- FTSE 100 closes down 76 points at 7,411
- Burberry warns of low-end profits on luxury slowdown
- Hotel Chocolat agrees £534m takeover from Mars
4:40pm: FTSE heads south as ex divs and weak oil price weighs
The FTSE 100 lost the feelgood factor hit by falls in oil majors and index heavweights, BP and Shell, plus a profit warning from Burberry.
At the close, London's blue-chip index was down 75.94 points, 1.0%, at 7,410.97 while the FTSE 250 was down 325.00 points, 1.7%, at 18,351.48.
Burberry led the fallers after warning sluggish sales would see profits at the low-end of guidance while a drop in the oil price saw BP drop 3.0% and Shell decline 2.9% - the latter was also trading ex-dividend.
“A host of heavyweight dividend payments today put the FTSE 100 on the back foot from the word go, but sentiment on the index continues to sour following Burberry’s numbers this morning," said Chris Beauchamp at IG.
"The downturn in luxury spending is not exactly applicable to most stocks in the index, but where luxury spending goes, other spending is sure to follow, putting pressure on the index’s other retail names, a point underlined by WalMart’s numbers today in the US," he added.
3:53pm: Samsung confirms data breach
Samsung has confirmed the personal contact information of some UK customers has been "unlawfully obtained" in a data breach.
The technology giant said no financial data, bank card details or customer passwords were involved, but in an email sent to affected customers the company said the data may include their name, phone number, address and email address.
The breach has affected some people who made purchases from Samsung UK's online store, but the number of customers has not been disclosed.
3:14pm: Goldman sees chance for fiscal support in Autumn Statement
Goldman Sachs (NYSE:GS) thinks yesterday’s inflation figures suggest that the MPC is very likely to hold Bank Rate again at the December meeting.
“The high level of underlying inflation points to some remaining risk of further tightening early next year, but we only attach a 10% probability to additional hikes and see the MPC most likely on hold until the first cut in Q3,” the investment bank said.
“That said, earlier cuts are possible if the economy turns out weaker than expected, putting our probability-weighted path for Bank Rate slightly below market pricing for the end of 2024,” it added.
It also said the economy’s resilience points to more fiscal headroom and has increased the likelihood of additional fiscal support in the Autumn Statement on November 22.
The bank sees a good chance that the Chancellor will use some of this headroom to provide tax relief in the Autumn Statement, for example, via an extension of companies’ full expensing of investment, lower inheritance tax, or adjustments to stamp duty.
“That said, we expect the measures to be modest in size to preserve fiscal space for the Spring Budget in March,” Goldman said.
2:45pm: US stocks edge lower in early exchanges
We are off and running in the US and stocks have opened lower, pausing for breath after recent strong gains so far this month.
Shortly after the opening bell, the Dow Jones Industrial Average was down 59.05 points, 0.2%, at 34,932.16, the S&P 500 was flat at 4,500.74 and the Nasdaq Composite was down 33.50 points, 0.2%, at 14,070.34.
In economic news, there were signs of a loosening in the labour market with the number of new claims for unemployment benefits in the week ended November 11 rising to 231,000, up from 218,000 and higher than economists’ forecasts of 220,000.
James Knightly at ING Economics said the figures were more evidence of a “cooling, but not collapsing jobs market.”
While US initial jobless claims remain low, continuing claims are climbing, he noted.
“So while there aren’t many people being fired, if you do lose your job it is becoming harder to find a new one,” he added.
In company news there were mixed fortunes for two of the best known retail names in the US.
Macy’s shares leapt 7.7% after the department store beat expectations and adjusted its full-year profit outlook, but WalMart slipped 7.6% after it too raised guidance but by less than hoped.
Alibaba slumped 9.9% after it pulled plans to spin off its cloud business and paused plans to list its supermarket unit in a blow to its restructuring plans.
2:16pm: Halfords joins suitors for Wiggle - Sky
Halfords, the high street bicycles chain, is joining a peloton of suitors for the stricken online retailer Wiggle, according to reports.
