- FTSE 100 down 3 points at 7,458
- Rolls-Royce unveils mid-term finance targets
- easyJet returns to profit, restores dividend
4:40pm: FTSE ends near parity after US consumer confidence rise
The FTSE 100 closed near opening levels after a day spent mostly languishing in the red.
At the close, London's blue-chip index was down 5.46 points, 0.1%, at 7,455.24 while the FTSE 250 was down 51.55 points, 0.3%, at 18,387.00.
The index was brought back to life after US consumer confidence improved in November which saw US markets push ahead after a subdued start.
Rolls-Royce Holdings PLC (LSE:RR.) was the star performer, with shares up 6.2% after it unveiled mid-term financial targets ahead of its eagerly awaited Capital Markets Day.
Broker upgrades underpinned B&M European Value retail and Lloyds Banking Group PLC (LSE:LLOY) which rose 2.0% and 0.8% respectively.
Heading the other way were Pearson, down 3.7%, after being downgraded by BNP Exane, and Prudential, down 2.6%, as Jefferies cut its price target highlighting issues in Vietnam.
3:56pm: Jefferies lowers Prudential target on Vietnam concerns
Jefferies has lowered its price target and estimates for Prudential to factor in the impact of the industry-wide slowdown of bancassurance sales in Vietnam.
Though only 7% of Prudential's Annual Premium Equivalent comes from Vietnam, Jefferies cautiously presumes that Bancassurance sales (c.51% of this) fall to near zero in the near term.
The broker explained that accusations of life insurance miss-selling at peers have emerged in Vietnam, largely in the bancassurance channel.
Specifically, it appears that some bank staff had persuaded customers to buy life insurance investment products, which carry higher fees and commission than bank deposits, selling the proposition to customers with the argument that life insurance products have a higher yield.
With 17.5% market share, Prudential is Vietnam's 3rd largest life insurer, after Bao Viet and Manulife.
Like all Vietnamese life insurers, Prudential makes extensive use of bancassurance (via at least 8 banks), selling 94,000 policies through this channel in 2021, of which 38,000 policyholders (41%) cancelled their contracts after just one year.
The broker’s new target for Prudential is 1,800p, down from 1,950p.
3:41pm: US consumer confidence improves
US consumer confidence improved in November, alongside a rising expectations index measuring short-term outlook for the economy, data on showed.
According to the latest Conference Board tracker, the consumer confidence index rose to 102.0 points in November, from October's downwardly revised tally of 99.1.
"This improvement reflected a recovery in the Expectations Index, while the Present Situation Index was largely unchanged," said Conference Board Chief Economist Dana Peterson.
3:32pm: Adobe and Figma deal could eliminate competition says CMA
A $20 billion deal between Adobe and Figma could eliminate competition and harm the UK digital design sector, according to the UK competition watchdog, which will now look at remedies to see if the deal can proceed.
The acquisition in its current form would threaten competition in three software markets: product design, image editing and illustration, the Competition and Markets Authority said in a statement.
The regulator will now consult on its provisional findings and look at potential remedies, which could include blocking the deal. A final decision will be issued by February 25 next year.
3:08pm: Barclays to axe 900 jobs
Barclays PLC (LSE:BARC) is cutting 900 jobs in its UK business as it looks to slash costs in a “disgraceful” pre-Christmas move, trade union Unite has said.
Unite secretary general Sharon Graham said the bank was cutting jobs in compliance, finance, legal, policy, IT and risk to “further boost its massive profits”.
Barclays said it was “taking a number of actions to simplify and reshape the business”, including changes to headcount as automation capabilities are improved.
It added: “We are committed to supporting impacted colleagues through these changes.”
Unite said staff were informed at lunchtime Tuesday.
Sharon Graham, general secretary of Unite, said: "Barclays is disgracefully cutting jobs to further boost its massive profits."
"This is a mega-rich bank that is already on course to make eye-watering profits this year."
Earlier, the Financial Times reported that the lender was considering axing a number of investment banking clients as part of cost-cutting drive.
