- FTSE 100 closed up 24 points at 7,638
- Superdry warns of significantly lower profits
- De La Rue profits slips but backs outlook
4:40pm: FTSE 100 springs to life buoyed by US gains
The FTSE has closed in positive territory taking heart from gains on Wall Street.
At the close, London's blue chip index was up 23.55 points, 0.3%, at 7,638.03 while the FTSE 250 was up 95.43 points, 0.5%, at 19,315.98.
Miners and gambling firms led the way but it was a generally quiet day for volumes and company news.
Kin & Carta was a late mover, rising 15%, after agreeing terms for a 130p per share bid from Valtech, which trumped a previously agreed offer from Apax Partners, worth 120p per share.
3:54pm: Asda bosses try to reassure MP fears on finances
Bosses at Asda have told MPs there are "no gaps" in its finances amid criticism over the supermarket giant's accounting structures.
The UK's third largest supermarket also said nobody should be concerned about its debts, despite confirming it has £4.2 billion of debts on its books.
The supermarket chain's leadership team faced questions on Tuesday from MPs on Parliament's Business and Trade Select Committee.
MPs quizzed the firm over its finances, more than two years after its debt-laden takeover by the billionaire brothers, Mohsin and Zuber Issa.
The brothers are behind petrol forecourt firm EG Group and private equity partners TDR Capital.
Mohsin Issa, co-owner of Asda, which employs 151,000 people across the UK, shrugged off suggestions there was money unaccounted for in its accounts.
"I can assure you there is no gap in the accounts signed off by our auditors," he said.
3:16pm: Fund managers bullish on Euro equities but think rally overdone
A survey of fund managers from Bank of America shows 68% of participants see upside for European equities in 2024, little changed from last month.
However, after the sharp rally in equities since late-October, 65% now expect near-term downside for the European market, up from 47% last month.
88% of investors see downside for European EPS in response to slowing growth and fading inflation, while a net 6% see European equities as overvalued, up from a net 26% that thought equities were undervalued last month.
A plurality of 44% regard earnings downgrades as the most likely cause of a market correction, followed by increased financial stress, at 24%.
2:46pm: US markets keep on rising
Stocks continued to march ahead on Tuesday fuelled by hopes of early cuts to interest rates in 2024.
Shortly after the opening bell, the Dow Jones Industrial Average was up 49.49 points, 0.1%, at 37,355.51, the S&P 500 was up 7.65 points, 0.2%, at 4,748.21 and the Nasdaq Composite was up 41.19 points, 0.3%, at 14,946.38.
In economic news, housing starts leapt to their highest level since May last month, beating economists’ expectations and signalling easing housing market conditions as mortgage rates fell and homebuilder confidence recovered.
New residential construction rose almost 15% to 1.56 million homes in November from 1.36 million in October, the US commerce department said on Tuesday, above forecasts of 1.35 million starts.
However, newly issued building permits, a barometer for future construction, declined 2.5% on a monthly basis to 1.46 million.
Elsewhere, there will be more 'Fedspeak' to guide the market with Fed speakers, including Barkin, Bostic and Goolsbee.
The bright start has sparked the FTSE 100 to life, up 11 points now.
2:12pm: Daily Mail confirms launch of limited paywall
The publisher of the Daily Mail has confirmed it is to launch a paywall giving access to up to 15 MailOnline articles each day, according to The Guardian.
The new service, which will launch at the end of January, will be made available through the UK website and app, and will cost a “small monthly fee” although the exact price has not yet been revealed.
The publisher said that the service would be known as Mail+, but stressed that the “overwhelming majority” of stories would remain free.
The amount of content represents just a few percent of the 1,500 articles that the MailOnline publishes on a daily basis.
1:45pm: Here are some of today's risers and fallers
Focusrite PLC (AIM:TUNE) moved 8.7% higher on Tuesday after announcing the acquisition of audio reproduction business OutBoard.
With the total acquisition price set to be £3.57 million, Focusrite will pay £2.37 million initially for the firm, alongside a performance-linked payment of £1.2 million by the end of next year.
De La Rue PLC (LSE:DLAR) shares fell 4.5% on Tuesday as it reported a drop in half-year profit although it backed full-year guidance.
