- FTSE 100 up 37 points
- JD Sports is Berenberg's top retail pick
- Computacenter jumps after strong results
4.45pm: FTSE finishes on front foot
At the close, the FTSE 100 was 37 points ahead at 7,478 for a gain of 0.5%.
3:55pm: Network Rail fined after fatal rail crash
Network Rail, the owner and operator of Britain’s rail infrastructure, has been fined £6.7 million after pleading guilty at the High Court in Aberdeen to health and safety failings following a fatal rail crash in north-east Scotland three years ago.
The case concerns a fatal incident that occurred when a passenger train collided with debris that washed on to the track after extreme rainfall.
The train’s driver, conductor and one passenger were killed. Six others were injured.
“Network Rail’s failings led to the deaths of Brett McCullough, Donald Dinnie and Christopher Stuchbury and life-long consequences for those who survived,” said Debbie Carroll, head of health and safety investigations at Scotland’s Crown Office and Procurator Fiscal Service.
3:25pm: JP Morgan says Spirax Sarco could double in upside scenario
Spirax Sarco PLC has received a boost from JP Morgan which has raised its price target to 11,500p and reiterated an overweight rating.
The investment bank pointed out that since half-year results in August, shares have fallen 9%.
JPM said investors "we have spoken to generally fall into 2 camps: 1) hedge funds who believe that guidance for FY23 remains too high and 2) long only investors who see the current issues as short-term and believe that the mid-term story is as attractive as ever."
The near-term debate centres on whether the group will have to cut guidance again for 2023 with the bears believing that even the bottom end of expectations remain too high.
JPM explained this is driven by two main areas of concern: 1) the recovery profile of bio-pharma end markets in the WatsonMarlow division and its margin implications and 2) the recovery profile of semiconductor end markets in ETS.
The bank pointed out that even its downside scenario implies just a 4% cut to 2023 consensus adjusted Ebitda expectations.
In the longer-term, the key areas of debate include: 1) whether steam specialties can accelerate growth; 2) whether ETS can deliver on its mid-term ambitions, 3) the importance of M&A to the equity story, 4) valuation and 5) what the change in CEO means for the strategy.
The bank concluded the earnings outlook of the business "is the most attractive it has been in years."
"We believe risk/ reward is very much skewed to the upside."
"Our downside scenario implies just c.12% downside to the current share price while our upside scenario implies c.40% upside," the bank said.
"Moreover, if we include the optionality from TargetZero, we see >40% upside with scope for the shares to even double from here," JPM added.
In afternoon trading, the shares were trading 1.5% higher.
2:41pm: Tech stocks pull Wall Street higher
US stocks has bucked expectations of a weak start by pushing higher in early exchanges led by shares in tech firms.
Shortly after the opening bell, the Dow Jones Industrial Average was up 23.68 points, 0.1%, at 34,524.41, the S&P 500 was up 9.81 points, 0.2%, at 4,460.95 and the Nasdaq Composite was up 57.05 points, 0.4%, at 13,805.89.
Apple recovered some its lost, gaining 1.0% while but another of yesterday's big fallers Qualcomm edged lower once more.
But, strategists at Barclays questioned whether markets can push much higher.
“While the S&P 500 equity risk premium was already low for most of 2023, the latest leg of the rally has caused the ERP to fall below IG credit spreads, raising the question of whether equity investors are willing to continue chasing growth at any cost,” the bank said.
“Absent a broad-based recovery in earnings estimates, we doubt that valuation expansion can continue driving equity market upside at these levels,” it added.
The FTSE though seems unimpressed by the US moves and is still narrowly in the green.
1:59pm: Dollar on track for longest weekly streak in nine years
The weak pound against the dollar has been a theme of the week leaving the greenback on track to secure its longest weekly winning streak in nine years as data indicated the UK and European economies are faring worse than the US.
The US dollar index, known as the DXY, which measures the greenback against major peers, is down a touch today but remains close to a six-month high of 105.15, leaving it on course to extend its gains into an eighth straight week - it is up 0.7% so far.
The dollar has also been boosted this week by strong services sector figures and a drop in weekly jobless claims, which has raised concerns that interest rates may stay higher for longer.
Sterling has slumped around 0.9% against the US currency this week, hitting a three-month low on Thursday, after Bank of England governor Andrew Bailey indicated that Britain may be at the “top of the cycle” on interest rates.
