- FTSE 100 closes up 41 points at 7,723
- Next raises guidance for fifth time in a row
- JD Sports slashes outlook, shares slide
4:40pm: FTSE 100 rallies to close firmly in the green
The FTSE 100 has closed firmly in the green finally finding its mojo in 2024.
At the close, London's blue-chip index was up 40.74 points, 0.5%, at 7,723.07 while the FTSE 250 was up 45.65 points, 0.2%, at 19,372.05.
Next was a stand-out performer after raising guidance for the fifth time in a row but it was a different story for JD Sports after its warning.
Michael Hewson at CMC Markets noted the FTSE100 has managed to "post its first positive day this year, with the main gains being driven by a resilient performance from defensives as well as the energy sector."
"The main story on the UK blue chip index today has been a tale of two retailers, with Next shares pushing up to new record highs, after upgrading its profits guidance for the 5th time in the last 12 months."
"JD Sports on the other hand has seen its shares plunge completely wiping out the 31% gain it saw in 2023 with the shares sliding to 13-month lows after warning that the milder weather in the last quarter meant that organic revenue growth would be weaker than expected at 6%," he added.
3:56pm: Sunak signals an Autumn election
The Prime Minister Rishi Sunak has signalled that Britain’s general election will take place in the autumn, saying his “working assumption” was that the UK would go to the polls in the “second half of this year”.
There had been speculation of a May election but Sunak sought to play down those rumours.
During a visit to a youth centre in Mansfield, Nottinghamshire on Thursday Sunak told broadcasters: “My working assumption is we’ll have a general election in the second half of this year and in the meantime I’ve got lots that I want to get on with.”
3:15pm: TUI recommends delisting from London Stock Exchange
The board of travel group Tui has recommended that the company cancels its UK listing, dealing a fresh blow to the London stock market.
Tui is listed in both London and Frankfurt, but said last month that shareholders had questioned whether the structure was “optimal and advantageous”.
In a statement on Thursday, the tour operator said that liquidity in the shares had moved from London to Frankfurt in recent years.
“Around 77% of share transactions are conducted directly through the German share register and less than a quarter of trading in Tui shares is carried out in the form of UK depositary interests,” it said.
It noted that in recent years in particular, the ownership structure of TUI shares and liquidity on the stock exchanges have changed significantly.
Mathias Kiep, CFO of TUI said: "Terminating the listing in London would offer clear advantages for investors and the company: Simplification of structures, improvement in liquidity and indexation as well as benefits for the EU ownership of our airlines."
The de-listing from the London Stock Exchange is expected to take place in June 2024.
Shareholders will be asked to vote on the proposal at the annual meeting next month.
2:46pm: Stocks extend gains despite mixed start on Wall Street
It's been a mixed start across the pond with the Nasdaq continung to struggle but blue-chips mountiung a rally.
Shortly after the opening bell, the Dow Jones Industrial Average was up 68.16 points, 0.2%, at 37,498.35, the S&P 500 was up 2.73 points, 0.1%, at 4,707.54 and the Nasdaq Composite was down 43.29 points, 0.3%, at 14,548.93.
Apple fell 0.9%, taking its losses for the week to around 4%, after being downgraded by Piper Sandler to 'neutral.' two days after Barclays lowered its rating on the tech giant to 'underweght'.
"We are concerned about handset inventories entering into 1H24 and also feel that growth rates have peaked for unit sales," the broker said in a note to clients.
Elsewhere, investors were digesting another batch of data on the jobs market ahead of non-farm payrolls tomorrow.
US new jobless claims fell by more than expected in the most recent week, new data on Thursday showed, while the ADP jobs report came in stronger than expected.
"Job gains rose for the fourth straight month, led by a healthy bump in leisure and hospitality hiring. Construction held strong in the face of high interest rates, but manufacturing continued to struggle, notching another month of losses," ADP said.
1:52pm: Boots reports strong sales growth
Adding to the positive column of updates from the UK retail sector is pharmacy chain Boots.
Its parent company, Walgreens Boots Alliance, has reported results today which showed like-for-like sales for its UK business rose by 9.8% in its financial first quarter, with growth across product categories and store formats.
Online sales were up by 18%.
That has helped to the US-listed parent’s results topping forecasts although it did hack back the dividend.
Investors will be loking out for any commments re a possible IPO of Boots which has been the talk of the town recently.
1:22pm: Carrefour drops PepsiCo (NASDAQ:PEP) products over high prices
French food retailer Carrefour has signalled to its customers that it will no longer sell PepsiCo (NASDAQ:PEP) products in the latest spat between food manufacturers and retailers over high food prices.
