- FTSE 100 closes down 1.7 points at 7,513
- Admiral to buy More Than for up to £115 million
- British Airways owner, IAG, falls after downgrade
4:45: FTSE ends flat
The FTSE 100 recovered earlier losses to close almost unchanged on Thursday, supported by a positive showing for tech stocks on Wall Street.
At the close, the blue-chip index was down 1.7 points, less than 0.1%, at 7.513.72 while the FTSE 250 shed 48 points, 0.26%, to 18,618.74.
While new US initial unemployment benefits claims picked up slightly last week, they were lower than expected. Investors are now hoping tomorrow's non-farm payrolls will boost hopes for an earlier-than-expected pivot in interest rates.
“Investors hoping for some further clues as to the state of the US labour market were left empty-handed by today’s claims figure," commented IG's Chris Beauchamp.
"Barring a shock payroll reading tomorrow, Wall Street seems to be in a holding pattern until the Fed decision next week.”
By the London close, the Dow Jones Industrial Average was flat at 36,046, the S&P 500 was up 0.6% at 4,578 and the Nasdaq Composite was 1.2% higher at 14,309.
3:54pm: Admiral agrees to buy More Than for up to £115 million
Admiral Group Plc (LSE:ADM) has agreed to buy the More Than personal home and pet cover business from RSA Insurance in a deal worth up to £115 million.
The car insurer will buy the UK personal insurance operations and More Than brand from RSA for £82.5 million upfront and a further potential £32.5 million depending on how many policies ultimately transfer over.
Around 300 RSA staff will transfer to Admiral as part of the deal, which will see the group take on the renewal rights to about £165 million of annual premiums.
But Cardiff-headquartered Admiral said it plans to only retain the More Than brand for pet insurance.
3:17pm: Deutsche sees ECB rate cut in April
Deutsche Bank has brought forward its expectations for rate cuts in Europe.
"Given the latest inflation data and the tone of official commentary, we fear we were too timid," the bank said.
"The risk is now earlier and larger cuts, and an ECB more capable of decoupling from the Fed," it added.
The bank has brought the first cut forward to April 2024, and sees a significant risk of a cut in March.
"We now expect the ECB to cut 150bp in 2024 (100bp previously), with 50bp cuts back-to-back in April and June," Deutsche added.
The ECB announces its next interest rate decision on December 14, and Deutsche expects the ECB to acknowledge that inflation has declined more rapidly than expected but to be coy about declaring victory prematurely.
"We expect the ECB to keep the guidance that maintaining restrictive rates for sufficiently long will bring inflation back to target in a timely manner."
2:48pm: Tech stocks lift Wall Street, Alphabet flies over 5%
US markets climbed led by tech issues as investors took the view tomorrow's non-farm payrolls will boost hopes for an earlier than expected pivot in interest rates.
Shortly after the opening bell, the Dow Jones Industrial Average was up 15.84 points at 36,070.27, the S&P 500 rose 21.49 points, 0.5%, at 4,570.83 and the Nasdaq Composite jumped 142.83 points, 1.0%, to 14,289.54.
Shares of Google-parent Alphabet leapt 5.6% as investors cheered the launch of its Gemini AI model, an update to Bard.
Google Bard will now be powered by an AI model called Gemini, which Google says can deliver more advanced reasoning, deeper understanding and more.
In economic news, new US initial unemployment benefits claims picked up slightly last week, though were lower than expected.
According to the US Department of Labor, initial jobless claims totalled 220,000 in the week ended December 2, rising slightly from 219,000 a week prior, below the consensus reading og 222,000.
The previous week's reading was upwardly revised from 218,000.
The four-week moving average moved higher to 220,750 from 220,250 while continuing jobless claims for the week ended November 25 decreased to 1.861 million from 1.925 million.
Nancy Vanden Houten at Oxford Economics said: "Looking past the noise, initial claims remain at a level that is consistent with relatively low layoffs, while the continued claims data suggest that some unemployed individuals may be finding it more difficult to find new jobs."
