- FTSE 100 close down 6 points at 7,322
- BP falls as profit misses City forecasts
- Rolls-Royce motors as Barclays upgrades
4:42pm: FTSE's rally fizzles out as BP disappoints
Blue-chips faded after a bright start with falls in oil majors, and index heavyweights, BP and Shell dragging the FTSE 100 lower.
The FTSE 100 index closed down 5.67 points, 0.1%, at 7,321.72 while the FTSE 250 ended up 65.46 points, 0.4%, at 17,083.05.
Rolls-Royce motored as Barclays upgraded the stock to overweight, while retailers were lifted by an easing in shop price inflation ahead of the Bank of England's meeting this week.
IHG slipped back as JPMorgan downgraded to underweight while in the FTSE 250 Spectris jumped after saying profit would be at the top-end of expectations.
4:15pm: Centrica continues to look attractive, says Citi
British Gas owner, Centrica PLC (LSE:CNA), is in the green, up 0.4% at 156.65p, supported by positive comments from Citi.
“With one of the best balance sheets in the sector, delivering above sector average 8% yield via returns to shareholders (both dividends and buybacks), Centrica shares continue to look attractive in a sector relative context,” the broker said.
It thinks the secured growth in flexible generation assets will deliver an aggregated portfolio internal rates of return of around 10% with the support of capacity market payments.
With retail churn continuing to be low and Ofgem consulting to increase bad debt allowance, Citi continues to see a good balance of risk and reward from the retail division.
Value creation from new investments, lower risk retail earnings and falling liabilities led the bank to lift its 12-month price target to 180p from 155p.
It kept a buy rating.
3:31pm: US consumer confidence falls but less than forecast
US consumers were less optimistic about the outlook for the economy and their finances in October, as fears of an impending recession weakened confidence for the third consecutive month.
The Conference Board’s consumer confidence index fell to 102.6 this month, down from an upwardly revised reading of 104.3 in September.
Although the job market outlook held steady, consumers were more pessimistic about business conditions.
Expectations for the next six months remained below the recession threshold of 80, as more Americans believe an economic downturn is likely.
Conference Board chief economist Dana Peterson said consumers were more worried about inflation, war and conflicts, higher interest rates and the “political situation”.
2:53pm: IHG risk-reward, ‘highly unappealing,’ says JPMorgan
Intercontinental Hotels Group is down 2.7% after JPMorgan downgraded the hotel operator to underweight from neutral.
In a sector review, the bank said it had been “surprised” by the outperformance of IHG, but now sees the risk-reward as “highly unappealing,” with a bear/bull cases suggesting close to around 20% downside/7% upside to the current share price.
The investment bank cut its price target for IHG to 5,400p, down 14% from 6,300p.
JPM keeps Whitbread as its conviction overweight, seeing 40% upside potential, and keeps Accor at neutral, with an unchanged price target of €39.
2:24pm: Spheon soars on bid approach
Shares in Sopheon PLC (AIM:SPE) (Sopheon PLC (AIM:SPE)) soared 84% to 902p each after it said it had received a 1,000p per share bid approach from IOps Buyer Inc, a wholly-owned subsidiary of Wellspring Worldwide Inc.
The firm said talks are "well advanced and due diligence has been completed, adding it would accept an offer at this level.
Wellspring is backed and controlled by Resurgens Technology Partners ("Resurgens"), a technology-focused private equity firm headquartered in Atlanta, Georgia,
A 1,000p per share bid would value Sopheon at £114.9 million.
1:45pm: US stocks open lower, Caterpillar down 6%
US stocks fell back in early trading, with blue-chips on the back foot after results from Caterpillar and Amgen disappointed.
Shortly after the opening the Dow Jones Industrial Average was down 117.08 points, 0.4%, at 32,811.88, the S&P 500 was down 7.69 points, 0.2%, at 4,159.13 while the Nasdaq Composite was down 75.52 points, 0.6%, at 12,713.97.
Alongside, another hefty batch of earnings investors are casting an eye to the Federal Reserve's two-day rate setting meeting.
