- FTSE 100 closes down 12 points at 7,426
- Rising oil price renews fears of rise inflation
- Bridgepoint buys ECP in £835 million deal
4:40pm: FTSE 100 closes in the red but off early lows
The FTSE 100 nursed modest losses at the close but rallied from a weak start after rising oil prices prompted fears of a renewed rise in inflation.
At the close, London's lead index was down 11.79 points at 7,426.14 while the FTSE 250 fell 39.60 points to 18,451.82.
“It seemed that the FTSE 100 was fated to suffer a sharp down day, but as the session wore on buyers came in to defend the 7400 level," said Chris Beauchamp at online trading platform IG.
"But with little in the way of heavyweight news, and despite gains for the oil giants BP and Shell, the mood in London remains cautious."
"UK inflation remains an untamed beast, and oil’s rise threatens to upend the Bank of England’s plans for the year," he added.
That's it for another day, we are back tomorrow.
3:56pm: Bakkavor results impress City
Going back to some early news and shares in Bakkavor has risen 3.0% after it raised its full-year guidance for operating profit to £89.4 million, from £84.7 million.
The UK company makes around 2,900 meal-ready food products for supermarkets like Tesco.
Chief Executive Mike Edwards said: "I am pleased with the strong performance the Group has delivered in the first half, and the momentum this has created as we move through the rest of the year.”
"We are confident in delivering an upgraded full-year performance, with adjusted operating profit now anticipated to be at least in line with last year and ahead of current market expectations.”
“This is underpinned by the execution of our restructuring, which is driving performance and synergies across the business ahead of our expectations. I am also pleased that we now have momentum building in all three regions, which is positive as we look forward."
Peel Hunt, which has a buy rating on Bakkavor, increased 2023 pre-tax profit forecast by 6% to £62 million.
3:25pm: BoE Governor sees marked fall in inflation by year-end
Schools are back and Bank of England governor is facing his own examination at the House of Commons where he is being grilled by MPs on the Treasury committee, where he has signalled that further interest rate rises might be avoided.
Bailey said he expects inflation to keep falling noting many economic indicators are signalling that the fall in inflation will continue (the CPI dropped to 6.8% in July, down from 7.9% in June).
“As I’ve said a number of times, I think it [the fall] will be quite marked by the end of this year,” he said.
However, Bailey said the strength of wage bargaining has surprised the Bank, so it is now looking to see whether pay rise demands ease off.
“The question now is, as headline inflation comes down and people become more confident that it will come down… will we see inflation expectations continue to come down too, and be reflected in wage bargaining?”
Later he said that while there had been a long period where it was clear that rates needed to rise, “but we’re not I think in that phase any more”.
He added: “I think we are much nearer now to the top of the cycle.”
2:45pm: Wall Street opens lower
US stocks opened lower on Wednesday as inflation worries resurfaced raising the spectre of inflated interest rates for some time to come.
Shortly after the opening bell, the Dow Jones Industrial Average was down 112.99 points, 0.3%, at 34,528.98, the S&P 500 was down 17.37 points, 0.4%, at 4,479.46 and the Nasdaq Composite fell 49.18 points, 0.4%, at 13,971.78.
The rise in oil prices prompted concerns of hotter-than-expected inflation reports ahead sugesting interest rates could rise further, or stay higher, for longer.
Neil Wilson at Markets.com said: "Remember higher oil means people worry about higher inflation and credit."
"The Fed’s job may not be done."
Federal Bank of Boston President Susan Collins said policymakers will need to be patient as they assess economic data to figure out their next steps and that further tightening may still be required, based on what the trends show.
The CME Fed Watch tool puts a 93% chance that the Fed will leave rates unchanged at its next meeting and a 55% likelihood it will do the same in November.
Still to come on Wednesday, the ISM services sector report and the Fed's Beige Book.
2:20pm: JP Morgan adds Sage to positive catalyst watch list
JP Morgan has taken a further at accountancy software provider Sage and likes what it sees.
The investment bank recently upgraded Sage to overweight and today has placed the firm on its positive catalyst watch list ahead of fourth results where it expects “robust guidance.”
