- FTSE 100 down 41 points at 7,470
- Boohoo falls after cutting revenue forecasts
- Burberry slips as UBS downgrades to sell
4:40pm: Blue chips fall while FTSE 250 hits year low
The FTSE 100 closed near its worst levels for the day after strong jobs data in the US added to concerns that interest rates across the pond will stay inflated for some time.
At the close, London's lead index was down 40.56 points, 0.5%, at 7,470.16 while the FTSE 250 was at a year low, down 299.53 points, 1.7%, at 17,677.76.
"Stronger-than-expected US job openings, indicating a robust labour market, reinforce the 'rates higher for longer' fear that market players have and leads to risk-off sentiment with oil, gold and silver also seeing declines," said Axel Rudolph at online trading platform IG.
Burberry fell 3.6% after UBS downgraded to sell while a drop in sales at boohoo seemed to put retailers on the back foot.
JD Sports Fashion, M&S and Next were all lagging while boohoo itself fell 10%.
3:55pm: Alfa Financial fall as bid talks end
Shares in Alfa Financial Software Holdings PLC (LSE:ALFA) tumbled around 10% after it said talks with Thomas H. Lee Partners over a possible bid have ended.
“After careful consideration the Board has unanimously decided to terminate Alfa's engagement with THL,” the firm said in a statement.
Last week, the company confirmed it had received an “unsolicited approach” for a possible offer from THL.
Alfa said it remains confident in the company's strategic direction including continued investment into the software and in high-quality people.
“The inherent robustness of the asset finance market, seen in the exceptionally strong late-stage pipeline, underpins our strong confidence in the outlook for the business,” it added.
3:15pm: Stocks slip further as strong Jolts report
More evidence that the US jobs market remains in pretty good health.
The US Bureau of Labor Statistics said the number of job openings increased to 9.6 million in August, ahead of expectations for a rise of 8.8 million.
US JOLTS Job Openings Aug: 9610K (est 8815K; prev 8827K)
— LiveSquawk (@LiveSquawk) October 3, 2023
Over the month, job openings increased in professional and business services (+509,000), finance and insurance (+96,000), state and local government education (+76,000), nondurable goods manufacturing (+59,000), and federal government (+31,000), the report showed.
The figures sent stocks lower and the dollar higher adding to the narrative that interest may stay inflated for some time.
In London, the FTSE 100 fell to session lows, now down 29 points at 7,482, while in the US, the Dow is now down over 200 points.
2:45pm: US stocks slide as bond yields hit 16-year high
US stocks opened in the red as the bond sell-off resumed as investors grow increasingly worried about the long-term effects of higher interest rates.
Shortly after the opening bell, the Dow Jones Industrial Average was down 144.89 points, 0.4%, at 33,288.46, the S&P 500 was down 18.83 points, 0.4%, at 4,269.56 and the Nasdaq Composite was down 84.45 points, 0.6%, at 13,223.33.
The US 30-year yield rose to the highest level since 2007, and 10-year rates rose for a second day touching 4.74%.
There are concerns that higher rates will stop economic growth in its tracks, hurt the housing market and damage government finances.
Goldman Sachs (NYSE:GS) (Goldman Sachs (NYSE:GS)) said a sharp rise in long-term interest rates combined with widening deficits and heightened fiscal discord in Congress has renewed questions about the sustainability of rising government interest costs.
It projects federal interest expense will rise from 2% of GDP in 2022 to 3% in 2024 and 4% by 2030, surpassing the early 1990s peak by 2025.
On average over the next decade, higher interest expense is likely to add an additional 0.3% of GDP to the annual deficit compared to its July projections.
As a result, Goldman has raised its deficit estimates for FY2024 by $50 billion to $1.7 trillion (6.0% of GDP) and FY2025 by $100 billion to $1.9 trillion (6.5% of GDP).
2:18pm: FTSE slips into the red as US bond yields jump (again)
Ahead of the open in the US and the FTSE 100 has slipped into the red, down 17 points at 7,493.
The falls come as the US 30-year yield rose to the highest level since 2007, deepening a bond sell-off driven by expectations the Federal Reserve will keep interest rates higher for longer.
It rose as much as seven basis points to 4.858%, exceeding its 2010 high of 4.8559%.
Meanwhile, the 10-year Treasury yield has risen to a fresh 16-year high - all contributing to US futures now pointing to a weak start on Wall Street.
