- FTSE 100 closes down 8 points at 7,620
- GSK strikes deal on Zantac case
- Burberry hit by LVMH slowdown
4:40pm: FTSE fades after strong US inflation data
The FTSE 100 ended a subdued day in the red after stronger-than-expected US wholesale prices figures reignited concerns over interest rates.
At the close, London's lead index was down 8.18 points, 0.1%, at 7,620.03 while the FTSE 250 was down 91.43 points, 0.5%, at 17,876.24.
Matthew Martin, US economist at Oxford Economics said he expects "prices to slow enough over the coming quarters to keep additional rate hikes off the table," but it put "more weight on the CPI release tomorrow."
Stocks had earlier spent most of the day in the green with a number of US Federal Reserve officials suggesting the recent rise in bond yields could mean further interest rate rises are not necessary.
In London, and weak results from luxury goods retailer LVMY, weighed on Burberry, down 2.5%, while the profit warning from Travis Perkins (LSE:TPK) hit sector peers Howden Joinery, down 4.7%, and Kingfisher, the owner of B&Q, down 1.9%.
Retailers remain a weak feature on fears the warm weather will dent sales of autumn and winter ranges - Next fell 2.0%, frasers fell 1.7% and M&S slipped 1.6%.
Elsewhere, trading statements saw mixed fortunes for PageGroup, down 3.4%, and FirstGroup, up 4.0%.
3:52pm: BP's interim management team impress at CMD
Barclays expects a positive reaction to BP’s ongoing capital markets day in Denver.
“As expected, there were no fireworks regarding the financial frame, but the importance of the message of longevity and growth in the upstream to the end of the decade and beyond should not be underestimated,” it said.
Given that both CEO and CFO are currently acting in an interim capacity, attention was inevitably going to be on how the team came across.
“Unsurprisingly it was a confident display from CEO Murray Auchincloss and CFO Kate Thompson with the main message reiterated again and again in the deliverability of strategy,” Barclays said.
When asked about the valuation of the shares, the CEO said that the near term will be characterised by energy shortages and volatility with changing perception about the longevity of the oil and gas business driving the initial rerating followed by increased investor recognition of the low carbon business.
The broker noted whilst 2025 targets remained unchanged, bp lifted its 2030 group ambition for Ebitda by $2 billion to $53-58 billion driven entirely by an enhanced assessment of its hydrocarbon business which it now expects to deliver $41-44 billion by 2030.
Longevity in oil and gas was the focus of the presentation - production can grow to 2025 and liquids to 2027 and be sustained both to 2030 and well into the next decade, Barclays noted.
The message here is clear, the bank felt.
“This is not a business in decline instead having meaningful terminal value.”
In terms of resources bp disclosed it has 36 billion or resources in the upstream, of which 7 billion boe are proves and 18 billion boe are included in the plan.
Barclays said one of the most interesting highlights was the focus on the Paleogene in the US Gulf of Mexico through the Kaskida and Tiber prospects.
“In a breakout session, the company highlighted a potential for Kaskida starting up in 2028 with production reaching towards 150kb/d. With the growth in bpx volumes, total US production for bp could reach 1mb/d by 2030.”
Barclays has a buy on BP with a 1,000p price target.
3:15pm: UK starts seeking feedback on Vodafone, Three merger
The UK’s antitrust watchdog is seeking market feedback on the long-anticipated merger of Vodafone Group Plc and CK Hutchison Holdings Ltd’s British units before it kicks-off a formal investigation.
The Competition and Markets Authority said Wednesday it will provide an opportunity for rival firms and interested parties to comment on what impact the combination could have on competition in the UK.
“We will also assess how it may affect incentives to invest in the quality of UK mobile networks,” said Sarah Cardell, chief executive officer of the CMA.
The deal to buy Three would create the UK’s largest mobile operator by revenue could face a significant challenge in getting sign-off from the UK watchdog.
2:48pm: Wall Street in the green despite strong PPI
We're off and running in New York, and US stocks have opened higher, shrugging off stronger-than-expected wholesale price inflation data, as bond yields continued to ease.
