- FTSE 100 closes up 76 points at 7,529
- House prices rise 0.2% in November
- Miners jump on positive China data
4.49pm: FTSE zooms higher at the close
London's main index finished the week on a high note, up 1% on the day to reach a closing level of 7,529 points.
3:53pm: Rishi Sunak announces £11bn offshore wind investment
Rishi Sunak has said energy companies Masdar and RWE (ETR:RWE) will invest £11 billion into an offshore wind farm in the UK, set to be “the world’s biggest”.
The Prime Minister was speaking at the COP28 Summit in Dubai, where he’s trying to stress his commitment to green causes after shelving key policies earlier this year.
Announcing the investment into the North Sea Dogger Bank wind farm, Sunak said “this is a huge boost for UK renewables, creating more jobs, helping to power 3 million homes and increasing our energy security.”
3:22pm: US manufacturing dips, ECB official says rate hikes over over
Some manufacturing data in the US to report which will add to the belief that the next move in interest rates will be down.
The S&P Global manufacturing PMI survey has shown that US manufacturers reported a renewed deterioration in operating conditions in November, as they were hit by a fall in new orders.
The S&P Global’s US manufacturing PMI fell to 49.4 in November, showing a small contraction, after stagnating in October while the Institute for Supply Management survey showed a sharper contraction, remaining at 46.7% in November for the second month running.
The European Central Bank isn’t ready to consider lowering borrowing costs now, but will examine the question at some point during 2024, Bank of France Governor Francois Villeroy de Galhau said.
“Barring any shock, rate hikes are now over,” Villeroy said at a conference near Paris. “The question of a cut may arise when the time comes during 2024, but not now: when a remedy is effective, you have to be patient enough on its duration.”
Villeroy said that euro-zone data on Thursday, showing a marked slowdown in consumer-price growth, shows that the process of disinflation “is even faster than expected,” notably in services, according to the comments provided by the Bank of France.
The cumulative effect is the FTSE has jumped to its best levels for the day, up 77 points.
2:44pm: US markets mixed, FTSE 100 strong
US stocks opened mixed as investors looked ahead to ISM manufacturing data and comments from Federal Reserve Chair Jerome Powell.
Shortly after the opening bell, the Dow Jones Industrial Average was up 25.45 points, 0.1%, at 35,976.34, the S&P 500 was down 9.33 points, 0.2%, at 4,558.47 and the Nasdaq Composite was down 67.22 points, 0.5%, at 14,159.00.
Powell is due to speak twice on Friday and investors will digesting his words carefully as the market continues to think interest rates will be cut sooner than originally thought.
Stocks on the move include Pfizer, down 6.7%, after it said it will focus on a once-daily formulation of its obesity pill after a mid-stage study on a twice-daily version showed that while it had a significant effect on weight reduction, side effects forced many participants to stop taking it.
Study participants achieved a weight reduction of as much as 13% over 32 weeks, Pfizer said, but high gastrointestinal side effects were reported.
It said the twice-daily formulation would not progress to late-stage trials.
Shares of media conglomerate Paramount Global climbed 1.3% following a report from the Wall Street Journal that the company has discussed bundling its streaming service with Apple.
2:14pm: 'Last mile' inflation narrative doesn't make sense
The idea being that bringing inflation down to a 3% to 4% range was easy, but getting it to a 2% level will be harder.
But Donovan thinks the “last mile” narrative does not make a great deal of sense, explaining there is plenty of evidence that the last mile of inflation is a sprint, not a slog.
He pointed out the transitory durable goods price inflation ended in a freefall of inflation rates.
It took just nine months for US durable goods prices to go from an all-time record inflation rate to deflation while durable goods disinflation in the UK and Europe has been almost as fast.
In developed economies, fewer and fewer items have inflation above 2% and higher inflation is a story for a relatively narrow universe of services (and very few goods).
This makes it harder to credibly claim that 3% is some magic barrier that central bankers must strive to overcome, he thinks.
As the “last mile” narrative of inflation stickiness looks increasingly implausible, central bankers must ask themselves if they are content to be raising real interest rates faster than they anticipated, he said.
