- FTSE 100 closes flat at 7,418
- RyanAir jumps on better than expected results
- Melrose climbs on extended GE partnership
4:40pm: FTSE ends subdued session little changed
The FTSE 100 ended a subdued session little changed while mid-caps started the week firmly on the back foot.
At the close, London's blue-chip index was flat at 7,417.76 while the FTSE 250 closed down 236.37 points, 1.3%, at 17,747.47.
Melrose Industries rose after its deal with GE Aeropsace while posiitve broker comments lifted Entain and Standard Chartered.
The firm price underpinned Shell but properties firms took a breather after strong gains last week with Segro and Land Securities lower.
Elsewhere, strong results from RyanAir gave the sector a lift with easyJet and Wizz Air on the front foot.
3:54pm: British Steel to shut Scunthorpe blast furnaces
British Steel has announced a £1.25 billion plan to replace two blast furnaces in Scunthorpe, in a move that would further reshape the UK steel industry and could eventually threaten the jobs of up to 2,000 steelworkers.
The company, owned by China’s Jingye, on Monday informed workers that it proposed to replace the blast furnaces with greener electric arc models, rejecting the possibility of capturing the carbon in a blow to the nascent British carbon capture industry.
Under the proposals, the two blast furnaces at Scunthorpe, in North Lincolnshire, would be replaced by an electric arc furnace at Scunthorpe and another at a site in Teesside, North Yorkshire.
3:21pm: Jefferies lifts StanChart price target
Heading towards the close and the FTSE 100 remains just the right side of the line, up 4 points at 7.422.
Melrose Industries remains the top riser after its deal with GE Aerospace, closely followed by Standard Chartered PLC (LSE:STAN), up 2.7%.
Jefferies has increased its price target to 1,100p from 1,020p and reiterated a buy rating.
The broker pointed out the Asia-focused bank's share price hit a 52-week low on Friday, which doesn't compute against an absence of downgrade's to 2024 & 2025E numbers and Jefferies newly increased buyback estimates to $2.5 billion/year, implying total return of 35% of current market cap through 2025E.
The broker believes StanChart is capable of delivering 12% return on total equity (ROTE) against 0.5x TBV.
The path to value creation lies in executing on its projected 12% ROTE, delivering capital repatriation (dividend plus buybacks) of $7.0 billion and effective communication of the company's investment case, the broker feels.
2:43pm: Wall Street opens on the front foot
It's been a steady start in the US where investors continue to bet on a soft economic landing and hope interest rates have peaked.
Shortly after the opening bell, the Dow Jones Industrial Average was up 86.54 points, 0.3%, at 34,147.86, the S&P 500 was up 7.48 points, 0.2%, at 4,365.82 and the Nasdaq Composite was up 36.53 points, 0.3%, at 13,514.81.
Craig Erlam at Oanda said: “Investors got everything they wanted from the Federal Reserve and the jobs report.”
“Chair Jerome Powell and his colleagues adopted a slightly less hawkish tone for the meeting while maintaining its extremely cautious position on inflation and interest rates.”
Shares in WeWork were halted for trading early on Monday, as Wall Street anticipated an imminent bankruptcy filing of the flexible working space company once valued at $47 billion.
The company, founded by Adam Neumann and backed with billions of capital from SoftBank, had previously announced it would not make an interest payment due to bondholders as it negotiated a comprehensive restructuring of $13 billion in lease obligations.
Elsewhere, shares in Paramount dipped 4.0% as Bank of America downgraded to underperform from buy and slashing its price target to $9 from $32.
2:14pm: Next cut but Dunelm raised as RBC rejigs retailers
RBC Capital Markets has rejigged ratings of two retailers, with Next PLC (LSE:NXT) downgraded and Dunelm heading the other way.
“We continue to view Next as a blue-chip UK consumer proxy offering longer-term growth potential from its Total Platform.”
“However, we see more valuation upside for some other retailers, hence we have downgraded our rating to sector perform, the broker said.
