- FTSE 100 closes down 32 points at 7,652
- Sainsbury falls after mixed Christmas trading
- Greggs and Persimmon rise after updates
4:40pm: FTSE 100 weakens ahead of US inflation report
The FTSE 100 has closed down near its worst levels for the day as investors took cover ahead of US inflation figures on Thursday.
At the close, London's blue-chip index was down 32.20 points, 0.4%, at 7,651.76.
Chris Beauchamp at IG said: "In London the FTSE 100 has seen a more negative tone to trading today, hit hard by falls for Sainsbury’s and Admiral."
"The former’s good Christmas food performance did offset its poorer sales in other categories, and given this was the problem for M&S for so long investors will fret that Sainsbury’s is heading in a similar direction."
"While housebuilders have propped up the index following Persimmon’s update, broader risk-off sentiment could prevail tomorrow and beyond should US inflation show signs of reviving.”
3:30pm: Inflation could hit 2% by Spring, Deutsche
Economists at Deutsche Bank have predicted that UK inflation could drop to the Bank of England’s 2% target this spring.
In a reserach note this morning, Deutsche Bank predits UK CPI inflation will average 2.5% year-on-year in 2024, down from a previous forecast of 2.7%.
Headline inflation will drop “a little below 2% in April and May”, they predict, before hovering around 2-2.5% for the remainder of the year.
Deutsche’s chief UK economist, Sanjay Raja, said: "Core CPI, we think will slow to just under 4% y-o-y, with services inflation tracking just above 5% y-o-y. RPI, we think, will drop to 3.5% y-o-y on the year."
2:45pm: Brighter start on Wall Street
US stoocks made steady progress on Wednesday asinvestors hoped a favourable inflation print on Wednesday would spark new life into the equity market.
Shortly after the opening bell, the Dow Jones Industrial Average was up 100.98 points, 0.3%, at 37,626.14, the S&P 500 was up 10.31 points, 0.2%, at 4,766.81 and the Nasdaq Composite was up 47.58 points, 0.3%, at 14,905.29.
Investors will look through the reports for clues on when the Federal Reserve may start cutting rates.
Some of those expectations have been dialed back in recent days, although the odds hover at around 64%, according to CME Group FedWatch tool.
2:10pm: Admiral and Direct Line hit by Insurance Post report
Shares in Admiral are now the top faller on the FTSE 100 index, down 5.6%, while Direct Line has tumbled 6.7%, leading the fallers on the smaller FTSE 250 index.
Bloomberg highlighted an article in the Insurance Post that quoted the Financial Conduct Authority’s Head of Insurance Matt Brewis as saying premium finance was a “poor product”.
Those comments could suggest insurers coule make changes to the way such products are priced.
Bloomberg's equity research analyst for insurance Thomas Bateman said: "The article) has reignited the discussion around premium finance, and while the FCA has talked negatively about it (the product) in the past, we believe the recent comments, which have been made publicly, are more negative than they have been in the past."
1:03pm: ECB vice-president warns of eurozone recession
Over in the eurozone, the vice-president of the European Central Bank has warned that a recession may have struck.
Luis de Guindos told an audience in Madrid that the euro zone may have been in recession last quarter and prospects remain weak,
De Guindos welcomed the drop in eurozone inflation last year, to just below 3% in December, but cautioned that growth developments are more disappointing.
He said: “Economic activity in the euro area slowed slightly in the third quarter of 2023.”
12:26pm: HS2 costs could rise further
Away from the City and news that the estimated cost of building the London-to-Birmingham stretch of the UK’s HS2 high-speed railway has soared to as much as £66.6 billion and could rise again, the chair of the scheme has said.
Sir Jon Thompson told parliament’s Transport Select Committee that the estimated cost for Phase 1 is between £49 billion and £56.6 billion in 2019 prices, but adjusting the range for current prices involves adding up to another £10 billion.
12:04pm: US stocks seen opening little changed
Stocks are expected to make a subdued start to trading as investors look ahead to key inflation figures on Thursday.
