- FTSE 100 closes down 21 points at 7,695
- UK borrowing falls in November by less than expected
- Swisscom considering bid for Vodafone Italia, report
4:41pm: FTSE closes off lows as US markets rally
The FTSE 100 ended Thursday in the red despite the best efforts of US markets which advanced once more.
At the close, London's lead index was down 20.95 points, 0.3%, at 7,694.73.
Axel Rudolph, senior market analyst at IG said: "The strongest US GDP expansion since Q4 2021, initial jobless claims unexpectedly holding at two-month lows and rapidly falling US Treasury yields gave US stock indices another boost."
"While they are back trading close to their recent record highs, european equity indices see a session in the red. Worse than expected UK retail sales put a dampener on the FTSE 100's advance after three straight days of gains."
4:32pm: Commuters face Christmas train chaos
Passengers faced travel chaos on Thursday as strike action disrupted Eurostar services and London’s Euston station was closed after trains were cancelled after wind caused havoc.
Avanti, who run services on the West Coast main line out of Euston, have reported that the damage to the overhead electric wires between Milton Keynes Central and Watford Junction means that all lines are blocked.
Euston has been closed with social media awash with stories of travel misery, chaos and disruption.
Eurostar closed and Euston west coast mainline closed on one of the busiest imaginable travel days…
— Faisal Islam (@faisalislam) December 21, 2023
This is leading to trains from London to Chester, Birmingham, Crewe, Edinburgh, Manchester and Liverpool to be cancelled or delayed.
The issue was seemingly caused by a plastic bag that was been caught on the overhead power lines.
Our engineers are working to remove a bag that has been caught on the overhead power lines.
Please check with @nationalrailenq and train operators before you travel.
Sorry for delays to your journey while we work hard to get you on the move. https://t.co/xFeSMh6K8V pic.twitter.com/POFEZLDns3
— London Euston (@NetworkRailEUS) December 21, 2023
Meanwhile, Eurostar services were brought to a halt due to an “unexpected” strike by Channel Tunnel workers, disrupting train travel between London and continental Europe ahead of the Christmas weekend.
Trains are unable to travel through the tunnel “until mid-afternoon at earliest,” Eurostar said in a post on the platform X, formerly known as Twitter.
Getlink SE, which operates the tunnel, said in a statement that unions called a strike to demand that the company triple its year-end bonus to workers.
Trade unions rejected an exceptional €1,000 bonus announced by management, Getlink said.
The problems spread to the skies as British Airways halted two dozen domestic and European flights due to Storm Pia.
Scottish airline Loganair has also grounded some services, while railway service TransPennine Express has issued “do not travel advice”.
BA, which is owned by International Consolidated Airlines Group SA (LSE:IAG) (International Consolidated Airlines Group SA (LSE:IAG)), said air traffic control restrictions were imposed because of the storm, leading to necessary adjustments in their schedule.
In a statement to Sky News, BA apologised for the disruption, assuring customers that they are diligently working to restore flight operations.
3:32pm: Oil price eases as Angola quits OPEC
The oil price has eased after Angola said it would leave OPEC over a disagreement on production quotas following the oil cartel's decision last month to further slash output next year.
Mineral Resources & Petroleum Minister Diamantino Azevedo said that the decision was not taken lightly, but OPEC membership no longer served the African country's interests.
"We feel that at this moment Angola gains nothing by remaining in the organization and, in defence of its interests, it decided to leave," the presidency quoted Azevedo as saying in a statement.
Azevedo told state broadcaster TPA that Angola is unhappy with OPEC's decision last month to further slash production next year in an effort to prop up volatile prices.
The price of Brent crude fell 1.2% to $78.81/barrel.
3:05pm: Harbour Energy soars on Wintershall Dea deal
Harbour Energy has soared 22% after agreeing an $11.2 billion deal to buy a portfolio of assets from German energy group Wintershall Dea.
The portfolio includes upstream assets in Norway, Germany, Denmark, Argentina, Mexico, Egypt, Libya and Algeria, as well as its carbon capture and storage licences in Europe. It excludes Wintershall Dea’s Russian assets.