1:08pm: Pfizer shares dip on obesity pill setback
A bit of news from the US where shares in Pfizer where the stock has fallen around 4% ahead of the open in trading after its highly touted weight loss pill showed significant side effects, stopping people from using it.
Pfizer will focus on a once-daily formulation of the pill after the mid-stage study on a twice-daily version showed that while it had a significant effect on weight reduction, side effects forced many participants to stop taking it.
Study participants achieved a weight reduction of as much as 13% over 32 weeks, Pfizer said, but high gastrointestinal side effects were reported.
It said the twice-daily formulation would not progress to late-stage trials.
Weight loss injections have boosted the fortunes of companies such as Denmark’s Novo Nordisk (NYSE:NVO), while AstraZeneca recently ventured into the industry.
Data on Pfizer’s once-daily oral pill is expected in the first half of 2024.
Shares in Novo Nordisk (NYSE:NVO) fell 1.7% while AstraZeneca fell from earlier highs.
12:05pm: US futures flat ahead of Powell speeches
US markets are expected make steady progress when trading resumes on Friday ahead of manufacturing data and speeches from the chair of the Federal Reserve, Jerome Powell.
In pre-market trading, futures for the Dow Jones Industrial Average were up 0.2%, while those for the S&P 500 were flat, and contracts for the Nasdaq 100 futures were down 0.1%.
The Dow touched a new 2023 high on Thursday and capped off its best month in more than a year while the S&P and Nasdaq also posted bumper gains in November.
After a busy week of ‘Fedspeak’, Jerome Powell will have his say today. The chair of the US central bank is due to speak not once, but twice, including a fireside chat and a roundtable discussion later in the day. while the president of the Federal Reserve Bank of Chicago Austan Goolsbee also speaks today.
Investors will also cast a careful eye over the Institute for Supply Management’s manufacturing purchasing managers’ index which is expected to have increased to 47.6 in November from 46.7 in October, as the manufacturing sector continues to struggle amid higher interest rates.
Positive manufacturing data from China should also boost sentiment, after the sector posted an unexpected increase in activity according to the Caixin manufacturing PMI.
11:41am: Smiths climbs after 'informative' CMD
Smiths Group (LSE:SMIN) has climbed 1.0% after its Capital Markets Day yesterday.
Analysts explained the presentation was focused on John Crane, the group’s largest division.
Liberum said while there were no changes to financial guidance, it re-affirmed its positive investment thesis.
The presentation highlighted the resilience of John Crane’s high margins, showed how energy transition is an opportunity for John Crane, and that Smiths has the capacity to invest to keep or grow share as energy markets transition.
Overall, Liberum said confidence in its John Crane estimates was reinforced by the upbeat demand outlook as detailed in the management presentations and as supported by the current strong orderbook.
It has ‘buy’ rating and 2,150p price target.
Barclays decsribed the event as “informative,” showing Crane was a division which is in a multi-year growth cycle and continuing to see ‘strong order growth’.
Barclays has an ‘oveRWE (ETR:RWE)ight’ rating on Smiths.
11:15pm: Five reasons to buy Dr Martens, says BofA
Dr Martens PLC (LSE:DOCS) has put its best foot forward today, rising 6.2%, after receiving a kicking from the City on Thursday after another profit warning and analysts haven’t given up hope on the iconic boot maker.
Bank of America has highlighted five reasons to buy the stock although it has cut its price target to 135p from 165p.
The investment bank said DM is simply too cheap at 12x 2025 EPS compared to peers trading at 15x, changes are underway, the brand isn’t broken, return on capital employed is as good as peers and this is peak bad news after five profit warnings since July 2022.
It sees the firm “nearer to the end of an earnings downgrade cycle,” with meaningful change “underway” at the business.
“This leaves a potentially cleaner equity story ahead,” it believes.
BofA has a ‘buy’ rating on Dr Martens.
Barclays was less upbeat, keeping an ‘equal weight’ rating on the stock.
“Tthis is not stand out cheap vs our coverage, where companies that are thus far delivering vs guidance trading on similar multiples,” it said.