The supermarket chain will from Thursday stop stocking PepsiCo (NASDAQ:PEP) products such as Doritos crisps and 7Up, and will add signs to shelves explaining to customers that they would no longer sell the brand due to “unacceptable price increases”.
PepsiCo (NASDAQ:PEP) products are also being removed from Carrefour’s ecommerce sites, although some existing stock may still be visible in stores, a person involved in the process said.
12:40pm: Morgan Stanley (NYSE:MS) expects oil prices to ease as demand weakens
Morgan Stanley (NYSE:MS) thinks oil prices will ease during the year and slip further in 2025.
The investment bank has estimate dated Brent will remain close to $80s in the first half of 2024, before gradually declining towards the end of the year, trading in the low-to-mid $70s in 2025.
The bank thinks growth in world oil demand is set to slow as post-covid recovery tailwinds abate.
It has pegged 2024 oil demand growth at 1.2 mb/d, down from 2.2 mb/d in 2023.
MS expects oil demand growth to slow down and eventually drop (well) below 1 mb/d in the second half of this decade, before peaking in the early 2030s.
The years 2024 and 2025 are likely to be transition years towards slower growth rates, probably still seeing demand rising by 1.1 - 1.2 mb/d per year, as two factors remain supportive: petrochemicals and aviation, it suggests.
12:02pm: UK bosses seen inflation only falling to 4% in 2024
UK executives expect inflation to fall to 4% in the coming year, according to a Bank of England survey, still double the central bank’s official target.
While chief financial officers questioned in December reduced their inflation expectations versus the prior month, the survey suggests many think price pressures will remain sticky in parts of the economy.
This would throw a spanner in the works for those hoping for an early cut to interest rates by the Bank of England.
11:45am: Brighter start expected on Wall Street
It looks like a brighter start for US markets, which should suport London, after the downbeat start to proceedings so far in 2024.
In pre-market trading, futures for the Dow Jones Industrial Average were up 0.2%, while those for the S&P 500 were 0.1% higher and contracts for the Nasdaq 100 futures climbed 0.2%.
Investors will be watching data on the labour market ahead of Friday’s jobs report for further clues as to the future direction of interest rates.
Yesterday’s minutes from December’s Federal reserve meeting showed officials felt rates would need to stay high form some time although they had probably peaked.
Joshua Mahony at Scope Markets said the minutes “brought a little bit of something for everyone.”
New applications for US state unemployment aid are predicted to have edged down slightly to 216,000 last week from 218,000 before, while the ADP employment report is forecast to show that 115,000 private sector jobs were added in December, up from 103,000 in November.
Elsewhere, Walgreens Boots will report its latest quarterly earnings.
11:20am: Morgan Stanley (NYSE:MS) turns neutral on greenback
Turning to currency markets and Morgan Stanley (NYSE:MS) has turned ‘neutral’ on the US dollar.
The investment bank explained the USD tried to rally in early December but this proved short-lived.
US data deceleration, coupled with the market interpreting a dovish pivot from the Fed, fueled a decline in US rates, in turn bolstering risk appetite, it pointed out.
Morgan Stanley (NYSE:MS) said its conviction about USD strength has waned meaningfully.
“Investors appear to be adopting an 'early cycle' mentality where peak Fed hawkishness is sufficient to 'paper over' other risks,” it said, adding it's not so clear if previous USD-positive catalysts will be enough to weigh on risk and bolster the USD.
However, despite taking a ‘neutral’ stance (down from ‘bullish’) the bank thinks risks remain skewed toward USD strength:
Nonetheless, it suggested a pivot from short EUR/USD to short EUR/JPY.
It thinks the Japanese yen (JPY) should continue to gain as long as US rates are falling, regardless of the risk outlook.
Meanwhile continued downside surprises in Eurozone data, particularly inflation, could lead to the euro re-emerging as a funding currency of choice given its lower carry versus the USD and risks from a dovish ECB pivot down the line.
10:58am: PMI suggests economy may have picked up momentum
Martin Beck, chief economic advisor to the EY ITEM Club thinks the PMI data suggests the economy may have picked up some momentum at the end of the fourth quarter, following October's decline in GDP.
But with the economy still dealing with the growing drag from previous interest rate rises and NHS strikes likely to weigh on public sector output in December, he said GDP growth was probably only marginal.
Looking ahead, the fact that [PMI] survey respondents reported a further increase in new orders and a stronger outlook for business activity is grounds for optimism, and the EY ITEM Club thinks momentum should build as 2024 progresses.
Beck pointed out inflation has slowed faster than expected, and by more than pay growth, implying a better outlook for real household incomes.
