- FTSE 100 closes up 21 points at 7,342
- Next raises outlook on solid sales growth
- Croda falls after Estee Lauder warning
4:40pm: Stocks close higher ahead of central bank decisions
Stocks in London closed higher, encouraged by a positive start on Wall Street as investors prepare for interest rate decisions in London and Washington.
The FTSE 100 index closed up 20.71 points, 0.3%, at 7,342.43 while the FTSE 250 ended up 102.84 points, 0.6%, at 17,185.89.
Next flourished after raising profit guidance once again, but Aston Martin Lagonda went into reverse after cutting sales forecasts for its DB12 sports car.
Asos sank as profit guidance disappointed while BP was downgraded to underweight by JPMorgan.
3:25pm: GLP-1 could change perceptions for sustainability of long-term growth
Morgan Stanley (NYSE:MS) has taken a look at the GLP-1 drugs and applied its US framework to assess the impact on European staples.
Near term the impact on earnings will be negligible, it thinks, but the question is how this will change investors' perception of long-term growth sustainability, as reflected in earnings multiples.
Its key UK-listed picks are Haleon (overweight) and Diageo (overweight) while in France Danone (OTCQX:DANOY) is moved to overweight from underweight.
The investment bank said that while GLP-1s have dominated recent headlines, weight loss has been in focus since the pandemic, with increased government intervention which is likely to continue.
MS thinks the Impact on staples will be mixed: HFSS foods, alcohol and tobacco are likely to be most impacted, whereas functional foods, waters, skincare/cosmetics and consumer health should be well positioned.
It thinks these changes will be felt sooner in developed markets, whereas emerging markets are likely to lag.
But while policy/ regulatory change may have more immediate impact, GLP-1 adoption is unlikely to impact earnings in the short term, given currently low penetration, and the global and broad scope of staples business lines.
However, with news flow likely to keep the topic front of mind, the near-term impact on stocks will relate to changes in perceived sustainability of long-term growth – and the multiples that investors will be prepared to pay for this.
2:47pm: Lloyds mulls annuity sale, Equals to review options
The FTSE 100 is holding firm, up 43 points now, at 7,364.
Lloyds Banking Group is around 1% with Bloomberg reporting that the lender is working with advisers on the sale of a portfolio of around £6 billion bulk annuities from pensions arm Scottish Widows, citing people familiar with the matter.
Elsewhere, Equals Group is up 9.1% after confirming that it is conducting a review of its strategic options.
This could include a bid for the company, it said.
Current trading remains in line with the expectations, it added.
1:45pm: Here are some of today's risers and fallers
Aston Martin Lagonda Global Holdings PLC (LSE:AML) shares skidded down almost 12% to, after the firm published third-quarter results showing the effects of production delays and revised down full-year wholesale volumes.
On the plus side, pricing power and a revitalised customer base supported revenue growth for the British luxury carmaker.
Cellular Goods PLC (LSE:CBX) jumped 15% on news it had begun selling a range of its skincare products in Germany and France ahead of the Christmas season.
Cellular’s anti-inflammatory cannabigerol-based rejuvenating face serum, night cream and nourishing face oil products are all now available for shipping to the European countries, a Wednesday statement said.
Eckoh PLC (AIM:ECK, OTC:EKTPF), the call centre payments and software company, slumped close to 6% on Wednesday after warning revenues would be marginally lower for the 2024 financial year.
Sales processes have slowed down at the Hemel Hempstead-based group, and it is taking longer for new clients to sign contracts, Eckoh revealed in its half-year trading update.
ASOS PLC (LSE:ASC) shares headed lower again after the online fashion retailer confirmed much larger losses for the past year and painted a mixed picture of progress with its "driving change" initiatives expected to result in slow sales continuing in the current year.
A loss before tax of £296.7 million was posted for the year to 3 September compared to a £31.9 million loss the prior year, while net debt swelled 166% to £319.5 million.
1:41pm: US stocks edge higher in early trading
US stocks made steady progress in early trading, ahead of the Federal Reserve's interest rate decision later in the session.
