- FTSE 100 closes dowb 2 points at 7,492
- Oil price jumps after attack on Israel
- Airlines dive as flights cancelled
4:40pm: Oil stocks insulate FTSE from further falls
The FTSE 100 closed little changed in a trading session clouded by events in the Middle East.
At the close, London's blue-chips were down 2.37 points at 7,492.21 while the FTSE 250 was down 160.26 points, 0.9%, at 17,572.06.
Defence manufacturer BAE Systems rose 4.3% after the attack on Israel by Hamas, which sent the oil price soaring, boosting BP, up 3.4%, and Shell, up 3.4%.
But airlines slipped back on flights were cancelled and as investors weighed up the impact of rising oil prices on fuel bills - BA parent company, IAG, fell 4.6%.
It wasn't the worst performer in the FTSE 100 though - that dubious priviledge fell to Croda, after the speciality chemicals firm lowered profit guidance, sending shares down 7.1%.
Fears that the warm weather would hit retailers sales of autumn and winter ranges saw M&S and Next fall 4.5% and 4.2% respectively.
3:50pm: Jefferies sees strategic sense from Bodycote deals
Jefferies reiterated its 'buy' rating for Bodycote after the company announced it bought two specialist technology-focussed businesses for $145 million.
"There is a good strategic rationale to these acquisitions, they are growing very strongly and enjoy good [earnings before interest, tax, depreciation and amortisation/earnings before interest and amortisation] margins, have attractive end markets, and the group retains a strong balance sheet post-acquisition," Jefferies said.
Jefferies expects "modest" earnings per share accretion in financial 2024 and financial 2025.
"Assuming completion in the [final quarter of financial 2023], Jefferies expects [mid-single-digit] upgrades to financial 2024 consensus Ebitda, and [low-single-digit] upgrades to financial 2024 consensus earnings per share," the investment bank said.
3:15pm: Goldman lowers UK inflation forecasts
Goldman Sachs (NYSE:GS) has trimmed its expectations for the UK inflation level for the next two years.
The investment bank now expects core inflation at 5.3% year-on-year, down from 5.5%, and at 2.8% compared to 3.3% previously.
Taken together with lower energy and food inflation, it also revised down its headline inflation projection to 4.3% from 4.5% for end-2023 and 2.5% from 3.2% for end-2024.
It expects sequential energy inflation to pick up but continue to contribute negatively to year-over-year headline inflation through 2024 while food inflation is forecast to slow further going forward.
Core goods inflation is forecast to slow going forward, similar to the trends observed in the US and Canada.
Goldman said the outlook for services inflation remains mixed, however.
It expects non-services inflation to decelerate meaningfully further going forward, but said the outlook for wage growth remains more uncertain with two-sided risks.
Private sector regular pay growth is predicted to moderate from 10.5% quarter-on-quarter in the second quarter but stay elevated at around 5.5% in quarter four.
As a result, services inflation is expected to decelerate from 9.1% quarter-on-quarter in Q2 to 4.9% by Q4.
2:48pm: Nasdaq slips but rising oil price props up Dow
The Nasdaq fell sharply at the open with sentiment hit by an the violence in the Middle East but a jump in oil stocks propped up the Dow.
Shortly after the opening bell, the Dow Jones Industrial Average was up 5.62 points at 33,413.20, the S&P 500 was down 14.87 points, 0.4%, at 4,293.63 and the Nasdaq Composite was down 129.11 points, 1.0%, at 13,302.24.
Craig Erlam at Oanda said: “The surprise attack by Hamas has fueled concerns about further instability in the Middle East which could in turn disrupt oil flows at a time when the market is already extremely tight and prices are high.”
“It's quite natural in these circumstances for investors to take a risk-averse approach while they gain a better understanding of what the knock-on effects will be - for example with the WSJ claiming that the attack was aided by Iran - and what that will ultimately mean for the global economy.”
