- FTSE 100 down 1 points at 7,554
- House prices fall 1.9% in December, Rightmove
- Citi raises Rolls-Royce target to 431p
4:40pm: Stocks end slightly lower after late rally
Stock prices in London nursed modest losses at the close on Monday as investors tread a careful path ahead of US inflation figures and central bank meetings this week.
At the close, London's blue-chip index was down 9.58 points, 0.1%, at 7,544.89 while the FTSE 250 ended up 48.40 points, 0.3%, at 18,750.39,
Equities had earlier opened lower after China's economy slipped further into deflation in November, according to official figures released on Saturday.
But a stronger-than-expected start in the US, saw equities in London rally in afternoon trading with the S&P 500 touching a 52-week high on Wall Street.
Rolls Royce led the risers, gaining 2.6% after Citi increased its share price target to 431 pence from 294p following the recent Capital Markets Day.
Leading the fallers was Endeavour Mining, down 3.5%, while gold and silver mining firm, Fresnillo fell 1.7%, after falls in the price of gold and silver.
SSE fell 2.1% after UBS downgraded to 'neutral' from buy while St James's Place fell 1.2% after Bank of America downgraded to 'neutral' from 'buy'.
4:02pm: More consolidation in the US energy sector
More consolidation in the US energy sector, with US producer Occidental Petroleum winning an auction to buy CrownRock, an energy producer in the west Texas area of the Permian basin.
Occidental is acquiring CrownRock in a mixture of cash and stock in a transaction valued at approximately $12.0 billion, including taking on CrownRock’s debt.
Occidental says the deal will add 170,000 barrels of oil equivalent per day to its output, and also give it around 1,700 undeveloped locations where fossil fuels can be produced.
3:25pm: St James's Place dips amid BofA downgrade
St James’s Place has dipped 1.2% after analysts at Bank of America downgraded the stock to ‘neutral’ from ‘buy’ in a wide-ranging sector review.
The bank favoured UK insurance play is Beazley
We think the insurance sector remains in excellent operational shape as we enter 2024
e think 2024 may have a difficult start, with banks providing stern competition and the sector trading at a historically high PE-relative
We think one of the key ‘buy triggers’ for the insurance sector in 2024 could be normalisation of the yield curve.
Other UK-listed stocks on the ‘buy’ are Hiscox, M&G, Phoenix and Prudential.
Admiral, Direct Line and Quilter are on the ‘sell’ list.
2:46pm: US stocks mixed ahead of CPI, rate decision
US stocks made a mixed start ahead of key economic data and the final rate call of the year by the Federal Reserve.
Shortly after the opening bell, the Dow Jones industrial Average was up 81.10 points, 0.2%, at 36,328.97, the S&P 500 was little changed at 4,603.28 and the Nasdaq Composite was down 39.48 points, 0.3%, at 14,364.50.
The US central bank is widely expected to leave interest rates unchanged on Wednesday as the market continues to speculate when rates will be lowered.
Bank of America explained that since the November meeting, the bulk of incoming data has pointed to moderation in economic activity, disinflation, and a cooling labor market.
“We think that this has increased the Fed's confidence that its current policy stance is appropriate and sufficiently restrictive.” it said.
“If so, upcoming Fed decisions will likely be more about how long to maintain its current policy stance than whether additional policy rate firming is needed,” BofA added.
With regard to tomorrow’s inflation figures, the bank expects headline and core CPI to rise by 0.0% m/m and 0.3% m/m, respectively, in November.
Energy prices should hold down headline inflation, while lodging away from home and used cars should lead to a firmer core, it thinks.
In company news, Occidental Petroleum, up 1.1%, has agreed to acquire Texas shale driller CrownRock, in a deal valued at about $12 billion, including debt.
The Houston-based company backed by Warren Buffett beat competition from rival bidders that had also tried to snap up CrownRock’s shale assets.
Elsewhere, Macy’s jumped 17% after reports that the company received a buyout offer.
People familiar with the matter told CNBC that two investment firms have offered to buy Macy’s for $5.8 billion, or $21 per share.
2:14pm: Mixed takes on utilities at UBS and Morgan Stanley
Utility stocks have attracted plenty of comment from City analysts today.
The team at UBS has rejigged some ratings and price targets in the sector with National Grid upgraded to ‘buy’ from ‘neutral, SSE PLC (LSE:SSE) downgraded to ‘neutral’ from ‘sell’ with British Gas owner, Centrica, kept as ‘neutral’ with an increased price target of 165p, up from 145p.
