- FTSE 100 closes down 2 points at 7,543
- Wage inflation eases in November
- US inflation in line with forecasts
4:40pm: FTSE 100 fades to close little changed
The FTSE 100 closed little changed, conceding early gains, as in line US inflation figures dampened hopes of an early cut to US interest rates.
At the close, London's blue-chip index was down 2.12 points at 7,542.77 while the FTSE 250 was down 88.27 points, 0.5%, at 18,662.12.
Stocks on the move included Royal Mail owner, IDS after an upgrade to buy from Bank of America while Rolls-Royce gained after ratings agency Fitch upgraded its credit rating to BB+, taking it to within one notch of investment grade.
3:54pm: Royal Mail owner, IDS, flies on BofA upgrade
Royal Mail owner, International Distribution Services, has delivered for investors today, rising more than 10% after analysts at Bank of America upgraded to ‘buy’ from ‘ neutral.’
“We are encouraged by turnaround progress at Royal Mail (RM) and how the new CEO is putting his stamp on operations – we see upside to consensus estimates,” BofA said.
The bank thinks the recovery at RM is progressing steadily and the company is winning back volume share.
BofA expects volume share to step up again from January (volume commitments are ‘locked’ for the peak period), as service quality continues to improve.
The broker has raised its 2025 adjusted Ebit forecast by 6% to reflect benefits of the union deal at RM, putting it 19% above consensus.
It has moved its price target to 335p from 275p reflecting the increased earnings and the target multiple for RM to 4x (from 3x) on self-help tailwinds, while UK parcel trends remain positive.
BofA thinks the shares look cheap and confidence in the turnaround should drive a re-rating.
3:42pm: Rolls-Royce gets credit rating upgrade from Fitch
Rolls-Royce Holdings PLC (LSE:RR.) has had its long-term credit rating upgraded to BB+ by Fitch Ratings in another step towards regaining BBB investment-grade status.
Fitch noted the efforts of chief executive Tufan Erginbilgic in steering the iconic UK aerospace company through a period of financial turbulence.
The rating upgrade was underpinned by Rolls-Royce's “ambitious but broadly achievable” financial targets, aiming for an operating profit of as much as £2.8 billion and free cash flow of up to £3.1 billion by 2027.
3:15pm: Billionaire investor increases stake in BAT
Kenneth Dart, the billionaire investor based in the Cayman Islands, has increased his stake in British American Tobacco PLC according to a stock exchange filing.
Dart, heir to the eponymous plastic-cup fortune, now owns more than 10% of the London-based maker of Dunhill, Lucky Strike and Pall Mall cigarettes, the filing shows.
He separately owns about 6% of rival tobacco firm Imperial Brands PLC.
Shares in BAT plunged last week after it wrote down the value of its tobacco assets and said revenue would be at the low-end of expectations.
Shares in BAT are down 0.3%.
2:47pm: FTSE falters as US markets edge lower
Stocks in New York made a mixed start to trading as in line inflation figures failed to reinvigorate the market ahead of the Federal Reserve’s interest rate decision.
Shortly after the opening bell, the Dow Jones Industrial Average was little changed at 36,394.18, the S&P 500 was down 12.89 points, 0.3%, at 4,609.55 and the Nasdaq Composite was down 24.06 points, 0.2%, at 14,408.43.
“These data won’t change the outcome of the FOMC meeting,” said Ian Shepherdson at Pantheon Macroeconomics.
“We expect Chair Powell to repeat that the Fed is still prepared to hike again if necessary, and he likely will push back in the press conference when asked about the likely timing for the first easing.”
“But the data will tell them what to do, and we expect the core PCE and wages data to push the Fed into easing in the spring,” he said.
Stocks on the move include Oracle which has opened 10.5% lower after its second quarter results disappointed.
The subdued start in New York has seen the FTSE trade back at its opening levels, giving up its early gains.