Bank of America thinks the Federal Reserve will "likely hold rates steady" despite accelerating GDP and employment.
"The Fed has adopted a more cautious tone due to the UST long-end rate rise, arguing rates markets have done some of its tightening," it pointed out.
"We think Powell will repeat his argument that more hikes could be warranted if there is "additional evidence" of above-trend growth or a tightening labor market," the bank said.
Caterpillar fell 5.6% after disappointing fourth quarter guidance, warning margins would fall back at the end of the financial year while Amgen slipped 4.3% after its numbers.
JetBlue plunged 12% after it warned fourth-quarter losses would be wider than forecast.
The warning came as the carrier posted worse-than-expected third quarter losses and revenue.
“While we have been able to offset some of the costs associated with the challenging operational backdrop, the sheer magnitude of the air traffic control and weather-related delays has been staggering," Ursula Hurley, JetBlue’s chief financial officer said.
1:35pm: Here are some of today's big risers and fallers
Rolls-Royce Holdings PLC (LSE:RR.) was the top-performing stock in the FTSE 100 on Tuesday, rising 5.3%, with Barclays feeling recent weakness in the share price presents a buying opportunity ahead of the November Capital Markets Day (CMD).
The bank pointed out the stock has de-rated by around 10% in the past month, a function it thinks of longer cycle pressure and macroeconomics.
Hydrogen Utopia International PLC (LSE:HUI, OTCQB:HUIPF) shares took off 62% following a bullish research report from Progressive Equity Research.
Progressive touted Hydrogen Utopia’s strategic acquisition of a 49% stake in medicinal cannabis company Ohrid Organics as a “potential innovative source of financing without having to resort to a dilutive share issue”.
Ondine Biomedical Inc (AIM:OBI), the life sciences company, bounced 22% after Alberta Health Services expanded the use of its Steriwave devices.
Steriwave, the Canadian group’s nasal photo-disinfection device, aims to reduce surgical site infections in patients undergoing orthopaedic surgery by using a red-light-activated agent to eliminate infection-causing bacteria, fungi and viruses.
Shares in Kore Potash PLC (AIM:KP2, ASX:KP2, JSE:KP2) fell 31% meanwhile, after it unveiled a discounted US$2.5 million fundraiser alongside the departure of its chief executive.
Brad Sampson will remain in situ until the end of next month and is departing to pursue other business interests, investors were told.
1:19pm: House sales plunge 17% in September
The number of home sales in the UK in September was 17% lower than in the same month in 2022, according to HM Revenue & Customs figures.
Across the UK, an estimated 85,610 home sales took place in September 2023, which was also 1% lower than in August.
In the financial year so far (April to September), an estimated 507,670 home sales have taken place.
This compares with 632,520 home sales during the same period a year earlier and 782,420 transactions between April and September in 2021.
Mortgage rates have jumped amid a string of Bank of England base rate rises, but there have been some recent signs of fixed-rates edging down amid expectations around inflation.
Strong wage growth may also help to support some transactions, although households remain squeezed by rising bills.
12:53pm: Bank of America bullish on Compass
Compass Group PLC (LSE:CPG) shares have risen 1.7% and analysts at Bank of America think there is more to come.
The bank has reinstated coverage of the food services firm with a buy rating and price target of 2,300p, against today’s share price of 2,101p.
BofA explained Compass is the global market leader in the still-underpenetrated food services industry.
It has a proven record of superior execution, unique scale benefit in structurally higher-growth North America and procurement benefits in food and beverage, the bank added.
This is well-evidenced by sector-leading organic growth, which the broker put at on average 250bps higher than peers, and return on capital employed 500bps above Sodexo historically.
Its strong balance sheet and cash conversion leave room for incremental share buybacks, with total cash returns potentially reaching 4.5% per annum, a total of £4.6 billion, BofA added.
12:15pm: Vodafone sale a tick in the box but more to do
There has been a subdued reaction to Vodafone's sale of its Spanish business for up to €5 billion.
