- FTSE 100 closes down 88 points at 7,500
- Rightmove rocked by CoStar bid for OnTheMarket
- Rentokil tumbles, warns of soft North American trading
4:40pm: FTSE 100 closes lower as Middle East anxiety persists
The FTSE 100 endured a tough day falling sharply while the FTSE 250 hit a one-year low as anxiety about developments in the Middle East continued to prompt a risk-of mood.
At the close, London's lead index was down 88.47 points, 1.2%, at 7,499.53 while the FTSE 250 fell 190.32 points, 1.1%, at 17,213.14.
"Sentiment continues to remain fragile and while the geopolitical noise from the Middle East hasn’t been as apparent today, it’s still there and remains a clear and present danger for nervous investors," said Michael Hewson at CMC Markets.
The FTSE 100 saw two significant fallers - Rentojil Initial down 17% after it warned of soft US trading conditions and Rightmove, down 13%, on compeition fears as US peer CoStar moved into the UK market with the acquisition of OnTheMarket.
Packaging company firm Mondi, down 6.1%, was another weak feature after its update but London Stock Exchange Group, up 1.6%, bucked the weak market after its update which pleased analysts.
Direct Line, up 4.9%, got a boost from an upbeat statement Sabre Insurance Group and Diageo held in the green, up 0.3%, after positive comments from Pernod Ricard about current US spirits trading.
3:50pm: Spire Healthcare acquisition welcomed by analysts
Heading to the close and the FTSE 100 remains firmly in the doldrums, down 80 points.
Spire Healthcare Group Plc (LSE:SPI) is having a better day, up 1.6%.
The private hospital operator has agreed to buy mental and physical health services firm Vita for £74 million.
RBC Capital Markets analyst Charles Weston said the deal “aligns with the company's strategy in broadening its healthcare services proposition, and growing its less capex-intensive businesses, and we expect this to be taken well by investors this morning.”
Weston explained Vita is the largest independent provider of talking therapies in the UK, with a track record of delivering consistent market-leading performance and quality measures.
Peel Hunt analyst Miles Dixon also positive.
“We think the tailwinds in private healthcare are clear and 7.4x is a decent price, especially given the limited capex requirements for the business, the c.10% growth market tailwinds, and that Spire is able to diversify into adjacent markets. creating more touch-points with patients,” he said.
3:15pm: Spectris could see further softening in orders
Other stocks on the move today include Spectris, down 3.6%, on fears orders have continued to soften.
The firm is expected to issue a third quarter trading update on October 31 and with news flow since the group’s second quarter results more cautious, a cautious update could be on the cards.
That is certainly what JPMorgan thinks.
“We believe orders will have continued to soften which points to cuts to FY24 forecasts,” it said.
The investment bank pointed out although the shares have fallen 14% since July, they are up 4% year-to-date, outperforming instrumentation peers by around 25% with the shares de-rating by 10% less than peers who have already cut guidance on China, life sciences and semiconductor end markets.
JPM doesn’t believe the risks are reflected in the share price and remains underweight.
Its price target moved to 2,850p (from 3,100p).
2:40pm: US stocks push higher ahead of Powell speech
US stocks opened higher ahead of a key speech from Federal Reserve chair Jerome Powell and as investors wade through another batch of earnings.
Shortly after the opening bell, the Dow Jones Industrial Average was up 24.65 points, 0.1%, at 33,689.73, the S&P 500 was up 5.08 points, 0.1%, at 4,319.68 and the Nasdaq Composite was up 40.05 points, 0.3%, at 13,354.36.
Powell is set to deliver what could be a key policy address, with markets bracing that the central bank leader may still talk tough on inflation.
Hawkish words could push bond yields even higher with the 10-year Treasury close to the 5% level and similarly send a fragile equity market lower.
Stocks on the move include VMWare, down 5.1%, after the Financial Times reported Beijing is weighing holding up the chipmaker Broadcom’s $69 billion acquisition of the cloud software company - a move that would come soon after Washington toughened rules to block Chinese access to high-performance semiconductors.
