- FTSE 100 closes down 33 points at 7,593
- Ithaca jumps after Rosebank gets green light
- Centrica falls as broker says take profits
4:40pm: FTSE 100 slides as early US gains fade
The FTSE 100 fell sharply into the close after trading in, and around, opening levels for much of the day as early gains in the US all but petered out.
At the close London's lead index was down 32.50 points, 0.4%, at 7,593.22 while the FTSE 250 was down 116.42 points, 0.6%, at 18,220.23.
Michael Hewson at CMC Markets said: "There remains a great deal of uncertainty as to what sort of economy we will see in Q4, and whether the determination of central banks to keep rates high will change if we see further deterioration in the economic outlook over the next few months."
"For most of this year there has been this belief that the current spate of rate hikes would quickly reverse once central banks had finished hiking, and headline inflation had started to slow."
"That outcome is now in doubt given the sharp rise we’ve seen in energy prices since June, and the penny is dropping that rates may well have to stay at current levels for much longer than thought, with all the consequences that might have for consumer disposable income and company earnings in the months ahead.," he added.
In the FTSE 100, IMI was the best performer, up 4.7%, after positive comment from JPMorgan while a further jump in the oil price supported BP and Shell, up 1.1% and 1.1% respectively.
Ocado fell 8.8% on reports that AQR Capital Management became the latest to take out a short position against the business while Morgan Stanley (NYSE:MS) said it was time to take profits in Centrica, which fell 5.1%.
Land Securities tumbled 3.9%, alongside a number of property stocks as Jefferies downgraded its rating and slashed its price target while worries of falling general merchandise sales at food retailer J Sainsbury saw the stock fall 3.2%.
3:50pm: Potts one of the 'greats' of the UK grocery scene
Shore Capital’s Clive Black says outgoing Morrisons boss David Potts sits “alongside the greats of Lord John Sainsbury, Sir Kenneth Morrison, Archie Norman, Sir Terry Leahy, and Charles Wilson,” as one of the greats of the UK grocery scene.
He said he undertook a remarkable textbook turnaround exercise at Morrisons alongside chair, Andrew Higginson, and his key lieutenant, Trevor Strain.
“He kept Morrisons alive, going on to oversee a sale process for which equity shareholders will be forever thankful,” Black thinks.
He described his stepping down from the firm in November as “a key moment in the history of British grocery retailing.”
3:12pm: Change at the top at Morrisons as Potts steps down
Morrisons chief David Potts is standing down after nine years at the helm of one of the UK’s largest supermarket chains.
He will be replaced next month by Rami Baitiéh, previously the chief executive of Carrefour France.
Potts, who presided over Clayton, Dubilier & Rice’s £7bn acquisition of Morrisons, said running the grocer had been the “privilege of a lifetime”.
He added that he had several conversations with Sir Terry Leahy, Morrisons’ chair and senior adviser to CD&R, about succession planning since the buyout in 2021.
“We had a clear understanding that I was prepared to devote several more years to Morrisons if that was required, but that if an outstanding successor was identified . . . then I would step down," he said.
Victoria Scholar, head of investment, interactive investor noted Baitieh has many years of experience working in supermarkets.
"He marched his way up to the top job at Carrefour having previously held regional CEO roles," she explained.
"There will of course be major similarities but also differences between the supermarket sectors in France and the UK. Getting to grips with the UK market dynamics is likely to be among his first tests", she added.
2:45pm: Steady progress on Wall Street
US stocks opened higher, led by technology plays, boosted by a positive economic reading which helped recover some of yesterday's heavy falls.
Shortly after the opening bell, the Dow Jones Industrial Average was up 44.03 points, 0.1%, at 33,662.91, the S&P 500 was up 16.89 points, 0.4%, at 4,290.42 while the Nasdaq Composite was up 52.28 points, 0.4%, at 13,115.88.
Craig Erlam at Oanda said: "Equity markets are pretty flat in the middle of the week, struggling to pick themselves up off the floor as investors worry about higher for longer interest rates and the economy."
"Last week was action-packed and it seems investors are still piecing it all together in the absence of much else happening."
New orders for manufactured durable goods in the US unexpectedly increased month-on-month in August, according to data from the US Census Bureau.
New orders for manufactured durable goods increased by $500 million, or 0.2%, to $284.7 billion in August, following a 5.6% decrease in new orders in July, according to revised figures.
According to FXStreet-cited consensus, new orders were expected to fall by 0.5% in August.
