief digital and technology officer in 2018.
“After five years at M&S, Jeremy is moving his family back to Canada in a planned move,” a spokesman for the retail chain told the Times.
2.42pm: US markets move higher led by tech
US stocks started the week on the front foot after a punishing August so far.
Shortly after the opening bell, the Dow Jones Industrial Average was up 43.23 points, 0.1% at 34,543.89, the S&P 500 jumped 20.36 points, 0.5%, to 4,390.07 and the Nasdaq Composite leapt 98.72, 0.7%, to 13,389.50.
Investors are looking ahead to this week’s annual gathering of central bankers at Jackson Hole, Wyoming, with Federal Reserve Chairman Jerome Powell due to speak Friday.
Ahead of two of Wall Street’s leading investment banks took differing views of the direction for US equities.
Morgan Stanley (NYSE:MS)'s Michael Wilson thinks sentiment is likely to weaken further if investors start to “question the sustainability of the economic resiliency.”
But his counterpart at Goldman Sachs (NYSE:GS), David Kostin, says there’s room for investors to further increase exposure if the economy stays on course for a soft landing.
2.03pm: Tech firm, RTOP, to announce London listing
A technology platform specialising in regulatory compliance will this week outline plans to join the London stock market in a welcome boost to the City.
Sky News understands that RTOP, which works with clients in the financial services sector, is to announce that it is pursuing a direct listing in London - a process which involves a company going public without issuing any new shares.
City sources said the listing was expected to value RTOP at about £60m, and was being orchestrated by The AvantGarde Group, the Milan-based business which owns it.
An announcement is expected as early as Tuesday.
1.33pm: Here’s a look at the top risers and fallers on the junior market today
Jubilee Metals Group PLC (AIM:JLP, JSE:JBL, OTC:JUBPF)'s share price nudged 5.4% higher after an upbeat operational update.
Chief executive Leon Coetzer highlighted the firm's "exciting growth path" as it updated on its South African chrome joint venture and the expansion of its Roan Concentrator in Zambia.
Fusion Antibodies PLC (AIM:FAB) (Fusion Antibodies PLC (AIM:FAB)) rose 13% after it signed an agreement with a US firm, which will co-market its artificial intelligence and machine learning platform AI/ML-Ab.
Shares in Oracle Power PLC (AIM:ORCP) jumped 4.5% after the AIM-listed mining company confirmed diamond drilling has been completed at its Northern Zone gold project, near Kalgoorlie, Australia.
Shares of Deltic Energy PLC (AIM:DELT) rose by nearly 9% after it announced that Shell UK has initiated site survey works for the Selene exploration well.
Crest Nicholson PLC (LSE:CRST)'s market value took a tumble after it reported trading conditions worsened during the summer, reflecting high inflation and rising interest rates.
Shares fell as low as 167p, marking a 15% downgrade, before partially recovering to 179p.
Fulcrum Utility Services Ltd (AIM:FCRM) tanked more than two-thirds of its value after it announced it would be cancelling its AIM listing subject to shareholder approval.
1.00pm: CMA gives green light to Broadcom's purchase of VMWare
The UK Competition & Markets Authority has cleared Broadcom Inc's planned acquisition of VMware Inc, after an in-depth phase 2 investigation.
Broadcom, a California-based semiconductor manufacturer, plans to buy California-based cloud computing company VMware for around $69 billion.
Broadcom expects that the transaction will close in its current financial year, which ends in late October.
The CMA's announcement comes weeks ahead of its own set deadline of September 12.
The CMA said it "has found that the potential financial benefit to Broadcom and VMware of making rival products work less well with VMware's software would not outweigh the potential financial cost in terms of lost business".
12.36pm: Tesco firms as Jefferies ups target and estimates
Tesco is enjoying a good day, with shares up 2.0% at 254.65p.
Jefferies has increased its price target to 320p from 310p and has riased earnings forecasts to an above consensus £2.62 billion.
"With the politically-motivated scrutiny of the industry out of the way (and blunted in urgency by the same CPI unwind) it should be easier to find reasons to be cheerful at Tesco's October interims," the broker thinks.