RBC sees the Leicester-based retailer as being relatively exposed to higher interest rates and softer employment trends in the UK, given it generates over 85% of its sales here.
“We do see Next as more exposed to the lagged impact of higher interest rates, given its relatively high exposure to the 30-50 age group, where average spend on mortgages is highest,” it said.
As such we expect Next's underlying sales performance to be more in line with the market next year, particularly as benefits from less competition in the midmarket are in the base.
It has cut its pre-tax profit forecasts for by 1-2% and lowered its price target to 7,700p from 8,000p.
It sees more valuation upside for some other stocks such as AB Foods, Boss and B&M European Value Retail.
RBC upgraded Dunelm to sector perform, pointing out it is trading towards the lower end of its historical valuation range.
“We view this as fair given Dunelm's well-managed, cash generative model, albeit a relatively challenging outlook for home related sales,” it said.
Shares in Next are down 1.1% while Dunelm is also lower, down 0.2%.
Elsewhere, JD Sports Fashion is up 1.2% after Citi initiated coverage with a buy rating.
1.30pm: Here’s a quick recap of the top risers and fallers on the junior market today
Shares in Strip Tinning Holdings PLC (AIM:STG) surged by 26% following the announcement of a new sales nomination for its glazing business.
Plexus Holdings PLC (AIM:POS) was up 26% after securing a £175,000 rental contract award to supply SLB’s range of ‘Exact’ adjustable wellhead systems and ‘Centric’ mudline suspension equipment to Neptune Energy UK.
Shares of Aptamer Group PLC (AIM:APTA) fell 11%, despite the company's announcement of operational progress and strategic advancements under its new management team.
A recent lull in customer confidence preceding a £3.6 million fundraise led to a temporary revenue shortfall compared to the previous year.
Hipgnosis Songs Fund Limited (LSE:SONG) slipped another 5% as it warned there would be no dividend this year due to a need to build up cash buffers to pay bigger-than-expected sums to its artists.
Kitwave Group PLC (AIM:KITW) shares fell 3.7% following the wholesaler’s pre-close trading update for the financial year ending October 31.
1:05pm: BAT makes further investment in Canadian cannabis producer
British American Tobacco has invested a further CS125 million in Canadian cannabis producer, Organigram Holdings.
The deal builds on an initial investment by the FTSE 100-listed firm in 2021.
Organigram said the investment furthers BAT’s support of Organigram as a trusted partner and accelerates the focus on innovative cannabis science and R&D outside of combustibles.
The investment comes as BAT, the owner of Rothmans and Lucky Strike, pursues its “A Better Tomorrow” strategy looking to increase the alternatives to combustible cigarettes.
Organigram said it looked forward to continuing to leverage BAT’s global capabilities and scientific expertise.
BAT will subscribe for around 38.7 million shares at a price of C$3.22 per share, for gross proceeds of C$124.6 million across three tranches.
12:35pm: Ex-NatWest boss gets an apology
Britain’s Information Commissioner has apologised to former NatWest CEO Dame Alison Rose, for suggesting she had breached data protection rules over the debanking scandal involving Nigel Farage.
Last month, an ICO report said that Rose had broken data protection rules, first by revealing to the BBC that Farage had a banking relationship with its private bank, Coutts; and secondly by providing “misleading information” that led the BBC to believe the bank was closing his accounts for purely commercial reasons, linked to his wealth.
The UK Information Commissioner’s Office said it had incorrectly given the impression that it had examined the actions of Alison Rose, when it was NatWest that was under investigation.
The agency said its investigation did not find that Rose had breached data protection law when she discussed the closing of Nigel Farage’s bank account with a reporter, and said it regretted giving the impression that she had.
11:55am: US markets expected to open slightly higher
US stocks are expected to make steady progress on Monday as investors mull the implications of last week’s interest rate decision and weaker-than-expected non-farm payrolls.
In pre-market trading, futures for the Dow Jones Industrial Average were up 0.1%, while those for the S&P 500 were 0.2% higher, and contracts for the Nasdaq 100 futures rose 0.2%.