2:42pm: US markets flat in subdued open
Trading has got underway on Wall Street and it's a muted start to proceedings as the bullish November rally showed signs of grinding to a halt.
Shortly after the opening bell, the Dow Jones Industrial Average was little changed at 35,331.23, the S&P 500 was down 5.62 points, 0.1%, at 4,544.81 and the Nasdaq Composite was down 14.94 points, 0.1%, at 14,226.09.
Investors will have one eye on consumer confidence figures due shortly which come ahead of GDP and inflation figures later in the week.
Stocks on the move include Zscaler which dropped 5.3% as maintained guidance disappointed the Street after a better than expected financial first quarter.
Investors will also track a number of Federal Reserve officials who are set to deliver remarks throughout the day.
Those speakers include Chicago Fed President Austan Goolsbee, as well as Fed Governors Christopher Waller and Michelle Bowman.
2:20pm: BoE's Haskel echoes higher, for longer mantra
The Bank of England’s Jonathan Haskel has warned that interest rates will need to stay higher, for longer, echoing the recent thoughts of the BoE governor.
In a speech at Warwick University, Haskel warned tightness in the UK job market means rates need to be held higher and longer than many expect.
His comments follow this month’s data which showed wages grew more than expected from July to September this year.
Haskel said the unexpected nature of the post-pandemic food and energy price shocks created a large gap between actual inflation and what inflation was expected to be.
“While it is right to think that the direct effect of these energy and food shocks will fade away, they have been so large and so concatenated that it will continue to take some time to work through the system, making inflation persistent.”
1:10pm: Slowdown in Euro bank lending eases
The sharp slowdown in eurozone bank lending showed signs of stabilising in October after a slight pick-up in monthly credit flows for mortgages and corporate loans, according to data from the European Central Bank.
Net mortgage lending rose €12 billion last month, the biggest monthly increase for more than a year, after sharp interest rate rises since last year caused property prices to fall and triggered a big drop in demand for home loans.
How did euro area bank lending and money supply evolve in October? How do they compare with September’s figures? Find out more in the press release https://t.co/CWKW1pASNK pic.twitter.com/4A86xkrEMc
— European Central Bank (@ecb) November 28, 2023
The ECB said the annual growth of lending to residents remained in negative territory, contracting 0.5%, while credit to the private sector grew 0.4% from a year ago, up from 0.2% the previous month.
12:44pm: UK shoppers splash £3.5bn on Black Friday/Cyber Monday weekend
British shoppers spent £3.5 billion online from Black Friday to Cyber Monday, according to industry data, an increase of 5.6% on last year.
Adobe said British shoppers spent more than £1 billion on Black Friday and an additional £2.4 billion over the following three days, a period known as Cyber weekend.
Adobe said British shoppers spent £475 million through ‘Buy Now Pay Later’ services over Cyber weekend, accounting for 13.8% of total online spend and up 15.8% compared with the same period the previous year.
It also said total spending since November 1 had reached £12 billion, up 5.1% on 2022 levels.
12:04pm: US futures point to subdued start in New York
Across the pond and US stock futures were little changed ahead of consumer confidence figures and speeches from a number of Federal Reserve officials.
In pre-market trading, futures for the Dow Jones Industrial Average were little changed, while those for the S&P 500 were 0.1% lower, and contracts for the Nasdaq 100 futures eased 0.1%.
Joshua Mahoney at Scope Markets said investors are taking stock of what has been another strong month of gains, "with these being realised despite the mounting macroeconomic headwinds."
“Yesterday’s miss in reported new home sales for October underlines the fact that rising borrowing costs are taking a toll on the consumer end of the market so despite the Fed perpetuating with its stance that suggests rates won’t be falling any time soon, it’s difficult to argue that the cracks aren’t beginning to show,” he said.
The mood among US consumers is expected to have deteriorated slightly in November, with the Conference Board’s consumer confidence index forecast to decline to a reading of 101 from 102.6 in October.
Elsewhere, US Federal Reserve governor Christopher Waller, Fed governor Michelle Bowman and Chicago Fed president Austan Goolsbee are all due to give speeches.
