- FTSE 100 closes up 2 points at 7,626
- Ofwat orders water firms to return £114 million
- Imperial Brands up, ban fears overdone, says broker
4:40pm: FTSE ends subdued day little changed
The FTSE 100 closed in positive territory after trading in and around opening levels for most of the day.
At the close, London's lead index was up 1.73 points at 7,625.72 while the FTSE 250 was down 78.66 points, 0.4% at 18,336.65.
Barclays was lifted by an upgrade to overweight by Morgan Stanley (NYSE:MS) while Imperial Brands benefited from positive comment from Barclays.
Despite the subdued showing, London still outperformed Europe where the Dax pushed close to a six-day low.
3:53pm: US consumer confidence declines in September
US consumer confidence declined for the second consecutive month in September as people’s short-term outlook for business, the labour market and income conditions worsened.
The Conference Board’s consumer confidence index fell to 103 this month, down from an upwardly revised 108.7 in August.
The “disappointing” reading was driven by deteriorating consumer outlooks, including growing recession fears, said Conference Board chief economist Dana Peterson.
“Expectations for the next six months tumbled back below the recession threshold of 80, reflecting less confidence about future business conditions, job availability and incomes,” Peterson said.
Consumers were particularly preoccupied with grocery and petrol prices, higher interest rates and “the political situation”, Peterson added.
3:18pm: BT unveils timetable to scrap landlines
BT Group PLC (LSE:BT.A) has announced the timetable for the ending of landlines using traditional analogue phones and replacing them with digital services instead.
Households will be invited to make the switch to a digital service on a region-by-region basis, BT said, starting this quarter with those in London and the northwest, moving to the West Midlands, southeast, Wales and East Anglia in spring 2024 and the northeast, Scotland and southwest in summer 2024.
Trials have already been running in some areas with Yorkshire and the Humber switching last month and Northern Ireland this.
2:48pm: Wll Street in downbeat mood as trading starts
Stocks have opened lower in the US and Treasury yields hit fresh highs as investors continue to adjust the likelihood of interest rates staying higher, for longer.
Shortly after the opening bell, the Dow Jones Industrial Average was down 147.74 points, 0.4%, at 33,859.14, the S&P 500 was down 27.60 points, 0.6%, at 4,309.84 and the Nasdaq Composite was down 94.52 points, 0.7%, at 13,176.80.
Investors are also grappling with negotiations in Washington, as lawmakers hope to avert a government shutdown that could take place as early as October 1 if Congress doesn’t agree on a spending bill.
"[R]isky assets, particularly long-duration stocks, have struggled to absorb these rate increases...the correlation between equity prices and bond yields has turned negative again, reflecting the 'good news is bad news' sentiment in the U.S.," SPI Asset Management said.
Since the Federal reserve's decision to leave interesr rates unchanged last Wednesday a series of Fed officials have reinforced the message that they will keep policy tighter for longer if the economy is stronger than expected.
Federal Reserve Bank of Minneapolis President Neel Kashkari said he expects the US central bank will need to raise interest rates one more time this year.
JPMorgan Chase CEO Jamie Dimon warned interest rates may need to rise further to tamp down inflation,
Dimon said in an interview with The Times of India that the Fed’s key borrowing rate could rise significantly from its current targeted range of 5.25%-5.5%.
2:15pm: RyanAir calls on air traffic control boss to step down
Budget airline Ryanair has waded in over the flights cancellations at Gatwick this week, due to air traffic control staff shortages.
Ryanair is calling on the Civil Aviation Authority to immediately intervene and protect passengers from further disruptions to flights to and from Gatwick over the next week.
The airline says it is unacceptable that Nats (which runs UK Air Traffic Services) is not adequately staffed, and wants its CEO, Martin Rolfe, to either fix UK staff shortages or immediately resign.
A Ryanair spokesperson said: "It is unacceptable that airlines have been asked to cancel flights to/from Gatwick Airport for the next six days (until 2 Oct) as a result of NATS’s failure to adequately staff UK ATC."
"NATS has been a shambles for years," it continued, adding Martin Rolfe should now do the right thing and "step down."