The bank notes printer said in the six months ended 30 September 2023, authentication revenue rose 5.7% to £48.1 million from £45.5 million and currency revenue fell 2.6% to £113.4 million from £116.4 million.
Flutter Entertainment PLC (LSE:FLTR) climbed 2.3% following a 'buy' rating from Peel Hunt after the betting group’s share price backtracked “from the initial excitement about a US domestic listing”.
Flutter’s shares remain 14% lower since the middle of the year, but Peel Hunt expects increased demand when the company lists in New York on January 29, 2024.
And finally, ENGAGE XR Holdings PLC, the spatial computing specialist, saw its shares fall 18.6% after saying contracts expected to be signed by the end of this financial year will now drop into 2024.
In an update, it said revenues for the 12 months ended 31 December 2023 will be €3.6-€3.8 million, while it expects to post an underlying loss of €4.6 million.
1:05pm: Gas prices drop on US intervention in Red Sea
European and UK benchmark gas prices have fallen fell sharply after the announcement by the US of an expanded maritime task force to protect ships passing through the Red Sea eased fears over potential liquefied natural gas supply risks.
The European benchmark Dutch TTF has dropped 7.6% to €32.83/mwh, and the UK equivalent has dropped 8.6% to 81.15p per therm on the Intercontinental Exchange.
12:32pm: UK at risk of serious downturn warns Pimco
The UK is at high risk of a serious economic downturn next year, one of the world’s biggest active bond fund managers has warned.
Daniel Ivascyn, chief investment officer at Pimco, told the Financial Times that he has been running larger than usual bets on UK government bonds relative to those from the US, in anticipation that the UK will suffer greater economic strain.
Bond fund giant Pimco warns of ‘hard landing’ for UK economy https://t.co/uoD28bELqz
— Financial Times (@FT) December 19, 2023
“In the case of the UK - a smaller, open economy, with a consumer that’s feeling the brunt of central bank policy far more than their US counterparts - you just have a higher probability of more significant economic deterioration.
“We do think there’s potentially more hard landing risks.”
12:03pm: Stocks seen little changed in New York
Equities in New York are expected to open little changed on Tuesday as investors take stock of recent strong gains on the back of hopes for early rate cuts in 2024.
In pre-market trading, futures for the Dow Jones Industrial Average were flat, while those for the S&P 500 were 0.1% higher and contracts for the Nasdaq 100 futures climbed 0.1%.
Markets have ramped up expectations for interest rate cuts in 2024 despite Federal Reserve officials pushing back against the more overly optimistic predictions.
Joshua Mahony at Scope Markets noted for now, markets remain steadfast in their approach, holding on to gains ahead of the key festive period.
“However, there is a feeling that we are pricing in a best-case scenario for 2024, and thus the risk appears firmly skewed towards potential disappointment,” he added.
“Whilst somewhat perverse, the best hope for equity market bulls would be a weaker economic picture, forcing the banks to put their foot on the gas,” he suggested.
In economic news, new residential construction is expected to have fallen slightly to an annualised rate of 1.36 million homes in November, down from 1.37 million in October.
11:28am: Easyjet shareholders back Airbus order
EasyJet Plc shareholders have approved an almost $20 billion aircraft order from Airbus SE, making the carrier one of the planemaker’s biggest customers in Europe.
The British budget airline held a general meeting with shareholders on Tuesday to get approval for its largest aircraft order yet and received the backing of 99.94% of investors.
The company first announced the order in October and said deliveries would run through 2034.
easyJet Chairman Stephen Hester said: “The board believes the proposed purchase will support positive returns for the business and forms a core part of the delivery of our strategic objectives.”
“We are therefore pleased with the strong support that shareholders have shown today by approving the transaction.”
10:53am: Rolls-Royce target hiked to 420p by Bank of America
Rolls-Royce Holdings PLC (LSE:RR.) has nudged higher on further positive broker comment with Bank of America lifting its price target to 420p from 400p.
The bank believes that engine flying hours (EFH) Rolls will land at 87% in 2023 and sees scope for Rolls to guide for EFH at 90-100% versus 2019 levels in 2024.
BofA has increased its mid-term EFH assumptions to 109% and 117% versus 2019 levels for 2025 and 2026, respectively.