10:44am: Manufacturing outlook remains sluggish
The EY ITEM Club notes that although November’s manufacturing PMI of 47.2 remained in contractionary territory, it was the highest in seven months.
The PMI has consistently come in weaker than the official manufacturing data this year, so November’s improvement brings it more into line with the story told by the ONS, it said.
Meanwhile, manufacturers’ input costs continued to decline, with price falls across a wide range of goods, meaning the economic forecaster thinks inflation will fall faster than the Bank of England and the consensus expect.
Martin Beck, chief economic advisor to the EY ITEM Club, said the outlook for manufacturers "is mixed."
"The shift in global consumption from services to goods during the pandemic has reversed to a degree, creating a headwind to manufacturers following a period of strong demand."
"But with consumer spending patterns stabilising, that obstacle to growth should at least not get any worse. In addition, relatively energy-intensive manufacturing has benefited from lower energy prices," he added.
He pointed out manufacturers continue to face a significant obstacle to demand posed by a rise in interest rates and uncertainty stemming from geopolitical tensions isn’t helping.
Overall, he thinks manufacturing faces the same sluggish outlook likely to characterise the wider economy in the near-term.
But 2024 should deliver an improvement, as interest rates fall and the full gains of lower cost pressures materialise, he added.
09:57am: UBS upgrades Anglo American and Antofagasta
As mentioned earlier, mining stocks are climbing on the back of a surprise rise in manufacturing in China, boosting hopes that demand for commodities will remain strong from the world’s second largest economy.
Top of those risers are Anglo American and Antofagasta, up 7.3% and 4.4% respectively, after they received an additional boost from UBS which upgraded both stocks to ‘buy’ from ‘neutral’.
On Anglo, UBS pointed out the stock is down 40% from the high in January 2023, underperforming Rio and BHP by around 28% due to weakness in platinum group metals (PGM) and diamonds, concerns about Woodsmith, and ongoing operational challenges.
But the Swiss bank believes the risk/ reward is now attractive with Anglo to benefit from improving copper prices in 2024/25, resilient iron ore & met-coal prices, as well as recovering PGM & rough diamond prices.
In 2024 it expects operational performance to gradually improve & more than $1 billion of working capital to be released.
It also thinks the market now ascribes no value to Woodsmith. 2,500p
On Antofagasta, UBS thinks the bottom-up investment case is attractive.
It expects a combination of organic volume growth and unit cost improvement to drive superior earnings growth compared to mining peers in the next 3-5yrs and believes earnings growth will drive attractive returns.
On top of this it believes the copper market is also close to a fundamental inflection point with the company one of the few 'lower risk' large cap global copper miners that offers leverage to copper price upside.
UBS has a 2,500p share price target for Anglo, and a 1,700p target for Antofagasta.
09:39am: Manufacturing picks up but brings little 'festive cheer'
The UK manufacturing sector showed signs of improving in November although it remained fiirmly in contraction territory, according to figures from S&P Global.
The S&P Global/CIPS UK manufacturing PMI posted 47.2 in November, up from 44.8 in October, rising for the third successive month to its highest level since April.
It was ahead of City expectations for a reading of 46.7.
UK S&P Global/CIPS Manufacturing PMI Nov F: 47.2 (est 46.7; prev 46.7)
— LiveSquawk (@LiveSquawk) December 1, 2023
Although production contracted for the ninth consecutive month, the rate of decline eased sharply to its second-weakest during that sequence, the report showed.
November saw all five of the PMI components (new orders, output, employment, suppliers' delivery times and stocks of purchases) remain at levels consistent with a deterioration in operating conditions, albeit to lesser extents than in the prior survey month.
Job losses were registered for the fourteenth successive month, the report showed.
However, Rob Dobson, director at S&P Global Market Intelligence, said the latest PMI report “brings little festive cheer when the finer details are considered.”
“With new order inflows and exports continuing to fall sharply, and clients destocking, a sustained meaningful growth revival still looks elusive,” he said.
“Manufacturers are preparing for tough times ahead, with their continued caution leading to cutbacks in staffing, inventories and purchasing,” he added.
