- FTSE 100 closes down 8 points at 7,402
- M&S jumps as profit soars, dividend restored
- BoE Governor dampens talk of rate cuts
4:40pm: FTSE 100 ends little changed....again
The FTSE 100 closed little changed continuing the theme of the week as investors look for a fresh catalyst to provide direction.
At the close, the FTSE 100 was down 8.32 points, 0.1%, at 7,401.72 while the FTSE 250 rose 84.55 points, 0.5%, at 17,846.26.
Marks & Spencer led the way, rising 9.1%, after better-than-expected results and a restored dividend boosting other retailers such as Primark owner, AB Foods, up 2.6%.
Rolls-Royce was lifted by a Morgan Stanley (NYSE:MS) upgrade to overweight with the investment bank believing the firm's free cash flow was being underpriced, but a sell note weighed on Hargreaves Lansdown which fell 2.3%.
In the FTSE 250, the continued weak advertising market weighed on ITV which fell 5.6%.
3:52pm: DS Smith drivers to strike in run-up to Christmas
A fleet of DS Smith lorry drivers delivering packaging cardboard and paper to major retailers, including Amazon, will strike over pay in the run up to Christmas, according to the Unite nnion.
The strikes will impact the ability of DS Smith clients, which also include Direct Wines, Cadbury and Haribo, to package items for mail order delivery to customers during the festive season.
An initial seven days of strike action is planned between 20 and 27 November, with strike action set to intensify throughout December if the dispute is not resolved.
Unite national officer Adrian Jones said:
DS Smith can avoid strike action but for this to happen they must properly engage in negotiations and put forward an acceptable pay offer. DS Smith is certainly not short of profits and can fully afford to pay these workers a fair wage increase that takes into account rising living costs.
3:14pm: Serco climbs after winning £200 million contract
Serco Group PLC (LSE:SRP) ticked up 2.6% after it has secured an electronic monitoring contract worth £200 million from the UK Ministry of Justice (MOJ).
The deal to provide electronic tagging services in England and Wales starts in May next year and will run for an initial six years, Serco said in a statement.
There are options to extend the contract for a further two one-year terms, which would increase the contract value to £275 million, the supplier of services to governments added.
Commenting on the news, Serco chief executive Mark Irwin said: "Our innovative data and technology-led approach will be focussed on supporting the MOJ to make a measurable impact to reduce reoffending, support rehabilitation and keep communities safe."
2:44pm: Positive start on Wall Street
US stocks opened higher as the Nasdaq looks to extend its winning streak to nine.
Shortly after the opening bell, the Dow Jones Industrial Average was 67.11 points, 0.2%, at 34,219.71, the S&P 500 was up 9.65 points, 0.2%, at 4,388.03 and the Nasdaq Composite was up 20.10 points, 0.2%, at 13,659.95.
Federal Reserve Chair Jerome Powell didn’t comment on the outlook for interest rates or the economy when he gave an opening address at the Division of Research and Statistics Centennial Conference in Washington.
However, there were numerous contributions from Fed officials on Tuesday, with more scheduled today.
Rivian jumped 2.6% after raising its production forecast and earnings guidance but it was different picture at Lucid Group Inc (NASDAQ:LCID), down 7.2%, after it lowered its estimate for full-year production.
eBay fell 7.0% after its outlook disappointed investors while Warner Bros Discovery tumbled 12.4% as it reported a wider loss than expected due to challenges from the ongoing strikes in Hollywood and weaker advertising revenue.
2:07pm: AB Foods extends gains amid Primark margin confidence
Primark owner, AB Foods, is up a further 2.8%, following strong gains on Tuesday in the wake of well-received results.
Barclays said the analyst meeting reiterated confidence in the Primark margin, with sugar improving, and a pathway to improved cash flow generation.
On the conference call management provided further colour that the 10% margin is set upon expectations of modest like-for-like growth with more upside than downside risk.
On the medium-term dynamics, they see Primark as a "double digit" margin business, Barclays said.
“ We feel confident on the Primark margin, as they have managed to take pricing for the first time for a decade and elasticities have held up well,” Barclays said.
Management referenced the idea that sugar margins of 12% are possible, as volatility in sugar eases with market volatility and crop-related volatility both subsiding.
Barclays continues to maintain our expectation that sugar profits should reach £250 million in 2024.
The bank has kept its equal weight rating.
1.31pm: Here’s a quick recap of the top risers and fallers on the junior market today
Cellular Goods PLC (LSE:CBX) shares sashayed up 12.5% to 0.45p on news that the company's Rejuvenating Face Serum will be included as part of celebrity makeup artist Jamie Greenberg's 'Swag Bag' event this month.
