- FTSE 100 closes up 9 points at 7,602
- William Hill owner 888 warns of lower revenue
- Mitchells & Butlers sees top-end earnings
4:40pm: FTSE rallies to close in the green
The FTSE 100 staged a late comeback to close in positive territory after being as much as 60 points lower mid-morning.
London's lead index closed up 8.63 points, 0.1%, at 7,601.85 while the FTSE 250 fell 121.55 points, 0.7%, at 18,098.68.
Chris Beauchamp at online trading platform IG said: "The one-way move in indices of the past week has paused this afternoon."
"European markets have edged higher and on Wall Street traders have done a small spot of bargain-hunting as the end of Q3 looms. But the worries about higher oil prices and rising yields haven’t gone away," he added.
United Utilities fell 3.6% after a Barclays downgrade to equal weight while a buy note from Bank of America supported Smiths Group (LSE:SMIN).
3:53pm: John Lewis plans £150 million sale and leaseback
John Lewis Partnership Plc is planning to raise as much as £150 million from the sale and leaseback of a dozen Waitrose supermarkets as the struggling retailer seeks more capital, Bloomberg reported, citing people familiar with the matter.
The marketing of the stores will begin next week and mostly includes supermarkets in the south of England with 20-year inflation-linked leases, said the people, asking not to be identified as the information isn’t yet public.
CBRE is acting as agent for the partnership, which owns the upmarket grocer and the John Lewis department store chain, they said, adding that there’s no certainty a deal will take place.
3:12pm: Barclays like Pennon, upgrades Severn Trent
A bit more on the moves by Barclays in the utility sector we reported earlier today.
The bank upgraded Severn Trent to overweight from equal weight, moved United Utilities to equal weight from overweight, kept National Grid at overweight with a 1,300p price target and kept Pennon at overweight, with a lower price target of 1,090p, down from 1,200p.
“We see a compelling entry point for UK water utilities in general and Pennon Group in particular,” the bank said.
It noted the valuation gap between United Utilities (1,290p price target, down from 1,310p) and Severn Trent (3,360p price target, down from 3,400p) has closed, hence the move there.
Barclays said asset growth with both energy transition and water trilemma is increasing to a high single digit % CAGR, a significant increase from the current run rate.
It thinks allowed base returns will need to rise to levels not seen since the mid-2000s while achieved returns should remain above allowed baseline for UK regulated companies.
Current valuations do not reflect the reality of allowed return rate transition, the broker believes.
2:45pm: Mixed start on Wall Street
It's been a start to proceedings in New York as in-line economic growth figures showed a sharp drop in personal consumption - the main driver of the US economy.
Shortly after the opening bell the Dow Jones Industrial Average was up 45.92 points, 0.1%, at 33,596.19, the S&P 500 was flat at 4,275.00 and the Nasdaq Composite was down 42.95 points, 0.3%, at 13,049.90.
US gross domestic product grew at the pace expected in the second-quarter of the 2023, though it eased from an upwardly revised expansion in the first quarter, numbers from the Bureau of Economic Analysis showed.
Quarter-on-quarter GDP gross grew 2.1% on an annualised basis in the three months to June 30, unchanged from the second estimate, while the first-quarter expansion was upwardly revised to 2.2% from 2.0% previously.
But Ian Shepherdson chief economist at Pantheon Macroeconomics pointed out the make-up of second quarter growth was "substantially different" from the second estimate.
Consumption growth was cut to 0.8% from 1.7%, while business investment in structures was revised up to 16.1% from 11.2%, and the GDP contributions from net trade and inventories were revised up by 0.26pp and 0.09pp respectively.
"As consumption is nearly 70% of GDP, expect to see Q3/4 growth forecasts revised down," Shepherdson said.
2:21pm: IOG heads into administration
IOG PLC (AIM:IOG), the London-based, UK-focused gas developer and producer, is being placed into administration.
"After extensive consideration of the company's current financial situation following underperformance of the developed assets and the resulting creditor position, the board has now regrettably concluded that IOG PLC (AIM:IOG) should be placed into administration," the company said in a statement.
This was in order to preserve the value of the business for creditors, IOG said.
