- FTSE 100 down 26 points at 7,429
- Halfords slumps after big ticket sales fall
- Aviva knocked by Deutsche Bank downgrade
4:40pm: FTSE 100 fails to join equity rally but mid-caps climb
The FTSE 100 underperformed its European and US peers on Wednesday dragged lower by energy and financial stocks.
At the close, London's blue-chip index closed down 31.78 points, 0.4%, at 7,423.46 while the FTSE 250 rose 80.58 points, 0.4%, at 18,467.58.
Chris Beauchamp at IG noted the FTSE 100 failed to join the party as European and US markets climbed.
“Once more it is the FTSE 100 that has been left behind by its peers."
"A mixture of stocks, but containing some heavyweight names like HSBC, have taken the index lower."
"A rallying pound won’t help matters, but the lack of any continued rebound this year speaks to continued disillusion among global investors regarding the prospects for the UK economy.”
Leading the risers was Fresnillo, supported by recent strength in gold and silver prices, while a positive statement from US peer Foot Locker lifted JD Sports Fashion.
A jump in mortgage approvals boosted Rightmove while an upgrade by Deutsche Bank boosted M&G. The same broker downgraded Aviva which fell back.
3:52pm: Diageo at risk of more earnings cuts - JPMorgan
Diageo PLC (LSE:DGE) is expected to see a softer financial 2024 organic delivery with material headwinds from a demand and inventory normalization in Latin America & the Caribbean, an uncertain path in North America while China and Europe momentum is less than had been anticipated, according to JPMorgan.
As a result, the investment bank has downgraded the Johnnie Walker owner to ‘neutral’ from ‘overweight’.
“While Diageo trades at a larger-than-historical average discount to International Spirits, we see further earnings downside risks from weakening discretionary demand, mix headwinds and earnings downside in spirits, while management has yet to regain investors confidence post the recent warning,” the bank said.
Shares are down 0.9%.
3:14pm: German inflation slips to lowest level since 2021
German inflation has fallen much more than expected, as lower consumer energy prices in Europe’s largest economy pushed the headline rate down to 2.3 % in November, the lowest level since June 2021.
The figure, following lower than forecast Spanish inflation figures, signals that eurozone inflation is likely to fall more than expected when that data is released on Thursday.
Germany’s federal statistical agency said annual consumer price growth was lower in all categories, helping the EU harmonised rate fall from 3%in the previous month. Economists had forecast a much smaller drop to 2.7%.
Core inflation, excluding energy and food, was 3.8%, down from 4.3% in the previous month.
2:45pm: FTSE 100 slips further despite strong start in the US
The FTSE 100 has failed to be inspired by events in Europe, and now a positive start in the US has seen it fall further.
In New York, the Dow opened higher after figures showed the world’s biggest economy grew faster than first thought, while a bumper buyback saw shares in General Motors jump more than 10%.
Shortly after the opening bell the Dow Jones Industrial Average was up 83.58 points, 0.2%, at 35,500.56, the S&P 500 was up 29.61 points, 0.7%, at 4,584.50 and the Nasdaq Composite was up 124.22 points, 0.9%, at 14,405.97.
General Motors was the star performer with shares leaping 10.9% after the company announced a $10 billion buyback and raised its dividend.
The Detroit, Michigan-based car maker also reinstated guidance and now expects net income between $9.1 billion and $9.7 billion, down from its previous range of $9.3 billion and $10.7 billion.
In the third quarter, the firm withdrew its guidance due to labour disruptions.
Elsewhere, figures from the Bureau of Economic Analysis showed quarter-on-quarter gross domestic product in the US grew 5.2% on an annualised basis in the three months to September 30, ahead of expectations for a revision to 5.0%. In the second-quarter, GDP had risen 2.1%.
An earlier advance estimate, reported a month ago, said the US economy grew by 4.9% on-quarter during the period.
The BEA said: "The update primarily reflected upward revisions to nonresidential fixed investment and state and local government spending that were partly offset by a downward revision to consumer spending. Imports, which are a subtraction in the calculation of GDP, were revised down.
"The increase in real GDP reflected increases in consumer spending, private inventory investment, exports, state and local government spending, federal government spending, residential fixed investment, and non-residential fixed investment."
US GDP has grown for five quarters in succession.
