- FTSE 100 closes up 25 points at 7,645
- UK economy grows 0.2% in August
- Wagamama owner soars on Apollo bid
4:40pm: FTSE closes in positive territory but off highs
The FTSE closed in the green but of early best levels after strong US inflation figures took the shine off a strong session.
At the close, London's blue-chip index was up 24.75 points, 0.3%, at 7,644.78 while the FTSE 250 was down 34.15 points, 0.2%, at 17,842.09.
Michael Hewson at CMC said: "The FTSE100 is once again finding support from a resilient oil and gas sector, and higher oil and gas prices with BP and Shell outperforming, while travel and leisure appears to be stuck on the tarmac."
BP rose 3.1% with a well-received analyst road trip in the US adding to the glow of rising oil prices. Shell climbed 1.5%.
But cautious comments from Barclays CEO that the recovery in dealmaking may be some way off saw the lender fall 3.0%.
In the FTSE 250, a profit warning saw Mobico tumble 28% while easyJet fell 7.0% as investors weighted up heavy investment plans in new fleet which accompanied a positive results statement.
3:52pm: Barclays CEO warns dealmaking revival some way off
Barclays PLC (LSE:BARC) chief executive has warned that subdued M&A activity, easing volatility and peaking interest rates are set to compound pressure on bank earnings.
Despite tentative signs of activity returning at the start of September, CS Venkatakrishnan told Bloomberg that a dealmaking revival is still looking “a little further away.”
He added that the expected end of rate rises will cap out banks’ net interest margins while lower volatility is likely to dampen trading revenues.
“All this means is some stability in bank earnings, as opposed to a shrinkage or tremendous growth,” he told Bloomberg.
Shares in Barclays are 3.4% lower today.
3:43pm: Halfords spikes on bid chatter
Shares in Halfords have jumped 16% on talk of a 270p per share bid for the cycle and motor repair specialist.
The Betaville blog said an unnamed potential buyer emerged for the company in recent months with an offer said to have been at around 270p, which Halfords rejected.
3:25pm: Berenberg expects dividend cut at Johnson Matthey, cuts to hold
Berenberg thinks while Johnson Matthey’s equity story is absorbing but downward earnings momentum calls into question the sustainability of the dividend.
“Downward earnings momentum and needed investments in growth call into question the mid-term tenability of the £77/share dividend floor. We forecast a cut for FY 2025,” it said.
It has grown more doubtful about the company’s ability to grow earnings in the next few years or expand its valuation multiple beyond c7x EV/Ebitda.
Platinum group metals prices, especially rhodium, have been under pressure while higher interest rates are not supportive of automotive sales.
The increasingly likely delay to and/or watering down of the Euro 7 emissions legislation also limits upside to consensus profit estimates for the company’s Clean Air division, it thinks.
The broker has moved its rating to hold from buy with a reduced price target of 1,650p from 2,200p.
Shares in Johnson Matthey are 1.9% lower in London.
2:48pm: US stocks little changed at the open
US stocks struggled for direction in early exchanges after slightly strong-than-expected headline inflation figures, although corre numbers were in line.
Shortly after the opening bell, the Dow Jones Industrial Average was up 3 points at 33,807.86, the S&P was little changed at 4,377.77 and the Nasdaq Composite was up 10.10 points, 0.1%, at 13,669.78.
Andrew Hunter at Capital Economics said the 0.3% m/m rise in core consumer prices in September suggests, at face value, that the downward trend in core inflation may be easing, but that’s largely because of a stronger gain in shelter prices which we know are likely to slow sharply again soon.
Headline CPI rose by a slightly stronger 0.4% m/m partly thanks to the further 2.1% rise in gasoline prices, but the more recent plunge in wholesale prices suggests that move will be more than reversed in October, he added.
"Overall, there is nothing here that will convince Fed officials to hike rates at the next FOMC meeting, and we continue to expect a more rapid decline in inflation and weaker economic growth to result in rates being cut much more aggressively next year than markets are pricing in."
Stocks on the move include Walgreens Boots Alliance jumped 5.2% after it unveiled $1 billion cost-cutting programme alongside narrowed fourth quarter losses, while Delta Air Lines (NYSE:DAL) (Delta Air Lines (NYSE:DAL)) climbed 1.1% after its quarterly earnings beat analysts’ estimates.