Sky News understands that Halfords, which has a market capitalisation of just over £500m, has registered its interest in a bid for Wiggle CRC, which fell into administration last month.
Revealed: Halfords, the FTSE-250 bicycles and car parts chain, is among a peloton of suitors hoping to ride to the rescue of Wiggle CRC, the online retailer which was forced to call in administrators last month. https://t.co/uPUyPyYRmz
— Mark Kleinman (@MarkKleinmanSky) November 16, 2023
Halfords will be pitted against Frasers Group, the owner of Sports Direct and Evans Cycles, which is also among the bidders, the report said.
Next is also said to have been considering a bid, although Sky said a spokesman for the company denied on Thursday that it was interested.
Halfords has already stepped in to honour warranties on products bought from Wiggle and Chain Reaction.
1.35pm: Here’s a quick look at the top risers and fallers on the market today
Hotel Chocolat Group PLC (AIM:HOTC)'s share price leapt a walloping 160% after Mars’ bid to acquire the company.
Shares in Burberry Group PLC (LSE:BRBY) fell 9% to 1,605.5p, the lowest in over a year, after the fashion group warned that if the recent global slowdown in demand for luxury goods continues it is unlikely to hit its full-year revenue targets.
Halma PLC (LSE:HLMA) continued to recover from its recent four-year low with what brokers described as a solid set of interim numbers. Shares were up 5% at 2.061p.
hares in MYCELX were marked down 6% following a good news-bad news sort of a morning.
Shares in HelloFresh fell 20% in early Frankfurt trade after the company lowered its annual core profit outlook and revised its revenue growth guidance.
1:06pm: Mars pays hefty premium to secure sweet deal
The Hotel Chocolate takeover has raised a few eyebrows - given the hefty premium paid by Mars.
Russ Mould at AJ Bell said the fact Mars is willing to pay a 170% premium for the shares is remarkable on two accounts.
First, bid premiums are typically in the 25% to 50% range so Mars paying so much more would suggest it has taken a long-term view of what the business is worth.
Second, it suggests that Mars has spotted an opportunity and there is no way it wants to waste time with a low-ball bid.
This looks like going in with its best offer with the hope of wrapping up the transaction as quickly as possible, he said.
“Mars doesn’t have to worry about sales of its eponymous chocolate bar, but it does have to think about the evolution of the business and tapping into parts of the market who are looking for a higher quality product," he explained.
Hotel Chocolat ticks the right boxes and while its international expansion strategy hasn’t gone to plan, perhaps Mars thinks it has the necessary skills to make a good job of turning the UK chocolatier into a global name, he said.
"It is hard to imagine shareholders turning down such a generous offer," he reckons
12:36pm: More rail misery with strikes planned
Rail passengers face disruption in December after train drivers announced a new set of strikes.
The Aslef union on Thursday outlined a “rolling programme” of strikes at 16 train companies between December 2 and December 8, with drivers at different operators walking out on each day.
The union said that spreading the strike action will mean the “ramifications for the rail industry will be greater.”
12:02pm: Subdued start expected on Wall Street
US stocks are expected to make a subdued start consolidating recent gains inspired by favourable inflation readings.
In pre-market trading, futures for the Dow Jones Industrial Average were flat, while those for the S&P 500 were also little changed, and contracts for the Nasdaq 100 futures were down 0.2%.
Joshua Mahoney at Scope Markets said: “Market optimism appears to be cooling off after a bumper period of gains for equity markets, built on growing expectations that the Fed are finished with their historic tightening process.”
“With markets now pricing a mere 1% chance of another hike, markets are now more concerned with the timing of the first rate cut and the pace of easing. “
“As things stand, markets are expecting 100 basis points worth of rate cuts next year, with precious metals and cryptocurrencies the early movers on the premise of a more advantageous macro environment.”
New applications for unemployment aid are forecast to have increased to 220,000 in the week ended November 11, compared with 217,000 claims a week prior.
In economics news, new applications for unemployment aid are forecast to have increased to 220,000 in the week ended November 11, compared with 217,000 claims a week prior. An industrial production reading is also expected.