In water stocks, United Utilities is rated ‘neutral,’ Severn Trent at ‘sell’ and Pennon Group at ‘buy.’
Meanwhile, at Morgan Stanley (NYSE:MS) the utilities team have also been busy with a note looking ahead to 2024.
“We expect Utilities to outperform in 2024 given attractive valuation, continued operational-driven EPS upgrades, defensive attributes, policy support and sensitivity to rate moves.” Morgan Stanley (NYSE:MS) said.
In contrast to UBS, the bank includes SSE and Severn Trent as two of its top picks – rated ‘overweight.’
National Grid, United Utilities and Drax are also rated ‘overweight.’
1.33pm: Here’s a look at the risers and fallers on the junior market today
DG Innovate PLC (LSE:DGI)'s stock soared by 155% following the announcement of a board restructuring and the appointment of three new directors, all former Tesla execs.
Joining the reshaped team are Peter Bardenfleth-Hansen as CEO, Christian Eidem and Jochen Rudat as executive directors.
Shares of Mast Energy Developments PLC (LSE:MAST) surged by 23% following the announcement that its board has received assurances from Proventure and its funders regarding the payment of an initial £2 million to the joint venture.
Synectics (AIM:SNX), the security camera group, shot up by over a quarter as it said results for the year ended 30 November 2023 would be materially ahead of market expectations.
1:05pm: Could Shein list in London?
Could the London stock market be in line with a much-needed boost?
Sky Business reports that the fast-fashion giant Shein has held talks with the London Stock Exchange about the possibility of staging a “blockbuster public listing” in the UK, even after filing documents paving the way for a flotation in New York.
EXCLUSIVE: The chairman of Shein, the Asian fast-fashion behemoth which last month filed documents to pave the way for a blockbuster New York listing, met executives from the London Stock Exchange last week to discuss the option of a UK flotation. https://t.co/9hJSl6g1oY
— Mark Kleinman (@MarkKleinmanSky) December 11, 2023
Sky said Donald Tang, Shein's executive chairman, met executives from the LSE and other stakeholders in the UK economy during a visit to London last week.
The report noted City sources said the discussions were focused on the possibility of a listing in the UK, with one saying the Singapore-based behemoth was continuing to explore various options for raising capital through a public share sale.
However, a US listing remains the likeliest outcome for Shein, according to bankers and people close to the company, while a dual listing in both financial centres is said to be unlikely.
12:34pm: Goldman trims FTSE 100 forecast, ups pound estimates
Goldman Sachs (NYSE:GS) has nudged its target for the STOXX Europe 600 index higher, but trimmed its outlook for the FTSE 100 as it begins to price in earlier expectations for rate cuts in Europe.
The investment bank now expects the first European Central Bank rate cut in April 2024 and the first Bank of England rate reduction in August.
Much of this has already been priced in the bank said, pointing out European equities are up 10% since October.
In the UK, Goldman has lowered its 3-, 6- and 12-month targets for the FTSE 100 to 7600, 7700 and 7900 (from 7700, 7800 and 7900).
In Europe, it has a more positive view, and has raised its STOXX Europe 3-, 6- and 12-month targets to 470, 480 and 500 (from 450, 460 and 480.
“This provides a 7% price return over 12 months but is flat over 3 months, reflecting the bounce we have already seen,” it said.
In Europe, Goldman has taken banks down to neutral given that rates will be declining.
In the UK, it has removed the short recommendation on UK Real Estate.
Goldman has also revised its forecasts for the pound raising to $1.25, $1.30 and $1.30 in 3, 6 and 12 months (from $1.18, $1.20 and $1.25 previously.
The bank said the British currency will benefit from the BoE starting its easing cycle later than the Federal Reserve and the ECB, which are expected to cut rates in the first half of the year.
“If the BoE sticks with its ‘tabletop’ approach even if its peers are moving to earlier cuts, this should support sterling, especially if it is in a context of a global move towards ‘adjustment’ cuts that are also generally supportive for risk sentiment,” Goldman said.
12:08pm: US futures point to weak start on Wall Street
US futures are pointing to a subdued start to the week as investors look ahead to consumer prices inflation data on Tuesday and the interest rate decision by the Federal Reserve on Wednesday.
