- FTSE 100 down 73 points at 7,576
- Consumer confidence improves in December
- UK business activity at six-month high
4:45pm: FTSE ends lower
London's main stock index finished 72.67 points, 0.95%, lower at 7,576.36 after a US Federal Reserve official damped hopes that interest rates could be cut early in 2024.
“After six to seven weeks of consecutive weekly gains some European and US stock indices are beginning to show fatigue amid a $5 trillion 'triple witching' in US options coinciding with S&P 500 and Nasdaq 100 rebalancing," IG's Axel Rudolph commented.
"Traders are taking money off the table amid comments by New York Fed President John Williams, who said that it is premature to be thinking about a March rate cut."
By the London close, the Dow Jones Industrial Average had reversed earlier losses to trade 0.1% higher at 37,272.91, while the S&P 500 was flat at 4,720.37 and the Nasdaq was 0.4% up at 14,826.54.
3:53pm: Wizz Air expects no increase in grounded aircraft
Wizz Air Holdings has said it does not expect the number of grounded aircraft to increase in 2024 due to Pratt & Whitney engines.
The Budapest-based airline was responding to an announcement from the US Federal Aviation Administration, earlier this week, in which it set out new maintenance requirements for PW1100G engines, which it says require inspection and possible art replacement if necessary.
However, Wizz Air said the announcement is in line with guidance previously given by International Aero Engines LLC, meaning that it has made no changes to its capacity assumptions for 2024.
3:14pm: Coal use hits record in 2023, Earth's hottest year
Global consumption of coal reached an all-time high in 2023, the IEA energy watchdog said Friday, as Earth experienced its hottest recorded year.
The International Energy Agency reported that nations would burn even more coal this year than in 2022, the previous record for consumption of the key source of planet-warming gases.
Scientists say greenhouse gases will need to be cut almost in half this decade to meet the world's targets of limiting global heating and avoiding catastrophic impacts on the Earth's climate.
The EU's Copernicus Climate Change Service said earlier in December that 2023 will be the hottest on record after November became the sixth record-breaking month in a row.
The IEA said, nevertheless, that after peaking this year, worldwide coal consumption was expected to start declining in 2024, as renewable power generation from solar and wind continues to expand.
2:46pm: US stocks mixed after Williams dampens rate cut hopes
The comments from John Williams have sparked a mixed retsrat across the pond.
Shortly after the opening, the Dow Industrial Average was down 81.43 points, 0.2%, at 37,166.92, the S&P 500 was down 10.66 points, 0.2%, at 4,708.89 although the Nasdaq Composite was up 40.64 points, 0.3%, at 14,802.20.
Williams, president of the Fed’s New York branch said: “We aren’t really talking about rate cuts right now,” but instead are still focused on whether rates are high enough to ensure that inflation would fall to the 2%.
“One thing we’ve learned even over the past year is that the data can move and in surprising ways, we need to be ready to move to tighten the policy further, if the progress of inflation were to stall or reverse,” Williams said, adding it’s “premature to be even thinking about March cuts.”
Neil Wilson at Markets.com said the comments signal the Fed was not entirely at ease with the degree to which the market swallowed the ‘pivot’.
“They’d maybe thought of it more of a leaning in rather than a volte face,” he added.
2:14pm: US Fed official plays down rate cut hopes
A leading Federal Reserve official has sought to temper speculation about imminent interest rate cuts from the US central bank, saying such discussions were “premature”.
The comments from John Williams, president of the Fed’s New York branch and a member of the rate-setting Federal Open Market Committee, came two days after the US central bank signalled that it expected rate cuts worth 75 basis points in 2024.
The comments sparked a rise in stocks.
“We aren’t really talking about rate cuts right now,” Williams said in an interview with CNBC on Friday. Instead, he said the Fed is still focused on is whether rates are high enough to ensure that inflation would fall to the 2 per cent target in a sustainable way.