1.29pm: Market Movers
A look at some of today's biggest movers
Risers
Supreme PLC (AIM:SUP) jumped 6% to 105p as the vaping specialist told shareholders it had enjoyed the best start to a year ever in spite of growing calls for the ban of both single-use and flavoured vapes.
Symphony Environmental Technologies PLC (AIM:SYM) lifted as much as 7% before falling back to a 2% rise after Yemen announced a ban on non-biodegrable plastic bags.
Fallers
tinyBuild Inc (LSE:TBLD), the indie game publisher, lost over a third of its value on Tuesday after it said it expects to struggle to achieve profitability for the rest of the financial year, having suffered huge pre-tax losses in the first half.
Videndum PLC (LSE:VID) shares slumped 37% after the company was hit by news of more industrial action in Hollywood just as it announced the writers' strike had wrecked its first-half numbers.
1:05pm: Analysts upbeat after PZ Cussons (LSE:PZC) results
Looking back at some of the early results, and PZ Cussons (LSE:PZC) is just the wrong side of the line after its numbers, down 1.6%.
Broker Investec said the results were ahead of its expectations, with positive contributions from a wide range of brands and geographies, including a return to growth in UK Personal Care by the period end.
Africa was particularly strong, which has continued into the new financial year, it noted.
It expects leave forecasts unchanged and keeps a buy rating (price target 225p).
Deutsche Bank also reiterated a buy rating and has 227p price target.
“A number of positives to take away from today's numbers and the continued execution of on the ground improvements by management,” it said.
“This remains a multi-year transformation,” in Deutsche’s opinion.
12:40pm: Smoking ban worries overdone, says Barclays
Imperial Brands has recovered some of Monday’s losses which followed reports that the UK was considering introducing a New Zeland-type smoking ban in the UK.
Shares are around 2% higher at 1,673.50p and Barclays thinks these worries are overdone, pointing out it is not a new discussion by the UK government.
The broker noted in "The Khan review - making smoking obsolete" published in June 2022, Dr Javed Khan alluded to following the NZ model.
“We doubt any such proposal will pass the current fractured UK parliament with elections looming over the next 12 months,” Barclays said.
“The UK government has yet to ban disposable e-cigarettes, which almost all stakeholders agree is a problem, so any cigarette ban is likely far off, in our view,” it added.
The broker modelled a scenario under which a NZ-style cigarette control proposal passes the UK parliament, with an implementation date of 2027.
It said this proposal would imply a c1.6% incremental headwind to cigarette volumes - from 2027.
Even under this proposal, the last cigarette sale in the UK would happen in 2087 it noted.
Barclays estimates the UK cigarette industry Ebit is structurally declining at a rate of c3% per annum, and thinks proposal would accelerate the decline from c3% to c5%.
But it suggests the void could then to be filled by lower taxed e-cigarettes, heated-tobacco and modern oral products, leaving the overall industry Ebit stable.
Barclays kept an overweight rating but trimmed tis price target to 2,400p from 2,550p.
It highlighted the potential for share repurchases and the c8% dividend yield.
12:35pm: Barclays boosted by upgrade
Top of the FTSE 100 risers is Barclays PLC (LSE:BARC) which has reportedly been upgraded by Morgan Stanley (NYSE:MS) to overweight.
The investment bank reckons its big cards division in the US is “quietly gaining more scale” and believe there was room for “capital efficiency to increase payouts”.
Shares are up 3.2% at 158.64p.
12:15am: Ratcliffe looks to sweeten bid for Manchester United
Jim Ratcliffe is restructuring his offer to buy Manchester United, people with knowledge of the matter said, in an attempt to break the deadlock in the long-running takeover saga, Bloomberg reported.
The British billionaire is working with his advisers to address concerns about the terms of his bid from minority investors in the English Premier League football club, according to the people, who asked not to be identified discussing confidential information, the report said.
Ratcliffe put forward a proposal earlier this year to acquire 69% of shares in Manchester United owned by the US Glazer family.
That left little benefit for holders of the club’s remaining stock, including Lindsell Train, Ariel Investments LLC and Eminence Capital.
It follows UK media reports over the weekend which speculated that another, higher bid to buy the club could possibly come from Qatari businessman Sheikh Jassim bin Hamad Al Thani, the rival bidder for the red Devils.