Shares reacted well, rising 1.6% to 988.40p.
The broker has taken a deep dive into Intacct, Sage’s most important product and growth engine (~15% of sales growing ~30%; contributing ~4.5pts of organic growth FY23E).
“Based on our analysis and industry discussions, we believe Intacct is a leading asset in the mid-market core financial management software space and is poised to continue taking share as its addressable market goes through a generational shift to the cloud,” JPM said.
“We believe Sage Intacct can drive upside to consensus through 1) the North America mix shift, and 2) International roll-out over time,” it added.
JPM says Sage is a key conviction in European Software with an under-appreciated 10%+ revenue growth profile, mid-term margin potential of ~25%, midteens sustainable EPS growth, balance sheet optionality, attractive valuation and runway of incremental buyers.
1:54pm: NatWest confirms Haythornthwaite as new Chair
NatWest Group PLC (LSE:NWG) has confirmed the appointment of Rick Haythornthwaite as chair succeeding Sir Howard Davies.
Haythornthwaite will NatWest board as an independent non-executive director on January 8 2024 and take over as chair on April 15, 2024, when Sir Howard Davies will stand down from the board.
Mark Seligman, senior independent director, said: "After careful consideration of a number of high-quality candidates, the board has unanimously chosen Rick as our new Chair."
He said he was a "highly experienced Chair who combines a successful commercial career with a deep knowledge of financial services markets and technology, as well as a strong track record of delivery at significant customer-facing organisations."
Haythornthwaite said: "It is a privilege to assume the role of NatWest Group Chair."
Haythornthwaite is chair of Ocado Group and a non-executive director of NYSE-listed Globant SA.
He will step down as a director of Globant and from his private company directorships apart from the AA where he will become a non-executive director.
1:35pm: Here are some of today's risers and fallers in London
Genedrive PLC shares soared 10% higher after the molecular diagnostics company said it secured UKCA marking for its new Genedrive CYP2C19 System, allowing it to start commercialisaton of the point-of-care test in the UK.
UKCA is the new UK product marking required for certain products placed on the market in Great Britain. It covers most products that previously required the European Union’s CE mark
Mosman Oil and Gas Ltd (AIM:MSMN) jumped 44% after lodging its Year Three report on EP 145, its exploration block in the Amadeus Basin in Australia, with the Northern Territory government.
The current work schedule on the permit will be the acquisition of seismic in early 2024, subject to funding and APAA and government approvals.
WH Smith PLC (LSE:SMWH) shares fell 7% despite a solid trading update on disappointment that the firm didn't raise guidance once more.
"The shares trade on a mid-teens PE and are excellent medium and long-term value, but the lack of an upgrade today may mean they do not do much up to the prelims in November," said analysts at Peel Hunt.
Shares in Surgical Innovations Group (AIM:SUN) fell over 15% after it warned on profits, saying disruptions to manufacturing productivity and in the supply chain have persisted since its June update and are also expected to hit second-half profits.
Directors guided to a "modest" profit at the adjusted EBITDA level for 2023, with "better momentum" in the 2024 financial year.
1:00pm: Eurozone construction activity slows in August
It's not just construction in the UK that is suffering.
Over in the eurozone, construction acrivity declined in August at the fastest pace since the start of the pandemic as rising interest rates hit building activity.
???????? “Gloomy” - that’s how the HCOB Construction PMI report characterizes eurozone activity in the sector in Aug
“Companies continued to reduce activity owing to sustained declines in new orders. In response, firms once again scaled down input buying, reduced employment levels and… pic.twitter.com/E3EZfI73tF
— Nikolay Kolarov, CFA (@libertniko) September 6, 2023
The HCOB eurozone construction purchasing managers’ index, which tracks total activity in the sector, edged down to 43.4 in August from 43.5 in July, its lowest level so far this year, and taking it further below the 50 level that separates growth from contraction.
Housebuilding declined at the fastest pace since April 2020, while commercial construction and infrastructure activity also declined but at a slower pace.