This may be partly because the sale had been well flagged with Zegona confirming talks were underway in September.
Russ Mould at AJ Bell feels it is "another tick in the box" for the company’s turnaround efforts but the journey is far from complete.
He pointed Vodafone "has lost its way in recent years and has been forced to review its business," which has led to asset sales and mergers with the intention of having a more streamlined platform from which to try and revive growth.
But he thinks the journey is far from complete and that Vodafone still needs to simplify its business, having suffered from being in too many markets with too little resource.
He suggested with the market shrugging off the Spanish news, that the telecoms group "needs to be more imaginative in reviving its fortunes otherwise its shares might continue to drift.”
Shares are down 0.2% at 76.56p while the FTSE 100 is up 36 points at 7,364.
11:38am: Insolvencies at highest levels since 2009
The number of British businesses in financial distress has rocketed to levels not seen since the financial crisis in 2009.
Official figures showed the number of company insolvencies in England and Wales jumped 10% year-on-year to 6,208 in the third quarter.
That was only slightly lower than in the three months through June, the Insolvency Service said, with the two quarters together the worst for corporate failures since 2009 during the depths of the financial crisis.
Last quarter there were 4,965 creditors’ voluntary liquidations, where a company’s directors choose to wind up their firm.
The last two quarters have seen the highest quarterly insolvency numbers since the second quarter of 2009, and “the highest numbers of CVLs since the start of the series in 1960”, the Insolvency Service said.
“The numbers of compulsory liquidations and administrations increased to levels last seen before the coronavirus (COVID-19) pandemic,” it added.
A separate report by Begbies Traynor Group found that there were 5,919 construction firms in “critical” financial distress in the three months through September, up 46% from the second quarter.
11:08am: US futures point to subdued start on Wall Street
US stocks look set for a subdued start consolidating Monday’s strong gains as the Federal Reserve kicks of its two-day meeting to decide whether to stick or twist on interest rates.
In pre-market trading, futures for the Dow Jones Industrial Average were flat, while those for the S&P 500 were down 0.2%, and contracts for the Nasdaq 100 futures fell 0.4%.
The US central bank is expected to leave interest rates unchanged at its meeting with the CME FedWatch tool suggesting a 98% probability that rates will stay at current levels.
David Mericle at Goldman Sachs said: "Fed officials appear to have signalled that they will not be hiking at their November meeting next week, and we interpret their recent comments to imply that most would prefer not to hike again, consistent with our forecast."
"The FOMC appears to have coalesced around the view that the recent tightening in financial conditions led by higher long-term interest rates has made another hike unnecessary," he pointed out.
It’s another busy day for earnings with AMD, Pfizer, and Caterpillar among companies updating investors on trading.
Stocks to watch include Nvidia fell 0.6% in pre-market trading after The Wall Street Journal reported, citing sources familiar with the matter, that the chipmaker may cancel billions of dollars in orders from China due to tighter US controls.
In economic news, consumer confidence is expected to have declined in October, with the Conference Board’s consumer confidence index reading forecast to drop to 100 from 103 last month.
The FTSE 100 is holding firm though, up 35 points.
10:46am: BAE Systems slips amid reports of Typhon row
BAE Systems is down 0.3%, failing to join in the brighter market mood.
The Sun reported that Germany is blocking a multi-billion deal to sell 48 Typhoons fighter aircraft to Saudi Arabia with government ministers warning that BAE production lines “will close” immediately if the order is blocked.
The Eurofighter Typhoon is manufactured by a consortium of Airbus, BAE Systems and Leonardo.
Defence blow amid row with Germany that could see UK typhoon production mothballed, ministers warned. https://t.co/rTOOiRusbI pic.twitter.com/RUUkbHsFrM
— Harry Cole (@MrHarryCole) October 31, 2023
Germany - who has a large stake in the Eurofighter Typhoon programme - is sticking to its veto of selling to the desert Kingdom due to fears they will be used to bomb Yemen, The Sun said.
The report said Whitehall sources said there is a £15 billion risk to the UK’s “combat air industrial base”, with Typhoon production lines to close “without further orders.”