Joshua Mahony at Scope Markets said: “ US markets look set for tentative gains at the open, with all eyes on big tech after a dramatic surge for the Nasdaq last week.”
“With markets now pricing in a lower chance of additional tightening from the Fed, we have seen both big tech (Nasdaq) and small caps (Russell 2000) outperform.”
“This week marks a significant cooling off period as the influence of earnings and economic data releases start to fade.”
“With that in mind, the price action seen this week should provide a good temperature check for markets having seen central banks and the vast majority of Q3 earnings reported.”
Tesla rose after it said it will produce a new model that will cost €25,000 at its factory near Berlin, according to Reuters.
Chief Executive Elon Musk announced the plan to staff last week when he visited the Tesla factory in Gruenheide, Reuters said Monday, citing an unnamed source.
11:19am: Analysts upbeat on Prudential despite third quarter slowdown
Prudential PLC (LSE:PRU)’s shares have slipped 0.8% to 892.60p after its third quarter trading update showed a slowdown in new business during the quarter.
AJ Bell’s Russ Mould explained “there are signs the unsettled Chinese economy and market are starting to weigh on the company.”
But he said “the challenges should be kept in perspective.”
“Consumer demand has remained resilient for now and Prudential still operates in immature markets with more significant growth potential than those targeted by counterparts operating in the West.”
At Jefferies, analysts noted domestic Hong Kong new business profit grew by a double-digit amount, suggesting that Prudential is taking share, probably from Manulife and FWD, whose share has been falling.
“ Mainland Chinese APE fell as expected, due to strong prior year bancassurance sales and diversification ahead of regulatory changes”, it pointed out.
UBS highlighted growth trends appear to have declined marginally versus the first half update, where growth of 37% (APE) was reported, versus 34% growth in the third quarter.
The new business margin at 47% was also lower than the 49% reported at the half-way stage.
But Bank of America felt there was a continuation of the trends seen at the half-year “which should be a relief.”
“We think momentum is building for Pru and think the shares do not reflect the company's long-term growth potential,” it said.
Mainland China sales slowed again due to regulatory changes, which should not be a surprise, but other ASEAN businesses picked up the slack, it pointed out.
UBS, Jefferies and Bank of America rate Prudential at buy.
10:47am: Ocado has turned a corner, says BofA
Ocado Group PLC (LSE:OCDO) has “turned a corner,” with the risk/reward “skewed to the upside” and significant opportunities in the non-grocery market.
That is the view of analysts at Bank of America which reinstated coverage of the online food retailer today with a buy rating and 850p price target, offering 57% upside from current levels.
The investment bank thinks both Ocado Retail and Ocado Technology Solutions are at a positive inflection point as online penetration rises and inflation fades.
E-commerce penetration is now rising after two years of continuous decline, which should incentivise grocers to invest again in their online fulfilment capabilities, BofA thinks, with . Ocado Technology Solutions best positioned to meet that demand.
It sees potential for a further 30 customer fulfilment centres on top of the current pipeline for 60 which BofA believes backs the group's key financial targets for 2026-28.
“Next up, Ocado is entering the non-grocery market, where its tech is easily transferrable: we think this is a £55 billion opportunity in the UK alone - 2.5x bigger than grocery,” the bank said.
“Overall, we believe Ocado's existing operations support the group market valuation, and we would expect any new deal - in grocery or beyond - to act as a positive catalyst for the shares,” the bank said in a research note.
Shares are up 0.6% at 545.20p, off an earlier high of 577p.
10:26am: Construction decline shows impact of rate rises
Samuel Tombs at Pantheon Macroeconomics thinks the latest construction PMI data shows the adverse impact of the rise in interest rates on construction activity "now that the backlog of work that built up in the wake of the pandemic has been fully depleted."
He noted the "silver lining" for construction firms, however, is that supply-side constraints have continued to ease, with subcontractor availability improving for the 12th consecutive month and suppliers’ delivery times shortening for the 8th consecutive month in October.
