- FTSE 100 closes 48 points higher
- UK economy grows 0.3% in November
- Burberry warns profit will miss expectations
4.45pm: London stocks in the green
At the close, the FTSE 100 had added 48 points ot close Friday at 7,624 points for a 0.6% gain on the day.
3:50pm: Weak PPI give markets a boost heading into the weekend
Craig Erlam at Oanda noted stock markets are ending the week on a high, buoyed by weaker PPI readings from the US that suggest inflation will keep falling in the coming months.
"The PPI data has repaired the damage done by yesterday's CPI data which came in a little higher than expected."
"But it's clear from today's readings that disinflationary pressures remain in the pipeline which should give the Fed confidence over the coming months that inflation is heading back to target," he added.
"Whether we'll see it in the PCE figures - the Fed's preferred measure - in time for the new forecasts in March is the key question now."
3:30pm: Oil and gold price rises support FTSE 100
Heading towards the close and the FTSE 100 remains in rude health.
The rise in the oil price is supporting BP and Shell while a 1.4% spike in the gold price has lifted Fresnillo and Endeavour Mining.
Rising global tensions have also seen the defence manufacturer, BAE Systems rise 1.9%.
Banks appear to be little moved by events in the US, with Lloyds and Barclays holding firm, supported by Morgan Stanley (NYSE:MS)'s upbeat comments.
There are only seven fallers in the blue-chip index with Burberry down 7.5% by far the worst performer.
Te rising oil price has seen British Airways owner, IAG, slip 2.4%.
2:50pm: Positive start in New York lifts London
Stocks in New York rallied on Friday after a wholesale price inflation increased less than the market had expected.
Shortly after the opening bell, the Dow Jones Industrial Average was up 98.39 points, 0.3%, at 37,809.41, the S&P 500 was up 20.33 points, 0.4%, at 4,800.57 and the Nasdaq Composite was up 56.47 points, 0.4%, at 15,026.65.
Investors were also digesting a mixed bag of earnings in the banking sector which saw JPMorgan and Citigroup rise but Bank of America and Wells Fargo fall back.
US producer prices grew at a slower pace than expected in December, numbers on Friday showed.
According to the Bureau of Labor Statistics, producer prices rose 1.0% year-on-year in December, picking up speed from a 0.8% climb in November, but falling short of consensus.
Producer prices had been expected to grow 1.3% annually in December.
2:12pm: London Tunnels eyes IPO
Another float on the way from a company developing once-secret tunnels under central London into a tourist attraction.
The London Tunnels has raised about £10 million privately and is targeting a £123 million valuation.
Could this be a sign of an upturn in new listings in London?
The company is the brainchild of former Macquarie banker Angus Murray, who said that after several years’ development the site will be “as iconic as the London Eye.”
1:03pm: Yellow Cake jumps as uranium price spikes
Yellow Cake is up another 5.4% today after a jump in the pricce in uranium.
The AIM-listed uranium miner is up 12.5% in the past week and 75% in the past year after spot uranium prices hit their highest levels in 15 years following a series of supply challenges.
That includes last year’s coup in major producer Niger, a cut to production targets from miner Cameco.
The price of uranium has risen more than 12% in the past month.
The latest boost comes after a warning from Kazatomprom, the Kazakhstan government-controlled uranium giant, that is is likely to miss its production targets over the next two years.
It said that shortages of sulfuric acid and construction delays at newly developed deposits are creating production challenges that could persist into 2025.
12:28pm: Warpaint London sees profit more than doubling
Warpaint London which was a top performer in 2023 has said its 2023 results should beat its recently raised expectations after strong business over its fourth quarter.
The make-up brand forecast its full-year pretax profit will more than double.
It expects to report 2023 pretax profit of not less than £18 million (2022: £7.7 million), which is ahead of current market expectations and the board's previous guidance of in excess of £16 million.