Shortly after the opening bell, the Dow Jones Industrial Average was up 106.73 points, 0.3%, at 33,846.03, the S&P 500 was up 18.77 points, 0.4%, at 4,377.01 while the Nasdaq Composite jumped 95.67 points, 0.7%, at 13,658.52.
Data from the US Bureau of Labor Statistics showed the producer price index rose 2.2% in September from a year before, rising from a 2.0% annual increase in August. Markets had been expecting the inflation rate cool to 1.6%.
Month-on-month, the PPI rose 0.5% in September, slowing from a 0.7% rise in August. The monthly PPI inflation print had been expected to be 0.4%.
Ian Shepherdson at Pantheon Macroeconomics said: "The headline was boosted by a 0.9% increase in food prices and a 3.3% jump in energy prices, neither of which is likely to be repeated this month; the recent drop in gasoline prices alone will subtract about 0.4% from the October headline."
Ryan Brandham, head of global capital markets, North America, at Validus Risk Management said the data was "a reminder that the last mile of the fight against inflation is going to be a tough one."
"CPI data tomorrow will be key, but the Fed may not be simply able to maintain higher for longer if they want to bring inflation all the way back to the 2% target."
"They may need to hike further and risk damage to the economy," he said.
2:12pm: US PPI stronger-than-expected
It still looks like a positive start in the US despite producer price inflation unexpectedly accelerating in September.
Data from the US Bureau of Labor Statistics showed the producer price index rose 2.2% in September from a year before, rising from a 2.0% annual increase in August. Markets had been expecting the inflation rate cool to 1.6%.
hottest YoY #PPI since April https://t.co/tXtYlseHHh
— Carl Quintanilla (@carlquintanilla) October 11, 2023
Month-on-month, the PPI rose 0.5% in September, slowing from a 0.7% rise in August. The monthly PPI inflation print had been expected to be 0.4%.
In London, the FTSE 100 has extended its gains, shrugging off the strong figure
1.52pm: Here’s a recap of the top risers and fallers on the junior market today
Cellular Goods PLC (LSE:CBX) shares vaulted 12% higher after its wholly owned subsidiary King Tide Carbon Canada formed a joint venture to "explore the untapped potential of kelp" as a tool to fight climate change and help decarbonise global supply chains.
Cambridge Cognition Holdings added 6% after announcing it has secured a £1 million contract to support a later-stage clinical trial.
Energy efficiency company Eneraqua Technologies shares plummeted nearly 60% after the company issued a profit warning today.
Shares in Forterra PLC (LSE:FORT) slipped by nearly 6% as the clay and concrete building materials manufacturer highlighted falling demand in a trading update on Wednesday.
Shares in PageGroup fell 3.4% after the recruiter reported a bigger-than-expected decline in the third quarter while also revealing that there had been an increase in the number of job offers rejected by candidates.
1:06pm: Zantac litigation fully priced in, outlook overlooked
Back to GSK's Zantac settlement, and Shore Capital's Dr Sean Conroy continues to believe the current share price reflects potential liabilities of up to c.$30 billion are being priced into the share price.
"All told, we understand GSK is named in c.4,500 cases at both a federal and state level in the US covering c.130,000 claimants."
"Working backwards from this implies individual settlements at c.$225,000 which seems towards the higher end of pay-outs made in talc or glyphos cancer-related suits," he said.
Moreover, this would fully discount the dismissal of the federal MDL cases in December 2022 and assume GSK is solely liable when multiple co-defendants have been named in these suits (Sanofi, Pfizer and Boehringer Ingelheim).
He thinks volatility in the share is likely to persist until this issue is fully resolved, but continues to feel that a worst-case scenario has been priced into the share and the improving growth outlook at GSK is being overlooked.
12:22pm: Next to bulk out with FatFace swoop - Sky
Next PLC (LSE:NXT) is set to add another string to its bow by picking up FatFace in a deal worth more than £100 million, according to Sky.
Sky News has learnt the FTSE-100 clothing giant is putting the finishing touches to an acquisition of FatFace, just three years after it was taken over by its lenders.
City sources said the deal could be announced later this week.
