- FTSE 100 closes down 75 points at 7,576
- M&S falls despite strong Christmas trading
- Tesco ups guidance, Whitbread backs outlook
4:40pm: FTSE slides into the close after strong US inflation
The FTSE 100 closed near its worst levels of the day as losses accelerated afternoon trading after a strong US inflation print.
At the close, London's blue-chip index was down 75.17 points, 1.0%, at 7,576.59 while the FTSE 250 declined 172.15points, 0.9% at 19,107.93.
Chris Beauchamp at IG said after the strong inflation number it was almost inevitable that further selling would set in.
"It seems like this January will continue to be a month of profit taking, but the medium-term outlook continues to suggest that inflation will keep falling, keeping rate cut hopes alive.”
3:16pm: Bunzl in talks to buys Nisbets for up to £450 million - Sky
Bunzl is in talks to buy privately owned catering equipment company, Nisbets, according to Sky News.
The FTSE 100 company could pay as much as £450 million for the firm.
Sky News said Andrew Nisbet, whose business has become a multinational distributor to the food-service sector, is in advanced talks with Bunzl about a deal that could be struck within weeks.
2:47pm: FTSE slips but US markets open higher
US stocks have opened higher despite the strong inflation numbers as economists think the underlying picture remains encouraging.
Shortly after the opening bell, the Dow Jones Industrial Average was up 41.39, 0.1%, at 37,737.12, the S&P 500 was up 10.92 points, 0.2%, at 4,794.37 and the Nasdaq Composite was up 65.03 points, 0.4%, at 15,034.68.
DeVere Group’s Nigel Green said: “We believe that there’s still not enough evidence for the central bank to start cutting rates."
But others still felt a March rate cut was possible.
Paul Ashworth at Capital Economics: "Core prices only increased by 0.3% because of a 0.5% m/m increase in used vehicle prices, which we know from the more timely auction data will be more than reversed soon, and a bigger 0.5% m/m increase in shelter inflation, which we know isn’t going to last based on the marked slowdown in the more timely measures of newly-signed rental agreements."
"What ultimately matters is the Fed’s preferred PCE measure of inflation," he said, where he expects to see a 0.2% month on month increase in December.
"In short, we don’t think December’s CPI data necessarily rules out a March rate cut by the Fed," he said.
Nonethless, the FTSE 100 has taken a turn for the worse, down 40 points now.
2:11pm: US inflation stronger-than-expected
The US inflation number is out and it is hot.
Annual consumer price inflation rate picked up at a faster pace than expected, putting some cold water on the more optimistic hopes of an early rate cut.
According to the Bureau of Labor Statistics, the nation's yearly inflation rate picked up to 3.4% in December, from 3.1% in November. The reading was hotter than expected. According to FXStreet cited consensus, the annual inflation rate was forecast to only slightly heat up to 3.2%.
Annual core inflation also came in above forecast at 3.9%, against expectations of 3.8%, according to FXStreet. The measure, which excludes food and energy, eased from 4.0% in November.
On a monthly basis, consumer prices were 0.3% higher in December from November. They had risen 0.1% in November from October.
The FTSE 100 has moved lower on the news, down 22 points at 7.630.
13.42pm: Market Movers
Risers
Meta Platforms Inc (NASDAQ:FB) closed at a 28-month high on the Nasdaq this Wednesday following a 365-basis-point rally after analysts started to reassess the stock in the age of artificial intelligence.
Shares in Windward Ltd (AIM:WNWD) rose 15% to a new one-year high as it said continued demand for its artificial intelligence-powered services, which predict and manage maritime risk, mean it now expects results to be "comfortably ahead" of market forecasts.
Fallers
Shares in Marks and Spencer Group PLC (LSE:MKS) fell by around 4.5% to top the FTSE 100 losers' board in the wake of the retailer's trading statement that failed to deliver an upgrade to full-year earnings guidance.
Shares in plantation group Dekel Agri-Vision plc (AIM:DKL) shelled 22% of their value to a new low of 1.52p after it updated on a year when its cashew shelling operations were hit by teething problems, offsetting a strong performance for its palm oil business.
1:04pm: Red Sea tension escalate once more
Not helping markets is the situation in the Red Sea which has continued to escalate.
