- FTSE 100 up 13 points at 7,333
- UBS says Rolls-Royce could reach 600p in upside case
- Berenberg tips 888 Holdings, price target 190p
4:40pm: FTSE fades into the close but remains in the green
The FTSE closed higher but well off early best levels as the Nvidia-inspired gains lost impetus as the day progressed.
London's lead index closed up 13.10 points, 0.2%, at 7,333.63 while the FTSE 250 closed down 31.92 points, 0.2%, at 18,194.57.
Axel Rudolph at online trading platform IG said: "Thursday's rally in European and US stock indices on the back off much-better-than expected Nvidia Q2 results ran out of puff as investors took money off the table ahead of Jerome Powell's Jackson Hole speech on Friday."
"In it the Fed Chair is expected to disappoint investors looking for reassurance that US rates have peaked," he added.
JD Sports Fashion PLC (LSE:JD.) rallied 4.4% after the heavy falls following results from Foot Locker and Dick's Sporting Goods in the US which investment bank, JP Morgan felt were overdone.
3:55pm: Europe tightens restrictions on Chinese tech
The EU’s executive will place fresh restrictions on grants given to Huawei and ZTE as the European Commission tightens its approach to Chinese tech.
Writing to the European parliament last week, Margrethe Vestager, the commission’s head of digital policy, said the EC had spotted a “considerably higher risk” in giving grants for research projects to the two Chinese firms, it emerged on Thursday.
She said: “The commission considers that Huawei and ZTE represent in fact materially higher risks than other 5G suppliers.”
It comes after the Financial Times reported that Brussels had funded Huawei in sensitive communications research projects after several countries had imposed bans on the group.
3:22pm: CRH sales and profit rise driven by US growth
CRH, PLC, the building materials firm which is shifting its listing to the US, has reported a jump in sales and earnings in the first half of 2023.
The firm said sales rose 8% to US$16.1 billion while pre-tax profit from continuing operations jumped 26% to US$1.51 billion from US$1.20 billion the previous year.
Ebitda rose 14% year-on-year to US$2.5 billion from US$2.2 billion a year prior above JPMorgan's US$2.43 billion.
CRH described the performance as robust with strong pricing offsetting cost inflation, significant contributions from prior year acquisitions and good underlying demand in key end-use markets.
Americas Materials Solutions delivered a strong performance with sales 9% above 2022 levels driven primarily by solid price progression across all lines of business while Americas Building Solutions sales were 21% ahead of 2022.
Europe Materials Solutions sales were in line with 2022 reflecting continued strong pricing progress which offset the impact of lower activity levels while Europe Building Solutions sales were 4% behind the same period in 2022.
Looking ahead, North American operations are expected to be supported by robust infrastructure demand, underpinned by significant increases in US federal and state funding, while businesses in Europe are expected to benefit from solid infrastructure demand, good non-residential activity and positive pricing momentum, while the residential market is expected to remain challenging.
CRH expects full-year group Ebitda of around US$6.2 billion, up from US$5.6 billion in 2022.
Shares fell 2.0% to 4.423p.
2:55pm: Steady start on Wall Street
US stocks have made a mixed start to Thursday's session with Nvidia lifting the S&P 500 and the Nasdaq while the Dow lagged behind.
Shortly after the opening the Dow Jones Industrial Average was down 0.1% at 34,452.61, the S&P 500 was up 0.2% at 4,446.28 and the Nasdaq Composite was up 0.3% at 13,763.09.
Nvidia remains the star of the show, opening 4.7% higher after its blow-out quarterly earnings.
“Nvidia is seen as the poster child for artificial intelligence, with its chips playing a key role in the roll-out of AI systems. AI has been the hot investment theme in 2023 and Nvidia’s results imply there is a lot more to go for," said Russ Mould at AJ Bell.
In economic news, new orders for long-lasting goods in the US declined by the most in more than three years, as demand for aircraft weakened.
Durable goods orders, which include washing machines, cars and aircraft, fell 5.2% in July from the previous month, according to the Census Bureau, the biggest decline since April 2020 and below economists’ expectations of 4%.
Excluding transportation, which had boosted the headline figure for four consecutive months, new orders for durable goods increased 0.5% in July, up from a 0.2% monthly increase in June.
New orders for non-defence capital goods excluding aircraft, considered a proxy for business investment, rose 0.1% in July, rising above a 0.4% decline in June.
Elsewhere, new claims for US unemployment support were lower than expected last week, figures on Thursday showed.