09:18am: ITV dips as Deutsche highlights weak ad market
Shares in ITV PLC (LSE:ITV) eased 2.1% after Deutsche Bank downgraded the stock highlighting the weak advertising market.
The German bank has moved the UK broadcaster to ‘hold’ from ‘buy’.
It still believes ITV's approach to streaming is the right one in a crowded market and ITV Studios is a valuable asset that could see mid-single-digit growth in the mid term.
“But in the near term, with TV ad revenue likely to decline 10% in the fourth quarter and the market showing little sign of recovery, we move to the sidelines,” it said.
Deutsche also cut its price target to 80p from 100p.
08:52: Tesco misses out on stock rally as JP Morgan downgrades
Tesco PLC (LSE:TSCO) is a prominent faller in an otherwise upbeat market after JPMorgan moved the food retailer to ‘underweight’ from ‘neutral’.
The investment bank downgraded the sector in September based on disinflation triggering lower like-for-like sales, impacting margins and valuations.
It sees this recurring in 2024/25, sitting around a double digit percentage below the Street EPS consensus.
Underpinning its cautious sector stance, JPM has downgraded Tesco to ‘underweight’ from ‘neutral’ and now rates six stocks in the sector as 'underweight'.
Shares in Tesco are down 1.9% at 280.60p.
08:36am: Miners lead FTSE 100 higher
Mining stocks are leading the FTSE 100 higher after a closely watched private survey of Chinese factory activity showed a surprise rise in manufacturing activity in November.
Caixin’s China general manufacturing purchasing managers’ index rose to 50.7, indicating a month-on-month increase in activity and well above the 49.3 forecast by economists.
Factories were supported by a rise in domestic orders, while export activity declined at a faster pace than in the previous month.
The figures contrast with the official PMI released on Thursday, which showed activity contracting for a second month. The official PMI puts a greater emphasis on larger, state-owned companies.
Duncan Wrigley at Pantheon Macroeconomics stressed that while “erratic” the Caixin PMI was more optimistic than the official gauge for November.
Wrigley noted cost pressures are abating and firms have a reasonably rosy 12-month outlook.
Anglo American rose 4.5%, Rio Tinto rose 2.7%, Antofagasta rose 2.3% and Glencore rose 2.0%.
Separately, UBS moved Anglo American and Antofagasta to ‘buy’ from ‘neutral’.
08:15am: Stocks jump, miners and housebuilders rise
The FTSE 100 opened higher in the wake of positive economic data in China and a surprise rise in UK house prices.
At 8:15am London’s lead index was up 60.22 points, 0.8%, at 7,513.97 and the FTSE 250 rose 41.17 points, 0.2%, at 18,274.64.
Nationwide reported that house prices rose for the third month in a row boosting hopes that the UK housing market might be stabilising.
The lender’s house price index showed prices rose by 0.2% month-on-month from October.
But Gabriella Dickens at Pantheon Macroeconomics warned not to “get too excited about the prospect of a sustained recovery just yet.”
She thinks the rise in Nationwide’s index over the last couple of months will reverse in the very near term and a material recovery in house prices still looks a few months away yet.
Nonetheless, shares in housebuilders took heart and advanced in early trading – Taylor Wimpey rose 0.9%, Barratt Developments climbed 0.6% and Berkeley Group gained 1.1%.
Mining stocks jumped after a closely watched private survey of Chinese factory activity showed manufacturing defying expectations and expanding in November, buoyed by stronger demand.
Anglo American rose 4.0%, with an additional boost of an upgrade by UBS to 'buy' while Antofagasta rose 2.1% as the Swiss bank also raised the stock to 'buy'.
Elsewhere, Pearson failed to join in the rally, falling 0.3%, as Deutsche Bank downgraded to ‘hold’ from ‘buy’ and ITV dropped 1.3% as the German bank made a similar cut to its rating.
07:58am: Van Elle trading in line in challenging markets
Van Elle Holdings PLC (AIM:VANL) remains confident of meeting City expectations despite challenging markets and rising prices.
In a trading update, the UK's largest ground engineering contractor said the group's results for the six months to October 31 are in line with the board's expectations.
