- FTSE 100 closes down 36 points at 7,327
- HSBC profit disappoints, $3bn buyback tops forecasts
- Ascential soars on disposal plans, special dividend
4:40pm: FTSE rallies after hitting two-month lows
The FTSE 100 rallied strongly on Monday, despite a further banking disappointment, as investors eyed interest rate decisions in Japan, the US and the UK this week.
At the close, London's blue-chip index was up 36.11 points, 0.5%, at 7,327.39, while the FTSE 250 ended up 151.36 points, 0.9%, at 17,017.59.
HSBC fell 2.7% after profits fell short of forecasts and cost guidance was increased, offsetting news of a larger than expected share buyback of $3 billion.
Fellow lender, NatWest also fell, 1.7%, extending Friday's 12% decline - brojer Jefferies moved the stock to underperform from buy with a 150p price target.
Heading upwards was Rightmove after a Berenberg upgrade to buy and Pearson which raised operating profit guidance.
3:25pm: Private sector activity falls slightly, says CBI
The CBI’s latest growth Indicator signalled that private sector activity fell slightly in the three months to October, broadly in line with the contractions seen over the last three rolling quarters.
But looking ahead, firms expect activity to stabilise over the next three months.
A return to growth in manufacturing looks set to broadly offset another contraction in distribution, with activity in services expected to be broadly flat, the CBI said.
2:48pm: World Bank warns oil prices could hit $150/barrel
The World Bank has warned oil prices could soar to as much as $150 a barrel if the war between Israel and Hamas escalates.
It said there was a risk of the cost of crude entering “uncharted waters.”
A “large disruption” scenario comparable with the Arab oil boycott of the west in 1973 would create supply shortages that would lead to the price of a barrel of oil increasing from about $90 to between $140 and $157.
The previous record – unadjusted for inflation – was $147 a barrel in 2008.
“The latest conflict in the Middle East comes on the heels of the biggest shock to commodity markets since the 1970s – Russia’s war with Ukraine,” said Indermit Gill, the World Bank’s chief economist. “That had disruptive effects on the global economy that persist to this day.
2:28pm: German inflation rate cools in October
Inflation in Germany has fallen this month as the cost of living squeeze in Europe’s largest economy eases.
Statistics body Destatis reports that the inflation rate in Germany is expected to be 3.8% in October 2023, the lowest level since August 2021, down from 4.5% a month earlier.
On a monthly basis, consumer prices are expected to remain unchanged compared to September.
Euro zone core inflation is tumbling and will continue to fall rapidly. Following the downside surprise in German inflation today, Euro zone core could fall from 4.5% in September (orange) to 4.1% in tomorrow's October release. This is a big catalyst for the Euro to fall... pic.twitter.com/3A9NiL5OJo
— Robin Brooks (@RobinBrooksIIF) October 30, 2023
Destatis said energy prices fell by 3.2% year-on-year, which had “a particularly dampening effect on the inflation rate.”
German core inflation - excluding food and energy - is expected to have fallen to 4.3%, from 4.6% in September.
On an EU-harmonised basis, the German inflation rate was even lower – just 3.0% in the year to October, down from 4.3% in September.
1:48pm: US stocks make strong start
US stocks recouped some of last week's heavy losses ahead of a busy week of earnings, the Fed's rate decision and non-farm payrolls.
Shortly after the opening bell, the Dow Jones Industrial Average was up 242.47 points, 0.8%, at 32,660.06, the S&P 500 was up 35.78 points, 0.9%, at 4,153.15 while the Nasdaq Composite was up 137.92 points, 1.1%, at 12,780.94.
McDonald's rose1.0% after reporting better-than-expected third quarter results while General Motors rose 1.4% after Bloomberg reported it reached a tentative agreement with the United Auto Workers to end a six-week-old strike with similar terms to the deal signed earlier by Ford, according to people familiar with the matter.
Chevron rallied 0.9% after falling heavily in the wake of third quarter results on Friday.
Bank of America upgraded to buy in what it termed "a tactical move in response to an unwarranted collapse in the shares."
1.37pm: Here’s a recap of the top risers and fallers on the junior market today
Ascential PLC (LSE:ASCL) jumped 25% higher following an announcement that it has agreed to sell its digital commerce and product design businesses for a total of £1.4 billion.