“It comes at a time when there is already enormous uncertainty over the global economy going into 2024 with most central banks likely done with monetary tightening but some still warning of more to come.”
The jump in the oil price saw Exxon Mobil rise 3.5% and Chevron advance 2.4% while Arm Holdings rose 0.7% as Citi and Bank of America started coverage of the Cambridge-based firm with a buy rating and $65 price target.
2:08pm: Gold price rallies - seen as safe haven
Gold prices bounced off a seven-month low on Monday after the weekend attacks on Israel boosted demand for the safe haven asset.
The yellow metal advanced 1% cent to $1,850 per troy ounce, reversing the downward pressure exerted in recent weeks by the US Federal Reserve indicating that interest rates will probably remain higher for longer.
Investors tend to ditch gold when yields on US Treasuries rise since gold is a non-yielding asset, yet rush to the precious metal during times of uncertainty
Craig Erlam at Oanda said: "The yellow metal has been under immense pressure in recent weeks as investors became increasingly unsure about the inflation and interest rate environment and yields soared."
"That appears to have steadied for now but policymakers will have plenty of chance to calm nerves - or reinforce those concerns - this week."
1.34pm: Here’s a quick recap of the top risers and fallers on the junior end of the market today
Cornish Metals Inc (AIM:CUSN, TSX-V:CUSN, OTC:SBWFF) shares added 15% as the UK mine developer told investors that the Crofty project’s feasibility study is advancing on schedule, with a substantial amount of the study now completed.
Chill Brands Group PLC (LSE:CHLL, OTCQB:CHBRF)), the CBD and smoking alternatives company, rallied 14% after it revealed a deal to sell its nicotine-free vapes in WH Smith PLC (LSE:SMWH) stores.
Shares in Jadestone Energy PLC (AIM:JSE) jumped over 11% as the oil and gas firm announced a boost to its borrowing capacity, alongside progress at the Akatara project.
Mind Gym PLC (AIM:MIND), the staff training and business service, plummeted 33% after the group warned full-year profits and revenues would be “significantly lower” than market expectations, while also posting a loss for the first half.
Croda International PLC (LSE:CRDA) dipped 5% after the chemical specialist slashed profit guidance for the full year on depressed sales.
1:05pm: Amazon plans Christmas hiring spree
Online retailer Amazon is preparing for the Christmas rush by recruiting 15,000 people to fill seasonal roles.
Amazon, which has faced strikes by workers seeking wage rises at its warehouses this year, has also announced a pay rise for its staff of at least £1 an hour.
The minimum starting pay for frontline employees will increase to between £11.80 and £12.50 an hour depending on location.
The rise, for all full-time, part-time, temporary and seasonal roles, will be effective from October 15, it said.
12:41pm: Oil prices jumps on Middle East conflict
Oil prices jumped as the crisis in the Middle East continued following the attack on Israel by Hamas on Saturday.
Brent crude rose 3.7% to $87.70/barrel and West Texas Intermediate rose 4.0% to $86.09 on fears the turmoil could spread to other oil producing countries.
Susannah Streeter, head of money and markets at Hargreaves Lansdown said investors are assessing the potential for the conflict to disrupt supply in the Middle East, if other countries are drawn in.
“With the Israeli government warning of a long and difficult war, there are concerns that deep and incessant retaliative strikes on Gaza could potentially bring Iran into the conflict and have an impact on the flow of energy in the region,” she said.
Oil price rose 3% on news from Israel pic.twitter.com/uBlZzHme32
— Laura Aboli (@LauraAboli1) October 9, 2023
Over at Citi, analysts noted that “timing is everything and the attacks almost certainly postpone any Saudi/Israeli rapprochement, along with any high probability expectation of Saudi Arabia reducing or eliminating its extra 1-m b/d cut if prices resume their recent fall.”
“Risks also grow for an Israeli attack on Iran, given its support and encouragement to Hamas, with timing an open question.”
“Meanwhile, any expansion of battles will have potential repercussions on oil markets,” Citi said.
