- FTSE 100 closes up 6 points at 7,548
- UK economy contracts 0.3% in October
- Entain CEO Jette Nygaard-Andersen steps down
4:40pm: FTSE 100 fades into the close after bright start
The FTSE 100 has closed just in positive territory although well off early highs.
At the close, London’s blue-chip index was up 5.67 points, 0.1%, at 7,548.44 and the FTSE 250 was up 33.64 points, 0.2% at 18,695.76.
Prominent risers include Entain after the departure of its CEO, ConvatEc boosted by positive comments from UBS and Howden Joiney after a buy note from Jefferies.
Heading downwards were B&M after a large, discounted share placing, Weir on unconfirmed reports of a downgrade by Bank of America, and Rightmove after the boss of US peer CoStar pledged aggressive investment in the UK online property space after its takeover of On the Market.
Elsewhere, Paragon was lifted by an upgrade by RBC and Impellam (AIM:IPEL) soared after confirming bid terms from HeadFirst.
3:50pm: German government strikes last-minute budget deal
In Europe, the German government has secured a last-minute budget deal, averting a financial shutdown in January and plugging a €17 billion hole opened by a court ruling last month.
After weeks of tense negotiations, Chancellor Olaf Scholz’s coalition agreed painful spending cuts to energy subsidies, the transport budget and subsidies for industry in order to comply with strict rules on government spending.
The government will also raise the carbon price.
Support for Ukraine and social security spending will be protected, Sholz said.
In a ruling on November 15, Germany’s top court declared that €60bn of funding allocated to a special climate fund was in violation of the country’s constitutionally-enshrined debt-brake, which tightly limits government borrowing, throwing financial planning for 2024 into disarray.
3:16pm: Visa and Mastercard under fire for escalating post-Brexit card fees
The FTSE 100 has come off its highs following a choppy start in the US ahead of the interest rate decision later in the session.
Elsewhere, the Payment Systems Regulator (PSR) has zeroed in on escalating cross-border interchange fees levied by major card operators Mastercard and Visa, proposing a cap on these fees to protect UK businesses from unfair charges.
Following an in-depth review, the PSR suggested an initial cap of 0.2% for consumer debit and 0.3% for credit transactions between the UK and European Economic Area (EEA), with a future permanent cap after further analysis.
An interchange fee is a fee that acquirers pay to issuers each time a card is used to buy goods or services.
There is more on this story here.
2:50pm: US markets climb ahead of interest rate decision
US stocks made steady progress at the open as easing wholesale prices backed an inflation-easing narrative ahead of the Federal Reserve's interest rate decision later today.
Shortly after the opening bell, the Dow Jones Industrial Average was up 12.09 points at 36,590.03, the S&P was up 6.45 points, 0.1%, at 4,650.15 and the Nasdaq Composite was up 56.31 points, 0.4%, at 14,589.71.
According to the Bureau of Labor Statistics, producer prices grew 0.9% on-year in November, slowing from October's 1.2% rise, and below the 1.0% consensus.
October's reading was downwardly revised from a 1.3% increase.
On a monthly basis, prices were flat, against expectations for 0.1% growth.
Excluding food and energy, annual producer price growth slowed to 2.0% in November from 2.4% in October, short of the 2.2% consensus.
The figures follow data on Tuesday showing the annual consumer price inflation rate in the US cooled as expected last month.
Stocks on the move include Pfizer, down 8.9%, after the pharmaceuticals giant releeased guidance below Street expectations while Tesla eased after recalling more than 2 million electirc vehicles due to a defect.
2:08pm: First UK rate cut not until August, says Citi
As markets continue to speculate as to when the Bank of England will cut interest rates, broker Citi has had its say.
It thinks the Monetary Policy Committee is likely to be comparably slow to cut, but aggressive once it does so.
In part, this reflects heightened supply uncertainties and fiscal hyperactivity, Citi believes.
But having also concluded that embedded inflation has materialized, the burden of proof for any inflection is also likely to be obstructively high, it thinks.
For this week, Citi expects the tone to therefore remain unapologetically hawkish, with a change in narrative only plausible after the spring budget in its view.
Citi expects cuts from August.