Shares in Sanderson Design Group PLC (AIM:SDG) jumped by 4% after the firm unveiled a licensing agreement with J Sainsbury PLC (LSE:SBRY).
Blencowe Resources PLC (LSE:BRES) climbed 5% as it followed up the news of tighter Chinese controls over graphite with its own update highlighting the quality of its Orom-Cross deposit in Uganda.
Shares in Upland Resources (LSE:UPL) Ltd plunged 42% as the oil and gas investment firm announced that a potential takeover bid had fallen flat.
1:08pm: Frasers deal with Shein strategically important
Analysts have given a positive reaction to the sale by Frasers Group PLC (LSE:FRAS) of Missguided to Shein.
AJ Bell’s Russ Mould thinks it could prove to be a strategically important move for the UK retailer, providing a foot in the door to a potential close working relationship with the Chinese fashion seller.
“Shein has become a major force in online retail and is one of the key reasons why the likes of ASOS and Boohoo are struggling,” Mould noted.
He thinks Frasers could feasibly be interested in a distribution deal whereby it can sell its products on Shein’s platform, while also using its Sports Direct and Flannels stores as a potential return hub for the Chinese partner.
“The more people coming through its doors, the more opportunities it has to try and sell its products,” he said.
Shore Capital explained the move is particularly noteworthy because it marks Shein's first acquisition of a British brand, aligning well with its focus on the UK as one of its fastest-growing markets.
It too thinks that a strategic partnership would complement with both parties' capabilities and reach.
Frasers would benefit from the footfall generated by Shein shoppers, while Shein would leverage Frasers' physical stores as an entry into traditional retail channels, the broker noted.
ShoreCap also believes this development has the potential to create a ripple effect across the UK retail sector.
“At a time when fast fashion is undergoing significant changes, with online pure plays already losing ground against Shein, this partnership could mark a significant moment in propelling Frasers’ investment case,” it said.
“We see this as the potential for Frasers to capitalise on Shein's footfall and cross-sell its ranges to younger female demographics, thereby adapting to the evolving retail landscape and fortifying its market position”, ShoreCap said.
12:41pm: Expectations for NatWest lowered limiting hopes for re-rating
NatWest’s share price remains subdued after Friday’s heavy falls with further cautious comments continuing to hold the lender back.
Jefferies has lowered its rating to underperform from buy, as lowered capital return expectations and earnings downgrades limit a re-rating as the market re-assesses the investment case.
The broker said new guidance around risk weighted asset inflation (RWA) suggests the market's capital return expectations for are “too high” and will have to be “reconsidered.”
Jefferies thinks the big issue for the shares is the CET1 ratio implied by higher than expected RWA inflation.
It pointed out management provided guidance that 2025 RWA balances are expected to be around £200 billion due to implementation of Basel 3.1, higher than forecast, and worth 70bps of CET1.
It has cut 2023-25 earnings forecasts by an average 11% and lowered its hopes for share buybacks to £1.7 billion over 2024 & 2025E from £3.2 billion before.
Jefferies has set a 150p price target, down from 370p.
12:09pm: FTSE holds gains, Airtel Africa tops risers
The FTSE 100 continues to make strong progress on Monday, rallying after hitting two-month lows on Friday.
Top of the risers sits Airtel Africa, up 7.8%, after it raised its dividend and posted sharply higher revenues and operating profits in its latest half-year.
The payments and mobile phone group posted underlying growth in revenues of nearly 20% to US$2.6 billion and in underlying earnings of more than 21% to US$1.3 billion.
St James's Place is 2.5% to the good, recouping recent losses - Swiss bank UBS upgraded to buy on Friday.
Rightmove continues to benefit, up 2.4%, from the Berenberg upgrade to buy, see 9.18am update, while positive comments from Barclays have given Prudential, up 1.7%, a boost.
11:34am: HSBC raises UK growth forecasts
HSBC is now expecting the UK economy to grow next year, as it lifted forecasts on signs of resilience to high inflation and rising interest rates
The Asia-focused now expects UK GDP to increase by 0.4% in 2024, after previously forecasting a contraction of 0.6%.
It also said the UK housing market was likely to perform better next year than it previously expected, with house prices to fall around 4.7%, up from a previous forecast of a 5.7% fall.
The lender said that GDP growth forecasts had improved “for most of our major markets during the third quarter, following better-than-expected growth in the first half of 2023”.
