- FTSE 100 finishes 5 points ahead
- Retail sales rise 0.4% in August
- Business activity slips in August
4.40pm: FTSE finishes flat
At the close, the UK's major index was flat at 7,694 points.
“Following a week which saw investors shed stocks at the fastest weekly rate in 2023 while US yields rallied to more than decade highs, stock indices stabilized near key technical support on short-covering into the weekend," IG's Axel Rudolph wrote.
"Next week's Eurozone and US consumer confidence, business climate and unemployment data could trigger further sell-offs in global stock markets, though."
3:52pm: US private sector slows in September
After the UK and Europe, comes news of the US PMI.
The US private sector remained in growth territory in September, though the pace of expansion faded on a less robust showing from the service economy.
The S&P Global flash services purchasing managers' index fell to 50.2 points in September, an eight-month low, and down from August's final tally of 50.5. The latest figure fell short of the FXStreet cited consensus, which predicted a rise to 50.6 points.
September flash data signalled a broad stagnation in private sector output across the #US. The headline #PMI fell to a seven-month low of 50.1 (Aug: 50.2). The slowdown was linked to muted demand conditions. Read more: https://t.co/oyd5brljun pic.twitter.com/dhw59lLHGs
— S&P Global PMI™ (@SPGlobalPMI) September 22, 2023
The flash manufacturing PMI rose to 48.9 points in September, from August's final reading of 47.9. Though the latest figure is a two-month high, it still suggests the manufacturing economy remains in contraction.
3:15pm: US and China announce new economic working groups
The US and China announced two new working groups on economic and financial policy, in the latest effort to stabilize fraught relations between the world's biggest economies.
The formation of the groups was agreed during talks in July between US Treasury Secretary Janet Yellen and Chinese Vice Premier He Lifeng in Beijing, the Treasury Department said.
Today’s announcement of the establishment of Economic and Financial Working Groups between the Treasury Department and counterparts in China is an important step forward in our bilateral relationship and builds on my visit to Beijing in July. https://t.co/Bedf7TChlN
— Secretary Janet Yellen (@SecYellen) September 22, 2023
Chinese state broadcaster CCTV also announced the launch of an "Economic Working Group" and "Financial Working Group," saying both will hold "regular and irregular meetings to strengthen communication and exchange on relevant issues."
"My trip to China aimed to establish a durable channel of communication between the world's two largest economies, consistent with President (Joe) Biden's guidance following his meeting with President Xi (Jinping) in Bali," said Yellen in a social media post announcing the new groups.
2:48pm: Steady start on Wall Street
US stocks haven't exactly motoroed out of the blocks but there are up which after their recent falls is something of a positive.
Shortly after the opening bell, the Dow Jones Industrial Average was up 4.43 points at 34,074.85, the S&P was up 6.90 points, 0.2%, at 4,336.90 and the Nasdaq Composite was up 30.65 points, 0.2%, at 13,254.63.
Oracle Corporation (NYSE:ORCL) rose 0.8% after it reiterated that it expects to generate about $65 billion in annual revenue by the 2026 fiscal year, a target it first shared with investors a year ago.
Activision Blizzard climbed 1.8% after the UK's competition watchdog said a new restructured deal from Microsoft substantially addresses its concerns over cloud gaming.
Amazon was another share in the green, up 1.3%, after it said in a blog post that it will introduce advertising on its streaming services in countries such as the US and UK.
2:10pm: Barclays upbeat on Lloyds; rate pause positive for UK banks
Lloyds Banking Group PLC (LSE:LLOY) received a further boost from Barclays which has made the lender one of its preferred European banking plays, replacing HSBC.
The bank thinks a pause in rate hikes is positive for the UK and its banks, particularly if adverse deposit trends, notably mix shift, can moderate from here as it expects, and earnings benefit from a sizable underappreciated hedge tailwind.
It thinks the earnings impact of a lower-than-expected UK Base Rate is likely to be minimal for UK banks, given deposit pass-throughs, or betas, of the most recent rate hikes are already very elevated.