The Sun sdid 6,000 jobs were at risk.
10:14am: Eurozone economy contracts, inflation falls
Some key data on inflation and economic growth has just been released in the Eurozone.
Starting with growth, and Eurozone GDP fell by 0.1% in July-September, data from Eurostat showed, worse than the stagnation which economists expected.
Euro area #GDP -0.1% in Q3 2023, +0.1% compared with Q3 2022: preliminary flash estimate from #Eurostat https://t.co/0ZQdY6hi6h pic.twitter.com/ZablZHVTwS
— EU_Eurostat (@EU_Eurostat) October 31, 2023
The wider European Union grew by 0.1%.
But there was better news on inflation, which has been a major limiting factor on growth.
Euro area annual inflation is expected to be 2.9% in October, down from 4.3% in September, according to a flash estimate from Eurostat.
This was below the 3.1% pencilled in by economists.
Euro area #inflation at 2.9% in October 2023, down from 4.3% in September. Components: food, alcohol & tobacco +7.5%, services +4.6%, other goods +3.5%, energy -11.1% - flash estimate https://t.co/q47wB1bmIu pic.twitter.com/BA5X96dgL9
— EU_Eurostat (@EU_Eurostat) October 31, 2023
Food, alcohol & tobacco is expected to have the highest annual rate in October (7.5%, compared with 8.8% in September), followed by services (4.6%, compared with 4.7% in September).
Non-energy industrial goods inflation slowed to 3.5%, compared with 4.1% in September,
And energy prices fell by 11.1%.
9:37am: Rolls-Royce fall presents a buying opportunity ahead of CMD
Rolls-Royce Holdings PLC (LSE:RR.) sits top of the FTSE 100 risers, up 4.2%, and Barclays thinks its recent weakness presents a buying opportunity ahead of the November Capital Markets Day.
The bank pointed out the stock has de-rated by around 10% in the past month, a function it thinks of longer cycle pressure and macro economics.
At the CMD, Barclays expects to learn the output of the strategic review, including quantifiable details around commercial optimisation costs and benefits, and the "all-important new medium-term targets."
“Profitability and pricing are likely to be an investor focus, and, in our view, key drivers of upside for 2024/5 EPS/free cash flow (FCF) consensus estimates,” the broker said.
Barclays has upgraded Rolls-Royce to overweight from neutral and set a 270p price target.
It has also increased its 2024/25 EPS forecasts by 25%, placing estimates 25%/40% ahead of the current 2025 EPS/FCF company-compiled consensus.
It views Rolls Royce's ability to grow its free cash flow/share as attractive for investors.
9:09am: BP transforming, but not performing
Michael Hewson at CMC Markets thinks today’s third quarter results from BP will prompt questions whether the oil major should continue with previous CEO’s Bernard Looney’s strategy.
He pointed out BP shares have underperformed peer Shell in the last three months which he said is “down to management.”
He wondered whether any new CEO will persevere with the “Performing while Transforming” of Bernard Looney, “because while it is clear that BP is transforming, it certainly isn’t performing, with the shares sharply lower, after missing on Q3 profits in its numbers released today.”
Hewson noted when BP reported in the second quarter the numbers were clearly expected to come in short of expectations, “and while the bar was low, they still somehow failed to clear it.”
Hewson explained the underperformance appears to have come from its gas and low carbon energy division where profits were lower compared to the second quarter at $1.25 billion, while oil production and operations saw an increase from the second quarter, coming in at $3.13 billion, although both numbers were sharply lower from the levels last year due to lower oil and gas prices.
Stuart Lamont, investment manager at RBC Brewin Dolphin, said BP’s numbers “improved on the second quarter, but they have still missed market expectations”
“Profits and free cashflow remain relatively strong and will underpin planned returns to shareholders, with a higher dividend than last year and a further share buyback,” he noted.
“This may well raise eyebrows in the current environment, particularly with oil prices predicted to continue their recent rise amid geopolitical tension,” he added.
