- FTSE 100 down 5 points at 7,685
- Shell slips on mixed trading, oil price fall
- Goldman sees FTSE 100 rising to 7,900 in 2024
4:40pm: FTSE 100 ends little changed
The FTSE 100 has recovered all of its early losses to close just in the gree while mid-caps have stormed ahead.
At the close, London's blue-chip index was up 4.58 points, 0.1%, at 7,694.19 and the FTSE 250 was up 183.41 points, 1.0%, at 19,393.80.
Traders pointed out any moves may be limited ahead of the US inflation print later this week.
B&M rose strongly late in the session ahead of tomorrow's trading statement, L&G was supported by a Berenberg upgrade and Smith & Nephew was boosted by positive comments from Morgan Stanley (NYSE:MS).
3:55pm: Manufacturers more confident about prospects
Britain’s manufacturers believe that they are about to turn the tide of history and start expanding the country’s industrial sector once again.
A snapshot survey from Make UK has led the industry body to declare that, despite concerns about rising costs, manufacturing could account for 15% of Britain’s gross domestic product.
Its share of the economy has dwindled from 25% of GDP, or national output, to only 9.4% last year during a long-term decline of the sector in Britain from the 1970s.
However, a survey of senior executives at 205 leading manufacturers by Make UK and PwC, the accounting group, has uncovered a renewed sense of confidence in their prospects.
3:16pm: Eurozone rate cut unlikely before summer - report
Over in Europe, and the same debate rages about the timing of the rate interest rate cut.
One a Governing Council member of the European Central Bank has said a reduction is unlikely before the summer, according to Bloomberg.
Boris Vujcic, the chief of the Croatian central bank, said policymakers will need to be convinced that inflation is slowing and will look at labour market data, Bloomberg reported.
"We're not talking about cutting interest rates now, and probably won't before summer," he told a Croatian news channel, Bloomberg reported.
Vujcic said both the eurozone and his native Croatia are likely to avoid a recession.
2:45pm: Mixed picture on Wall Street but Boeing knocks Dow
It's a mixed picture in the US with the blue-chip Dow knocked by heavy falls in Boeing but technolofay stocks holding firm.
Shortly after the opening bell, the Dow Jones Industrial Average was down 150.14 points, 0.4%, at 37,315.97, the S&P 500 was up 11.68 points, 0.3%, at 4,708.92 and the Nasdaq Composite was up 94.71 points, 0.7%, at 14,618.78.
Shares in Boeing fell 9.3% while Alaska Airlines declined 4.6%.
Aside from Boeing, investors will be looking ahead to the inflation figures and the start of the earnings season.
Joshua Mahony at Scope Markets said the commencement of the fourth quarter earnings season brings a fresh source of directional bias for markets, with traders watching closely for early signs over US consumption in the festive period.
This week will be dominated by the big banks, with many hitting long-term highs as concerns of a hard landing ease, he explained.
Elsewhere, Johnson & Johnson was little changed after it agreed to acquire clinical-stage biopharmaceutical company Ambrx Biopharma for $2.0 billion and shares in Axonics soared 20% after being bought by Boston Scientific in a $3.7 billion deal.
2:15pm: Wells Fargo predicts mild technical recession in UK
Wells Fargo believes a mild technical recession for the UK remains more likely than not and thinks this tilts the balance of an earlier rate cut than thought.
The bank currently expects the first rate reduction by the Bank of England in August but said UK growth and inflation slowdown suggests the risks are tilted towards an earlier cut.
An initial rate cut could perhaps come in June, possibly May, it suggested.
Nonetheless, it still thinks the risks are tilted towards more gradual easing than reflected in current market pricing, which already sees around a 75% chance of an initial rate cut by the time of the May meeting.
Against this backdrop, it thinks UK bond yields could drift higher from current levels while it could also mean moderate gains in the pound against the US dollar as 2024 progresses.
1:04pm: Goldman sees modest rise in FTSE 100 in 2024
Goldman Sachs (NYSE:GS) expects the FTSE 100 to rise to 7,900 this year despite what it termed “structural impediments.”
“Low valuation, improving global demand and low supply aiding commodities stocks, and continued buybacks all support FTSE 100,” it said, adding “we do not expect UKX to underperform as it did in 2023.“
But the investment bank pointed out the UK market has been de-equitising, companies are buying back shares in record amounts, there have been very few IPOs, “and coincident with this – and we argue the main driver – there are relatively few domestic buyers of UK stocks.”
Goldman explained regulation has pushed pension/insurance companies out of public equity and UK households have a relatively low propensity to own stock.