12:32pm: Barratt falls after results but it's not all doom and gloom
Shares in Barratt Developments remain in negative territory, down 1.7%, following its annual results.
Riss Nould as AJ Bell notes the UK’s biggest housebuilder is a good bellwether for the wider sector so gloomy results are unsurprisingly dragging down the peer group.
"The costs of doing business are still rising while increased borrowing costs for consumers are hitting demand and house prices," he pointed out.
“Beset by planning issues too, Barratt is announcing marked reductions in its build targets for 2023," he added.
But unlike during the global financial crisis, the last time the industry was really shaken to its foundations, most housebuilders, Barratt among them, have fixed the roof while the sun was shining and have fairly robust finances, he added.
But Aarin Chiekrie, equity analyst at Hargreaves Lansdown felt "it’s not all doom and gloom."
Build cost inflation looks set to ease to mid single-digits this year while a sharp reduction in land spend last year more than offset the share buyback programme, helping to keep Barratt’s net cash position broadly flat at a mighty £1.1 billion.
"That provides plenty of flexibility to smooth out any future bumps in the road," he reckons.
But with interest rates set to remain higher for longer, consumer confidence and spending will continue to come under pressure this year, it could be a while before momentum really picks back up again, he thinks.
"Barratt’s valuation’s already trading well below the long-term average, so the market slowdown looks well priced in", he believes.
12:04pm: Asos and boohoo lower as Goldman cuts targets
Retail is the name of the game at Goldman Sachs (NYSE:GS) today with the investment bank rejigging price targets for a number of retailers.
Shares Asos and boohoo have slipped 4.4% and 2.2% on the news.
Goldman has cuts JD Sports Fashion (buy) price target to 240p from 270p, Next (neutral) to 7,650p from 7,750, Kingfisher to 280p (neutral) from 315p, Boohoo (neutral0 to 43p from 50p and Asos (neutral) to 515p from 600p.
It has raised targets for Ocado (neutral) to 900p from 880p and Marks & Spencer (neutral) to 255p from 240p.
11:42am: US markets expected to open lower
US stocks are expected to open lower on Wednesday as a spike in the oil price sparked fears of a renewed jump in inflation.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.1% lower, while those for the S&P 500 fell 0.2%, and contracts for the Nasdaq 100 futures were down 0.3%.
The Dow finished close to 200 points, or roughly 0.6%, lower on Tuesday, while the S&P 500 and Nasdaq Composite slipped 0.4% and nearly 0.1%, respectively.
Part of the downward pressure came from oil prices, which rose to their highest level since November after Saudi Arabia and Russia extended their voluntary supply cuts.
But on Wednesday, West Texas Intermediate futures slipped 0.7% to $86.07.
Stocks on the move include Zscaler which jumped 7.2% in pre-market deals after well-received results after the closing bell Tuesday.
Otherwise, the release of the Beige Book late in the session will attract investor interest.
11:02am: US election could limit rise in oil price
So what does the move by Saudi Arabia and Russia to extend production cuts mean for the future path of the oil price.
Daan Struyven at Goldman Sachs (NYSE:GS) sees two bullish risks to his oil price forecast of $86/bbl for December 2023, and $93/bbl for December 2024.
First, the mechanical upside risk to the December 2023 forecast from a 500kb/d Saudi fourth quarter supply miss is roughly +$2/bbl.
Second, a bullish scenario where 9 OPEC+ countries do not reverse half of the 1.7mb/d cut announced in April 2023 in January 2024 suggests a mechanical $14/barrel of upside risk, which would put Brent in December 2024 at $107/barrel, he calculated.
But Stuyven stressed "this is not our baseline view."
"We still think that the producer group is unlikely to pursue Brent prices well and sustainably above $100/bbl given its focus on medium-run stability."
This view reflects an analysis of the 2022 energy crisis (which caused large increases in oil supply from the US and from sanctioned producers and in investment in alternatives to oil; high-frequency tracking of US shale; and the political importance of gasoline prices and real income in the run up to US presidential elections.
Brent crude has eased a touch from the levels seen yesterday, hovering just below $90/barrel.