1:03pm: Pearson shareholder calls for move to US listing
Pearson’s biggest shareholder has said that it should re-list in the US, arguing that leaving London would be better for shareholders as most of the education publisher’s business and rivals are based in North America.
The founder of Cevian Capital, Europe’s largest activist investor, said that joining the increasing number of London-listed companies moving out of the FTSE would be an “easy and effortless way” to increase the value of Pearson which has seen its market value flatline this year.
“Pearson is a US company with the majority of sales and executives there,” said Christer Gardell, managing partner of the Stockholm-based investor, in an interview with Bloomberg. “It is only due to historical reasons it is still listed in the UK.”
Pearson makes almost two-thirds of its £3.8 billion annual revenues in North America.
Shares in Pearson are down a touch, off 0.4%.
12:31pm: Reach jumps after phone hacking settlement
Shares in Reach PLC (LSE:RCH) jumped despite Prince Harry, the Duke of Sussex, winning a High Court case over phone hacking charges against Mirror Group Newspapers Ltd.
However, as a result of this ruling that claimants ought to have been aware they had a potential claim within a few weeks of MGN admitting to wrongdoing, the company said all claims issued after October 2020 are "now likely to be dismissed other than where exceptional circumstances apply".
The court handed down the judgment in favour of the duke, but awarded him only £140,600, well short of £443,025 sought.
"The level of these awards will assist the parties to calculate the appropriate level of damages for the remaining cases not impacted by the time limitation," Reach said in a statement.
12:05pm: More gains expected in the US but the FTSE stumbles
While the FTSE 100 remains under pressure, it is looking like another positive day in the US as the Federal Reserve’s rate pivot continues to bring frestive cheer to the equity market.
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%.
Jim Reid at Deutsche Bank noted Thursday saw the S&P 500 post its 6th consecutive advance, which left the index at a fresh all-time high in total return terms.
It also means the index is still on track for a 7th consecutive weekly advance, which would be the first time that’s happened since 2017, he pointed out.
The Dow is also on pace for a nine-week winning streak, its longest run since 2019.
Stocks to watch include Costco Wholesale Corporation (NASDAQ:COST) (Costco Wholesale Corporation (NASDAQ:COST)), up 1.5% in pre-market trading after the company’s first-quarter sales topped expectations.
The bulk retailer posted revenue of $57.8 billion, up 6.2% year over year and above expectations of $57.72 billion. Membership fee revenue increased 8.2% to $1.08 billion.
Net income was $3.58 per share, compared to $3.07 per share a year earlier.
11:21am: PMI data reassures recession not looming
Today’s PMI data adds to the impression that October's significant month-on-month fall in GDP was more noise than signal.
That was the view of the EY ITEM Club although it noted the pace of expansion implied by the PMIs remains relatively soft compared with historical averages and renewed weakness in manufacturing is a concern.
Tight fiscal policy settings and the lagged impact of tighter monetary policy will remain strong headwinds to activity in the near-term, it said.
But with the effects of inflation continuing to fade, and the Bank of England likely to start cutting interest rates from mid-2024, the EY ITEM Club expects the growth outlook to improve as 2024 progresses.
Samuel Tombs at Pantheon Macroeconomics said the figures provide further reassurance that "a recession isn’t developing, despite the fall in GDP in October."
He noted the composite PMI exceeded 50 by a larger margin than in November, while the new orders index topped 50 for the first time since June.
10:52am: St James's Place slips on fund raising reports
St James’s Place is planning to raise up to £1 billion by 2030 to buy the businesses of retiring partners, as it tackles challenges wrought by its increasing scale and higher interest rates, according to the Financial Times.
The funds will support succession planning within SJP’s network of 2,622 partner firms, who manage the group’s relationship with its 914,000 clients.
Some of these firms contain more than 50 advisers running up to £2 billion in client assets.
“We have been thinking about how we increasingly employ equity alongside debt to help with succession planning,” Iain Rayner, SJP’s chief operating officer, told the Financial Times.
Shares have dropped 3.7% today.