In a note, the bank said it remains of the view that Tesco is tracking ahead of guidance, as conditions in the first part of the financial year have proved more supportive than management's typically cautious guidance would have assumed.
This progress has been lost "in the deep-rooted concerns around UK grocers emerging from an ongoing discounters' encroachment and the 'public service' nature of the industry," Jefferies thinks.
The broker has a buy on the food retail giant and shares rose 2% to 254.70p.
12.07pm: US markets expected to rally
US markets are expected to open higher on Monday attempting to recoup some of last week's hefty losses.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.3% higher, while those for the S&P 500 rose 0.4%, and contracts for the Nasdaq 100 futures were up 0.6%.
Goldman Sachs (NYSE:GS) thinks the recent falls in equities will be not last for long.
“Should the US economy continue on its path to a soft landing, we believe the recent decrease in equity length will be short-lived,” the US investment bank said.
“The re-opening of the buyback blackout window will provide a boost to equity demand in coming weeks although a flurry of expected equity issuance this fall may provide a partial offset,” it suggested.
The main focus of the week will be the speech by the Federal Reserve chair Jerome Powell at Jackson Hole although Goldman doesn’t expect this to “carry the same ‘pain’ warning as last year.”
It seems the overall message will still be one of “seeing the job through,” the broker reckons.
The main earnings focus this week will be results from Nvidia while today earnings are due from video conferencing firm Zoom, two weeks after announcing it would be calling its employees back to the office twice a week.
In pre-market trading, Palo Alto Networks Inc is up 11% after results after the market close were well received despite worries of the unusual scheduling.
11.33am: Should Prudential consider a buy-back?
Could companies take advantage of the heavy falls in stock prices to buy-back shares?
UBS thinks one such company in a good place to do so is Prudential but thinks the company can generate returns from organic growth.
The Swiss bank says a buy-back is “certainly affordable” with $8 billion of surplus capital and $1.6 billion of debt capacity.
Announcing a share buyback would also dispel concerns around the “fungibility” of the $8 billion of free surplus reported at full year 2022, the broker said.
But, it believes the insurer can generate greater returns from writing new business relative to its current market implied cost of equity.
“Pru can generate IRRs of 30% from writing new business compared to a UBS estimated market implied cost of equity of 15%,” it calculated.
“Given Pru's new management team, we believe a share buyback is unlikely with 1H23 results,” it added.
“We believe Pru can re-rate if management provide ambitious growth targets with 1H23 results. If the shares still do not re-rate following such an announcement, we believe a share buyback could be on the cards,” it concluded.
UBS rates Prudential buy.
10:58 Diect Line approaches Aviva exec over CEO role
Direct Line Insurance Group PLC (LSE:DLG), the struggling motor insurer, has approached one of the most senior executives at rival Aviva to become its new boss, according to reports.
Sky News has learnt that the FTSE 250 group, whose brands include Churchill and Green Flag, has been holding talks with Adam Winslow about taking over as its CEO.
The report said it was unclear whether Winslow would take the role or whether other candidates remained in talks with Direct Line.
Direct Line has been searching for a new chief since January, when Penny James stepped down in the wake of a string of profit warnings and a decision to axe its dividend.
Winslow has been with Aviva for less than three years, having joined as CEO of its international operations in January 2021.
10:26am: Indivior litigation settlement lower than expected
Indivior PLC (LSE:INDV) shares have risen 2.8% after it paid $30 million to settle some litigation claims in the ongoing multi-district suboxone antitrust litigation.
Analysts at Stifel said "while we were expecting an end-payer settlement to be lower than the $102.5 million settlement reached with the States' Attorneys General, this $30 million settlement is lower than we were anticipating."
Indivior said the settlement is in line with the current provision of $188 million for the litigation.
The firm said it continues to prepare for trial in October in relation to the remaining claims of the direct purchaser class while at the same time exploring the possibility of settlement at the right value with this class.
Stifel pointed out the settlement leaves a $157.5 million remaining provision to settle with direct payers and other individual claimants not in the class actions.
"We believe this should help Indivior resolve all remaining anti-trust litigation within its initial provision estimates putting to bed once and for all the anti-trust Suboxone marketing claims."
"In the meantime, Indivior continues to drive strong growth of Sublocade with prescriptions up 11.4% in the first six weeks of 3Q23 compared with the same period in 2Q23," it pointed out.