12:10pm: Weak open expected on Wall Street
Across to the US now and it looks like a weak start on Wall Street given the tensions in the Middle East.
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 100 futures were down 0.7%.
FUTURES RIGHT NOW
S&P 500 DOWN 0.8% ????
NASDAQ 100 DOWN 0.7% ????
DOW JONES DOWN 0.7% ????
VIX UP 7% ????
— ????BT ビットコイン (@DogeXBT) October 9, 2023
Oil prices jumped following the attack on concerns output from leading oil producers could be hit.
Ipek Ozkardeskaya at Swissquote Bank said: “It is difficult to predict the extent of the price action on geopolitical shocks. The fact that the US and Iran are pulled into the turmoil hints that tensions may further escalate.”
“From a price perspective, the $90pb level is expected to shelter decent offers in US crude, as escalation and prolongation of Mid-East tensions could be the final straw that could bring the world very close to the brink of recession, and temper appetite for oil. It's too early to call.”
Disney will be focus after The Wall Street Journal reported that activist investor Nelson Peltz plans to push for a seat on the board.
His firm, Trian Fund Management, owns a stake worth more than $2.5 billion in Disney, the report said, citing people familiar with the matter.
Elsewhere, speeches from Dallas Fed President Lorie Logan and Board of Governors member Philip Jefferson will be watched for any clues as to the future path of interest rates.
The speeches come as the Fed prepares for the latest data on inflation with consumer price and wholesale price data this week.
Minutes from September’s FOMC meeting will also be published on Wednesday.
Meanwhile, the reporting season kicks off later in the week with banking results from JPMorgan, Citigroup and Wells Fargo due on Friday.
11:41am: Lloyds' consumer business on track
Lloyds Banking Group PLC (LSE:LLOY)’s consumer business is making good progress, according to analysts at KBW Europe.
The research team, were commenting following what it called an "excellent" update from Lloyds’ management.
In particular, KBW said management highlighted that the business is on track to contribute c.30% of its total additional revenue target (£1.5 billion by 2026) and c.40% of its gross cost savings target (£1.2 billion by 2024).
This is achieved by a combination of new products as well as efficiency initiatives, it noted.
In terms of near-term performance, despite challenging margin trends, it remains comfortable with existing >310bps net interest margin guidance for 2023.
But KBW retained an underperform on Lloyds.
“We continue to like Lloyds as a simple, well-run UK retail and commercial banking operation, and the seminar yesterday very much confirms this proposition.”
“However, as we look into 2024, the dynamics for UK banking continue to feel demanding, with latest data showing no let-up in recent trends particularly in terms of margin pressure.”
It added the shares are not particularly cheap at 5.7x consensus 2024 /E with a limited chance of seeing positive news with third quarter results later this month.
Lloyds shares were down 0.8% at 42.30p.
11:06am: Signs that the labour market may be creaking
Companies’ hiring intentions have fallen to their lowest level in almost a decade as recession looms, according to a new survey.
BDO said its employment index had declined for a third consecutive month to its weakest reading since 2014.
Businesses were struggling to maintain staffing numbers “amid higher borrowing costs, elevated wage growth and weaker customer demand”, the advisory firm concluded, warning that “given that output remains weak and a recession is likely on the horizon, these pressures on firms are expected to have persisted last month”.
UK labour market “continues to show signs of cooling,” vacancies down 270,000 year on year. BDO said “further downward pressure on the employment index could follow as a recession looms.” BDO’s business confidence and output indices also fell in September https://t.co/DuQ8I4OCKL
— Duncan Brown (@duncanbHR) October 9, 2023
BDO monitors business trends by carrying out a poll of polls using business surveys and economic indicators.
Its employment index includes labour market data from sources including the Bank of England, IHS Markit, the CBI and the Office for National Statistics.
The report comes ahead of updates from three sizeable recruiters, Robert Walters, Pagegroup and Hays, which have all noted a marked slowdown in activity this year.