EXCLUSIVE: Next is close to buying Fat Face, the fashion chain, in a deal worth more than £100m - the latest example of a high street shopping spree which has made Next chief executive Lord Wolfson Britain's most prolific acquirer of smaller retail brands. https://t.co/KandeaosUI
— Mark Kleinman (@MarkKleinmanSky) October 11, 2023
The purchase of FatFace, a family-focused clothing retailer which trades from around 180 UK stores, will be the latest name to have made it onto Next's lengthening post-pandemic shopping list.
It recently confirmed that it was increasing its stake in Reiss to cement its position as the brand's majority shareholder.
Since the COVID crisis, it has snapped up the online furniture retailer, Made.com, Cath Kidston, and JoJo Maman Bebe, the maternity wear retailer.
12:03pm: US futures point higher, PPI, Exxon in focus
Aside from digesting the Exxon deal US markets will have producer prices figures to digest before the market opens.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.2% higher, while those for the S&P 500 rose 0.2%, and contracts for the Nasdaq 100 futures were up 0.3%.
US producer prices are expected to have increased by 0.3% in September after advancing 0.7% in August.
The reading comes ahead of consumer prices figures on Thursday as investors continue to speculate as to the future path of interest rates.
Later in the session, minutes from the last FOMC meeting will also be released.
11:45am: Exxon seals $59.5 billion Pioneer deal
Across to the US now and Exxon Mobil Corp has agreed a $59.5 billion deal to buy Pioneer Natural Resources (NYSE:PXD).
The biggest western oil supermajor said it had sealed an all-stock deal which values Pioneer at $253-a-share.
The combination hands Exxon a dominant position in the Permian Basin, the vast field in western Texas and New Mexico that has helped turn the US into the world’s largest oil and gas producer.
Exxon said together, the companies will have an estimated 16 billion barrels of oil equivalent resource in the Permian.
"Combining Pioneer’s differentiated Permian inventory and basin knowledge with ExxonMobil’s proprietary technologies, financial resources, and industry-leading project development is expected to generate double-digit returns by recovering more resource, more efficiently and with a lower environmental impact," Exxon said in a statement.
It said the combination transforms its upstream portfolio by increasing lower-cost-of-supply production, as well as short-cycle capital flexibility.
Exxon shares are down 2% in pre-market deals.
11:22am: UK gas prices drop back after sabotage fears played down
Wholesale gas prices have fallen back today after rising sharply on Tuesday after the damage caused to the Baltic Sea pipeline and a telecommunications cable connecting Finland and Estonia on Sunday.
Damage to the Balticconnector gas pipeline was caused by “quite heavy force”, Estonia’s defence minister said today, a day after Finland said it could have been the result of deliberate action.
But defence minister Hanno Pevkur told Reuters “at the moment it rather seems that it had been mechanical impact or mechanical destruction.”
There had been concerns the leak may have been the result of a third party attack.
UK gas prices have fallen back 6.5% to 116.64p per therm, while Europe’s benchmark contract is little changed €49.45 per megawatt hour.
Both had soared to their highest levels since June in the wake of the closure of Israel’s Tamar gas field and fears about energy security following the claims that the Baltic undersea pipeline could have been sabotaged.
10:47am: Berenberg sees 50% upside in Barclays
Banks are attracting the attention of City analysts ahead of third quarter updates and Berenberg is today singing the praises of Barclays.
The broker reiterated a buy rating with a 240p price target, around 50% upside from today’s 157p share price.
Berenberg said Barclays has shown that it can generate acceptable returns, including in its investment bank (IB).
But “in order to re-rate, the bank must prove that the recent level of its returns is sustainable.“
Barclays’ valuation is subdued, even relative to global IB peers it said, which it feels is hard to justify given its presence in the US market (where returns are higher than in Europe) and market share gains (including versus US peers).
“While the precise trajectory of global banks’ IB revenues is uncertain, our analysis indicates that consensus IB revenues for Barclays in FY 2025 are consistent with a “normal” year,” it said.
The broker also expects Barclays’ consumer goods to provide support, its share of UK mortgage lending is also rising and a cyclical recovery in credit card usage can also support volumes.
“As a result, we expect Barclays’ consumer revenues to grow c3% pa beyond FY 2023,” it added.
