- FTSE 100 closes down 10 points at 7,684
- Hays tumbles after profit warning
- Barclays announces 5,000 job cuts
4:40pm: FTSE edges lower in lacklustre session
The FTSE 100 struggled for direction once more closing just the wrong side of the line.
At the close, London's blue-chip index was down 10.23 points, 0.1%, at 7,683.96 while the FTSE 250 was down 99.78 points, 0.5%, at 19,294.02.
“Most major global stock indices couldn't capitalize on Monday's tech driven rally and instead consolidated ahead of Thursday's US CPI release and the start of US Q4 earnings season on Friday," said Axel Rudolph online trading platform IG.
The rise in the oil prices supported BP and Shell, while a $1.4 billion deal underpinned GSK.
But retailers were mixed after a weak BRC report as Christmas trading updates gear up with J Sainsbury on Wednesday.
Recruiters had a poor day after a profit warning from Hays which sank 7.6%, dragging Pagegroup down 3.5% and Robert Walters down 7.4%.
3:54pm: More strikes at Amazon
The GMB union has announced that workers at Amazon’s new flagship warehouse in Birmingham have voted to join industrial action, just weeks after opening.
Workers at the Birmingham fulfillment centre will strike on January 25, the anniversary of the first ever official strike action at a UK Amazon warehouse.
Amazon warehouse workers set first-ever strike date at Birmingham depot https://t.co/hg3kyc69Jl
— Retail Week (@RetailWeek) January 9, 2024
Amazon’s new £500 million Birmingham fulfilment centre opened its doors at the end of 2023.
Amazon faced nearly 30 days of strike action in the last twelve months, the GMB says, with workers at its Coventry warehouse holding several days of industrial action in the last year.
3:15pm: Berenberg likes Astra’s Alexion business
Berenberg has highlighted the potential for AstraZeneca PLC (LSE:AZN)'s Alexion Pharmaceuticals (NASDAQ:ALXN), believing it is still in good shape despite some competitors entering the market.
Berenberg was commenting after a meeting with Alexion's management.
"We continue to view this business as a high-value asset within AstraZeneca, contributing $7.8 billion of sales in 2023 (17% of total revenue)," Berenberg said.
"We forecast 4% per annum sales growth for the Alexion business through 2023-30, driven by the strength of the legacy complement business, leveraging AstraZeneca's global footprint and pipeline contribution,” the bank said.
“Our Alexion sales forecasts are 4% ahead of consensus for 2025,” it added, which “supports 6% pa revenue growth for AstraZeneca group versus large pharma average of 3% per annum [excluding obesity drugs]."
Berenberg rates AstraZeneca at 'buy' and has a price objective of 12,500p.
2:45pm: Wall Street resumes downward path
As expected, US stocks have opened sharply lower as Monday's tech-led bounce faded and investors turned their attention to Thursday's inflation print.
Shortly after the opening bell, the Dow Jones Industrial Average was down 233.84 points, 0.6%, at 37,449.17, the S&P 500 was down 25.96 points, 0.5%, at 4,737.58 and the Nasdaq Composite was down 98.23 points, 0.7%, at 14,745.54.
Boeing fell a further 3.3% after United Airlines and Alaska Airlines found loose parts on some grounded 737 Maxes, threatening to widen the company’s problems after a single plane suffered a mid-air blowout on Friday.
Airlines were in the spotlight at Bank of America which double-upgraded United Ailines, up 0.7%, to 'buy' but downgraded JetBlue to 'underperform.'
Elsewhere, shares of Juniper Networks soared 23% after a Wall Street Journal report said Hewlett Packard Enterprise could announce a deal to acquire the networking hardware company for about $13 billion as soon as this week.
It has all had little impact on events in London, where the FTSE 100 remains just the wrong side of the line, down 5 points.
2:15pm: Shell boosted by rising oil price, City bulls
Shell has perked up 0.9% today, after Monday’s fall, with much of the movement dictated by a rally in the oil price.
The price of Brent has rallied around 2.8% to $78.19/barrel after being as much as 4% lower on Monday after the Saudi price cuts.