11:55am: US seen lower as Moody's warns top rating is at risk
US stocks are expected to head lower on Tuesday after Moody’s warned the country’s top credit rating was at risk if politicians fail to avert a government shutdown.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.4% lower, while those for the S&P 500 fell 0.5%, and contracts for the Nasdaq futures were down 0.5%.
Investors, already dealing with the prospects of higher interest rates for longer, are facing a new threat as lawmakers in Washington aim to avert a government shutdown that could take place as early as October 1, if Congress doesn’t agree on a spending bill.
Moody's Investors Service, the only remaining major credit grader to assign the US a triple A credit rating, signalled that its confidence is wavering.
"While government debt service payments would not be impacted and a short-lived shutdown would be unlikely to disrupt the economy, it would underscore the weakness of US institutional and governance strength relative to other Aaa-rated sovereigns that we have highlighted in recent years," analysts led by William Foster wrote in a report.
In economic news, the Conference Board will release its consumer confidence index for September, which economists expect will tick down to a reading of 105.6 from 106.1 in August.
11:28am: Burberry falls as Morgan Stanley (NYSE:MS) predicts slower growth
Shares in Burberry have been marked 2,2% lower after Morgan Stanley (NYSE:MS) cut its price target for the luxury good retailer.
In a note covering the European luxury goods sector, the investment bank cut targets across the board with Burberry’s moving to 2,200p from 2,400p.
Morgan Stanley (NYSE:MS) lowered its second quarter financial year 2024 like-for-like growth forecast to 4% from 7% previously to take account for softening global demand and heightened macro pressure.
It cut its financial year 2024 Ebit forecast by 2% to £608 million from £624 million before.
The lower estimates and a higher weighted average cost of capital (9% vs. 8.5% previously) prompted the price target change.
The bank said it would remain selective in its approach to the sector, staying overweight LVMH, upgrading Prada to overweight but downgrading Richemont to equal weight.
“Next year, we expect growth to decelerate to around +4%, with Chinese nationals accounting for nearly all the industry growth, as spend by Europeans turns negative in 4Q23 and remains so for most of 2024,” the bank said.
11:00am: Pound extends fall
Talking of the pound, it is down again, heading towards Goldman's call of $1.18 in three months.
Sterling is trading around the 1.2187 mark, down a further 0.2% against the dollar.
A weak pound gives the dollar earners in the FTSE 100 a boost but it's not having the desired effect today.
The FTSE is now back in the red, down 4 points at 7,619.
10:25am: Goldman sees pound weakness, oil strength boosting FTSE 100
Goldman Sachs (NYSE:GS) thinks the weakness in the pound and the rising oil price should support the FTSE 100.
It points out London's lead index remains very positively correlated to oil prices and its commodities strategists expect further upside from here - they reviewed their 12-month Brent forecasts to $100/bbl (from $93/bbl).
A case is point is Goldman’s chart below which shows the FTSE 100’s correlation to oil and to the pound.
Source: Goldman Sachs (NYSE:GS)
At the same time, Goldman's FX team expect the pound to be under pressure due to a combination of weaker growth, higher inflation and lower real rates and they expect GBP/USD to move to $1.18 in 3-months.
"We think this can be a tailwind for the FTSE 100 given its strong international exposure," Goldman said,
9:55am: Videndum hit by Hollywood writers strike
Videndum shares have slumped 31% after it reported revenues fell 24% in the first half of this year, while it made a loss of £50 million, swinging from a £16.4 millio profit a year earlier.
The company makes hardware and software for the entertainment industry and has been hit by the Hollywood writers strike.
Analysts at Jefferies note: "the group's end markets remain very difficult."
"The length and impact of the strike have been much worse than expected, given the combination of writers and actors being on strike and the uncertain shape/pace of recovery."
"Moreover, Consumer and ICC markets are more difficult than expected and there is no recovery under way, and speciality retailers are increasingly cautious/destocking further."
It also pointed out management notes there could be a wide range of potential full year outcomes and no guidance was given.
9:33am: FTSE 100 rallies but could there be drama across the pond
The FTSE 100 has pushed into the green after a shaky start, now up 14 points at 7,637.
