- FTSE 100 closes up 25 points at 7,414
- Lloyds Bank profits beat forecast, holds guidance
- Reckitt falls on weaker trading
4:40pm: FTSE 100 ends flat day with a flourish
The FTSE 100 ended a fairly lacklustre day with a flourish, closing near to best levels for the day.
At the close, London's blue-chip index was up 24.64 points, 0.3%, at 7,414.34 while the FTSE 250 was down 123.39 points, 0.7%, at 16,870.71.
Lloyds Banking Group PLC (LSE:LLOY) rose 2.2% after better-than-expected results which were driven by lower bad debt charges than forecast while it held its UK net interest margin guidance, unlike its rival Barclays yesterday.
Ocado Group PLC (LSE:OCDO) fell 11%, although there appeared to be news to explain the move, while Reckitt Benckiser slipped 3.4% after sales disappointed - the firm did launch a £1 billion share buy-back.
Mining stocks benefited from hopes that stimulus plans in China will drive growth with Rio Tinto up 2.2% and Antofagasta up 1.4%.
3:53pm: HSBC boss warns of tipping point
HSBC Holdings PLC (LSE:HSBA) boss Noel Quinn has warned that years of government borrowing have gradually led global economies to a knife edge.
Speaking at Saudi Arabia’s Future Investment Initiative Institute’s summit, he argued rising government debt since the financial crisis and pandemic had become unsustainable.
“I’m concerned about a tipping point on fiscal deficits,” he said.
“When it comes, it will come fast and I think there are a number of economies in the world where there could be a tipping point and it will hit hard.”
3:19pm: Canary Wharf owners to inject £400m into London financial district
Canary Wharf Group, the developer of London’s dockland financial district, has received a fresh equity injection from its shareholders, as the area contends with high profile departures and a shift to working from home.
Brookfield and the Qatar Investment Authority have committed to a £300 million equity injection for the firm as well as a £100 million revolving credit facility, according to a press release from the firm.
The company said it would use the money to carry out a “strategic repositioning” for the financial district."
2:48pm: Alphabet drags Nasdaq lower
US markets have opened and Alphabet has fallen 9% dragging the Nasdaq down with it - it's also pulled the rug out of London's attempted rally with the FTSE 100 now up jusy 3 points.
Shortly after the opening bell, the Dow Jones Industrial Average was up 35.20 points, 0.1%, at 33,176.58, the S&P 500 was down 29.20 points, 0.7%, at 4,218.48 and the Nasdaq Composite was down 157.76 points, 1.2%, at 12,982.12.
Alphabet paid the price for disappointing cloud earnings which sent the stock 8.3% lower, but there was better news for shareholders in Microsoft where results pleased the market sending shares up 3.5%.
AJ Bell head of financial analysis Danni Hewson said: "Microsoft and Alphabet both delivered better than expected earnings although there was some divergence in the reaction, with the former higher and the latter lower on their respective numbers."
"Microsoft’s head start in AI seems to be paying off, while Alphabet appears to be in catch-up mode on both this and cloud computing."
On another busy day of earnings, Boeing flew 3.2% higher after reporting narrowed third quarter losses and an increase in revenue but T-Mobile eased 1.3% despite raising guidance.
2:22pm: Ibstock "cheap" but volume recovery required
Berenberg thinks while Ibstock undoubtedly cheap on a through-cycle basis indications of a volume recovery are needed for the shares to perform.
it prefers the likes of Genuit and Howden in UK domestic building products at present.
It said today's trading update ultimately guided in line with consensus expectations for 2023.
However, it has taken a more prudent view on volume recovery and operational gearing dynamics for 2024-25, which results in more material cuts to numbers for those years.
Investor focus remains on the dynamics of a potential timing of recovery in the new-build markets, or indeed the lack of one through 2024, the broker said.
Berenberg expects Ebitda of £107 million in 2023, and £90 million in 2024. It has a hold rating on Ibstock.
2:05pm: CMA extends probe into Adobe takeover of Figma
UK competition regulators have said they need more time to investigate Adobe’s $20 billion takeover of private software company Figma.
The Competition & Markets Authority has extended its investigation into the takeover, and now has set itself a statutory deadline of Feburary 25.
It previously had until the end of the year.
The chair of the CMA inquiry group, Margot Daly, said: “In taking this decision, the inquiry group had regard to the complexity of this case and the need to carefully consider the merger parties’ detailed submissions received in response to the annotated issues statement and working papers.”