However, the carrier did cut the high end of its outlook for 2023 profit on rising fuel prices and larger-than-expected aircraft maintenance costs.
Target Corp jumped 2.7% as Bank of America upgraded to buy from neutral with a $135 price target, up from $120.
But Ford Motor Co fell 2.6% as it became the latest strike target for the United Auto Workers after members walked out of its largest plant, a pickup factory in Kentucky.
1:56pm: US stock futures pare gains after inflation figures
US stocks futures have eased after the US annual inflation rate was slightly hotter-than-expected in September, though core price pressure eased.
The yearly inflation rate was unmoved at 3.7% in September, according to the Bureau of Labor Statistics, against expectations it would cool to 3.6%.
US CPI has moved down from a peak of 9.1% in June 2022 to 3.7% today.
What's driving that decline? Lower rates of inflation in Gas Utilities, Used Cars, Fuel Oil, Medical Care, Apparel, Food at Home, New Cars, Electricity, Gasoline, and Food away from Home.
Shelter and… pic.twitter.com/RJOI99tBGS
— Charlie Bilello (@charliebilello) October 12, 2023
Consumer prices rose 0.4% in September from August, ahead of a market forecast of 0.3%.
Excluding food and energy, the yearly core inflation rate eased to 4.1% in September, from 4.3% in July, as expected.
Core consumer prices grew 0.3% in September from August, also as expected.
The figures ass to the dlimena faced by the Federal Reserve as it tries to balance bringing inflation down its 2% without choking off economic growth.
Separate data showed initial jobless claims were lower than expected in the week ended October 7.
New claims for unemployment support totalled 209,000, unmoved from the prior week's figure, which was upwardly revised from 207,000.
But the FTSE 100 is so far little changed, up 53 points.
1.47pm: Market Movers
A snapshot of some of London’s movers on Thursday
Risers
Shares in Wagamama-owner The Restaurant Group PLC (LSE:RTN) soared close to 37%, reaching over 66p, after the company agreed to a bid from Apollo Global Management (NYSE:APO), valuing the business at £506 million.
Chill Brands Group PLC (LSE:CHLL, OTCQB:CHBRF) shares jumped 12% to 6.2p on news that its Chill ZERO nicotine-free vapour products will be available for sale to adult customers on Amazon's UK site this month.
Fallers
Mobico Group PLC (LSE:MCG), formerly known as National Express, is the top faller in the FTSE 250 after warning higher costs are hitting profits. Shares in the bus and train operator have lost nearly a third of their value, down 28% at 60.8p.
Insulation and building product supplier SIG PLC (LSE:SHI)’s share price fell 9% to 30.9p on Thursday after it issued a profit warning, expecting to deliver an underlying profit of £50 million to £55 million for the full year.
12:58pm: Household mortgage defaults at 14 year high
The share of UK lenders reporting a rise in household defaults on mortgages rose to the highest in 14 years, according to a Bank of England survey.
The bank’s regular survey of credit conditions found that 43% of lenders reported an increase in household defaults on secured loans over the past three months minus those reporting a decrease, up from 30.9% in the previous quarter and the biggest share since the second quarter of 2009.
Still fewer than 1-in-75 UK mortgages are in arrears - but this morning's Credit Conditions Survey tallies with the FCA's mortgage lending stats that this is inflecting higher, quickly. This, and recent soft PMI data, strongly suggests the UK rate hiking cycle is done given what… https://t.co/zopmVqFaVd pic.twitter.com/pmt33vH5zK
— Simon French (@shjfrench) October 12, 2023
However, the survey found that 1% of loans were in arrears in the second quarter, well below a peak of 3.6% in 2009.
The survey also reported that both demand for and availability of mortgages fell in the third quarter.
12:06pm: US markets await inflation figures
Across to the US now and it's a big day with inflation figures to come before the market opens.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.4% higher, while those for the S&P 500 rose 0.4%, and contracts for the Nasdaq 100 futures were up 0.4%.
Back in London, and the expected firm start on Wall Street is keeping stocks well ahead for the day.