An oil tanker that was embroiled in a dispute between the US and Iran has been seized off the coast of Oman, in a raid that UK maritime authorities said was carried out by individuals in military-style uniforms.
The seizure comes as threats to shipping in the Middle East are already at the highest level in decades.
Speaking to the Financial Times, the chief executive of Maersk, the world's second-largest container shipping firm, warned it could take months to reopen the Red Sea route to trade.
Vincent Clerc, Maersk’s chief executive, told the Financial Times that the closure of the Red Sea to most shipping after a series of attacks was “brutal and dramatic” and that there were “no winners” as vessels are forced to take a lengthy and costly detour around South Africa instead.
“It’s unclear to us if we are talking about re-establishing safe passage into [the] Red Sea in a matter of days, weeks or months . . . It could potentially have quite significant consequences on global growth,” he added.
About 12% of global trade passes through the vital waterway.
12:30pm: ING thinks things are looking up for the UK
ING thinks things could be looking up for the UK.
The UK stagnated through much of 2023 and might have even entered a technical recession, albeit a small one, it said.
"But things are looking brighter."
"Rate cuts will dampen the mortgage squeeze and gift the government with extra room for tax cuts," it said.
"While we don't expect a dramatic acceleration in UK growth this year, the chances of a recession have fallen," it thinks.
Lower market rates are also good news for the government, ING said.
"The fall in both short-dated and, to a lesser extent, long-dated market rates/bond yields since November's Autumn Statement should unlock £12 billion extra "headroom" by our estimates," ING said.
12:00pm: US futures higher ahead of inflation print
Stock futures are pointing to a positive start but that could all change depending on today’s inflation reading.
In pre-market trading, futures for the Dow Jones Industrial Average were flat, while those for the S&P 500 were up 0.1% and contracts for the Nasdaq 100 futures rose 0.4%.
Julien Lafargue, chief market strategist at Barclays Private Bank, said: “US headline inflation is expected to have picked up slightly in December on the back of base effects related to energy prices. At the core level in our view, prices increases should remain on a downtrend helped by continued goods deflation.”
“The key question mark is what will happen to housing-related costs. These have yet to significantly moderate. Although we would expect this to happen over the course of 2024, lag effects and the prospects of lower interest rates ahead could slow down the normalisation process.”
“In the end, in our view markets remain too aggressive around interest rate cuts expectations. While an upside surprise to the December CPI may not be enough to change this perception it could be a first step in allowing markets to align with the Fed’s narrative that cuts will come but not just yet.”
In other economic data, new applications for US state unemployment aid, a proxy for lay-offs, are forecast to have ticked up to 210,000 last week, from 202,000 in the prior seven-day period.
11:15am: easyJet flies on BofA double-upgrade
After a double-downgrade, comes news of a double-upgrade on easyJet which is up 3.1%.
Bank of America has double-upgrades easyJet to buy, as it sees "growth benefiting from capacity constraints in Europe, a bigger Holidays contribution and stable ex fuel unit costs."
It has raised financial 2024 pretax profit forecast by 14% to £549 million, modelling 1ppt higher year-on-year load factors in 2024.
BofA has also upped its price target to 640p from 470p.
"At 9x FY24E P/E, the shares trade below their 12x historical average, which we think is unjustified, given solid earnings growth prospects and a strong balance sheet," the broker added.
10:38am: WPP hit by double downgrade by UBS
WPP is down 3.2% after UBS double-downgraded to sell from buy for two main reasons.
"Firstly, we think organic growth is likely to be below consensus and the sector in both 2024 and the medium term," it said.
"Secondly, we expect FCF to remain at depressed levels in 2024," it added.
"We think this will limit the size of any share buyback programme," with a large share buyback "only likely if we see asset disposals."
"In this regards, the recent news on Kantar Media is helpful, but timing remains uncertain," the bank added.
10:16am: Trustpilot, Mears and Darktrace lead FTSE 250 higher
Over in the FTSE 250 and it's a good day for Trustpilot, up around 19% after it launched a £20 million share buyback and said it expects full-year earnings to beat market expectations.