2:13pm: Endeavour, Fresnillo and Greatland Gold jump on rising precious metals prices
Gold and silver miners continue to shine benefiting from the recent rally in precious metals prices.
The price of gold has risen 2.5% this week alone, taking it back above the $2,000 an ounce mark, currently trading at $2,038.73/ounce, while the price of silver has enjoyed an even better week, up 5.7%.
The share prices in gold miner Endeavour Mining PLC is up a further 3.1% today, taking gains in the past month to more than 10%, while gold and silver miner, Fresnillo PLC has jumped 5.8% today, and 6.7% in the past month.
Greatland Gold PLC (AIM:GGP, OTC:GRLGF) is another stock to benefit, rising 5.7% today, and a bumper 26% in the past month.
Susannah Streeter, head of money and markets, Hargreaves Lansdown explains the price has gold has been helped by the dip in the dollar as interest rate cuts are eyed on the horizon.
“A cheaper greenback makes gold less expensive to buy for foreign investors,” she pointed out.
“The eruption of conflict in the Israel and Gaza sparked this most recent rally. Although there are hopes a truce can be extended, there is deep uncertainty about what might lie ahead for the region, which is making gold edge higher,” she added.
1:07pm: High Court kicks out challenge to LME
The High Court has rejected an attempt by a US hedge fund to sue the London Metal Exchange for nearly half a billion dollars over its decisions when nickel prices spiked dramatically last year.
The court disagreed with Elliott Management's claims that the LME did not have the power to cancel a series of trades.
The move cost Elliott about $456 million in lost net profits, the court in London heard.
A second claimant, Jane Street Global Trading, said that it had lost around $15 million.
Elliott said it would make a bid to appeal against the decision.
The exchange's managers suspended trading in nickel for a day in early March last year after an enormous spike in the price of the metal.
12:48am: JD Sports boosted as Foot Locker raises sales outlook
The FTSE 100 is trying its best to move into positive territory, trading close to its opening levels now.
JD Sports Fashion has spiked 4.5% higher after US peer Foot Locker raised its full-year sales after a strong Thanksgiving period.
Admittedly, the footwear retailer still expects sales to fall but by less than previously guided - shares in Foot Locker are more than 8% higher in pre-market trading in the US.
JD’s share price got a similar push last week after another US peer Dick’s Sporting Goods raised its profit outlook after posting sales that were “meaningfully ahead” of analyst expectations.
In Europe, peers Adidas and Puma are up 1.9% and 2.2% respectively.
12:10pm: US markets expected to open higher
US markets are expected to open higher, tracking most European markets, on hopes that interest rate cut will come sooner than thought.
In pre-market trading, futures for the Dow Jones Industrial Average were up 0.3%, while those for the S&P 500 were 0.3% higher, and contracts for the Nasdaq 100 futures rose 0.4%.
Investors are hoping for favourable European and US inflation readings after positive data in Europe today, boosting the narrative that rates could soon be coming down.
Jim Reid at Deutsche Bank noted comments from the generally hawkish Fed Governor Waller on Tuesday, who said that he was “increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2%”.
“His off the cuff Q&A responses even suggested cuts were potentially possible in H1 if inflation behaves as he thinks it could. So surprisingly explicit,” Reid pointed out.
Reid said the remarks were taken as another sign that the Fed were done hiking rates, and investors moved to price in a noticeably more dovish path for rates over the year ahead.
In the US today, there will be a estimate for gross domestic product in the third quarter, which economists expect will show growth accelerated by 5%, a slight revision from the preliminary estimate of 4.9%.
Elsewhere, earnings are due from discount retailer Dollar Tree, spam maker Hormel and shoe retailer Foot Locker.
After the closing bell, tech groups Salesforce and Snowflake will report.
11:49am: European markets jump on good inflation news
While the FTSE 100 sticks in the red, other European markets have soared on positive inflation figures from Spain and Germany.
The Dax in Frankfurt is 0.9% higher, the CAC-40 in Paris is 0.4% to the good and the Ibex in Madrid has climbed 0.6%.
Spanish inflation has declined for the first time since June, after lower fuel and tourism prices helped to bring down the headline rate, defying expectations of a further rise.