2:30pm: AJ Bell unveils £14m price cuts in response to FCA
AJ Bell has unveiled a package of price cuts worth around £14 million.
The investment platform was responding to the guidance from the Financial & Conducts Authority today which AJ bell said has “provided clarification on the expectations of firms in this area.”
Michael Summersgill, chief executive said: “Our philosophy has always been to share our economies of scale with customers as we grow - an approach that is very much aligned with the Consumer Duty.”
“We announced £5 million of price reductions for our customers last year and have increased our interest rates on cash balances several times as base rate has increased.”
“Now we have clarity from the regulator, we are pleased to confirm another significant package of pricing changes which will benefit our customers to the tune of £14 million a year.”
He said as well as improving rates of interest paid, the firm is also reducing dealing charges for D2C customers and reducing the custody charges advised customers pay.
He said the financial impact is fully factored into the guidance provided last week.
Shares have pulled away from earlier lows, now down 3.6%.
2:15pm: FTSE falls despite as expected US inflation
London's blue-chips have fallen back lsoe to opening levels after the as expected US inflation numbers.
The annual US consumer price inflation rate cooled as expected last month strengthening the case for the Federal Reserve to once again decide against a rate hike when it announces a decision on Wednesday.
According to the Bureau of Labor Statistics, the headline inflation rate eased to 3.1% in November, in line with consensus, from 3.2% in October.
On a monthly basis, consumer prices were 0.1% higher in November from October, an outcome slightly ahead of consensus.
The annual core inflation rate, excluding food and energy, was unmoved at 4.0% in November, also in line with consensus.
The data comes ahead of the Federal Reserve's final interest rate decision of the year on Wednesday.
The central bank is widely expected to leave the federal funds rate range at 5.25%-5.50%, with a growing consensus that the next move will be a cut at some point next year.
1:30pm: Here are some of today's risers and fallers
Shares in Hargreaves Lansdown PLC (LSE:HL.) and AJ Bell PLC (LSE:AJB) and Abrdn PLC (LSE:ABDN) slumped 7%, 7.5% and 4% respectively after the Financial Conduct Authority (FCA) warned investment platforms over the practice of charging to hold people’s cash and then accruing interest on it, so-called 'double dipping'.
The FCA warned of intervention if issues over customers not receiving fair value as brokers essentially gained two means of income from their cash were not fixed by February.
Shares in MS International PLC climbed over 8% on Tuesday as the firm announced a solid uptick in profit following a host of orders, including from the US Navy.
Pre-tax profit for the sixth months to 31 October 2023 soared to £7.72 million from £3.46 million, MS International said.
Shares in Mkango Resources Ltd (AIM:MKA, TSX-V:MKA, OTC:MKNGF) were lifted 8.6% after it hailed a historic moment in the first production of recycled rare earth magnets from UK subsidiary HyProMag's Birmingham plant.
After the first test production runs at the Tyseley Energy Park rare-earths hub produced around 3,000 magnets using the revolutionary new recycling technology, commercial production is being targeted for the middle of next year.
Headlam Group (LSE:HEAD) PLC shares slipped nearly 6% on Tuesday as the flooring firm acknowledged customers had cut back on home improvement spending this year.
Though summer trading was resilient, Headlam said in a statement that September and October proved tougher than anticipated as cost-of-living pressures hit spending.
1:02pm: Momentum building at On The Beach, Liberum upgrades
Away from the FTSE 100, and one stock on the move today is On The Beach, up 3.3%, boosted by an upgrade by Liberum to 'buy' from 'hold'.
After a period of investment, the tide is turning with positive momentum across both its core 3 star and premium segments, the broker thinks.
"Importantly, marketing costs have reduced from 45% to 38% of core UK segment revenue meaning operating leverage should now deliver faster profit growth against the backdrop of strong consumer demand for holidays," it added.
Liberum thinks the outlook suggests upgrade momentum is building, and as a result, has increased its price target to 200p from 125p.