He said that the construction PMI is consistent with the official measure of output falling at a 1% quarter-on-quarter pace.
10:05am: Construction contracts once more amid housebuilding slump
The UK construction sector picked up slightly in October but remained in decline amid a further slump in housebuilding.
The latest S&P Global/Chartered Institute of Procurement & Supply construction purchasing managers' index rose to 45.6 points in October, from 45.0 in September, the second-lowest reading since May 2020.
The survey showed “challenging” business conditions persisted during October, with business activity falling for the second month running amid a lack of new work to replace completed projects.
“House building decreased for the eleventh successive month in October and at a much steeper pace than elsewhere in the construction sector (index at 38.5),” S&P Global said.
“Falling work on residential construction projects was widely linked to a lack of demand and subsequent cutbacks to new projects,” the survey reported.
Civil engineering activity also decreased sharply in October (index at 43.7) and the rate of decline was the fastest since July 2022.
Meanwhile, there were signs of stabilisation in the commercial; building segment, with activity falling only marginally and at a slower pace than in September (index at 49.5).
Tim Moore, economics director at S&P Global Market Intelligence, said: "October data highlighted another solid reduction in UK construction output as elevated borrowing costs and a wait-and-see approach to new projects weighed on activity.”
Dr John Glen, Chief Economist at the Chartered Institute of Procurement & Supply (CIPS), said: “There is no doubt that UK construction is in a difficult period and there will likely be further challenging months to come.”
9:44am: RyanAir results beat forecasts
Peel Hunt said RyanAir’s second quarter exceeded its forecasts due to higher average fares, which increased 29% to €65.45, ahead of its €64.26 estimate.
As a result, scheduled revenues were €3,600 million compared to its €3,534 million prediction.
Ancillary revenues were €7 million less than it expected, as were operating costs, due to lower fuel over the quarter, giving operating profit of €1,705 million, growth of 20%, and ahead of its €1,607 million forecast.
Victoria Scholar, head of investment, interactive investor explained: "Ryanair has been able to pass on additional cost pressures to consumers through higher airfares with ticket prices likely to continue to go up next year."
"Plus, it has been enjoying a tailwind from strong demand post pandemic which it expects will be even stronger next year, despite cost-of-living pressures with elevated inflation and interest rates."
She pointed out Ryanair has also been more focussed than rivals on keeping its debt down and the airline expects it will be debt-free by the end of 2026.
"Investors have lots to be cheerful about in this set of results including its better-than-expected earnings, its outlook, and its dividend announcement," she added.
9:14am: Melrose jumps on $5 billion GE Aerspace deal
Melrose Industries PLC (LSE:MRO, OTC:MLSPF) has jumped 4.1% after announcing its GKN Aerospace Engines business has signed a major new agreement with GE Aerospace, the global aerospace engines market leader.
The two firms have expanded their long-term partnership with a new agreement that expands risk and revenue sharing partnership participation on the GEnx programme, the fastest-selling high-thrust engine.
The new agreement also covers new technology insertion, aftermarket repair of high-volume engines structures, and production of fan cases for a range of GE engines.
The FTSE 100-listed firm expects the deal to boost GKN Aerospace sales by around $5 billion over the full 30 year life of the GEnx engine.
The benefits will read through significantly in the medium term from GEnx aftermarket activities and as new GKN technology enters the GE engine fleet, it said, adding “there is no material change to short-term guidance.”
8:57am: FTSE 100 muted, airlines lifted by RyanAir
The FTSE 100 continues its muted start, now up 4 points at 7,422, with airlines gaining altitude on the back of RyanAir’s statement.
IAG, the owner, of British Airways is up 1.2%, while easyJet is 2.9% to the good higher and Wizz Air up 2.4%.
JD Sports Fashion is up 1.1% as Citi starts coverage with a buy rating but Next is 0.8% as RBC Capital Markets downgrades to sector perform.