Mears is around 6% higher after it upgraded its earnings expectations for the full year while Darktrace is up about 7% after it raised its full year outlook.
The FTSE 250 is up 0.3% today.
9:48am: Whitbread on track but are things about to get tougher
Whitbread remains in positive territory and Derren Nathan, head of equity research at Hargreaves Lansdown notes Whitbread says it “has plenty to celebrate as it heads towards the end of its financial year.”
He noted in the UK Premier Inn’s rooms on average generated 9% more in the third quarter than they did in the comparable period, some 39% ahead of pre-pandemic levels.
But he did highlight a few signs that Whitbread is having to work a little harder to keep its room full.
Quarter on quarter occupancy fell over a percentage point to 84.9%, and whilst London room rates only nudged down a fraction, compared to the second quarter, they dropped by 11% in the UK regions.
In Europe, expansion of the German business is continuing to plan and Germany’s expected to hit the break-even point at some point in 2024.
He also pointed out while Whitbread looks to be well on track to meet forecasted operating profit growth of nearly 25% in the current financial year going forward the comparatives will be a lot tougher.
A slowing economy may present some challenges, he added..
“But Whitbread is a best in class operator with the financial strength to take advantage of growth opportunities, whilst supporting dividend payments and the current share buyback plan,” he said.
9:13am: Antofagasta boosted by RBC upgrade
Antofagasta is having a good day, up 4.9%, supported by an upgrade by RBC Capital Markets.
“A rapid tightening in expected copper supply has brought forward a medium-term bull market,” it said.
It pointed that with Centinela's second concentrator now approved, the firm has the highest forecast copper-equivalent growth in our large cap coverage.
This, and improving prices should double earnings by 2028, it reckons.
“Antofagasta is expensive, but should stay this way with dual drivers for earnings growth,” RBC said.
“We upgrade to outperform from sector perform, and our target price increases to 1,800p from 1,300p.”
Deutsche Bank has also taken a look at Antofagasta and lifted its target to 1,450p from 1,400p and kept a hold raing.
It rates Anglo American buy (target from 2900p to 2700p), BHP hold (target from 2150p to 2300p), Glencore buy (target from 560p to 540p) and Rio Tinto buy (target from 6000p to 6200p).
8:43am: M&S slips on profit-taking, rising costs
M&S is down 4.3% despite a strong looking trading update with analysts putting it down to an element of profit-taking and expectations of rising costs.
Richard Hunter at interactive investor thinks the initial share price reaction to the update from Marks and Spencer contains an element of “inevitable profit taking after what has been a blistering share price performance,” culminating in the group’s return to the FTSE100 in September.
Meanwhile Zoe Gillespie, investment manager at RBC Brewin Dolphin, said the optimism of "very good festive period" was "tempered slightly by higher than anticipated labour costs and business rates, while the economic picture in the UK also looks uncertain."
"Nevertheless, M&S has been on a very strong run and remains well placed to meet the challenges of the next few months head on," she said.
Hunter pointed out “In addition, and from here on in, expectations and indeed comparatives are likely to become tougher, although at these levels the shares are not looking especially expensive based on historic valuations."
He said trading remained strong with momentum continuing to build, with the key festive trading period bolstering a recent performance which has revitalised the entire business.
The most striking element of the group’s transformation is in the Clothing & Home unit, he felt, which currently accounts for 32% of group sales.
“Its offering is clearly appealing to the new target market of the “modern mainstream customer” as the company attempts to throw off the shackles of a previously dowdy and tired image.”
8:15am: FTSE 100 climbs but M&S takes a tumble
The FTSE 100 has made a bright start to proceedings as investors pin their hopes on a soft inflation print in the US while strong trading at Tesco also lifted the mood.
At 8:15am, London’s blue-chip index was up 33.74 points, 0.4%, at 7,685.50 and the FTSE 250 was up 59.50 points, 0.3%, at 19,339.58.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank said that optimism “is on the menu ahead of today’s much-awaited US inflation report.”
“Data in line, or ideally softer than expected, will keep the Federal Reserve (Fed) doves in charge of the market and could further boost appetite in stocks and bonds.”