“But by then, policy will likely be left with little choice but to move at an aggressive pace, and plausibly a long way,” it reckons.
1.30pm: Here’s a quick recap of the top risers and fallers on the market today
Ladbrokes-owner Entain PLC (LSE:ENT) rallied 4.4% after chief executive Jette Nygaard-Andersen resigned from her position with immediate effect.
Entain’s board has asked Stella David, currently a non-executive director, to take the top position on an interim basis until a permanent replacement has been found.
Tandem Group PLC (AIM:TND) slumped by a quarter as it warned poor sales of toys and garden products would mean results this year being well behind forecasts.
Bike sales are going well, especially electric two-wheelers, but this has not been able to offset destocking by toy retailers in the run-up to Christmas.
Rightmove PLC (LSE:RMV) fell 4% after US rival CoStar signalled it was raising the stakes in the UK online property market.
The US online real estate marketplace, information and analytics provider, which has a market value of US$34.66 billion, fired the warning shot to the UK online property website after completing the £99 million takeover of OnTheMarket yesterday.
B&M European Value Retail SA (LSE:BME) fell sharply after SSA Investments sold 27.8 million shares in the discount retailer via a placing.
Shares in B&M fell more than 6% as the shares were placed in the market at 582.5p per share, a 3% discount to last night’s closing price.
1:03pm: RBC highlights value at Paragon
A bit more now on the Paragon Banking Group by RBC which has pushed shares 2.5% higher.
RBC said one of its key takeaways from this reporting season was that "we had underappreciated the quality of Paragon."
"In our view, the bank has irresistible momentum going into next year," it added.
"Operating trends are impressive, and there are potential catalysts from a softening of Basel 3.1 and IRB approval."
"Therefore, we upgrade our recommendation to outperform (previously sector perform) and increase our price target to 850p (previously 700p)."
RBC said it preferred Paragon to OSB but stressed "it's a tough call, as OSB's valuation is more depressed."
Paragon seems like the cleaner story going into 2024, it added.
12:03pm: Fed likely to hold rates, but how many cuts will it signal in 2024?
Across to the US now, where it is a big day as attention switches to the Federal Reserve’s interest rate decision later in the session.
In pre-market trading, futures for the Dow Jones Industrial Average were up 0.2%, while those for the S&P 500 were 0.2% higher and contracts for the Nasdaq 100 futures climbed 0.2%.
Deutsche Bank’s Jim Reid said the US central bank is expected to leave rates unchanged for a third consecutive meeting.
“As a result, the focus is likely to be on the latest dot plot for where they see rates moving over the next couple of years,” he said.
He explained Deutsche’s US economists think it will only show 50bps of cuts in 2024, which would be a direct challenge to market expectations, since futures are currently pricing in 109bps of cuts by the December 2024 meeting.
Apart from that, the focus will be on what Chair Powell says in the press conference, particularly if there’s any potential timeline for reducing rates.
However, Reid pointed out the Deutsche economists believe that Powell will stop short of declaring the tightening cycle as over, likely restating that “We are prepared to tighten policy further if it becomes appropriate to do so.”
Ahead of the Fed’s rate call, the producer price index, a leading inflation indicator tracking wholesale prices, is expected to have increased 0.1% in November after falling by a half-point in October.
The annualised rate is expected to decrease to 1% from 1.3%.
Stocks to watch include Tesla, down 1% in pre-market trading, on news that the EV maker is recalling more than 2 million vehicles to rectify an Autopilot defect.
11:30am: SSA sells down stake in B&M via placing
A bit more detail on the B&M placing which has seen a sharp fall in the company's share price.
SSA Investments has sold 27.8 million shares in the discount retailer via a placing at 582.5p per share, a 3% discount to last night’s closing price.
The firm raised £162.1 million through the issue which equates to around 2.8% of B&M's share capital.
The shares were sold via Goldman Sachs (NYSE:GS) International and Rothschild and after the sale, SSA will still hold around 3.4% of B&M’s ordinary shares.
11:07am: Sainsbury continues to gain share from discounters - Barclays
Sainsbury continues to gain market share from discount retailers, Aldi and Lidl, according to research from Barclays.
The broker report on 'switching data' covering the 12 weeks to 26 November showed that Sainsbury was once again the standout performer, making gains from both discounters.