The bulls are also out in force after Shell’s mixed trading update on Monday.
Bank of America is particularly upbeat, reiterating a ‘buy’ and 3,200p price target.
“We see Shell as one of our Big Oil top picks - with ~30% upside potential to our unchanged 3,200p [price objective].” it said in a research note.
“We believe 2024 should provide critical catalysts underlining execution of the new CEO's restructuring agenda - sticking out as the only Supermajor with absolute capex cuts y/y and upside to disposal plans,” BofA continued.
It reckons this should further strengthen Shell's relative balance sheet advantage and provide upside to Shell's 30-40% cash from facility operations payout ratio.
As a result, it expects around $25 billion of shareholder distributions, above the $21 billion consensus.
Barclays trumped BofA with a 3,800p price target, reiterating an ‘overweight’ rating.
BP is also up by 1.2%.
1.35pm: Here’s a look at the top risers and fallers on the market today
Shoe Zone PLC (AIM:SHOE) jumped 4% after posting stronger profits and proposed a higher dividend for the year to September 2023 after particularly strong second-half trading.
Pre-tax profit climbed 19% to £16.2 million for the year, the retailer reported on Tuesday, on the back of a 6% jump in revenue to £165.7 million.
Shares in MJ Gleeson (LSE:GLE) subsided 9% after the housebuilder reported a decline in sales, expectations of lower profit margins and a swing to a net debt position for the six months to 31 December 2023, the first half of its financial year.
Jupiter Fund Management PLC (LSE:JUP) shares orbited 14% lower after it reported £2.2 billion of net outflows in the past year and revealed that highly regarded fund manager Ben Whitmore is leaving to start his own management boutique.
Zytronic (AIM:ZYT) shares tumbled to almost a two-decade low after it withdrew its dividend after a swing to losses last year.
It insisted there are "grounds for cautious optimism over the medium term" but warned that trends seen in the second half of last year have continued into the first quarter.
1:07pm: Bond auction sees strong demand
A UK auction of 20-year government bonds has seen record demand from investors.
The bid-to-cover ratio, which measures how many bids received for the amount of bonds sold -- was 3.6 times.
Decent start to the duration debt deluge
UK 20-Year Bond Auction Sees Record Investor Demand https://t.co/xNTsyIvDRw https://t.co/3kIhzeevGX
— David Scutt (@Scutty) January 9, 2024
The average yield was 4.391%, a touch higher than where the market is right now.
It could be that investors are rushing to snap up government bonds to lock in higher yields before central banks start loosening monetary policy, which could begin as early as March.
12:48pm: Euro unemployment falls despite weak growth
Unemployment in the eurozone has fallen unexpectedly to a joint record low, suggesting Europe’s jobs market remains strong despite the weak growth in the region.
The jobless rate in the eurozone dipped to 6.4% last November, new data from Eurostat shows, down from 6.5% in October, matching the record low set in June.
Euro area #unemployment at 6.4% in November 2023, EU at 5.9% https://t.co/JcCXnbpZrp pic.twitter.com/BYK8JODkwU
— EU_Eurostat (@EU_Eurostat) January 9, 2024
A year earlier, the unemployment rate was 6.7%.
ING’s Peter Vanden Houte said even though eurozone GDP was virtually stagnant over the year to the third quarter of 2023, the eurozone unemployment rate fell to a new historic low.
He said one reason for this was the economic weakness has been predominantly in the manufacturing sector, while the more labour-intensive services sector has fared better.
With employment expectations rising again, a significant increase in unemployment looks very unlikely over the coming quarters, he suggested.
12:35pm: Flutter, Whitbread and Compass among Morgan Stanley (NYSE:MS) top leisure and hotels picks
Morgan Stanley (NYSE:MS) has named Flutter, Accor, Whitbread and Compass as its top four picks in the leisure and hotels sector in 2024, rated ‘overweight’, but has kept Carnival at ‘underweight.’
It also looked into its crystal ball and suggested five possible surprises to watch out for in 2024 - including a possible 30% share price rise in IHG; TUI as the sector's best performer; a wave of US iGaming liberalisation; Ryanair up 80% on rerating, pricing upside, cash returns; and the return of M&A in the leisure sector.