1.39pm: Here’s a quick recap of the top risers and fallers on the junior market today
Oxford BioDynamics PLC (AIM:OBD) saw its shares rise by 10% after the company received a unique reimbursement code for its EpiSwitch Prostate Screening (PSE) Test.
Shares of Renalytix PLC (AIM:RENX) surged 28% after the Centers for Medicare & Medicaid Services (CMS) announced a price of $950 for the company's FDA-approved kidneyintelX.dkd test.
ADM Energy PLC (AIM:ADME, ETR:P4JC) shares rose 10% at one point, as the micro-cap oil and gas firm was boosted by a third-party transaction in Nigeria.
Gooch & Housego PLC (AIM:GHH) shares climbed 7% after the photonic components maker reported that "trading momentum was sustained" in the second half.
Shares in Ascent Resources PLC (AIM:AST), the oil and gas company, jumped close to 15% after it signed a collaborative agreement with MBD Partners, the European-based investment firm.
Safestyle UK PLC (AIM:SFE) said it is actively engaging with existing shareholders and third-party investors to secure a working capital injection designed to stabilise its financial position. Shares opened 13% lower at 3.84p.
Shares of PCI-PAL PLC (AIM:PCIP), a provider of secure payment solutions, fell by 10% even after the company announced a victory in a UK High Court patent case against competitor Sycurio Limited. The court ruled strongly in favour of PCI-PAL, stating that Sycurio's patent claims were unfounded.
1:05pm: RMT calls off tube strikes
Some good news for London's commuters as strike action on London Underground planned for later this week has been suspended.
The RMT union has announced that strike action planned for Wednesday and Friday this week will now not go ahead.
This follows “significant progress” made by RMT negotiators and London Underground Limited (LUL) representatives, the union said.
This week's Tube strikes in London have been called offhttps://t.co/6cP2zryupa
— LBC (@LBC) October 3, 2023
RMT general secretary Mick Lynch said: "I congratulate all our members who were prepared to take strike action and our negotiations team for securing this victory in our tube dispute."
“We still remain in dispute over outstanding issues around pensions and working agreements and will continue to pursue a negotiated settlement.”
12:50am: Boohoo remains in the doldrums after sales shortfall
Shares in boohoo remain out of fashion, down 10%, after it a weak first half which saw it cut
its financial year 2024 revenue guide to a negative 12% to negative 17% decline (from 0% to negative 5%) although it held adjusted Ebitda margin guidance at 4-4.5%.
Analysts at Barclays said first half revenue declined 17% to £729 million, 6% below company consensus and below guidance of negative 10% to negative 15%.
Adjusted Ebitda declined 12% to £31 million, £4 million ahead of consensus, driven by improved gross margins but marketing was up 170bps as a percentage of sales.
“On the positive side, Boohoo has demonstrated its ability to deliver on profitability guidance, despite weaker top-line,” Barclays said.
“However, the clear negative is the weakness in the market and their market share loss - the latter of which is a particular focus for investors regarding future growth and profitability potential”, it added.
The broker kept its underweight rating and 30p price target.
12:05pm: Modest gains expected on Wall Street
It doesn't look as though US markets are going to provide much of a push to London this afternoon.
Indeed, ahead of what is expected to be a flat open, London's blue-chips have headed back towards opening levels, now up just 8 points.
Over in New York, 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 also up 0.1%.
There will the first of quite a few updates on the US labour market today with economists predicting Jolts data to show August job openings held steady at around 8.8 million from the prior month.
Later in the week, ADP private payrolls figures and weekly jobless claims numbers are due ahead of the employment report on Friday.
Bank of America expects a solid US employment report, with payrolls up by 185,000 (compared to 187,000 in August), average hourly earnings up 0.3% m/m, and unemployment down by 20 percentage points to 3.6%.
Elsewhere, Raphael Bostic, president of the US Federal Reserve’s Atlanta branch, will participate in a roundtable in the city on the 2024 economic outlook, but will no doubt add his views into the interest rate debate.
11:39am: Burberry estimates too high, reckons UBS
The downgrade by UBS continues to weight on Burberry Group PLC (LSE:BRBY) which is down 2.7%.
The Swiss bank noted it entered 2023 with high hopes for Daniel Lee's first collection.
“However, the increasingly challenging sector context, combined with so far muted reaction of the trade and consumer to the new brand aesthetics, means that the turnaround may have to be more costly to succeed,” the bank thinks.