Harbour said it expects the acquisition to make it “one of the world’s largest and most geographically diverse independent oil and gas companies”.
Harbour said it is expected to receive investment grade credit ratings and to benefit from a significantly lower cost of financing resulting from the porting of existing euro denominated Wintershall Dea bonds with a nominal value of c.$4.9 billion and a weighted average coupon of c.1.8%.
It said the deal is also accretive to Harbour's free cash flow, supporting enhanced and sustainable shareholder returns.
It described the deal as a "transformational value-creating opportunity for Harbour's shareholders."
2:45pm: FTSE 100 off lows as US stocks soar
The FTSE 100 has pulled off its lows after US stocks soared at the open, rebounding from Wednesday's blip, as optimism returned to Wall Street.
Shortly after the opening bell, the Dow Jones Industrial Average was up 296.13 points, 0.8%, at 37,378.13, the S&P 500 was up 40.69, 0.9%, at 4,739.04 and the Nasdaq Composite was 149.08 points, 1.0%, at 14,927.02.
The gains came as economic growth was revised down a notch, new figures showed.
According to a final gross domestic product estimate from the Bureau of Economic Analysis, GDP grew by 4.9% quarter-on-quarter on an annualised basis in the three months to September 30.
In the second-quarter, GDP had grown by 2.1% on the same basis.
An earlier advance estimate, out a month ago, said the US economy grew by 5.2% in the third quarter.
The BEA said: "The increase in the third quarter primarily reflected increases in consumer spending and inventory investment. Imports, which are a subtraction in the calculation of GDP, increased."
Separately, US jobless claims, a proxy for lay-offs, came in lower than economists expected last week as the labour market continued to prove resilient.
New applications for US state unemployment aid totalled 205,000 in the week ending December 16, a slight rise from the previous week’s 203,000, the labour department said on Thursday.
Economists had forecast 215,000 new claims.
Warner Bros Discovery was down 1.3% and Paramount Global down 2.4% after reports the two companies are in early talks to merge.
2:14pm: Retailers report downturn in sales - CBI
British retailers have reported a downturn in sales this month as consumers feel the squeeze from high interest rates and inflation, according to a survey released today.
UK retailers are also gloomier about the start of 2024, according to the CBI’s latest distributive trades survey.
Martin Sartorius, CBI principal economist, said: "The retail sector ended 2023 on a glum note, with the ongoing downturn in sales volumes deepening during the crucial holiday trading period."
"Looking ahead, retailers are bracing themselves for a New Year’s chill, as sales are set to fall at an even quicker pace next month."
The CBI’s monthly retail sales balance has dropped to -32 from -11 in November, showing that sales volumes fell at a fast pace in the year to December.
Orders placed upon suppliers fell in the year to December at the quickest rate since May 2020. Retailers expect the cutback in orders to soften next month #DTS pic.twitter.com/3YW0i68KS3
— CBI Economics (@CBI_Economics) December 21, 2023
More companies reported that their sales were below average for the time of year in December, than above normal.
Expected sales for the next month also fell sharply to -41 - the weakest since a record low of -62 in March 2021 - down from -6 a month ago.
1:07pm: UK set to sign finance pact with Switzerland
The UK is set to deal a deal with Switzerland that makes it easier for UK and Swiss financial firms to deal with each other.
The BBC reported that Chancellor Jeremy Hunt will be in Switzerland on Thursday to sign the agreement.
Trade in financial services between the UK and Switzerland is worth more £3 billion and the government is hoping that the Berne Financial Services Agreement will help that figure grow.
The deal means that Switzerland and the UK will recognise and accept each other's regulations.
It goes further than the relationship that both the UK and the Swiss have with the European Union.
Hunt insisted that the agreement was only made possible by the UK being outside the EU.
12:33pm: Harland & Wolff scraps bid proposal for Isles of Scilly ferry operator
Shares in Harland & Wolff Group Holdings PLC (AIM:HARL) bounved around 6% after it said it would not bid for Isles of Scilly Steamship Company Limited .