“In North America and Europe, economic growth has proved more resilient to higher inflation and interest rates than was previously expected.”
“Consumption spending in particular has continued to grow despite the squeeze on real disposable income, while employment demand has also remained strong.”
11:08am: US markets expected to open higher
Across to the US now, where markets will open at 1:30pm UK time, following the clock change here.
Stock futures are pointing upwards in the US ahead of a busy week of earnings, the Federal Reserve’s rate call, plus a raft of data on the data, culminating in the jobs report on Friday.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.5% higher, while those for the S&P 500 were up 0.6%, and contracts for the Nasdaq 100 futures rose 0.7%.
The S&P 500 fell into correction territory last week, shedding 2.5% for the week to put it down by 10.6% from its 2023 high.
Morgan Stanley (NYSE:MS)’s Michael Wilson is forecasting more pain for investors before the year-end, reiterating a year-end target for the S&P 500 of 3,900.
He thinks earnings expectations are too high for the fourth quarter and 2024, even in an economy that’s performing well.
“Monetary and fiscal policy are unlikely to provide relief and could tighten further,” he suggested, plus while the Federal Reserve may be done hiking for now, it is a long way from easing.
In company news, US chipmaker Broadcom and cloud software company VMware have delayed the completion of their $69 billion merger, which had been scheduled to close today.
The companies said in a joint statement that they maintained their “expectation that Broadcom’s acquisition of VMware will close soon, but in any event prior to the expiration of their merger agreement”.
Earlier this month, the Financial Times reported that Chinese regulators were considering holding up the deal, announced in May 2022.
Elsewhere, fast-food chain McDonalds will report this quarter earnings.
10:45am: Asos at a crossroads with reports of Top Shop sale
Asos PLC is up 3.1% after reports it is exploring a sale of the Topshop brand it bought from Sir Philip Green's collapsed retail empire less than three years ago.
Sky News said the online retailer, which will publish its delayed full-year results this week, is at the early stages of a process that could see it offload what was once one of the best-known names on the high street.
But Shore Capital analyst Eleonora Dani said while the sale could offer Asos “a financial lifeline,” these developments raise questions about the firm’s long-term viability.
Dani felt Topshop had been a key growth driver for Asos since its acquisition and selling it now could severely impede the company’s recovery efforts.
With the brand's assets currently valued at £219 million in Asos’s latest annual report, the sale could add to the loss on the P&L, she suggested.
Compounding these concerns are other red flags at Asos.
The company recently delayed its full-year results by a week, a move that, when
considered in isolation, may not have attracted significant scrutiny.
But, coupled with Frasers reducing its stake from 23% to 19%, these developments cast a shadow over the retailer's going concern, in Dani’s view.
The potential sale of Topshop and Frasers Group's reduced stake paint a picture of a company “at a crossroads, facing both operational and financial challenges,” Dani added.
10:16am: Pearson proving resilient with the "grunt work" now complete
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown thinks today's trading update from Pearson shows it can teach "us all a thing or two about resilience."
The FTSE 100-listed firm raised guidance today after a strong third quarter.
"While the wider economy is under pressure, the likes of vocational testing, English Language Learning and broader assessments and qualifications are all being taken up in force, boosting Pearson’s top and bottom line," Lund-Yates pointed out.
"At a time when economic wheels creak is often a time when we see increased demand for upskilling and retraining, which means that even in the face of a recession, Pearson has enviable assets," she believes.
She added this reflects "an enormous amount of legwork to improve its digital offering and reduce exposure to the declining physical courseware sector. "
She thinks the the incoming CEO’s has being handed a company in much better condition "and with the grunt work now complete, making his mark could be a trickier task.”
Pearson shares are 1.8% higher at 935.40p.
9:46am: Mortgage approvals at 9-month low
UK mortgage approvals hit their lowest level in September since January, according to figures from the Bank of England.
Net mortgage approvals for house purchases fell to 43,300 in September 45,447 in August, the data showed, while approvals for remortgaging fell to 20,600 in September, the lowest level since January 1999.
Instant Info – Bank of England Mortgage Approvals pic.twitter.com/dzj35ti1Ji
— BuiltPlace (@BuiltPlace) October 30, 2023
Net borrowing of consumer credit by individuals amounted to £1.4 billion in September, down from £1.7 billion in the previous month.
9:18am: Rightmove fall an "overreaction," says Berenberg
One of the best performers in the FTSE 100 is Rightmove, up 2.6% at 491.60p.