Economist expect CPI to have risen 0.3% in September, taking the annualised rate down to 3.6% from 3.7% in August. Core CPI, which strips out volatile food and energy costs, is also projected to have climbed 0.3% from August, bringing the yearly rate down to 4.1% from 4.3%.
The figures will provide the Federal Reserve with further evidence as it plots its next move on interest rates.
Minutes from the last FOMC meeting on Wednesday showed most officials expect one more increase in interest rates and all agreed rates would need to stay high for some time to come.
Andrew Hunter at Capital Economics said it would be difficult to argue that the minutes were "notably hawkish or dovish."
11:32am: BoE's Huw Pill says decision on interest rates "finely balanced"
The Bank of England’s chief economist Huw Pill has said that the decision of whether to raise UK interest rates higher is “finely balanced”.
Speaking in Marrakech, where the IMF and the World Bank are holding their annual meeting, Pill pointed out that much of the Bank’s earlier rate hikes have yet to “come though” and affect the real economy.
Pill said: "We have done a lot over the last two years. A lot of that policy is still to come through."
Bank of England Chief Economist Huw Pill says interest-rate decisions are becoming "finely balanced" and officials may have already "done enough" https://t.co/6cGIxPMx0P
— Bloomberg UK (@BloombergUK) October 12, 2023
“Whether we’ve done enough - or whether we have more to do – I think is becoming a more finely balanced issue."
"But we will do what we need to do in order to have inflation at 2% on a lasting basis.”
But he said it is premature to talk about rate cuts and the idea that policy stance will turn on a sixpence is overdrawn.
11:13am: Bernie Ecclestone pleads guilty to fraud
Away from the markets and Bernie Ecclestone, the former Formula One tycoon, has pleaded guilty to a £400 million fraud allegation in a London court.
The 92-year-old businessman faced a single charge of fraud by false representation over a failure to declare to UK’s HM Revenue & Customs overseas assets held in a trust.
At a on Thursday, Ecclestone stood with his lawyers as the charge was read to him by the clerk of the court.
He replied: “I plead guilty.”
The Financial Times said he had faced allegations that in July 2015, he had dishonestly made a false representation to the UK tax authorities that he had only set up a single trust in favour of his daughters, and that he was not the settlor or beneficiary of any other trust in or outside the UK.
The former racing car boss failed to declare a trust in Singapore with a bank account containing $650mn, the charges alleged.
10:50am: BP jumps as US presentations draw praise
BP PLC (LSE:BP.)'s capital markets event in the US continues to draw praise, sending it top of the FTSE 100 risers, up 2.7%.
Barclays said analysts spent the day at selected Permian assets of bpx, BP's US shale business.
Permian is in the news, after Exxon’s £59.5 billion purchase of Pioneer Natural Resources (NYSE:PXD) yesterday which more than doubled its footprint in the field.
UBS said the company confirmed its strategy, financial framework and net zero ambitions at the event with the only change to guidance the higher 2030 Ebitda target: up $2 billion or 4% to $53-58 billion.
“This was driven by the oil & gas business where bp expects to achieve further margin improvements,” it noted, and is well above consensus of $42 billion and UBS’s estimate of $47 billion with the bulk of the difference coming from the upstream.
The additional benefits appear to be back-end loaded as the 2025 Ebitda target of $46-49 billion was unchanged, also above consensus.
Barclays said the progress made on methane monitoring and electrification is impressive as is the plan to grow at c10% a year out to 2030.
In total the US could well be 1mb/d or half of all BP output by 2030, it said.
Barclays rates BP ‘overweight’ and UBS has ‘buy’ rating on the oil major.
10:21am: Asos and Boohoo hit by Goldman downgrade
Shares in the online fashion firms Asos PLC and boohoo Group PLC have both slipped this morning after Goldman Sachs (NYSE:GS) downgraded both today.
The US investment bank has moved its rating to sell from neutral.
The price target for Asos goes to 380p from 485p and for boohoo to 29p from 37p.
Bloomberg said Goldman noted their “significant underperformance” compared to the wider UK clothing market.