But Kieran Clancy at Pantheon Macroeconomics noted the "upside surprise in the August headline is mostly offset by downward revisions to previous months' data, in yet another reminder that the advance data should be interpreted with caution."
2:10pm: Drop in merchandise sales could take shine off Sainsbury first half
Heading into the afternoon and a note of caution ahead of interim results at food retailer J Sainsbury PLC (LSE:SBRY) on November 2.
The stock has fallen for the second day in a row, down 1.8% at 256.90p, after Barclays became the latest broker, after UBS yesterday, to highlight an easing in general merchandise (GM) sales.
Barclays warned of a "significant slowdown for GM sales (from plus 4.0% in Q1 to minus 4.0% in Q2), driven by a combination of unhelpful weather, the cycling of the boost from improved availability and a bigger drag from the closure of Argos stores in Ireland.
"This may take the shine off what we expect to be a strong half for Grocery sales and profitability," it said.
"We still expect Sainsbury to be able to deliver comfortably within its FY23/24 PBT guidance of £640-700 million, but the performance of Argos at Christmas will likely play a big part in determining precisely where the FY PBT ultimately lands," Barclays thinks.
It retains an overweight rating but maintain a slight preference for Tesco.
1:52pm: Here's a recap of the top market risers and fallers today
Shares in Saietta Group PLC (AIM:SED) zoomed 40% higher after the company confirmed that it had won an £11.2 million order from a leading Indian manufacturer of electric rickshaws and other lightweight vehicles.
Tasty PLC (AIM:TAST), the owner of restaurant brands Dim t and Wildwood, slumped over 25% after it warned investors revenues and profitability are expected to be impacted by several headwinds over the near future.
Amigo Holdings PLC (LSE:AMGO) shares exhibited an unusual 'dead-cat bounce' as the lender issued a statement akin to a professional footballer's 'come and get me' plea as it continued to wind down the business and warned that it is likely to be insolvent within a few months.
Pendragon Group (LSE:PDG) shares jumped by over 10% on Wednesday morning, after the car dealership firm reported growing profits and sales as the market recovers post-Covid.
1:03pm: UBS slips as US steps up investigation on sanctions breaches
The US Department of Justice has stepped up its probe into Credit Suisse Group and UBS Group AG over suspected compliance failures that allowed Russian clients to evade sanctions, according to people familiar with the situation, according to Bloomberg.
What began as a series of subpoenas sent to a range of banks early this year has developed into a full-scale investigation focusing on Credit Suisse, Bloomberg said, citing sources.
BREAKING: The US Department of Justice escalates a probe into Credit Suisse and UBS over suspected failures that allowed Russian clients to evade sanctions https://t.co/rtkd0EsX1j pic.twitter.com/qbeiOA4XaJ
— Bloomberg Markets (@markets) September 27, 2023
The DOJ has briefed US-based lawyers for UBS about Credit Suisse’s alleged exposure to sanctions violations since UBS acquired its smaller rival in June.
The DOJ is also looking into possible compliance failures at UBS.
Shares in UBS are down 3.3% at CHF22.26 after hitting an intra-day low of CHF21.20 earlier in the session.
12:28pm: Property stocks hit as Jefferies warns of tipping point
More on the property downgrades by Jefferies today which have caused a stir pushing shares in British Land down 2.1%, Land Securities down 2.6%, Great Portland down 3.7% and Derwent London down 2.4%.
The broker has moved British Land to underperform from hold, and slashed its price target by 40% to 250p from 420p and Land Securities to underperform from hold, with a target of 465p, down from 641p.
Great Portland and Derwent London are moved to hold from buy with reduced price targets of 387p and 1,913p (down from 706p and 3,399p) respectively.
“Retail was technology's first casualty and we think offices are next,” the broker said.
Analysts at the bank said London vacancies are at a 30-year high and above the tipping point at which rents fall.
It estimates a 20% contraction in London office utilisation on working from home and hybrid working with reoccupation focused on core green HQ buildings and SMEs in the suburbs.
Jefferies said it had modelled this cycle on the early noughties with the negative net absorption after the TMT bubble burst.
It noted tech tenants became accidental landlords offloading surplus space on the 'grey' market to recover costs and under-cutting landlords.
The TMT index peaked in 2000 with rents down 15% two years later and Covid is now having the same effect on offices, Jefferies reckons.
12:01pm: Wall Street called higher after Tuesday's heavy falls
It should be a brighter start on Wall Street after heavy losses on Tuesday which followed new home sales and consumer confidence data missing economists’ estimates.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.2% higher, while those for the S&P 500 rose 0.3%, and contracts for the Nasdaq 100 futures were up 0.3%.