Berenberg thinks the 17% fall since the announced of the offer for OnTheMarket by CoStar is an “overreaction,”and has upgraded its rating to buy.
The broker continues to believe Rightmove will remain the number one property portal in the UK and will be largely unaffected by the new market dynamic.
The share price weakness provides an “attractive entry point”, in its view.
It thinks concerns that CoStar would be able to take share away from Rightmove are overdone for three key reasons:
Firstly, the barriers to success are high given the impact from network effects.
Secondly, Rightmove’s ability to retain its leading position from its UK competitors and lastly, evidence of failed attempts from other international companies attempting to enter the UK portal market suggest the status quo will remain.
8:58am: HSBC's profit light, costs ahead, buyback better
HSBC has pushed 0.7% higher, joining the market rally, supported by its $3 billion share buyback, although profit and cost forecasts disappointed.
Shore Capital’s Gary Greenwood said the results showed a small earnings miss versus consensus profit expectations.
He pointed out full year guidance has been downgraded in respect of cost growth, which may disappoint the market given cost control has been previously flagged as a key area of management focus.
On the plus side, the group has announced a larger-than-expected share buyback of $3 billion, while management also reiterated guidance for a mid-teens RoTE in 2023 and 2024.
He expect a small moderation to full year earnings forecasts.
Morgan Stanley (NYSE:MS)’s Nick Lord expects a broadly neutral reaction to the results.
“It is true the increase in costs could weigh on the share price; however, HSBC delivered on margins despite more mixed delivery among peers, and the share buyback was ahead,” he said.
Lord has lowered his 2023 earnings estimates by 0.5% for 2023, raised 2024 by 0.2%, and cut 2025 by 0.3%.
He has increased net interest income (NII) estimates for all three years driven by higher net interest margin but lowered non-NII estimates for 2023/24, driven by treasury income.
8:42am: Upgrade lifts Rightmove, further falls at NatWest
The FTSE 100 continues to make strong progress, now up 56 points at 7,348.
One of the top performers is Rightmove PLC (LSE:RMV) which is up 3.2% after Berenberg upgraded to buy with a 605p price target.
It thinks the 17% fall since CoStar’s bid for OnTheMarket is an “overreaction,” and that Rightmove will remain the number one property portal.
NatWest is one of the few fallers in the FTSE 100 – Jefferies has downgraded the bank to underperform from buy, while strategists at Morgan Stanley (NYSE:MS) have cut UK banks to underweight from neutral.
Jefferies slashed its price target to 150p from 370p.
Asos PLC is up 2.5% on reports that it is considering selling Top Shop.
Peel Hunt said this would potentially represent a material improvement to the online retailer’s balance sheet and debt levels, but also indicate a step back in short-term US ambitions.
8:17am: FTSE 100 rallies from two-month lows
The FTSE 100 opened higher on Monday, after hitting a two-month low on August, as investors look ahead of a busy week of earnings and central bank announcements.
At 8:15am, London's blue-chip index jumped 63.93, 0.9%, at 7,355.21 while the FTSE 250 was up 143.76 points, 0.9%, at 17,009.99.
HSBC is down 1.4% despite launching a $3 billion buyback as profits missed expectations.
Matt Britzman, equity analyst at Hargreaves Lansdown said: “The UK’s largest listed bank is showing off its capital strength with a fresh $3bn buyback despite missing expectations.”
“There’s some noise to look through in these results, largely the massive impairment charge taken in the comparable period last year,” while “under the hood, costs were a little higher than expected and there’s a question mark on how they’ll evolve over 2024.”
Pearson PLC (LSE:PSON) rose 1.1% after raising operating profit guidance by $20 million after reporting a 5% rise in revenue in the third quarter.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown said: “While the wider economy is under pressure, the likes of vocational testing, English Language Learning and broader assessments and qualifications are all being taken up in force, boosting Pearson’s top and bottom line.”
Ascential PLC (LSE:ASCL) soared 36% after announcing plans to sell its Digital Commerce business to Omnicom for a total enterprise value of $900 million and WGSN to Apax Partners for an enterprise value of up to £700 million.
It then intends to return £850 million to shareholders by a special dividend.
7:54am: Pearson lifts guidance, £300m buyback
Pearson PLC (LSE:PSON) has raised operating guidance after third quarter revenue grew boosted by particularly strong performances in Pearson VUE and Pearson Test of English.