Looking ahead to 2024, the broker thinks a key focus will likely be pricing improvement in long-term service agreement contracts, with 2023 negative one-offs expected to reverse in 2024, benefitting free cash flowe (FCF), working capital dynamics and capital allocation once it achieves an investment grade (IG) profile in 2024.
It has increased its 2024-26 FCF estimates by 1-7% after raising assumptions on pricing and increasing EFH levels to be in line with mid-term guide.
As a result, BofA has increased its price objective to 420p from 400p.
"We reiterate our Buy rating on the strong growth outlook and cap allocation optionality," it said.
It pointed out while Rolls has by far been the best performer in its EU Civil Aero coverage in 2023 it still trades at a significant discount to peers.
"We believe that Rolls deserves to trade at discount to pure civil aero peers, such as Safran, MTU and Melrose," but "see scope for this level of discount to close as Rolls' margins and cash flow improve over the next 12 months."
It thinks Rolls to be at an IG profile in 2024, which should trigger resumption of dividends.
BofA has pencilled in dividends of 3.5p per share in 2024 by assuming c.25% pay-out.
10:11am: Flutter to benefit from US exposure as listing looms
Flutter Entertainment remains in demand supported by an upgrade to ‘buy’ from ‘hold’ by Peel Hunt.
The broker expects increased demand when the company lists in New York on January 29, 2024.
It also believes the trading update in January against lower expectations could be a “platform for upgrades.”
The broker explained that Flutter’s FanDuel is a familiar brand to many US domestic investors and the shares will offer them exposure to a fast-growing local market leader with a cash cow international business.
“We expect increased demand, and solid trading, to drive up the share price,” it said.
9:40am: Hipgnosis queries asset valuation - results delayed
Hipgnosis Songs Fund Ltd is down 2.0% after delaying its results after in light of concerns over the valuation of its assets.
The company explained that an independent valuer found its assets to be "materially higher than the valuation implied by proposed and recent transactions in the sector", including recent deals made by the company.
Steve Clayton at Hargreaves Lansdown noted Hipgnosis has always been an unusual animal on the stock market.
“They own portfolios of songs, for which they collect the royalties. That idea’s simple enough, but what’s it worth?”, he asked.
Clayton said seasoned market followers will know that the normal sequence of events when a unique business which has assembled a seemingly valuable portfolio of non-traditional assets expresses uncertainty about their value it is rarely good news.
However, Hipgnosis have reported today that their independent valuer has in fact put a “radically higher valuation” upon their portfolio than even they were expecting.
“Awkwardly, it also suggests that the valuation at which they had sold a portfolio of songs to a related party was well below that true value,” he pointed out.
Despite the high valuation put on the portfolio, the market is treating Hipgnosis with caution this morning, Clayton noted.
9:09am: Superdry warning adds tension ahead of New Year updates
Shore Capital’s retail analyst Clive Black thinks the warning from Superdry adds a “little tension into the air” ahead of the forthcoming New Year trading updates from clothing players.
Following on from a quite mellow Black Friday time when UK volumes were at best flat, shopper behaviour in December seems to be quite late in committing to spending, he suggested, with trading only really 'getting into gear' across the UK in recent days.
“We continue to expect the listed grocers (M&S, Sainsbury, and Tesco UK) - where our visits show decent footfall - to report robust trade and well ahead of the likes of Asda, Iceland, and Morrison,” he said.
On the clothing side, Next kicks off the New Year trading season on 4 January and “we would be surprised to see any disappointment from this name, but the Superdry warning suggests that it and others need to gain share to deliver another nudge up to forecasts.”
8:44am: FTSE 100 climbs with bets placed on Flutter and Entain
The FTSE 100 continues to make steady progress although news flow is thin on the ground as we wind down to the holiday period.
Flutter Entertainment is up 1.7% supported by an upgrade to ‘buy’ from ‘hold’ from Peel Hunt who see clearer US momentum for the FanDuel owner, while Entain is up again.
But a weaker oil price has dragged shares in BP and Shell lower.
Superdry has rallied a touch but remains down 17% after its profit warning although the rest of the sector has emerged unscathed so far.
Hipgnosis Songs Fund is 1.8% lower after delaying its results while de La Rue is now 5% lower after its figures.
8:15am: FTSE up but Superdry plunges after warning
The FTSE 100 nudged higher in early exchanges but retailers were on red alert after a warning from Superdry.