The supplier of colour cosmetics and the owner of the W7 and Technic brands said it anticipates 2023 sales to be around £89.5 million, a jump of 40% from £64.1 million a year ago and up 5.3% from guidance of £85 million it gave in November.
Shares have bounced 3.4% on the news.
12:02pm: US banks mixed after earnings
It's a big day for earnings in the US with results from a number of the big banks just hitting the wires.
The initial reaction seems to be negative with JPMorgan, Bank of America and Wells Fargo all lower after releases.
Overall, US stock futures are lower ahead of the open.
In pre-market trading, futures for the Dow Jones Industrial Average were down 0.2%, while those for the S&P 500 were down 0.2% and contracts for the Nasdaq 100 futures fell 0.3%.
Just released, Bank of America has slipped 0.9% in pre-market trading after reporting a spike in bad debts and a drop in annual profit.
Fourth quarter net income more than halved from a year before to $3.14 billion from $7.13 billion.
Elsewhere, Wells Fargo is down 2.1% after reporting slightly higher fourth quarter revenue and net income.
But JPMorgan has reversed early losses and is now up 2.1% after it reported a 15% fall in fourth quarter net income although revenue puished higher.
BlackRock is another quick out of the blocks, reporting assets under management topped $10 trillion at the end of the fourth-quarter, plus a cash and shares deal to acquire Global Infrastructure Partners.
The deal will create a “world leading infrastructure investment platform,” the firm said.
BlackRock is paying over $3 billion in cash to acquire GIP, as well as handing over 12 million of its own shares, taking the deal value to $12.5 billion
Shares were down 0.6% in pre-market deals.
11:30am: Air Astana float should be good news for BAE
Air Astana has released more details about the Kazakhstan flag carrier’s planned listing on the LSE, Astana International Exchange and Kazakhstan Stock Exchanges.
The IPO will comprise GDR offers for local and global markets and a domestic share sale, according to a statement.
As I reported in November, the float could provide a windfall for BAE Systems which has 49% stake in the airline.
The British company put in $8.5 million to co-fund the launch of Air Astana in 2002 as part of an attempt to sell radar systems to Kazakhstan.
That defence deal collapsed under pressure from Russia, however, and BAE was left with the Air Astana stake, which today rests in its books with a valuation of £63 million.
10:45am: Stocks prosper but Quilter knocked by UBS downgrade
Shares in Quilter PLC (LSE:QLT) have fallen 3.5% after UBS downgraded to ‘neutral’ from ‘buy’.
It reckons with a re-rating “achieved,” the stock is “fairly priced” at these levels.
It left its price target unchanged at 115p.
Meanwhile, the FTSE 100 continues to push ahead, up 60 points.
Russ Mould, investment director at AJ Bell noted equities had been given a lift as investors focused on comments from European Central Bank President Christine Lagarde who implied the worst was over with inflation in Europe, stoking hopes for rate cuts from the ECB.
Relx is up 1.5% after JPMorgan said it remained its top pick in the media sector.
"RELX was the only stock you needed to own in 2023 & it remains our top pick in media," the investment bank said.
10:15am: Bank of America brings forward UK rate cut forecast to August
Bank of America has cut its inflation estimates for the UK and broguht forward its expectation of when the first UK rate cut will happen.
Its 2024 forecast for headline inflation drops to 3% (-40bp), while 2025 falls only 10bp.
"We expect core inflation now to average 3.8% in 2024 (-20bp) and 3% in 2025 (-10bp)," it said.
"Disinflation is likely to happen faster than we thought a couple of months ago, but it is still much slower than elsewhere, particularly when it comes to services inflation," BofA said.
It still thinks the UK still has a "persistent inflation problem, despite recent improvements."
"However, with faster disinflation, there is less need to keep real rates as high as we thought before."
Hence, it nows expect the BoE to keep Bank Rate on hold at 5.25% until August 2024 (from February 2025 before), and expects a cutting cycle of 25bp per quarter from there.