The Spanish statistics office said the harmonised index of consumer prices was up 3.2% in November, compared with 3.5% in the previous month and below the 3.7% level forecast by economists.
The figure added to hopes that eurozone inflation may fall more than expected when that data is released on Thursday.
Core inflation, excluding energy and fresh food, dropped from 5.2% to 4.5%, its lowest level since April 2022.
In Germany, a drop in regional indicators are pointing towards a sharp pullback in German CPI which is released this afternoon.
ING said the incoming inflation data "continues to be very encouraging."
"The Spanish and German regional inflation data for November so far points to a larger-than-expected drop in eurozone inflation. That data will be out tomorrow, and could be another surprise to the downside."
11:25am: Recovery in mortgage approvals likely to be muted
Imogen Pattison at Capital Economics said with mortgage rates easing, the rise in mortgage approvals in October confirms that the trough in mortgage approvals is behind us.
But with mortgage rates unlikely to fall much below 5% until H2 2024, mortgaged demand is likely to remain weak by normal standards, she thinks.
Figures from the Bank of England showed a substantial rise in mortgage approvals for home purchase from 43,000 in September to 47,000 in October, above the 45,000 consensus.
However, it still leaves approvals 28% below the pre-pandemic average of 66,000.
Pattison noted the rise followed the declines in mortgage rates from their peak of 5.9% in July to 5.7% in August while further falls in quoted rates since to about 5% now suggests mortgage approvals will continue to climb in the months ahead.
She estimates that mortgage rates will hover close to 5% until the second half 2024 meaning the recovery from here will be muted, with approvals only rising to 600,000 in 2024 still someway short of their usual level of around 800,000 before the pandemic.
10:48am: OECD warns not to expect rate cuts before 2025
While some US Federal Reserve officials are talking about possible rate cuts, the OECD tthinks central banks in western Europe may need to keep interest rates at high levels until 2025, much longer than financial markets are expecting, to guard against stubborn inflationary pressures,.
In its latest economic outlook, the Paris-based OECD said it expected the European Central Bank to hold its policy rate at current levels until the spring of 2025, while the Bank of England might not start reducing borrowing costs until the first months of that year.
OECD: DON'T EXPECT ECB RATE CUTS BEFORE SPRING 2025
— Neil Wilson (@marketsneil) November 29, 2023
That would mean keeping rates high for a longer time than the Federal Reserve, which the OECD said would start cutting in the second half of next year.
The prospect of sticky inflation came alongside a softening growth outlook amid tighter financial conditions, slower trade expansion and ebbing business and consumer confidence, the OECD said.
10:03am: Mortgage approvals surprise on the upside
Better news for the housing market - UK mortgage approvals rose more than expected in October, according to data by the Bank of England that suggests an easing in the housing downturn.
Net mortgage approvals for house purchases rose to 47,400 in October from 43,700 in September, data showed on Thursday - above the 45,000 forecast by economists but about 28% below its October 2019 level.
Net approvals for remortgaging also increased, to 23,700 in October from 20,600 in September.
The ‘effective’ interest rate - the actual interest paid - on newly drawn mortgages saw a 24 basis point increase and now sits at 5.25%.
Net borrowing of consumer credit by individuals amounted to £1.3 billion in October, down from £1.4 billion in the previous month.
9:33am: Deutsche warms to Direct Line, L&G and M&G, cuts Aviva
Deutsche Bank has taken a more upbeat view of the European insurance sector with Direct Line and Legal & General among its top picks but question marks over Aviva PLC (LSE:AV.) prompted its rating to be lowered.
The German investment bank said an expectation of bond yields having peaked, a generally muted outlook for credit spreads, and a continuation of ongoing [property & casualty] price increases provides “the right environment for a stronger relative performance for the European Insurers – supported by increasingly resilient balance sheets.”
“In this context, our Top Picks seek out relative laggards where momentum should be increasingly in their favour,” the bank said, highlighting Direct Line and Legal & General in the UK.
Within the UK life sector which the broker said “has been unloved over the past few years” it sees positive catalysts skewing in the favour of L&G and M&G - both of which are upgraded to ‘buy’ from ‘hold’.
But small earnings headwinds and questions around excess capital return at Aviva has prompted a downgrade to ‘hold’ from ‘buy’.