9.58am: Scale of Crest's warning hints at speed of deterioration in market
The warning from Crest Nicholson and news of falling prices continue to weight on housebuilder stock prices.
AJ Bell's Russ Mould explained while "weak house price data is hardly a surprise," the warning from Crest Nicholson’s "has laid bare the scale of the impact of a housing slowdown on the housebuilding sector."
“Sales of new homes have plunged alarmingly and, while not all developers in the space are created equal, the news, allied to Rightmove’s latest reading on the property market, has had a knock-on effect on share prices in the rest of the sector this morning."
“The £7,000 drop in the average asking price observed by Rightmove in the last month, allied to a big drop in transaction volumes, is the kind of statistic to make estate agents distinctly uneasy," he said.
“The scale of Crest Nicholson’s warning may come as a shock to investors given it reported its first half results just a couple of months ago and this hints at the speed and scale of the deterioration in the market.
9:22am: Chinese stimulus underwhelms
Some reaction to the move by Chinese authorities to try and boost the flagging economy.
Susannah Streeter at Hargreaves Lansdown said the "small injection of stimulus by China’s central bank in the ailing economy has proved largely underwhelming given the scale of the challenges erupting across sectors, but it has given investors hope there could be more to come."
"There is still some expectation that Chinese authorities will step in with a more generous boost, but it appears the weakness of the yen appears to be stemming more immediate action," she added.
"Nevertheless, the policy move on the key loan rate has helped shore up oil prices slightly, helped by a tightening of supply on the markets," she pointed.
Indeed, the price of Brent crude has jumped 0.6% to $85.31/barrel while West Texas Intermediate is up 0.7% to 81.80/barrel.
This has in turn given a boost to the FTSE 100, currently up 20 points, at 7,282 with BP and Shell prominent risers.
8.57am: Housebuilders rattled by Crest warning
Housebuilders are feeling the pain from the Crest Nicholson warning while news of falling house prices from Rightmove isn't helping.
The warning is weighing on the sector - the top three fallers in the FTSE 100 are Taylor Wimpey PLC (LSE:TW.), Persimmon PLC (LSE:PSN) and Barratt Developments PLC (LSE:BDEV), down 4.0%, 2.7% and 1.8% respectively.
In the FTSE 250, Redrow PLC (LSE:RDW) is 4.7% lower, while Vistry is 2.9% lower.
The downbeat mood in the sector has also hit estate agent Savills PLC (LSE:SVS), down 2.4% and Rightmove istelf, down 1.8%.
Oil majors BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL) provided support to the lead index as oil prices rose while retailers were another firm feature with B&M European Retail Value SA and JD Sports Fashion both 1.5% to the good.
Liberum was upbeat on B&M, reiterating a buy with a 685p price target.
"B&M remains a top pick due to: (i) strong trading that we expect to continue; (ii) its market leading value-focused proposition – our latest survey shows its prices remain >15% cheaper than rivals; (iii) a high-quality management team, including retaining the Group Trading Director (and co-founder); and (iv) better than ever retail disciplines," the broker said.
8:17am: Crest Nicholson tumbles after profit warning
The FTSE 100 has make steady progress in early trading although there is more downbeat news on the UK property market.
At 8:15am, London’s lead index was up 16.98, 0.2%, at 7,279.41 while the FTSE 250 fell 37.28, 0.2%, at 18,059.32.
Events in Asia have also grabbed attention with commentators left underwhelmed by news that China has cut a benchmark lending rate but left another unchanged.
The one-year loan prime rate, a reference for bank lending in China, was lowered 10 basis points to 3.45%, the People’s Bank of China announced on Monday.
But the equivalent five-year rate, which is closely watched because of its relationship to mortgage lending, was kept steady at 4.2%.
Duncan Wrigley at Pantheon Macroeconomics said the moves had disappointed the markets.
“Market expectations - and ours - were for 15bp cuts to both benchmark lending rates, following the 15bp on-year MLF rate and 10bp seven-day reverse repo rate announced cut last week,” he said.