Barclays said Sainsbury’s recent market share performance remain encouraging, with increasing year-on-year gains in the last six four-week periods.
Sainsbury has been making strong net switching gains for each of the last eight 12-week periods – and the gains seem to be on an upward trend, it added.
The food retailer has made net switching gains from all retailers (excluding Ocado) within the scope of this data for the last three 12-week periods, Barclays said.
Barclays said Tesco has made small year-on-year market share gains in five of the last six four-week periods.
The good news for Tesco is that it has now made moderate switching gains for the last eight 12-week periods, Barclays said.
The bank rates Sainsbury ‘overweight’ with a 340p price target and Tesco ‘overweight’ with a 350p price target.
10:30am: Goldman cuts GDP forecasts after weak October
Goldman Sachs (NYSE:GS) has cut its expectations for UK gross domestic product for 2023 and 2024 after today’s weaker-than-expected data.
Economist James Moberly said the 0.3% fall was a “downside surprise.”
He pointed out that the fall in output in October was driven by declines in all major sectors.
Goldman now expects fourth quarter GDP to rise 0.1%, down from 0.2% before, taking its 2023 forecast down to 0.5% from 0.6%, in line with consensus expectations and the BoE's forecast.
For 2024, Goldman has revised down its real GDP growth forecast to 0.6% from 0.7% previously, above consensus expectations of 0.4% and the BoE's forecast of 0.1%.
10:07am: Rightmove dips as CoStar fires warning shot after completing OnTheMarket deal
Rightmove is down 2.0% today and this may reflect comments from CoStar late Tuesday.
The US online real estate marketplace, information and analytics provider fired a warning shot to the UK online property website after completing the £99 million of OnTheMarket yesterday.
CoStar said the acquisition will create a “genuine disruptor” to the established UK market leaders.
Andy Florance, founder and chief executive officer said: “The current market leader has grown complacent focusing on margin over innovation, and pricing ahead of value."
CoStar Group plans to invest £46.5 million into sales and marketing in the first full year following the commencement of the integration, six times the current annual media spend and it said more than three times the current annual media spend of Rightmove.
This would mark the first stage of a multi-year investment programme totalling hundreds of millions of pounds to drive more consumers to the OnTheMarket portal.
9:43am: B&M falls after placing, Paragon lifted by upgrade
B&M European Value Retail has fallen 5.7% after reports it is raising £162.1 million through a share placing at a small discount to last night's closing price.
Other stocks on the move on Wednesday include Paragon Banking Group, up 2.7% after RBC upgraded to ‘outperform’ from ‘neutral’ and increased its price target to 850p from 700p.
ConvaTec is up after upbeat comments from UBS which has reiterated a 'buy' rating while Howden Joinery is up 1.5% after Jefferies reiterated a buy rating.
Meanwhile, the FTSE 100 continues to trade in the greem up 21 points.
9:30am: WPP hurt by JPMorgan downgrade, prefers RELX
WPP has fallen 1.1% in early trading after JPMorgan downgraded to ‘neutral’ from ‘overweight’ to reflect the slowing US macroeconomic environment.
The broker made the move in a sector review in which it said the outlook for 2024 is very similar to that 12 months ago.
Economies, consumers & earnings were resilient in 2023 & the forecast economic slowdown has been rolled into 2024, it pointed out.
JPM maintains a defensive bias as it starts the year as it expects higher inflation and interest rates to finally catch up with consumers and earnings.
Its key picks include RELX PLC (LSE:REL), up 1.3%, a high quality, defensive megacap, an AI winner that is compounding at an accelerating rate.
The bank pointed out RELX trades at a 20% discount to US peers despite offering better quality and growth.
JPMorgan also lowered its price target for WPP to 850p, down from 1,170p.
9:03am: COP28 summit strikes deal to transition away from fossil fuels
Perhaps another factor weighing on the oil price is news of a “historic” agreement to transition away from all fossil fuels to reach net zero emissions globally by 2050 for the first time, at the COP28 climate summit in Dubai.
COP28 President Sultan al-Jaber announced the agreement with no objections from any of the almost 200 countries present.
“We have language on fossil fuels in our final agreement for the first time ever,” said Jaber.