Dane Cekov, senior macro and FX strategist at Nordea Markets, said: “The relative divergence of the US and European economy is a key topic again and the weaker dollar story has just faded away.”
1.29pm: Here’s a recap of the top risers and fallers on the market today
Computacenter PLC (LSE:CCC) shares rose 17% after it reported what it called “extraordinary” growth in revenue, despite the challenging macroeconomic conditions, leaving it on course to deliver a nineteenth consecutive year of adjusted diluted earnings per share growth.
Simec Atlantis jumped 6% as its MeyGen tidal power generation site in the Moray Firth was awarded four Contracts for Difference (CfD) in the latest offshore auction round.
Harland & Wolff Group Holdings PLC (AIM:HARL) shares crumpled almost 11% to 13.62p after the Belfast shipbuilder reported a 78% increase in losses for the first half of the year, but reiterated guidance for the full year.
Guidance for revenue to double in 2024 to £200 million was, however, also restated.
AMTE Power PLC (AIM:AMTE), the lithium-ion and sodium-ion battery cells maker, crashed 81% as investors reacted to last night’s hugely discounted fundraising.
Shares are to be issued at 1.7p raising £2.1 million, which AMTE said would tide it over until a new equity investor completes due diligence on a £2.5 million cash injection.
Shares in Supreme plc, a major distributor of disposable vapes, continued to fall on Friday, down 11% to 113p over the week, as research showed the level of waste associated with the single-use vaping kits and growing calls for a ban.
1:04pm: Planning permissions hit record low
Further evidence that the UK housing market is weakening with a report showing the number of planning permissions granted across England for new houses has fallen to a record low.
The Home Builders Federation said planning permissions continued to fall “sharply”, with the number of homes approved in first half of 2023 down by 19%.
The latest data confirms industry warnings that in the midst of an increasingly “anti-development” policy environment and worsening economy, the number of homes built in the coming years could fall to record low levels, said the HBF.
Around 2,456 projects were granted planning permission during the second quarter of the year, the lowest since similar records began in 2006, said the report.
This number is 10% lower than the previous quarter and 20% lower than a year ago.
Today, housebuilder Berkeley Group bemoaned the planning system which it said continued “to deter investment into brownfield regeneration and the wider housebuilding sector.”
12:46pm: CMC offers upside after recent falls
CMC Markets is enjoying a better today, up around 2%, although it us 56% lower year-to-date.
Last month, the online trading and platform technology group said in August trading and investing net revenues trended 20% lower year-on-year with “markedly lower monetisation of client trading activity due to a higher proportion of lower margin institutional volume”.
RBC Capital Markets said: the drop-off in volatility seen year-to-date has been untimely for CMC as it has coincided with a period of elevated cost owing to investment in strategic initiatives.
But the broker sees valuation support from the high proportion of market cap now covered by surplus own-funds.
RBC has cut net operating income forecasts by 18% on average following the trading update and lowered its price target to 140p from 250p.
This offers upside from the current share price of 102.40p and RBC has reiterated an outperform, speculative risk rating.
12:10pm: Flat start expected in the US
Across the pond now, and it looks like a subdued start on Wall Street, on as tensions rise in the relationship between the US and China.
Investors also continue to mull the possibility of a further US interest rate increase following a batch of robust economic data this week.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.1% lower, while those for the S&P 500 fell 0.1%, and contracts for the Nasdaq 100 futures were down 0.1%.
Apple recovered its poise after a two-day fall which saw close to $200 million wipred off its market value.
Reports that China could limit the usage of iPhones sparked the falls highlighting the ongoing friction between he companies over access to technology.
Neil Wilson at markets.com is “not convinced a full bazooka is on the cards – for instance an outright Apple product ban doesn’t seems very unlikely.”
“It’s no coincidence that Huawei is back with a new flagship device just before Apple launches the iPhone 15 – Beijing will be happy to let rumours do the rounds to nudge consumers into buying China not America,” he said.
“However, we can also see it perhaps through the lens of the broader tit-for-tat between the US and China, so won’t necessarily be forgotten soon and it will not be immaterial in terms of sales for Apple,” he added.
Elsewhere, Michael Barr, the Federal Reserve’s vice-chair for supervision, will speak about payments innovation at the Philadelphia Fed’s annual fintech conference.
11:39am: Aviva and M&G favoured UK insurance names at Morgan Stanley (NYSE:MS)
Aviva PLC (LSE:AV.) and M&G are Morgan Stanley (NYSE:MS)’s favoured UK insurance plays trading at “relatively attractive multiples.”