Berenberg said Barclays’ current strategy review is unlikely to lead to material strategic changes beyond modest simplification and efficiency improvements.
But it does believe that management can strengthen its resolve to demonstrate that a 10% RoTE is a floor by committing to a nominal level of capital returns - of at least £6.0 billion during the 2024-25 financial year.
This, and clearer targets for consumer and payments growth, may help to sharpen investors’ focus on Barclays’ strategic strengths.
10:21am: Rising costs and tough macro hurting hiring
More evidence on how tough the recruitment is, after the warning from PageGroup. comes from a study out today which shows uncertainty over the economic outlook as well as rising costs are hitting hiring.
The Recruitment & Employment Confederation and KPMG found the number of permanent placements by recruiters fell in recent weeks as companies were reluctant to commit to hiring new workers.
#ReportonJobs signalled that temp billings have returned to growth after a slight decline in the previous month. Also, the data highlights that pay pressure is easing as staff supply for permanent and temporary staff increases. Read the latest data here: https://t.co/oDWpQJPIPa pic.twitter.com/jImMMAJisu
— Recruitment & Employment Confederation (@RECmembers) October 11, 2023
The study among 400 recruitment firms also showed improved demand for short-term staff and increased availability of workers to fill vacancies.
Neil Carberry, REC chief executive, said: "Employers tell us they are feeling better about themselves as the year moves on, and today's data does suggest the possibility of a turnaround in hiring over the next few months.
"Permanent placements have been falling for a year now from abnormal post-pandemic highs. While permanent hiring activity continues to slow, fewer firms reported a slowdown last month, leading to a much shallower rate of decline than most months recently.
"Likewise, temporary hiring remains robust with billings growing marginally in September – as they have most months this year."
9:51am: PageGroup sees greater deal of uncertainty
Heading the other way is PageGroup PLC (LSE:PAGE), down 3.8% at 408p.
The international recruiter said group gross profit of £242.2 million was down 7.9% year-on-year and said it expects 2023 operating profit, excluding the previously announced one off cost of £5 million, to be between £125- £130 million.
Liberum noted this was below its £137 million forecast with management referring to a heightened degree of uncertainty in the short term due to a slower end to the quarter.
Nicholas Kirk, chief executive efficer, said: “The group delivered a resilient result in challenging markets. EMEA was our best performing region, however, tough market conditions affected our performances in Asia, the UK and the US.”
Kirk said the firm was seeing a higher proportion of offers being turned down as firms try to play hard ball in salary offers.
“The increased time to hire that we saw in Q2 continued,” he added.
“"Looking ahead, due to a slower end to the quarter, there is a heightened degree of uncertainty in the short term,” he added.
9:25am: FirstGroup on the right track
FirstGroup PLC (LSE:FGP) shares are 4.3% higher after it told the City it expects 2024 adjusted operating profit and adjusted attributable profit will be ahead of the previous expectations by around £14-20 million and c.£7-10 million respectively.
Demand for the train division’s open access operations (Lumo and Hull Trains) has been stronger than anticipated due to increased leisure travel during the summer period, it said, while the final variable fee payments due for the division’s management fee-based contracts was also ahead of projections.
The buses division has traded slightly ahead of expectations due to strong passenger volumes and productivity improvements resulting from the management actions we have taken to transform the business.
Liberum said it was a “positive trading update” highlighting “outperformance in both divisions.”
It keeps a buy rating and raises its sum-of-the-parts based target price to 185p from 180p.
9:00am: Easyjet and Wizz Air lower after Luton airport fire
Easyjet PLC and Wizz Air are both lower following the fire at Luton Airport overnight.
The airport closed last night after a large fire, and all flights were suspended.
Update at 07:10 pic.twitter.com/WXCrmUcLih
— London Luton Airport (@LDNLutonAirport) October 11, 2023
Flights are not expected to resume until 3pm at the earliest.
The fire ripped through a multi-storey car park, causing it to collapse.
8:40am: FTSE creeps higher, Burberry knocked by LVMH slowdown
The FTSE 100 has reversed its early losses and is now in positive territory, up 10 points at 7,639.