On the earnings front, Intuit, Workday, CrowdStrike, Splunk and HPE will report quarterly earnings after Wall Street’s closing bell
11:24am: Frasers and B&M favoured by City analysts
Two retailers feeling the love of the City today are Frasers, up 0.4%, and B&M European Value Retail, up 0.3%.
Barclays has started coverage of Mike Ashely’s Frasers with an ‘overweight’ rating and a 1,060p price target.
It thinks the firm is overlooked by many investors, given a low free float and eclectic operations.
“We think this ignores i) being named by Nike and Adidas as a key partner, and ii) potential [medium-term] upside from Financial Services.”
“The group's approach can be unconventional, but the focus is long term, and its track record is strong,” analysts said.
Citi has upgraded B&M to ‘buy’ from ‘neutral’ noting the quasi-defensive nature of its value proposition.
It also thinks the UK will narrowly avoid a ‘consumer recession,” and has raised its price target for B&M to 640p from 540p.
10:38am: Rolls' flies as Erginbilgic looks to back up words with actions
Russ Mould at AJ Bell noted today’s statement from Rolls-Royce shows chief executive Tufan Erginbilgiç has moved from “talking tough about the problems” at the business to identifying the cure.
“Erginbilgiç has clearly recognised this and has met the moment at today’s investor day with ambitious targets for growth,” he pointed out, noting the electric aviation division is to be “flogged off, jobs are being cut and the company is targeting £3.1 billion in free cash flow by around 2027.”
Mould thinks delivering on improving margin in its core civil aerospace division from 2.5% to mid-teens will be a "challenge,” but given Erginbilgiç has been able to put his own team in place “he has few excuses.”
“For all its problems, Rolls-Royce is a business with some inherent strengths – most notably an installed base of engines on global aircraft on which it enjoys lucrative spares and repairs contracts,” Mould said,
“For ‘Turbo Tufan’ it is all about backing up his words with action and he has set himself some clear parameters on which his tenure of the company can be judged.”
10:10am: Lloyds boosted by Morgan Stanley (NYSE:MS) upgrade
Lloyds Banking Group PLC (LSE:LLOY) is outperforming the weak market, up 0.8%, boosted by an upgrade by Morgan Stanley (NYSE:MS).
The investment bank has moved the lender to 'overweight' from 'equal weight' with an increased base case price target of 64p, up from 60p.
The broker said Lloyds is a cash-generative business with a more seasoned book and more than 20% market share.
It sees manageable pricing pressures, and despite higher costs, a steeper yield curve, stronger mortgage flows and lower provisions.
This drives the bank's 13.5% return on total equity expectation for 2024, it said.
Morgan Stanley (NYSE:MS) forecasts around 25-30 basis points cost of risk going forward, factors in dividend per share growing to 3p in 2024, with £2 billion annual buybacks.
This would leave the CET1 ratio at 14.4% by the end of 2025, in line with management guidance, it said.
The broker has a bull case scenario price target 85p which assumes terminal rate at 3.25% with mortgage spread front books stabilising at 85 basis points in 2022-24.
9:52am: Good time to be a home buyer says Zoopla
House sellers are accepting discounts of £18,000 on average in order to agree a deal with buyers, according to a property website.
Zoopla said they are further evidence of a strong buyers' market, as higher mortgage rates hit demand and more supply boosts buyers' choice and negotiating power.
Those who can still afford to move, shop around for a bargain, sifting throu UK Estate Agents well stocked rails to secure an avg discount of £18,000. Further price reductions in London & the South East, avg’ing £25,000 proves a draw for those keen to avoid a commute @Zoopla pic.twitter.com/PDlJJrUmi7
— Emma Fildes (@emmafildes) November 28, 2023
The typical 5.5% discount-to-asking price for achieved for UK property sales is at a five-year high, Zoopla said.
It took the average across all sales, including ones where there would be no discount.
Richard Donnell, executive director at Zoopla, said: "These are the best conditions for home buyers for some years, with more homes to choose from and with sellers more prepared to negotiate on price to agree a sale."