In pre-market trading, futures for the Dow Jones Industrial Average were down 0.1%, while those for the S&P 500 were flat and contracts for the Nasdaq 100 futures rose 0.2%.
Joshua Mahony at Scope Markets said early optimism seen throughout financial markets may be difficult to maintain given the uncertainty within markets as we head into a crucial second half of the week.
“Between tomorrows US inflation report, and the earnings from a raft of big banks, we should gain greater clarity over market sentiment by the weekend,” he suggested.
Cryptocurrency exchanges Coinbase and Marathon Digital fell 1% and nearly 3%, respectively, as bitcoin prices declined.
The price movement came on the back of an incorrect announcement posted to the US Securities and Exchange Commission’s X account, saying that it had approved bitcoin ETFs.
11:34am: Persimmon in demand as sales top guidance
Shares in Persimmon remain in demand, up 3.7%, after today’s update.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown highlighted new home completions came in ahead of group expectations in 2023 although lower volumes overall mean there’s much “less cash coming in the door.”
He pointed out in a bid to keep the cash coffers in reasonable shape, investment in new land has been reigned right back, something he expects to continue in the near term, given the group’s healthy land bank.
He pointed out that market forecasts are suggesting a 35% fall in revenue for 2023 which while not ideal, is a picture that’s largely being repeated across the sector.
“Investors need to keep in mind that housebuilders are cyclical businesses that go through periods of ups and downs,” he explained.
Nonetheless, he thinks the near-term outlook “remains challenging, and it could be a while before we see a step change improvement in buyer confidence across the housing market.”
11:06am: Marks Electrical plunges after margin warning
Away from the big caps and shares in Marks Electrical have plunged 24% as it warned of pressure on margins despite double-digit sales growth.
The electrical retailer said in the nine months to December 31, revenue rose 22% year-on-year to £88.9 million.
But, its gross margin did not see the rise it had expected, due to "a challenging trading environment where consumers remain highly price conscious", despite controlling other costs.
The firm warned this will have a knock-on effect on its annual earnings.
Shore Capital noted the new guidance was more than 30% below consensus EBITDA, at the mid-point.
It has slashed its adjusted EBITDA forecast for financial 2024 and 2025 by 31% and 29% respectively.
10:35am: Wise offers 32% upside, says Berenberg
Another share getting a boost from positive broker comments is Wise Group, up 2.2%, after Berenberg initiated coverage with a ‘buy’ rating and an 1,140p price target, offering 32% upside.
The bank thinks Wise’s “superior economic model and sharing of scale economies with customers are entrenching its competitive advantages.”
Ancillary income, such as the net interest income generated on customer balances, provides additional upside to consensus estimates, it reckons.
Further, the expensed infrastructure build-out is concealing significantly higher underlying profitability and/or a meaningfully improved ability to lower prices.
10:14am: IWG boosted by RBC upgrade
RBC has also upgraded IWG helping shares up 3.7%, to ‘outperform’ from ‘sector perform’.
"Whilst IWG is a somewhat risky investment given the macro sensitivity and inherent operational leverage, we think it warrants a revisit", the broker said.
“IWG should benefit from better disclosure, lower capital intensity and WeWork's demise,” it reckons.
“All in all we think risk reward is in favour but not one for the faint-hearted,”it said, setting a 215p price target.
9:52am: Capita sinks on downgrade; Argos trading weighs on AO and Currys
Other stocks on the move today include Capita, down 7.5%, after RBC downgraded to ‘sector perform’ from ‘outperform’ and nearly halved its price target to 23p from 42p.
“Whilst there remains material potential upside, if [Capita] can improve margins and FCF conversion, with the new CEO joining shortly, there is likely to be a lack of catalysts for c.6 million until he has got his head under the bonnet,” the broker said.
Costain is up 7% after its cash performance topped expectations and it won a contract with Northumbrian Water potentially worth up to £670 million.
But the lacklustre trading at Argos in the Sainsbury update seems to be weighing on AO World and Currys, both near the top of the FTSE 250 fallers.