Stocks on the move include Cisco, down 11% in pre-market trading, after guidance disappointed investors while Palo Alto is down 4.8% after missing Wall Street estimates for billings in its fiscal first quarter and lowering its estimates for the full year.
Results from Walmart will also attract attention.
11:38am: Premier Foods dishes up raised guidance
Shares in Premier Foods are 2.8% higher after the owner of OXO stock cubes said its full year profit would be at the top end of market expectations.
The company said it had no further price increases planned for the rest of 2023, as it believes the recent period of significant input cost inflation is now “past its peak”.
Jefferies said the strong momentum supports a 5% upgrade to 2024 trading profit forecasts.
“The business is clearly delivering on all of its key strategic growth levers and, on sub-10x PE, remains undervalued,” it said.
Susannah Streeter at Hargreaves Lansdown said the firm’s promotional prices have been lowered across a stack of its brands, including Batchelors Super Noodles. Shoppers, who’ve been battling painful grocery price rises for so long, seized the opportunity to buy favourite products at cheaper prices.
Branded sales rose 15.8% in the first half of the year, while there was also impressive double-digit growth in new product categories of 21%, as Premier Foods moves into ‘healthier’ ranges, with the Ambrosia porridge pots proving to be a winning recipe.
11:22am: Hargreaves Lansdown at risk from reported ISA changes
Hargreaves Lansdown shares are down nearly 5% with JPMorgan warning the investment platform is most at risk from changes which may be in next week’s autumn statement.
The investment bank noted proposed changes to the ISA set-up might include (i) increasing allowances, (ii) relaxing rules for Lifetime ISA, (iii) scrapping the limit on the number of accounts which can be opened each year, as well as (iv) a possible merge of Cash ISAs and Stock and Share ISA in a single product.
Whilst increasing allowances could result in a modest uplift to earnings for UK platforms over time, merging ISAs could also drive a reduction in cash balances held within Stock and Share ISAs and therefore reduce the interests accrued by platforms, the bank said.
“Overall, we believe that Hargreaves Lansdown (Underweight) is the most exposed to this risk, as we estimate that cash margins account for c60% of 2024 estimated EPS,” it said.
10:53am: DX agrees £315m bid from HIG
Another bid, following the deals for Hotel Chocolat and City Pub today, although this one has been rumbling along for a while.
DX Group has finally agreed terms with HIG and recommended a £314.8 million bid for the firm.
The cash bid values each DX share at 48.5p, including a 1p special dividend.
DX said the bid offers shareholders an opportunity to crystallise an “attractive value for their holdings and provides DX with an excellent partner for the next stage of its development."
DX said it recognises the challenges that companies of DX's size and shareholder structure face in raising further capital for expansion or acquisitions and the challenges that major shareholders have in crystallising value for their holdings.
Furthermore, DX is dependent on UK demand growth across its operating sectors, and thus exposed to potential economic and global investment sentiment headwinds, it said.
Shares are up 7% at 46.56p.
10:45am: BoE's Greene bangs higher for longer drum
Bank of England policymaker Megan Greene has warned that global investors have not fully grasped the message that central bank interest rates may have to stay at restrictive levels for some time.
Greene told Bloomberg TV that there had been structural changes in major economies over recent years that pointed to a need for higher interest rates.
“I think markets globally haven’t really clocked onto this,” she said.
She said: The recent data is good news,” but that UK wage growth was still “incredibly high”, and that there are reasons to worry about the persistence of inflation.
Greene is one of three MPC members who wanted to raise UK interest rates to 5.5% last month, but were outvoted by the other three committee members.
She says the Bank’s current monetary stance is restrictive, but the question is whether it is restrictive enough to bring inflation down to the 2% target.
She says she is not thinking about cutting interest rates at the moment, adding “I don’t think that’s where we are.”
10:32am: Royal Mail’s new CEO finding out just how hard the job is
Shares in Royal Mail owner, International Distribution Services, are down 1.8% and Derren Nathan at Hargreaves Lansdown thinks the new CEO, Martin Seidenberg, is finding “it harder than first thought to turn round His Majesty’s mail service.”