Net Buying of UK Equities (GBP billion)
Source: Haver Analytics, Goldman Sachs (NYSE:GS) Global Investment Research
In addition, higher rates now on offer in fixed rate savings products make it even less likely that there will be a structural shift in equity by households, it said.
“Increasingly pension funds and overseas investors have been allocating more to bonds given the comparatively high yields to offer” Goldman added.
12:50pm: BT's new boss starts in February
The new era at BT Group PLC (LSE:BT.A) will start in February,
The FTSE 100-listed telco has confirmed that Allison Kirkby will start as its new chief executive on February 1.
BT named Kirkby, the boss of Swedish telecoms company Telia, as Philip Jansen's successor in July.
She is leaving Telia at the end of January and BT has now confirmed when she will take the helm.
12:32pm: Barclays rejigs UK housebuilder ratings after recent rally
Barclays has rejigged ratings of a number of UK housebuilders, believing that despite a fourth quarter rally, there is still some scope for even a modest price/cost to support an inflexion on earnings.
We still see reasons for potential optimism even without the market dramatically improving, it said.
“Under our bull case for 2024/25, we see scope for c30% earnings upside to our estimates.”
While around one-third of this potential upside already appears factored into consensus, Barclays still anticipates a meaningful inflexion point for estimates over the next 18 months.
It has upgraded Bellway to ‘overweight’ from ‘equal weight’ because it sees the company's strong relative positioning for growth in an improving market and its discounted valuation as positives.
It also upgraded Crest Nicholson to ‘overweight’ from ‘equal weight’ following its heavy underperformance versus the sector through 2023.
But heading the other way, Barclays downgraded Barratt Developments and Berkeley Group from ‘overweight’ to ‘equal weight’ owing to relatively strong performance through 2023 and what it sees as generally full valuation multiples.
12:03pm: Dow seen lower, Boeing nosedives
Across to the US and stocks are expected to make a weak start to proceedings with Boeing set to nosedive when trading opens.
In pre-market trading, futures for the Dow Jones Industrial Average were down 0.4%, while those for the S&P 500 were 0.1% lower and contracts for the Nasdaq 100 futures declined 0.1%.
Shares in Boeing are trading 8.4% lower in pre-market trading after US federal regulators temporarily grounded some 737 Max planes.
Investors are reacting to the news that an Alaska Airlines Boeing 737 Max 9 aircraft suffered a blowout that left a gaping hole in the side of the fuselage.
AJ Bell investment director Russ Mould said Boeing’s has been “shattered” after the incident, which is the “latest in a string of problems” for the company.
“Safety is of paramount importance in the aviation sector and airlines using 737 Max planes will be thinking long and hard about their future aircraft requirements and how Boeing might play a smaller role, or none at all,” he said.
Elsewhere, investors will be looking ahead to this week’s inflation print as traders continue to speculate when the US central bank will start to lower interest rates, while US banks kick off the reporting season at the end of the week.
ING’s James Knightley notes markets are expecting the first Fed rate cuts in March this year, but he thinks it'll be later.
“The latest decent job figures suggest there's no need for an imminent reduction and it's one of the reasons why we think we'll be waiting until May,” he commented.
11:38am: Senior hit by Boeing woes
Boeing’s woes have hit shares in Senior PLC (LSE:SNR), down 4.8%.
The engineering firm makes components and systems for manufacturers including Boeing and others, such as Airbus.
Boeing’s 737 Max 9 has been grounded across the world after a fuselage section on a brand-new Alaska Airlines jet blew out mid-flight, triggering an emergency landing and the fall-out has hit Senior given its exposure to Boeing.
In December, Senior said it expected its aerospace division to grow in 2024 as supply chain challenges ease.
11:05am: L&G supported by improved macro, dividend yield - Berenberg
Legal & General Group PLC (LSE:LGEN), up 1.7%, is another to benefit from positive broker comments today.
Berenberg has upgraded its rating on the life insurer to 'buy' from 'hold.'
It highlighted a more supportive macro outlook heading into 2024 compared to 2023 which it thinks will support the L&G share price, as well as the share performance for the wider UK life insurance sector.
Fears of credit risk and real estate valuations are subsiding, but the benefits of higher interest rates for L&G, such as strong annuity volumes, are here to stay, Berenberg said.
"We expect strong annuity volumes to drive a step-up in capital generation," it added.
The broker pointed out L&G offers one of the best dividend prospects for income investors, ranking seventh-highest yielding stock in the FTSE 100, trading at an 8.5% 12-month forward dividend yield.
Berenberg has set a price target of 289p.