According to the Department of Labor, initial jobless claims totalled 230,000 in the week ended August 19, falling by 10,000 from an upwardly revised 240,000 the week prior.
The latest reading came below FXStreet-cited consensus, which expected the figure to hold steady at 240,000.
2:12pm: Ofgem poised to unveil this winter's price cap on Friday
Ofgem will likely announce a reduction in its price cap for October onwards on Friday, as households brace for yet another winter of higher-than-usual energy bills.
Though Cornwall Insight analysts anticipate the next cap will fall from £2,074 currently to £1,926 on October 1, others have warned that bills could actually rise for some year-on-year.
Given government support last year, including subsidies on the unit prices of households’ energy and £400 bill support payments, think tank the Resolution Foundation found that those using less than the typical amount of energy could face higher bills this winter.
1:00pm: JD Sports share fall in reaction to US results overdone says JP Morgan
JP Morgan thinks the share price reactions by adidas, JD Sports and Puma following results by US retailers Dick’s Sporting Goods and Foot Locker are overdone.
The investment bank pointed sales forecasts already embed very weak demand trends in the US, with a much sharper slowdown for the US in the second half of 2023 than is even implied by FL’s lowered guidance.
In addition, ongoing markdown and/or promotional pressures in the US have been well flagged over the last few months and are already reflected in gross margin forecasts, JPM believes.
The bank forecasts on average 100bps gross margin pressure year-on-year from these drivers in the third quarter.
In a downside case, applying the incremental 80bps markdown pressure in Foot Locker's new FY23 gross margin guidance to its FY US forecasts implies a 1-2% EBIT downgrade.
JPM retains overweight ratings on adidas, JD Sports and a neutral stance on Puma.
In London, JD Sports has rallied 4.4% to 138.95p.
12:34pm: UK retail volumes sag in August - CBI
UK retail sales volumes fell in the year to August at the fastest pace since coronavirus pandemic lockdowns in March 2021, according to new data from the Confederation of British Industry (CBI).
The balance of retailers that reported a sales decline rose to 44%, a level seen only once between the pandemic and the global financial crisis in 2008, according to a weighted poll of CBI retailer members.
Gloomy set of results in our latest retail survey:
???? Sales contract at quickest rate since early 2021
???? Retailers cut investment plans
???? Headcount falls for fourth quarterly survey in a row https://t.co/7AiYlpPkKV
— Martin Sartorius (@SartoriusMartin) August 24, 2023
Sales are expected to continue to contract next month, but at a slower pace, the survey found.
Martin Sartorius, the CBI’s principal economist, said: "Retail sales in August fell at their quickest pace in over two years, culminating a summer that many retailers would rather forget."
"Against a backdrop of rising interest rates and weak demand, retailers foresee cuts to investment over the next year, while employment is expected to fall again next month."
12:02pm: Nasdaq and S&P called higher after Nvidia
The Nasdaq is set for further gains on Thursday riding the wave of enthusiasm generated by blow-out results from Nvidia once more, although the mood among blue-chips is more subdued.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.1% lower, while those for the S&P 500 rose 0.6%, and contracts for the Nasdaq 100 futures were up 1.2%.
Nvidia Corp stock is up around 7.5% in pre-market trading after the chipmaker smashed Wall Street’s high expectations, with key revenue lines coming in billions of dollars better that forecast.
Deutsche Bank described the results as a “another stunning quarter,” while the outlook was “even more impressive.”
Morgan Stanley (NYSE:MS) said: “These are remarkable results, particularly in the context that the company is looking at so much unmet demand; the breadth of AI spending is clearly growing and appears to be durable.”
“To grow a business of this complexity this rapidly with such a recent inflection is remarkable supply chain performance,” it added.
Away from Nvidia and attention will switch to the Jackson Hole gathering of central bankers which will be addressed by Federal Reserve chair Jerome Powell tomorrow.
Jeffrey O'Connor at Liquidnet reckons “Jackson Hole will set the tone for the rest of the year. Many expect higher rates for longer - whatever signals Powell gives, they will act as traders’ starting gun and will likely usher a lively period of trading throughout September.”
Elsewhere, economic data sees the release of weekly jobless claims and durable goods order figures.
Initial jobless claims, a proxy for lay-offs, are expected to have ticked up to 240,000 last week from 239,000 the prior week while durable goods are projected to have fallen 4% last month after rising 4% in June.
In company news, look out for results from discount retailer Dollar Tree and retailer Gap.