"We think the claims data, along with other recent labor market statistics, are consistent with a job market that is cooling enough to rule out further rate hikes, but still healthy enough to preclude rate cuts from consideration any time soon."
But despite the bright start, the FTSE 100 has fallen back once more, down 12 points.
2:15pm: Mondi confirms to special dividend from Russian exit proceeds
Shares in Mondi PLC (LSE:MNDI) has risen 1.3% after it said it would pay a special dividend now that it has received final payments from sale of Syktyvkar.
The packaging firm said in September it had entered into an agreement to sell its last remaining facility in Russia to Sezar Invest LLC and said today it has received proceeds of around €775 million..
Mondi said the proceeds will be distributed by a special dividend, which it said allowed "a timely return of cash" to shareholders plus a associated share consolidation,.
If approved, the special dividend is expected to be paid, and the share consolidation to take effect, in the first quarter of 2024.
1:03pm: Somerset Capital Management to wind down
Somerset Capital Management, the boutique fund manager co-founded by Tory MP Sir Jacob Rees-Mogg, is to wind down after large client redemptions made the business unsustainable, according to the Financial Times.
At its peak in 2018 had $10 billion in assets under management and as recently as four years ago rejected a bid of up to £90 million from London-based rival Artemis Investment Management.
The FT reported on Saturday that Somerset had lost more than two-thirds of its assets after its largest client, St James’s Place, severed ties.
12:32pm: Kelso calls on THG to demerge once more
THG’s investor Kelso has once more called on the company to consider a demerger.
Kelso pointed out that over recent weeks, the market has seen a growing and concerning trend of high-quality smaller UK companies exiting the London Stock Exchange.
It firmly believes that THG's sum of the parts is worth significantly more than the company's current market capitalisation, and specifically that a demerger announcement is the most compelling route to resolving the inherent disparity between THG's share price and its fundamental fair value.
It pointed out that many of the larger global peers for THG's Nutrition business trade on over 3-7x sales valuation multiples, while several of the larger global Beauty brands trade on 3-5x sales.
By comparison, THG trades on around 0.5x sales, it noted.
“Kelso believes that the UK stock market will not ascribe a sum of the parts valuation to THG, until the company publicly confirms its intention to demerge its businesses,” it said.
Such a demerger would allow each part of the business better access to capital to deliver further growth and build upon their market leading positions, it suggested, highlighting examples including Whitbread's demerger of Costa Coffee in April 2018 and GSK's Consumer Healthcare business in July 2021.
John Goold, CEO of Kelso commented: “We believe that the market would respond well to a formal confirmation of a demerger of THG.”
12:04pm: Mixed start expected on Wall Street
Across to the US where a mixed start is expected as the recent rally continues to stall ahead of tomorrow’s jobs report.
In pre-market trading, futures for the Dow Jones Industrial Average were down 0.2%, while those for the S&P 500 were flat and contracts for the Nasdaq 100 futures climbed 0.2%.
Joshua Mahony at Scope Markets said “looking ahead, US unemployment claims data comes into view as we gear up for Friday’s jobs report.”
“With both initial and continuing jobless claims on the rise of late, there are tentative signs that the US economy is finally starting to feel the squeeze.”
“Nonetheless, we are yet to see any significant uptick in unemployment, with the Fed likely to remain confident that they have managed to land the perfect soft landing despite a historic monetary tightening policy seen over the past two-years,” he noted.
Ahead of tomorrow’s jobs data, initial applications for US state unemployment aid, a proxy for lay-offs, are expected to have ticked up to 222,000 last week from 218,000 the prior week.
Elsewhere, results from discount retailer Dollar Tree are due before the market opens while Canadian athletic apparel maker Lululemon will disclose numbers after the market close.
Stocks to watch include online pet products retailer Chewy which tumbled 10.2% in pre-market trading after the company issued a weak forecast for fourth quarter net sales.
Back in London, the FTSE 100 has continued to edge back towards opening levels, now down just five points.
11:38am: Lloyds price target slashed but still a 'buy' at Jefferies
Lloyds Banking Group PLC (LSE:LLOY) slipped 1.0% after broker Jefferies cut earnings estimates and slashed its price target for the UK’s largest lender.