Shortly after the opening bell, the Dow Jones Industrial Average was up 2.51 points at 33,055.38, the S&P 500 was up 5.75 points, 0.1%, at 4,199.55 and the Nasdaq Composite was up 39.97 points, 0.3%, at 12,891.21.
Craig Erlam at Oanda said: "We're seeing some trepidation in markets on Wednesday ahead of the Federal Reserve meeting later in the session and the jobs report on Friday."
"The Fed meeting should be quite straightforward, with policymakers having come out in force to soothe market fears of another rate hike from the central bank, claiming recent moves in bond markets may have done some of the job for them."
"This followed previous commentary that strongly hinted that another rate hike is likely, aligning with the dot plot from the September meeting, while warning that rates will stay high for a long time."
"With no new forecasts due today, it's all about the tone from policymakers and Chair Jerome Powell, and with bond yields still near their recent highs, I see little chance of another shift," he added.
The ADP National Employment Report showed private sector employment increased by 113,000 jobs in October, but below the FXStreet-cited market consensus of 150,000.
However, it was an improvement from last month's increase of 89,000 jobs.
"Leisure and hospitality hiring led the post-pandemic job recovery. But the industry ceded its place as the top job creator last month to education and health care," ADP said.
Estee Lauder slumped 15% after after the US cosmetics maker slashed its profit forecast, blaming slow growth in Asia and disruption from the Israel-Hamas war.
WeWork shares plunged 45% following a report in the Wall Street Journal that the shared workspace company is planning to file for Chapter 11 bankruptcy protection as soon as next week.
12:55pm: Stocks tick higher after cooling US jobs data
Stocks have perked up with the FTSE up 24 points at 7,346 following weaker-than-expected jobs data in the US.
The ADP National Employment Report showed private sector employment increased by 113,000 jobs in October, below the FXStreet-cited market consensus of 150,000.
However, it was an improvement from last month's increase of 89,000 jobs.
"Leisure and hospitality hiring led the post-pandemic job recovery. But the industry ceded its place as the top job creator last month to education and health care," ADP said.
The resilient US jobs has been a key factor in the Fed's mindset when keeping interest rates at inflated levels.
12:26pm: Mid-caps underperform blue-chips
Over to the FTSE 250 which is underperforming its blue-chip rival, down 86.70 points, 0.5%, at 16,996.35.
Heading upwards is Essentra PLC (LSE:ESNT), up 1.9% at 151.40p.
Broker Jefferies reiterated a buy rating following last week’s trading update.
While the statement highlighted a “tough trading backdrop,” which is “frustrating, management continues to manage costs well and pricing continues to be resilient.”
“The equity story remains attractive in our view, and although the trading backdrop will likely remain difficult into 2024, there is still a lot to play for,” the broker said.
Not such a good day for Great Portland Estates (LSE:GPOR), down 4.9%, at 371p.
Citi has downgraded the property stock to sell as it estimates that “office values fall further and that the stock could overshoot to the downside.”
Longer term Citi continues to estimate a once in a cycle buying opportunity for office assets and anticipates GPE taking advantage of their de-leveraged balance sheet and operational platform and cyclical expertise into the end of the cycle.
It sees near term stock weakness as the final phase of downside risks playing out this cycle.
11:53am: Croda slips after Estee Lauder warning
Shares in Croda have slipped around 3.4% after Estée Lauder stock tumbled 14.6% in pre-market trading after the US cosmetics maker slashed its profit forecast, blaming slow growth in Asia and disruption from the Israel-Hamas war.
It said sales in the three months to September fell 10% to $3.5 billion.
Croda supplies ingredients to the Estee Lauder, and in October cut its profit guidance due to declining demand, especially in its North American beauty care business.
11:33am: No manufacturing recovery in sight
The early gains in the FTSE 100 have vanished and the blue-chip index is down 9 points at 7,312.
The weak manufacturing PMI figures haven’t helped.
Boudewjin Driedonks, at McKinsey & Co said theflash estimate had created “some signs of hope” and “while there will be some relief that UK figures have not fallen again like in Europe, the decline still shows signs of holding steady.“
"Activity remains subdued but we are now seeing consecutive months of gradual recovery.”