The agreement, known as the UAE Consensus, “calls on parties to contribute” to take actions including “transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner . . . so as to achieve net zero by 2050”.
8:42am: FTSE extends gains, WPP hurt by downgrade
The FTSE 100 has extended its gains, now up 22 points at 7,565.
Entain leads the risers, up 3.8%, with Rolls-Royce continuing its stellar progress this year, up a further 1.7%.
Heading the other way is WPP, down 1.4%, after JPMorgan downgraded the advertising group to ‘neutral’ from ‘overweight’ with a reduced price target of 850p, down from 1,170p.
The weak oil price is weighing on BP and Shell, both down 0.6%, with the price of Brent crude trading below $73/barrel.
Susannah Streeter at Hargreaves Lansdown said the price fall came as forecasts from US Energy Information Administration came in lower than earlier estimates, with the EIA now expecting oil prices to average around $83 a barrel next year, $10 lower than forecasts.
She added global growth is expected to slow and although cuts to production by OPEC+ nationals were agreed, totalling 2.2 million barrels a day in the first quarter, those aren’t considered enough given the drop in demand forecast.
“However, oil producing nations will probably lose patience with lower prices and are likely to keep the supply taps tighter for a longer period, than the initial three months agreed,” she suggested.
Goldman Sachs (NYSE:GS) has cut its price target for BP to 620p from 640p and for Shell to EUR40 from EUR41 but retained a ‘buy’ rating on both.
8:28am: Entain jumps as Chief Executive steps down
Leading the FTSE 100 risers is Entain, up 4.0%, after it said chief executive Jette Nygaard-Andersen is stepping down with immediate effect.
Nygaard-Andersen departs the betting operator, which owns Ladbroke and Coral, just a week after striking a £585 million settlement with UK authorities to end a probe into alleged bribery at the company’s former Turkish business dating back more than a decade.
“The past three years have been rewarding and challenging in equal measure,” Nygaard-Andersen said in a statement.
“The resolution of the HMRC investigation into the legacy business, which was sold by a former management team in 2017, offers a clean inflection point for me and for Entain.”
Nygaard-Andersen has also come under fire from shareholders for a falling share price and series of costly acquisitions.
Entain said Stella David, who has been a non-executive director at the group for almost three years, will take over as chief executive on an interim basis.
8:15am: FTSE edges higher and pound sinks on weak GDP
The FTSE 100 has made steady early progress as weak UK growth figures led investors to continue to bet the Bank of England will cut interest rates earlier than previously thought.
At 8:15am, London’s lead index was up 12.94 points, 0.2%, at 7,555.71 while the FTSE 250 was up 62.97 points, 0.3%, at 18,725.09.
The UK economy shrank 0.3% in October, worse than the 0.1% predicted by economists, with weakness across the board.
Darren Morgan, director of Economic Statistics at the Offie for National Statistics said: “October...saw contractions across all three main sectors.”
“Services were the biggest driver of the fall with drops in IT, legal firms and film production - which fell back after a couple of strong months.”
“These were also compounded by widespread falls in manufacturing and construction, which fell partly due to the poor weather.”
Samuel Tombs at Pantheon Macroeconomics noted October’s drop adds to the “growing list of recent downside data surprises, but we still doubt that the [Monetary Policy Committee] will change its tune and signal its willingness to cut Bank Rate next year as soon as this week’s meeting.”
“Worryingly, the decline in GDP was broad based, with industrial production falling by 0.8%, construction output dropping by 0.5% and services output falling by 0.2%,” he pointed out.
Nicholas Hyett at Wealth Club said this is shaping up to be a “flatline festive period.”
“The question now is when the Bank starts cutting rates.”
“Leave it too long and the cure could yet prove worse than the disease . . . who would want to be a central banker."
The figures saw traders slightly adding to bets for rate cuts next year.
Three cuts are still priced in for 2024, but the markets are getting very close to fully pricing in four.
This has put pressure on the pound which has fallen 0.35% to $1.2518 after the figures.
7:54am: UK heading for mildest, of mild recessions - Capital
Ruth Gregory at Capital Economics told BBC Radio 4 that the UK was heading for the mildest of mild recessions after today's GDP figures.