Indeed, an earlier peak in UK Base Rate may slow the pace of adverse deposit trends, which have been weighing on near-term net interest margin estimates, notably deposit mix shift from current accounts to more costly term deposits, it suggested.
UK banks share performance has lagged rate rises but Barclays thinks the UK risk premium should unwind if confidence in the UK macro can improve.
“With provisions set to stay low and earnings strong, we see attractive value for a patient investor,” Barclays said.
“We prefer overweight-rated Lloyds (price target 70p), which in our view is simply too cheap at 5x 2025 estimated EPS (vs European banks c6x)."
1:35pm: Here are some of today's risers and fallers
OptiBiotix Health PLC (AIM:OPTI, OTC:OPBXF) shot up almost 17% as it announced an agreement to launch its slimming products SlimBiome, GoFigure and Snacksmart online with Boots.
Sales are scheduled to start early next year with a potential store launch in May 2024, subject to Boots' in-store category rebuild, said a statement from OptiBiotix.
Shares in R&Q Insurance Holdings Ltd (AIM:RQIH) climbed over 13% on Friday morning after the firm confirmed it is in talks over the potential split of its business.
According to a statement, R&Q is in “advanced talks” with investment manager Onex (TSX:OCX) Corporation over the sale of its Maltese-based insurance wing Accredited.
AstraZeneca PLC (LSE:AZN)’s share price surged by 2.3%, adding nearly £5 billion to the company's market value, following the announcement of encouraging results from an ongoing clinical trial on datopotamab deruxtecan, a drug aimed at treating breast cancer.
Comptoir Group PLC (AIM:COM) shares slipped by almost 20% on Friday morning as the restaurant operator unveiled industrial action and weather hit interim results.
Though revenue grew marginally by 2.1% to £14.8 million, alongside like-for-like sales up by 6%, earnings per share slumped from 0.77p in 2022 to a loss of 0.64p this time around.
1:07pm: Vodafone's Spanish exit?
London-listed buy-fix-sell vehicle Zegona Communications has confirmed that it is in talks with Vodafone Group PLC (LSE:VOD) to take over the British telecoms group’s flailing Spanish arm.
Responding to press speculation, the company said it "confirms that it is in discussions with Vodafone Group PLC (LSE:VOD) in connection with the potential acquisition, and with banks in relation to its financing."
Sources told the Spanish paper Expansion that Zegona is seeking out funding for either a total takeover, or 50% acquisition, of Vodafone Spain at a €5 billion (£4.3 million) valuation.
Vodafone is a top-three telecoms operator in Spain, alongside domestic player Telefónica and French firm Orange.
12:35pm: JD Sports 'best in class' sportswear retailer, says BofA
JD Sports Fashion PLC (LSE:JD.) is nearly 2% higher on further positive comment after yesterday’s results.
Bank of America has reiterated a buy rating and 233p price target, compared to the 147.50p share price today.
“We think JD’s robust trading and unchanged guidance is encouraging amidst a backdrop of disappointing results from US peers in recent weeks, having cited market challenges,” BofA said.
It said the results “reaffirm our conviction in what we deem is a best-in-class sportswear retailer with compelling valuation.”
BofA highlighted progress with store roll-outs, the potential for an extension to its loyalty card, and that the new distribution centre in Derby was on track to fulfil most UK online orders ahead of peak trading in the fourth quarter.
12:00pm: Wall Street set to rally after heavy falls
US stocks are expected to rally at the open on Friday, led by tech stocks, after three days of falls after the Federal Reserve signalled interest rates would stay higher, for longer.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.1% higher, while those for the S&P 500 rose 0.2%, and contracts for the Nasdaq 100 futures were up 0.4%.
There was good news for Microsoft Corp, which rose 0.2% in pre-market trading after its $75 billion acquisition of Activision Blizzard drew closer to completion after the UK's competition watchdog said a new restructured deal substantially addresses its concerns over cloud gaming. Activision shares jumped 1.8%.
Amazon is to introduce advertising on its streaming services in countries such as the US and UK.