UBS said its said its discussions with selected wholesalers suggest its price point is too high for the targeted consumer, thus driving a reduction in orders y/y, while some of the social media trends also don't suggest any "hype" among the consumers.
It reckons consensus estimates are too high and has reduced its EPS forecasts for the 2024, 25 and 26 financial years by 9%/14%/15% which places its 9%/15%/17% below consensus.
It sees risks of earnings cuts and a de-rating and has moved to sell from neutral with a 1,614p price target, down from 2,285p before.
11:10am: Insurers face ‘dynamic’ BoE stress test in 2025
The UK’s insurance sector’s ability to cope with a market crisis will be tested in 2025, in a similar fashion to the tests already faced by the banking sector.
The Bank of England said it will run a “dynamic” stress test for the general insurance sector in 2025, which will assess the industry’s solvency and liquidity resilience to a specific adverse scenario; assess the effectiveness of insurers’ risk management and management actions following an adverse scenario; and inform the Prudential Regulator Authority's supervisory response following a market-wide adverse scenario.
The dynamic nature of the 2025 exercise represents a significant change from previous exercises and will involve simulating a sequential set of adverse events over a short period of time, the BoE said.
The PRA intends to engage with the industry including trade bodies over the next six months, with a view to providing more details of this exercise during the first half of 2024.
10:35am: Pound slides on expectations US rates will stay higher, for longer
The pound has a hit a six-and-a-month low against the US dollar this morning, dipping to $1.2082 this morning, a six and a half-month low.
The slide comes traders bet on US interest rates staying higher, for longer thanks to the strength of the US economy.
Yesterday, manufacturing data showed that America’s manufacturing sector was close to recovery, while last week’s jobless claims figures remained historically low.
The Federal Reserve indicated recently that it favoured one more rate rise this year while at the same cutting expectations for rate cuts in 2024, to two redictions from four previously.
On Monday, a number of Fed officials backed this viewpoint stressing the likelihood of rates staying higher for an extended period of time.
Meanwhile, in the UK, interest rates are seen to have peaked against a weaker economic backdrop.
That could encourage the US Federal Reserve to raise interest rates on more time this year.
In contrast, the Bank of England may have ended its hiking cycle, after leaving UK interest rates on hold last month.
The drop in the pound has also given a boost to the dollar earners in the FTSE 100, keeping it in the green.
10:05am: Greggs shares fair value, store openings cut
Greggs has slipped 3.1% after its trading statement which showed strong growth in sales in the third quarter.
AJ Bell’s Russ Mould pointed out its ambitious growth strategy isn’t quite going to plan with a reduction in guidance for the number of net shop openings in 2023.
“Previously hoping for 150 net openings, the sausage roll king now expects between 135 and 145 net new sites,” he said.
“It’s hardly disastrous but gives investors something to grumble about,” he thinks.
But he added “achieving the new guidance would still be a record year for the absolute number of new shops opened, and planting new flags across the UK provides more opportunities to grow sales.”
Peel Hunt said it was a “strong performance,” but viewed the update as “an interesting rather than view-changing statement.”
“The share trade on 20x current year PE, which is fair value in our eyes,” the broker said.
Shore Capital described it as “another good update from Greggs,” and believes that the stock merits a “premium equity rating” but as with Peel Hunt thinks the current share price represents “full and fair value.”
Both Peel Hunt and Shore Capital rate Greggs at hold.
9:38am: Flutter offers opportunity amid the pessimism
Top of the FTSE 100 risers is Flutter Entertainment PLC (LSE:FLTR), up 1.9% 13,465p after analysts at research boutique Redburn upgraded the stock to buy from neutral.
Despite warnings from industry peers Entain and 888 Holdings, Redburn argues “that Flutter is more insulated given its US growth trajectory and share gains elsewhere.”
In a research note called "Opportunity Amid the Pessimism", analyst Andrew Tam said “following five months on the sidelines, we upgrade it back to buy.”
It thinks that idiosyncratic factors drove a large part of Entain’s and 888’s guidance cuts.
Market share losses (in Italy) and timing differences within UK safer gambling implementation at Entain point to internal (rather than market) causes while 888 also saw revenue impacted by internal factors such as compliance changes and a change in marketing strategy.
It points out Flutter shares are down 21% from their May 2023 peak and while the risk of results
below expectations remains, it argues Flutter is more insulated.