IOG said regarding the existing bond waiver which expires on September 29, talks discussions have been held with a representative group of senior secured bondholders and their advisors regarding a potential additional capital injection and associated restructuring of the company.
Discussions are intended to continue during the administration with a view to a potential restructuring solution that protects the operating subsidiaries, which are not being placed into administration, it said.
In late June, the London-based, UK-focused gas developer and producer agreed a waiver to postpone the interest payment deadline under an €100 million senior secured bond from June 20 to July 31.
This was then postponed to the September 29.
2:12pm: Renewi says Macquarie bid "fundamentally undervalues" firm
Renewi says Macquarie Asset Management's bid proposal "fundamentally undervalues the value of Renewi and its prospects," and rejected it this morning.
The company was responding to what it called "an unsolicited and highly conditional non-binding proposal" from Macquarie in relation to a proposed all-cash offer of 775p per share.
Renewi strongly urged shareholders to take no action at this time.
Macquarie earlier revealed it had approached Renewi over a £636 million bid but that it had been rebuffed.
Macquarie said the bid represents a multiple of 8.4x Ebitda for the year ended March 31 2023 which compares favourably to the trading multiples of Renewi's listed peers in the European waste and resource recovery sector.
The bid offers a "compelling opportunity for Renewi's shareholders to realise their investment for cash at a very significant premium and at an attractive multiple," Macquarie said.
1:35pm: Here are some of today's risers and fallers
Renewi PLC (LSE:RWI) shares rocketed 33% after Macquarie Asset Management said it is "considering" a possible £636 million cash offer for the waste management group.
A proposed offer of 775p per share on Monday 25 September 2023 was rejected by the Renewi board, the investment arm of the Australian bank confirmed in a statement this morning, turning it into a semi-hostile situation.
Takeaway delivery company Deliveroo PLC (LSE:ROO)'s share price rose almost 9% after it proposed a tender offer to buy £250 million of stock and return that money to shareholders.
The company first announced its intention to return capital to shareholders in August, in addition to a £50 million share buyback announced in March, and said today that it will price its tender offer at between 115p and 135p per share.
Defence firm Babcock International PLC (LSE:BAB) rose nearly 4% after announcing operating cash flow had outdone expectations for the first five months of the year.
Underlying operating profit looks set to increase come the firm’s November interims on the back of higher revenue, FTSE-250 listed Babcock said in a statement ahead of its annual general meeting.
N4 Pharma PLC (AIM:N4P)’s stock plunged more than 30% after it announced plans to buy a majority stake in Nanogenics Ltd, a company developing “complementary” lipid and peptide-based delivery technology.
The pharmaceutical group, which is developing a novel system for delivery of oncology, gene therapy and vaccines, said it will finance the stake purchase through a subscription of new ordinary shares.
ZOO Digital Group Plc (AIM:ZOO), the supplier of cloud software to the media industry, sank around 19% after it revealed revenues were expected to come in lower than analysts had initially expected.
Writers' strikes in Hollywood have plagued the entertainment industry in 2023 and ZOO Digital has experienced it first hand, with the reduced demand for media services leaving the group’s first-half revenues at around US$21 million, less than half that of the US$51.4 million posted in the 2023 financial year.
1:06pm: Burberry's new Bond Street store performing well
Burberry shares perked up 1.3% following a well received analyst visit to its newly renovated Bond Street flagship store in London.
This was followed by a Q&A session with management for sell-side analysts with CEO Jonathan Akeroyd, newly appointed CFO Kate Ferry and VP of product strategy Helen Davis.
Analysts at Barclays said the key takeaway is that Burberry's newly reopened Bond Street store has been running “ahead of expectations, and that early reception of Daniel Lee's products appears to be positive.”
“We liked hearing that the new creative vision appears to be resonating well with Chinese customers, who particularly like that production of new products has shifted towards Europe from Asia,” the bank said.
But the broker kept an equal weight rating on the stock.
“While we appreciate that early feedback from customers appears positive, and that the brand has been enjoying solid social media momentum thanks to various activations over the past month, we believe it may be too early to turn more positive at this stage,” it said.
12:50pm: BofA likes Yellow Cake, bullish on uranium
Yellow Cake PLC (AIM:YCA) is the spotlight after it announced an equity raise for up to US$125 million by issuing around 18.7 million shares at 550p each.