11:18am: Berenberg tips 888 as a winner
Shares in 888 Holdings PLC (LSE:888) were in the winners enclosure on Thursday, up 4.3% to 130.32p, as analysts at Berenberg tipped them for further progress.
The betting operator has been plagued by a number of issues so far in 2023 and reported first half revenue and Ebitda below expectations earlier this month.
The broker highlighted performance in the retail channel was encouraging, although its online performance was softer than anticipated.
Synergies of £150 million are now expected to be delivered in 2024, which is a year earlier than anticipated, and the group reduced leverage to 5.1x, “providing us with further confidence in 888’s ability to meet its FY25 leverage target.”
“These factors, aided by the appointment of a CEO with a proven track record, provide us with further confidence in 888’s ability to deliver a continued reduction in leverage,” Berenberg said.
Per Widerström was recently appointed CEO, and the announcement of a new CFO is expected shortly.
“With everything considered, we reiterate our Buy rating and our price target of 190p”, the bank added.
10:55am: Goldman Sachs (NYSE:GS) sees UK rates peaking at 5.75%
After yesterday's weak PMI figures, Goldman Sachs (NYSE:GS) expects two more interest rate rises by the Bank of England, with a peak of 5.75%.
Goldman's Sven Jari Stehn predicts a 25 basis point rise at the next meeting on September 21.
"Given mixed progress on the BoE’s watchlist with weak labour market activity, strong wages and slightly firmer services inflation - similar to the split verdict in the run-up to the August meeting - we expect a further 25bp hike," he said.
He thinks a 50bp move would likely require notable upside surprises across all indicators, including labour market activity but given the weakness in employment and the flash PMI "we therefore see a very high hurdle for a 50bp move in September."
Stehn believes that further tightening is probably needed to slow labour demand sufficiently to cool wage growth to 3% and therefore predicts another 25bp hike in November for a peak Bank Rate of 5.75%, "somewhat below market pricing."
He then expects the Monetary Policy Committee to maintain the peak rate for an extended period to keep policy sufficiently restrictive with the first cut in the third quarter of 2024.
"We therefore view a range of 5.5%-6.0% as reasonable for the terminal rate, with market pricing clustering towards the upper end," he added.
9:46am: Profits slip at Harbour Energy
Harbour Energy PLC (LSE:HBR) reported a fall in interim profit and lowered the top-end of its production guidance pushing shares a touch in early trading.
The North Sea’s biggest operator reported pre-tax profit in the six months to June of US$0.4 billion, down from USD1.5 billion a year ago, but swung into the red after tax to the tune of US$8 million driven by a higher UK tax rate and one-off tax charges.
It said this was mainly caused by the UK government's introduction of the energy profits levy (EPL) driving the headline tax rate on oil and gas profits up to 75% from 40% last year.
In response to the EPL, Harbour said, "we scaled back our activities in certain areas and acted decisively to manage our cost structure," including a review of its UK organisation. It expects this to deliver around US$50 million in annual savings from next year.
Analysts at Stifel said the results “illustrate the business operationally performing well.”
It retained a buy rating and 480p price target while shares were 1.8% lower at 237.80p.
9:17am: Rolls-Royce could reach 600p, says UBS
A bit more on Rolls-Royce Holdings PLC now with the stock up 1.7% at 205.20p.
But UBS thinks the shares could still triple from here reaching 600p under an upside scenario it has calculated.
“Rolls Royce offers a compelling risk/reward ratio, though both risks and rewards are high: we see an upside scenario where the stock is valued at £6 and a downside scenario of £1,” the Swiss bank said in a note on Thursday.
The bank has nearly doubled its current price target to 350p from 200p and reiterated a ‘buy’ rating.
“We believe that 2023 guidance looks conservative, that Rolls Royce could achieve £2 billion of FCF as soon as 2024 and £2.8 billion of underlying FCF in 2026,” UBS said.
“Whilst we recognise the macro economic risks given the company's China exposure, our review of aircraft utilisation patterns over H1 suggests upside risk to flying hours in H2,” it added.
UBS sees 16.5 million engine flying hours in 2024, 8.5% ahead of consensus and has doubled its free cash flow estimates for 2024-26, with smaller increases thereafter.
8:53am: FTSE firmly in the green
The FTSE 100 remains firmly in the green although a touch off early highs.
Victoria Scholar, head of investment, interactive investor said: “There is a sea of green across European equities this morning.”
“Very strong Q2 results, bullish guidance, and a major share buyback from Nvidia have provided a boost to global market sentiment,” she noted.