The investment bank was taking a look at the sector in the wake of the transition to reporting under the IFRS 17 accounting standard.
It explained the earnings revision has been around negative 2% which it see as not material with the main impact felt by UK life insurers where earnings downgrades are material at more than 20%.
For life insurers, the key metric MS is focused on is the movement in contractual service margin (CSM), especially organic CSM growth which is new business profit add interest accretion less release to P&L.
This reflects the underlying growth in the business and the range was minus 4% to plus 11% in recent results, the bank noted.
Morgan Stanley (NYSE:MS) said the sector is currently trading at a price to book value of 1.6x “which in our view is reasonably attractive.”
It rates Aviva and M&G at overweight.
11:19am: Berekely's update surprises no-one despite tough markets
The muted response to Berkeley Group PLC’s trading update just shows how low expectations are in the City towards UK housebuilders at present.
The FTSE 100-listed housebuilder said reservation levels have fallen 35% reflecting the tough economic and political backdrop but the stark number was expected.
Russ Mould at AJ Bell said the update “surprised nobody,” but “a 35% drop in reservations tells you just how tough the housing market is right now.”
UBS said the “deterioration is consistent with others in the sector reporting sales rates over recent months.”
The sharp fall showed the recent interest rate hikes which have pushed up mortgage costs “are causing a relative lack of urgency among new buyers,” in the opinion of Aarin Chiekrie, equity analyst at Hargreaves Lansdown.
The company also bemoaned the planning which Mould said “suggested the sector’s current travails are prompting some testiness.”
“That’s not to say such complaints aren’t justified given how under-resourced many local planning departments are,” he added.
But Chiekrie said: “Looking bigger picture, Berkeley’s London focus offers something different to peers, and demand in the capital’s likely to remain more robust than other areas of the country.”
“Add to the mix that the UK housing market’s suffering from a fundamental supply shortage, and the long-term picture doesn’t look so bleak,” he said
Richard Hunter head of markets at interactive investor thinks that Berkeley is, in some ways, “a different beast to many of its competitors, with a potential edge coming from its mix of an exposure to London and the South East, higher-end properties and the regeneration of brownfield sites in which it is well accomplished.”
He pointed out the cash position remains strong which provides a potential buffer against a punishing background and a progressive dividend policy seems likely to be followed.
But he cautioned it is “far from being immune to the wider issues of mortgage availability and affordability, planning bottlenecks, uncertain consumer propensity to buy and a cloudy outlook.”
10:39am: JD Sports is Berenberg's top retail pick, ups target
JD Sports Fashion PLC (LSE:JD.) is top of the FTSE 100 risers following positive comments from broker, Berenberg.
The bank pointed out that since the initial excitement at the time of its capital markets day in February, the shares have since fallen by nearly 30% due to macro uncertainties, peer warnings and perceived execution risks.
“This looks harsh to us, as consensus earnings have continued to rise, and we think risks are lower than the market fears,” Berenberg analysts said.
“We also think investors still underappreciate the strength of JD’s model, its positioning and the international opportunity,” it added.
“JD is more than a retailer – it is a global brand dominating “mindshare” of the generation-Z consumer, with impressive local and global social media engagement (eg c66m TikTok likes versus an average c28m for sports brands and c5m for sports retail peers),” Berenberg said.
It described the JD fascia as the “jewel in the crown,” while recent acquisitions add “lots of strategic value”.
Near-term concerns well overdone with the read-across from Foot Locker and Dick’s Sporting Goods results in the US “limited.”
The bank thinks JD offers extreme value for the quality and growth on offer, looking cheap against every peer group.
“The stock is priced for significant downgrades, which we do not think will materialise, creating an attractive entry point ahead of near-term catalysts,” the bank said, noting half-year results ahead.
“JD is our top pick in the sector,” the broker concluded.
10:00am: Jefferies raises Computacenter price target to 3,300p
Computacenter continues to shine, up 6.6%, after its half-year numbers.
One broker particularly impressed was Jefferies which has raised estimates and its price target for the Hatfield-based firm.
"Better than expected interims and an upbeat tone to the statement lead to c2% upgrades in FY23 and beyond," it said in a note.
"We continue to believe investors materially undervalue Computacenter's track record of outperforming expectations and delivering high quality cash backed profits."
"We raise our price target to 3300p and reiterate our buy rating," the bank added.