It follows concerns that the deal could lessen competition in the market.
The CMA has previously said the deal could give both Adobe and Figma less incentive to invest in new software products.
1:07pm: Banks sitting on sizeable Twitter losses - WSJ
The banks that helped fund Elon Musk’s takeover of social network Twitter, now renamed X, are sitting on losses of as much as $2bn, the Wall Street Journal has reported.
The Journal reported: "The banks currently expect to take a hit of at least 15%, or roughly $2bn, when they sell the debt, people familiar with the matter said."
"That would mean hundreds of millions in losses for those holding the largest pieces, which include Morgan Stanley (NYSE:MS), Bank of America, Barclays and MUFG. BNP Paribas, Société Générale and Mizuho were also involved," it said,
12:31pm: AstraZeneca boss commits to another years - The Times
Sir Pascal Soriot has said it would be a failure of his leadership if AstraZeneca did not appoint an internal candidate to eventually succeed him, as he committed himself to leading the FTSE 100 drugs company for another five years, The Times reported.
The news follows a Bloomberg report on Monday which said Soriot had dismieed talk that he was preparing to quit the business.
Soriot, has overseen the transformation of AstraZeneca since he became chief executive in 2012, turning down a £69 billion takeover offer from Pfizer and transforming the Cambridge business into one of Britain’s biggest public companies, valued at about £172 billion, after reviving its drugs pipeline.
There has been renewed speculation over his leadership after reports that he was considering stepping down next year, weakening the Anglo-Swedish company’s share price.
However, Soriot said that he envisaged leading AstraZeneca for another five years before retiring at the company, as “long as I perform and deliver”.
“We have people inside the company that can replace me, and I will see it as a failure on my part if I’m not replaced by someone on my team. So there’s no hurry, there’s no issue.”
He added: “We have a very good succession planning process in place. The board reviews our own internal candidates but also we have a few people on the shortlist that are external candidates and at the appropriate time the board will pick the right person.”
12:10pm: Mixed start seen on Wall Street after tech earnings
Across to the US now and the earnings season is in full swing after results from two of the 'magnificent seven' after the close last night with Meta Platforms following today.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.2% higher, while those for the S&P 500 were down 0.3%, and contracts for the Nasdaq 100 futures fell 0.6%.
Shares of Microsoft jumped 4.0% following stronger-than-expected results in the fiscal first quarter with investors particularly enthused on the company’s revenue growth, particularly from its Azure cloud segment.
Meanwhile, Alphabet shares tumbled 6.5% as its cloud business missed analysts’ estimates, overshadowing its revenue growth and earnings beat.
Commenting on Microsoft, Dan Ives at Wedbush said it had “delivered a much needed quarter for the bulls featuring top and bottom-line beats driven by 29% Azure growth which came in above Street expectation of 26% as the company saw heightened demand across its entire product portfolio with the infusion of AI across its tech stack.”
The earnings season remains in full swing with results from Meta Platforms, IBM and Mattel after the closing bell.
Ahead of that Boeing, Moody’s, Hess and Hilton are all due to report.
In economic news, new home sales in the US are expected to edge up to an annualised rate of 6.8 million units in September from 6.75 million units in August, as limited supply of existing homes boosts demand for new builds.
11:51pm: Lloyds takes brighter view of UK economy, savings balances jump
A bit more on Lloyds which is reporting customers are opening record numbers of ISA’s as they hunt for better savings rates following the sharp increase in interest rates.
The UK’s largest lender said in the third quarter it had seen a £3.9 billion rise in savings balances and a £3.2 billion drop in current account totals.
William Chalmers, Lloyds’ chief financial officer, said that customers were opening record numbers of new ISA products as they search for better interest rates.
The high street lender said its net interest margin, a key driver of bank income and accounts for the difference between what is charged for mortgages and paid on savings, dropped from 3.14% to 3.08% in the third quarter, due to “expected mortgage and deposit pricing headwinds”.
Chalmers said that decline was expected to continue into the next quarter.
Despite the rise in savings, Lloyds said household spending had increased in recent months despite the squeeze being faced by consumers.
Chalmers said “You can see some pretty consistent and reasonable spend increases,” adding “I think it’s safe to say that, as a general matter, customers are adjusting to the times that we’re in.”
The bank said it lent £1.4 billion more in the third quarter, up to £452 billion, with growth of £1.2 billion in its retail business.