Top of the fallers in the lead index is Burberry, down 3.8%, after LVMH said growth slowed considerably in the third-quarter of the year amid tricky market conditions.
Total revenue in the third-quarter of 2023 amounted to €19.96 billion, organic growth of 9% on-year. Progress slowed from a 17% year-on-year rise in each of the first and second quarters, however.
A number of brokers have cut price targets for Paris-listed LVMH which owns Louis Vuitton, Givenchy, Tag Heuer, Hublot and Tiffan, amongst others. LVMH shares are 6.3% lower.
The warning from Travis Perkins (LSE:TPK) has hit shares in Howden Joinery Group (LSE:HWDN), down 2.4%, and Kingfisher – which owns B&Q - down 2.1%.
The rising oil price is supporting BP, up 1.7%, and Shell, up 0.8%, while the Zantac deal continues to keep GSK higher, up 1.7%.
8:15am: FTSE edges lower, GSK up, Travis Perkins (LSE:TPK) down
The FTSE 100 paused for breath after Tuesday’s strong gains but there was good news for investors in GSK PLC (LSE:GSK, NYSE:GSK).
At 8:15am, London’s blue-chip index was down 7.40 points, 0.1%, at 7,620.81 while the FTSE 250 fell 67.10 points, 0.4%, at 17,900.57.
Susannah Streeter, head of money and markets, Hargreaves Lansdown said: "The surge of optimism, fuelled by hopes the Fed will go easier with its interest rate policies and buoyed by expectations of fresh stimulus in China, appears to have plateaued."
"A little more caution is returning, as investors look ahead to tomorrow’s snapshot of inflation in the United States."
GSK rose 2.2% after it said it had struck a deal to stop a high profile case concerning its heartburn medication Zantac heading to court in California.
The FTSE 100-listed pharma giant said it had reached a confidential settlement in the Cantlay/Harper case over allegations Zantac caused cancer.
The case, which was set to begin trial on November 13, will be dismissed.
Shore Capital’s Sean Conroy noted the decision is in a similar vein to the settlement it made in June,
He believes this news should help “some of the noise around Zantac further abate ahead of the Q3 results where we expect to see first lot of Arexvy sales booked, something which should help refocus people on the improving growth outlook for the company.”
But there was bad news for shareholders in Travis Perkins (LSE:TPK) PLC which warned full-year profits will be well below previous guidance as a slowdown in new building hit its revenues.
In a trading update, the Northampton-based firm said operating profits for the year would be between £175 million and £195 million, down from £240 million projected in August.
Shares tumbled 11%.
PageGroup PLC (LSE:PAGE) was another share on the wane, down 6.1%, after it also warned profits would be below prior expectations.
Liberum noted management refers to a heightened degree of uncertainty in the short term due to a slower end to the quarter.
The broker said management now expects 2023 Ebit of £125 million to £130 million below Liberum’s forecast of £137 million.
But better news from FirstGroup which rose 4.8% after its trading update while Marston’s was just in the green after reported strong sales growth and an improved outlook.
7:53am: Travis Perkins (LSE:TPK) slashes profit guidance
Not good news for shareholders in UK building merchant Travis Perkins (LSE:TPK) which has warned full-year profits will be well below previous guidance as a slowdown in new building hit its revenues.
In a trading update, the Northampton-based firm said operating profits for the year would be between £175 million and £195 million, down from £240 million projected in August.
Nick Roberts, chief executive, said: “Market conditions remain challenging with continued weakness across new build housing and domestic RMI. Deflation on commodity products has also been greater than we had anticipated.“
The firm said whilst third quarter trading started as expected in the Merchanting segment, September saw a notable deterioration in market activity and sentiment.
Third quarter revenue revenue was down 3.4% year-on-year, a modest improvement on the first half, however the drivers of revenue have shifted markedly, Travis said.
Pricing declined by 3.1%, resulting primarily from strong deflationary pressures on commodity products which have significantly impacted on gross profit and margins, including the impact of selling through existing stocks at lower market prices.
7:46am: BP to stick to plans to cut oil and gas output - report
BP PLC (LSE:BP.) has confirmed its ongoing commitment to reducing oil and gas output, despite recent upheavals in its executive leadership, according to a report in the Financial Times.