8:44am: Rolls-Royce motors on upgrade, BP lags
The FTSE 100 remains just the right side of the line, up 7 points, at 7,335.
Rolls-Royce Holdings PLC (LSE:RR.) leads the risers, up 4.0%, boosted by the upgrade at Barclays which thinks recent weakness in the share price presents a buying opportunity.
Pearson PLC (LSE:PSON) has climbed 2.3%, continuing to benefit from yesterday’s increased profit guidance while Centrica is up 0.7% after Citi raised its price target to 180p from 155p and reiterated a buy rating.
Rate sensitive stocks have taken encouragement from the fall in shop price inflation reported by the British Retail Consortium, on hopes this will encourage the Bank of England to leave interest rates unchanged on Thursday.
Housebuilders, Barratt Developments, Berkeley Group Holdings PLC (LSE:BKG) and Taylor Wimpey all advanced, while retailers M&S Group PLC and Kingfisher also rose.
But holding the blue-chip index back are falls in oil majors, BP and Shell after BP’s results missed expectations.
8:15am: FTSE 100 higher but BP limits gains
The FTSE 100 eked out small gains in early trading with a sharp fall in BP PLC (LSE:BP.) keeping a lid on further progress.
At 8:15am, London’s lead index was up 7.44 points, 0.1%, at 7,334.83 while the FTSE 250 was up 64.64 points, 0.4%, at 17,082.23.
BP fell 4.1% after missing City hopes for profits in the third quarter as weak results in gas marketing offset a strong performance in oil trading.
Third quarter adjusted net income was $3.29 billion, down from $8.15 billion a year earlier, but up from $2.59 billion in the prior period.
Richard Hunter, head of markets at interactive investor said “there is some scope for disappointment here, given expectations of a number of $4.01 billion.”
Vodafone Group PLC (LSE:VOD) rose 0.5% after confirming the sale of its Spanish business for up to €5 billion while Spectris PLC (LSE:SXS) rose 2.8% after predicting top-end operating profits.
Rolls-Royce was another strong performer, up 3.2%, after Barclays upgraded to overweight from neutral, setting a 270p price target.
IG Group Holdings Plc (LSE:IGG) rose 0.6% after the online broker said it to cut around 10% of its workforce as part of a wider plan to reduce around £50 million in costs a year.
7:57am: Shop price inflation cools in October
Finally before the market opens, some good news on inflation.
Shop price inflation has eased for the fifth consecutive month to its lowest rate since last August.
Prices were 5.2% higher in October than a year earlier, a sharp fall from September's 6.2% figure, according to the British Retail Consortium-Nielsen Shop Price Index.
Today at @the_brc we published the latest Shop Price Inflation report, covering the month of October.
???? Shop Price Inflation eases further to 5.2% over October, down from 6.2% in the preceding month. pic.twitter.com/njDObKVYHV
— Harvir Dhillon (@HarvirDhillon) October 31, 2023
Imported goods saw higher levels of inflation due to a weaker pound, still-high producer costs and emerging trade frictions, while prices for some domestically-produced food, such as fruit, were lower compared with last month.
Prices of children's and baby clothing also fell as retailers continued to support families with the arrival of colder weather, the BRC said.
Food inflation also slowed, to 8.8% from September's 9.9%, the sixth consecutive deceleration, while fresh food inflation slowed even further to 8.3%, down from 9.6% a month earlier.
7:53am: Coca-Cola HBC reports double-digit organic revenue growth
Another trading update to report.
Coca-Cola HBC AG reported continued growth in the third quarter with organic revenue up 15.3% and year-to-date organic revenue growth of 17.0%.
The consumer packaged goods business and strategic bottling partner of The Coca-Cola Company (NYSE:KO) said organic volume growth of 2.2% was led by its strategic priority categories, with Sparkling up 1.5%, Energy up 24.8% and Coffee up 33.5%.
Reported revenue was up 3.8%, with strong organic growth offset by FX headwinds in Emerging markets.
Zoran Bogdanovic, chief executive said: “We're pleased to have delivered another solid performance, and a second consecutive quarter of organic volume growth.”