The company had previously said it was considering the opportunity to build and/or operate ferries to service the Isles of Scilly to Penzance route, which it believes is significantly underserved by its current operation.
It still sees clear strategic, operational and financial rationale for the proposed acquisition and is disappointed that the board of ISSCL had unequivocally rejected its proposal.
As a result, it has is no longer considering a bid.
Instead, it continues with its plans to offer a fast ferry service on the Penzance - Isles of Scilly route as well as offer dedicated freight service on this route.
12:08pm: US markets expected open higher
Stocks in New York look set to resume their upward path after heavy falls late in the day on Wednesday.
In pre-market trading, futures for the Dow Jones Industrial Average were up 0.4%, while those for the S&P 500 were 0.5% higher and contracts for the Nasdaq 100 futures advanced 0.6%.
Ahead of the open the US commerce department will release its final estimate for the country’s gross domestic product in the third quarter, which economists expect will be the same as the second estimate at 5.2%.
Elewhere, initial claims for US state unemployment aid, considered a proxy for lay-offs, are forecast to have risen to 215,000 last week, up from 202,000 in the previous seven-day period.
Stocks to watch include Micron Technology, up 5.8% in pre-market trading after strong first quarter results after the market close Wednesday.
The chipmaker reported a 16% year-over-year sales increase to $4.73 billion, beating the consensus of $4.55 billion.
CEO Sanjay Mehrotra attributed the success to strong execution and pricing.
11:48am: Top asset manager bets against the pound
Europe’s biggest asset manager Amundi is betting against sterling because it reckons the Bank of England will cut interest rates in the first quarter of 2024 - earlier than markets are currently pricing in.
Amundi says the pound could tank more than 4% against the dollar to $1.21 by March, compared to last month’s high of near $1.28.
“We expect the pound to fall apart,” is the rather stark warning from Federico Cesarini, head of developed FX at Amundi Investment Institute, the asset management company’s research arm, reported by Bloomberg.
The pound has rallied a touch today, trading at $1.2667, after falling sharply in the wake of the soft inflation figures yesterday.
11:32am: Admiral up with events, Berenberg downgrades
Admiral Group PLC has slipped 1.1% after Berenbeg moved the stock to 'hold' from 'buy.'
The broker pointed out the insurer has been one of the strongest performers in the insurance sector in 2023, up by 29% year-todate, and it believes the stock will continue to have EPS upgrades primarily due to the very strong re-pricing of the UK motor insurance market.
But it believes "the complexity of its accounting leads to some risk and the high valuation multiple the company is already trading on may limit the upside in the near term."
It still sees 10% upside to its new 2,961p price target.
10:32am: Morgan Stanley (NYSE:MS) sticks with May rate call forecast
Plenty of comments after yesterday's inflation surprise.
Morgan Stanley (NYSE:MS)’s Bruna Skarica is sticking with her call for a first cut in UK interest rates in May 2024 after yesterday’s “soft” inflation print.
She thinks with utility bills now likely to fall by around 10% in April, the 2% annual CPI target looks within sight early in the second quarter.
Skarica think softening retail pricing power is finally allowing for global goods disinflation to take hold in the UK in earnest – “which we don't see reversing in the near term.”
She expects a further fall to 3.8% in December, as the tobacco price increase will counter the drag from food prices, and a pause in January “given the 5% rise in utility bills and some punitive base effects related to hospitality prices.”
But she sees a very constructive story emerging for the UK's inflation outlook in 2024.
Morgan Stanley (NYSE:MS) now sees headline inflation averaging 2.2% next year (from 2.8% before), and at target in April although Skarica accepted there are risks of another spike in energy prices.
She expects the BoE to revise inflation projections at February’s MPC meeting, paving the way for a change in stance with communication more focused on a gradual ‘normalisation’ of policy.
Skarica maintained her “long-standing call for the first cut in May 2024.”
“We think that 1Q24 is too early for a move, as the MPC will want more evidence on pay settlements early next year.”