It reckons Flutter’s US profitability has scope to outperform, the group financial profile is being transformed, sees scope for M&A and returns, while the US listing should be positive for investor attention, liquidity and comparability.
For Whitbread, UK hotel demand remains resilient, cost guidance likely better than feared, Germany is set to break even in the second half while asset backing more appreciated.
On Compass, the bank said structural growth in outsourcing continues, it thinks net new sales growth will accelerate in the second half, and highlighted margin recovery potential and scope for another buyback or value enhancing M&A.
12:10pm: Weak start expected on Wall Street
Across the pond now, and US stocks are expected to open lower as the volatile start to the year continues.
In pre-market trading, futures for the Dow Jones Industrial Average were down 0.4%, while those for the S&P 500 were 0.4% lower and contracts for the Nasdaq 100 futures declined 0.6%.
Monday saw a tech-led rally as mega-cap stocks outperformed as investors bought the dip after last week’s selloff.
Bank of America pointed out last week's mixed data releases and reversal of the "everything rally" reaffirmed that economic data remains hard to forecast, forward policy path visibility is still low and equities can sell off as rate cuts get priced out.
Investors are also wary ahead of Thursday’s inflation print although yesterday’s sharp fall in the oil price supported hopes price growth will continue to decelerate in 2024.
Boeing could come under further pressure after United Airlines and Alaska Airlines found loose parts on some grounded 737 Maxes, threatening to widen the company’s problems after a single plane suffered a mid-air blowout on Friday.
Elsewhere, the EU’s competition regulator is investigating whether Microsoft’s investment into OpenAI could be reviewed under the bloc’s merger rules.
“The European Commission is checking whether Microsoft’s investment in OpenAI might be reviewable under the EU Merger Regulation,” the commission said in a statement.
Back in London, and the FTSE 100 continues to trade either side of the line.
11:38am: MJ Gleeson (LSE:GLE) tumbles after margin warning
MJ Gleeson (LSE:GLE) is another big faller today, down 9.3%.
The homebuilder and land development outfit warned that margins in the housebuilding business are to be lower than anticipated.
A slower housing market has resulted in extra costs which together with less sales than expected, is weighing on the bottom line.
The firm now expects full year gross margin to fall below expectations by circa 1.5% to 2.0%.
Gleeson Homes completed the sale of 769 homes during the half-year, 14% fewer than the half-year to 31 December 2022, reflecting the weaker conditions experienced across the housing market during 2023.
But it is pinning its hopes on stabilising interest rates leading to a recovery in demand for low-cost housing in the seasonally busier selling period over the coming weeks and months.
11:05am: Melrose, Rolls-Royce and 3i among Morgan Stanley (NYSE:MS)'s top picks
Morgan Stanley (NYSE:MS) thinks the current equities cycle is most similar to the mid-1990s soft landing and has predicted 11% to its year-end target for the MSCI Europe Index.
It explains the similarities are striking with the recent sharp rally and pullback playing out according to both the 1995 and 2019 Fed pivot playbooks.
The bank believes the pullback should prove tactical and then "we grind higher, fuelled by a re-rating on the rate cut hope trade and approaching trough earnings expectations."
Once rate cuts are underway, flows from money market funds should join the party, MS suggested, while the recent pick-up in European M&A skews the risk-reward up
"Our playbook indicates 1H24 will be about relative idiosyncratic drivers rather than a cyclical trade," the bank said.
Bond proxies and highly levered stocks should continue to give back recent gains for now, it thinks.
Morgan Stanley (NYSE:MS) sector picks are 'overweight' Software & Services, Telecoms, Food Retail, Pharma, DivFins, Aerospace & Defense, and Banks and 'underweight' Luxury, Chemicals, Life Sciences, Food/Bev/Tobacco, and Medtech.
The bank sees 11% upside to its 2115 YE target on MSCI Europe, which rises to 16% on a total return basis, including dividends and buybacks.