"There is a growing acceptance that what a home might have been worth a year ago is now largely academic given current market conditions," he added.
9:26am: Barclays could ditch thousands of investment banking clients - FT
Barclays is looking at ditching thousands of its investment bank clients amid a strategic overhaul to bolster its bottom line and cut £1 billion of costs, according to the Financial Times.
Chief executive CS Venkatakrishnan is under pressure to reduce Barclays’ reliance on investment banking and return more capital to investors, with a public announcement expected in February.
Barclays is exploring a plan to drop thousands of clients at its investment bank as part of a strategic overhaul https://t.co/p2OMSzwXbM
— Financial Times (@FT) November 28, 2023
The FT said Barclays is likely to focus on cutting ties with its least profitable investment banking clients, citing people close to the situation said.
This could mean ending relationships with more than 2,500 customers out of a total of more than 10,000.
Barclays executives have met several times this year to thrash out the restructuring, according to the report, codenamed Minerva after the Roman goddess of wisdom.
Shares in Barclays are down 0.3%.
9:05am: Shop price inflation cools but threats on the horizon
Shop price inflation fell for the sixth month in a row in November, hitting its lowest level since June 2022, figures have showed.
Annual inflation decelerated to 4.3% in November, down from 5.2% in October, according to BRC-Nielsen Shop Price Index data. This is below the 3-month average rate of 5.3%.
Today at @the_brc we published the latest Shop Price Inflation report, covering the month of November.
???? Shop Price Inflation eases further to 4.3%, down from 5.2% in the preceding month. pic.twitter.com/qBgWiXULXE
— Harvir Dhillon (@HarvirDhillon) November 28, 2023
Non-food inflation cooled to 2.5% in November, down from 3.4% in October, below the 3-month average rate of 3.5%.
Food inflation eased to 7.8% in November, down from 8.8% in October, below the 3-month average rate of 8.9% and the seventh consecutive deceleration in the food category.
Helen Dickinson, chief executive of the British Retail Consortium, said prices cooled as "retailers competed fiercely to bring prices down for customers ahead of Christmas."
"Food inflation eased, thanks to lower domestic energy prices reducing overall input costs, particularly for dairy products," she pointed out.
8:43am: FTSE 100 slides but Rolls-Royce shines
The FTSE 100 has fallen sharply now down 53.64 points at 7,407.06.
Rolls-Royce remains the star performer, up 3.9%, while easyJet’s results have boosted British Airways parent, IAG, up 0.9%.
Melrose Industries is 0.4% after Citi raised its price target to 620p but Pearson fell 1.8% after BNP Exane downgraded to ‘neutral’ from ‘outperform’ and cut its price target to 1,000p from 1,050p.
Lloyds Banking Group PLC (LSE:LLOY) rose 1.2% as Morgan Stanley (NYSE:MS) moved to ‘overweight’ from ‘neutral’ and B&M European Value retail climbed 0.8% as Citi upgraded to buy from neutral.
Prudential was another as both UBS and Jefferies reduced their price targets for the insurer – both kept a ‘buy’ rating on the stock though.
8:18am: FTSE 100 opens lower but Rolls-Royce motors
The FTSE 100 opened lower despite gains in Rolls-Royce following its strategic update and a report showing a welcome drop in shop price inflation.
At 8:15am, London’s lead index was down 20.85 points, 0.3%, at 7,439.85 while the FTSE 250 was down 22.81 points, 0.1%, at 18,415.74.
Rolls-Royce motored 4.5% higher after unveiling new mid-term financial targets, plans for sales of up to £1.5 billion and improved margins across the board.
Chief Executive Tufan Erginbilgic’s said the firm was “at a pivotal point in its history,” and that it was “creating a high performing, competitive, resilient and growing Rolls-Royce that will have the financial strength to control and shape its own destiny.”
easyJet also rose 2.8% after returning to full-year profit and restoring its dividend.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown said: “easyJet has once again shown how its best-in-class operation has set it up for success.”
“The group’s measured expansion at high-calibre airports has proved an especially shrewd move, as has the supercharged effort to push easyJet holidays.”