The firm will use the proceeds to purchase 1.5Mlbs physical uranium from Kazatomprom, under its long-term offtake agreement, at a price of US$65.5/lb, a 8% discount to yesterday's spot price of US$71/lb.
Bank of America explains Yellow Cake is something of an unusual vehicle – a listed company that gives investors exposure to uranium price movements.
It doesn't mine or process uranium, instead it raises equity to buy and hold physical uranium, U308 (ASX:UTO), "Yellowcake" which it stores at licensed facilities in Canada and France.
As such, analysts at BofA suggest the shares should (broadly) track the group's implied NAV/share which is driven mainly by moves in the spot uranium price.
BofA is bullish on uranium.
“Nuclear power is fast (re)gaining acceptance as a solution to the twin challenges of decarbonisation & energy security,” it notes.
With more life extensions for existing nuclear reactors in France and North America, uranium prices have rallied +47% year-to-date.
In the medium-term, China likely will drive the demand for uranium as the country shifts its energy mix from coal.
BoFA explained that according to World Nuclear Association, China currently has 23 reactors under construction and 45 reactors planned.
The bank rates Yellow Cake at buy with a 610p price target.
Shares were down 0.5% at 559.50p.
12:28pm: Lower mortgage rates offer hope for housebuilders
With mortgage rates heading downwards, what the implications for housebuilders, with the sector still facing a wall of bad news, almost on a daily basis.
Analysts at Barclays think while data screens as increasingly negative, there are reasons to assume an improvement in trends through the autumn.
It points out mortgage rates have been working down in recent weeks, following the swap rate and are now around 120 basis points lower than the July peak, and the bank expects further falls in the coming weeks, moving sub-6%.
Barclays points out when mortgage rates were closer to c5% in early Q2, house-builders reported sales rates that were closer to negative 20-25%, rather than the negative 40-45% seen through the summer.
“Assuming mortgage rates continue to edge down in the coming weeks, we see reasons for improved optimism,” the bank added.
One caveat, Barclays pointed out the average rate on outstanding mortgages in the UK in the second quarter was still only c.3%, highlighting the degree to which interest rate increases have yet to fully feed through to existing home-owners.
12:01pm: Steady start expected on Wall Street
Midday and time to turn attention to events across the pond with a muted start expected.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.1% higher, while those for the S&P 500 rose 0.1%, and contracts for the Nasdaq 100 futures were down 0.1%.
Economic figures will provide an early focus with the release of the final estimate for second-quarter economic growth, with economists expecting gross domestic product to hold steady at its second reading of a 2.1% annualised increase.
Initial claims for US state unemployment benefits, a proxy for lay-offs, are expected to have risen to 215,000 last week from 201,000 the prior week.
In company news, Peloton shares are 13% higher in pre-market trading after it signed a five-year global partnership with sportswear retailer, lululemon Athletica, after the close Wednesday.
The pact will see Peloton, the New York-based exercise outfit, become the exclusive digital fitness content provider for lululemon, and lululemon become the primary athletic apparel partner to Peloton.
11:33am: Renewi rejects £636 million bid from Macquarie
Renewi PLC (LSE:RWI) shares soared 35% to 685p after news emerged it had rejected a £636 million bid approach made by Macquarie Asset Management.
Macquarie said it made its 775p per share move on September 25 but the board of Renewi had turned it down.
Macquarie said the bid represents a multiple of 8.4x Ebitda for the year ended March 31 2023 which compares favourably to the trading multiples of Renewi's listed peers in the European waste and resource recovery sector.
The bid offers a "compelling opportunity for Renewi's shareholders to realise their investment for cash at a very significant premium and at an attractive multiple," Macquarie said.
11:14am: HSBC eyeing Citi's Chinese onshore retail wealth business
HSBC Holdings PLC (LSE:HSBA) is in talks to buy Citigroup's China onshore retail wealth business as it continues to build its presence in the mainland, Bloomberg reported, citing people familiar with the matter.
Citi’s China retail wealth business has about $4 billion of assets and deposits and about 400 staff, which would be transferred to HSBC if the deal goes through, the people said.
The deal could be announced as early as next month, one of the people said.