But there could be a “traumatic” end to September if a US shutdown can’t be averted, says Neil Wilson of Markets.com.
“Keep your eyes on Washington,” he said.
“If Republicans have not agreed a short-term funding deal to keep the US government from shutting down on September 30th, we could be in for a traumatic end of the month/quarter.”
“A full, lengthy shutdown of the US government is “likely” at the end of the month, PIMCO said last week,” he noted, while Moody’s said a US government shutdown would likely have “an increasingly negative impact on the credit profile”.
9:07am: Ofwat orders water companies to return £114 million
Water customers in England and Wales will share a £114 million rebate after underperformance by the majority of water and wastewater companies.
David Black, Ofwat CEO said water companies were “falling short” leading to £114 million being returned to customers through bill reductions.
Ofwat, the industry regulator, has announced that nearly all the 19 water and sewage companies missed targets on pollution, water leakage and customer servicehttps://t.co/yb7yBZjBQJ
— Jim Pickard ???? (@PickardJE) September 26, 2023
“While that may be welcome to billpayers, it is very disappointing news for all who want to see the sector do better,” he added.
Ofwat said the rebate, which followed its assessment of performance against targets set for 2022-23, will come off customers' bills for next year.
The industry regulator’s decision comes as it publishes its annual Water Company Performance Report, which categorises companies' performance as 'leading' 'average' or 'lagging'.
This year, no company has been ranked in the 'leading' category.
Ten companies are in the 'average' category and seven have been categorised as 'lagging' (Anglian Water, Dŵr Cymru, Southern Water, Thames Water, Yorkshire Water, Bristol Water and South East Water).
Ofwat said some improvements had been made on leakage and internal sewer flooding but progress has been too slow.
“In 2022-23, fewer than half of companies achieved their performance target on reducing pollution incidents and fewer than half of the companies meeting their performance commitment on leakage,” it said.
“This performance is matched by an overall decline in customer satisfaction during the past year,” it added.
In addition, Ofwat also reports that most companies have not fully invested their 2020-2023 allowed funding for delivering service enhancements.
8:46am: Mood remains downbeat as stocks stay lower
The FTSE 100 remains in negative territory as worries over higher, for longer interest rates continue to dent the mood.
Susannah Streeter head of money and markets, Hargreaves Lansdown said: “‘With little data expected to blow away worries about the impact on high interest rates, concerns are set to linger, holding back gains for stocks.”
“Nervousness is setting in about restrictive monetary policy in major economies, particularly the US, reducing appetite for goods and services, as consumers and companies keep their belts tightened,” she added.
Smiths Group (LSE:SMIN) is down around 1%, reflecting the downbeat market mood but analysts were happy enough with the figures.
Jefferies said the results were “gently ahead of consensus (Ebitda 1% ahead) and there are few surprises in the divisional splits overall.”
The broker highlighted an improved cash flow position and said the outlook commentary is “very robust.”
In the FTSE 250, the top riser is AG Barr, up 2.9%.
The maker of IRN-BRU and Rubicon soft drinks said it remains confident its full-year results will be marginally better than analysts expect, despite poor weather in the summer months.
Meanwhile, Asos has reversed its early losses and is now up 1.4%.
8:17am: FTSE 100 lower, Asos falls on low-end profit guidance
The FTSE 100 opened lower on Tuesday following falls in Asia as nerves over the health of the world’s second largest economy continue to cast a shadow over the market.
At 8:15am, London’s lead index was down 23.72 points, 0.3%, at 7,600.27 while the FTSE 250 was down 52.14 points, 0.3%, at 18,363.17.
Asos PLC fell 2.4% after warning of low-end profits after reporting a 15% drop in sales in the fourth quarter.
Shore Capital noted that despite delivering £300 million of profit improvement and cost savings, the company fell short of meeting its own guidance, with a considerably more negative free cash flow expected for the year.
But on the positive side, Peel Hunt said stock clearance was better than expected, with year-on-year stock down 30% (target was 20%), with management targeting a further 30% reduction this year to sub £600 million.
It described the update as “steady progress, although the lower achieved FCF generation may weigh on sentiment.”