Mortgage demand is stable, with modest growth in its open mortgage book, cards, loans and motor businesses. Lending to businesses dropped £0.6 billion.
The bank has also taken a brighter view of the UK economy, nudging up its growth forecasts for next year although it expects inflation to fall more slowly.
The FTSE 100-listed bank thinks GDP will now strengthen by 0.4% in 2023 against its previous forecast of 0.2% and believes interest rates have peaked at 5.25%.
But it forecast more pain in the housing market with a peak to trough fall in house prices of 11%, and a 5% drop this year, while it thinks inflation will still be around 4% towards the end of next year.
The news came as Lloyds posted better-than-expected third quarter profits as it set aside less-than-expected to deal with bad debts.
Lloyds had no comment on talk of a bid for Metro Bank, or at least part of it, other than it was glad to see its competitor survive.
10:45am: Essentra slides on softer trading environment
Essentra PLC (LSE:ESNT) is down 7.3% after warning annual profit would be at the lower end of expectations, as it deals with a "softer trading environment".
The FTSE 250-listed firm, which provides components to customers in the manufacturing, automotive, electronics and construction fields, said it "experienced market softening" in the Europe, Middle East and Africa region.
In the third quarter of 2023, like-for-like and trading day adjusted group revenue fell 7.1% on-year, although the decline eased from 12% in the second quarter.
"EMEA performance in the third quarter has experienced market softening, in line with changes to the macro-economic environment. In AMERS, destocking behaviour continues to be observed in distributor end-market channels, whilst the APAC business continues to recover at a gradual pace, driven by the market dynamics in China," the firm said in a statement.
But broker Jefferies remained positive on the group's long-term prospects.
"At first glance, this update reads quite cautiously, but we think this is largely a reflection of the group's end markets, which are challenging," it said.
the broker believes management is "responding well from a cost/pricing perspective, but we still recognise that likely drifts in FY23F & FY24F consensus forecasts, while ultimately being reasonably modest, are still unhelpful."
Overall, Jefferies thinks the equity story "remains largely unchanged," with scope for upside potential on the top and bottom-line, the ongoing buyback plus M&A opportunities.
10:08am: Mondi dividend could be at risk
Barclays thinks the potential proceeds from the Russia disposal could lead to a significant distribution to shareholders – it has a special dividend payment of €745 million in its forecasts.
But once this is in the rear view mirror, investors will likely focus on core free cash flow (FCF) – which is poor, in its view.
As a result, it sees a significant risk to dividends (c4% yield) and has cut its dividend estimates to 48c from 70c in FY22.
Barclays says at a c3% FCF yield, Mondi is one of the most expensive stocks in its recycling and packaging coverage.
The bank has lowered its rating to underweight from equal weight with a price target of 1,150p.
Shares are down 0.8% at 1,262.50p.
9:37am: Reckitt makes buy-back amid disappointing sales
Reckitt Benckiser shares are 3.7% lower after today's trading and strategy update.
New boss Kris Licht said there was room "to sharpen and improve," which while not a Rolls-Royce "burning platform" moment clearly shows he feels work needs to be done.
AJ Bell's Russ Mould said the £1 billion share buyback was "not enough to blind shareholders to an uncertain start for new Reckitt boss Kris Licht with like-for-like sales growth coming in slightly below expectations and its Nutrition business having a rough quarter."
“To be fair Nutrition is suffering in comparison with the same period of last year when a US competitor faced temporary supply issues with its infant formula, but the specialist in health and hygiene branded goods saw a pretty significant drop in volumes across the board, compensated for by rising prices," he added
Mould suggested there "may be concern in the market that this reflects a shift in consumer behaviour with people switching out of the likes of Nurofen and Finish dishwasher tablets into own-brand alternatives."
“While for drinks, snacks and other food items people might be willing to push the boat out and still buy their favourite brands – can the same hold true for cleaning products and over-the-counter medicine? If not then Reckitt risks losing any reputation for pricing power," he said.
Mould thinks having stuck with full-year targets, Licht "will be under significant pressure to achieve them when he unveils the 2023 results next year.”
9:12am: No surprises in Lloyds' results as cash pile builds up
Reaction to the Lloyds Banking Group results is broadly positive with some relief after the numbers from Barclays on Tuesday.
Shares are moving either side of opening levels in early trading, down 0.4%, at 40.39p for now.