In pre-market trading, futures for the Dow Jones Industrial Average were flat, while those for the S&P 500 were down 0.1% and contracts for the Nasdaq 100 futures declined 0.2%.
The US central bank is expected to maintain the fed funds rate steady in the 5.25%-5.5% range but it will be comments regarding the future path of monetary policy that will grab the headlines.
Richard Hunter at interactive investor said: “The Fed’s interest rate decision and accompanying comments will be of particular interest to investors, especially given the recent rally in stocks on optimism of an end to the hiking cycle and the gradual move towards monetary easing.”
Stocks to watch include Macy’s, up 21% in pre-market trading, after reports that an investor group consisting of Arkhouse Management and Brigade Capital has made a $5.8 billion offer to take department store chain private.
11:38am: Qinetiq upgraded by JPMorgan
Shares in Qinetiq Group have risen 1.7% to 'overweight' from 'neutral', believing the outlook for the defence sector to be bullish and that the Farnborough, Hampshire-based firm's shares have some catching up to do after underperfoming this year.
The investment bank has increased its price target for Qinetiq to 440p from 390p.
It pointed out that the company's share price has fallen 16% so far this year, falling well short of the sector average share price growth of around a third.
"We attribute this to investor concerns over Qinetiq's M&A activity, with the initial results of acquired businesses falling short of expectations", it suggested.
While accepting these concerns are valid JPM thinks the severe de-rating of the shares provides an attractive entry point.
For the wider European aerospace & defence coverage group, JPMorgan expects "another year of strong performance" in 2024.
"In 2024 we expect another strong year for share prices in both sub-sectors. In European civil aerospace, in 2024 we expect 10% growth in global air traffic, 20% growth in large aircraft deliveries, 10-15% growth in aftermarket sales, and 25% average earnings per share growth."
11:02am: BoE won't cut rates until 2026, warns CBI
The Bank of England will not reduce interest rates until 2026, according to forecasts from the CBI, which predicts sluggish economic growth for the next three years.
In its latest outlook on the UK economy, the embattled business advisory group said the base rate will stay at 5.25% for at least two more years, despite rising market speculation that rates will be cut next year.
Our latest economic forecast shows that the UK is set for another couple of years of lacklustre growth. It’s clear that without further action to unlock the UK’s growth potential, the 2020s will fail to roar. Here’s a thread of key messages from our forecast (1/11) pic.twitter.com/ULNf2bvrCu
— CBI Economics (@CBI_Economics) December 11, 2023
The forecast is based on projections showing that consumer price inflation will not reach the BoE’s 2% target until the third quarter of 2025.
The CBI expects weak momentum to persist, with GDP growth of 0.8% in 2024, rising to 1.6% in 2025.
It predicts the unemployment rate to peak at a still-low 5% in mid-2025.
10:28am: UK manufacturers see signs of optimism
UK manufacturers have reported the first signs of business confidence after the global uncertainty and domestic political chaos of the last few years.
Make UK said its research showed that export orders had surpassed domestic orders for the first time in four years, suggesting that companies are taking advantage of either faster growing or new markets, in contrast to the "anaemic" UK economy.
Recruitment intentions have also rebounded, according to a survey of more than 300 companies.
Fhaheen Khan, senior economist at Make UK, said: "After the economic and political shocks of the last few years there is some semblance of stability returning for manufacturers.
"While growth is not exactly supercharged, the positive announcements in the autumn statement can at least allow companies to plan with more certainty without having to constantly fight fires."
Richard Austin of BDO, which helped with the research, added: "Manufacturers have been calling on the government to provide targeted support to help stimulate growth and investment for some time, and it feels like some headway was made in last month's autumn statement.
9:52am: Mortgage lending set to slump in 2024, UK Finance
Mortgage lending is set to slump next year, as the number of arrears and repossessions increases, according to a trade association representing the UK banking and finance industry.
The outlook for 2024 is one of continuing challenges in the mortgage market, but the main pressures on affordability look to be peaking now, UK Finance said.
Mortgage lending to fall in 2024, predicts UK Finance: 'We expect lending to remain weak in 2024, with a gradual improvement in affordability reflected in a modest increase in activity levels in 2025,' says banking industry trade body. https://t.co/mslarqqzpX pic.twitter.com/lSndBtEKQK
— PrimeResi Journal (@PrimeResi) December 11, 2023
It added that, while it will take some time for the pressure on household finances to recede, it expects the situation to improve in 2025.