The FTSE 100 listed firm said underlying group revenue rose 5% and it now expects full-year operating profit between £570 million to £575 million, £20 million more than previous guidance.
Assessment & Qualifications revenue was up 8% largely driven by a strong performance in Pearson VUE with good growth in IT and healthcare, alongside the commencement of new contracts.
Virtual Learning revenue decreased 20%, Higher Education revenue was down 5% and English Language Learning revenue increased 34%.
Pearson said it had also started a £300 million share buyback programme.
Andy Bird, chief executive, said: “This third quarter performance illustrates the continuing momentum across our businesses, led by Pearson VUE and Pearson Test of English.”
“We've received positive initial feedback from our Generative AI tools and are evolving our AI capabilities to create further opportunities to maximise the potential of our trusted, proprietary content and data sets,” he added.
Bird is stepping down shortly, and Pearson confirmed that Omar Abbosh will assume the role of chief executive January 8, 2024.
7:43am: Frasers offloads Missguided brand and IP to Shein
Frasers Group PLC (LSE:FRAS) has sold the Missguided brand and intellectual property rights to Shein for an undisclosed sum, just over a year after it bought the online fashion retailer.
The retailer, owned by Mike Ashley, said it will retain Missguided’s real estate and employees, which have been integrated into Frasers’ fashion division.
Frasers said the deal has enabled “exciting discussions” with Shein around opportunities for potential collaboration across its brand portfolio.
Michael Murray, CEO of Frasers said: ”With I Saw it First and Missy Empire, we now have a foothold in women's digital-first fashion.”
“Retaining the combined Frasers fashion teams whilst rationalising our portfolio in this space to focus on fewer brands makes a lot of sense in the current climate.”
“We are also excited about the ongoing discussions around further collaboration between Frasers Group and Shein."
Frasers bought Missguided out of administration for £20 million last year when the company fell victim to supply chain problems, rising freight costs and increasing competition.
7:30am: HSBC launches new $3 billion buyback, profits rises
HSBC Holdings PLC (LSE:HSBA) reported strong growth in revenue and profit in the third quarter alongside plans for a new $3 billion share buy-back.
The Asia-focused bank said pre-tax profit in the quarter ended September 30, rose by $4.5 billion to $7.7 billion, reflecting the positive impact of a higher interest rate environment and the $2.1 billion reversal of an impairment relating to the sale of its French business.
Revenue increased 40% to $16.2billion, as the higher interest rate environment supported growth in net interest income in all of global businesses, and non-interest income increased.
Noel Quinn, Group Chief Executive, said:
"We have had three consecutive quarters of strong financial performance and are on track to achieve our mid-teens return on tangible equity target for 2023. There was good broad-based growth across all businesses and geographies, supported by the interest rate environment
HSBC declared a third interim dividend of $0.10 per share and intend to make a further share buy-back of up to $3 billion, which is expected to be completed by its 2023 full-year results in February.
Net interest margin of 1.70% increased by 19 basis points compared with a year ago, and decreased by 2bps compared with the previous quarter, notably reflecting an increase in customers migrating their deposits to term products, particularly in Asia.
Bad debt charges of $1.1 billion were broadly in line with last year while operating expenses of $8.0 billion were 2% higher than last year.
Customer lending balances decreased by $24 billion compared with last year while customer accounts fell by $33 billion compared with a year ago.
The group’s common equity tier 1 capital ratio of 14.9% rose 0.2 percentage points compared with a last year.
The bank said it continues to target a return on average tangible equity in the mid-teens for 2023 and 2024, and sees net interest income in 2023 to be above $35 billion.
7:00am: FTSE 100 expected to open higher ahead of rate calls
Good morning – the FTSE 100 is expected to start the week on the front foot despite ongoing uncertainty in the Middle East and ahead a busy week of central bank decisions.
Spread betting companies are calling London’s lead index up by around 20 points after closing down 63.29 points 0.9%, at 7,291.28 on Friday.
There will be another hefty batch of earnings this week starting in London with updates from HSBC, Glencore and Pearson providing the early focus.
Mortgage approvals and the Nationwide House Price Index are also due to be released.
Later in the week, interest rate calls from the Federal Reserve, Bank of Japan and Bank of England will provide direction with non-farm payrolls to come on Friday.