Netflix soared 14.4% after its strong earnings but Tesla steered off course, down 6.0%, after its numbers and poorly received analyst call.
Philip Morris fell 2.2% after its numbers while AT&T rose as it raised free cash flow and Ebitda guidance alongside strong third quarter figures.
2:12pm: US jobless claims fall below 200,000
New applications for US state unemployment aid fell below 200,000 claims level for the first time since January last week, a sign of continued labour market resilience as the Federal Reserve weighs another interest rate increase before the year end.
Jobless claims, a proxy for lay-offs, totalled 198,000 during the week ending October 14, the labour department said.
That was the first time they were below 200,000 since the week of January 28 and the lowest level since the week before that.
Economists expected a figure of 212,000, up from the previous week’s upwardly revised level of 211,000.
1:12pm: Oil price eases as US eases sanctions on Venezuela
The oil price has fallen back after the US said is partially lifting sanctions on Venezuela following the resumption of talks between the South American country’s socialist government and a US-backed faction of the opposition.
As part of this, the US has eased sanctions on Venezuela’s oil sector.
The U.S. Treasury Department has issued a new licence authorizing Venezuela, a member of Opec, to produce and export oil to its chosen markets for the next six months without limitation.
The prospect of an increase to supply has pushed down the oil price.
Joshua Mahony of Scope Markets said: “For energy markets, the prospect of conflict in the Middle East has been overshadowed by the confirmation that sanctions on Venezuelan energy exports have been lifted, with Biden hoping to negate the inflationary efforts of OPEC+ by flooding the world in cheap oil.”
“However, while Venezuela holds the largest proven oil reserves of any country, years of underinvestment means that the upside may be limited to roughly 200,000 barrels per day for the time being.”
It was still enough to bring the price of Brent crude back towards $90/barrel down 1.1%, although the price remains 5.6% higher in the last week.
12:32pm: EasyJet could see demand soften " significantly"
EasyJet faces disruption from the ongoing conflict in the Middle East with important markets likely to see demand soften “significantly.”
Egypt is an important winter sun market for easyJet holidays, representing 2% of group seats in the first half of financial 2024, according to research from Barclays.
Combined with Israel constituting 1.3% of seats and Jordan constituting 0.2%, 3.5% of easyJet seats overall are for travel to and from the vicinity of the current conflict.
Moreover, given the very long stage lengths to these markets, routes to and from Egypt, Israel and Jordan account for 10.1% of easyJet's available seat kilometres in the first half of financial 2024, the bank said.
“We expect travel demand to soften very significantly to the Egyptian Red Sea resorts and to Jordan, and we expect services to Israel to remain suspended for the immediate future,” Barclays added.
Barclays has lowered its rating on the budget airline operator to equal weight from overweight and cut its price target to 415p from 550p.
Alongside, the Middle eastern disruption it said: “New financial targets and growth plan show ambition, but whilst we see potential from holidays and upgauging we lack confidence that winter losses can be reduced.”
The bank’s financial 2024 and 2025 pre-tax profit estimates are 10% and 17% below consensus, respectively, it added.
Shares are down 1.1%.
11:58am: Subdued start expected in the US
Across to the US and stocks are expected to make a muted start as investors reflect on earnings from Tesla and Netflix and await jobs data before the market open.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.1% lower, while those for the S&P 500 were little changed, and contracts for the Nasdaq 100 futures were up 0.1%.
It’s another busy day of earnings with results from tobacco manufacturer Philip Morris, carrier American Airlines, mining company Freeport-McMoran, and regional bank Western Alliance all due before the bell.
In economic news, new applications for unemployment aid are forecast to have increased to 212,000 in the week ended October 14, compared with 209,000 claims a week prior.
Stocks to watch include Tesla, down 4.5% in pre-market trading, changing hands at $231.60, after the Elon Musk-led carmaker posted third quarter results that missed expectations.