The weakness in consumer confidence comes as the US government is still days away from a potential government shutdown, unless Congress can agree to pass funding beyond September 30.
Deutsche Bank noted “a bipartisan deal has emerged in the Senate, which would keep the government open until mid-November.”
“However, it’s uncertain as to whether that would be brought to a vote in the Republican-controlled House, and Speaker McCarthy said that he’d put a different stopgap funding measure on the floor this week, saying that a vote would probably be on Friday,” it added.
“If there is a shutdown, that could affect several upcoming data releases depending on how long it lasted, including the September jobs report on October 6,” Deutsche speculated.
Today sees figures for orders for durable goods, or products that last more than one year, which are expected to have slipped 0.5% in August after falling 5.2% in July, their largest drop since 2020.
11:28am: First time buyers to fall 20%, says Halifax
The number of first-time buyers taking their first step on the property ladder will fall by more than a fifth this year, it has been predicted.
Based on transaction data from this year so far, Halifax, estimates that about 186,000 people will buy their first home in 2023, 22% fewer than last year.
The number of first-time buyers fell 22% between January and August this year, compared to the same period in 2022, according to the latest @HalifaxBank First-Time Buyer Review. Industry professionals have shared their thoughts on the data. #HousingMarket https://t.co/2CVXavv6IL
— Mortgage & Property (@IFAMMortgage) September 27, 2023
At the peak of the pandemic property market boom in 2021, close to 270,000 first-time buyers got on the property ladder.
The biggest fall in demand from first-time buyers has been in the southeast, where prices are highest, the lender said.
By contrast, in Scotland, the most affordable place in the UK for would-be homeowners, the fall in first-time buyer numbers has been less pronounced.
10:57am: Wizz Air boosted by Liberum upgrade
Shares in Wizz Air have jumped after Liberum analysts upgraded the stock following a visit to the firm's Budapest site.
The broker said discussions about the potential impact on next year’s capacity plans from GTF groundings dominated discussions and management has more scope to mitigate than anticipated, although there remains uncertainty over how many aircraft will be impacted.
Ultimately, compensation from Pratt & Whitney ought to cover short-term financial impacts, Liberum said.
Liberum said recent share price weakness has seen its target price hit and left the valuation more reflective of the risks and rewards.
As a result, it has upgraded the stock to hold from sell with an unchanged target price of 2,000p.
Shares are 1.4% higher at 1,944.00p.
10:35am: Time to take profits in British Gas owner Centrica
It’s time to take profits in British Gas owner Centrica PLC (LSE:CNA), according to Morgan Stanley (NYSE:MS).
Investors took the advice and shares are trading 4.1% lower at 159.40p.
The investment bank has downgraded its rating to equal weight from overweight and would switch into SSE, Engie or Fortum.
It pointed out Centrica's shares have appreciated 116% over the past year and sees them now approaching “fair value.”
Morgan Stanley (NYSE:MS) has a 190p price target, at which the shares would trade on 12.6x normalised 2026 estimated PE, or 9.5x once adjusting for the elevated free cash flow during 2023-2026 period.
“While we continue to see a strong, and in many divisions improving, operating environment for Centrica, we see few catalysts near term to drive further re-rating,” the bank said.
Morgan Stanley (NYSE:MS) said the market has demonstrated a preference for shareholder distributions over growth investment in 2023, which in part propelled Centrica's share price.
“Although we have seen no change to this mindset so far, as we look into 2024 we think this debate could evolve if investors re-engage with the renewables sub-sector and/or yields start to decline.”
“In such a scenario, we would expect a rotation out of Centrica and into more obvious growth stories, preferring SSE in the UK,” it added.
The downgrade comes a day after analysts at Liberum put a sell rating on Centrica, arguing that all the good news and recent self-improvement are now in the price.
The broker put a 150p price target on the stock.
9:59am: Flutter's push into Serbia reasonably priced
Flutter's move into Serbia has been well received by the City with shares up 1.0%.
Broker Jefferies says the 51% stake acquisition in number 2 Serbian omni-channel, local operator MaxBet, follows a well-trodden and proven path of acquiring a majority stake in a 'podium' position player in a regulated market, with scope to leverage Flutter's tech / product / talent to drive incremental growth and value.
It reckons access to the Flutter platform should drive MaxBet revenue synergies from enhanced digital marketing, global risk / pricing, and a broader range of iGaming content.