12:33pm: French and German equity markets hit all-time highs
Across to Europe where stock markets in France and Germany’s have both hit record highs today, as European shares enjoy a proper pre-Christmas santa rally.
In Paris, the CAC-40 climbed as much as 0.4% to a record high of 7,582.47 points this morning, while in Frankfurt the DAX index also touched a new peak, of 16,837 points today.
???? FRANCE'S CAC-40 EQUITY INDEX SET NEW HIGH OF 7,582.12 POINTS, BEATING PREVIOUS INTRADAY RECORD HIGH OF 7,581.26 POINTS SET IN APRIL THIS YEAR pic.twitter.com/9MvWQPlu6B
— PiQ (@PiQSuite) December 12, 2023
Fawad Razaqzada, market analyst at City Index and Forex.com, said expectations of eurozone interest rate cuts have been pushing up shares.
"Persistent weakness in economic data has led traders to anticipate an European Central Bank (ECB) rate cut next year, driving the DAX to attain new record high in recent days, in what has been one of the strongest bullish trends," he said.
The ECB will make its latest interest rate decision on Thursday.
12:03pm: US stocks futures modestly higher ahead of CPI
US stock futures are pointing to cautious early progress on Wall Street although consumer prices data before the market open will likely dictate the path for equities.
In pre-market trading, futures for the Dow Jones Industrial Average were up 0.1%, while those for the S&P 500 were 0.1% higher and contracts for the Nasdaq 100 futures climbed 0.1%.
Jim Reid at Deutsche Bank explains the inflation readings are “critical to the hard/soft landing debate, as a crucial part of the answer is whether inflation can durably get back to target, which would enable the Fed to ease off from a more restrictive policy stance.”
Deutsche’s US US economists are looking for monthly headline CPI to come in at just +0.07%, supported by another 8% decline in gas prices since October.
That would take the year-on-year rate down to 3.1%.
For core CPI, Deutsche looks for a stronger +0.27% monthly reading, with the year-on-year measure at 4.0%.
If the forecasts are right, then that would push the six-month annualised rate for core CPI down to 2.8%, marking the first sub-3% reading since March 2021.
In company news, Google-parent, Alphabet, is down 1.0% in pre-market trading after losing an antitrust legal battle with Fortnite maker Epic Games.
11:15am: UK mortgage arrears at six-year high
UK mortgage arrears increased to the highest rate in six years in the three months to September, according to data by the Bank of England, in a reversal of a longer-term decline and demonstrating the impact of higher interest rates on household finances.
The proportion of the total loan balances with arrears, relative to all outstanding mortgage balances, rose to 1.14% in the third quarter from 1.02% in the previous three months and the highest since the second quarter of 2017, figures showed.
New arrears cases decreased by 0.3 percentage points from the previous quarter to 15.8% of the total outstanding balances with arrears, but remained 5.1 percentage points higher than a year earlier.
The value of outstanding mortgage balances with arrears increased by 11.4% from the previous quarter, to £18.8 billion, and was 44.0% higher than a year earlier.
However, arrears remain well below their peak rates of 3.64% in the first quarter of 2009.
10:45am: Copper supply challenges present tactical opportunity, says Morgan Stanley (NYSE:MS)
Morgan Stanley (NYSE:MS) has taken a look into the world of copper and thinks its mounting supply challenges present a tactical opportunity, especially in the miners with better line of sight on 2024 volumes.
It likes the look of Canadian miner, Lundin, which it says “ticks all the boxes”, while Antofagasta/Glencore offer operating leverage, with Sweden’s Boliden looking the least attractive.
The investment bank pointed out that copper's worsening supply outlook continues to gather pace.
In the past two weeks alone, the market has lost >500kt of 2024 projected output, or 2.5% of global supply, across First Quantum (Cobre Panama), Anglo American, Rio Tinto and Southern Copper.
It noted that in certain cases, the volume loss extends well beyond 2024 (e.g. Anglo American), but is far less clear in others such as First Quantum.