“We see 23% upside to our higher £163 target price,” Redburn said.
It also reiterated a buy on Entain but feels “more patience is required.”
“Underlying growth expectations are more modest following the guidance cuts, and while risks of further downgrades remain, we are arguably closer to the end of the downgrade cycle – particularly as UK regulatory headwinds are lapped,” it believes.
9:12am: AstraZeneca takes $425 million hit to settle litigation
A bit more on the AstraZeneca settlement which has supported shares today which are up 0.4% in early deals.
The Cambridge-based pharmaceuticals giant said it has settled legal matters involving its Nexium acid reflux and Prilosec heartburn products, for $425 million.
It said the agreement resolves the product liability claims pending in the US District Court for the District of New Jersey, as well as in the Delaware Superior Court and the New Jersey Superior Court.
But, it maintains its belief that the claims are "without merit", and it doesn't admit any wrongdoing in its settlement.
The firm explained that the settlement will allow it to avoid lengthy and expensive legal proceedings, and "move forward with its purpose of delivering life changing medicines to millions of patients around the world".
The firm has already made a provision for the settlement.
8:46am: FTSE 100 flatlines, downgrade hits Burberry
The FTSE 100 has pushed higher, up 11 points at 7,522.
AstraZeneca PLC (LSE:AZN) is up 0.8% after it settled legal matters involving its Nexium acid reflux and Prilosec heartburn products, parting with $425 million.
Astra said it still believes suits in the US District Court for the District of New Jersey, as well as in the Delaware Superior Court and the New Jersey Superior Court, are "without merit". It said it "admits no wrongdoing in the settlement agreement".
Heading the other way was Burberry Group PLC (LSE:BRBY), down 2.9%, after UBS downgraded to sell from hold with a price target of 1,614p, down from 2,285p.
The Swiss bank said the reaction to Burberry’s latest collection was muted and that its products are too expensive for the consumers who would want to buy Burberry items.
Flutter Entertainment PLC (LSE:FLTR) is 1.9% higher after analysts at Redburn upgraded to buy with a 16,300p price target.
Elsewhere, the warning from boohoo has hit shares in Asos, down 3.8%.
8:15am: FTSE flat but boohoo slides
The FTSE 100 held modest losses in early exchanges but it was bad morning for investors in boohoo Group PLC.
At 8:15am, London's lead index was down 1.80 points at 7,508.92 while the FTSE 250 was down 81.34 points, 0.5%, at 17,895.95.
Shares in boohoo fell 7.7% after it said half-year sales fell 17% to £729.1 million from £882.4 million the year before resulting in an adjusted pre-tax loss of £9.1 million compared to a pre-tax profit of £6.2 million before.
It also warned revenue for the full-year is now expected to decline by 12% to 17%.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown said for Boohoo, “the party’s on hold for now,” while Josh Warner, market analyst, City Index said it will “a hard update to swallow for investors.”
Warner noted it ultimately means it will take longer for Boohoo to turn around its fortunes than previously hoped.
“The company did well to clear inventory, but sales are now set to drop by double-digits over the full year and it has signalled that Ebitda is also at risk of falling too – having previously signalled that both measures would grow,” he added.
Greggs also fell 1.8% but it was a better looking update from the sausage roll seller.
The FTSE 250-listed firm said sales rose 20.8% in the 13 weeks to September 30 with company-managed shop like-for-like sales up 14.2%.
John Moore, senior investment manager at RBC Brewin Dolphin, said “Greggs’ update is positive in what has become a business-as-usual way for the baker.”
“Input inflation is beginning to ease and sales are growing, despite a challenging high-street environment.”
“If anything, Greggs is proving it can be a beneficiary in tougher times, offering a price competitive option for lunch and, increasingly, evenings.”
Peel Hunt viewed it as “interesting rather than view-changing statement.”
8:00am: Shop price inflation at lowest level in a year
As mentioned earlier, shop price inflation in the UK hit its lowest level in a year, as food prices fell, according to the latest British Retail Consortium-NielsenIQ tracker.
The survey showed that the annual shop price inflation rate cooled to 6.2% in September, from 6.9% in August, falling for the fifth consecutive month in September.
Non-food inflation eased to 4.4% in September from 4.7% in August, while food inflation decelerated to 9.9% from 11.5%, hitting single digits for the first time since August last year and down from an all-time peak of 15.7%.