The UK will be the last of the major central banks to start the cutting cycle and it is likely to move slower, at least compared with the ECB, the bank preedicts.
9:45am: Lloyds is Morgan Stanley (NYSE:MS)'s top UK banking pick
Shares in Lloyds Banking Group are up around 1.1% after Morgan Stanley (NYSE:MS) named it as its top UK banking pick.
“Deposit mix migration has slowed down during Q3, which could make 4Q [net interest margins] less bad than feared and provides better visibility for 2024.”
“We re-iterate our positive view on UK banks, and see Lloyds as Top Pick.”
For Lloyds, the broker forecast [net interest margin] would fall 6 basis points quarter-on-quarter to 3.02% in-line with company guidance and consensus.
For 2024, it predicts a 2.94% NIM which is also consistent with the guidance of "below 3%".
It estimates a £500 million provision release related to the write-back of the Telegraph debt in December, which leads it to raise its share buyback expectations from £2 billion to £2.5 billion, higher than consensus at £2.2 billion.
“On 0.9x [tangible net asset value] for a 13% [return on tangible equity] 2024-2026E, we re-iterate our ‘overweight’ on the stock,” the bank said.
It views Barclays' investor update “as a positive catalyst,” but suggested NatWest could lower its 14- 16% ROTE guidance.
On NatWest the bank expects “NIM down from 2.94% to 2.87% in the quarter, broadly in-line consensus.”
“Although we acknowledge short term upside on lower deposit competition, we believe Natwest is the more rate sensitive of the three large domestic names and we believe it is vulnerable to the new lower rates curve.”
Barclays is rated 'overweight' and NatWest 'equal weight'.
The broker has also nudged up its price targets for HSBC and Standard Chartered.
9:13am: Vistry gains on improved outlook
Vistry PLC is enjoying a good morning after it announced leadership changes alongside a trading update for 2023.
The housebuilder said it now expects adjusted pretax profit for 2023 to be in line with 2022's £418.4 million, ahead of its previous guidance.
Completions fell "only" 5.4% over the year to 16,124 units from 17,038 in 2022, which Vistry said represents a significant outperformance to its peers, and reflects "the resilience of [its] Partnerships model".
Non-Executive Chair Ralph Findlay is to step down at its AGM in May, with CEO Greg Fitzgerald to succeed him, taking on the roles of chair & CEO.
Vistry said it has begun a search for an experience senior director to provide additional oversight on governance matters.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown said: "Vistry’s large-volume projects have held it in good stead, with completions only down 5.4% to 16,124 new homes, which is significantly better than most of its peers."
"As a result, full-year underlying pre-tax profit is now expected to come in at around £418.4mn, slightly ahead of previous guidance of £410.0mn," he noted.
8:45am: Burberry slips as cracks appear in luxury demand
Burberry is down around 8% now.
Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown said the latest profit warning shows “cracks appearing in luxury demand."
“So-called aspirational shoppers are one of the demographics pulling back, and Burberry is more exposed to this type of customer than super-high-end luxury,” she noted.
The business model also lacks the product diversification that others in the space have, she felt.
The free cash outflows seen in recent months has also set the cat among the pigeons, she said.
While it’s “crucial” to invest in brands in luxury, “at some point, the top of the profit and cash flow funnel needs to be replenished by rising revenues and a calmer rate of investment.”
8:15am: Stocks push ahead but Burberry plunges
The FTSE 100 opened higher on Friday after figures showed the UK economy grew more than hoped in November but it’s another bad morning for investors in Burberry.
At 8:15am, London’s blue-chip index was up 65.35 points, 0.9%, at 7,641.94 while the FTSE 250 was up 200.40 points, 1.1%, at 19,308.33.
Samuel Tombs at Pantheon Macroeconomics said it was a “coin toss” as to whether the UK will avoid a second consecutive quarter fall in GDP the fourth quarter.