9:57am: SIG follows Travis Perkins (LSE:TPK) (Travis Perkins (LSE:TPK)) in warning on profits
Builders merchant SIG has followed sector peer Travis Perkins (LSE:TPK) in warning of lower profits sending shares down 14%.
In a trading update, the firm said it expected underlying operating profits will be £50-55 million against a forecast range of £65-70 million.
Peel Hunt said weaker new build housing volumes across the UK, France and Germany are the main culprits, although the group's commercial and RMI markets are also weaker.
Peel Hunt has cut its 2023 and 2024 financial year operating profit forecasts to £50 million in both years.
This results in 2023 pre-tax profit falling from £34 million to £14 million while its 2024 forecast drops £50 million to £14 million.
Liberum said the news was not “entirely unexpected,” and thinks “the big story for the shares is still the medium term margin recovery plan under a new CEO, with a CMD next month to set out plans.”
9:33am: Bid for Wagamama owner too low, says analyst
Shore Capital thinks the bid level for TRG, the owner of Wagamama and Frankie & Benny’s is too low.
“We do not believe it reflects the quality of the estate (especially having recently exited the challenged leisure business), the freehold asset backing (c £160 million) and the progress it was making across its strategic objectives on margin accretion (250-350bps) and deleveraging (under 1.5x Ebitda), the broker said.
ShoreCap said delivery these would take Ebitda to c.£130 million and potentially worth c100-120p per share on a three-year view.
Analyst Greg Johnson said: “We would see 80p per share as a starting point more consistent with the longer-term opportunity or maybe we just long for a bygone era for UK equities.”
Liberum said “although it could be argued that a c30% premium is low in this market, we expect it to be successful due to the cash structure, activist shareholder support, helped by recently market turmoil.”
9:21am: Mobico slumps over 20%, profit warning, dividend suspended
Mobico Group PLC (LSE:MCG), formerly known as National Express, is the top faller in the FTSE 250 after warning higher costs were hitting profits.
Shares in the bus and train operator have lost nearly a third of their value, down 31% at 59p.
“Group revenue growth up 10% year on year but path to improving profitability impacted by higher costs, particularly in the UK and in North America School Bus as a result of investment in a strong operational school year start up,” the firm said in a statement.
It now expects financial 2023 Ebit in the range of £175 million to £185 million which Peel Hunt pointed out was at least 10% less than its £205 million forecast.
The firm plans to sell its North America School Bus business and has suspended the final dividend.
Mobico plans further cost efficiencies and expects to deliver an additional £20 million annualised savings on top of those already announced.
Ignacio Garat, chief executive, said: “We recognise that the recovery of our profitability will take longer than we had previously expected.“
8:56am: FTSE flourishes, BP gains as US trip impresses
The FTSE 100 continues to make ground, now up 24 points at 7,644.
BP PLC (LSE:BP.) leads the risers, up 2.1%, as its Capital Markets event in the US continues to be well received.
The most recent leg of the event has seen analysts spend the day at selected Permian assets of bpx, BP’s US shale business.
“What is clear is that a lot has been achieved in the past four and half years when bpx took over operations in March 2019 from bhp.,” analysts at Barclays said.
Entain rose 0.9% as JPMorgan named it as one of its favoured plays in the gaming sector but Taylor Wimpey 4.1% as it traded ex-dividend, as did Kingfisher, down 1.9%.
But Mobico, formerly called National Express, fell 21% after it suspended the final dividend after saying a recovery in profit is taking longer than expected, due to rising costs.
Builders merchant SIG tumbled 18% after it issued a profit warning, following on from sector peer Travis Perkins (LSE:TPK) yesterday.
Peel Hunt has cut its 2023 and 2024 financial year operating profit forecasts to £50 million in both years.
This results in 2023 pre-tax profit falling from £34 million to £14 million while its 2024 forecast drops £50 million to £14 million.
8:26am: Wagamama owner jumps after agreeing Apollo bid
Shares in Wagamama owner, The Restaurant Group PLC (LSE:RTN), have soared 37% after agreeing a bid from Apollo Global Management (NYSE:APO) valuing the business at £506 million.
The all cash bid is worth 65p per share, implying an enterprise value of £701 million and a multiple of around 9.0 times TRG's adjusted Ebitda for the twelve months ended July 2 2023.