Faring better is Netflix, up 13.6% in pre-market trading, thanks to third quarter earnings that landed ahead of expectations and significant subscriber growth.
AT&T rose 3.6% after raising guidance for free cash flow for the full year and posting adjusted earnings and revenue ahead of Street expectations.
Third-quarter adjusted earnings were 64 cents per share, the company said in a statement, higher than the 62 cents per share forecast, while revenue of $30.4 billion, was narrowly higher than the $30.2 billion estimated.
11:25am: Unseating Rightmove will be "no easy feat"
Bank of America thinks while the news of CoStar’s bid for OnTheMarket (OTM) may initially be taken negatively for Rightmove given the risk of OTM securing the backing of a potent owner.
“That said, history has shown unseating incumbents in the classified space is no easy feat,” it pointed out, noting Rightmove is a significant market leader even by classifieds' high standards, boasting 86% share of consumer engagement.
BofA pointed out OnTheMarket was created by estate agents in 2013 to provide an alternative to the two main portals, but has been unable to match Rightmove's scale - it listed 13,200 advertisers as of 2023 compared to Rightmove's 19,100.
Rightmove also dwarfs OnTheMarket in terms of revenue with 20222 sales of £33 million compared to £34 million.
The broker also pointed out Rightmove is trading close to 5 year lows relative to the market, weighed down by end market concerns.
But BofA noted the firm signalled at its interim results in late July that it planned to further develop areas like commercial real estate to accelerate growth into the double digits, with an investor day scheduled for 27 November.
BofA reiterated a buy rating.
10:42am: London Stock Exchange update "reassuring"
Bank of America described today’s update from London Stock Exchange as “reassuring “ with total income of £1.97 billion in line with its forecast and company consensus.
Shares bucked the weaker market and rose 1.6% to 8,206p on Thursday morning.
Data & Analytics (D&A) revenues were 1% light against consensus due partly to a disposal in Trading & Banking but Capital Markets and Post Trade were 1% ahead.
Annual Subscription Value (ASV) rebounded back to 7.1% after falling to 6.9% in June which BofA believes supports forecasts for Data & Analytics growth.
It also noted the firm said it is making good progress on building new products with Microsoft and is on target to launch with customers in the second half of 2024.
Within D&A, revenues were 1% light of consensus with small misses in trading & banking due to a small disposal which caused a stepdown in revenues in the quarter.
Reiterating a buy rating, BofA said: “LSE is well-placed to benefit from the demand for data, while the Microsoft partnership is likely to transform and expand its offering.”
“We remain optimistic into LSE's CMD in Nov where we expect improved revenue guidance from the Microsoft partnership and operating margin expansion.”
Jefferies also reiterated a buy rating, noting the inline performance was driven by 1% beats in Capital Markets and Post Trade.
Data & Analytics revenues undershot consensus by 1% driven by Trading & Banking (NEST disposal) and Enterprise Data both 2% below.
The broker noted ASV growth rebounded to +7.1% quarter-on-quarter but thinks market expectations were more in the +7.2-7.5% range, so management commentary around momentum will be important.
10:05am: Direct Line, Admiral lifted by Sabre update
Direct Line and Admiral are enjoying a good morning, up 2.7% and 1.9% respectively, after an positive update from industry peer Sabre Insurancce Group PLC.
Sabre riased its premium growth guidance as the increases it has pushed through on car insurance rates are outpacing expectations.
"Premium in recent months has been above expectations, therefore we increase our overall 2023 full-year gross written premium year-on-year growth expectation to 20% - 25%," the company said.
It said significant rate increases were mitigating the impact of claims inflation and ensuring margins return towards historical levels for business written in recent months.
Shares in Sabre are 3.8% higher.
9:50am: Barclays cuts Tate & Lyle on threat of weigh-loss drugs
Tate & Lyle is 3.4% lower after Barclays downgraded the stock to equal weight from overweight.