Jefferies noted the results were “characterised by a large impairment beat, broadly in-line net interest income, better non-interest income and better cost performance.”
The broker pointed out all guidance was held, notably the greater than 310bps full year 2023 net interest margin (NIM) forecast, with the credit cost ratio modestly improved.
It was disappointed the company stuck to what it called its “stale” buy-back policy with no announcement alongside its results today.
Jefferies points out Lloyds is sitting on £2.5 billion of capital in excess of its 13.5% target.
The lack of a buy-back is in stark contrast to moves by Deutsche Bank today, which has announced plans to accelerate the payouts it makes to its shareholders, sending shares up 6.3%
Gary Greenwood at Shore Capital said the profit performance was a touch ahead of consensus expectations, primarily due to a lower than anticipated impairment charge.
“Although NIM was slightly lower than consensus expected, the market should take some comfort that guidance is unchanged, following yesterday’s downgrade by Barclays,” he thinks.
Richard Hunter, head of markets at interactive investor, believes “Lloyds is making a good fist of performing within a difficult environment, with its underlying financial strength underpinning progress.”
Although NIM fell in the third quarter, Lloyds has retained its guidance on the outlook for the year at 3.1%, which suggests that “some stability has returned,” he thinks.
But although the group has backed its full-year guidance, “pockets of doubt remain.”
“As with its competitors, there has been a limited exodus as savers chase higher rates elsewhere in an increased interest rate environment,” he pointed out.
Zoe Gillespie, investment manager at RBC Brewin Dolphin, felt that after Barclays’ mixed set of results saw a sell-off of banks yesterday, Lloyds’ update should provide “some reassurance about the sector’s resilience.”
“There are no surprises in today’s update, which should assuage the market, and Lloyds appears to be holding onto cash for any opportunities that emerge in the coming months,” she said.
8:47am: FTSE flat, Lloyds recovers early falls
The FTSE 100 remains in negative territory although losses are modest, down 7 points at 7,383.
Lloyds Banking Group is now just in the green after its better-than-expected profit and fall in bad debts.
Jefferies said the results were “characterised by a large impairment beat, broadly in-line net interest income, better non-interest income and better cost performance.”
“We were disappointed the company has stuck to its stale full year buyback policy,” it added.
The broker had hoped the lender would break its buy-back policy and bring forward an announcement from the end of the financial year.
Belluscura PLC (AIM:BELL) rose 1.3% after it said TMT has completed due diligence and would be in a place to make a firm offer shortly.
The terms have been revised and will now comprise the issuance of 3 new ordinary shares of Belluscura in exchange for every 4 ordinary shares of TMT Acquisition.
Elsewhere, XP Power is up 2.6% as Berenberg upgrades to buy from hold although it has slashed its price target to 1,400p from 2,300p.
8:16am: FTSE edges lower, Lloyds and Reckitt ease
The FTSE 100 edged lower in opening exchanges with solid results from Lloyds Banking Group PLC (LSE:LLOY) failing to inspire investors.
At 8:15am, London's lead index was down 8.91 points, 0.1%, at 7,380.79 while the FTSE 250 fell 66.16 points, 0.4%, at 16,927.94.
Lloyds shares fell 1.6% despite better-than-expected third quarter profits and a drop in bad debts.
Net interest margin did fall in the quarter but the high street lender backed its full-year guidance, unlike UK rival Barclays yesterday.
Zoe Gillespie, investment manager at RBC Brewin Dolphin, said: “After Barclays’ mixed set of results saw a sell-off of banks yesterday, Lloyds’ update should provide some reassurance about the sector’s resilience.”
“The group’s performance is in line with expectations, its loan book appears to be relatively stable despite the economic backdrop, and its guidance for the year remains unchanged.”
For now, the market is taking a dimmer view of the update which has pulled Barclays down by a further 1.3%.
Reckitt Benckiser is down 2.3% as new CEO Kris Licht attempts to make his mark on the business unveiling a new share buy-back alongside financial aspirations.
The consumer goods firm also said it was on target to hit full-year expectations.
Mondi is down 1.8% after Barclays downgraded to underweight from equal weight while Experian (LSE:EXPN) steadied after its 10% fall yesterday following the warning from TransUnion.
Essentra is the big loser, down 11.3% at 130.95p, after its update.
Liberum said: “Europe is weakening, while the US remains difficult and the APAC recovery is gradual.”