Apollo said it has closely followed TRG over many years and believes it is a high quality and leading company in the casual dining market with an attractive portfolio of concepts and brands.
TRG said it despite recent improvements it has become clear that there are divergent and opposing shareholder views on TRG's future portfolio shape, and timing and pathway to achieving it.
The firm has faced criticism from activist shareholders who have pushed for a shake-up or partial sale of TRG’s restaurant assets.
Ken Hanna, TRG’s chair, said the board was “cognisant of the premium and the certain value of the Apollo offer against the backdrop of a challenging macroeconomic environment” and it planned to “unanimously recommend” the offer to shareholders.
8:15am: FTSE jumps and Wagamama owner soars
The FTSE 100 made a strong start to the day as the economy returned to growth in August although economists think it is “touch and go” whether it can avoid a contraction in the third quarter.
At 8:15am, London’s lead index was up 40.41 points, 0.5%, at 7,660.44 while the FTSE 250 was up 35.72 points, 0.2%, at 17,911.96.
Gross domestic product grew 0.2% in August, in line with expectations, after falling a downwardly revised 0.6% in July (from a fall of 0.5%).
Services output rose by 0.4% in August and was the main contributor to the growth in GDP. In contrast, production output was down 0.7% and construction registered a 0.5% fall.
Director of economic statistics at the ONS, Darren Morgan, said: “Within services, education returned to normal levels, while computer programmers and engineers both had strong months.”
Samuel Tombs at Pantheon Macroeconomics thinks it “is touch and go as to whether GDP dropped marginally in Q3.”
But Martin Beck at the EY ITEM Club thinks the economy enjoys enough positives to avoid a serious downturn.
“In particular, falling inflation and strong pay growth mean wages have started to rise again in real terms,” he said.
EasyJet fell 1.1% despite a record fourth quarter, and plans to return dividend payments next year.
The budget airline is also targeting £1 billion of pre-tax profit in the medium-term.
Richard Hunter, head of markets at interactive investor, said the budget airline operator “is in fine fettle at the moment, with the planned return to dividend payments and ambitious new growth targets clear signs of management confidence in prospects.”
But the big winner was Wagamama owner The Restaurant Group which soared 37% after agreeing a £506 million bid from Apollo Global Management (NYSE:APO) worth 65p per share.
Johnson Matthey was down 1.4% after Berenberg downgraded to hold from buy.
7:58am: "Touch and go" whether UK economy grows in Q3
Samuel Tombs at Pantheon Macroeconomics thinks it “is touch and go as to whether GDP dropped marginally in Q3.”
He explained the three-month-on-three-month growth rate will fall sharply in September, when June’s weather-boosted level of GDP will transfer to the denominator.
“GDP would have to rise by 0.2% on a month-to-month basis again in September, for a quarter-on-quarter contraction to be avoided,” he estimated, which “looks just out of reach”.
He said this was because two-thirds of the increase in August reflected increases in output in the education and health sectors, as strike disruption faded, rather than underlying momentum.
He also highlighted the latest surveys point to a weather-related fall in retail sales in September and a further downturn in manufacturing output.
Indeed, manufacturing output which fell by a further 0.8% in August “probably still has further to fall, as businesses trim inventories now that the cost of working capital has shot up and supply chains have normalised.”
“Nonetheless, our base case remains that GDP rises gradually in Q4 and into 2024,” he added.
7:50am: Darktrace backs guidance, signs "gaining traction"
A trading update from Darktrace PLC which held guidance after reporting a strong start to the financial year and signs of a pick-up in new business.
The cyber security specialist confirmed it expects year-over-year constant currency annualised recurring revenue (ARR) growth of between 21% and 23%, implying net ARR additions of between $133.8 million and $146.6 million.
Darktrace said it continues to frame the coming financial year in terms of first half stabilisation and second half re-acceleration but now expects around 44% of net ARR added to be in the first half and around 56% to be added in the second half (previously 45% first half, 55% second half).
It also confirmed its expectations for year-over-year revenue growth of between 22.0% and 23.5%, an adjusted Ebitda margin range of 17.0% to 19.0%, and free cash flow in the range of 50% to 60% of adjusted Ebitda.