“We continue to like Tate’s long-term transformation story, but Tate is the Food ingredient stock across our European coverage that we estimate is most exposed to the end-market categories in the US where GLP-1 impacts on consumption and concerns on terminal growth prospects could be the highest,” it said.
The comments refer to concerns that weight loss products which mimic a hormone called glucagon-like peptide-1 (GLP-1), which slows digestion and depresses appetite.
Barclays has cut its financial 2025 Ebitda forecast by a further 3%, leaving it 5% below consensus, taking a more conservative view on the calendar 2024 pricing round given reduced industry capacity utilisation across some of Tate’s key ingredients.
The broker thinks volume-driven packaged food ingredient suppliers are potentially the sub-sector within the broader staples sector that is most exposed to the crescendo in GLP-1 concerns on long-term packaged food industry growth prospects.
“Beyond the GLP-1 debate we think another negative narrative on structural growth for the space could be the growing backlash against ultra-processed foods (UPF) in many developed markets,” it added.
9:28am: Nokia plans to cut 14,000 jobs
Nokia is to cut up to 14,000 jobs as part of a cost reduction strategy after reporting a drop in quarterly profit.
The Espoo, Finland-based telecommunications equipment company said it will lower its cost base on a gross basis by between €800 million and €1.2 billion over a three-year period in order to "address the market environment".
A combination of higher interest rates and slower global growth prompted its customers to retrench, Nokia said.
Nokia to cut up to 14,000 jobs as part of cost base ‘reset’ https://t.co/JtFEPuiqIO
— Financial Times (@FT) October 19, 2023
This represents a 10-15% reduction in personnel, which will see the company cut its workforce from 86,000 to between 72,000 and 77,000.
Chief Executive Officer Pekka Lundmark said: "Resetting the cost-base is a necessary step to adjust to market uncertainty and to secure our long-term profitability and competitiveness.”
9:07am: CoStar's firepower a threat to Rightmove, says Citi
Rightmove's shares remain sharply lower following the move by CoStar for OnTheMarket.
Citi sees it as bad news for Rightmove on a number of fronts.
Firstly, it believes there had been some hope Righmove could be one of the M&A targets for CoStar, pointing out shares are 7% higher since comments from CoStar's chief executive that it plans to allocate a portion of its $9 billion 'war chest' to consolidating European property portals.
This is now unlikely given the acquisition of On The Market given Rightmove's dominance of the UK market.
Secondly, CoStar has firepower ($450-500 million free cash flow per annum), so Rightmove could face more intense competition in residential and other areas - especially given CoStar's strength in commercial.
It keeps a sell rating on Rightmove.
8:53am: FTSE 100 plummets, Rightmove, Rentokil slide
It's a busy morning and the falls in the FTSE 100 show no signs of relenting, now down 82 points at 7,506.
Rentokil tops the fallers, down 15%, after its warning, while CoStars move for OnThe Market has sent Rightmove's shares crashing 12%.
Mondi PLC (LSE:MNDI) is another heavy faller, down 6.1%, after its trading update.
The packaginf firm said in the third quarter of 2023 "the challenging market conditions continued as expected in light of the ongoing weak macro-economic environment."
"Market demand has remained soft with lower average selling prices largely mitigated by lower input costs and tight fixed cost control."
"A much-reduced forestry fair value gain resulted in a lower underlying Ebitda of €261 million when compared to the second quarter," it added.
Hargreaves Lansdown is down 4.8% - analysts at Liberum said the first quarter update showed net outflows on the main platform and sluggish client growth."
It noted net new business nudged down from £0.7 billion in the first quarter 2023 to £0.6 billion in the first quarter of financial 2024, below the consensus of £1.1 billion. Client growth was "weak," the broker said.
8:35am: Rightmove rocked by CoStar move for OnTheMarket
Another big mover in the FTSE 100 is Rightmove PLC (LSE:RMV), down 13.2%, following news of a takeover bid for its rival OnTheMarket.