3i is going well, up 1.2%, after UBS started coverage with a ‘buy’ rating and 2,700p price target while top of the FTSE 100 risers is Intertek, up 1.7%, upgraded by RBC to 'outperform'.
But Ashtead is down 1.4% after Bank of America downgraded to 'neutral' from 'buy' and cut its price target to 5,300p from 6,000p.
9:35am: Sainsbury fails to meet 'elevated' expectations
A bit more on Sainsbury now, with shares still topping the FTSE 100 fallers.
Part of that is due to the recent strong performance in the share price which on Tuesday hit its highest level since August 2021.
Michael Hewson at CMC Markets said there may have been a “little too much optimism” ahead of the update which he described as “solid.”
“Unsurprisingly, given the trends exhibited earlier this week in the BRC retail sales numbers, the weak spots were in clothing, general merchandising, and the Argos business and this has weighed on the overall numbers,” he pointed out.
Neil Wilson at Finalto agreed. He said the update needs “to be viewed in the context of some very elevated expectations and a run up in the stock since it upgraded its full-year profit outlook at the start of November.”
“Management had kinda already shot their bolt as far as the upgrade so we are seeing some payback today on these pretty in-line numbers,” he added.
House broker Shore Capital was unsurprisingly upbeat, calling the update “good” with grocery the “star of the show.”
It has upgraded its financial 2024 pre-tax profit forecast of £685 million by £10 million to £695 million.
9:10am: Greggs on a roll - shares jump
Over to the FTSE 250 and Greggs - famous for its sausage rolls - leads the risers, up 9.1%, after its trading update.
Matt Britzman, equity analyst, Hargreaves Lansdown said it a “solid final quarter means Greggs can tick off 2023 as a year of real progress.”
He explained double-digit growth in like-for-like sales was down to extended opening hours, more delivery options, improving supply chain capacity and a “fresh new suite of tasty treats.”
He said bears may point to sales growth slowing over the year, and the fourth quarter was the lowest of 2023 but “that’s largely because Greggs was able to limit price hikes as inflation cooled.”
“Longer-term, that’s a net positive,” he said.
“The most important thing is to see volumes trend higher, and that remains the case.”
He said the job’s “not done,” and predicted “more progress over 2024 as investment continues into the digital offering, delivery partnerships and expanding the store estate.”
8:44am: FTSE 100 slips back in early trading
The FTSE 100 continues to nurse modest losses with Sainsbury topping the fallers after its mixed trading update.
The food retailer is down 3.3% and the update has seen Tesco and Marks & Spencer ease ahead of their updates.
M&S in particular had a storming 2023 and could be vulnerable with expectations high.
Also heading lower were shares in DCC, down 2.4%, after RBC downgraded to ‘sector perform’ from ‘outperform’.
Top of the risers is Intermediate Capital Group (LSE:ICP), up 1.1%, after UBS started coverage of the company with a ‘buy’ rating and 1,950p price target while Persimmon’s relatively positive update had supported Taylor Wimpey, Barratt Developments and Berkeley Group.
8:15am: Sainsbury falls on mixed sales, Greggs leaps and Persimmon gains
The FTSE 100 opened lower as investors digested a mixed bag of trading updates and the World Bank’s warning on Tuesday of lower global economic growth prospects.
At 8:15am, London’s blue-chip index was down 20.11 points, 0.3%, at 7,663.85 while the FTSE 250 was little changed at 19,296.92.
Susannah Streeter at Hargreaves Lansdown said: “With the World Bank forecasting that geo-political crises will drag global growth back to the slowest pace since the pandemic, there is little momentum for the internationally focused FTSE 100.”
J Sainsbury fell 3.7% after reporting a mixed trading performance over Christmas.
Food sales remained strong but general merchandise and clothing sales fell back, although the food retailer maintained full-year profit guidance between £670-£700 million.
Richard Hunter at interactive investor noted strong food sales are not “being mirrored in other parts of the group.”
“There have been many warning signs over the last few months that the consumer is becoming increasingly selective in non-essential items which, coupled with other competitors specifically concentrated in this space, has somewhat left Sainsbury trailing,” he said.