10:53am: Diageo update should reassure, reckons BofA
Diageo’s trading statement was a case of no news is good news, according to Bank of America.
The bank felt the update should provide some reassurance and evidence of growth acceleration in the second half should support a re-rating.
BofA said while there is no explicit commentary on current trading it believes that trading in the US has not changed much in the last two months and is still growing around mid-single digits, with Diageo below that
In Europe, it thinks the first half should benefit from pricing actions taken in the second half of the previous financial year while in China, it should be less impacted by the current environment, while momentum in India should have remained strong.
The broker has buy rating on Diageo but cut its price target to 3,600p from 3,800p.
But positive forex movements drive an increase to EPS estimates of between 3-5%.
“For FY24, we now assume a £230m negative FX impact on EBIT versus c-£400m previously, noting, however, that Diageo will soon move to USD reporting,” the bank said.
It also trimmed its organic forecasts for 2024 marginally, it now expects +4.9%/+6.0% organic sales/EBIT for 2024 (versus +5.2%/+6.5% previously).
Amongst a sea of red, Diageo shares are holding up well, down 0.3% at 3,013.25p.
10:27am: Car production drops almost 10% in August
Car production dropped by almost 10% in August, following six consecutive months of growth, new figures from the Society of Motor Manufacturers and Traders show.
A total of 45,052 models rolled off factory lines, the industry body said.
UK car manufacturing falls in August as factories gear up for next gen models
???? production down -9.7%, following 6 months of growth
⬇️Production for home market falls -25.2%
⚡️Electrified vehicles represent nearly 2 in 5 of all cars producedhttps://t.co/mSyqyrprKk pic.twitter.com/wQo49nhZED
— SMMT (@SMMT) September 28, 2023
August typically has the fewest number of cars built because of summer shutdowns but last month was also hit by extended production pauses at some plants for planned maintenance and upgrades as car makers gear up to produce the next generation of electric vehicles.
Production for the domestic market fell by a quarter while output for export dropped by 5.5%, driven largely by a decline in shipments to the US, China and Japan.
The EU remained the UK’s biggest global market with almost six in 10 exports heading for the bloc.
In the year to date, overall production has increased by 11.8% to 571,671 units, the SMMT said.
10:13am: Ex-divs weigh
Adding to the downward pressure on the FTSE 100 are a number of stocks going ex-dividend.
These include Barratt Developments, down 6.8%, BAT. down 3.6%, Rightmove, down 1.8%, Smurfit Kappa, down 2.4% and Phoenix Group, down 6.1%.
All contributing to the 64 point fall in the lead index.
9:51am: Oil price rise stokes inflation worries
Russ Mould, investment director at AJ Bell says "another leg up in oil prices has added to the market worries about sticky inflation, thereby stoking fears that interest rates will stay higher for longer."
Although off its early highs Brent crude is still trading around $96.50, close to 10-month highs.
“The market is worried that supplies of oil are going to be tight and if prices keep going, it is going to cause a real headache for businesses and consumers," Mould said.
Fiona Cincotta, senior financial markets analyst, City Index explained: "Oil is pushing higher after a drop in US crude stockpiles, which have added to mounting worries over tight global supplies."
"US crude stockpiles fell by 2.2 million barrels last week to 416.3 million barrels. This was well below the 320,000 barrel draw that analysts had been expecting."
Meanwhile, crude stocks at the Cushing, Oklahoma storage hub fell by 943,000 barrels across the week to less than 22 million barrels, the lowest level since July 2022, she pointed out.
Stockpiles at Cushing have fallen to historic lows and are close to the minimum operating level, adding to concerns about tight supply in the market, she noted.
The crude drawdowns follow production cuts of 1.3 million barrels a day by Saudi Arabia and Russia, which are set to continue until the end of the year.
9:34am: UK home sellers increase discounts to secure deals
UK house sellers are increasingly cutting prices to secure deals even as the normally busy autumn selling season gets under way, according to data from property platform Zoopla.
Discounts have increased to 4.2% from the original asking price over the past four weeks, representing an average of £12,125, the highest level since March 2019, the property portal reported.
Zoopla pointed out: "The more than doubling in mortgage rates since last 2021 together with increases in the cost of living represents a big adjustment for home buyers and the wider market."