The assurance was given at a two-day investor event in Denver by the company's interim chief executive, Murray Auchincloss. He stated that BP's long-term objectives, including its net-zero ambitions, remain unaltered, the paper said.
The investor gathering was initially planned to highlight BP's significant investments in the United States, exceeding £100 billion since 2005.
7:42am: Marston's cheers better cost outlook, sales growth
A decent looking update from pub chain Marston's PLC which reported healthy growth in sales and an improved cost outlook as it updated investors on trading.
The pub chain said in 52 weeks to September 30 total retail sales in the group's managed and franchised pubs rose 11.3% on last year with like-for-like growth of 10.1%.
Both drink sales and food sales have been strong, demonstrating the resilience and appeal of our predominantly suburban pub estate.
Sales did soften towards the end of the year, reflecting the wet weather in July and August, with like-for-like sales in the 10 weeks to September 30 up 7.7%, compared to the year prior.
Drink sales in this period were behind food sales, principally due to the weather.
Marston’s said it has reduced head office headcount costs by approximately £5 million, the majority of which will benefit 2024 and subsequent years.
This cost reduction is expected to translate into higher pub operating profitability than was previously anticipated, the firm said.
Andrew Andrea, chief executive said: “An improving outlook in which cost headwinds are abating, together with the actions we have taken this year to drive further efficiencies, leaves us confident that Marston's remains well-placed to continue to outperform in the current macroeconomic environment, grow revenue and profitability, as well as deliver improved margin in the year ahead."
Marston’s is also targeting a debt reduction of £60-70 million in the 2024 financial year plus the sale of around £50 million of additional non-core properties.
7:24am: GSK strikes deal to stop Zantac case going to court
We start the day with news that GSK PLC (LSE:GSK, NYSE:GSK) has struck a deal to stop a high profile case concerning its heartburn medication Zantac heading to court in California.
The FTSE 100-listed pharma giant said it had reached a confidential settlement in the Cantlay/Harper case over allegations Zantac caused cancer.
The case, which was set to begin trial on November 13, will be dismissed.
GSK said it has also settled the three remaining breast cancer bellwether cases in California and it will be dismissed from these cases, removing all related pre-trial hearings for the company.
The settlements reflect the company's desire to avoid the distraction related to protracted litigation, it said.
GSK does not admit any liability in the settlements and will continue to vigorously defend itself based on the facts and the science in all other Zantac cases.
GSK and other drugmakers that have previously owned Zantac are facing lawsuits claiming that the drug causes cancer because it contains small amounts of N-nitrosodimethylamine, known as NDMA.
NDMA is commonly ingested in small amounts but can cause cancer in humans when more is consumed.
Sanofi voluntarily withdrew the drug from the market in 2019 when the US regulator began investigating small amounts of NDMA.
In 2020, the Food and Drug Administration said Zantac appeared to produce unacceptably high levels of the chemical when exposed to heat and requested its removal from the market.
The litigation has cast a shadow over the firm and this could be another step along the road to remove some of the uncertainty.
7:00am: FTSE 100 set to edge lower
Good morning and it could be a more muted start to the day for the FTSE 100 after the stellar gains yesterday.
Spread betting companies are calling London’s blue-chip index down by around 6 points after closing up 136.00 points at 7,628.21 on Tuesday.
US markets market ended higher after more dovish rhetoric from a leading Federal Reserve official but there may be some caution today ahead of the release of the FOMC minutes.
Federal Reserve Bank of Atlanta President Raphael Bostic reiterated that he doesn’t think policymakers need to raise interest rates any further and that policy is restrictive enough to bring inflation back to their 2% goal.
"I think that our policy rate is at a sufficiently restrictive position to get inflation down to 2%," Bostic said at the annual convention for the American Bankers Association.
"I actually don’t think we need to increase rates anymore," he added.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank said: “Due today, the FOMC minutes will remind investors that ‘the rates will stay higher for longer’ if inflation remains above target.”
Today sees the release of US PPI figures with CPI data to follow on Thursday.
Back in London, and the early focus will be an update from pub chain, Marstons.