Giving its predictions for next year, UK Finance said it expects lending for house purchases to fall to £120 billion next year, from £130 billion in 2023.
External remortgaging activity is expected to fall to £60 billion, from £65 billion this year.
The value of internal product transfers is also predicted to fall, from £219 billion this year to £202 billion in 2024.
9:31am: Anglo American recoups early losses on bid talk
Anglo American has reversed its early falls and now tops the FTSE 100 risers after a broker highlighted the miner could become a bid target.
Shares in Anglo American fell sharply on Friday after the company slashed production targets.
But The Times noted a report from analysts at Jefferies suggesting that if Anglo cannot revive its fortunes and its share price “continues to lag”, it may become “involved in the broader trend of industry consolidation”.
Jefferies pointed to Glencore as a potential suitor.
They noted that Glencore-backed Xstrata proposed a merger with Anglo in 2009; Xstrata has since been fully subsumed into Glencore, which is in the process of buying the coal assets of Canada’s Teck to combine with its own coal assets into a spin-off company.
The analysts said that Glencore’s strategic fit with Anglo after the Teck deal “appears even stronger now due to operating synergies, even greater marketing benefits, and a cost of capital arbitrage”.
“We believe this angle would only become a possibility if Anglo fails to turn things around, but we need to consider it as part of the Anglo investment case at this point,” they said.
9:06am: Rolls-Royce gets another target boost, this time from Citi
Leading the FTSE 100 risers is Rolls-Royce Holdings PLC (LSE:RR.) after Citi increased its price target for the engineering firm.
The broker has raised its target to 431p from 294p following the recent Capital Markets Day.
Citi has also lifted its EPS forecasts by 27% in the near term and 52% in the long term driven by very strong cash generation – it forecasts free cash flow up 85-96% in 2024/5, and 68% longer term.
“In the near term, we believe cash flow will be helped by working capital unwind, but expect the medium term FCF of well over 30p per share (31p in 2025 rising to 38p in 2028) will be sustainable and should be valued accordingly,” Citi said.
The broker said modelling of the net long-term service agreement customer advances creditors shows continued growth in the £0.8-1.2 billion per year range, driven by fleet growth, but also taking into account of increasing engine overhauls.
The increase by Citi is the latest bullish commentary on Rolls-Royce.
On Friday, analysts at UBS and Deutsche Bank increased their share price target to 400p, following an upgrade by arch-bear JPMorgan earlier in the week.
8:42am: Weak Chinese data weighs on mining stocks
The FTSE 100 remains on the back foot on Monday with weak data out of China hitting mining stocks.
Susannah Streeter, head of money and markets Hargreaves Lansdown explained the latest data showing China is sinking deeper into deflationary territory is raising fresh concerns about persistently weak domestic demand, amid plummeting food prices.
“Consumer prices fell 0.5% year on year in November and what will be a particular worry is that signs of fragility are now starting to be felt in the service sector,” she said.
With global growth expected to slow further in 2024, there will be little support coming from overseas, while the property market’s woes keep consumer confidence subdued, she added.
She said there will be growing “clamour for a big bazooka of stimulus” with hopes focused on the Central Economic Work Conference later this month for more medicine to try and put the economy on the road to better health.
On the back of the weak figures, Glencore fell 2.2%, Anglo American declined 2.0% and Fresnillo eased 1.7%.
8:15am: FTSE 100 edges lower, Rolls get another target boost
The FTSE 100 has made a sudbued start to proceedings ahead of a busy week of economic data and central bank meetings.
At 8:15 am, London’s lead index was down 12.89 points, 0.2%, at 7,541.58 while the FTSE 250 was little changed at 18,709.19.
On Tuesday, US inflation figures will be released followed by a trio of interest rate calls in the US on Wednesday and the UK and Europe on Thursday.
Jim Reid at Deutsche Bank thinks it “will be interesting to see how Powell and the committee play it.”
“Markets have got way ahead of the Fed in terms of pricing cuts for next year, so do they try to rein them in or acknowledge the direction of travel?”
“The Fed is still likely to be more of a slow oil tanker than a speedboat but will probably acknowledge that barring a unexpected surprise, the hiking cycle is over but will conclude that it’s premature to talk about cuts at the moment,” he believes.