UK stocks in Morgan Stanley (NYSE:MS) top 20 are Melrose Industries, Rolls-Royce and 3i (Smiths Industries at number 21 just misses out).
10:55am: M&S enjoys strong Christmas, NIQ
A lot of data swirling around regarding retailers today, not surprising given the aftermath of the key Christmas period.
Figures from Researcher NIQ showed that aside from German-owned discounter Lidl GB, Marks & Spencer was Britain's fastest growing supermarket in the Christmas quarter.
NIQ said M&S's food sales on a value basis rose 12.1% in the 12 weeks to December 30 year-on-year, with its share of the UK grocery market rising 0.1 percentage point to 3.8%.
Almost 29% of households shopped at M&S in December, up from 27% in the same period last year, equating to 500,000 new shoppers, it said.
10:28am: Chancellor holds talks with City chiefs to thrash out UK ISA plan - Sky
The Chancellor Jeremy Hunt held talks with some of the City's top business leaders on Tuesday in a bid to inject fresh momentum into London’s flagging market for new company listings, according to reports.
Sky News said chief executives of asset managers Abrdn and Schroders and their counterpart at HSBC Holdings were among those scheduled to attend a breakfast summit with the chancellor.
Revealed: The bosses of Abrdn, HSBC and Schroders met the chancellor this morning to discuss fledgling plans for a UK ISA aimed at bolstering investment in British companies amid concerns about the competitiveness of London’s public equity markets. https://t.co/TcFKHjPvxO
— Mark Kleinman (@MarkKleinmanSky) January 9, 2024
City sources said the objective of the meeting was to review existing initiatives aimed at boosting the competitiveness of UK equity capital markets following the Mansion House reforms unveiled last year by Mr Hunt.
Among the measures he announced last summer was a move to liberalise the rules governing the spectrum of assets in which pension funds can invest.
Hunt is expected to announce further measures to bolster the financial services industry's international competitiveness in his Budget in early March.
Among these could be the creation of a UK ISA, which would support investment into London-listed companies.
10:03am: B&M trading solid against tough comparatives
B&M’s trading update has received a fairly muted reaction with shares down 0.9%.
It should be pointed the stock rallied quite sharply into the close on Monday, so an enthusiasm may have been lost there.
Analysts at Peel Hunt said: “In our view that is not a bad effort, given that the comp got significantly more difficult, and it was driven by non-food volumes.”
“There was a good sell-through of these products and the company's stock position is clean, which is always important after the Golden Quarter, and implies a decent margin showing. Heron and France are said to have performed well.”
It said the special dividend of 20p was expected to arrive at some time but probably not just yet, “so it is a nice positive.”
It believes the shares still offer good value.
Liberum described the update as “solid” although a slowdown from the update given in November, reflecting tough comparatives.
Analyst Adam Rawlinson said overall, “this is a very resilient performance, and maintaining EBITDA guidance, which at the top-end would equal the group’s COVID-peak profitability, is commendable.”
“B&M’s leading value proposition should drive further continued trading resilience into 2024,” he added.
9:37am: Games Workshop in line but little new to excite
Games Workshop is off around 2.4% after today's results.
Analysts pointed put the numbers were, as guded in December, with "no particular surprises."
Jefferies decsribed it as a strong first half, "obviously boosted by the outstanding launch of 40k 10th Edition as well the non-repeat of some FY23 cost elements."
But it added "there is nothing particularly new here to get excited about."
9:32am: German factory output falls for sixth month in a row
Not helping the mood is news fron Europe, where German factory output has fallen for the sixth consecutive month, matching its longest ever downturn after the 2008 financial crisis hit.
It suggests growth in Europe’s largest economy remained weak in the fourth quarter of last year.
New month, same trend!#Germany's industrial production fell 0.7% in November.
German industrial production has been in a downtrend since 2017.
Production is 13% lower than the peak six years ago. https://t.co/35a7SCtU2F pic.twitter.com/vPhr7wjR8v
— jeroen blokland (@jsblokland) January 9, 2024
Industrial production fell 0.7% in November from the previous month, defying economists’ forecasts of a slight increase.
Factory output has been falling since May, dragging it down 5% from a year earlier and 9% since before the pandemic hit.