10:07am: Shell to offload stake in German refinery
Shell PLC (LSE:SHEL, NYSE:SHEL) has agreed to sell its stake in Germany’s PCK Schwedt refinery, a plant that supplies much of eastern Germany with fuel and has been caught up in Europe’s standoff with Moscow over the war in Ukraine.
Shareholdings in the refinery, seized by Germany from Russian majority owner Rosneft PJSC after the invasion, were left in limbo as Europe worked to recover from last year’s energy crisis.
Shell Deutschland will now divest its 37.5% holding to Prax Group, the company said Friday.
The transaction is expected to close in the first half of 2024.
9:50am: UK business activity at six-month high - PMI
Activity in the UK private sector hit a six-month high in December boosted by a pick-up in the services sector, figures showed Friday.
At 51.7 in December, up from 50.7 in November, the headline seasonally adjusted S&P Global/CIPS Flash UK PMI composite output index pointed to the fastest rise in private sector business activity since June.
“Higher levels of business activity were supported by a renewed improvement in order books, alongside efforts to work through post-pandemic backlogs,” the survey said.
UK avoids recession (for now at least!) as flash #PMI rises to six month high in December. However, this will add to speculation of UK interest rates remaining higher for longer, and more #BOE rate hikes cannot be ruled out depending on upcoming months' data 1/ pic.twitter.com/7PXEY46V45
— Chris Williamson (@WilliamsonChris) December 15, 2023
The UK services PMI business activity index registered 52.7 compared to 50.9 in November, a six-month high, but manufacturing remained subdued.
The manufacturing PMI hit a two-month low at 46.4 compared to 47.2 in November.
Chris Williamson, chief business economist at S&P Global Market Intelligence said: “The UK economy continues to dodge recession, with growth picking up some momentum at the end of the year to suggest that GDP stagnated over the fourth quarter as a whole.”
But he noted it was “a dual-speed economy, with manufacturing contracting sharply while services regained some poise.”
He felt the service sector’s resilience and sticky inflation picture “will add to speculation that it’s too early for the Bank of England to be talking about cutting interest rates.”
9:30am: House prices to fall by as much as 4% in 2024, Halifax
House prices are predicted to fall by as much as 4% in 2024, after a resilient 2023, according to a forecast from lender Halifax.
“Overall, with the combination of cost of living pressures and interest rate levels that are still much higher than even two years ago, we will likely see continued mild downward pressure on house prices,” said Kim Kinnaird, director, Halifax Mortgages.
Halifax, which is part of Lloyds Banking Group PLC (LSE:LLOY), the largest lender in the UK, expects prices to fall between 2% and 4%.
But it predicts a partial recovery in market confidence and transaction volumes in 2024 as interest rates ease and affordability improves.
As with recent years, forecast uncertainty remains high given the current economic environment, it added.
Kinnaird noted prices held up better than expected in 2023, falling just 1.0%.
9:00am: FTSE edges higher with support from miners
The FTSE 100 has edged higher, up 11 points at 7,660.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown:described it as "mild enthusiasm," with investors "chewing through an enormous amount of data from central banks in recent days, with the pause button for interest rates still the go-to."
But she pointed out the pressure could be mounting though, as markets are still largely behaving as though these pauses are pivots, "but it’s likely that cuts are further away than investors are expecting."
Miners are prominent among the risers with Glencore, Anglo American and Antofagasta all firmer, after some mixed data from China.
Industrial production rose 6.6% year-on-year, ahead of analyst expectations but tetail sales came in lower than anticipated, although they still rose 10.1% in the month.
In the FTSE 250, Trainline continues to dominate up more than 17%.
8:32am: Trainline rises as DfT abandons train ticket app
It’s full steam ahead for shares in Trainline which have surged 20% after the Department for Transport withdrew proposals to create a new Great British Railways ticket retailing website and app.
The proposals were originally outlined by the DfT in May 2021, as part of the Williams-Shapps Plan for UK Rail white paper.