In a blog post on Friday, Amazon said Prime Video content will include “limited” adverts from early next year to enable it to continue investing in TV content and increase investment “over a long period of time”.
S&P Global will release its US flash purchasing managers' indices for September, which are expected to rise.
Economists forecast manufacturing PMI to tick up to 48, compared with 47 in August, and services PMI at 50.6, up slightly from 50.5 in the prior month.
11:25am: Phoenix Group hit by JPMorgan downgrade
One stock on the wane today is Phoenix Group Holdings PLC (LSE:PHNX), down 1.7%, knocked by a downgrade by JPMorgan.
The investment bank has downgraded the insurer to underweight from neutral and slashed its price target to 500p from 655p.
It's part of a number of changes made by the broker.
It has raised the price target for Admiral (underweight) to 1,700p from 1,650p and kept an underweight rating, cut Prudential PLC's price target (neutral) to 1,500p from 1,630p and Legal & General's price target (overweight) to 290p from 315p pence.
Hiscox has been upgraded to overweight from neutral with the price target lifted to 1,300p from 1,200p with Lancashire downgraded to neutral from overweight with a 715p price target, down from 750p.
Just Group's price target (overweight) goes to 125p from 120p.
11:01am: Lloyds is Deutsche's preferred UK banking play
Lloyds Banking Group PLC (LSE:LLOY) is motoring along, up 3.0%, lifted by positive comments from Barclays and Deutsche Bank.
The German investment bank said Lloyds is its preferred UK banking play, reiterating a ‘buy’ rating on the high street lender despite nudging its price target down to 62p from 63p.
“Our preference among UK domestic banks is Lloyds which we believe has a more stable deposit base; lower NIM sensitivity to deposit outflows; lower consensus expectations; and with a substantial yield,” analyst Robert Noble said.
Noble expects monetary policy to have incrementally negative impacts on the outlook for UK banks.
“As liquidity tightens we expect banks' will shrink and cost of funding will increase,” he said, adding “there is risk that the BOE passes more costs onto the banks through rate reform.”
However, he explained the current valuation of UK banks more than adequately compensates for these risks.
Noble rates Barclays PLC (LSE:BARC) (Barclays PLC (LSE:BARC)) at hold with a price target of 200p, down from 230p, NatWest Group PLC (LSE:NWG) (NatWest Group PLC (LSE:NWG)) buy with a price target of 320p down from 370p and Virgin Money UK PLC (LSE:VMUK) (Virgin Money UK PLC (LSE:VMUK)) hold with a price target of 210p, down from 220p.
Shares in Lloyds were 3.0% higher at 45.74p.
10:43am: Stocks jump in weak PMI signals peak in interest rates
Ashley Webb, UK Economist at Capital Economics reckons the fall in the activity PMI further below the boom-bust level of 50.0 in September suggests the economy may well already be in recession.
"This helps to explain why the Bank of England didn’t raise interest rates yesterday (it saw the data in advance), and all-but confirms that interest rates have peaked," he notes.
"Overall, growing signs of weaker activity and easing price pressures supports our view that interest rates are now at their peak," he said, adding he given he core inflation to fall only slowly, the Bank will keep rates at their peak of 5.25% until late in 2024.
The market seems to have taken the bad news is good news for equities view, jumping 40 points, on expectations that interest rates have ideed paused.
9:58am: PMI figures show a UK recession likely, says S&P
A bit on the PMI report.
Chris Williamson, chief business economist at S&P Global Market Intelligence, which compiled the PMI survey said: "The disappointing PMI survey results for September mean a recession is looking increasingly likely in the UK."
"The steep fall in output signalled by the flash PMI data is consistent with GDP contracting at a quarterly rate of over 0.4%, with a broad-based downturn gathering momentum to hint at few hopes of any imminent improvement."
"Underscoring the severity of the UK’s deteriorating situation, September’s downturn is the steepest since the height of the global financial crisis in early 2009 barring only the pandemic lockdown months."
"The survey had warned that a revival of growth in the second quarter looked unsustainable, and the third quarter is indeed seeing a mounting toll on the economy from the reality of the increased cost of living and the recent rapid rise in interest rates."