Construction output fell 2.9% from the previous month, while there was a 3.9% rise in energy production.
9:12am: Retail sales growth slows in December, BRC
Retailers are a weak feature in the FTSE 100 although moves are restrained.
The slight falls follow a downbeat report from the British Retail Consortium and a subdued update from B&M today.
Figures from the BRC showed British retailers had a disappointing December as consumers held back from making big purchases during the festive period.
BRC Retail Sales Monitor YoY in the United Kingdom decreased to 1.90 percent in December from 2.60 percent in November of 2023.https://t.co/ygQS0kaY4C pic.twitter.com/zG3u8gPDkf
— TRADING ECONOMICS (@tEconomics) January 9, 2024
Retail sales grew by an annual rate of 1.7% in December, down from 2.7% the previous month and below the 12-month average of 3.6%, the figures showed.
“The festive period failed to make amends for a challenging year of sluggish retail sales growth, as weak consumer confidence continued to hold back spending,” Helen Dickinson, chief executive of the British Retail Consortium, said.
She added that discounting in the traditional post-Christmas sales was “unsuccessful in enticing spend in areas such as furniture and homeware, with households remaining cautious about making larger purchases”.
Retailers on the wane include JD Sports Fashion, down 1.7%, Kingfisher down 1.3% and Frasers down 1.1%.
8:47am: FTSE 100's bright start fades
Blink and you may have missed the FTSE 100’s gains which have all but vanished after a bright start.
London’s blue-chip index is now up just 3 points at 7,697 while mid-caps have given back some of Monday’s strong gains.
Leading the FTSE 100 risers is Scottish Mortgage Investment Trust PLC (LSE:SMT), up 1.4%, after the strong gains in tech stocks on Wall Street.
Disappointing trading from Samsung may have dampened the mood along with the profit warning from Hays, always a useful barometer as to how UK PLC is performing.
In the FTSE 250, along with Hays, there is a sharp fall in Jupiter Fund Management PLC (LSE:JUP) which is anticipating worse outflows than previously expected in 2023, as a result of weaker retail sentiment in the final quarter of the year.
Investors pulled £2.2 billion from the asset manager last year, the sixth consecutive year of net outflows.
8:25am: Hays warning drags recruiters lower
The warning from Hays has dragged other recruitment share prices lower with PageGroup PLC (LSE:PAGE) down 8.0%, SThree PLC (LSE:STEM) down 4.0% and Robert Walters PLC (LSE:RWA) down 3.1%.
On Monday, the REC/KPMG report yesterday showed that the labour market in the UK was under pressure, although the pace of a slow down had decreased since November.
Hays CEO Dirk Hahn said: “It is too early to say if December’s weakness reflects a sustained market slowdown or some placement deferrals, however, we expect near-term market conditions to remain challenging.”
Liberum analyst Sanjay Vidyarthi explained the guidance from Hays for adjusted Ebit of around £60 million compared to consensus expectations of £73 million and £97 million last year.
8:15am: Blue-chips rise but Hays crashes after warning
The FTSE 100 has opened higher although a profit warning from of the UK’s top recruiters reminded investors of the challenges the UK economy continues to face.
At 8:15am, London’s blue-chip index was up 16.90 points, 0.2%, at 7,711.09 while the FTSE 250 was down 48.94, 0.3%, at 19,344.86.
The gains came in the wake of a strong showing on Wall Street where a tech-led rally saw stocks rise sharply.
This buoyant mood has spread to Europe with the Dax in Frankfurt and Cac-40 in Paris joining London in the green.
In London, Hays crashed 19% after warning first-half pre-exceptional operating profit will be around £60 million, below current market consensus expectations.
The firm said group fees were down 10% in the quarter to December 31, impacted by a “more difficult” December, where fees fell by 15% .
Analyst Sanjay Vidyarth at Liberum said given the first half miss and uncertain prospects, “we see at least 20% downside risk to FY24E EBIT, albeit there will be some mitigation from cost savings.”
Elsewhere, B&M is down 2.1% after its trading update which included a promise of a 20p special dividend.