Back in the UK, and the housing market was back in the spotlight as property website reported prices had fallen at their fastest monthly rate since 2018 while housebuilder, Crest Nicholson PLC (LSE:CRST), issued a profit warning.
The reported trading conditions worsened during the summer reflecting high inflation and rising interest rates.
It said sales per outlet per week were 0.25 in the seven weeks to August 18, half its previous forecast.
Peel Hunt noted the firm was now forecasting 2023 pre-tax profit of around £50 million, below the previous market consensus of £73 million.
The broker added that bulk sales deals being sought by the housebuilder “given the weak market backdrop, which would impact profits as well.”
Crest Nicholson shares tumbled 14% dragging others in the sector lower.
7:55am: Crest Nicholson reports dip in trading in the summer months
The theme of a tough market housing market continues with a downbeat trading update from Crest Nicholson PLC (LSE:CRST).
The housebuilder reported trading conditions worsened during the summer reflecting high inflation and rising interest rates.
It said sales per outlet per week were 0.25 in the seven weeks to August 18, half its previous forecast.
“While pricing has remained resilient in a market with limited supply and few distressed sellers, the economic uncertainty is deterring prospective home movers,” the firm said.
The firm said transaction levels across the industry have therefore weakened further, particularly in recent weeks and it sees no material improvement before the year end.
Crest Nicholson now expects 2023 financial year pre-tax profit of around £50.0 million but plans to hold the dividend at 17p.
Talks are underway on several bulk deals with partners which will provide support to volume delivery in future years.
Management is also cutting costs with the newly created East Anglia division will be incorporated into its existing Eastern division with revised boundaries.
7:37am: House prices post biggest monthly drop since 2018 - Rightmove
UK house prices declined at the fastest pace for the month of August since 2018, while year-on-year, they declined for the first time since prior to the pandemic, according to latest figures from Rightmove.
The online property website said house prices fell 1.9% on-month to £364,895 in August, the biggest August price fall since 2018. Prices declined by 0.2% in July from June.
Average asking prices slip back -1.9% on last month & -0.1% on last year according to all-seeing @Rightmove. Average SALE price we were told last week are still rising - just & remain 50% higher than September 2007 & 23% higher than Jan 2020 pic.twitter.com/DIQdvuJIOB
— Henry Pryor (@HenryPryor) August 21, 2023
Potential were "preoccupied by holidays, inflation, and the highest base rate since 2008", Rightmove said.
"These lower asking prices, combined with increasing average earnings and the apparent downward trend of mortgage rates are tentative steps towards improved buyer affordability, although average prices are still £59,000 (19%) higher than in the pre-pandemic market of August 2019," Rightmove added.
07:05am: Chinese rate moves underwhelm, FTSE seen little changed
The FTSE 100 is expected to open little changed at the open on Monday as investors digest the latest moves by Chinese authorities to boost its flagging economy.
Spread betting companies are calling London’s premier index down by around 3 points after closing down 47.78 points at 7,262.43 on Friday.
China has cut a benchmark lending rate but surprised the market by leaving another unchanged as policymakers grapple with their response to slowing economic growth, a property sector cash crunch and a weakening currency.
The one-year loan prime rate, a reference for bank lending in China, was lowered 10 basis points to 3.45%, the People’s Bank of China announced on Monday.
The equivalent five-year rate, which is closely watched because of its relationship to mortgage lending, was kept steady at 4.2%.
Ipek Ozkardeskaya at Swissquote Bank said the cuts were “less than expected.”
She felt the “decision to keep the 5-year rate steady is confusing for investors, in the middle of a property crisis.”
Michael Hewson at CMC said: “Unsurprisingly markets were less than impressed by this move, expecting authorities to be much more forceful. This lack of urgency has weighed on Asia markets and is unlikely to spark demand in an economy where loan demand appears to be low anyway.”
In China, the Shanghai Composite fell 0.6% while in Hong Kong, the Hang Seng fell 1.7%.
Back in the UK, and another gloomy housing market survey to report.
In early UK news, house prices declined at the fastest pace for the month of August since 2018, while year-on-year, they declined for the first time since prior to the pandemic, according to numbers from Rightmove.
The property portal's latest findings showed house prices fell 1.9% on-month to GBP364,895 in August. We will have more detail on this through the day.