US group CoStar has agreed to buy OnTheMarket for 110p a share, sending shares in that company up 53% - adding a major new competitor for Rightmove and Zoopla in the market.
OnTheMarket itself was launched by a group of estate agents to compete with Rightmove and Zoopla in the property listings market in the UK.
But the entrance of CoStar takes competition to a different level.
It has a market value of $31.7 billion compared to Rightmove's of around £4.1 billion.
8:17am: Stocks plunge on Middle East anxiety, Rentokil slumps
The FTSE 100 opened sharply lower as diplomatic efforts intensified amid ongoing tensions in the Middle East which continue to spark nervousness across the globe.
At 8:15am, London’s lead index was down 72.76 points, 1.0%, at 7,515.24 while the FTSE 250 was down 119.58 points, 0.7%, at 17,283.88.
Susannah Streeter, head of money and markets, Hargreaves Lansdown said: “’A wary mood is spreading as the Middle East crisis looks increasingly intractable, while a high-interest rate environment looks set to stay for longer.”
She noted there “are little signs of an easing in high tensions.”
“Other diplomatic efforts will be closely watched, with the UK’s Prime Minister visiting Israel, and the foreign secretary meeting leaders in neighbouring countries, but a resolution still looks very difficult to achieve and concerns remain about the conflict potentially widening.”
Back in London, and investors were digesting a batch of trading updates which saw Rentokil Initial the big loser with shares, down 11%, as it warned of softness in its North American markets.
The pest control firm warned “near-term market uncertainty” means that North American full year performance is anticipated to be marginally below previous expectations.
“Reflecting the impact on revenue, we now anticipate regional adjusted operating margin to be in the range of 18.5%-19.0%,” it said.
Despite this, the firm said it remains on track to meet full year guidance to grow group adjusted operating margin to around 16.5%.
Otherwise, trading updates from Relx, London Stock Exchange and Deliveroo prompted modest falls in share prices, broadly in line with the market.
7:56am: Relx backs outlook, momentum continues into fourth quarter
Relx PLC has reaffirmed its outlook for the full-year after seeing underlying revenue growth for the first nine months of 2023.
It said underlying revenue growth year to date was 8% with momentum strong across the group as it enters the final quarter.
Relx expects underlying growth rates in revenue and adjusted operating profit to remain above historical trends, driving another year of strong growth in adjusted earnings per share on a constant currency basis.
Growth was driven by its deeply embedded analytics and decision tools across segments.
Business Services growth was driven by Financial Crime Compliance and digital Fraud & Identity solutions, while Insurance growth reflected continued new sales momentum and positive market factors.
Specialised Industry Data Services has continued to deliver strong growth, it said.
Scientific, Technical & Medical saw revenue growth of 4%, Legal 6% and Exhibitions 32%.
7:48am: Rentokil sees softer trading in North America
Rentokil Initial PLC (LSE:RTO) reported a modest rise in organic revenue although the acquisition of Terminix saw the figure soar.
But the pest control firm warned “near-term market uncertainty” means that North American full year performance is anticipated to be marginally below previous expectations.
“Reflecting the impact on revenue, we now anticipate regional adjusted operating margin to be in the range of 18.5%-19.0%,” it said.
Despite this, the firm said it remains on track to meet full year guidance to grow group adjusted operating margin to around 16.5%.
The pest control firm said revenue in the third quarter jumped 53% to £1.38 billion although on a like-for-like basis growth was a more modest 4.3%.
It reported softer consumer demand environment in North America, with broad-based strength elsewhere.
In North America, organic revenue increased by 2.2%.
Other regions saw strong growth, 9.5% in Europe, 8.9% in Asia & MENAT, 7.6% in Pacific and 5.2% in the UK and Sub-Saharan Africa.
Rentokil said the Terminix integration plan has progressed well and the cost synergy programme is on track to meet full year guidance of $60 million of pre-tax net P&L synergies.