"Even so, 2023 is likely to become a year with no month-on-month growth. The double whammy of soft demand and elevated inflation – albeit finally slowing now - is increasing the pressure on UK manufacturers.”
“Many are closely watching whether energy costs will make matters worse or provide some relief by proving stable this winter,” Driedonks added.
The EY ITEM Club agreed there were no signs of recovery just yet.
“With survey respondents reporting that higher interest rates continue to weigh heavily on customer demand, the EY ITEM Club doubts manufacturers’ fortunes will see a significant upturn anytime soon,” it said.
11:09am: Weak start expected in the US ahead of rate call
US stocks are expected to open lower ahead of the Federal Reserve interest rate decision later in the session.
In pre-market trading, futures for the Dow Jones Industrial Average were down 0.3%, while those for the S&P 500 were down 0.3%, and contracts for the Nasdaq 100 futures fell 0.4%.
The US Federal Reserve is widely anticipated to leave interest rates unchanged at its November meeting despite strong recent economic data.
According to the CME FedWatch Tool, there is a 98% chance the central bank will leave the federal funds rate range unchanged at 5.25% to 5.50%.
Elsewhere, the first of a number of indicators on the job market will be released.
US job openings are expected to have fallen to 9.25 million in September from 9.61 million in August.
Stocks to watch include Advanced Materials Devices, down 1.7%in pre-market trading, after it reported third-quarter earnings results which fell short of estimates, and its final quarter revenue guidance also missed consensus.
Earnings from CVS Health, Estée Lauder, Kraft Heinz and Yum Brands are due before the open, while Airbnb, PayPal and Mondelez (NASDAQ:MDLZ) report after the closing bell.
10:28am: "Battered and bruised" Asos falls again
Shares in Asos are down 9.7% after it released its delayed results today.
Russ Mould at AJ Bell said the online retailer was "battered and bruised."
"While the company desperately tries to talk up progress with reshaping the business, the headline numbers for its full-year results tell a different story."
“Sales are down, net debt has ballooned and pre-tax losses have got significantly worse."
He said "its fifteen minutes of fame have long gone and the business is now having to rethink its strategy."
He noted consumer shopping habits have changed after the heyday of Covid when everyone was ordering goods because they were bored at home, now there is more consideration made to purchases, something that’s been exacerbated by the cost-of-living crisis.
“So where next? A plan is in place to focus more on profitable sales, but it will take some time to wash out the dregs of its old business model from the system," he added.
Shore Capital's Eleonora Dani noted the company now projects a worrying 5% to 15% drop in sales (consensus: flat topline).
But Berenberg was more positive - "In our view, the current valuation underappreciates the progress made by Driving Change, or the benefit to the business that is to be delivered from the next phase of the company’s strategic ambition," the broker said.
10:05am: Manufacturing contraction continues with risks to the downside
UK manufacturing contracted at the start of the final quarter, falling for the 8th month in a row, as October saw output, new orders and employment all decline, latest figures showed.
The seasonally adjusted S&P Global/CIPS UK manufacturing PMI posted 44.8 in October, up from 44.3 in September but below the earlier flash estimate of 45.2.
???????? Manufacturing output in the #UK fell for the 8th consecutive month in October, the longest run of decline since 2008/09, with the #PMI posting 44.8 (Sep: 44.3). Weak demand led to sustained falls in new orders, #employment and #prices. @cipsnews https://t.co/ikihhLTOdy pic.twitter.com/4Ua1g2QPQq
— S&P Global PMI™ (@SPGlobalPMI) November 1, 2023
All five of the sub-components included in the PMI calculation signalled a deterioration in operating conditions during October.
Alongside lower new orders, output and employment, stocks of purchases also declined and suppliers' delivery times improved (traditionally a sign of weak demand).
Rob Dobson, director at S&P Global Market Intelligence, said the manufacturing downturn "remains a weight dragging on an economy already skirting with recession."