Shares have since rebalanced to 0.42p.
Rainbow Rare Earths Ltd (LSE:RBW, OTC:RBWRF) rose 11% as the US government-backed TechMet took an option over a key project in South Africa.
Merit Group’s share price surged by a third this morning to 72.88p after it returned to profit in the first half of the fiscal year.
eEnergy plc shares surged by over 40% after a £1.75 million investment in its shares from Luceco PLC (LSE:LUCE), which supplies the company with LED lighting.
Shares in Tern PLC (AIM:TERN) fell 8% to 4.28p after it said it had decided not to invest more in industrial software provider Konektio.
1:07pm: Mirror owner plans to cut 450 jobs
The owner of the Mirror and Express newspapers has announced plans to cut about 450 jobs as it looks to slash costs further.
Reach PLC (LSE:RCH), which also owns the Daily Star and regional UK titles including the Manchester Evening News, Birmingham Mail and Liverpool Echo, said the job losses are part of proposals to trim operating costs by 5% to 6% in 2024.
The company said the savings “will allow the business to deliver on its long term plans.”
Jim Mullen chief executive said it was “essential we set ourselves up to win, by making our operations suited to an increasingly fast-paced, competitive and customer-focused digital world."
Shares are flat pretty much reflecting the market mood with the FTSE 100 up 3 points.
12:31pm: More people looking for jobs as hiring remains subdued
UK recruiters registered a sharp rise in the number of people looking for work last month, according to a survey published today, as companies cut their headcount.
The Recruitment & Employment Confederation and KPMG’s Jobs Report showed the overall availability of permanent and temporary staff rose to 59.0, from 55.5 in September, with any figure higher than 50 indicating improvement.
Many recruiters attributed the increase to companies making staff redundant or restructuring their workforce, with some people also looking for a new job because they were worried they would be laid off, the survey said.
#ReportonJobs signalled that temp billings have increased for the second month after a decline in September. Since March, the permanent labour supply has continued to grow. Read the full press release https://t.co/B8HbBhgjQP pic.twitter.com/eT10CK81qq
— Recruitment & Employment Confederation (@RECmembers) November 8, 2023
Claire Warnes, partner at KPMG UK, said the widening pool of candidates was “good news for recruiters” but reflected “employers who are making more redundancies as they tighten budgets”.
The survey showed a cautious hiring environment persisted during October.
Notably, uncertainty around the economic outlook contributed to the thirteenth successive monthly reduction in permanent staff hires, albeit with the rate of decline easing to the weakest since June.
At the same time, there was a back-to-back rise in temp billings as some employers preferred the flexibility of short-term staff in the current climate.
12:02pm: Modest gains expected on Wall Street
US stocks are expected to make a subdued start to trading ahead of a speech by Federal Reserve chair Jerome Powell later today.
In pre-market trading, futures for the Dow Jones Industrial Average were up 0.1%, while those for the S&P 500 were 0.1% higher, and contracts for the Nasdaq 100 futures were little changed.
On Tuesday, the Nasdaq and S&P extended their winning runs to 8 and 7 respectively, the best streak since November 2021.
Powell will deliver opening remarks at a conference in Washington hosted by the central bank with vice chair Philip Jefferson will give the event’s closing remarks.
The speech comes on the back of a number of comments from Fed officials suggesting further rate increases remain possible.
Biogen, Warner Bros, Discovery, Roblox, Ralph Lauren and Under Armour will report their latest quarterly earnings before the market opens, while Lyft and Duolingo will post results after Wall Street’s closing bell.
Walt Disney also reports numbers today.
Stocks to watch include eBay, down 7% in pre-market trading after it issued a bleak revenue outlook for the busy holiday quarter, alongside third quarter results after the close Tuesday.
Heading the other way is Rivian Automotive Inc (NASDAQ:RIVN) (Rivian Automotive Inc (NASDAQ:RIVN)), up 6.2%, after it raised earnings guidance and its 2023 production target after reporting a narrowed third quarter loss.
The electric vehicle maker said after the close Tuesday that based on the progress of its production ramp, including the ramp of in-house motor, along with its current view of the supply chain, it is increasing production guidance to 54,000.
But Lucid Group Inc (NASDAQ:LCID) (Lucid Group Inc (NASDAQ:LCID)) fell 5.6% in pre-market trading after it lowered its 2023 production guidance to 8,000 8,500 vehicles from prior guidance of more than 10,000 to prudently align with deliveries.