10:22am: NatWest set to appoint Rick Haythornthwaite as new chair
Rick Haythornthwaite, the City grandee who has chaired companies including Centrica and Network Rail, is being lined up as the new chairman of NatWest Group in the wake of the row about the de-banking of Nigel Farage, according to Sky News.
Sky News has learnt that Mr Haythornthwaite, who currently chairs Ocado and the AA, is expected to be appointed as Sir Howard Davies's successor in the coming days.
EXCLUSIVE: Rick Haythornthwaite, the former MasterCard chairman, is being lined up as the new chairman of NatWest Group, the taxpayer-backed bank. He will replace Sir Howard Davies, who will leave next year after the controversy over the Nigel Farage debanking scandal. More soon.
— Mark Kleinman (@MarkKleinmanSky) September 6, 2023
City sources said that an announcement could come as early as Wednesday following the disclosure of his prospective appointment, Sky said.
Haythornthwaite is among Britain's most experienced businesspeople, having led a string of companies, including MasterCard International.
10:13am: Housebuilding continues to contract, S&P
UK construction saw a mild expansion in activity in August, according to survey data, but the slump in the housebuilding sector continued.
The S&P Global/CIPS UK construction purchasing managers' index fell to 50.8 points in August, from 51.7 in July, but remained above the 50-point mark that separates expansion from contraction.
United Kingdom Construction PMI pic.twitter.com/4fyQnPzMxo
— Kaname Gokon (@bullgokon) September 6, 2023
S&P Global, noted "divergent trends" across the three main surveyed categories. Commercial building expanded at a "robust" pace, with a PMI of 54.2, while civil engineering grew, but at a somewhat slower pace, with a PMI of 54.2.
But, housebuilding continued to contract, with a PMI of 40.7, the second-fastest downturn since May 2020.
"Survey respondents widely commented on subdued market conditions and a headwind to activity from cutbacks to new build projects," S&P Global said.
"Resilient demand for commercial work and infrastructure projects are helping to keep the construction sector in expansion mode for now, but the survey's forward-looking indicators worsened in August," warned S&P Global Market Intelligence economics director Tim Moore.
New orders fell at the fastest pace in over three years as respondents cited concerns over the macroeconomic outlook and the effects of high interest rates. The degree of positive sentiment was the lowest recorded since the beginning of 2023.
9:45am: Bridgepoint swoops for ECP in £835 million deal
Bridgepoint Group PLC (LSE:BPT) is to buy Energy Capital Partners Holdings LP with an upfront enterprise value of £835 million
This comprises 235 million of newly issued Bridgepoint shares, £233 million of cash, and £179 million of ECP's existing debt.
Bridgepoint said the newly combined platform will span private equity, infrastructure and credit with offices across Europe, North America and Asiaadds and create a €57 billion global private markets asset manager.
The deal will be accretive for Bridgepoint shareholders from the day of closing across fee-related earnings, Ebitda and net income per share
Brigdepoint said the transaction accelerates the enlarged group's growth ambitions and significantly diversifies its income streams.
9:15am: UK economy set to flatline says BCC
The UK economy is set to flatline for the next six months, but it will ‘feel a lot’ like a full-blown recession for millions.
That is the view of the British Chambers of Commerce which thinks economic activity in the UK’s ‘fragile economy’ will remain very weak throughout 2024 and 2025.
The BCC expects the next two quarters to flatline, leading to overall growth of 0.4% for the year.
????️@realVickyPryce: "The BCC forecast shows the UK economy is teetering on the edge of a recession. But the fact is, that with growth predicted to hover so close to zero for three years, it will still feel a lot like one for most people and businesses."
— BCC (@britishchambers) September 6, 2023
This means the UK economy remains on course to avoid a technical recession, but growth is likely to remain so feeble that it will be hard to spot the difference, the BCC said.
It has also slashed its forecast for the next two years, as the economy is hit by rising inflation and high interest rates which squeeze disposable income and household spending.
The UK economy expected to grow by just 0.3% in 2024 (down from a previous forecast of 0.6%), rising to 0.7% in 2025 (down from 1%).