At 8:15am, London’s blue-chip index was up 9.63 points, 0.1%, at 7,624.11 while the FTSE 250 was up 92.75 points, 0.5%, at 19,313.30.
Shares in branded goods retailer, Superdry, plunged 21% after warning profits will be “significantly below” management expectations.
The warning, comes as retailers are in the middle of the key Christmas trading period, raising fears of further bleak updates.
Clive Black at Shore Capital said the warning “adds a little tension into the air ahead of the forthcoming New Year trading updates from clothing players.”
Peel Hunt cuts its rating to ‘hold’ from ‘buy’ and lowered sales assumptions by 15% to £506 million and forecast a loss of c.£45 million for the year.
De La Rue is also on the back foot, down 4.9%, despite backing full-year guidance.
The bank note printer said first half profits had fallen a touch although they were ahead of previous guidance.
7:50am: Hipgnosis Songs Fund delays results on valuation query
Hipgnosis Songs Fund has delayed the publication of its interim financial results, which had been scheduled for today.
The delay was in light of concerns over the valuation of its assets, given that an independent valuer found its assets to be "materially higher than the valuation implied by proposed and recent transactions in the sector", particularly the proposed sale of assets to Hipgnosis Songs Capital.
The company said it therefore sought advice from Hipgnosis Song Management Ltd, its investment adviser, which is majority owned by funds managed and/or advised by Blackstone, on their opinion on the independent valuer's valuation.
"Hipgnosis Song Management Limited eventually provided an opinion, which was heavily caveated, such that the board has concerns as to the valuation of the company's assets in its interim results," the company added.
The troubled music intellectual property investor expects the publish the results before the end of the year.
7:43am: De La Rue on track after first-half profit tops guidance
De La Rue PLC (LSE:DLAR) also updated investors on trading today backing full-year guidance after reporting half-year operating profit ahead of previous guidance.
The bank notes printer said in the six months ended September 30, authentication revenue rose 5.7% to £48.1 million from £45.5 million and currency revenue fell 2.6% to £113.4 million from £116.4 million.
Adjusted operating profit of £7.9 million, although below last year’s £9.3 million, was ahead of previous guidance of breakeven.
The firm’s pre-tax loss widened to £16.8 million from £15.9 million.
This underpins the board's reiteration of full year guidance with adjusted operating profit expected in the early £20 million range with net debt in the mid £90 million range.
7:24am: Superdry warns profits to be significantly below expectations
Superdry PLC (LSE:SDRY) has warned that full-year profits will be hit by the “challenging” trading environment and the warm Autumn weather.
The branded goods retailer, famous for its hoodies, said trading performance has been “significantly below” management expectations and profit for the year is expected to reflect this weaker trading.
Superdry said trading in the 26 weeks to 28 October was characterised by a challenging consumer retail market and the abnormally mild autumn which resulted in a delayed uptake of the Autumn collection:
Retail sales fell 13.1% from the year before while Wholesale sales slumped 41.1%, although this was, to some extent, expected due to the decision to exit our US wholesale operation.
Despite some more encouraging trends, sales in the six weeks since the half-year are still down around 7% on a like-for-like basis.
Superdry said it had made progress on its cost savings programme and remains on track to make £35 million of savings within the year.
It said its Inventory reduction programme was on track as clearance of aged stock has continued.
7:00am: FTSE 100 set to edge higher after US gains, BoJ holds rates
The FTSE 100 is expected to post modest gains on Tuesday when trading starts following further advances in New York on Monday.
Spread betting companies are calling London’s lead index up by around 8 points after closing up 38.12 points, 0.5%, at 7,614.48 on Monday.
US markets closed higher, extending their recent winning streak. although blue-chips were subdued.
Two more Federal Reserve officials pushed back against market expectations for an early cut to interest rates but for now the market seems to be shrugging these comments aside.
In Asia, The Bank of Japan held off from lifting negative interest rates, causing the yen to fall.
The central bank kept overnight interest rates steady at minus 0.1%.
After a two-day meeting, the bank said on Tuesday: "With extremely high uncertainties surrounding economies and financial markets at home and abroad, the Bank will patiently continue with monetary easing."
Back in London, and the early focus will be updates from De La Rue and Nanoco.