11:41am: UBS sees downside risks at Hargreaves Lansdown and AJ Bell
Shares in trading platforms Hargreaves Lansdown and AJ Bell are under pressure after cautious comments from UBS today.
The Swiss bank has started coverage of both companies with a sell rating highlighting a risk to the interest the firm’s earn on client cash balances from the Financial Conduct Authority’s Consumer Duty standards.
Interest on client cash was flagged as an ‘Emerging Risk of Harm’ in a recent FCA letter, UBS explained.
UBS pointed out AJ Bell that the interest earned on client cash makes up more than 80% of AJ Bell’s pretax profit for this year, and 55% at Hargreaves Lansdown.
UBS has a 650p price target for Hargreaves Lansdown and 240p for AJ Bell.
Shares in HL fell 2.4% while AJ Bell dipped 1.2%.
11:13am: Savills thinks worst is behind property market
Savills has assessed the property market and thinks the worst is “certainly behind us.”
The estate agent said a peak-to-trough house price adjustment of in the order of 10% still looks like it is on the cards, albeit occurring over a longer period than it anticipated during late 2022.
It expect the market to bottom out mid-way through 2024 as mortgage rates start to ease in anticipation of a base rate cut later in the year.
But with the prospect of a general election in late 2024, it only expects that to translate into a return of modest price growth from 2025 onwards.
Savills has pencilled in the strongest price growth for 2027 when rates reach their long-term neutral level and buyers are at their most positive.
From there it expects a return to more modest levels of price growth, as some of this exuberance dissipates.
10:55am: BoE Governor quells talk of rate cuts
Bank of England Governor Andrew Bailey has said it’s “too early” to talk about interest rate cuts.
Speaking at a conference hosted by the Central Bank of Ireland (LSE:BKIR) in Dublin, Bailey said: "It’s really too early to be talking about cutting rates… We are very clear, we are not talking about that."
Bailey said he is “optimistic” that inflation will come back to the 2% target within two years, but that rates will likely need to stay high for longer to make that happen.
The speech follows comments on Monday, from the Bank’s chief economist Huw Pill who said financial market expectations of a rate cut in August 2024 “doesn’t seem totally unreasonable, at least to me”.
10:28am: Insurers slip amid weak results from Swiss Re
Holding the FTSE 100 back are falls in financials with weaker-than-expected results from Swiss Re and ABN Amro weighing on sentiment.
Shares in the Dutch lender slipped 7.5% after the bank reported a decline in net interest income, a key financial metric, though profits beat forecasts.
UBS said total revenues of EUR 2.2 bn are 1.5% ahead, but with what can only be described as a disappointing mix. Net interest income missed consensus by 6.1%, fees were 1.4% better and other income 112% better.
Meanwhile, Swiss Re fell 6.0% after premiums of CHF4bn CHF in the third quarter missed consensus by 7%.
UBS said fee income of CHF588 million was 2% below estimates which appears to be driven by the international division.
Prudential fell 2.2%, L&G eased 1.4% while Lloyds Banking Group PLC (LSE:LLOY) fell 0.6%.
9:51am: Rolls-Royce cash flow potential significantly mispriced
Rolls-Royce Holdings PLC (LSE:RR.) continues to be supported by the upgrade by Morgan Stanley (NYSE:MS) with shares up 1.7%.
The investment bank sees further upside to 2023 free cash flow following strong engine flying activity through the second half, and thinks the medium-term cash potential of the group is still significantly mispriced despite the strong run by the share price.
It moved to overweight from equal weight and views the upcoming Capital Markets Day as key to changing perceptions.
MS explained its aircraft activity tracker suggests engine flying hours for Rolls' large-engine fleet, the key driver of cash, is towards the top end (87%) of the 80-90% guidance range for the 10 months.
“We think full-year EFH could meet or exceed 90% if current trends continue, placing upward pressure on already-upgraded FCF guidance of £0.9-1 billion,” it added.
It now assumes 90%, driving its FCF forecast to £1.1 billion, around 20% above the guidance mid-point and 15% above consensus.
The broker thinks key to the longer term investment case is management's more granular description of how it intends to achieve its goals, given the challenging track record.
“Combined with delivery of the strategy over the medium term, we see a clear path to a progressive re-rating of the shares,” it added.
MS has set a price target of 275p, up from 166p.
9:25am: Hargreaves Lansdown lower as UBS starts with sell
Shares in Hargreaves Lansdown fell 2.3% making it the worst performing blue chip as UBS started coverage with a sell rating and price target of 650p.
The Swiss bank 2024-27 EPS estimates are 5-20% below consensus.