"Production volumes contracted for the eighth consecutive month, the longest sequence of continual decline since 2008-09," he noted.
"Risks to the outlook remain skewed to the downside," he added, noting business optimism dipped to a ten-month low and manufacturers' "increased belt-tightening drove cuts to employment, purchasing and inventories."
9:45am: Aston Martin spins into reverse as cuts volume guidance
Aston Martin Lagonda shares have slumped 15% after the luxury car maker lowered full-year volume guidance down by 300 units to around 6,700 compared to the consensus of 6,952 and previous guidance of 7,000.
The firm said production of its DB12 had been hit by supplier issues and the integration of its new infotainment system.
Jefferies noted third quarter results were slightly below consensus on volume and revenue with core average selling prices down 3% year-on-year.
Adjusted Ebit was £14 million below consensus and free cash flow was £9.5 million below consensus at negative £78.5 million.
But Sophie Lund-Yates at Hargreaves Lansdown noted full year plans haven’t been driven off course, despite a blip in production of new models with higher selling prices coming to the rescue.
But after having come “cap-in-hand to investors in the summer, it’s crucial that Aston Martin comes good on its plans to fire up its profit and cash flow engines – there is a limit to the market’s patience and generosity.”
She added the longer-term picture is muddied somewhat by the pivot to electric vehicles which increases risk and interrupts the market “being able to become too excited just yet.”
9:24am: BP falls further, JPMorgan cuts to underweight, sees lower buyback
BP PLC (LSE:BP.) is down a further 2.6% following heavy falls on Tuesday in the wake of disappointing third quarter results.
JP Morgan has downgraded the oil major to underweight from neutral and cut its price target to 550p from 615p.
The investment bank noted a substantial third quarter miss follows a soft second quarter.
“In the context of a bullish sector stance that prioritises premium beta to an oil supercycle, we downgrade to underweight and retain our preference for overweights Shell, Total, Eni,” it said.
The broker suggested there could be a potential for a further clearing of the decks in advance of a new CEO, following the offshore wind impairment in the third quarter and has incorporated a $1 billion write-down for the full-year.
It also sees near-term buyback momentum as “negatively skewed.”
Given working capital tailwinds, it estimates $9 billion full year surplus cash and a resultant fourth quarter buyback cut to $1 billion.
9:02am: Next packs a punch as raises guidance again
Next has drawn praise from the City after another strong trading update, with shares up 3.1% at 7,100p.
Richard Hunter, head of markets at interactive investor, said “Even within a brief trading statement, Next was able to pack the punch that it is increasing its profit estimate for the fourth time this year.”
Shore Capital’s Eleonora Dani described the update as “an encouraging performance that exceeded expectations, while analysts at Peel Hunt said it was a “very confident statement.”
Stifel said this “consistent strong performance in a challenging macro-environment reflects the strength of the Next business model and supports our buy rating, with 17% upside to our price target of 8,000p.”
Dani noted full price sales in the quarter rose by 4.0%, surpassing the consensus full price sales estimate of 2.5%, driven by robust online sales, which saw a growth of 6.5% compared to last year.
She thinks the positive numbers from the trading statement offer some insights into the wider UK retail sector.
Online sales remain a strong growth driver, while the physical channel shows some softness against normalised comps.
“The focus on full price sales, as opposed to sales during clearance events, suggests a potential shift in consumer spending habits towards quality over quantity,” she suggested.
Overall, the performance bodes well for both the company and the retail sector at large, at least in the short term, she thinks.
Peel Hunt noted the update was strong given the poor weather backdrop.
Next’s week-by-week disclosure reveals solid trading (up a high single-digit average in August against weak comparatives, September largely negative through the warm weather, and October stepping up to generate double-digit gains as the autumn weather arrived).
It said it was “a very confident statement in our view, given few retailers would see forecasts move days ahead of peak trading.“
8:44am: Modest gains in London, Next leads the way
The FTSE 100 continues to make steady progress, now up 7 points at 7,329.
Next leads the FTSE 100 risers, up 2.3%, and has given a lift to other retailers, Marks & Spencer PLC, up 2.1%, and Kingfisher, up 1.2%.