Deutsche has also upgraded Direct Line to ‘buy’ from ‘hold’ and thinks “we will see evidence the group is being steered on the right path: first, via a dividend reinstatement with FY23 results; second, with margin expansion from above-market pricing; and third, with volume growth in 2024.”
Price targets for Aviva move from 495p to 485p, for L&G from 290p to 295p, M&G from 230p to 250p and Direct Line Group from 170p to 250p.
Elsewhere in the sector, the bank rates Admiral at ‘hold’, price target from 2130p to 2280p, Phoenix Group Holdings at ‘hold’, price target from 630p to 540p, and Prudential at ‘buy’, price target from 1420p to 1400p.
Shares in Aviva fell 1.7%, but Direct Line, L&G and M&G rose 0.3%, 0.5% and 1.7% respectively.
9:08am: Halfords downgrades "unfortunate rather than careless"
The market has been unforgiving with today’s update from Halfords sending shares 17% lower.
The cycle and car retail and repair specialist has guided the City to the lower end of previous profit guidance as reporting softer sales of big ticket items.
Peel Hunt said while there was plenty to be “impressed by, strategically and tactically,” the problem is that “hardly any of the broader markets have lived up to the growth expectations set out in the summer, so profit is becalmed.”
The broker has lowered financial 2024 pre-tax profit forecasts by £5 million to £50 million and taken £10 million off each of the outer years.
Halfords has tightened its profit guidance to a range of £48-53 million.
“We sense this could be too cautious,” Peel Hunt said, but it added conditions could hardly be any more difficult for Halfords, especially in tyres and bikes.
But the broker felt the downgrades are “unfortunate rather than careless, and we urge investors to look at the glass half full, as we see value here.”
“It may take the consumer perking up for it to emerge, but we are sure it will,” the broker added.
8:47am: FTSE 100 slips but Fresnillo lifted by rise in gold and silver
The FTSE 100 is now down 23 points at 7,433, a touch above early lows, with Asia-focused banks HSBC and Standard Chartered top of the fallers.
The recent rise in the price of silver and gold continues to drive Fresnillo, up 3.5% and Endeavour Mining, up 1.5%, while hopes of an early interest rate cut are sending property firms such as Land Securities, up 1.6%, and Segro, up 1.8%.
Other companies to watch include Deliveroo which is hosting a Capital Markets Event today.
The food delivery outfit said there will be no new disclosures on current trading, with management reiterating its guidance for the full year 2023.
But it said one further driver of growth will be the expansion of its platform to encompass retail, such as DIY, homeware and electrical goods.
“This enhancement of our offering will leverage our existing capabilities to bring more of the neighbourhood to consumers’ doors”, the firm said in a statement.
Shares are 2.2% higher.
Harbour Energy is 2.9% to the good after the UK North Sea oil and gas firm maintained its production and cash flow forecasts and said market conditions for M&A activity in the sector are improving.
Elsewhere, Diageo slipped 0.5% as JPMorgan downgraded the owner of Johnnie Walker to ‘neutral’ from ‘overweight’.
“We remain most cautious on Spirits given risks of EPS downgrades and relatively high valuation versus the staples sector,” the investment bank said.
8:15am: Rising pound keeps a lid on blue-chips
The FTSE 100 opened lower after a fresh spike in the pound amid dovish comments from a leading US Federal Reserve official.
At 8:15am, London’s lead index was down 28.94 points, 0.4%, at 7,426.40 while the FTSE 250 rose 64.34 points, 0.4%, at 18,451.34.
Jim Reid at Deutsche noted comments from the generally hawkish Fed Governor Waller, who said that he was “increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2%”.
“His off the cuff Q&A responses even suggested cuts were potentially possible in H1 if inflation behaves as he thinks it could. So surprisingly explicit,” Reid pointed out.
Reid said the remarks were taken as another sign that the Fed were done hiking rates, and investors moved to price in a noticeably more dovish path for rates over the year ahead.
The comments hit the dollar, which sank to a three-month low, boosting the pound, which traded above $1.27, hitting some of the dollar earners in London’s lead index.
Halfords plunged 19% after lowering guidance to the lower end of previous expectations after warning of softening big ticket sales.
Peel Hunt said while the first half print was largely in line with hopes, there is little sign of markets picking up.