She said the figures showed a clean sweep of weakness, and showed the impact of high interest rates and high borrowing costs.
She said the economy is likely to remain subdued in 2024 as high interest rates act as a drag on activity but doesn't think it will move the dial too much for the Bank of England's meeting on Thursday.
???? ouch!
Monthly #GDP can be volatile but the 0.3% m/m fall in October is disappointing, with services, manufacturing and construction all down... ????
Big picture - UK economy is flatlining. pic.twitter.com/QdBe3ArVfT
— Julian Jessop (@julianHjessop) December 13, 2023
The BoE is widely expected to leave interest rates unchanged on Thursday for the third month in a row.
7:46am: Impellam (AIM:IPEL) agrees £483 million bid from HeadFirst
Impellam (AIM:IPEL) Group PLC has agreed a £483.2 million bid from HeadFirst Global BV concluding talks which were first made public in July.
The Luton-based recruiter said the deal was worth 557.2p per share in cash and 392.8p in principal amount of loan notes.
Shareholders will also be entitled to the 55.9p dividend declared in November, plus two further dividends totalling 78.5p which Impellam (AIM:IPEL) has yet to declare.
Taken together, the terms are worth 1,084.4p per Impellam (AIM:IPEL) share the company said.
Impellam (AIM:IPEL), is majority-owned by Michael Ashcroft, a British businessman who was formerly deputy chair of the UK Conservative Party.
He said he was “delighted” with the deal, noting that “significant value have been created for Impellam (AIM:IPEL) shareholders.”
7:30am: Walgreens considers London IPO for Boots - report
Walgreens Boots Alliance is dusting down plans on a potential exit from its UK drugstore chain Boots, which could include a listing in London, according to Bloomberg.
The Illinois, US-based retailer has been holding early talks about ways to separate Boots, which could be valued at about £7 billion, Bloomberg said, citing people with knowledge of the deal.
The report, which comes nearly 18 months after a previous sale process was scrapped, said one option being considered was an initial public offering (IPO) in London.
A Boots stock offering would be a big boost to the London stock market, which has been hit by a steady flow of companies opting to list elsewhere.
UK IPO fundraising has fallen more than 50% this year to about US$1 billion, according to data compiled by Bloomberg.
Walgreens is in cost-cutting mode and has brought in new chief executive Tim Wentworth to attempt to turn around the business.
On Monday, Walgreens had its senior unsecured credit rating cut to junk by Moody’s Investors Service, which cited the drugstore chain’s high debt relative to earnings.
7:14am: UK economy contracts more than expected in October
The economy shrank by more than expected in October as the UK continues to battle to avoid a recession.
Figures from the Office for National Statistics showed that GDP fell 0.3% in October following growth of 0.2% in September, worse than the 0.1% fall predicted by economists.
GDP was flat (0.0% growth) in the three months to October.
In the month of October, GDP fell 0.3%.
— Office for National Statistics (ONS) (@ONS) December 13, 2023
Over the three months to October, the ONS said GDP showed no growth compared with the three months to July 2023.
Services output fell by 0.2% in October, driven by a fall in information and communication, and was the main contributor to the fall in growth in GDP, following growth of 0.2% in September.
Production output fell by 0.8% in October, driven by widespread declines in manufacturing, after showing no growth in September.
The construction sector fell by 0.5% in October after growth of 0.4% in September.
07:00am: FTSE 100 to edge higher ahead of GDP, US rate call
The FTSE 100 is expected to edged higher at the open ahead of a trio of interest rate decisions over the next two days, as well as the UK GDP reading this morning.
Spread betting companies are calling London’s lead index up by around 5 points after closing down 2.12 points at 7,542.77 on Tuesday.
In the US on Tuesday, markets climbed, with both the Dow Jones Industrial Average and the S&P 500 up 0.5% and the Nasdaq Composite up 0.7%.
Investors will be eyeing the interest rate decision from the US Federal Reserve after the London close and comments from the Fed Chair Jerome Powell regarding the future path of interest rates.
The US central bank is widely expected to leave interest rates unchanged, as are the Bank of England and the European Central Bank tomorrow.
Back in London, and the early focus will be GDP reading.