Smurfit Kappa rose 2.2% as it reported improving trends for box demand in the third quarter.
It said demand in the third quarter was around 2% behind 2022 levels versus a negative 7% and 5% figure in the first and second quarters respectively.
It expects this trend to continue, and the improved outlook pulled DS Smith and Mondi, up 1.8% and 1.4% higher too.
On the downside Weir slipped 2.3% despite a confident sounding trading statement, while BP has fallen a further 1.6% after its results on Tuesday.
Weir said its third quarter performance was “in line with our expectations,” and expressed “significant confidence” in reiterating 2023 guidance of strong growth in constant currency revenue and operating profit, and in meeting margin and cash conversion targets.
Stifel said some of the order trends were mixed but Peel Hunt was positive stating the company is “right on track, with visibility, consistency, and improvement.”
8:15am: FTSE 100 on the front foot, lifted by Next and GSK
The FTSE 100 has made a bright to the day boosted by positive trading statements from GSK and Next plus a surprise rise in house prices in October.
At 8:15am, London’s blue-chip index was up 27.48 points, 0.4%, at 7,349.20 while the FTSE 250 rose 19.82 points, 0.1%, at 17,102.87.
Nationwide reported that UK house prices rose by 0.9% month on month in October, confounding predictions of a 0.4% fall.
The average price of a property sold last month rose to £259,423, up from £257,808, according to figures from the lender.
That still leaves house prices down 3.3% compared to October 2022, though, which is a smaller annual fall than the 5.3% recorded in September.
Next PLC (LSE:NXT) raised guidance for the fourth time in recent months, lifting shares 3.7%.
The Leicester-based retailer has nudged up its full-year pre-tax profit forecast by £10 million to £885 million.
Full price sales in the quarter to October 28 were up 4.0% on last year, £23m ahead of previous guidance, with online sales up 6.5%, while retail sales fell 0.6%.
The firm said sales had been volatile which it put down to changing weather conditions rather than any underlying changes in the consumer economy.
Peel Hunt said it was a “very confident statement,” given few retailers “would see forecasts move days ahead of peak trading.”
GSK rose 1.5% after it also raised guidance after exceeding consensus expectations.
Shore Capital pointed out vaccines beat forecasts by 13% largely on a “stellar” debut for its recently approved RSV vaccine, Arexvy.
First sales were booked this quarter and Arexvy “smashed consensus expectations,” the broker said, with sales of £709 million, “a 98% beat.“
The broker expects to edge up 2023 forecasts by c.3-4%.
But Aston Martin Lagonda went into reverse, down 6.1%, after it lowered its delivery forecasts for the year after delays to its latest flagship sports car, the DB12, leading to a wider-than-expected loss in the three months to September.
Asos was also on the back foot, down 8%, after releasing its delayed results.
The online retailer now projects what Shore Capital called a “worrying” 5% to 15% drop in sales against the consensus of unchanged.
7:51am: House prices rise but market remains "extremely weak"
Nationwide reported that UK house prices rose by 0.9% month on month in October, confounding predictions of a 0.4% fall.
The average price of a property sold last month rose to £259,423, up from £257,808, according to figures from the lender.
That still leaves house prices down 3.3% compared to October 2022, though, which is a smaller annual fall than the 5.3% recorded in September.
Autumn moves show a mild uptake in houses prices, which edged up 0.9% in October 23 but remain -3.3% down on last year. As winter sets in, this reprieve may prove short lived, as many wait for the right climate before “spring”ing back into action @AskNationwide pic.twitter.com/mVia7iT4Mv
— Emma Fildes (@emmafildes) November 1, 2023
But despite the rise Robert Gardner, Nationwide’s chief economist, warned that housing market activity has remained “extremely weak.”
He pointed out just 43,300 mortgages were approved for house purchase in September, around 30% below the monthly average prevailing in 2019.
“Activity and house prices are likely to remain subdued in the coming quarters. Despite signs that cost-of-living pressures are easing, with the rate of inflation now running below the rate of average earnings growth, consumer confidence remains weak and surveyors continue to report subdued levels of new buyer enquiries.”