Nathan pointed out he escalated the agenda to Downing Street’s door calling for a relaxation of the group’s statutory duties.
That’s in the face of the steep declines in volume bought about by digitalisation and competition in the market, he explained.
“His comment that it's simply not sustainable to maintain a network built for 20 billion letters when Royal Mail is only delivering 7 billion is one that resonates,” Nathan said.
But he suggested investor confidence, which has rebounded of late, is likely to take another hit as the profitability horizon is pushed out further.
There’s a lot of work going on behind the scenes to restore the public’s faith in Royal Mail, and a faultless execution of Santa’s delivery list will be important to rebuilding trust, he reckons.
10:12am: BP and Shell weigh on FTSE 100
The FTSE 100 has slipped back after a subdued opening with falls in oil majors BP and Shell weighing on the blue-chip index.
The oil price is down for a third day in a row after figures released on Wednesday by the Energy Information Administration showed US crude inventories grew by 3.6 million barrels last week, well ahead of a Reuters forecast for a 1.8 million-barrel increase.
Fiona Cincotta at City Index said the figures combined with concerns over demand from China, pulled the price lower.
Cincotta said the larger-than-expected increase in inventories offset recent optimism surrounding the demand outlook for crude oil after OPEC and the IEA provided upbeat demand outlooks earlier in the week.
The rebound in the US dollar is also adding pressure to oil prices, she pointed out.
Shares in BP are down 1.3% and Shell down 1.9%.
9:56am: Aviva’s strong performance should support re-rating
Some more on Aviva which reiterated that it expects to exceed its medium-term targets, in a trading update today.
Broker Jefferies said this, and a shift towards more capital-light lines, should support a re-rating.
The bank noted Aviva reiterated its 5-7% operating profit growth guidance for 2023 despite higher-than-normal weather claims in Canada.
The higher weather claims resulted in a 96.3% undiscounted COR for the first nine months of the year, slightly higher than the broker’s estimate of 95.4%.
However, including the impact of UK storms in the fourth quarter, year-to-date weather losses across the group remain within Aviva's long-term average according to the company.
Jefferies said Aviva's Solvency II ratio remains exceptionally strong (200%) despite a number of one-offs and seasonal factors.
The has a buy rating on the insurer.
Analysts at KBW Europe said Aviva’s nine-month solvency and combined ratio are better than it expected, which was fully adjusted for concerns about capital market movements and weather losses in Canada/UK.
The comment that weather experience to date is still within budget is particularly reassuring, it felt.
9:26am: SSE lifted by improved wind farm price support
SSE PLC (LSE:SSE) is enjoying a good morning with shares up 2.6% after the UK raised its price support for offshore wind farms.
Ministers have agreed to raise the starting price of the government’s next auction for offshore wind subsidies by around two-thirds to £73 per megawatt hour to help more offshore windfarm projects to move ahead despite higher costs.
The government has also raised the starting price for floating offshore wind projects by more than 50% from £116 a MWh to £176 a MWh before the next subsidy auction in 2024.
SSE operates three offshore sites in the UK and has a large development pipeline.
9:08am: Burberry knocked as demand for luxury good wanes
Burberry Group PLC (LSE:BRBY) is down 9.7% after warning of low-end profits.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown feels it shows the shine is “dimming on the luxury sector as even higher end consumers tighten their belts.”
She explained “suggestions of missing targets and lower-end profits aren’t what investors have come to expect and that has consequences for valuations.”
Specifically for Burberry, it doesn’t have a basket of other brands or products to help diversify risk in this scenario, she pointed out.
The work the group’s done to become a more premium luxury house is to be commended and will improve strength in the long-term, but there’s no getting away from the fact that particularly aspirational, younger shoppers are thinking twice before swiping their cards, she said.
“There could be further pressure to come before things improve, especially if a broader pull back in spending comes through in 2024 after the glut of festive trading,” she cautioned.