Jefferies felt that against a backdrop of investor uncertainty, these were "another strong set of numbers."
It described top-line growth of 27% as "amongst the best in the industry."
Germany was the star performer, as it has been in recent periods, Jefferies said with revenue growth at 18%, with strong contributions from both Tech Sourcing (+23%) and Services (+11.5%).
9:38am: Wagamama chair to step down after activist pressure
The chair of Wagamama owner The Restaurant Group PLC (LSE:RTN) is stepping down for personal reasons following a growing chorus from activist investors for him to go.
TRG said that Ken Hanna, its chair since January last year, would not seek re-election at next year’s annual general meeting and it would initiate a search for his successor.
Hanna’s exit will be seen as a concession to activist investors who have called for his removal and a shake-up and partial sale of TRG.
The Financial Times reported that following half-year results this week, activist fund Irenic Capital, which holds a 4% stake in TRG, renewed its calls for Hanna to go because of corporate governance failures, citing correspondence seen by the publication.
Shares rallied 5% on the news.
9:08am: Gas prices jump as Australian workers beging strike
While hopes are that inflation will keep falling, rising energy prices could throw a spanner in the works.
The oil price has risen following the decision by Saudi Arabia and Russia to extend production cuts and today European natural gas prices have climbed after workers at LNG facilities in Australia, a key liquefied natural gas exporter, began strike action, stoking fears of disruption to global supplies.
The industrial action covers the Gorgon and Wheatstone liquefied natural gas facilities, which supplied roughly 7% of global LNG last year.
UK gas prices are up 7.3% at 85.300p/therm while European natural gas futures surged 5.3% to €34.51 per megawatt-hour.
8:43am: FTSE creeps higher, Berenberg likes JD Sports
The FTSE 100's early progress has already run out of steam, now up just 2 points at 7,444.
Richard Hunter at interactive investor notes "the spectre of interest rate rises which may have further to run has stalled progress over the last few trading sessions, and the latest economic news from the US in particular has strengthened the possibility."
Added to this, there are growing tensions between the US and China seen in the reports that China is seeking to limit the usage of iPhone's by state employees.
"Tensions between the US and China have reared their head again, with the reported ban on iPhone use by state employees and wider protectionist fears in both directions weighing on sentiment," Hunter noted.
Next PLC (LSE:NXT) rose 1.7% as Societe Generale upgraded to buy from hold with a price target of 8,239p, up from 7,034p while the biggest riser in the FTSE 100 is JD Sports Fashion PLC (LSE:JD.), up 2.4%, as Berenberg raised its price target to 225p from 210p and reiterated a buy rating.
8:17am: FTSE edges higher as it looks to end week on a high
The FTSE 100 opened higher on Friday despite a mixed showing in New York as London looks to end the week on a high.
At 8:15am, London’s lead index was up 10.97 points, 0.2%, at 7,452.69 while the FTSE 250 climbed 50.72 points, 0.3%, to 18,434.57.
Computacenter PLC (LSE:CCC) made a strong start to proceedings, rising 6%, after what it described as an “extraordinary” jump in first-half revenue given the tough macro backdrop.
The Hatfield, England-based computer services firm said in the six months ended June 30 revenue increased 27% to £3.58 billion from £2.83 billion the year before.
Broker Stifel was more measured in its review of the numbers but noted “strong revenue growth and adjusted pre-tax profit slightly ahead of expectations.”
“We believe it is a high quality company that is making the right decisions to invest, and we would look to become more constructive on the shares as we start to see growth reaccelerate,” the broker said.
It has a hold rating at present.
Berkeley Group PLC was little changed after its trading update where it held guidance despite reporting a 35% drop in reservations.
The housebuilder also bemoaned the current planning system which it said continued “to deter investment into brownfield regeneration and the wider housebuilding sector.”
Peel Hunt said: “Given this update and where consensus is, we expect very limited changes to market estimates following this update.”
Spirax-Sarco was given a lift by positive comments from JP Morgan
The investment bank reiterated its overweight rating but raised its price target to 11,500p from 11,300p and shares rose 1.7%.
7:56am: Hiring at three-year low in Augsut, says REC/KPMG report
More on the KPMG and REC jobs report which has showed a sharp slowdown in hiring in August.
The report showed permanent hires fell at the sharpest pace in three years, while temp billings contracted for the first time since July 2020.
The REC's measure of permanent staff placements dropped to 38.9, a reading below the threshold of 50 that indicates a decline.