The BRC reported that food prices fell by 0.1% between August and September in the first month-on-month drop for more than two years, which the trade body attributed to “fierce competition between retailers”.
“Customers who bought dairy, margarine, fish and vegetables — all typically own-brand lines — will have found lower prices compared to last month,” said Helen Dickinson, chief executive of the British Retail Consortium.
7:46am: Greggs to extend online deliveries with Uber Eats link-up
Another retailer in the news is Greggs PLC (LSE:GRG) - famous for its sausage rolls, although other options on its new autumn menu include spicy chicken and veg bhaji baguettes which can be washed down with a pumpkin spice latte.
Back to the numbers, and the company reported continued strong growth in sales in the third quarter supported a rise in evening trade and use of its app.
The retailer said sales rose 20.8% in the 13 weeks to September 30 with company-managed shop like-for-like sales up 14.2%.
The FTSE 100-listed firm revealed evening trade represented 8.8% of company-managed shop sales, up from 8.3% a year ago, while Greggs app participation grew to 13.1% of company-managed shop transactions scanned, up from 10.6%.
Greggs is also set to roll out its delivery service with a second delivery partner, Uber Eats, following a successful trial with Just Eat.
It expects to have around 500 shops live with Uber Eats by the end of October 2023, with further expansion to come in 2024.
Around 135 and 145 net shop openings are expected in 2023 and Greggs said it had seem some easing in cost inflation.
The full year outcome is expected to be in line with previous expectations.
7:35am: Boohoo slips into the red as sales slide
We're off and running with results from boohoo Group PLC, the online retailer, which seemed to spend most of its time recently engaged in a spat with Revolution Beauty.
The online retailer said in the six months ended August 31 fell 17% to £729.1 million from £882.4 million the year before resulting in an adjusted pre-tax loss of £9.1 million compared to a pre-tax profit of £6.2 million.
UK sales slid 19% and International sales fell 15% although boohoo said revenue in core brands), declined 10%, consistent with prior guidance of negative 10% to negative 15%.
The firm said it had targeted more profitable sales in its labels which resulted in more significant revenue declines.
Nonetheless, given the slower volume recovery than previously anticipated and the continued targeting of more profitable sales within its labels, revenue for the full-year ending February 28 2024 are now expected to decline by 12% to 17%.
Adjusted Ebitda margins are expected to be between 4% and 4.5%, in line with prior guidance, given the strong progress made on gross margin and cost control.
Adjusted Ebitda is expected to be between £58 million to £70 million.
Gross margin strengthened in the first half, despite significant investments into reducing lead times in the supply chain and into price reductions for the customer.
Boohoo has also identified more than £125 million of annualised cost savings across cost of goods, supply chain and overheads, to be delivered across 2024 & 2025, supporting a disciplined reinvestment programme.
Stock fell £94 million/35% year on year, it added.
7:00am: Weak start expected in London
Good morning and it looks like a weak start in London after a mixed showing in the US following hawkish comments from two leading Fed officials.
Spread betting companies are calling the FTSE 100 down by around 16 points after closing down 97.36 points at 7,510.72 on Monday.
The US Federal Reserve will likely need to keep interest rates higher for longer in order to firmly bring down inflation, a senior Fed official said.
"The most important question at this point is not whether an additional rate increase is needed this year or not, but rather how long we will need to hold rates at a sufficiently restrictive level to achieve our goals," Fed Vice Chair for Supervision Michael Barr told a conference in New York in prepared remarks.
"I expect it will take some time,” he added.
Meanwhile, Federal Reserve Governor Michelle Bowman said she expects it will likely be appropriate to raise rates further and hold them at a restrictive level for some time to return inflation to the 2% goal in a timely way.
In prepared remarks to a banking conference Bowman said she sees "a continued risk that high energy prices could reverse some of the progress we have seen on inflation in recent months."
The comments kept the Dow Jones Industrial Average in the red down 0.2% although the Nasdaq Composite rose 0.7%.
In Asia, Evergrande shares surged as much as 42% on Tuesday after resuming trading in Hong Kong after a suspension.
Back in the UK and there was better news with shop price inflation cooling for the fifth consecutive month in September, according to the latest British Retail Consortium-NielsenIQ tracker.
Aside from that, the early focus in London will be updates from online retailer Boohoo and Greggs, the retailer famous for its sausage rolls.