10:22am: Barclays eyes return of dividend at Rolls-Royce
Barclays has become the latest broker to set a price target for Rolls-Royce Holdings PLC (LSE:RR.) north of 400p.
It thinks the potential reinstatement of an investment grade rating, and subsequent resumption of the dividend will be a key catalyst.
Barclays said despite an expected £300 million of one-off outflows (over-hedging costs/OE concessions), it forecasts Rolls reaching a net cash position of around £750 million in 2024, “a key metric for potential reinstatement of an investment grade rating.”
It forecasts an additional £4 billion in free cash flow between 2024-27 due to the lag effect on cash to profit, improved pricing per flight hour, mix effect profitability/volume of Trent 700 and T1000 provisions in prior years, recognised at very low margin falling away.
The bank has increased its target to 409p from 270p and reiterated an ‘overweight’ rating.
9:55am: FTSE 100 extends losses
The FTSE 100 has taken a turn for the worse with losses accelerating in the last 30 minutes, now down 53 points at 7.637.
The 2.3% fall in Shell is not helping, with BP also down 1.1%, as the oil price eased.
AJ Bell’s Russ Mould noted the usual teaser for Shell’s quarterly results did little to “enthuse investors as Saudi Arabia’s decision to cut crude prices dampened sentiment towards the sector.”
“If it wasn’t for the threat of disruption to supplies thanks to tensions in the Middle East, one might have expected crude prices to come under sustained pressure as inventories and production build and signs of demand weakness emerge,” he said.
He said the improved performance in its big integrated gas arm hardly feels like a big revelation while a weak performance for its chemicals division is compounded by the big writedown associated with a Singapore refining hub it is looking to sell.
Mould said the company needs to show it can deliver when market conditions aren’t so helpful.
Meanwhile, Morgan Stanley (NYSE:MS) has lowered the energy sector to 'in-line'.
However, it sees opportunities in selected stocks and reiterated 'overweight' ratings on TotalEnergies and BP, offset by 'underweight' ratings on Equinor, Galp and OMV.
9:25am: Melrose a 'top pick' for JPMorgan
Top of the FTSE 100 risers is Melrose Industries PLC (LSE:MRO, OTC:MLSPF), up 1.9%, supported by some warm words from JPMorgan.
The investment bank reckons results on March 7 will meet the top-end of the 2023 guidance (at least) and thinks the firm will raise the 2024 guidance to ahead of consensus expectations.
"Melrose remains a key pick for us in 2024; an aerospace pure-play with a credible margin story, further upside to forecasts and a sizeable buy-back supporting the shares," the investment bank said.
It has placed the stock on positive catalyst watch ahead of the results with an unchanged June 2025 price target of 620p.
9:15am: Drax leaps amid reports of carbon capture approval reports
Drax has stormed ahead on Monday, up 7.6%, after a report suggested ministers are to approve a multibillion-pound CO2 capture scheme.
Energy Secretary Claire Coutinho is expected to secure Drax’s future by approving a scheme to bolt two massive carbon capture plants onto Drax’s four generating units, potentially stripping out almost all their CO2 emissions, the Telegraph reported.
The report said Coutinho is also due to launch a consultation into how best to extend the subsidy system under which Drax last year received £617 million from consumer bills.
The scheme terminates in 2027 so Coutinho will propose extending it into at least the 2030s, keeping Drax in business for at least several years.
8:54am: Rolls-Royce target raised, L&G, Bellway, Crest upgraded
It's another good day for Rolls-Royce Holdings PLC (LSE:RR.), up 1.7%, as another broker hikes its price target for the firm.
Barclays has increased its price target to 409p from 270p and reiterated ‘overweight’ rating on the engineering outfit which was the best performer in the FTSE 100 in 2023.
Another stock on the move is Legal & General Group PLC (LSE:LGEN), up 1.6%, after Berenberg upgraded to 'buy' from 'hold.'
Barclays has also been busy reviewing its price targets and ratings for a number of UK housebuilders.
It has upgraded Bellway, up 1.7%, to 'overweight' from 'equal weight' and increased its price target to 3,022p from 2,330p but downgraded Berkeley Group, down 0.1%, to 'equal weight' from 'overweight' with a price target of 4,812p.
Crest Nicholson, up 5.4%, has been upgraded to 'overweight' from 'equal weight' with an increased price target of 258p from 200p but Barratt Developments, up 0.8%, has been moved to 'equal weight' from 'overweight,' although the price target has been increased to 560p from 464p.
8:40am: Weak chemicals outlook hits Shell
The FTSE 100 remains under pressure with Shell one of the worst performing stocks.