It was the 11th consecutive drop and the steepest since June 2020 during the pandemic.
Claire Warnes, partner, skills and productivity at KPMG UK, said: "Despite an increasing pool of candidates this month, the economic outlook is keeping businesses cautious."
"Many employers aren’t ready to commit to permanent roles, and those who are indicate they cannot find candidates with the right skills, causing these placements to fall at a rapid pace during August – the sharpest for three years."
Recruiters frequently mentioned that employers were hesitant to commit to new hires and adopted recruitment freezes due to a weaker economic climate, the report stated.
The slowdown in hiring and reports of redundancies drove a further substantial increase in candidate availability. Concurrently, total vacancy growth continued to moderate, for the sixth month in a row, hitting a two-and-a-half year low.
The report showed the rate of starting salary inflation edged down to the joint weakest since March 2021. While temp pay growth picked up from July, it was the second-softest since April 2021.
Neil Carberry, REC chief executive, said: "August is always a slower month for new permanent roles, but this has been exacerbated in 2023 by the lack of confidence to start the new hiring we saw among firms in the Spring."
"As inflation begins to drop, it is likely that firms will return to the market later in the year – employer surveys suggest confidence may be returning. But for now, the labour market has more slack than it has since the heights of the first lockdown."
7:50am: Computacenter calls jump in first half revenue "extraordinary"
Strong looking numbers from Computacenter PLC (LSE:CCC) which described the rise in first-half revenue as "extraordinary” given the challenging macro-economic conditions.
The Hatfield, England-based computer services firm said in the six months ended June 30 revenue increased 27% to £3.58 billion from £2.83 billion the year before.
"We have seen extraordinary growth in gross invoiced income and revenue despite well published challenging macro-economic conditions," it said.
"During the period we have grown significantly faster than the market as a whole and also our major competitors. Therefore, we have gained market share," the firm added.
Technology sourcing revenue rose 33.5% to £2.77 billion, Professional Services rose 11.8% to £333.7 million and Managed Services revenue rose 6.3% to £482.8 million.
Pre-tax profit rose 14% to £122.8 million from £107.8m before and shareholders saw the dividend rise 2.3% to 22.6p from 22.1p.
7:20am: Berkeley holds guidance despire 35% fall in reservations
Another housebuilder is updating on its fortunes in the tough housing market.
The Berkeley Group Holdings PLC bemoaned the current planning system, as it backed profit guidance despite a 35% slump in reservations reflecting the “elevated macro-economic and political volatility.”
In a trading update ahead of today’s AGM, the housebuilder said it expects to deliver pre-tax profit of at least £1.05 billion across the current and next financial years; likely to be weighted slightly to financial year 2024.
Profits for the current year are expected to be split broadly evenly between the first and second half, it said.
Berkeley reported enquiries have stayed at similar levels over the last four months, but the value of underlying private sales reservations is some 35% below last year's rate.
Cancellation rates remain stable.
The firm said it had a strong opening forward sales position, with over 90% of financial 2024 revenue exchanged and anticipates cash due on forward sales to be around £2 billion at October 31.
“We remain on track to be working capital neutral over the course of this and the next financial year,” it said.
But Berkeley said it had not bought any land in the period and will only invest very selectively in new opportunities.
“The complexity and protracted nature of the current planning system and lack of clarity surrounding certain regulatory changes affecting our sector, at a time of considerable uncertainty for the UK economy with persistent high inflation and interest rates, continues to deter investment into brownfield regeneration and the wider housebuilding sector,” it said.
Berkely said it was on track to deliver the next annual shareholder return of £282.7 million (currently £2.66 per share) by September 30 2024 through a combination of dividends and share buy-backs, with at least £0.66 per share of the annual return made via dividends.
7:02am: FTSE expected to open higher
Good morning and the FTSE 100 is expected to edge higher at the open on Friday
Spread betting companies are calling London’s lead index closed up by around 11 points after closing up 15.58 points at 7,441.72 on Thursday.
US markets were mixed with the Dow rising but S&P 500 and Nasdaq slipping back weighed by further falls in Apple after report China was considering limiting the usage of iPhones for state employees.
Back in London, and updates from Berkeley and Compuacenter will provide the early while recruitment firms will be in the spotlight after a report showing a slowdown in hiring activity in Augyst.
The KPMG and REC UK report on jobs showed permanent hires fell at the sharpest pace in three years, while temp billings contracted for the first time since July 2020.
We’ll have more on this shortly.