The BCC said: "Consistently low economic growth of this nature is comparable to previous periods of economic shocks and recessions such as the oil crises of the 1970s and financial crash of 2008."
8:48am: FTSE firmly in the red
The FTSE 100 remains in the doldrums, now down 59 points at 7,379.
Fallers are broad-based led by luxury good retailer Burberry Group PLC (LSE:BRBY), housebuilder Persimmon PLC (LSE:PSN) (with Barratt Developments not far behind) and engineering firm, IMI PLC (LSE:IMI).
Over to the FTSE 250, and Darktrace was an early casualty, down 5.5%, after it said that changes to its sales commission would squeeze its earnings margin in the current year after it delivered a 52% rise in adjusted core earnings in the 12 months to end-June.
The company said the decision to pay 100% of its sales commissions up front, rather than 50% with the remainder typically one year later, would result in an adjusted core earnings range of 17% to 19% for the year, down from its previous expectation of around 22%.
But it stressed “underlying performance trajectory is not changing.”
The trading update from Halfords continues to be well received with shares up 2.9%.
Peel Hunt noted the market was strong in services but weaker in discretionary and cycling.
“Halfords won share in all categories but overall sales growth was in line with its expectations (it would have been better had it not been for a quiet July and August) and forecasts do not change today,” the broker added.
“Market share gains should bear fruit in time and the strategy is bang on point,” Peel Hunt said, adding “the shares reflect mostly bad news ahead and that is just too harsh in our view.”
Dunelm rose 3.2% after Deutsche Bak raised its price target to 1,340p from 1,310p ahead of full-year results.
The bank said its industry and Dunelm datapoints indicate a “strong start to FY24 with continued market share gains.”
“Costs pressures have largely been alleviated, with FX to become a tailwind towards the end of FY24,” Deutsche added.
8:15am: FTSE 100 slides on inflation worries
The FTSE 100 opened lower as rising oil prices throw another spanner in the works, renewing fears of a further spike in inflation.
At 8:15am, London’s lead index was down 46.48 points, 0.6%, at 7,391.45 while the FTSE 250 slipped 67.67, 0.4%, at 18,423.75.
Susannah Streeter, head of money and markets, Hargreaves Lansdown said the rise in oil prices will “cause another headache for central bankers.”
“Energy prices are big inflationary drivers, and just at the time when the price spiral appears to be moving more obediently downwards, high crude prices could cause upset.”
Deutsche Bank’s Jim Reid said the move “has already had a clear impact on gasoline/petrol prices, and is expected to lead to some hot CPI reports in August, so the risk is that this further run-up will only add to those pressures in the September/October numbers.”
“This could pose a tricky dilemma at a time when several growth indicators are already turning lower, particularly in Europe, since central bankers will have to decide whether to focus on above-target inflation, or whether they should ease up on rate hikes given the downturn in growth.”
“It’s true that this won’t directly show up in core inflation since it's energy, but the risk is you ultimately get second-round effects in other categories,” he added.
“In addition, since central banks’ targets are still measured in headline terms, it’s going to be harder for them to pivot in a dovish direction the longer inflation stays above target,” he reckons.
The oil price has eased a touch today but Brent crude sits just below US$90/barrel at US$89.77.
In a busy morning of company news, Barratt Developments fell 1.0% as it cut the dividend and paused its buyback programme to reflect the tough trading environment.
The housebuilder reported a drop in profits and soft trading over the seasonally weak Summer period.
Richard Hunter, head of markets at interactive investor, commented “All things considered, Barratts is playing a decent hand with the woeful cards being dealt to them in the current environment.”
Elsewhere, trading updates saw Halfords rise 2.2% while WH Smith slipped 3.8%.
On Halfords, analysts at Liberum said: "With no changes to guidance today, we don’t expect a material change to consensus forecasts."
7:50am: Barratt cuts dividend, pauses buy-backs, completions to fall
Barratt Developments PLC (LSE:BDEV) has cut its dividend and scrapped plans for further share buybacks for now as tough trading conditions continue.