PZ Cussons (LSE:PZC) also fell, down 1.1%, after reporting a fall in profit and an unchanged dividend.
Shore Capital said it saw “no shocks or surprises in the completed year.”
7:54am: PZ Cussons (LSE:PZC) profit hit by falling margins
Now for the owner of Carex - PZ Cussons (LSE:PZC) PLC which reported a rise in revenue but a fall in profit hit by a drop in operating margin and a one-off charge relating to Sanctuary Spa.
The consumer goods firm said revenue in the year to May 31 rose 11% to £656.3 million from £592.8 million the year before with like-for-like (LFL) revenue growth of 6.9% - the third consecutive year of LFL revenue growth.
Statutory pre-tax profit fell 4.5% to £61.8 million from £64.5 million while basic earnings per share slipped 27% to 8.70p from 11.88p.
The company said operating margin declined by 200 basis points while the EPS decline also reflected a £16.5 million impairment of the Sanctuary Spa brand, as well as increased investment related to transformation.
The firm said performance in the new financial year has been in line with expectations, with modest year on year growth in LFL revenue and a higher operating profit margin.
“We have seen continued good revenue growth in Nigeria and ANZ, a stable performance in the UK, offset by a further decline in Indonesia,” it said.
The dividend was left unchanged at 6.40p reflecting the devaluation of the Naira following the year end, which is expected to have a material adverse impact on the near-term reported financial performance.
7:32am: Asos reports drop in sales and see low-end profit
First out of the blocks is a very detailed trading update from Asos PLC.
The retailer reported a drop in sales in the fourth quarter and warned profit would be at the low-end of expectations as it continues to pursue its Driving Change agenda.
In a trading statement for the period ended September 3, the FTSE 250-listed firm said sales fell 15% with the hot weather boosting sales in June followed by weaker performance in July and August amidst a deterioration in the UK clothing market.
Sales continued to fall across the group's four main geographies - the UK, EU, US and Rest of World - but the downturn worsened in every region except the EU.
Earnings before interest and tax are expected around the bottom of the guided £40 million to £60 million range, with free cash inflow in the second half now expected to be c.£60 million, down from £150 million, principally as a result of timing effects that will reverse in September and October.
Asos explained that the hot weather drove a strong June and a wet July and August produced a weaker sales result.
Adjusted gross margins for the second half were up just 150 basis points year-on-year, below previous guidance of a 200bp improvement, due to the investment in promotional activity to reduce inventory levels.
Asos said while the stronger than expected June and weaker than expected July and August broadly netted out to deliver sales and Ebit in-line with guidance, the phasing of sales impacted year-end cashflow, it said.
This impact will reverse during September and October, it claimed.
Inventory levels are down around 30% year-on-year, ahead of guidance, while adjusted gross margin rose 150 basis points in the second half, below guidance, as lower freight and duty costs, were partially offset by tactical investment in promotional activity to prioritise stock reduction in a challenging trading environment.
7:00am: FTSE 100 called lower as Asian markets fall
It could be another weak start in London on Tuesday despite a better trading session in New York.
Spread betting companies are calling the FTSE 100 down by around 11 points after closing down 59.92 points at 7,623.99 on Monday.
US stocks broke a four-day losing streak to close higher as investors sought value after recent falls.
However, Moody’s warned that a US government shutdown would threaten the country’s triple A credit rating.
The warning came amid a stand-off in Congress that risks leaving the federal government without funding.
Moody’s, the last major rating agency yet to have downgraded the US’s debt, said a shutdown would be “credit negative for the US sovereign”.
Ipek Ozkardeskaya at Swissquote Bank noted: “ US yields rose, and the dollar extended gains yesterday as the looming US government shutdown drama got the only remaining big rating agency company Moody’s to sound cautious about the US’ AAA rating.”
In Asia, stocks fell further with jitters over the healthy of the Chinese property sector still on investor’s minds after Evergrande announced on Monday that it was unable to issue new debt as its subsidiary was "being investigated".
Back in London, and on a bumper day of company results updates from Asos, Close Brothers, PZ Cussons (LSE:PZC) and Smiths Group (LSE:SMIN) may get investor’s pulses racing as we start the day.