MS explained that First Quantum's and Anglo American's challenges have likely prompted many investors to look elsewhere for copper exposure, magnifying the scarcity aspects of pure-play equities.
“As such, the growing pool of capital is now chasing an ever smaller universe of copper-exposed equities, which are perceived to have better line of sight on 2024 volumes,” it said.
Against this backdrop, the recent equity re-rating impetus may have further room to run. and shift the bargaining power to the miners, the bank suggested:
It thinks the tightening concentrate supply and demand is shifting the bargaining power towards the miners at the expense of the smelters.
The bank thinks Antofagasta (equal weight) offers upside risks as a pure-play with 2024 volume growth and low jurisdictional risks, although it already “prices in a lot.”
Among diversifieds, Glencore (equal weight) may benefit vs peers given sizeable copper exposure (30% of 2024 spot EBITDA) while its equity valuation is “reasonable.”
9:50am: PRA outlines tighter capital rules for lenders
It is turning to the day of the regulator.
Not to be outdone by the CMA and FCA , the Prudential Regulation Authority has outlined how it plans to impose tighter capital rules on lenders.
It has made a number of adjustments that it says will moderate the impact of the measures, known as the Basel 3.1 standards.
It estimates that the impact of Basel 3.1 requirements will be low and result in an average increase in Tier 1 capital requirements for UK firms of around 3% once fully phased in (ie in 2030).
The PRA pointed out this is lower than the European Banking Authority’s estimate of a Tier 1 increase of around 10% in the EU and the US agencies’ estimate of a CET 1 increase of around 16% for US firms.
The rules will promote the safety and soundness of the firms the PRA regulates and make capital ratios more consistent and comparable, it said.
9:13am: Miners support FTSE, JPM upgrades Rio Tinto
The FTSE 100 continues to forge ahead with mining stocks supporting the rise.
JPMorgan has made some positive comments on the sector today, upgrading Rio Tinto to ‘overweight’ from ‘neutral’ and reiterating an ‘overweight’ rating on Anglo American, despite cutting its price target.
“We believe a mixed macro outlook presents an opportunity for investors to re-examine long-term structural themes in the sector, which can drive relative outperformance for select companies,” the investment bank said.
Notably, JPM believes emerging costs of carbon (both explicit & implicit) could drive structural shifts in certain subsectors (aluminium, iron & steel, coking coal) & offer significant opportunities for those miners positioned as either low CO2 producers in high CO2 intensive sectors and incumbents where restrictions could drive supply/demand tightening.
JPM remains ‘underweight ‘ on Antofagasta.
“While we see copper moving to deficit given recent supply cuts, EMEA copper miners screen relatively more expensive with greater idiosyncratic risks,” the broker said.
Shares in Rio are up 1.8%, shares in Antofagasta are up 1.2% and Anglo American is 0.8% to the good.
8:45am: Ofcom's planned ban on inflation-linked mid-contract price rises knocks telcos
Shares in BT and Vodafone are on the back foot after Ofcom proposed a ban on inflation-linked mid-contract price rises.
The telecoms regulator also reveals that take-up of social tariffs more than doubled in the last year, but millions of eligible customers remain unaware of them.
Slightly after the horse has bolted Ofcom proposes ban on phone companies making inflation-linked price hikes midway through customer contracts. With inflation above 10% earlier this year some customers had near 14% price hikes.
(CPI now at 4.6%) pic.twitter.com/S2r8py3X31
— Ashley Armstrong (@AArmstrong_says) December 12, 2023
Ofcom said telecoms customers must be told upfront in pounds and pence about any price rises their provider includes in their contract, under new consumer protection plans set out today.
Ofcom said it was concerned that customers' contracts do not provide sufficient certainty about the prices they will pay.
It said it had provisionally concluded that inflation-linked mid-contract price rise terms can cause substantial amounts of consumer harm and that these terms also require customers to unfairly assume the risk and burden of financial uncertainty from inflation.