9:43am: UK private sector sees steepest fall since 2009 - excluding lockdown
Now it's the UK's turn and activity in the private sector has fallen at its fastest rate in 32 months.
The headline seasonally adjusted S&P Global / CIPS Flash UK composite output Index registered 46.8 in September, down from 48.6 in August, to signal the fastest reduction in output since the lockdown period in January 2021.
Aside from pandemic disruptions, the drop was the steepest since March 2009.
The @SPGlobal @cipsnews #UK Flash #PMI fell to 46.8 in September (Aug: 48.6) to signal the sharpest contraction in private sector activity since the financial crisis when excluding lockdown-hit months: https://t.co/0gOgNWh3xF
Find out about the PMIs: https://t.co/9s02gyxV9S pic.twitter.com/5u6y30K86L
— S&P Global PMI™ (@SPGlobalPMI) September 22, 2023
S&P said the loss of momentum reflected a steeper drop in service sector activity than seen during August, which more than offset a slower decrease in manufacturing production.
The flash UK Services PMI business activity index fell to 47.2 from 49.5 in August, a 32-month low, although the flash UK manufacturing output index climbed to 44.6 from 44.1 in August, a 2-month high.
Weaker demand due to cost-of-living pressures and higher borrowing costs were cited by survey respondents, alongside cutbacks to spending among clients in the real estate and construction sectors.
Some manufacturers suggested that customer destocking had acted as a brake on their output requirements.
Better news on pricing wiith input price inflation seeing its largest monthly fall so far in 2023, despite widespread reports citing pressure on costs from higher fuel bills.
A combination of weak demand and lower cost inflation contributed to the slowest increase in average prices charged by private sector companies since February 2021.
Remember, this number was seen by the Bank of England before it decided to leave interest rates unchanged.
9:20am: Eurozone private sector downturn continues
A raft of flash PMI releases today.
Starting in Europe and the downturn in eurozone private sector activity continued in September amid a sharp deterioration in customer demand, according to preliminary survey data on Friday.
The Hamburg Commercial Bank flash composite purchasing managers' index edged up to 47.1 points in September from 46.7 in August. Rising towards the 50-point no-change mark, it shows the downturn softened marginally over the month. It was higher than FXStreet-cited market consensus of 46.5.
Waning demand continued to hit business activity across the #eurozone in September, with the headline flash #PMI remaining in contraction at 47.1 (Aug: 46.7). Job levels rose but only slightly amid the gloomiest outlook since Q4 2022. Read more: https://t.co/0RmoxNHIuW pic.twitter.com/grG1oaJxsP
— S&P Global PMI™ (@SPGlobalPMI) September 22, 2023
The services PMI rose to 48.4 from 47.9, indicating the pace of decline slowed slightly. The overall private sector contraction was led by the ongoing slump in factory activity, with the manufacturing PMI inching lower to 43.4 from 43.5. Aside from a brief period in the first quarter, eurozone manufacturing output has fallen continuously since the middle of 2022, S&P Global noted.
8:59am: AstraZeneca gives FTSE 100 a lift
The FTSE 100 has pushed higher now, up 8 points at 7,687, as AstraZeneca shrugged off its opening fall to push 2% higher after hailing strong results from an ongoing trial on the effects of drug datopotamab deruxtecan in breast cancer patients.
The pharmaceutical giant said the drug showed a “statistically significant and clinically meaningful improvement” on progression-free survival when compared with chemotherapy.
“This was another pivotal readout for dato’ and could reinvigorate sentiment about this drugs broader potential to replace systemic chemotherapy across a range cancers whilst also providing another important read on safety,” said Dr Sean Conroy at Shore Capital.
He noted the company has guided it will also begin to make regulatory submissions given data on hand from that study, “which we sense has helped quell some of the initial concerns people might have had; we highlight the news today should help this further.”
“Fundamentally, we still view the initial outcome communicated as positive but will await to see data presented in detail (potentially ESMO) before we draw any firm conclusions on dato’.”