The bank has made material cuts to net interest income forecasts on lower net interest margin (NIM) expectations, higher deposit churn and lower base rate benefits with the favourable tailwind from structural hedge income not set to be a full offset until the third quarter of 2024.
It expects NIM to trough in the first quarter of 2024 at 301 basis points.
But while the bank has cut 2023-25 earnings by an average of 10%, it maintains predictions for £7.5 billion of cumulative buybacks over this period.
It is the scale of the share buy-backs – around 26% of the bank’s market value – and 14-15% return on total equity sustains value creation, in Jefferies view.
But given recent industry trends and the company’s own experience, notably in the third quarter, the broker has cut its NIM forecasts by 4bps for 2023 and 26bps for 2024, followed by 12bps in 2025.
Jefferies keeps a ‘buy’ rating on Lloyds but has slashed its price target to 62p from 80p.
11:15am: Thunderstorm losses push catastrophe insurance claims pass $100bn
Record loss from thunderstorms will push Insured losses from natural catastrophes past the $100-billion threshold for the fourth year running in 2023, reinsurance giant Swiss Re has said.
Despite this, the estimated total amount of insured losses in 2023, at $108 billion, is down by 23% from $141 billion recorded in 2022, the insurer said.
Total economic losses were estimated at $269 billion, a 9% drop from 2022.
Insured losses from severe thunderstorms reached an all-time high of $60 billion in 2023, while the February earthquake in Turkey and Syria was the costliest natural catastrophe to date for the year, the insurer said.
"With 2023 expected to be the warmest year on record, the effects of climate change are becoming apparent," the company added.
Natural catastrophes accounted for the overwhelming majority of the insured and total losses, the report showed.
Swiss Re noted in particular the impact of a rising number of low-to-medium severity events.
"The cumulative effect of frequent, low-loss events, along with increasing property values and repair costs, has a big impact on an insurer's profitability over a longer period," Swiss Re's Group Chief Economist Jerome Haegeli.
"The high frequency of severe thunderstorms in 2023 has been an earnings' test for the primary insurance industry," he added.
Swiss Re has calculated that losses from severe thunderstorms have steadily increased by 7% annually over the last 30 years.
10:40am: Kin & Carta jumps after increased bid
Shares in Kin & Carta PLC have jumped 8.3% after Apax Partners LLP raised its bid for the software consultancy.
Apax is now offering 120p for every K&C share, up from 110p before, valuing the firm at £258 million.
K&C said it recommended the bid which was described as an "increased and final" offer.
10:02am: AJ Bell jumps more than 10% after 'record' results
Shares in AJ Bell PLC (LSE:AJB) have risen more than 10% after reporting "record" annual results, helped by rising customer numbers, while its best-ever net inflows outcome sent assets under management higher.
The trading platform said revenue in the year ended September 30 leapt 33% to £218.2 million from £163.8 million while pre-tax profit jumped 50% to £87.7 million from £58.4 million.
Assets under administration climbed 11% to £70.9 billion from £64.1 billion a year earlier.
Chief Executive Michael Summersgill said that while a "challenging environment" is likely to continue in the short-term, AJ Bell has promising long-term prospects.
9:37am: Big energy deal on the cards as Woodside and Santos confirm talks
There could be another big deal in the energy sector after Australia’s two largest oil and gas companies confirmed press speculation that they are in talks over a potential A$80 billion merger.
Woodside Energy and Santos said that they had opened talks over a potential merger that, if consummated, would largely consolidate Australia’s LNG sector into one company.
Woodside, which is valued at A$57 billion, said talks were “incomplete” and there was “no certainty that discussions would lead to a transaction”.
Santos, worth A$22 billion said the talks were “preliminary” and that it was assessing “a range of alternative structural options” to unlock value.
9:24am: Future profit forecasts seen falling 15% on investment plans
Away from the FTSE 100, there are some chunky price moves to report.
Future has dipped 20% after announcing a cost-cutting program designed to cull up to £30 million from overheads after a slowdown in the US led to a 19% drop in profitability.