“We cut our FY23E EBIT by 6%, with sales pressure mitigated by strong margin discipline.”
“The longer-term growth story is intact, with a significant opportunity to consolidate a large, fragmented market,” it thinks.
7:56am: Reckitt launches new £1bn buyback as new CEO unveils hopes
Reckitt Benckiser Group PLC (LSE:RKT, ETR:3RB) launched a £1 billion buy-back as new chief executive Kris Licht unveiled his hopes for the business, saying it had “room to sharpen and improve.”
The consumer goods firm, which makes Harpic, Dettol and Clearsil, reported like-for-like net revenue growth of 3.4%, to £3.6 billion, in the third quarer led by strong broad-based growth of 6.7% across Hygiene and Health combined.
Reported net revenue declined 3.6% with like-for-like growth offset by forex headwinds of 6.8% and a net M&A impact of 0.2%.
Licht said the firm was “firmly on track to deliver our full year targets, despite some tough prior year comparatives that we continue to face in our US Nutrition business and across our OTC portfolio in the fourth quarter."
In a separate statement, Licht announced a strategy update which included plans for “an enhanced shareholder returns programme,” starting today with the start of a £1 billion share buy-back.
He said Reckitt is a “strong, competitive, resilient business,” but does “however, have room to sharpen and improve.”
He said the firm was well placed to deliver sustainable mid-single digit like-for-like net revenue growth over the medium term and sees “a clear runway for sustainable growth, with superior gross margins.
Reckitt will “extend our productivity programme to focus on fixed costs to fuel both growth and earnings.”
It said it is well positioned to grow adjusted operating profit ahead of net revenue in the medium term.
7:37am: Lloyds profit tops forecasts, bad debts fall
Results are in from the UK's biggest lender and Lloyds Banking Group PLC (LSE:LLOY) has backed its outlook for 2023, including UK margin guidance, as it reported better-than-expected profits and a fall in bad debts.
Charlie Nunn chief executive said: “The group continues to perform well. Robust financial performance and strong capital generation in the first nine months of the year was driven by net income growth, cost discipline and resilient asset quality.This performance allows us to reaffirm our 2023 guidance.”
The high street lender reported said pre-tax profit in the third quarter more than tripled to £1.89 billion up from £576 million last year, and ahead of the £1.77 billion consensus.
Net income edged up 1% at £4.51 billion from £4.48 billion with net interest income up 1% to £3.44 billion from £3.39 billion.
Net interest margin of 3.08% was down 6 basis points on the previous quarter given the expected mortgage and deposit pricing headwinds but Lloyds held its full-year guidance for a banking net interest margin of greater than 310 basis points.
Lloyds’ results come a day after rival Barclays cut its outlook for margins in the UK this year, saying competition for deposits was heating up.
The bank held its full-year operating cost forecast of £9.1 billion with the only change to guidance slightly improved asset quality which it now expects to be less than 30 basis points.
Operating costs in the third quarter rose 4% to £2.24 billion from £2.15 billion.
Lloyds reported a strong return on tangible equity of 16.9% while the CET1 ratio of 14.6% remains ahead of the ongoing c.12.5% target, plus management buffer of c.1%.
Loans to customers fell 1% to £452.1 billion while customer deposits dropped 3% to £470.3 billion but bad debt charges fell to £187 million from £668 million.
It was a bad day for banking shares yesterday in the wake of results from Barclays so let's see what the City makes of these.
7:00am: Flat start expected in London
The FTSE 100 is expected to open little changed on Wednesday despite gains in the US and Asia after a mixed reaction to results from Microsoft and Google owner Alphabet.
Spread betting companies are calling London’s lead index down by around 3 points after closing up 14.87 points at 7,389.70 on Tuesday.
Michael Hewson said the results from Microsoft and Alphabet were “impressive, although judging by the market reaction the market had a somewhat mixed view, sending Alphabet lower and Microsoft higher in aftermarket trading, even though both beat expectations on revenues and profits.”
Reaction centred on the performance of both businesses Cloud operations where Microsoft performed strongly and Alphabet missed expectations.
Asian markets were boosted after China announced the issuance of $137 billion in additional sovereign bonds and Hong Kong’s government announced new support measures to buoy the financial hub’s languishing economy.
Back in London, and the early focus will updates from Lloyds Banking Group PLC (LSE:LLOY), Fresnillo and Reckitt Benckiser.