UK Home Sellers Increase Discounts To Secure Deals, Zoopla Data Shows - FThttps://t.co/h0HzuBPKeg
— LiveSquawk (@LiveSquawk) September 27, 2023
Richard Donnell from Zoopla said: "House prices are falling the most in London and the south east as higher mortgage rates have the greatest impact on buying power and prices. It’s in these areas where buyers are driving the greatest discounts to asking price to achieve a sale as they have stronger negotiating power."
9:08am: Babcock jumps on upbeat trading
Over to the FTSE 250 and Babcock International Group PLC is the clear winner with shares up 9.9% at 425.40p after updating investors on trading ahead of today's AGM.
"Trading has been encouraging since the start of the financial year, with good organic revenue growth, improved operational performance and higher cash flow compared to the same period in the previous year," the engineering outsourcing company said in a statement.
Underlying operating profit has increased year-on-year, driven by revenue growth and continued operational improvement driving underlying operating margin expansion, Babcock said.
It also benefitted from the earlier than anticipated receipt of initial licence fees associated with the Polish MIECZNIK frigate programme.
Underlying operating cash flow in the period was higher than expected, largely due to contract phasing, the firm added.
Expectations remains unchanged, but the City has nonetheless been encouraged by the update.
Peel Hunt said trading has been encouraging, with good organic revenue growth.
8:41am: Severn Trent boosted by upgrade
The FTSE 100 remains little changed, supported by gains in oil majors, BP and Shell following the latest rise in the oil price.
Severn Trent PLC (LSE:SVT) is the top riser in the FTSE 100 following an upgrade by Barclays which has also nudged up its price target.
The broker has moved the firm to overweight from equal weight but lowered its price target from 3,400p from 3,360p.
Shares rose 1.7% to 2,348p.
The bank has reinstated its rating on National Grid at overweight and updated water companies as they go into regulatory review.
Pennon is its favoured water utility, rated overweight, with a reduced price target of 1,090p down from 1,200p.
But United Utilities has been downgraded to equal weight from overweight with a 1,290p price target, down from 1,310p.
We’ll have more on this later.
The warning from 888 Holdings has hit Entain, down 2.4%, and Flutter Entertainment, down 2.6% while Croda fell 1.5% as Deutsche Bank cut its price target to 5,200p from 5,600p.
The bank expects the firm to update on trading within the next two weeks.
8:15am: FTSE flat, oil majors provide support
The FTSE 100 was little changed in early trading with investors weighing up the inflationary implications of a further jump in oil prices and further trouble for embattled property developer, Evergrande.
At 8:15am London’s lead index was down 3.19 points at 7,590.03 while the FTSE 250 fell 22.84 points, 0.1%, at 18,197.39.
Brent crude rose a further 1.0% to $97.15/barrel after the latest report from the Energy Information Administration showed that US commercial crude oil inventories fell by 2.2 million barrels from the previous week, further tightening supply while the delivery point for WTI saw inventories fall to the lowest point in more than a year.
Shares in BP rose 1.7% while Shell climbed 0.9%.
Meanwhile, in China, shares in Evergrande were suspended on the Hong Kong stock exchange on Thursday, according to notices posted by the bourse.
Neither the company nor the exchange provided any explanation for the halt, which also followed a Bloomberg report on Wednesday that the company’s chair Hui Ka Yan was under police surveillance.
Back in London, and William Hill owner 888 Holdings PLC (LSE:888) slumped 14.5% to 94.95p after warning third revenue had fallen 10% due to the impact of compliance changes and unfavourable sporting results.
The downbeat trading update followed a similar statement from Ladbrokes owner Entain earlier in the week.
Better news for shareholders in Mitchells & Butler which rose 2.7% to 220p after an upbeat trading statement.
The pub and restaurant chain, which owns Harvester and Toby Carvery, expects results at the top-end of expectations.
Liberum described it as a “strong trading statement,” while Peel Hunt expects to upgrade profit forecasts by around 7% “due to strong sales.”
Diageo edged 0.9% higher 3,050p after a solid trading update, remaining confident of hitting medium-term targets.
7:52am: Mitchells & Butler sees top-end earnings
But better news from Mitchells & Butlers PLC which expects full-year earnings to be at the top end of expectations after a strong rise in sales and easing of cost headwinds.