The firm continues to expect organic Ebit growth in the range of 9% to 12% in 2023.
7:48am: Spectris predicts top-end operating profit
Spectris has reported strong trading in the third quarter and now expects full year operating profit expected to be in the top half of guidance.
The supplier of precision instrumentation and controls reported third quarter like-for-like sales growth of 11% taking the year-to-date figure to 16%.
It said demand has now broadly normalised with backlog and lead times returning to more typical levels while making strong progress on margins, particularly in Spectris Dynamics.
Spectris now expects LFL sales growth of around 10% for the full-year and operating profit in the upper half of the guidance range of £250 million to £265 million.
Looking further ahead to 2024, it expects another year of progress, including further margin expansion.
7:41am: BP profit fall short of City hopes
Results are in BP, and the oil major said profit more than halved in the third quarter, falling short of City forecasts, as weak results in gas marketing offset a strong performance in oil trading.
Murray Auchincloss, who became interim chief executive officer of after the resignation of Bernard Looney, said it had been a “solid quarter,” and that “momentum continues to build across our businesses.”
“We remain committed to executing our strategy, expect to grow earnings through this decade, and on track to deliver strong returns for our shareholders,” he said.
The oil major said third-quarter adjusted net income was $3.29 billion, down from $8.15 billion a year earlier, but up from $2.59 billion in the prior period.
However, the figure was well below the average analyst estimate of $4.05 billion.
BP said compared to the second quarter, the result reflected higher refining margins, lower level of refining turnaround activity, a very strong oil trading result, higher oil and gas production, partly offset by a weak gas marketing and trading result.
The pledged to repurchase $1.5 billion of shares prior to reporting fourth-quarter results and remains committed to using 60% of 2023 surplus cash flow for buybacks.
BP paid a dividend of 7.270 cents and said its guidance for distributions remains unchanged.
7:25am: Vodafone sells Spanish business for up to €5 billion
We start the day with news that Vodafone Group PLC (LSE:VOD) has confirmed the sale of its Spanish business, Vodafone Spain, to Zegona Communications (LSE:ZEG) for up to €5 billion.
The FTSE-100 listed telco said it would receive at least €4.1 billion in cash and up to €0.9 billion in the form of redeemable preference shares which redeem, for an amount comprising the subscription price and accrued preferential dividend, no later than 6 years after closing.
Margherita Della Valle, chief executive said the sale “is a key step in right-sizing our portfolio for growth.”
In September, Vodafone said it was in talks with Zegona about a potential deal for the Spanish unit.
Vodafone said it would provide certain services to Vodafone Spain for a total annual service charge of around €110 million.
The deal is expected to close in the first half of 2024, and Vodafone said it would review the use of proceeds as part of a broader capital allocation review.
7:00am: FTSE 100 expected to edge higher
The FTSE 100 is expected to edge higher at the open, despite disappointing economic data in China, after US markets made strong gains.
Spread betting companies are calling London’s lead index up by around 6 points after closing up 36.11 points at 7,327.39 on Monday.
China’s official manufacturing purchasing managers index came in at 49.5 for October, below the 50-point mark that separates contraction from expansion.
Tuesday’s data reverses a shift into expansion in September, which had followed five consecutive months of contraction.
Elsewhere in Asia, the Bank of Japan kicked off a week of central bank meetings by deciding to allow yields on the 10-year Japanese government bond to rise above 1%, revising its yield curve controls for the second time in three months.
In a statement, the BoJ said the 1% control cap on 10-year JGB yields would be regarded as “a reference”, noting that strictly capping long-term interest rates could entail “large side effects”.
In the US, markets powered ahead taking comfort that the crisis in the Middle East had been contained.
The US Federal Reserve kicks off its two-day monetary policy meeting today, with the market widely expecting interest rates will be left unchanged on Wednesday.
The Dow Jones Industrial Average surged 1.6%, the S&P 500 jumped 1.2% and the Nasdaq Composite leapt 1.2%.
Back in London, and the early focus will be an update from BP.