Lloyds Banking Group PLC (LSE:LLOY) is up 0.7% with Deutsche Bank reiterating a buy rating, although it did lower its price target to 62p from 63p.
In the FTSE 250, Ascential is now up 7% after its well-received half-year results and Investec is 1.8% higher after its trading update.
8:35am: Consumer confidence improves - GfK
UK consumer confidence is continuing to rise against a backdrop of falling inflation but many households are continuing to struggle with cost-of-living pressures, according to a survey.
GfK's long-running consumer confidence Index increased four points in September, but remains at a subdued minus 21.
GfK’s long-running Consumer Confidence Index rose four points to -21 in September - the best result since January 2022. All five measures were up compared to last month’s announcement. Read the full story https://t.co/o34NwUlbln pic.twitter.com/caY8bwIrNK
— GfK - An NIQ Company (@GfK) September 22, 2023
Joe Staton, client strategy director at GfK, said: "Against the backdrop of falling inflation figures, growth in wages and high interest rates, UK consumer confidence rose this month to minus 21, the best recorded showing since January 2022."
"While this month's improved headline score is good news, it's important to note many households are still struggling with the cost-of-living crisis and that economic conditions are tough."
"The reality is that consumer confidence remains suppressed, and the financial mood of the nation is still negative."
Expectations for the UK's wider economy over the next 12 months saw a robust six-point increase to minus 30, 44 points higher than last September.
Confidence in personal finances for the coming year registered a marginal one-point increase to minus two, which is now 38 points higher than this time last year.
8:17am: FTSE opens lower, retail sales up, consumer confidence improves
The FTSE 100 inched lower on Friday as retail sales rallied less than expected, consumer confidence improved, and with investors continuing to weigh the implications from the Bank of England’s rate pause on Thursday.
At 8:15am, London’s lead index was down 7.90 points, 0.1%, at 7,670.72 while the FTSE 250 eased 57.07 points, 0.3%, at 18,581.48.
Retail sales rose 0.4% in August, after a weather hit 1.1% fall in July, but the figure was below the City consensus for growth of 0.5%.
Capital Economics said the rebound “isn’t as good as it looks as it partly reflected a pickup in sales after the unusually wet weather in July.”
“While the worst of the falls in real household disposable incomes are behind us, the full drag on activity from higher interest rates has yet to be felt,” it said, adding “we still think that real consumer spending will decline by 0.5% from its peak to its trough over the coming quarters.”
There was better news on consumer confidence which is continuing to rise despite a backdrop of falling inflation.
GfK's long-running Consumer Confidence Index increased four points in September, but remains at a subdued minus 21.
On a quiet morning for company news, Ascential PLC (LSE:ASCL) rose 1.9% to 193.90p after reporting a jump in revenue which helped narrow pre-tax losses in the six months to June 30.
Peel Hunt’s Jessica Pok said “this was a strong 1H with growth in all divisions.”
AstraZeneca fell despite hailing strong results from an ongoing trial on the effects of drug datopotamab deruxtecan in breast cancer patients.
The pharmaceutical giant said the drug showed a “statistically significant and clinically meaningful improvement” on progression-free survival when compared with chemotherapy.
Nonetheless, shares fell 1.9%.
Lloyds Banking Group PLC (LSE:LLOY) shares rose 0.7% as Barclays added the lender – which it rates overweight - to its preferred European Bank names replacing HSBC.
“A pause in rate hikes is positive for the UK and its banks, particularly if adverse deposit trends, notably mix shift, can moderate from here as we expect, and earnings benefit from a sizable underappreciated hedge tailwind,” it said.
7:58am: Ascential's pre-tax loss narrows as revenue jumps
Ascential PLC (LSE:ASCL) is out with its numbers, reporting a rise in revenue, lifted by its Events division, which helped narrow pre-tax losses in the first of the year.
In the six-months to June 30, the information, analytics, events and eCommerce optimisation company said revenue rose to £307.4 million from £260.7 million the year before boosted by a 25% jump in sales in its Events arm.