Relatedly, oil, petrol and wholesale gas prices have fallen significantly and headwinds to activity from monetary and fiscal policy should lighten this year, as the Bank of England cuts interest rates and the tax cuts announced in the Autumn Statement take effect.
10:25am: Mortgage approvals at five-month high
UK mortgage approvals rose more than expected to a five-month high in November, according to Bank of England data pointing to a pick-up in the property market as interest rate expectations ease.
Net mortgage approvals for house purchases rose to 50,100 in November from 47,900 in October, the figures showed.
There were 50,067 mortgage approvals in the UK in November 2023 according to the Bank of England, 4.6% higher than in October & 9.9% higher than a year earlier (during the post-Mini Budget spike in mortgage rates & slump in mortgage approvals). (1/n)#ukhousing #housing pic.twitter.com/1mgaf2ZwuJ
— Noble Francis (@NobleFrancis) January 4, 2024
This was higher than the 48,500 forecast by economists and the highest reading since June.
Net approvals for remortgaging rose from 24,000 in October to 27,000 in November.
This tallies with other signs that the housing market is picking up, although experts are still predicting further price falls this year.
10:00am: Service sector stronger than expected in December
Britain’s service sector grew at a faster pace in December than previously thought and optimism among firms hit a seven-month high, according to a survey.
The final headline reading from the S&P Global/CIPS services purchasing managers’ index was 53.4 in December, the highest since June.
It was up from 40.9 in November and a preliminary reading of 52.7.
UK PMI Services was finalized at 53.4 in December, up from November’s 50.9, and the highest reading since last June. S&P Global noted continuous rise in output and new work for the second consecutive month. # # # # # #https://t.co/f75UblRJQK pic.twitter.com/rECFcu344S
— OverviewFX (@OverviewFx) January 4, 2024
Firms’ optimism regarding the outlook for 2024 improved for the second month in a row to its highest since last May, driven by hopes of a sustained turnaround in client demand.
Tim Moore, economics director at S&P Global Market Intelligence said: "December data indicated that the UK service sector ended last year on a high, with business activity growth accelerating to its fastest for six months as the turnaround in order books gained momentum."
But he cautioned many firms continued to cite challenging underlying business conditions due to the stagnating UK economy and strong pressure on margins from rising labour costs.
Nonetheless, "business activity expectations for the year ahead are now the most upbeat since last May, supported by signs of a rebound in clients' appetite to spend."
Staff hiring was the main weak spot in December, with hiring freezes yet to be lifted as service providers sought to maintain a tight grip on headcount, he added.
9:40am: ShoreCap puts JD Sports rating under review after warning
Shore Capital has placed its buy rating on JD Sports under reviewafter today’s “disappointing news” with a profit warning set around sales slightly behind management expectations alongside weaker than anticipated gross margin.
The broker noted revised pre-tax profit guidance c£915-935 million compares to its slightly above consensus expectation of £1.09 billion.
At the midpoint, this marks a notable 15% cut to its forecast, ShoreCap noted.
“We see a lot to like in JD., not least its balance sheet, but confidence in earnings estimates is a pre-condition of a positive equity case and so we place our buy stance under review,” it said.
9:10am: Next says Suez problems could delay deliveries
Amid the upbeat trading news, Next did warn of the potential for deliveries to be delayed owing to difficulties accessing the Suez Canal.
Danish shipping giant Maersk this week said the Red Sea was too unsafe for its ships to use right now.
“Difficulties with access to the Suez Canal, if they continue, are likely to cause some delays to stock deliveries in the early part of the year,” Next said.
Nonetheless, analysts continue to praise the Leicester-based retailer.
Richard Hunter, head of markets at interactive investor, said Next “is a master of the ability to under promise and over deliver, and this update is the latest illustration as it raises its profit guidance for the fifth time this financial year.”
“In all, Next has shown its mettle once more in a famously competitive environment, in which it is seen as something of a linchpin.”
8:40am: Tale of two retailers as JD Sports tumbles and Next climbs
Blue-chips remain in the green although slightly below opening highs after mixed news from two of the UK’s leading retailers.
Next continues to attract the plaudits after raising its outlook – again – but it’s a different tale at JD Sports which is down 19%.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown said Next’s update gave investors “plenty to be jolly about.”
“Unwrapping some of the headline figures, the group’s revenue growth came largely from its online channel where sales grew at near double-digit rates,” he explained.
Next still has a strong high street presence too, and growth here remains positive, he added.
Next’s statement has given Primark owner, AB Foods, a boost with shares up 1.7% while Marks & Spencer is up 0.9%.
But JD’s warning has knocked Sports Direct owner, Frasers Group PLC (LSE:FRAS), which is down 1.6%.