The pub and restaurant chain said strong trading had continued through the fourth quarter, bringing year to date like-for-like sales growth to 9.1%, with total sales growth now of 10.5%.
Like-for-like sales in the fourth quarter increased by 9.7% supported by sustained growth in both food and drink volumes and reflecting an increasing out-performance against the market, the firm said.
The owner of Harvester, Toby Carvery, All Bar One, Miller & Carter said cost headwinds are abating and remain at the bottom end of the range previously identified.
“We remain mindful of the challenging macroeconomic environment and pressures on the consumer however, as trading continues to be strong, we have confidence that the current year outturn will be at the top end of consensus expectations, with momentum into FY 2024," M&B said in a trading update.
7:42am: 888 warns of sharp fall in revenue in third quarter
Not such good news from 888 Holdings PLC (LSE:888) which has warned unfavourable sporting results and regulatory compliance has seen revenue drop sharply in the third quarter.
The news follows a similar warning from Entain earlier in the week.
Lord Mendelsohn, Executive Chair of 888, said the “performance in Q3 has been below our expectations, and this means we now expect to end the year with EBITDA below our prior expectation.”
The owner of William Hill, 888 and Mr Green, said performance has been “mixed”, with overall revenue for the third quarter expected to be down around 10% to around £400 million.
888 explained the fall reflected the ongoing “significant” impact from compliance changes implemented in dotcom markets, customer friendly sports results impacting win margin across both UK and International markets in September and the ongoing impact of safer gambling changes within the UK.
The betting operator also saw a short-term impact from the change in marketing approach to focus on higher return marketing.
Retail continues to perform strongly, with broadly stable revenue, and no change to the expectation of mid-single digit revenue growth in the full year.
The firm expects fourth quarter revenue to be higher than the third quarter, but lower year-on-year.
Synergy delivery is on track and significant cost savings are being delivered that have helped to mitigate the year-to-date revenue performance versus initial expectations, 888 said.
Full year adjusted Ebitda margin is now expected to be approximately 18-19%.
7:26am: Diageo confident of hitting mid-range targets
We start the day with Diageo PLC which remains confident of delivering medium-term targets despite a challenging operating environment.
The spirits maker, which owns Johnnie Walker, Smirnoff and Guinness, said it was well-positioned to deliver its medium-term guidance for financial 2023 to financial 2025 of organic net sales growth consistently in the range of 5% to 7% and organic operating profit growth sustainably in the range of 6% to 9%.
Debra Crew, chief executive, said: “our expectations for fiscal 24 are unchanged,” adding the firm expects “
operating environment challenges to persist, with ongoing cost pressure and geopolitical and macroeconomic uncertainty.”
Crew said she firmly believes “the strength of our portfolio, our diversified footprint and our deep consumer insights will drive sustainable long-term growth and generate value for shareholders."
The FTSE 100 firm was updating investors ahead of today’s AGM.
7:00am: Oil price continues to march towards $100, Evergrande suspended
Good morning – and the FTSE 100 is expected to open higher on Thursday despite fresh concerns over embattled Chinese property giant, Evergrande.
Spread betting companies are calling London’s lead index up by 12 points after closing down 32.50 points at 7,593.22 on Wednesday.
Evergrande suspended trading of its shares on the Hong Kong stock exchange on Thursday, according to notices posted by the bourse.
Neither the company nor the exchange provided any explanation for the halt, which also followed a Bloomberg report on Wednesday that the company’s chair Hui Ka Yan was under police surveillance.
The suspension comes just days after the developer said its restructuring plan could not proceed and pushed the Hang Seng to a 10-month low, falling 1.1%.
US markets closed mixed after a fresh surge in the oil price sparked inflationary concerns.
The latest report from the Energy Information Administration showed that US commercial crude oil inventories fell by 2.2 million barrels from the previous week, further tightening supply while the delivery point for WTI saw inventories fall to the lowest point in more than a year.
Brent crude was trading a further 1.0% higher at $97.45/barrel, continuing what appears to be a relentless rise to $100/barrel, after strong gains on Wednesday.
Back in London and the early focus will be an update from pub chain Mitchells & Butler.