She felt the UK’s decision to halt VAT refunds is denting demand in the important UK market, noting it was an important pull to encourage tourist spending.
She believes Burberry has done pretty much all it can to place itself in a better position but the issue is that it is currently residing in a “hostile environment outside of its control.”
8:45am: Halma, Melrose up, Burberry down after updates
The FTSE 100 has nudged into positive territory for now, up 2 points at 7,489.
Susannah Streeter, head of money and markets, Hargreaves Lansdown thinks “a subdued session looks set to bed in after the enthusiasm sparked by the dip in inflation.”
“Cautiousness about the trajectory of interest rates in the United States is edging back in after retail sales didn’t slow by as much as expected,” she noted.
“China’s fragile housing market has loomed back into focus, after data showed new home prices in 70 major cities across the vast country fell for the fourth month in a row, dipping 0.3% month on month,” she added.
Leading the risers is Halma, up 2.8%, after the firm reported a 9% rise in half-year revenue and boosted its dividend.
We remain on track to make further progress in the second half of the year." Marc Ronchetti, chief executive.
Melrose Industries PLC (LSE:MRO, OTC:MLSPF) is 1.6% higher after the aerospace company said trading for the four months to 31 October was ahead of expectations.
“The margin performance in the Period is substantially better than expectations, driven by higher aftermarket demand and pricing, and the successful delivery of operational improvements,” it said.
It gave new guidance, 7% ahead of previous forecasts.
But Burberry continues to lead the fallers, down 9.7%, after its warning.
8:16am: Stocks posts modest losses at the open
The FTSE 100 has opened modestly lower with a warning from luxury goods retailer Burberry denting the mood.
At 8:15am, London’s blue-chip index was down 4.27 points, 0.1%, at 7,482.64 while the FTSE 250 was down 26.86 points, 0.1%, at 18,649.62.
Burberry Group PLC (LSE:BRBY) slumped 9.6% in early exchanges after warning the slowdown in luxury demand globally is having an impact on current trading.
"If the weaker demand continues, we are unlikely to achieve our previously stated revenue guidance for FY24," the FTSE 100-listed group said.
It has predicted adjusted operating profit towards the lower end of the current consensus range which it put at £552 million to £668 million.
It was a brighter start for Aviva PLC (LSE:AV.), up 0.8%, after it reported cost savings would be delivered one year ahead of schedule and it was on track to beat medium-term targets.
Amanda Blanc chief executive said: “Aviva's prospects are very positive. We expect to beat our medium-term financial targets and, in line with previous guidance, grow operating profit by 5-7% this year, despite higher weather-related claims.”
Royal Mail owner, IDS, is little changed from its results, down 0.2%, after reporting trading was in line with expectations in the first half, with losses at Royal Mail widening.
Eslewhere, the star performer was Hotel Chocolat, up a bumper 162% after agreeing a cash takeover from confectionary group, Mars.
8:00am: Royal Mail losses deepen on costs of pay deal
Royal Mail owner, International Distributions Services PLC (LSE:IDS) called on the Government to act to support the business as it reported a widened loss in the first half.
Chief Executive Martin Seidenberg said we need the regulator and the Government to do their bit.
“It's simply not sustainable to maintain a network built for 20 billion letters when we're now only delivering seven billion.”
“The UK is not immune to the trends that we see across the world. Many other comparable countries have already reformed their Universal Service, and the UK is getting left behind.”
IDS said first half performance was in line with expectations, against a challenging macroeconomic backdrop.
Group revenue in the first half ended September 24 of £5.86 billion, was up 0.4% year-on-year, with GLS revenue up 5.9% and Royal Mail revenue down 2.9%.
Royal Mail saw growth in total letter revenue, with price rises offsetting volume decline; lower parcel revenue reflecting the weaker macroeconomic environment and a drag from the costs of strike action.
Group reported operating loss totalled £243 million compared to £157 million a year ago, with profit in GLS more than offset by loss in Royal Mail, as expected.
Royal Mail adjusted operating loss of £319 million widened from £219 million last year, in line with expectations due to lower revenue and cost of pay deal.