The broker has also started coverage if AJ Bell with a sell rating pushing the shares 2.9% lower.
9:16am: ITV at the mercy of "creaking" economy
Reflecting on ITV’s trading update, Sophie Lund-Yates at Hargreaves Lansdown feels the firm is “at the mercy of creaking economic conditions.”
“Companies are snapping marketing purses shut as they buckle down for the unknown over the coming months, and that makes moving ITV’s advertising top-line in the right direction a very difficult task.”
“The structural decline in broadcast advertising isn’t exactly a new bulletin, but the extent of the challenges are becoming more pronounced,” she explained.
She pointed out Digital revenues are holding up much better then free-to-air channels, given the wider and more engaged viewer-base, but growth here isn’t enough to carry the weight of the traditional business as things stand.
The Studios business has an excellent proposition and should be able to scoop up demand as streamers battle to create an increasing amount of content, but there’s still a chunk of revenue tied to less glamorous channels like terrestrial TV – which is cutting back, she added.
She thinks the market needs to be convinced it has the right strategy and firepower in place to reach potential.
“Pushing content spend out into next year won’t have been a decision taken lightly – cost cutting can only go so far, and trimming this area of the business wreaks slightly of desperation,” she added.
Shares are down 6.9%.
8:54am: FTSE springs higher as M&S lifts retailers
The FTSE 100 has reversed its early falls and is now up 14 points at 7,424 with retailers leading the way.
M&S is up 9.5% following its better-than-expected results, which has boosted Primark owner, AB Foods, up 2.1%, Next, up 1.3%, and B&M European Value Retail.
Rolls-Royce is up 1.8% following the Morgan Stanley (NYSE:MS) upgrade, but finance stocks are a weak feature with Hargreaves Lansdown down 1.8%, Prudential off 1.2% and Legal & General down 1.2%.
In the FTSE 250, ITV fell 5.5% to 61.00p while Rathbones slipped 2.2% as Barclays reiterated an underweight rating.
8:32am: Bringing back dividend a 'statement of confidence' at M&S
M&S continues to storm ahead following today’s results, now up more than 9% at 247.5p.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said the real talking point was the reintroduction of dividend payments, which should put a spring in investors’ steps.
“The yield is relatively low, but it marks a moment of significance for the group, and it’s a real statement of confidence around the outlook for the business from M&S’ management,” he felt.
Chiekrie said M&S food was the standout performer in the first half, with demand here arguably more protected from high levels of inflation.
Coupled with impressive margin growth, total underlying operating profits jumped significantly.
There’s also been good headway on the group's reshape programme, which looks to pivot to new locations and refresh existing stores to create a more productive estate, he said.
Michael Hewson at CMC Markets said: “All in all, despite the heavy pessimism around the UK economy, the fact that we've seen positive updates from Next, Associated British Foods owner Primark and now M&S suggests that while the economic backdrop is difficult it’s not all bad news.”
8:15am: FTSE 100 slips but M&S sparkles
The FTSE 100 opened lower as signs of slowing demand in the labour market added to concerns that the global economy is slowing.
At 8:15am, London’s blue-chip index was down 17.66 points, 0.2%, at 7,392.38 while the FTSE 250 fell 74.70 points, 0.4%, at 17,687.01.
But there was good news for investors in Marks & Spencer Group PLC with shares up 9.4% after the food and clothing retailer restored the dividend and reported better-than-expected half-year profits.
Clive Black at house broker Shore Capital called it “a quite staggeringly successful” first half of the year while Zoe Gillespie at RBC Brewin Dolphin, said the results “provided some pre-festive period sparkle.”
“Sales have risen more or less across the board, profits have surged, and its balance sheet has strengthened – shareholders will also benefit from the restoration of a modest dividend after four years without one,” Gillespie noted.
Peel Hunt said there was “good news came from both categories, with food showing 12% LFL for the half and clothing 5%+, both of which were accompanied by stronger margins as well.”
The pre-tax profit outcome of £360 million beat the consensus of £275 million today.
Not such good news at ITV where shares fell 6.3% after it reported flat revenue as the advertising slump continues to bite.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown said: “ITV is at the mercy of creaking economic conditions.”
“Companies are snapping marketing purses shut as they buckle down for the unknown over the coming months, and that makes moving ITV’s advertising top-line in the right direction a very difficult task,” she added.
Another stock in the green is Rolls-Royce Holdings PLC (LSE:RR.), up 1.1% as Morgan Stanley (NYSE:MS) upgrades to overweight.
Elsewhere, a survey from the Recruitment & Employment Confederation and KPMG showed there remains caution about hiring permanent staff in the UK given the prevailing economic uncertainty while demand for temporary staff fell for the second month in a row.