Victoria Scholar, head of investment, interactive investor said investors are focusing on the fact that Shell warned that profits from trading oil products and chemicals would be lower resulting in a loss in that division.
She noted the oil major is also facing an impairment charge of between $2.5 billion and $4.5 billion in the fourth quarter, relating to its Singapore refining and chemicals hub. This offset an improved outlook in its gas trading division.
8:15am: FTSE 100 falls; CMC leaps
The FTSE 100 opened lower hit by falls in oil and mining stocks as the downbeat start to 2024 continues.
At 8:15am, London's blue-chip index was down 19.11 points, 0.3%, at 7,670.50 while the FTSE 250 was up 16.45 points, 0.1%, at 19,226.84.
Susannah Streeter, head of money and markets, Hargreaves Lansdown said “wariness has returned at the start of the week, as investors assess the risks of geo-political conflict, amid fresh signs of global economic slowdown and uncertainty about the trajectory of inflation.”
Shell and BP fell amid a drop in the oil price as US Secretary of State Antony Blinken embarked on a whistlestop diplomatic tour, in an attempt to calm inflamed tensions.
Streeter noted oil prices have been fluctuating, as fresh concerns about the Middle East have been brewing, but for now focus has switched to signs of a dwindling appetite for oil globally.
“Saudi Arabia has flagged that it is seeing softening demand, prompting it to cut crude prices for buyers in all regions in February,” she noted.
Today, Shell reported a boost to gas trading in its fourth quarter but warned of lower earnings in its chemicals unit.
Elsewhere, CMC Markets leapt 20% after raising profit guidance substantially.
The trading platform has increased its full-year profit forecast to a range of £290-£310 million, up from £250-£280 million.
“ If the improvement in revenue contribution from B2B in the Trading business can sustain, justifying the significant investment the company has made here, we could take a more constructive view on CMC shares,” analysts at Shore Capital said.
7:49am: CMC ups guidance after strong fourth quarter
One stock to keep an eye on is CMC Markets PLC (LSE:CMCX) which has raised its full-year profit forecast to a range of £290-£310 million, up from £250-£280 million.
The company reported a strong performance in the third quarter of 2024 driven by an improvement in market conditions led by an increased contribution from the B2B and institutional business.
7:44am: Recruitment market subdued in December
The recruitment market remained subdued in December although there were some signs the slowdown was easing, according to latest figures.
The latest KPMG and REC, UK Report on Jobs said permanent placements and temp billings declined again in December, albeit at softer rates than in November, while overall vacancies fell slightly for the third time in the past four months.
The supply of candidates continued to rise sharply, despite the rate of expansion easing from November's near three-year record, while competition for skilled staff pushed up rates of starting pay again in December.
Neil Carberry, REC Chief Executive, said: “The slowdown in our labour market seems to be easing a bit.”
“Given that December is a time when employers generally postpone activity into the new year, this is a positive sign that the labour market is weathering the current economic storm.”
7:32am: Shell sees strong gas trading, weaker chemcials performance
We start the week with news from oil mjaor and index heavyweight Shell PLC (LSE:SHEL, NYSE:SHEL).
A mixed update with the company expecting to report an improved fourth quarter performance in its gas division but a downturn in chemicals.
Shell forecast production of 880 to 920 kboe/d in its integrated gas division and said trading and optimisation is expected to be significantly higher than the third quarter due to seasonality and increased optimisation opportunities.
Production in the upstream business is forecast between 1,830 to 1,930 kboe/d in the quarter with exploration well-write offs expected to be $0.2 billion.
But trading and optimisation in the chemicals unit is expected to be significantly lower with the division is expected to make an adjusted earnings loss in the fourth quarter.
7:00am: FTSE 100 expected to open lower
The FTSE 100 is expected to start the week on the back foot with investors hoping this week’s US inflation print will prompt a change in fortunes for equities after the weak start to the year.
Spread betting companies are calling London’s blue-chip index down by around 23 points after closing down 33.46 points at 7,689.61 on Friday.
"After several weeks of gains and having finished 2023 on a high note it was inevitable that at some point markets would probably take a step back, having been given a lift into year-end by a belief that rate cuts were coming in early 2024,” said Michael Hewson, UK chief market analyst at CMC Markets.
On Thursday, US inflation figures are due.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank said: “The headline inflation in the US is expected to have slowly accelerated to 3.2% from 3.1% printed a month earlier, while core inflation is expected to have further eased to 3.8% from 4% printed a month earlier.”
“Soft inflation numbers, ideally softer-than-expected, could slow the corrective selloff in both stock and bond markets, yet the inflation risks are now tilted to the upside,” she added.