“Nevertheless, with employment still rising and business and consumer confidence recovering, it would be overblown to label this a recession if GDP did indeed drop slightly,” he said.
He pointed out November’s increase in GDP reversed all of October’s decline, rebounding in consumer-facing sectors after spending in October was adversely affected by Storm Babet and the later-than-usual timing of school holidays in some areas.
Burberry has opened 12% lower after its latest profit warning while Vistry has risen 1.7% after its trading update.
7:52am: US and UK attacks on Houthi rebels push oil price higher
Also worth keeping an eye on the oil price which is on the move after the US and the UK have carried out military strikes against Iran-backed Houthi rebels, raising fears of a broader escalation of the conflict in the region.
The price of Brent is up around 2.4% at $79.24 today.
Susannah Streeter, head of money and markets, Hargreaves Lansdown highlighted the inflationary risks amid warnings from major companies that shipping delays could see prices ramp up.
"While its highly uncertain what trajectory energy prices will take, especially given the disruption to trade and the slowing global economy, risks of further price rises will be monitored closely by central bank policymakers," she said.
"With major manufacturers and retailers warning of significant delays to products and components, the price of a vast range of goods threatens to march upwards again."
7:45am: UK economy rebounds in November
Better news on the UK economy which rebounded more than forecast in November driven by growth in the services sector, according to official figures which ease fears of a technical recession.
Gross domestic product rose 0.3% month on month in November, following a 0.3% decline the previous month, according to data from the Office for National Statistics, stronger than the 0.2% growth forecast by economists.
GDP fell 0.2% in the three months to November 2023.
Services was flat (0.0%), while production was down 1.5% and construction down 0.6%
— Office for National Statistics (ONS) (@ONS) January 12, 2024
The figures were lifted by 0.4% growth in services output in November which followed a fall of 0.1% in October, revised up from a 0.2% fall.
Production output grew by 0.3% in November, following a fall of 1.3% in October (revised down from a 0.8% fall) and the construction sector fell by 0.2% in November after a fall of 0.4% in October (revised up from a 0.5% fall).
ONS chief economist Grant Fitzner said: “GDP bounced back in the month of November . . . led by services with retail, car leasing and computer games companies all having a buoyant month.”
“The longer-term picture remains one of an economy that has shown little growth over the last year,” he added.
7:28am: Burberry warns again after December slowdown
Before we get to the GDP figures, news of another profit warning from Burberry Group PLC.
The luvuxry goods retailer expects full-year results to be below expectations amid “challenging” trading conditions and “backdrop of slowing luxury demand.”
Chief Executive Officer Jonathan Akeroyd said: “We experienced a further deceleration in our key December trading period and we now expect our full year results to be below our previous guidance.”
The luxury goods retailer now expects adjusted operating profit for the financial year ended March 30 to be in the range of £410 million to £460 million, below previous guidance.
In November, Burberry said operating profit would be closer to the bottom of the then consensus range of £552-668 million range.
The firm said retail revenue in the 13 weeks months to December 31 fell 7% to £706 million from £756 million with like-for-like store sales down 4%.
7:10am: FTSE called higher ahead of US banking results
The FTSE 100 is expected to rally on Friday after US markets recovered early losses to close little changed following Thursday’s strong inflation print.
Spread betting companies are calling London’s blue-chip index up by around 30 points after closing down 75.17 points at 7,576.59 on Thursday.
On Wall Street, the Dow Jones Industrial Average closed marginally higher, the S&P 500 slightly lower and the Nasdaq was almost unchanged.
Investors were also digesting the latest economic data from China where figures showed deflation continued for the third month in a row, while imports and exports struggled in 2023.
Back in London, the early focus will be on GDP figures to see how the economy fared after October’s fall.
Later in the US, some of the big beasts of the US banking world kick off the earnings season stateside with Bank of America, JPMorgan and Citigroup among those reporting.