7:39am: London Stock Exchange on track after strong third quarter
A busy morning of updates.
London Stock Exchange Group PLC (LSE:LSEG) reported strong growth in the third quarter as it said it was on track to deliver full-year growth towards the upper end of previous guidance of 6-8%.
The stock market operator said in the third quarter total income grew 8.0% to £1.97 billion from £1.91 billion while gross profit climbed 8.2% to £1.77 billion from £1.70 billion.
Growth was reported across the business with Data & Analytics up 7.2%, Capital Markets up 6.2%, driven by TradeWeb, and Post Trade up 17.0%.
LSEG said it continues to make very good progress building new products with Microsoft and are on target to launch with customers in the second half of 2024.
All 2023 guidance was reiterated including Ebitda margin and capex, the firm said.
David Schwimmer, chief executive said: “LSEG delivered another quarter of strong, broad-based growth,” establishing a “consistent track-record of growth in our Data & Analytics business.”
“Our Capital Markets revenues accelerated in the third quarter, with ongoing innovation increasing Tradeweb's share of global credit trading.”
“Our Post Trade businesses also continue to grow strongly as customers look to our risk management services in an uncertain macro environment.”
7:28am: Deliveroo reports growth in revenue and transaction value
Deliveroo PLC (LSE:ROO) reported modest growth in revenue, driven by a strong performance in the UK & Ireland, although order levels fell.
The online food delivery firm described a 5% rise in gross transaction value in the third quarter (GTV) to £1.70 billion from £1.64 billion the year before as “robust,” supported by a 9% increase in the UK & Ireland.
The decline in International GTV reduced to 1%, with improving trends across most markets, including France, the company said.
Order levels fell 1% to 69.7 million from 70.1 million but Deliveroo said this was nonetheless an “improving trend.”
GTV per order climbed 5% to £24.30 from £23.40 while revenue edged 3% higher to £487 million from £481 million.
Revenue growth lagged the rise in GTV due to previously-flagged investments.
Looking ahead, Deliveroo expects GTV growth to be lower single digits percentage growth in constant currency and adjusted Ebitda in the range of £60-80 million.
Will Shu, founder and CEO of Deliveroo, was upbeat: “My confidence in our ability to drive growth and deliver on our goals for profitability and sustainable cash flow generation has never been stronger.”
7:00am: FTSE 100 called lower on Middle East unease
The FTSE 100 is expected to open lower as Middle East tensions sparked heavy falls in the US and Asian markets.
Spread betting companies are calling London’s lead index down by around 36 points after closing down 87.21 points at 7,588.00 on Wednesday.
“In the absence of a positive catalyst in the coming days there is a risk we could start to see further weakness if tensions escalate further. For the here and now European markets look set to open slightly lower, with Asia markets also trading sharply lower this morning,” Michael Hewson said.
“"With Iran calling for an oil embargo the temperature is slowly being dialled higher, with the region becoming even more of a tinderbox," he added.
UK Prime Minister Rishi Sunak is expected in Israel this morning, to meet his counterpart Benjamin Netanyahu and Israeli President Isaac Herzog.
UK Foreign Secretary James Cleverly is due to visit Egypt, Turkey and Qatar "in the coming days", according to Downing Street.
US markets were also lower with heavy falls for Morgan Stanley (NYSE:MS) after results in its wealth management arm disappointed and United Airlines which warned that ongoing disruption to flights to Israel would dent profits.
After the market close, Tesla reported revenue and earnings below expectations, sending shares lower, while Netflix soared after it announced strong results and plans to raise prices.
The Dow Jones Industrial Average closed down 1.0%, the S&P 500 fell 1.3%, and the Nasdaq Composite declined 1.6%.
In Asia, the Nikkei 225 was down 1.7%. In China, the Shanghai Composite was down 1.2%, while the Hang Seng index in Hong Kong was down 2.0%.