“The ongoing tensions in the Red Sea region and the rising cost of moving goods – and their potential impact on consumer prices – will remain on the back of our minds, but disinflation remains the base case scenario for 2024 due to weakening demand, and until there is stronger data-based evidence that the geopolitical situation is bad for inflation, investors won’t let go of the beautiful upside swing that the market caught into last year’s end,” she suggested.
Tesco rose 1.0% after lifting guidance after strong Christmas trading but Marks and Spencer slipped 5% despite holding guidance amid strong trading.
M&S shares are up 84% in the last 12 months and the lack of increased guidance may be holding them back.
On Tesco, Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown noted it managed “what Sainsburys couldn’t quite muster, which is a profit upgrade for the full year.”
“The tills were chiming away over Christmas, and the slightly conservative previous estimates, coupled with lower exposure to General Merchandise, means there’s room for expectations to be inflated,” she said.
Elsewhere, trading updates saw Whitbread rise 1.8% while Taylor Wimpey was little changed.
One of the best performers is Antofagasta, up 4.9%, after RBC upgraded to outperform from sector perform, and lifted its target price to 1,800p from 1,300p.
7:54am: Robert Walters trading in line, FCA probs motor insurers
Keep an eye on Robert Walters after it said pretax profit would be in-line with market expectations unlike industry peer Hays which warned recently.
That may come as some relief to the market although the recruiter said net fee income was down 10% in the fourth quarter reflecting “continued challenging macro-economic conditions across many of the group's markets.”
Direct Line and Admiral were under the cosh yesterday and today the UK’s top financial regulator has launched an investigation into historical commission agreements at motor finance companies after finding that companies were rejecting “most” of the “high number” of complaints brought to them.
The Financial Conduct Authority banned discretionary commission arrangements in motor finance in 2021.
The FCA said on Thursday that it would review how “several firms” applied commissions before that after a high number of complaints from customers, including two recent cases that were
7:45am: Tesco ups guidance, M&S and Whitbread back outlook
It's a busy morning for trading updates, here's what we have so far.
Starting with the retailers and grocer Tesco has raised its full year profit guidance to £2.75 billion, versus its previous forecast of £2.6 billion to £2.7 billion.
Sales in the six-week Christmas period rose 6.8% in the UK including growth of 9.2% in the four weeks to Christmas.
Marks & Spencer, expects results to continue to be in line with expectations but sounded a note of caution.
It reported third quarter UK sales of £3.57 billion, up 8.5% at constant currency, and up 8.1% like-for-like.
“As we enter the new year and FY25, expectations for economic growth remain uncertain, with consumer and geopolitical risks."
"We also face additional cost increases from higher than anticipated wage and business rates related cost inflation," it said.
Whitbread PLC (LSE:WTB) has held full-year guidance as robust demand for hotels supporting occupancy and pricing in the third quarter.
For the 13 weeks to November 30, Whitbread said Premier Inn UK sales rose 11% with strong demand in both London and the regions.
Housebuilder Taylor Wimpey PLC (LSE:TW.) expects to report annual operating profit at the top-end of guidance despite an uncertain market and challenging planning backdrop.
Looking ahead, Taylor Wimpey said “we have seen good levels of enquiries so far this year and it is encouraging to see recent mortgage rate reductions which will improve affordability.”
Profit for 2023 is seen at the top end of the guidance range of £440 million to £470 million.
Let's see what the City makes of those.
7:07am: FTSE 100 called higher ahead of US CPI
The FTSE 100 is expected make a positive start to the day after US stocks rallied ahead of today's US inflation figures.
Spread betting companies are calling London's blue-chip index up by around 30 points after closing down 32.20 points at 7,651.76 on Wednesday.
"Today's December inflation numbers have the potential to either add to the expectation of a move in March, or push it out until later in the year," said CMC Markets UK chief market analyst Michael Hewson.
Economists expect the US headline consumer price index to edge up to 3.2% annually in December, from 3.1% in November.
However, core inflation - which excludes food and energy - is expected to cool to 3.8% from 4.0%.
In the US on Wednesday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.5%, the S&P 500 up 0.6% and the Nasdaq Composite up 0.8%.
Back in London, and retailers are once again in the spotlight with updates from Tesco and M&S, while Premier Inn owner, William Hill is also due to update investors.