As a result, Ofcom has proposed to introduce a new rule requiring that any price written into a customer's contract would need to be set out in pounds and pence and be clear about when any changes to prices will occur.
Dame Melanie Dawes, Ofcom's chief executive, said: "Our tougher protections would ban this practice once and for all, giving customers the clarity and certainty they need to secure the best deal for their needs and budget."
8:25am: Hargreaves Lansdown and AJ Bell hit by FCA warning on charges
Shares in Hargreaves Lansdown and AJ Bell fell sharply after the Financial Conduct Authority (FCA) said it has written to investment platforms and SIPP operators setting out its concerns on the way they deal with any interest earned on customers' cash balances.
Hargreaves Lansdown is down 5.9% and AJ Bell down 5.7%.
The FCA pointed out the amount of interest earned by some firms has increased as rates have risen.
It surveyed 42 firms and found the majority retain some of the interest earned on these cash balances, which may not “reasonably reflect” the cost to firms of managing the cash.
Many also charge a fee to customers for the cash they hold, known as "double dipping,” the FCA said.
The FCA is concerned these practices may not be providing “fair value” to customers and may not be understood by consumers or properly disclosed.
The practice of "double dipping" has raised concerns with the regulator and firms have been told to cease this, it said.
Sheldon Mills, executive director of Consumers and Competition at the FCA said that firms “need now to ensure how much of the interest they retain and, for those who are double dipping, how much they're charging customers holding cash, results in fair value.”
“If they cannot make that case, they need to make changes.”
"If they don't, we'll intervene,” he warned.
8:13am: FTSE 100 opens higher as wage pressures continue to ease
The FTSE 100 opened higher on Tuesday as figures showed wage pressures continued to ease last month.
At 8:15am, London’s blue-chip index was up 28.13 points, 0.4%, at 7,573.02 while the FTSE 250 was up 12.38 points, 0.1%, at 18,762.77.
Data from the Office of National Statistics showed that average weekly earnings excluding bonuses rose by 7.3% in the three months through October, compared to the expectation of 7.4% and last month’s 7.7% growth.
Including bonuses, weekly earnings rose by 7.2%, well below the 7.7% estimate.
The figures will be welcomed by the Bank of England ahead of Thursday’s interest rate decision although analysts cautioned that the numbers remain at inflated levels.
Samuel Tombs at Pantheon Macroeconomics said: “The slowdown in wage growth is becoming more established every month, but the [Monetary Policy Committee] likely will wait for signs that this trend will be maintained through the early 2024 pay round before signalling it will reduce Bank Rate soon.”
Michael Hewson at CMC Markets went further, suggesting that anyone hoping the figures would prompt an earlier pivot from the BoE is “kidding themselves.”
“The numbers are still very high historically and still well north of the 2% inflation target,” Hewson pointed out.
“The reality is that while the Bank of England was the first central bank to start raising rates it doesn’t necessarily follow that they will be the first to start cutting,” with rates cut “likely to come later rather than sooner.”
In company news, Unilever PLC (LSE:ULVR) eased 0.3% after news of the CMA’s probe into its green credentials.
Sarah Cardell, chief executive of the CMA, said: “We’ll be drilling down into these claims to see if they measure up.”
“If we find they’re greenwashing, we’ll take action to make sure shoppers are protected.”
AstraZeneca rose 1.2% after boosting its RSV pipeline with a $1.1 billion acquisition while Rio Tinto climbed 1.6% after JPMorgan upgraded to ‘overweight’ from ‘neutral’.
7:50am: Unilever's green credentials put to the test by UK's CMA
The UK’s competition regulator is to examine ‘green’ claims made by Unilever PLC (LSE:ULVR) to make sure shoppers aren’t being misled.
The Competition and Markets Authority (CMA) is concerned that Unilever may be overstating how green certain products are through the use of vague and broad claims, unclear statements around recyclability, and ‘natural’ looking images and logos.