He felt the “uptick in house prices in October most likely reflects the fact that the supply of properties on the market is constrained.”
7:44am: Next ups outlook as wet dictates volatile quarter
Another positive update from retailer Next PLC (LSE:NXT) which has increased profit guidance for the fourth time in recent months as sales in its third quarter grew more than expected.
The Leicester-based retailer has nudged up its full-year pre-tax profit forecast by £10 million to £885 million.
Full price sales in the quarter to October 28 were up 4.0% on last year, £23m ahead of previous guidance, with online sales up 6.5%, while retail sales fell 0.6%.
The firm said sales had been volatile which it put down to changing weather conditions rather than any underlying changes in the consumer economy.
In an Autumn season cooler weather is good for sales, warmer than average weather depresses sales, it explained.
Reflecting this, Next showed sales in the warmer week to September 10 fell 7% while in the week to October 15, which saw wet and stormy weather, sales rose 16%.
Next now expects full-year full price sales to rise 3.1% to £4.74 billion, with pre-tax EPS up 4.1% to 730.2p.
7:32am: GSK raises guidance, sales of new RSV drug fly
We start the day with a strong trading update from one of the UK's leading companies.
GSK PLC (LSE:GSK, NYSE:GSK) said a strong third quarter performance has driven a further upgrade to full-year guidance boosted by demand for its respiratory treatment in the US.
The pharmaceuticals company expects turnover to increase by 12% to 13%, up from 8% to 10% before, with adjusted operating profit growth between 13% to 15%, up from 11% to 13% previously.
Adjusted EPS is seen rising by as much as 20% compared to 17% before.
Emma Walmsley, chief executive officer said: “"GSK is delivering strong and sustained performance momentum, with another quarter of double-digit sales and earnings growth.”
“Competitive performance was broadly based but benefitted particularly from the outstanding US launch of Arexvy, the world's first RSV vaccine.”
Total third quarter sales rose 10% to £8.15 billion, with adjusted operating profit up 15% to £2.77 billion and adjusted EPS up 17% at 50.4p.
Vaccines sales jumped 33%, with sales of shingles drug Shingrix up 15% to £800,000 while strong demand for the new respiratory syncytial virus vaccine, Arexvy, saw sales reach £700,000.
GSK assumes sales of Arexvy will track in line with high-dose flu analogues and for the full year expects sales between £0.9 to £1 billion.
Specialty Medicines sales fell 1% with General Medicines sales down 2% with impact of generic competition to older products, in part offset by Trelegy which rose 23%.
GSK declared a third quarter dividend of 14p, with a 56.5p expected for full year.
7:00am: Bright start expected as US rate call looms
The FTSE 100 is expected to open higher on Wednesday after US markets reversed early falls to close ahead of today’s interest rate decision by the US Federal Reserve.
Spread betting companies are calling London’s lead index up by around 25 points after closing down 5.67 points at 7,321.72 on Tuesday.
The US Federal Reserve is widely anticipated to leave interest rates unchanged at its November meeting despite strong recent economic data.
According to the CME FedWatch Tool, there is a 98% chance the central bank will leave the federal funds rate range unchanged at 5.25% to 5.50%.
At its September meeting, the Fed left rates unchanged after hiking rates by a quarter percentage point in July.
But Ipek Ozkardeskaya senior analyst at Swissquote Bank thinks “the chances are that we won’t hear anything soothingly dovish.”
“’The higher yields help us do the job’ is the best it will get,” she reckons.
In the US on Tuesday, the Dow Jones Industrial Average rose 0.4%, the S&P 500 rose 0.7% and the Nasdaq Composite rose 0.5%.
In Asia, Chinese manufacturing returned to a mild state of contraction in October, survey data revealed.
The Caixin manufacturing purchasing managers' index fell to 49.5 points in the month from 50.6 in September.
Back in London, and the early focus will updates from GSK, Next and Asos while the Nationwide House Price Index will also be scrutinised as to the health of the UK property market.