“This reflects a resilient operational performance despite challenging market conditions, continuing inflationary pressures and delayed project starts,” it said.
The company expects to report revenue for the period of around £68 million, down 16% on the year prior, but expects to report operating profit margins consistent with the prior year.
It said the balance sheet remains strong, with a net funds position (excluding IFRS16 lease liabilities) of £8.9 million at the period end.
But the firm cautioned there continues to be uncertainty and subdued activity levels in some of the group's end markets, particularly the housebuilding sector, which is expected to continue into the second half of the financial year.
However, further progress has been made on several substantial growth opportunities in the energy sector.
The order book at 31 October increased to £32.7 million from £30.8 million at the end of April, which excludes framework agreements and preferred bidder positions, providing a strong platform entering the second half.
In addition, Van Elle said it had completed the acquisition of Rock and Alluvium Ltd and expects the deal to be accretive to underlying earnings in the first full year of ownership.
07:55am: AstraZeneca cuts two trials for Lokelma
AstraZeneca PLC (LSE:AZN) has discontinued the STABILIZE-CKD and DIALIZE-Outcomes Phase III evidence trials for Lokelma, used in the treatment of hyperkalaemia, a chronic condition characterised by high potassium levels in the blood.
“The decision was made due to substantially increased enrolment timelines and low event rates, respectively, which made it prohibitive to deliver study results within a timeframe to meaningfully advance clinical practice”, the drug maker said.
The decision to discontinue the trials has nothing to do with safety and the positive benefit-risk of Lokelma does not change, the FTSE 100-listed firm stressed.
07:36am: House prices rise for third month in a row - Nationwide
UK house prices rose 0.2% month on month in November in the latest sign the housing market may be stabilising, latest figures showed.
The Nationwide House Price Index showed that on annual basis prices fell 2.0%, an improvement from October’s 3.3% annual decline.
Robert Gardner, Nationwide's chief economist, said it was the “third successive monthly increase,” with the annual figure “the strongest outturn for nine months.”
“There has been a significant change in market expectations for the future path of Bank Rate in recent months which, if sustained, could provide much needed support for housing market activity,” he said.
“In mid-August, investors had expected the Bank of England to raise rates to a peak of around 6% and lower them only modestly (to c.4%) over the next five years.”
“By the end of November, this had shifted to a view that rates have now peaked (at 5.25%) and that they will be lowered to around 3.5% in the years ahead,” he added.
Earlier, this week figures from the Bank of England showed a bigger than expected jump in mortgage approvals boosting hopes that the housing market could be showing signs of life.
07:00am: Blue-chips called higher after Dow ends November with a flourish
The FTSE 100 is expected to make a bright start after strong gains by US blue-chips and ahead of a raft of PMI readings in Europe, the UK and US.
Spread betting companies are calling London’s lead index up by around 29 points after closing up 30.29 points, 0.4%, at 7,453.75 on Thursday.
In the US on Thursday, Wall Street ended mixed, with the Dow Jones Industrial Average up 1.5%, rising more than 500 points, the S&P 500 up 0.4% and the Nasdaq Composite down 0.2%.
Equities received a boost on Thursday from cooling inflation figures in the US and Europe raising hopes that interest rates would be cut sooner than thought.
Energy stocks will be in focus after the oil price slipped despite Opec agreeing a further production cut.
This ws soon followed by figures which showed US oil production hitting record levels easing fears over supply.
Michael Hewson noted: “Concerns over weak demand and an economic slowdown has also weighed on oil prices with Brent prices falling for the 2nd month in a row, despite OPEC+ agreeing an additional 1m barrel a day production cut on top of the original Saudi cut announced in April this year.”
“The announcement of the new agreement was immediately overshadowed by Angola breaking ranks and saying it would continue to pump as before, and seeding doubt as to whether other OPEC members would do the same.”
“Overshadowing the cut, the announcement the US reported record output of its own of 13.2m barrels a day, with the IEA saying it expected to see the oil market return to surplus next year.”
Back in London, and the early focus will be the Nationwide House Price Index with manufacturing PMI figures due at 09:30 GMT.