The move comes as part of the CMA’s wider investigation into greenwashing and follows concerns around how Unilever is marketing certain products, within some brands, to customers as environmentally friendly.
The CMA said it would investigate claims about some ingredients are presented in a way that may exaggerate how ‘natural’ the product is and that certain green claims – particularly in relation to recyclability – may be unclear.
Sarah Cardell, chief executive of the CMA, said: “We’ll be drilling down into these claims to see if they measure up.”
“If we find they’re greenwashing, we’ll take action to make sure shoppers are protected.”
“More and more people are trying to do their bit to help protect the environment, but we’re worried many are being misled by so-called ‘green’ products that aren’t what they seem,” she added.
7:30am: AstraZeneca boosts RSV profile with $1.1bn Icosavax deal
AstraZeneca has bought US biopharmaceutical company, Icosavax Inc, for up to $1.1 billion.
The Anglo-Swedish drugs maker said the deal will build on its expertise in respiratory syncytial virus (RSV), and strengthen its Vaccines & Immune Therapies late-stage pipeline with Icosavax's lead investigational vaccine candidate, IVX-A12. IVX-A12 a “potential first-in- class.”
IVX-A12 is the most advanced investigational vaccine targeting both RSV and hMPV and has a differentiated profile versus currently approved RSV vaccines, the company said.
Phase II data demonstrate that IVX-A12 elicits robust immune responses against both RSV and hMPV one month after vaccination and reconfirm previous immunogenicity data seen in the Phase I trial, the firm added.
AstraZeneca is paying $800,000 cash upfront as part of the deal and will acquire the cash and marketable securities on Icosavax's balance sheet, which totaled $229 milion at September 30.
Combined, the upfront and maximum potential contingent value payments represent, if achieved, a transaction value of around $1.1 billion, a 91% premium to Icosavax's closing market price on December 11, the company said.
7:15am: Wage pressures cool in boost for Bank of England
There was good news for the Bank of England after figures from the Office for National Statistics showed a larger than expected drop in wage inflation.
Average weekly earnings excluding bonuses rose by 7.3% in the three months through October, compared to the expectation of 7.4% and last month’s 7.7% growth.
Including bonuses, weekly earnings rose by 7.2%, well below the 7.7% estimate.
The unemployment rate was unchanged at 4.2% in the new experimental data series from the ONS, the same as the reading last time out.
In September to November 2023, the estimated number of vacancies in the UK fell by 45,000 on the quarter to 949,000, the ONS reported.
Vacancies fell on the quarter for the 17th consecutive period, the longest consecutive run of quarterly falls ever recorded but still above pre-coronavirus (COVID-19) pandemic levels.
The estimate of payrolled employees in the UK for November 2023 was largely unchanged compared with the revised October 2023 figure, down 13,000 to 30.2 million.
7:00am: FTSE called higher ahead of key UK and US data
The FTSE 100 is expected to open higher on Tuesday following gains in the US on Monday and ahead of UK jobs and average earnings figures.
Spread betting companies are calling London’s lead index up by around 19 points after closing down 9.58 points, 0.1%, at 7,544.89
On Wall Street, the Dow Jones Industrial Average closed up 157.06 points, 0.4%, at 36,404.93. The S&P 500 rose 18.07 points, or 0.4%, at 4,622.44, and the Nasdaq Composite advanced 28.51 points, or 0.2%, at 14,432.49.
Later today, US inflation figures will be released while the two-day FOMC meeting kicks off.
Danni Hewson, AJ Bell head of financial analysis, said: "Although no one expects any surprises from central bankers in terms of their decision, it will be their tone and choice of words with the power to send any anticipated Santa rally hurtling in the other direction."
She pointed out "there’s a rather tight rope to walk as bankers try and keep confidence in check without squashing it entirely."
Back in London, and the early focus will be UK unemployment and average earnings figures, a key figure ahead of Thursday’s interest rate decision by the Bank of England.