She sees risks to the call as a bit more balanced after the print, “but marginally still skewed more towards a start in August, as opposed to in February.”
9:56am: Borrowing figures still leave scope for tax cuts
The latest borrowing figures still leave scope for the Chancellor Jeremy Hunt to deliver tax cuts, economists believe.
Samuel Tombs at Pantheon Macroeconomics estimates that the Chancellor’s ‘headroom’ will be around £25 billion by the time of the Spring budget, if the recent fall in gilt yields and Bank Rate expectations is sustained, and the OBR leaves its other assumptions unchanged.
However, he thinks Hunt “will be relatively restrained with pre-election bribes,” noting the unfavourable market reaction to the national insurance tax cut.
“We think that he will decide that it is best to promise tax cuts in the next parliament and to give the [Monetary Policy Committee] scope to reduce interest rates now by largely sticking to his plans for a large fiscal consolidation in 2024/25.
Tombs predicts a net giveaway of about £10 billion to £15 billion in the Budget, allowing the MPC to conclude shortly afterwards that it can begin to reduce Bank Rate.
Martin Beck, chief economic advisor to the EY ITEM Club said “as things stand, the impact of lower debt interest spending is likely to be greater than the increase in borrowing from lower inflation.”
“With the extra room to manoeuvre this would give the Chancellor against his fiscal rules, tax cuts in next spring's Budget, the last before the next general election, seem likely.”
9:28am: Co-op Bank enters 'exclusive' talks with Coventry BS
Co-op Bank has entered exclusive talks to merge with Coventry Building Society, in a deal that would return the private equity-controlled high-street bank to mutual ownership.
Coventry Building Society is the UK’s third largest mutualised lender and earlier this month was reported to have submitted a bid for Co-op that valued it at north of £700 million.
A deal would result in a combined group with about £90 billion in assets.
Co-op Bank kicked off an auction process earlier this year.
8:52am: Vodafone climbs as Swisscom eyes Italian deal
The FTSE 100’s losses are modest for now despite the heavy falls in the US.
Vodafone PLC, up 1.4%, leads the risers after more speculation as to the fate of its Italian operations.
Swisscom is the latest group eyeing a move for the telco’s Italian business, according to Bloomberg.
The report said Swisscom is weighing an offer early next year, potentially countering a rival bid from Iliad for the unit.
The possible deal would combine Vodafone’s mobile service with Swisscom's Fastweb SpA fiber broadband carrier in the country.
On Monday, Vodafone confirmed it was exploring options Vodafone Italia.
The statement came after Paris-based telco Iliad confirmed it had proposed a merger of the two companies' Italian businesses valuing Vodafone’s operation at €10.45 billion.
8:16am: FTSE 100 follows US markets lower
The FTSE 100 has opened lower after heavy falls in the US soured the previously buoyant end-of-year mood.
At 8:15am, London’s blue-chip index was down 17.23 points, 0.2%, at 7,698.45 while the FTSE 250 was down 119.10 points, 0.6%, at 19,509.99.
Henry Allen at Deutsche Bank said after an “astonishing melt-up over recent weeks, markets suddenly shifted gear late in the US session yesterday, with the S&P 500 posting its biggest daily decline since September.”
He noted just 19 companies in the entire index were higher on the day, “the lowest number since March at the height of the banking turmoil, so this was an incredibly broad-based decline.”
The reverse in London saw some of Wednesday’s strong gains, in the wake of a sharp drop in the annual rate of inflation, given back.
Stocks to watch include Admiral, down 1.4% after Berenberg downgraded to ‘hold’ from ‘buy’.
Smart Metering Systems fell 5.5% after a leading shareholder said it would oppose KKR’s bid while the market gave the thumbs down to the publication of delayed results from Hipgnosis Songs Fund, with shares losing 1.7% early on.
7:57am: Top investor opposes Smart Metering Systems bid
Smart Metering Systems PLC (AIM:SMS)’s bid from KKR is being opposed by a long-term investor and its founders.
PrimeStone and the founders which control 17.8% of SMS’s shares said they were “disappointed” with the 955p per share cash bid.