But it was better news for shareholders in Greggs, with shares up 8.3%.
Liberum Wayne Brown analyst said: “Greggs has come out with a very strong update,” with store openings “ahead of expectations and while the P&L is in line with expectations, cash generation has massively beaten our expectations with net cash of £195m at year-end vs. our £130m expectation.”
Persimmon was another stock in demand, with shares up 2.4%, after its trading update.
Peel Hunt said completions of 9,992 were “above the previous guidance of 9,500 and comfortably above our forecast of 9,000.”
7:54am: Greggs sales boosted by festive favourites
Sausage roll seller, Greggs PLC (LSE:GRG), said 2023 sales rose 19.6% to £1.81 billion from £1.51 billion the year before and with like-for-like sales growth of 13.7%.
However, this rate of LFL growth slowed to 9.4% in the fourth quarter.
Nonetheless, seasonal lines, including the ‘iconic’ Festive Bake, Chocolate Orange Muffin and Christmas Lunch Baguette were in high demand in the fourth quarter, featuring alongside shop-baked Sweet Mince Pies and festive hot drinks, Greggs said.
The FTSE 250-listed firm anticipates a full year outcome in line with previous expectations.
The baker also said inflationary pressures are easing.
7:44am: Persimmon sales beat hopes but market remains uncertain
Housebuilder Persimmon PLC (LSE:PSN) has also updated the City on trading.
It believes the housing market to remain “highly uncertain” in 2024 although it delivered more sales than expected in 2023.
It reckons moderating build costs should benefit new home completions in 2024 and the long-term outlook for new homes is still favourable.
The company said it completed the sale of 9,922 new homes in 2023, ahead of previous guidance, with a particularly strong delivery in the fourth quarter.
However, this was still 33% lower than the year before.
Persimmon said it had seen a sustained pick up in interest throughout the year from the lows of the fourth quarter of 2022, albeit with demand lower than previous years.
Private average selling prices increased in 2023 by around 5% to £285,770 which largely reflected the mix of developments and house types sold, the company said.
7:28am: Sainsbury backs outlook but sales growth slows over Christmas
Quiet a few trading updates of note today.
We start with J Sainsbury which has backed its full-year outlook despite reporting a slowdown in sales over Christmas.
Strong food sales were offset by a drop in general merchandising and clothing sales, the food retailer said.
Sainsbury said said third quarter grocery sales rose 9.3% although this rate slowed to 8.6% in the six weeks to January 6 to 8.6% with stronger volumes offsetting lower inflation.
Total retail sales rose 6.5% in the third quarter and by 4.9% in the six week period.
Sainsbury said it continues to expect underlying profit before tax in 2023/24 of between £670 million and £700 million, with a strong grocery performance offsetting weaker general merchandise and financial Services contributions.
Third quarter general merchandise sales slipped 0.6%, accelerating to 3.7% in the six week festive period while clothing sales tumbled 6.0% over Christmas and 1.7% for the quarter as a whole.
Sainsbury said it continues to expect to generate retail free cash flow in 2023/24 of at least £600 million.
7:00am: FTSE expected to start on the back foot
The FTSE 100 is expected to open lower as investors await inflation figures in the US on Thursday for further clues as to the pace of interest rate cuts this year.
Spread betting companies are calling London’s blue-chip index down by around 21 points after closing down 10.23 points at 7,683.96 on Tuesday.
"Since the end of last year and the strong gains leading up to the end of last month markets have exhibited none of the same enthusiasm to carry the momentum higher, with trading activity subdued and a relatively negative bias so far year to date," said CMC Markets' UK chief market analyst Michael Hewson.
"It's hard to assign a singular reason for the lack of enthusiasm so far month to date apart from a great deal of uncertainty around the prospects for the global economy and the timeline for central bank rate cuts."
On Wall Street, markets closed mixed with modest gains for the Nasdaq and losses for the Dow and S&P.
Updates from Sainsbury’s, Persimmon, Greggs and Hunting will provide the early focus in London.