The smallest of the trio, Robert Walters PLC, reports on Tuesday 10 October, followed by middle child PageGroup PLC on Wednesday, with fellow FTSE 250-listed peer Hays PLC on Thursday.
10:27am: Warm weather could be hurting retailers
The warm weather may not have been helpful for clothing retailers, according to JPMorgan, as they launch their Autumn/ Winter ranges.
The bank points out that the autumn/winter selling period is relatively short, therefore often bringing pressure to start discounting early if there is a weak start to the season.
“We expect all of our clothing coverage to be impacted by the warm temperatures, but given the relative share price performance, we place Next and ABF (Primark) on negative aatalyst watch ahead of their updates on November 1 and November 7 respectively,” the broker said.
JPM thinks it could turn into a similar situation to 2018 which Mike Ashley called as “unbelievably bad”.
"In a similar situation to that which we think could develop this year, the sector underperformance in late 2018 was exacerbated by concerns that weather-driven weakness could have been masking an underlying deterioration in consumer confidence," the bank noted.
“More broadly, we remain concerned that the benefits of pent up demand in the sector could start to wane, and that clothing price deflation could also weigh on topline forecasts into 2024,” it added.
Retailers are certainly on the back foot today with Next down 3.3%, M&S down 1.7%, and AB foods down 1.0%.
9:48am: Metro Bank deal provides breathing space
AJ Bell’s Russ Mould said Metro Bank’s financing deal averts another crisis “for now.”
He said it was important on two counts.
First, it avoids any panic and a run on the bank, something that could have feasibly happened if it had not raised a significant amount of cash over the weekend to shore up its balance sheet.
Second, it provides breathing space for the company to conclude talks on asset sales.
After a weekend of swirling takeover speculation and nervousness Metro Bank seals £925m rescue deal. But equity investors and bondholders take another heavy hit. Bank of England says it welcomes move to stabilise the challenger bank|via @thetimeshttps://t.co/BP0oP4wv7J
— Ashley Armstrong (@AArmstrong_says) October 9, 2023
“The fundraising now removes a lot of the risks, yet existing shareholders who do not participate in the equity raise will suffer significant dilution. Bondholders also get a big haircut,” he pointed out.
“Metro Bank needs to find a way to keep its clientele happy and still win new business, which is going to be a tough job,” he thinks.
He believes it is time for a radical rethink of how the company operates.
“A high-cost base is unsustainable, so something has to change. If not, Metro Bank might find itself gobbled up by a bigger company whose first job will be to shut down its expensive branch network,” he added.
Shares are up 23% to 55.60p.
9:21am: HSBC buys Citi’s Chinese retail wealth arm
HSBC Holdings PLC (LSE:HSBA) has agreed to buy Citigroup Inc’s retail wealth management portfolio in mainland China.
The portfolio comprises about $3.6 billion in assets and deposits from wealth customers across 11 major cities, HSBC said in a statement.
Terms of the transaction weren’t disclosed and the deal is expected to close in the first half of 2024, Citi said.
HSBC to acquire Citi's retail wealth management business in China.https://t.co/cIhNBUnAJM
— Nikkei Asia (@NikkeiAsia) October 9, 2023
HSBC said it will integrate the business into Bank China's Wealth & Personal Banking Operations.
It plans to extend offers to in-scope employees who are supporting the business in China.
The FTSE 100 listed firm said the acquisition forms part of its organic and inorganic efforts to "scale up its capabilities and deepen coverage" of mainland China wealth customers.
"These include the acquisition of the remaining 50% stake in HSBC Life China for full ownership, the launch of Global Private Banking across six cities in mainland China, and the ongoing buildout of a team of more than 1,400 Pinnacle mobile wealth planners," HSBC explained.
8:54am: BAE Systems rises, airlines rocked by events in Israel
The FTSE 100 has lost its early gains to trade little changed, down 1 point at 7,493.