“Technology is the leading sector across Europe this morning following Nvidia’s 6.5% after-hours gain and its near 9% jump in Frankfurt this morning. Semiconductor stocks like ASML and STMicro are rallying too on the back of Nvidia’s blowout quarter,” she added.
In London, one star performer is Rolls Royce Holdings Ltd, up 1.8% after UBS raised its price target to 350p from 200p.
JD Sports bounced 1.7% after falling heavily yesterday after the Foot Locker warning while 888 Holding PLC rose 1.0% after an upbeat note from Berenberg.
8:20am: FTSE makes strong early progress
The FTSE 100 has stormed ahead in early exchanges with Nvidia’s blow-out numbers setting the tone.
At 8:15am, London’s lead index was up 43.75 points, 0.6%, at 7,364.28 while the FTSE 250 was up 147.15 points, 0.8%, at 18,373.64.
Deutsche Bank described Nvidia’s results as a “another stunning quarter,” while the outlook was “even more impressive.”
Sophie Lund-Yates at Hargreaves Lansdown said: “Despite a very high benchmark, Nvidia has beaten Wall Street’s expectations.”
“The artificial intelligence boom is continuing to catapult demand for the tech company’s complex chips into the stratosphere, with sales of US$16 billion expected in the three months to October.”
“That is streets away from analyst expectations and reflects the seemingly insatiable appetite for Nvidia’s products, which are the leading option for creating AI tools like ChatGPT.”
Back in London, and shares in Hays PLC (LSE:HAS) failed to join the party, falling 1.8% as it predicted net fees in the first half of the new financial year would fall reflecting touch conditions in permanent hiring.
The international recruiter saw operating profit in the UK drop 34%.
8:00am: Hays in cautious mood as annual profit drops
International recruiter Hays PLC (LSE:HAS) reported record net fees but a fall in profit, and warned net fees would dip in the first half of the coming financial year.
“Overall, we expect group net fees will decline year-on-year in H1 FY24, driving a reduction in first half conversion rate year-on-year,” the firm said in a statement.
Since the year-end, temp volumes remain stable but conditions remain tough in permanent recruitment globally, with reduced client & candidate confidence driving increased time-to-hire, Hays added.
Alongside, its full-year numbers the firm named a new chief executive with Dirk Hahn, currently managing director of Hays Germany and CEMEA taking the helm as of September 1, succeeding Alistair Cox.
Hays said net fees in year to June 30 grew 9% to £1.29 billion from £1.19 billion with growth in temp fees of 9% while permanent fees climbed a more modest 3%.
But pre-tax profit fell 6% to £192.1 million from £204.3 million but the dividend was increased 5% to 3.00p from 2.85p.
Fees in Germany grew 19% but in the UK & Ireland by only 1%, while operating profit in the latter tumbled 34%.
7:28am: B&M and Poudland eyeing Wilko stores but most to close
An update on the situation on Wilko where administrators have failed to find a buyer for the collapsed retailer meaning the most stores look set to close.
Administrators from PricewaterhouseCoopers, said on Wednesday evening that it was “likely that there will be redundancies and store closures in the future” as they had not found a buyer for the whole group.
However, they said stores would remain open for now, with no immediate job cuts or store closures as “discussions continue with those interested in buying parts of the business.”
The chain’s stores are likely to be bought by rival bargain retailers such as Poundland, Home Bargains, Primark and B&M, while landlords in some sites may have to divide up the space.
Sky News reported on Wednesday evening that Poundland could take over up to 100 stores.
7:00am: FTSE 100 called higher as Nvidia does it again
The FTSE 100 is set to open higher after Nvidia Inc lifted the mood smashing expectations once again.
Spread betting companies are calling London’s lead index up by around 32 points after closing up 49.77 points at 7,320.53 on Wednesday.
Nvidia shares soared in after-hours trade on Wednesday, adding 6.6%, after the chip maker reported "record" revenue in its hotly-anticipated second quarter results.
The Santa Clara, California-based firm said revenue climbed to US$13.51 billion in the three months ended July 30, more than double from US$6.70 billion a year earlier, comfortably topping the consensus of US$11.1 billion.
“There is nothing an investor could ask more,” Ipek Ozkardeskaya at Swissquote Bank said.
“The market expectations were sky-high, the results went to the moon, the forecasts for this quarter are as stunning,” she added.
“Magic is happening for Nvidia,” she continued.
Aside from Nvidia, attention will focus on events at Jackson Hole gathering of central bankers where Federal Reserve chair Jerome Powell is due to speak Friday.
Back in London, and results from CRH, Hunting and Hays are the early focus.