The firm which has been dogged by weak advertising markets expects low-single-digit top-line growth but expects the investment programme to drive accelerating revenue growth of mid-single digit CAGR over the next three years.
Analysts at Peel Hunt doesn’t expect to change its revenue forecasts for 2024 but said the added investment is pointing to a 15% downgrade to profit estimates.
9:05am: Burberry out of fashion as Deutsche cuts target...again
Another blue-chip on the wane include Burberry Group PLC (LSE:BRBY), down 2.3%, after Deutsche Bank cuts its price target for the second time in two weeks.
The German bank has cut its target to 1,600p from 1,950p after a previous reduction at the end of November from 2,200p.
Deutsche, which has a ‘hold’ rating on the luxury brands retailer has left 2024 forecasts broadly unchanged but cut its 2025 EPS expectations by 11% with a 4% cut to its sales forecast to £3.29 billion and Ebit to £549 million from £616 million.
This flows through into a 14% cut to 2026 EPS forecasts giving adjusted Ebit of £609 million down from £701 million.
8:36am: British Airways owner, IAG, flies low amid downgrade
The FTSE 100 remains in the doldrums, and leading the fallers is British Airways owner, IAG PLC, down 3.1%.
Shares have fallen after JPMorgan downgraded the airline, after taking a more cautious on the sector, given potential for large capacity increases to bring yields down against a backdrop of weaker economic growth.
The investment bank prefers low cost carriers to the networks due to capacity constraints which could aid pricing.
The long-haul supply picture looks more difficult given network capacity increases in particular on Transatlantic, JPM said.
The broker said lower margins and elevated fuel/ex-fuel cost pressure mean unit revenues are unlikely to grow.
Balance sheets and valuations do not look overly stretched; however, earnings pressure could send stocks lower, in the broker’s opinion.
JPM has moved IAG to ‘underweight’ from ‘neutral’ and Lufthansa and Air-France KLM to ‘underweight’ from ‘overweight’ with its top pick RyanAir – rated ‘overweight’.
It remains neutral on easyJet and Wizz Air.
8:15am: FTSE 100 follow US and Asian markets lower
The FTSE 100 opened lower, tracking US and Asian markets as investors take stock ahead of Friday’s non-farm payrolls.
At 8:15am, London’s lead index was down 25.50 points, 0.3%, at 7,489.88 and the FTSE 250 was down 115.18 points, 0.6%, at 18,551.55.
Frasers edged 0.6% higher after backing its full-year outlook following a strong first half performance.
Mike Ashely’s retailer highlighted a strong performance at Sports Direct and at its international business but warned of a subdued trading in its Premium Lifestyle arm.
Analysts at Shore Capital said Frasers is a distinctive business carrying a wide range of views amongst investors “but at its heart it is well-run, growing now and set to do so for the foreseeable future.”
“Not all of its operating pistons are firing at this time, particularly Premium Lifestyle, but the group is signaling adjusted pre-tax profit of £500-550 million, and so we keep our £517 million estimate in place for now,” they said.
One notable faller is IAG PLC, the owner of British Airways, which has fallen 3.5%, after being downgraded by JPMorgan to ‘underweight’ from ‘neutral’ in a sector review which also sees downgrades for Germany’s Lufthansa and the Franco-Dutch airline Air France-KLM (OTC:AFLYY).
Vodafone is also under pressure, down 1.4%, after Exane BNP cut the telco to ‘underperform’ with a price target of 68p
But Smart Metering Systems soared 42% after agreeing a £1.3 billion from private equity outfit, KKR.
7:52am: House prices nudge higher, says Halifax
UK house prices nudged higher in November, according to figures from Halifax.
The lender’s House Price Index showed prices rose by 0.5% in November, following a rise of +1.2% in October.
On an annual basis, property prices dropped by 1.0%, dropping from a 3.1% decline in October.
Halifax said a typical UK home now costs £283,615, around £1,300 more than last month.
The reports showed south east England continues to see most downward pressure on house prices.