Analysts at Peel Hunt said: “In our view that is not a bad effort, given that the comp got significantly more difficult, and it was driven by non-food volumes.”
7:56am: Hays warns on profits after difficult December
Signs that the labour market is softening after a profit warning from one of the UK’s leading recruitment companies.
Hays PLC (LSE:HAS) has warned first-half pre-exceptional operating profit will be around £60 million, below current market consensus expectations.
The firm said group fees were down 10% in the quarter to December 31, impacted by a “more difficult” December, where fees fell by 15% .
Hays said fees in the UK & Ireland were down 17%, with Temp down 13% and Perm slowing through the quarter, down 21%.
It also expects to take an exceptional restructuring charge in the first half of c.£12 million relating to cost cutting measures.
7:49am: Barclays cuts 5,000 jobs, Games Workshop sales jump
Other stocks to keep an eye on today include Barclays and Games Workshop.
Barclays PLC (LSE:BARC) has confirmed it has cut thousands of jobs around the world in a huge cost-cutting exercise.
Some 5,000 roles were axed from its global workforce of 84,000 last year in a bid to "simplify and reshape the business", it said.
The BBC reported that around a quarter of the cuts have taken place in the UK.
Elsewhere, Games Workshop Group PLC has delivered growth in revenue and profits at the half-year stage and said sales in the key festive period were in line with hopes.
The fantasy miniatures retailer and Warhammer IP owner said revenue rose 11% in the 26 weeks to November 26 to £247.7 million from £225.6 million.
Pre-tax profit jumped to £95.2 million from £83.6 million, EPS advanced to EPS 216.9p from 202.4p and the dividend was boosted to 195p from 165p.
Kevin Rountree, chief executive said: “Games Workshop and the Warhammer hobby are in great shape.”
7:26am: B&M special dividend, GSK's $1.4 billion deal
We start with news of a big deal for GSK and a special dividend from B&M European Value.
GSK has snapped up Aiolos Bio, an asthma treatment specialist, in a deal that could be worth up to $1.4 billion.
That covers $1 billion upfront, and another $400 million in milestone payments.
GSK said the acquisition expands its respiratory pipeline adding AIO-001, a phase II-ready, long-acting antibody targeting the clinically validated TSLP pathway.
Tony Wood, GSK's chief scientific officer,, said: "Adding AIO-001, a potentially best-in-class medicine targeting the TSLP pathway, could expand the reach of our current respiratory biologics portfolio, including to the 40% of severe asthma patients with low T2 inflammation where treatment options are still needed."
Meanwhile, B&M European Value Retail SA (LSE:BME) has promised shareholders a 20p special dividend after disclosing strong Christmas trading.
The retailer said in the 13 weeks to December 23, revenue grew 5.0% year-on-year to £1.65 billion, taking year-to-date growth to 8.1% to £4.19 billion on a constant currency basis.
Including the week to December 30, B&M UK like-for-like3 revenue growth was 1.2%, what it called “a strong quarter given prior year comparatives,” with performance was driven by positive transaction numbers
B&M reiterated guidance for adjusted EBITDA within its target range of £620- £630 million for the financial year, up from £573 million the year before.
7:00am: FTSE 100 called higher after tech-led US rally
The FTSE 100 is expected to open higher on Tuesday after US markets soared ahead of inflation figures later this week.
Spread betting companies are calling London’s lead index up by around 17 points after closing up 4.58 points at 7,694.19 on Monday.
In the US on Monday, technology stocks led the way with Nvidia hitting a new all-time high. The Dow Jones Industrial Average rose 0.6%, the S&P 500 advanced 1.4% and the Nasdaq Composite leapt 2.2%.
Michael Hewson at CMC Markets said: "The strong US finish seen last night looks set to ripple out into today’s European open with a solid start expected."
A sharp fall in the oil price boosted hopes that inflation will fall further in 2024 supporting reductions in interest rates.
Back in London, the early focus will be updates on festive trading from discount retailer B&M and from Games Workshop, responsible for the Warhammer games franchise, plus retail sales data from the British Retail Consortium.