Not the biggest surprise given the weak state of the housing market but we'll see how the City reacts shortly.
The FTSE 100 listed housebuilder said: “Whilst the company remains in a strong financial position, the UK housing market remains difficult and the outlook remains uncertain.”
“We have therefore agreed that whilst our reduction in dividend cover to 1.75 times will apply from FY24 as planned, there will be no further share buybacks at this stage.”
The news came as the firm reported a 16.2% drop in adjusted pre-tax profit to £884.3 million from £1.05 billion in the year to June 30, while adjusted EPS fell 18.9% to 67.3p from 83p.
The dividend was cut by 8.7% to 33.7p from 36.9p.
David Thomas, chief executive said: “We have delivered a strong operational performance in a challenging operating environment.”
Total completions were down 3.9% to 17,206 from 17,908 and Barratt reckons this figure will fall to between 13,250 and 14,250 in the coming year.
7:41am: Travel rebound boost WH Smith
Another well-known name on the high street but which has shifted its focus to airports is WH Smith PLC (LSE:SMWH).
It expects full-year results to be in line with the upgraded expectations reported in its recent trading update.
The retailer said revenue was up 28% for the year versus 2022, driven by travel which was up 42% boosted by much stronger passenger numbers in the second half of the financial year compared to the first half.
In the UK, WH Smith saw continued strength in air passenger numbers in the peak holiday season, building on the recovery in passenger numbers seen in the second half of the previous financial year.
Businesses in North America and the Rest of the World continued to show good momentum, whilst also reflecting the strength in sterling.
Growth plans for the coming financial year, include over 40 new stores in North America and 25 new stores in the Rest of the World, which including the UK travel business, takes planned new store openings to over 80.
WH Smith said its high street business has performed well and in line with expectations.
7:29am: Autocentres drives growth at Halfords, weather hits cycling
A busy morning of results and trading updates. We'll starts with Halfords Group PLC which said trading has remained strong with like-for-like revenue up 7.8% driven by growth in Autocentres.
In the 20 weeks to August 18, the car and cycling specialist said Autocentres same store revenue rose 16.6% and Retail by 3.7%.
Within Retail, needs-based products and services drove strong motoring like-for-like growth of 7.5% whereas the more discretionary areas of Cycling, Car Cleaning and Touring were adversely impacted by unfavourable weather and low consumer confidence.
Cycling, which now only represents 25% of total revenue, was down 2.7% like-for-like.
The FTSE 250-listed firm highlighted market share gains across all categories and in line with expectations set out at the Capital Markets Day in April.
As a result, the company expects full-year underlying pre-tax profit to be between £48 million and £58 million compared to a company compiled consensus of £51.0 million to £57.7 million.
Graham Stapleton, chief executive said: “It’s been a good start to the year for Halfords, and our ongoing focus on essential maintenance and servicing is driving a strong performance in our Autocentre and Retail Motoring business.”
7:00am: Rising oil price renews inflationary fears
Good morning and the FTSE 100 looks set to weaken when trading opens on Wednesday after the jump in the oil price sparked renewed fears over inflation.
Spread betting companies are calling London’s lead index down by around 30 points after closing down 14.83 points at 7,437.93 on Tuesday.
News that Saudi Arabia had extended production cuts until the end of the year pushed oil prices higher on Tuesday with the price of Brent crude topping $90/barrel, although it is below that mark in current trading.
"There is increasing concern that the rise in oil prices that we've seen since June, will put a base under the recent slowdown in prices, and keep inflation at elevated levels for longer," CMC’s Michael Hewson said.
Ipek Ozkardeskaya at Swissquote Bank said: “As a result, the central banks, including the Fed, will have little choice but to keep their monetary policies sufficiently tight to prevent an uptick in inflation.”
“That could mean further rate hikes, or keeping the rates at restrictive levels for longer, in which case, oil prices make a U-turn and cheapen due to recession and global demand concerns.”
The early focus in London on a busy looking morning will be from Barratt Developments, WH Smith, Darktrace, Ashmore and WH Smith amongst others.