Kim Kinnaird, director, Halifax Mortgages, said that over the last year, “despite the wider economic headwinds, property prices have held up better than expected.”
But she explained the resilience continues to be underpinned by a shortage of properties available, rather than any significant strengthening of buyer demand.
On a more optimistic note, Kinnaird suggested that with mortgage rates starting to ease slightly, this may be leading to increased buyer confidence.
“However, the economic conditions remain uncertain, making it hard to assess the extent to which market activity will be maintained.”
“Other pressures – like inflation, the broader cost of living, overall employment rates and affordability – mean we expect to see downward pressure on house prices into next year,” she said.
7:44am: Smart Metering snapped up by KKR in £1.3 billion deal
Smart Metering Systems PLC (AIM:SMS) has become the latest company to be snapped up after agreeing a bid approach from US private equity outfit Kohlberg Kravis Roberts.
The integrated energy infrastructure company said it had agreed a cash bid worth 965p per share valuing the firm at around £1.3 billion on a fully diluted basis, implying an enterprise value of around £1.4 billion.
This is a 40.4% premium to Wednesday’s 680p closing price.
“The offer price represents a significant premium to the current share price and allows shareholders to realise immediate and attractive value for their shareholding,” the company said.
For its part, KKR said it believes that SMS is a business of high quality, with a best-in-class management team and long-term, contracted and inflation-protected cashflow streams.
KKR believes that SMS, under private ownership, will be able to accelerate its growth and continued transition from a metering provider and grid-scale battery storage operator to a fully integrated, end-to-end energy infrastructure company which owns, installs and manages carbon reduction assets.
7:33am: Frasers upbeat as Sports Direct drives strong first half
Frasers Group PLC (LSE:FRAS) said it was heading into the Christmas trading period with great momentum as it said strong trading at Sports Dircet and in its international businesses had underpinned a strong first half.
“This strong trading momentum continued throughout the first half of FY24 and into the early recent weeks of the second half especially at Sports Direct,” said Michael Murray, chief executive.
“We are looking forward to our Christmas trading period and remain confident of achieving APBT in the range £500-£550 million,” he added.
In the 26 weeks ending October 29, Mike Ashley’s diversified retail group reported a 4.4% increase in revenue to £2.77 billion up from £2.65 billion the year before with pre-tax profit climbing 8% to £310.2 million from £287.2 million before.
Margin improved to 43% from 42.7% while adjusted basic jumped 18.3% to EPS 53.7p from 45.4p.
Sales in the UK sports retail business edged 0.8% higher to £1.49 billion while International Retail sales leapt 13.2% to £645.8 million.
This was helped by a strong trading performance from Sports Direct reflecting the continuing success of the elevation strategy and strengthening brand relationships, Frasers said.
Murray said: “"We have delivered a strong performance in the first half of the year, with great momentum as we head into the Christmas trading period.”
But he cautioned that progress in its Premium Lifestyle business are likely to remain subdued for the short to medium term in the face of a softer luxury market although he remained confident of long-term prospects.
7:00am: FTSE expected to open lower tracking Asian and US markets
The FTSE 100 is expected to open lower after falls In Asian markets amid mixed Chinese trade figures, while US markets reversed early gains to close in the red.
Spread betting companies are calling London’s lead index down by around 30 points after closing up 25.54 points, 0.3%, at 7,515.38 on Wednesday.
China reported stronger than expected export growth on Thursday, breaking six consecutive months of contraction, but imports unexpectedly shrank, indicating persistent softness in demand in the region’s largest economy.
"Asia markets on the other hand have struggled with the latest set of Chinese trade numbers pointing to an economy that is still struggling, and a downgrade by Moody's on China's credit outlook, along with downgrades to banks, and other small companies which looks set to weigh in the European open this morning, in the wake of weakness in Asia markets," said CMC Markets analyst Michael Hewson.
In the US, Wall Street ended lower, with the Dow Jones Industrial Average down 0.2%, the S&P 500 down 0.4% and the Nasdaq Composite down 0.6%.
Back in London, and the early focus will be updates from Balfour Beatty, DS Smith, Watches of Switzerland and Frasers.