Defence contractor BAE Systems is the top risers, up 4.5%, following the events in attacks in Israel on Saturday, while the rising oil price continue to support BP and Shell.
But the oil price spike, and tensions in the Middle East, is not such good news for British Airways’ parent IAG, which is down 5.1%, on concerns of higher costs while a raft of flights have also been cancelled.
Easyjet PLC fell 5.5% and Wizz Air Holdings PLC (AIM:WIZZ) tumbled 7.0%.
The events in Israel also hit Energean which fell 10% - the firm’s flagship production & development assets are the multi-tcf Karish, Karish North and Tanin fields, offshore Israel.
GSK is up 0.8% after signed an exclusive deal with Chongqing Zhifei Biological Products Ltd to co-promote its shingles vaccine, Shingrix, in China for an initial three-year period.
Zhifei will purchase agreed volumes of Shingrix with a value to GSK of £2.5 billion in total over the initial three-year period, the firm said in a statement.
Concerns that the warm weather in the UK will hit retailers sales has seen falls for Next, JD Sports Fashion, M&S and AB Foods – the owner of Primark.
8:15am: Oil majors keep blue-chips in the green
The FTSE 100 opened higher as the ongoing tensions in the Middle East pushed oil prices higher, supporting shares in oil majors, BP and Shell.
At 8:15am, London’s blue-chip index was up 11.31 points, 0.2%, at 7,505.89 while the FTSE 250 fell 20.16 points, 0.1%, at 17,712.16.
Oil prices jumped following the attack by Hamas on Israel with Brent crude up 3.5% to $87.48/barrel.
Susannah Streeter head of money and markets, Hargreaves Lansdown said: “'The shocking attacks in Israel have sent the price of oil soaring, as investors assess the potential for the conflict to disrupt supply in the Middle East, if other countries are drawn in.”
“With the Israeli government warning of a long and difficult war, there are concerns that deep and incessant retaliative strikes on Gaza could potentially bring Iran into the conflict and have an impact on the flow of energy in the region,” she added.
The spike in prices saw BP rise 2.5% and Shell jump 2.7% underpinning the FTSE.
But it was not such a bright start for shares in Croda which slumped 10% after it warned profits would be much lower than expected.
The speciality chemicals firm now expects full-year 2023 adjusted pre-tax profit between £300 million and £320 million, down from £370 million to £400 million.
In a statement, Croda said customers have continued to reduce their ingredient inventories in consumer care, crop and industrial end markets, due to a combination of destocking and a weaker demand environment.
Metro Bank Holdings PLC (LSE:MTRO) rallied 15% after it announced a financing deal to shore up its finances.
But Shore Capital’s Gary Greenwood said: “This is a very painful rescue for Metro Bank’s existing equity and debt holders and one which could not have been achieved without the support of its current largest shareholder, Spaldy.”
Volex fell 4.6% after warning it had been hit by a cyber attack.
The group said it would see a “material” hit to finances but nonetheless the news has left the market nervous.
Elsewhere, Next PLC (LSE:NXT) was dwon 1.3% as JPMorgan placed the retailer on negative catalyst watch warning the warm weather in September and October may have hit sales.
7:59am: GSK inks Chinese deal for shingles vaccine
GSK PLC (LSE:GSK, NYSE:GSK) (GSK PLC (LSE:GSK, NYSE:GSK), GSK PLC (LSE:GSK, NYSE:GSK)) has signed an exclusive deal with Chongqing Zhifei Biological Products Ltd to co-promote its shingles vaccine, Shingrix, in China for an initial three-year period.
Zhifei will purchase agreed volumes of Shingrix with a value to GSK of £2.5 billion in total over the initial three-year period, the firm said in a statement.
There is also the potential to extend the partnership, should the companies agree.
Luke Miels, chief commercial officer, GSK, said the deal includes the option to extend the collaboration to include the RSV vaccine, Arexvy.
Zhifei will have exclusive rights to import and distribute Shingrix in China from January 1.