8:12am: FTSE 100 jumps but mixed fortunes for JD and Next
The FTSE 100 has opened higher although there are mixed fortunes for two leading retailers.
At 8:15am, London’s blue-chip index was up 33.29 points, 0.4%, at 7,715.62 while the FTSE 250 climbed 62.55 points, 0.3%, at 19,388.95.
Next PLC (LSE:NXT) jumped 4.6% after raising guidance for the fifth time in a row, nudging its full-year pre-tax profit outlook up by £20 million.
Shore Capital’s Clive Black said Next is a “high-class firm with a top-class leader,” and described the further increase in guidance as welcome and the 2025 outlook broadly reassuring.
He said Next is “the master” of setting earnings expectations, and “not a bad retailer at all to boot.”
But JD Sports is under the cosh, down 17%, after saying it expects full-year pre-tax profit between £915 million and £935 million.
It had previously expected a number north of £1 billion.
The retailer blamed the mild Autumn and soft Christmas trading for the cut.
Peel Hunt said “this clearly is not an ideal update, but external factors are mostly to blame.”
“The consumer is cautious and looking for a deal, and with no especially exciting launches, it was a dullish period,” the broker said.
It has lowered its prior £1.04 billion to £920 milliom, and next year’s £1.1 billion to £980 million.
But it thinks the weakness in the shares “will offer a good opportunity to buy a high-quality, growing market leader.”
7:52am: Sales slip at Topps Tiles
We‘ve also had an update from Topps Tiles PLC (LSE:TPT) which said sales fell 4.0% in the 13 weeks to December 30.
The flooring retailer said trading in its financial first quarter reflected “ongoing challenges” to discretionary consumer spending.
Like-for-like sales in Topps Tiles were down 7.1% in the first quarter, continuing the trend seen in the first eight weeks, with sales to trade customers proving more resilient than sales to homeowners.
Trading remains strong in Online Pure Play, with significant year on year sales growth, led by Pro Tiler Tools.
The Parkside commercial business is performing in line with expectations and is profitable in the year to date.
7:43am: JD Sports cuts outlook, after mild Autumn, soft Christmas
Not such good news for JD Sports Fashion PLC (LSE:JD.) which has lowered guidance after the mild Autumn weather and softer Christmas trading hit sales.
The sports retailer said sales in 22 weeks to December 30, constant currency organic revenue growth was 6.0% with like-for-like growth of 1.8%, slightly behind its expectations.
Clothing sales was hit by “milder weather from the second half of September, while the peak trading season, across the market, “was softer and more promotional than we anticipated.”
Gross margin was in line with last year, lower than expectations due to more promotional activity during the peak trading period.
JD now expects full-year pre-tax profit between £915 million and £935 million.
It had previously expected a number north of £1 billion.
The warning comes after industry titan Nike warned of lower sales and profit before Christmas.
7:32am: Next raises guidance - again
We've had the first major Christmas trading statement and it's good news for the High Street.
Next PLC (LSE:NXT) has increased profit guidance again after reporting sales during November and December were better than anticipated.
The Leicester-based retailer said in the nine weeks to December 30, full price sales were up 5.7% compared to last year, £38 million above previous guidance.
As a result, Next has increased full year pre-tax profit guidance by £20 million to £905 million, up 4.0% versus last year.
Interestingly, sales accelerated as Christmas approached, rising 10% in the two weeks to December 24.
7:00am: FTSE 100 set to nudge higher despite US losses
The FTSE 100 is expected to open higher on Thursday after a downbeat start to the year.
Spread betting companies are calling London’s blue-chip index up by around 12 points after closing down 39.19 points at 7,682.33 on Wednesday.
Overnight, US markets closed lower after Federal Reserve officials said interest rates would need to stay high for some time, although they indictaed rates have peaked.
"In discussing the policy outlook, participants viewed the policy rate as likely at or near its peak for this tightening cycle, though they noted that the actual policy path will depend on how the economy evolves," the minutes from December’s FOMC meeting stated.
Federal Reserve officials concluded that interest rate cuts are likely in 2024, although they deemed it would be appropriate to maintain a restrictive stance "for some time," according to minutes of December's meeting.
US markets closed lower in response, with the Dow Jones Industrial Average and the S&P 500 both down 0.8%, while the Nasdaq Composite was down 1.2%
A slew of service sector PMIs are due on Thursday, kicking off in Asia.
China's services sector expanded at a faster pace at the end of 2023, according to the latest survey data.
The Caixin services purchasing managers' index rose to 52.9 points from 51.5 in November, climbing further above the 50-point no-change mark.
Back in London, and a trading statement from Next will provide the early focus, ahead of the service sector PMI.