As a result, they intend to vote against the offer.
7:48am: UK public borrowing falls less than expected in November
UK public sector borrowing fell to £14.3 billion in November, as lower spending on government energy support schemes offset a higher bill for benefits.
According to figures from the Office for National Statistics (ONS), the figure was £0.9 billion less than in the same month in 2022, but higher than the £12.9 billion forecast by economists.
Public sector net borrowing excluding public sector banks was £14.3 billion in November 2023, £0.9 billion less than in November 2022.
It was the fourth highest November borrowing since monthly records began in 1993.
— Office for National Statistics (ONS) (@ONS) December 21, 2023
“Payments relating to the energy price schemes that began in October 2022 have now stopped; however, these reductions in spending were offset by other inflation-related costs, such as increased benefit payments,” the ONS said.
Since the start of the financial year in April, the government has borrowed £116.4 billion, which is £24.4 billion more than in the same period last year and the second-highest financial year-to-November borrowing on record.
Public sector borrowing had undershot the forecast from the Office for Budget Responsibility, the UK fiscal watchdog, for most of this year, thanks to stronger tax receipts than in its March forecast.
7:40am: Hipgnosis Songs Fund spat with adviser rumbles on
It's all getting a bit messy at Hipgnosis Songs Fund Limited.
The embattled investor in music rights has released interim results despite its own Investment Adviser continuing to refuse to provide an unqualified value of the company’s assets.
Chair Robert Naylor said: “While the Investment Adviser did eventually provide an opinion to the Board, it was heavily caveated,” citing “confidentiality clauses of the Investment Advisory Agreement.”
Naylor urged the adviser to provide their opinion as to the fair value of the assets, without caveats, “such that we can provide greater certainty and transparency to our shareholders."
Naylor said that since he joined the board issues have been raised “as a result of ongoing failures in the financial reporting and control process.”
This led the firm to the company to suspend the dividend for at least the remainder of the year in order to ensure compliance with banking covenants.
The confused financial picture led the company to issue four different measures of revenue in the half-year results released today.
Net revenue from continuing operations fell to $54.0 million in the six months from September 30 from $76.8 million the year before while underlying net revenue climbed 14.0% to $65.8 million from $57.6 million.
The operative NAV per share decreased 9.2% to $1.7392 from $1.9153 at March 31. driven primarily by a reduction in the fair value of the portfolio.
Hipgnosis said it believes, based on forecasts provided by the Investment Adviser, that the company should have sufficient headroom to operate within its banking covenants for at least the next 12 months.
However, this is qualified by the continuation of issues around financial reporting and controls, it stressed.
It will be interesting to see what the market's make of it all.
7:00am: FTSE called lower after Dow's bubble bursts
The FTSE 100 is expected to open sharply lower on Thursday, conceding some of Wednesday’s gains, after falls in the US and Asia overnight.
Spread betting companies are calling London’s lead index down by around 37 points after closing up 77.65 points at 7,715.68 on Wednesday.
US markets posted heavy losses by the close with the Dow breaking a nine-day winning streak after a profit warning from industry bellwether, FedEx (NYSE:FDX).
The Dow Jones Industrial Average ended down 1.3%, the S&P 500 down 1.5% and the Nasdaq Composite down 1.5%.
Ipek Ozkardeskaya at Swissquote Bank said we are starting to feel “the cracks in market optimism.”
“A 12% plunge in FedEx (NYSE:FDX) – which acts like a gauge of economic activity, the overbought market conditions in major global stock indices and the awareness that a further fall in bond yields weaken the idea of soft landing triggered a much-needed retreat in equity valuations,” she said.
“We know that a further correction in equity valuations is on the cards. We just don’t know what the trigger will be,” Ozkardeskaya said.
UK markets had been boosted on Wednesday by a sharp fall in the annual rate of inflation sparking hopes for an earlier–than-expected cut to interest rates.
In London, results from cruise operator Carnival will be released while Vodafone may grab some attention on reports that SwissCom is one of the companies looking at buying its Italian unit.