Also heading lower are property stocks, Land Securities, down 1.3%, and Segro, down 1.1%, after strong gains last week on the back of hopes interest rates have peaked, while in the FTSE 250 Hammerson is down 2.4%.
Also in the FTSE 250, Hipgnosis Songs Funds Limited is down 6.1% after saying it will not be paying a dividend this year after reviewing its financial position.
8:32am: RyanAir flies high on dividend plans
RyanAir has jumped 7.1% after it said it will pay its first ever dividend after profits hit nearly €2.2 billion following increases in passenger fares.
Europe’s largest discount airline said it plans to hand over about a quarter of its annual profits to shareholders after benefitting from a record summer of passenger traffic.
The airline forecast a full-year profit after tax of between €1.85 billion to €2.05 billion for its financial year ending in March, which would be a record.
It said it will pay a dividend of €400 million and plans to give around a quarter of its annual profit to shareholders in its financial first-half results, along with a pledge to consider special dividends and share buybacks in the future.
Ryanair carried 105.4 million passengers between April and September, another record for the summer season.
8:15am: Stocks edge higher, Prudential update fails to inspire
The FTSE 100 made a subdued start to the week as the dust settles on a busy week of interest rates calls and economic updates.
At 8:15am, London’s lead index was up 8.13 points, 0.1%, at 7,425.86 while the FTSE 250 fell 44.22 points, 0.3%, at 17,939.62.
Equities rallied last week on hopes that interest rates have peaked and for a soft economic landing in the US.
Jim Reid at Deutsche Bank said: “The fascinating thing about markets is that the path to a hard landing is often via the appearance of a soft landing first.”
“So we’re in this window where the data is softening but if it only ends up softens a bit, and then stabilising, then its great news.”
“However if it's the start of something bigger it's not,” he noted, adding “the former scenario won out last week.”
On a quiet morning for company news, Prudential fell 2.0% despite a strong trading update.
The Asia-focused insurer said in the first nine months to end-September, new business profit was up 37% to $2,143 million with third quarter business momentum continuing to reflect the strength of its multi market, multi-channel strategy.
7:52am: Prudential reports strong growth, led by China
We start the day with Prudential PLC (LSE:PRU) which reported strong growth in new business and sales in the first nine months of the year and said momentum had continued into the fourth quarter.
The Asia-focused insurer said in the first nine months to end-September, new business profit was up 37% to $2,143 million with third quarter business momentum continuing to reflect the strength of its multi market, multi-channel strategy.
Excluding economic impacts, new business profit was up 48%, with margins improved due to positive developments in channel and geographic mix.
Year to date annual premium equivalent sales were up 40% to $4,417 million led by Hong Kong, with increased sales to both Chinese Mainland visitors and domestic customers compared with the same period last year.
CEO Anil Wadhwani, said: "The new business momentum we saw in the first half of 2023 continued in the third quarter,” highlighting fifteen of its life markets across Asia and Africa delivered double-digit growth in new business profit.
"Consumer demand in Asia remained resilient and we have seen ongoing demand for both savings and health and protection products from both Domestic and Chinese Mainland visitor customers in Hong Kong,” he said.
“Looking forward the environment continues to be challenging but new business momentum has continued into the fourth quarter supported by our multi-market growth engine,” Prudential added.
7:00am: Flat start expected in London
The FTSE 100 is expected to edge lower at the open on Monday as investors continue to assess the likely path of interest rates following last week's central bank decisions.
Spread betting companies are calling London’s lead index down by around 7 points after closing down 29 points at 7,418 on Friday.
On Friday, US markets made further strong gains after weaker-than-expected jobs figures in the US.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank said: “The excellent combo of lower-than-expected US NFP, weaker-than-expected wages growth and the unemployment rate at an almost two-year high sent another wave of optimism to the financial markets on Friday that the Federal Reserve is done hiking the interest rates.”
Back in London, and the early focus on Monday's will be half-year results from budget airline Ryanair, as well as a trading statement from building materials supplier Kingspan.