Revenue for the financial first quarter ended September 30 was $161.6 million, up 28% on the year before, with gross margin and one-year gross ARR churn as expected.
The firm said there were “indicators of gaining traction,” and signs the “transformations we have been targeting are starting to take hold.”
Darktrace CEO Cathy Graham said: “In the first quarter, meetings held with prospects having over $1 billion in revenue for priority sectors and $5 billion for others, increased 65% from Q4 FY 2023 and 173% from the first quarter of the prior year.”
She added partner-generated product trials increased 13% from the fourth quarter and 45% from the year prior.
7:31am: EasyJet sets sights on £1 billion profit
A bullish update from Easyjet PLC which is targeting the £1 billion profit barrier after reporting a record fourth quarter as passengers continued to take to the skies.
The budget airline operator unveiled new medium-term targets alongside a trading update for the quarter ending September 30.
It set an ambition to deliver pre-tax profit of more than £1 billion with profit per seat between £7-10.
Return on capital is forecast of mid-teens, Holidays pre-tax profit over £250 million with capacity compound annual growth of 5% through to 2028.
Easyjet also proposed a new shareholder returns policy, starting with financial year 2023 results.
It has set a payout ratio of 10% of headline profit after tax, rising to 20% in the following financial year.
The firm expects to report a record fourth quarter pre-tax profit between £650-£670 million with passenger growth of 8% year-on-year.
Ticket yield per passenger rose 9% compared to the year before and ancillary yield per passenger climbed 14%.
Pre-tax profit for the second half is expected between £850-£870 million giving full-year profit between £440-£460 million.
Looking ahead to the first quarter of the new financial year, easyJet expects to be 15% ahead year-on-year.
7:12am: UK GDP rises 0.2% in August
The UK economy showed modest growth in August after a sharp fall in July, figures just released showed.
Data from the Office for National Statistics showed monthly real gross domestic product (GDP) rose 0.2% in August, following a fall of 0.6% in July, revised down from a 0.5% fall.
Looking at the broader picture, GDP increased by 0.3% in the three months to August, with growth in all sectors.
GDP grew 0.2% in August.
▪️ services grew 0.4%
▪️ production fell 0.7%
▪️ construction fell 0.5%
— Office for National Statistics (ONS) (@ONS) October 12, 2023
Services output rose by 0.4% in August and was the main contributor to the growth in GDP.
Output in consumer-facing services fell by 0.6% in August 2023 after a fall of 0.2% in July 2023, revised down from no growth.
Production output fell by 0.7% in August after falling by 1.1% in July 2023, revised down from a 0.7% fall while the construction sector fell by 0.5% in August after a fall of 0.4% in July, revised up from a 0.5%.
7:00am: FTSE seen higher after gains in US and Asia
The FTSE 100 is expected to open higher on Thursday after US markets rose after the latest FOMC minutes and Asian markets made strong gains.
Spread betting companies are calling London’s lead index up by around 30 points after closing down 8.18 points at 7,620.03 on Wednesday.
In London, the early focus will be a GDP reading and updates from Brooks Macdonald, Dechra, easyJet and Wise.
"US markets finished the day modestly higher with the Fed minutes not adding too much extra colour to where rates might go, ahead of today's US CPI report," said CMC Markets' Michael Hewson.
The Dow Jones Industrial Average closed up 0.2% on Wednesday, with the S&P 500 up 0.4% and the Nasdaq Composite up 0.7%.
The minutes from the latest FOMC meeting showed most officials expect one more interest rate increase before the end of the year and signalled monetary policy would remain restrictive for some time.
In Asia, shares of China’s four biggest state banks climbed after Central Huijin, Beijing’s sovereign wealth fund responsible for public financial institutions, expanded its stakes in the lenders.
The shares of China Construction Bank, the country’s second-largest lender by assets, jumped by as much as 3.6%. Shares in Industrial and Commercial Bank of China, Agricultural Bank of China (OTC:ACGBF) and Bank of China also gained following the announcement.
Asian markets rose strongly - the Nikkei 225 index in Tokyo was up 1.7%, in China, the Shanghai Composite rose 0.9%, while the Hang Seng index in Hong Kong is up 2.1%.