JPMorgan said this removes a “key overhang to Trainline’s investment case we believe, where the narrative has faced growing investor concern on the risk surrounding the emergence of a new, online retail competitor in the UK, and threat to Trainline’s market share position.”
The broker said while it expects some investor focus to also remain on the emergence of Uber as an online ticket aggregator, “indications continue to suggest little in-roads on traffic share to-date, and we expect investor focus to now turn to Trainline’s strong passenger momentum and improved operational delivery.”
It rates Trainline ‘overweight.’
Elsewhere, the decision prompted analysts at Barclays to upgrade the stock to ‘equal weight’ from ‘underweight’.
It said the decision is "good news for Trainline and a thesis-changer for us."
8:18am: FTSE 100 pauses after Fed euphoria wanes
The FTSE 100 made a muted start to proceedings as investors took stock after central bank meetings and the implications for interest rates.
At 8:15am, London’s blue-chip index was little changed at 7,648.46 while the FTSE 250 rose 68.33, 0.4%, to 19,325.29.
Despite retaining its hawkish tone, the Bank of England is still expected to lower rates next year although the timing remains uncertain.
Economists at Citi feel the BoE’s hawkish stance leaves it “at growing risk of overtightening.”
New forecasts in February may present an opportunity to re-evaluate, the bank said.
“But with little sign today of a nascent shift in the MPC’s thinking, we think the current guidance is more likely to survive through Q1,” Citi said.
The broker continues to expect cuts from August, if with risks skewed towards an earlier move.
The mood was given a further lift by a survey showing an improvement in consumer confidence.
Gabriella Dickens at Pantheon Macroeconomics said: “The ongoing recovery in consumers’ confidence adds weight to our view that households’ spending will partially rebound in Q4, supported by an increase in real wages.”
7:50am: Consumer confidence improves in December - GfK
It's a quiet morning for company updates but there is some good news on consumer confidence as we hit the peak Christmas trading period.
GfK's closely watched consumer confidence index rose for the second consecutive month in December, suggesting households could be more inclined to splash out more this Christmas.
The consumer confidence index, a measure of how people view their personal finances and broader economic prospects, rose two points to minus 22, its highest level since September and the second-highest since January 2022.
“UK consumer confidence edged higher in December as households looked forward to lower inflation and a slightly improved economy in 2024. GfK’s sentiment measure increased 2 points to minus 22.” - BBG pic.twitter.com/96iYaqI9Jl
— Michael Brown (@MrMBrown) December 15, 2023
“Despite the severe cost of living crisis still impacting most households, this slow but persistent movement towards positive territory for the personal finance measure looking ahead is an encouraging sign for the year to come,” said Joe Staton, client strategy director at GfK.
The data showed that confidence was also sharply higher from minus 42 in December 2022.
For the year ahead, expectations of their personal financial situation rose one point to minus 2 in December, up strongly from minus 29 in December 2022.
Staton said the recovery in that sub-index was encouraging because it indicated household “financial optimism and control over personal budgets”.
7:00am: FTSE seen little changed as Fed euphoria wanes
The FTSE 100 is seen little changed when trading kicks off on Friday as investors continue to digest the fall-out from interest rate decisions this week.
Spread betting companies are calling London’s lead index up by around 1 point after closing up 100.54 points at 7,648.98 on Thursday.
The US Federal Reserve, European Central Bank and Bank of England all chose to hold interest rates, but it was the dovisih tone of the US Federal Reserve which took the headlines.
Ipek Ozkardeskaya at Swissquote Bank pointed out the contrast between the resilient US economy adopting a dovish stance and faltering European economies holding on to a hawkish position gives the impression that “something is amiss. “
Michael Hewson at CMC Markets agreed.
“The contrast between the ECB’s tone and the Fed’s tone could not have been starker, and yet when you look at the numbers the divergence becomes even more bizarre.”
He felt if anything, “the policy stances should be in reverse.”
In London, on Friday, PMI figures will be reported while results from Naked Wines are also due.