Within the Events division, marketing revenue rose 28%, Lions' revenue climbed 30% and the firm saw continued double-digit growth from WARC's subscription business, up 12%.
The jump in revenue helped reduced the half-year pre-tax loss to £11.8 million from £41.6 million last year while adjusted Ebitda improved to £78.6 million from £67.2 million.
Retail & Financial Services revenue grew 17%, Digital Commerce segment revenue rose 10% and Product Design segment revenue climbed 8%.
Ascential saw the strong revenue growth outpaced a market impacted by the continuing challenging retail environment, aided by continued key client wins in the first half.
Looking ahead, Chief Executive Duncan Painter said: “We have had a solid start to the second half.”
“Despite continued macro uncertainty impacting the industries we serve and currency headwinds, our businesses remain well set for the year, supported by multiple growth levers,” he added.
7:43am: Investec sees solid profit growth
Back to company news and Investec PLC said it continues to experience a solid performance from underlying client franchises notwithstanding the challenging macroeconomic environment leaving it on course to achieve its financial targets.
The Anglo-South African international banking and wealth management group was updating investors on trading for the six months ending September 30.
It expects to report adjusted EPS between 35.5p and 37.5p, growth of 8-14% from last year’s 32.9p and adjusted operating profit before tax tax between £428.7 million and £449.6 million, up from £405.0 million before.
Profit growth was driven by continued client acquisition, positive effects from higher global interest rates and year on year growth in average lending books.
But it forecast the credit loss ratio would be at the upper end of the cycle range of 25bps to 35bps reflecting the higher interest rate and inflationary environment.
Return on equity is expected to be around the mid-point of the group's target range of 12% to 16%.
Revenue growth was supported by growth in new clients, a higher interest rate environment and balance sheet growth.
The cost to income ratio improved as revenue grew ahead of costs and is expected to be below 60%.
7:16am: Retail sales rally in August after drab July
Retail sales rebounded in August after the bad weather kept consumers away from the high street in July.
Figures from the Office for National Statistics showed retail sales climbed 0.4% in August, after falling 1.1% in July (revised from a fall of 1.2%).
The figure was slightly below City hopes for a rise of 0.5%.
On a three-month view to August, retail sales rose by 0.3% when compared with the previous three months.
Food stores sales volumes rose by 1.2% in August, following a fall of 2.6% in July when supermarkets reported that the wet weather reduced clothing sales, and supermarket food sales also fell back.
Retail sales grew 0.4% in August 2023, partially recovering from a revised fall of 1.1% in July 2023.
When we look more broadly, sales rose 0.3% in the 3 months to August when compared with the previous 3 months.
— Office for National Statistics (ONS) (@ONS) September 22, 2023
Non-food stores sales volumes grew by 0.6% in August, following a fall of 1.2% in July when poor weather reduced footfall.
Non-store retailing (predominantly online retailers) sales volumes fell by 1.3% in August, following a rise of 1.9% in July when wet weather and a range of promotions boosted sales.
The percentage of retail sales taking place online fell from 27.4% in July to 26.9% in August.
Automotive fuel sales volumes fell by 1.2% in August, with retailers suggesting the fall was linked to a sharp increase in petrol and diesel prices.
7:00am: FTSE 100 expected to edge lower
The FTSE 100 is expected to post modest losses at the open on Friday as investors digest interest rate decisions around the world and await PMI and retail sales releases today.
Spread betting companies are calling London’s lead index down by around 11 points after closing down 53.03 points at 7,678.62 on Thursday.
US stocks nursed heavy losses on Thursday after the Federal Reserve signalled interest rates would stay higher, for longer, after it held interest rates steady, a ‘hawkish’ hold, while the Bank of England’s pause in rates was perceived to be more ‘dovish’.
In Japan, the Bank of Japan left its ultra-loose monetary policy in place, as was widely expected, and showed no sign of shifting its approach to monetary policy.
The focus now will be on whether the BoE hikes again at its November meeting, and if not, when the first cuts in interest rates will begin.
Back to today, and economic data will provide the early focus in London with the corporate diary looking fairly quiet.