The pharmaceutical company described Zhifei as the largest vaccine company by revenue in China and said the partnership will significantly extend the availability of Shingrix.
7:44am: Metro Bank strikes financing deal
A bit more on Metro Bank Holdings PLC (LSE:MTRO) which has secured a financial package with investors following intense weekend negotiations, providing the UK-based challenger bank with much-needed capital and averting regulatory concerns.
Announced on Sunday, the deal comprises a £325 million capital raise, divided between £150 million in new equity from Metro's largest shareholders and £175 million in fresh debt from bondholders.
Colombian billionaire Jaime Gilinski Bacal, Metro's biggest shareholder, is slated to contribute £102 million to the new equity, positioning him to become the bank's majority shareholder.
Financing arrangement also includes £600 million in debt refinancing, requiring Metro's Tier 2 bondholders to accept a 40-45% haircut on their investments.
7:42am: Croda slahes profit guidance
It could be a rocky morning for investors in Croda International PLC (LSE:CRDA) which has slashed profit guidance after reporting continuing de-stocking by customers had depressed sales.
The speciality chemicals firm now expects full-year 2023 adjusted pre-tax profit between £300 million and £320 million, down from £370 million to £400 million.
In a statement, Croda said customers have continued to reduce their ingredient inventories in consumer care, crop and industrial end markets, due to a combination of destocking and a weaker demand environment.
This has continued to depress sales volumes meaning overall performance for the period was therefore weaker than originally anticipated.
In Consumer Care, sales volumes in the Beauty Care business were lower than expected in July and August with North America not recovering from quarter two.
But there has been an improvement in September and the firm expects this to continue through the remainder of the year, albeit from a lower base.
Second half operating profit margin is expected to be lower than the first half year due to the negative leverage impact of low volumes and adverse business mix.
In Life Sciences, sales have weakened further in crop protection and improvement is now expected to commence in the first half of next year.
Industrial Specialties continues to be hit by weak industrial demand globally and is not expected to be profitable in the second half of the year.
7:25am: Volex sees no material hit from cyber attack
We start with news that Volex PLC has become the latest company to be hit by a cyber attack, although it doesn’t expect a “material” financial hit.
The integrated manufacturer of critical power and data transmission products said that the incident had resulted in unauthorised access to certain IT systems and data, at some of the group's international sites.
Volex said at this stage “any financial impact resulting from the incident is not expected to be material.”
It said it had taken immediate steps to stop the unauthorised access to its systems and data and has engaged specialist, third party consultants to investigate the nature and extent of the incident, and to implement the incident response plan.
Volex said the actions taken to date have ensured that all sites remain operational, with minimal disruption to global production levels, and it continues to trade with its customers and suppliers.
7:00am: Blue-chips set for modest gains
Good morning and the blue chips in London are expected to make steady progress on Monday although ongoing tensions in the Middle East may limit gains.
Spread betting companies are calling the FTSE 100 up by around 6 points after closing up 43.04 points at 7,494.58 on Friday.
Crude prices surged to as high as $89 a barrel on Monday over concerns that Hamas’s attack on Israel will increase tension across the Middle East and affect output from leading oil producers.
Ipek Ozkardeskaya at Swissquote Bank said: “It is difficult to predict the extent of the price action on geopolitical shocks. The fact that the US and Iran are pulled into the turmoil hints that tensions may further escalate.”
“From a price perspective, the $90pb level is expected to shelter decent offers in US crude, as escalation and prolongation of Mid-East tensions could be the final straw that could bring the world very close to the brink of recession, and temper appetite for oil. It's too early to call.”
Back in London and Metro Bank has struck a financing deal with investors after a weekend of negotiations that should give the UK challenger bank some breathing space and fill a capital hole that had prompted talks with regulators.
The package agreed with investors and announced on Sunday night includes a £325 million capital raise, split between £150 million of fresh equity from Metro’s largest shareholders and £175 million of new debt from bondholders.