It also thinks the price at 8.6x EV/EBITDA, looks reasonable compared to other sector deals.
9:31am: Government welcomes Rosebank approval
The government has welcomed the regulator’s decision to to approve the Rosebank project, saying it will boost the UK’s energy security and economy with a direct investment of £8.1bn from Equinor.
In a statement it said: “New projects like Rosebank are expected to be significantly less emissions intensive than previous developments, as they are more efficient and are developed with measures to mitigate emissions.”
“Even when we’ve reached net zero in 2050, the climate change committee say that a quarter of our energy needs will come from oil and gas, but the choice is between it coming from hostile states rather than from the supplies we have here at home.”
“The oil and gas industry adds £17bn annually to the economy, supports around 200,000 jobs, and will provide around £50bn in tax revenue over the next five years, which can be used to support the shift to cleaner forms of energy.”
Not everyone is happy though.
This is no less than an act of war against life on earth . . . https://t.co/DQ59phldXb
— Chris Packham (@ChrisGPackham) September 27, 2023
9:05am: Three-way tussle for Pendragon
Pendragon has jumped a further 10% after it revealed a third approach for the business from AutoNation after the market close on Tuesday.
The proposal to buy the Nottingham-based automotive retailer for 32p per share follows a joint bid approach from Hedin Mobility Group AG and PAG International Ltd also worth 32p per share, and the firm’s own plan to sell its UK motor and leasing business to North American rival Lithia Motors.
The company today reported revenue climbed 13% to £2.09 billion, with post-tax profit climbing 2% to £26.9 million as a result of the improving market.
Shares are up 10% at 32.90p, above the latest bid approach, suggesting the market thinks this battle could heat up further.
8:43am: FTSE flat but Centrica slips on Morgan Stanley (NYSE:MS) downgrade
The FTSE 100 has nudged into positive territory in cautious trading, now up 3 points at 7,628.
IMI is the top riser in the FTSE 100 as JPMorgan said it was one of its favoured picks in the European Capital Goods sector.
The broker named Melrose and Oxford Instruments as its other favoured UK plays in the sector.
Flutter’s push into Serbia seems to have been well received with shares up 1.1%.
But Centrica was the top faller down 4% after Morgan Stanley (NYSE:MS) downgraded the stock to equal weight from overweight with a 190p price target.
Land Securities is also down 2.7% despite its positive-looking update ahead of its Capital Markets Day.
Jefferies has moved the stock to underperform and cut its price target to 465p from 641p.
The broker has also cut Great Portland Estates (LSE:GPOR) to hold from buy pushing the stock 3.8% lower and downgraded British Land, which is down 2.4%, to hold from buy.
8:17am: FTSE 100 edges lower, Ithaca jumps
The FTSE 100 edged lower in early trading as investors paused for breath after recent falls.
At 8:15am London's lead index was down 1.03 points at 7,624.69 while the FTSE 250 fell 27.11 points, 0.2%, at 18,309.54.
“The FTSE 100 is set for a lacklustre session, hit by negative sentiment emanating from the US,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
“Nerves are frayed about the impact of high interest rates in the United States, while fragility in China is showing up once again. The latest big tech probe into Amazon has come as a double whammy amid a state of heightened tension about global growth prospects,” she said.
Ithaca Energy jumped 9.1% after the government’s oil and gas regulator gave the go-ahead for the development of Rosebank oil and gas field in the North Sea.
Ithaca Energy owns a 20% working interest in Rosebank, one of the largest undeveloped oil and gas fields on the British continental shelf, and expects to produce 300 million barrels of oil from the field in its lifetime.
Peel Hunt said this “is a major derisking event for the business,” and “provides line of sight on a material new, long-term leg of net production from 2026-27 onwards.”
“Rosebank is the UK’s largest undeveloped oil field,” it noted.
“Therefore, in addition to creating several thousand local jobs, the decision to move forward with its development is also important from a UK energy security perspective,” the broker felt.
Peel Hunt has a buy rating on Ithaca and a price target of 210p.
Land Securities fell 2.2% despite some positive looking update ahead of its Capital Markets Day.
The commercial property developer said customer demand for its office space in London has remained strong since the end of March.
Shore Capital said: “Occupier demand for Landsec's best-in-class office space has remained strong in the current year.”
“Reflecting the strong demand, rents across both schemes are more than 10% ahead of initial assumptions,” it added.
It said it would review its sell rating following the capital markets events later today and “our perceived improving sentiment for UK REITs.”