It has lowered financial 2024 pre-tax profit forecasts from £55 million to £50 million, and taken £10 million off each of the outer years.
“The downgrades are unfortunate rather than careless, and we urge investors to look at the glass half full, as we see value here”, the broker said.
Elsewhere, stocks on the move include Aviva, down 2.0%, after Deutsche Bank downgraded to ‘hold’ from ‘’buy’.
The German investment bank has taken a more positive view on Direct Line, Legal & General and M&G all upgraded to buy from hold in a review of the European insurance sector.
7:53am: Competition watchdog to probe supermarket loyalty schemes
Loyalty schemes used by supermarkets such as Tesco and Sainsbury to lure customers with discount deals will be examined by the UK’s competition watchdog.
The Competition and Markets Authority plans a review of loyalty scheme pricing by supermarkets, considering its impact on consumers and competition in the groceries sector.
Sarah Cardell, chief executive of the CMA, said we have seen an increase in the use of loyalty scheme pricing by supermarkets, which means that price promotions are only available to people who sign up for loyalty cards.
“This raises a number of questions about the impact of loyalty scheme pricing on consumers and competition and the CMA will launch a review in January 2024”, she added.
The CMA also plans to examine further whether ineffective competition in the baby formula market could be leading to parents paying higher prices.
The report showed similar to other products evidence suggests that branded suppliers of baby formula have also increased their prices by more than their input costs.
The CMA found some branded suppliers have pushed up prices by more than their costs increased, but in most cases, shoppers can find cheaper alternatives.
“In all but one of the relevant product categories the CMA looked at, as food prices have risen, many consumers have switched away from brands towards own label alternatives, or reduced their consumption, leading to a decline in brands’ market shares and profits.”
“This switching is positive for competition and allows those able to switch, to lessen the impact of high food price inflation.”
7:33am: Halfords lowers sights as warns of softer big ticket sales
We start today with news that Halfords Group PLC (LSE:HFD) tightened guidance to the lower end of previous expectations as it warned of a softening in discretionary big ticket products.
The car and cycle retail and repair specialist now expects financial 2024 underlying pre-tax will fall within a narrower range of £48-£53 million, compared to the £48-£58 million before.
The firm said B2B businesses and needs-based categories are continuing to show very strong growth but trading patterns have been volatile across the first half of the year.
In the 26 weeks to September 29, Halfords reported revenue growth of 13.9% to £873.5 million with Iike-for-like sales growth of 8.3% achieved despite a “challenging macro environment.”
Pre-tax profit advanced 3.3% to £19.3 million from £18.7 million with underlying EPS up 13.4% to 7.6p.
Looking beyond 2024, assuming markets recover in line with projections, Halfords remains confident in ts mid-term target of £90-£110 million underlying pre-tax profit.
7:00am: Stocks called lower but pound climbs on doish Fed words
The FTSE 100 is expected to open lower while the pound climbed against the dollar after dovish remarks from officials of the US Federal Reserve.
Spread betting companies are calling London’s lead index down by around 20 points after closing down 5.46 points, 0.1%, at 7,455.24 on Tuesday.
"I am increasingly confident that policy is currently well positioned to slow the economy and get inflation back to [the Fed’s target of] 2%," Christopher Waller, of the Fed's most hawkish policymakers, told the American Enterprise Institute think-tank.
"If we see disinflation continuing for several more months - I don't know how long that might be, three months, four months, five months...you could then start lowering the policy rate just because inflation's lower."
"Markets chose to focus on Waller’s comments given his previously hawkish stance on rates in a sign that the consensus was starting to shift on the [Federal Open Market Committee]," said Michael Hewson at CMC Markets.
The comments helped push sterling back above $1.27 against the dollar.
Today, the economic focus will be US GDP figures with European and US inflation data tomorrow.
“The US GDP data is expected to confirm a nearly 5% growth in Q3 with an amazing 4% growth on consumer spending and inflation in Europe is expected to continue to ease. Keep in mind that a robust US growth is positive for the USD, and softening inflation is negative for the euro,” said Ipek Ozkardeskaya at Swissquote Bank.
Back to London, and the early corporate focus will be updates from bike and car retail and repair specialist Halfords, oil firm Harbour Energy and utility Pennon.