IDS expects adjusted operating performance for the group to be around breakeven in the full-year and expects to be able to pay modest dividend from GLS at the full year.
But Royal Mail will not be able to fund a dividend until it returns to positive cash generation, it said.
7:45am: Burberry warns of low-end profits
Burberry Group PLC (LSE:BRBY) has warned the slowdown in luxury demand globally is having an impact on current trading.
"If the weaker demand continues, we are unlikely to achieve our previously stated revenue guidance for FY24," the FTSE 100-listed group said.
It has predicted adjusted operating profit towards the lower end of the current consensus range which it put at £552 million to £668 million.
The warning came as Burberry reported 4% growth in sales in the first half of the financial year to £1.40 billion and a 6% drop in adjusted operating profit to £223 million.
7:35am: Hotel Chocolat agrees sweet takeover from Mars
Hotel Chocolat Group PLC (AIM:HOTC) has agreed to be taken over by confectionary group, Mars, in a deal worth £534 million on a fully diluted basis.
The upmarket chocolatier said the cash offer values each share at 375 pence, a premium of 169.8% to Hotel Chocolat’s share price of 139p at the close of business on November 15.
Hotel Chocolat’s directors have said they consider the terms of the deal “to be fair and reasonable”.
Chief Executive Angus Thirlwell said: “We know our brand resonates with consumers overseas, but operational supply chain challenges have held us back.”
“By partnering with Mars, we can grow our international presence much more quickly using their skills, expertise and capabilities.”
“In Mars we have found a true meeting of minds - in strong cultural values, bold strategy and true long-termism,” he added.
Mars said it has “long admired” Hotel Chocolat's impressive credentials as a contemporary, premium brand with a differentiated product offering.
7:25am: Aviva in confident mood
Aviva PLC (LSE:AV.) was in confident mood as it said it would deliver cost savings a year ahead of schedule and beat medium-term financial targets.
In a third quarter trading update, the FTSE 100-listed insurer said general Insurance gross written premiums (GWP) rose 13% at constant currency to £8.0 billion, with UK&I GWP up 15% and Canadian GWP up 11% at constant currency, both driven by strong rate, new business volumes and retention.
The group undiscounted combined operating ratio (COR) was 96.3%, up from 94.2% a year ago, reflecting the impact of third quarter wildfires and other adverse weather in Canada, offset by continued rate increases and disciplined underwriting.
Protection & Health sales, were up 23% with strong growth in Individual Protection, and in Health which was supported by higher corporate new business.
Amanda Blanc chief executive said: “Aviva's prospects are very positive. We expect to beat our medium-term financial targets and, in line with previous guidance, grow operating profit by 5-7% this year, despite higher weather-related claims.”
Aviva said it expects to beat its own funds generation (£1.5 billion p.a. by 2024) and cash remittances (more than £5.4 billion cumulative 2022-24) targets, and to deliver its target of £750 million gross cost reduction by 2024 one year early.
It continues to anticipate further regular and sustainable returns of surplus capital.
Blanc said: “Aviva has delivered nine months of strong growth. We have clear trading momentum, driven by our uniquely diversified business, as well as our leading positions in growing markets.”
7:00am: Stocks called lower after inflation sugar rush
The FTSE 100 is expected to open lower as the euphoria sparked by weak inflation data in the US and the UK wears off.
Spread betting companies are calling London’s lead index down by around 21 points after closing up 46.44 points, 0.6%, at 7,486.91 on Wednesday.
In the US, markets closed in the green, but off early highs.
Ipek Ozkardeskaya at Swissquote Bank said: “The sweet mix of the recent economic data backs the idea that the Federal Reserve (Fed) could achieve what they call a ‘soft landing’ following an aggressive monetary policy tightening – and more importantly stop hiking the interest rates.”
The Dow Jones Industrial Average rose 0.5%, the S&P 500 rose 0.2% and the Nasdaq Composite rose 0.1%.
Back in London, and the early focus will be updates from insurer Aviva, luxury goods retailer Burberry and aerospace company Melrose.