7:53am: Ithaca welcomes UK go-ahead to develop Rosebank
Ithaca Energy PLC (LSE:ITH) has announced the government’s oil and gas regulator has given the go-ahead for the development of the Rosebank oil and gas field in the North Sea.
The firm said The North Sea Transition Authority granted consent for the development of the field today.
An NSTA spokesperson said: “We have today approved the Rosebank Field Development Plan which allows the owners to proceed with their project.
“The FDP is awarded in accordance with our published guidance and taking net zero considerations into account throughout the project’s lifecycle.”
Ithaca Energy owns a 20% working interest in Rosebank, one of the largest undeveloped oil and gas fields on the British continental shelf, which is expected to produce 300 million barrels of oil in its lifetime.
The Rosebank field is located around 130 kilometres north-west of Shetland.
The field will be developed with subsea wells tied back to a redeployed floating production storage and offloading vessel with first production expected in 2026-2027.
Gilad Myerson, executive chairman, Ithaca Energy, commented: "We are delighted to announce the decision to move forward with the Rosebank development alongside Equinor."
But not everyone is happy.
Green MP Caroline Lucas called it “the greatest act of environmental vandalism in my lifetime, causing emissions equal to 28 lowest income countries.”
BREAKING - #Rosebank oilfield just given go-ahead - the greatest act of environmental vandalism in my lifetime, causing emissions equal to 28 lowest income countries, busting #climate targets & doing nothing for energy security since vast majority is for export #climatecriminals
— Caroline Lucas (@CarolineLucas) September 27, 2023
7:42am: Saga sees profit ahead of current consensus
Saga PLC (LSE:SAGA) expects to deliver “significant” double-digit growth in full-year revenue and underlying profit ahead of market estimates, it said today.
The news came as the firm, which specialises in holidays and insurance for the over 50s, reported a 15% jump in revenue in the six months ended July 31 to £355.3 million from £309.8 million the year before.
Pre-tax losses narrowed to £77.8 million from £261.8 million while on an underlying basis pretax profit fell 45% to £8.0 million from £14.6 million.
Saga also said it has put the sale of its underwriting business on hold believing there is potential to generate greater value once market conditions improve.
Euan Sutherland, chief executive officer, said growth in revenue reflected “the continued growth of our Cruise and Travel businesses, in addition to further debt reduction.”
"In Ocean Cruise, bookings are on track to achieve our targets for the full year, reflecting continued strong customer demand, while our River Cruise business has returned to profit with a 34% increase in guest numbers.”
Travel is also on track to return to profit for the full year,” he added.
"In Insurance, we continue to develop our business against the backdrop of a difficult inflationary market,” Sutherland said.
Saga also expects to repay the May 2024 bond when it falls due.
7:24am: Flutter moves into Serbia with £123m deal
Starting the day with Flutter Entertainment PLC which has taken a 51% stake in MaxBet, Serbia's number two omni-channel sports betting and gaming operator.
The owner of Betfair, FanDuel, Paddy Power is paying £123 million cash for the interest, with an opportunity to buy the remaining 49% in 2029.
“We believe MaxBet is an excellent opportunity to replicate the success we have achieved in markets like Georgia, India and Italy by acquiring a strong brand in a podium position,” said Peter Jackson, Flutter chief executive.
MaxBet will provide Flutter with the platform to access fast-growing markets, the firm said in a statement.
In the 12 months to June 2023, Maxbet generated pro forma fully regulated revenue of €145 million of which 44% is online, with adjusted Ebitda of €32 million.
Flutter said Serbia is an attractive, regulated market (2022: €700 million) with relatively low online penetration of circa 35% and expected online compound annual growth to 2025 of approximately 15%.
The deal is expected to close in the first quarter of 2024.
7:00am: FTSE 100 seen little changed
The FTSE 100 is expected to open slightly lower on Wednesday after heavy falls in US markets after data showed a drop in consumer confidence adding to nerves over a possible government shutdown.
Spread betting companies are calling London’s lead index down by around 3 points after closing 1.73 points higher at 7,625.72 on Tuesday.
Ipek Ozkardeskaya senior analyst at Swissquote Bank said: “Investors continue to dump stocks and buy US dollars on looming uncertainty regarding whether the US government will be shut in three days.”
“There is progress regarding a 6-week short-term funding deal, but getting an approval from the Senate will be a challenge,” she said.
The Dow Jones Industrial Average closed down 1.1%, the S&P 500 fell 1.5% and the Nasdaq Composite shed 1.6%.
Back in London, and the early focus will be updates from Saga, Old Mutual and Everyman Media.