“In a time when cost and convenience are the ultimate precursors to whether or not customers will splash on a trip, easyJet has been able to scoop up lots of existing demand in its net.”
Elsewhere, Frasers rose 1.6% after Barclays started coverage with an overweight rating and 1,060p price target.
7:55am: Rolls eyes improved margins, cost savings and sales
A big strategic overhaul at Rolls-Royce ahead of today's Capital Markets Day.
The firm plans disposals of up to £1.5 billion as it unveiled mid-term financial targets which are set to “deliver record future performance,” as Chief Executive Tufan Erginbilgic’s turnaround continues.
The company said it was aiming to become “financially stronger and more resilient” than it has been before targeting operating profit of £2.5-£2.8 billion, operating margin of 13-15%, free cashflow of £2.8-£3.1 billion and a return on capital of 16-18%.
Erginbilgic said the firm was “at a pivotal point in its history,” and that it was “creating a high performing, competitive, resilient and growing Rolls-Royce that will have the financial strength to control and shape its own destiny.”
By 2027, the firm expects operating margins in Civil Aerospace to improve from 2.5% in 2022 to 15-17%, in Defence from 11.8% in 2022 to 14-16% and in Power Systems from 8.4% in 2022 to 12-14%.
Rolls-Royce said its focused strategy has identified investment priorities, partnership opportunities and supports a £1-£1.5 billion disposal programme over next 5 years.
“We will only sell assets at the right time and at the right price,” it said, adding that it was looking at options at Rolls-Royce Electrical while Advanced Air Mobility would “represent good value to a third party,”
It plans to focus on its core electrical engineering activities in Power Systems, Defence and Civil Aerospace.
Across all of its businesses the firm expects to deliver sustainable savings of £400-£500 million in the mid-term.
Rolls said current trading is in line with expectations and guidance for 2023 was reconfirmed.
Engine flying hours for large civil engines on long term service agreements were 86% of 2019 levels for the 10 months to end of October and in line with our expectation for 80%-90% for the full year.
7:30am: easyJet returns to profit, restores dividend
We start Tuesday with news that easyJet PLC swung back into profit for the full-year, after a record second half despite a challenging external operating environment and high fuel costs.
The budget airline operator reported full-year pre-tax profit for the year ended September 30 of £455 million compared to a pre-tax loss of £178 million the year prior as revenue jumped 42% to £8.17 billion.
easyJet Holidays profits grew 221%, delivering £122 million profit before tax, passenger numbers rose 19% to 82.8 million while airline revenue per seat (RPS) increased 21% to £79.84.
The airline also reinstated the dividend with a 4.5p payout and expects the dividend to increase to 20% of headline profit after tax in the new financial year.
Looking ahead, the firm reported a positive outlook for financial 2024 with October RPS up 12% and first quarter RPS expected to be ahead year-on-year despite being impacted by Middle East conflict.
EasyJet said second quarter through to the fourth quarter RPS are all ahead on the year before with cost per seat in the first half expected to be broadly flat.
easyJet holidays is expected to grow more than 35% in the new financial year with average selling prices up high single digits.
Johan Lundgren, easyJet's chief executive officer said: “We see a positive outlook for this year with airline and holidays bookings both ahead year on year and recent consumer research highlights that around three quarters of Britons plan to spend more on their holidays versus last year with travel continuing to be the top priority for household discretionary spending.”
7:00am: Subdued start expected in London
The FTSE 100 is expected to make a subdued start to the day after falls in US markets.
Spread betting companies are calling London’s lead index down by around 2 poin ts after closing down 27.50 points, 0.4%, at 7,460.70 on Monday.
Figures showing that UK shop price inflation fell for the sixth month in a row in November, hitting levels not seen since June 2022, should support the mood.
Annual inflation decelerated to 4.3% in November, down from 5.2% in October, according to BRC-Nielsen Shop Price Index data.
Aside from the inflation figures, investors will be scrutinising updates from easyJet, Pets at Home, Greencore and Treatt amongst others, while later US consumer confidence figures will be released.