Pantheon Macroeconomics said the survey suggests that the MPC already has done enough to slow the economy and that the committee can move to reduce interest rates sooner than it anticipated last week.
7:56am: JD Wetherspoon ups investment in pubs as sales climb
JD Wetherspoon has reported a continued "gradual improvement" in sales, with inflationary pressures easing, though energy costs remain robust.
In the 14 weeks to November 5, like-for-like sales were 9.5% higher on-year.
Chairman Tim Martin said sales "have continued the pattern of gradual improvement which has followed the ending of lockdowns and restrictions."
"Inflationary pressures have eased, but energy costs, in particular, remain at far higher levels than pre-pandemic, putting pressure on suppliers and the wider economy," he added
The pub operator is increasing its investment in existing pubs in the current financial year to around £70 million from £46.9 million the year before.
It expects an outcome for the financial year in line with market expectations.
7:48am: M&S restores dividend as profit jumps
Marks and Spencer Group PLC (LSE:MKS) restored the dividend for the first time in four years as it said its strategy to reshape the food and clothing retailer was delivering.
Pre-tax profits in the six months ending September jumped 56% to £325.6 million from £208.5 million led by strong growth in food sales.
Sales rose 10.8% to £6.16 billion from £5.56 billion the year prior while basic EPS climbed 24.7% to 10.6p from 8.5p before.
M&S Chief Executive Stuart Machin said trading momentum has been “maintained” through October but warned of “challenges and headwinds in the year ahead,” saying progress won't be linear.
Against more challenging comparatives, the firm expects profit before tax and adjusting items to be weighted towards the first half.
Food sales rose 14.7% with like-for-like sales up 11.7%, driven by growth in volume and market share, and manufacturing efficiencies.
Clothing & Home sales rose 5.7% with adjusted operating profit rising to £223.4 million, up from £171.4 million and a margin of 12.1%.
M&S said the cost reduction programme remained on track with savings of over £100 million delivered in the first half and said new full line stores and renewals were performing ahead of plan.
A dividend of 1p per share was declared.
7:26am: ITV reports flat revenue as advertising slumps weighs
We start the day with ITV which has reported broadly flat revenue as growth in ITV Studios and Media & Entertainment (M&E) offset a decline in advertising revenue.
Carolyn McCall, chief executive, said: ”ITV continues to make good strategic progress despite the challenging macro environment which is impacting the advertising market and also the demand for content from free-to-air broadcasters in the UK and internationally.”
The free to air broadcaster said in the nine months to September 30 total revenue rose 1% at £2.98 billion from £2.95 billion the year before.
Total ITV Studios revenue rose 9% at £1.52 billion from £1.39 billion a year ago while M&E revenue was down 7% at £1.46 billion from £1.56 billion, driven by a 7% drop in total advertising revenue (TAR).
Digital advertising revenue remained strong, up 25% at £283 million, ITV said.
ITVX continued to perform strongly with total digital revenue up 23% and total streaming hours up 27% to the end of September with monthly active users continuing to grow in line with the firm’s expectations.
Looking ahead, ITV expects ITV Studios to deliver total organic revenue growth of at least 5% per annum on average to 2026 and to grow ahead of the market.
Media & Entertainment is expected to deliver at least £750 million of digital revenues by 2026 although the advertising market remains challenging and full year TAR is likely to be down around 8% versus 2022.
ITV said it continues to review its cost base, in addition to the current £50 million target to 2026.
7:00am: FTSE 100 seen lower but Nasdaq extends winning run
The FTSE 100 is expected to open lower despite gains in the US which saw the Nasdaq extend its winning run to eight day.
Spread betting companies are calling London’s lead index down by around 23 points after closing down 7.72 points at 7,410.04 on Tuesday.
"In the space of a week, we've gone from higher for longer back to rate cuts in 2024, and this time the push back from central bankers isn't anywhere near as aggressive," said CMC Markets' Michael Hewson.
"Given the challenges facing the UK economy in the coming months however it's not too much of a stretch to suggest that a lack of demand might do the [Bank of England]'s job for it," he added.
A number of Federal Reserve officials highlighted the possibility that interest rates could be raised further on Tuesday, but they failed to spook markets.
The Dow Jones Industrial Average closed up 0.2%, the S&P 500 rose 0.3%, its seventh winning day in a row, and the Nasdaq Composite climbed 0.9%, an eighth day of gains, its best run since November 2021.
Back in London, and the early focus will be updates from Marks & Spencer, JD Wetherspoon and ITV.