Shares to watch include Rolls-Riyce Holdings PLC, up 2.2%, after Cit became the latest broker to increase its price target.
Citi has a set a 431p price target for the engineering firm. On Friday, UBS and Deutsche Bank raised their price targets for Rolls to 400p.
Elsewhere, Qinetiq rose 4.0% after JPM upgraded to ‘overweight’ after significant underperformance in 2023.
7:55am: Domino's Pizza backs guidance ahead of Investor Event
Anorher update to reportt comes from Domino's Pizza Group PLC which said it expects underlying Ebitda in a range of £132 million to £138 million and confirmed it expects to open at least 60 new stores this year.
The firm is hosting an Investor Event today and said this would discuss new CEO Andrew Rennie's initial impressions of the group and the company’s approach to growth going forward.
This would focus on the core UK & Ireland markets and accelerating growth through additional opportunities.
Andrew Rennie said: “It is clear from my first 100 days that the business is well placed.”
“Material progress has been made in recent years but there are a number of areas where we can significantly enhance growth.”
“Today I will set out my thoughts on what I've found so far, and what I see as the key drivers of growth moving forward, all of which will benefit our shareholders and franchise partners, while advancing our corporate purpose of delivering a better future through food people love,” he added.
7:47am: House prices dip in December, Rightmove
The average price tag on a UK home fell by nearly £7,000 in December, according to figures Rightmove.
The online property portal said average asking price for a home coming on the market fell by 1.9% or £6,966 in cash terms this month, reaching £355,177..
Rightmove said that prices tend to fall in December, as Christmas approaches, but noted this month's drop is bigger than the past 20-year average of 1.5%, as sellers look to price attractively to secure a deal.
The fall was partly driven by more new sellers looking to price below the competition now that the pendulum has swung towards a buyers' market, Rightmove said.
Tim Bannister, Rightmove's director of property science, said: "Further price falls beyond the usual seasonal trends that we'd expect at this time of year signal that some new sellers are continuing to act on the advice of agents to price competitively.”
"We entered this year under a cloud of uncertainty, as the fallout from the autumn mini-budget filtered through to lower activity levels.”
“High mortgage rates which have added to already-stretched buyer affordability have been a challenge throughout 2023 and this is likely to carry into next year.”
“However, for now, there appears to be more calm and certainty heading into 2024, and the annual fall of 1.1% in asking prices highlights the market's much-better-than-predicted resilience this year."
7:38am: Begies sees more business failures in second half
Begbies Traynor (AIM:BEG) Group PLC said it expects more business failures to support business as it reported a jump in half-year revenue, although profit fell.
In the six months ended October 31, the business recovery specialist said revenue rose to £65.9 million, up from £58.5 million last year, although profit slipped to £3.0 million from £5.0 million before.
The firm described it as a strong first half performance building on consistent track record of growth in revenue and adjusted earnings.
It said its insolvency and financial advisory performed well with increased year on year insolvency activity levels, while property advisory and transactional services continue to provide a solid platform for growth.
Begbies remains confident of delivering full year results in line with current market expectations and anticipates continued increase in insolvency activity; financial advisory anticipated to deliver broadly consistent second half.
Property advisory and transactional services are expected to deliver another year of strong growth, it added.
The dividend was increased to 1.3p from 1.2p.
7:00am: FTSE seen little changed ahead of US inflation, rate calls
The FTSE 100 is expected to edge higher as trading starts for the week on Monday ahead of a busy week for central bank decisions.
The Federal Reserve announces its final rate decision of the year on Wednesday with the Bank of England and European Central Bank following on Thursday.
Spread betting companies are calling London’s lead index up by around 4 points after closing up 40.75 points, 0.5%, at 7,554.47 on Friday.
Ipek Ozkardeskaya at Swissquote Bank said: ”The economic calendar for the week is heavy.
“The US will announce its latest CPI update on Tuesday and the Fed will announce its latest policy verdict on Wednesday, then the Swiss National Bank (SNB), the European Central Bank (ECB) and the Bank of England (BoE) will give their last verdict for this year on Thursday. “
“All four major central banks are expected to keep their interest rates steady at the current levels, but we will closely scrutinize how they address the rate cut expectations that have been ahead of their skis since the end of October.”
“Chances are that the accompanying statements will attempt to cool down the doves.”
In London, the early focus will be an update from business recovery company Begbies Traynor (AIM:BEG) and house price data from Rightmove.