- FTSE 100 closed down 30 points at 7,595
- House prices rise in January - Rightmove
- Crest Nicholson falls after cutting outlook
4:40pm: FTSE ends lower in subdued session
The FTSE 100 closed down 30.02 points, 0.4%, at 7,594.91.
Chris Beauchamp at IG said: "Friday’s bounce for the FTSE 100 has been reversed as a risk-off mood prevails across European markets."
"Today’s volume-light day across global markets shouldn’t provide too much of a clue for the coming sessions, though it seems that profit-taking continues to prevail among investors."
3:30pm: Fresh wave of train strikes coming down the track
Train drivers with the Aslef union have announced a fresh series of strikes at the end of this month as part of its long-running dispute with 16 train companies over pay.
The industrial action, set to take place between Tuesday 30 January and Monday 5 February, will affect different operators each day. This comes a week after the City breathed a sigh of relief as planned tube strikes by RMT union members were called off.
More strikes are also bad news for London’s hospitality industry, which has issued several warnings of the damaging impact of strike action on businesses.
2:40pm: Banking watchdog warns on AI
Global leaders need a co-ordinated response to the challenges posed by AI, the chair of the world’s banking watchdog said, as he warned that the fast-developing technology “could change the course of history, not necessarily for the good”.
Pablo Hernández de Cos, who chairs the Basel Committee on Banking Supervision and is also governor of the Bank of Spain, urged leaders ahead of this week’s summit in Davos to use financial regulation as a blueprint for tackling issues such as AI and climate change.
The “really remarkable” co-operation on financial regulation that allowed watchdogs to keep the world’s financial system stable through a pandemic and two wars should be applied to AI, the Spanish official told the Financial Times.
1:28pm: UK to consider further action to repel Houthi attacks
The UK will "consider" whether it "has to take further action" to repel Houthi attacks on international cargo ships in the Red Sea, the Defence Secretary has said.
Grant Shapps said Britain needs to "wait and see" what happens after the joint air strikes with the US on Friday, military action that followed weeks of assaults on shipping along the vital global route by the Iran-backed military group.
Sunday saw further action in the region, with the US military confirming that one of its fighter jets shot down an anti-ship cruise missile fired towards an American destroyer in the Red Sea.
Shapps, taking part in a media round ahead of a speech on Monday, said the actions by the Houthi rebels in Yemen are akin to "thuggery" as he refused to rule out taking part in further co-ordinated air strikes.
12:43pm: Crest Nicholson must put operational issues behind it
AJ Bell’s Russ Mould said while there may have been a break in the clouds looming over the housebuilding sector the latest update from Crest Nicholson shows life remains tough.
“Higher costs on a delayed project in Surrey and a legal claim linked to a fire at an apartment building in 2021 contribute to the company warning on profit for 2023,” he added.
“Helping to salve the pain for shareholders is a more encouraging outlook, which is lent credibility by a Rightmove survey showing an increase in asking prices at the start of the year,” he noted.
But if it is to be a beneficiary of any improvement in the outlook, Crest Nicholson must put operational issues behind it, he said.
12:01pm: Goldman sees headline inflation below 2% in May
Some important data coming up in the UK this week.
Goldman Sachs (NYSE:GS) expects the upcoming November labour market report (to be released on Tuesday) to show the unemployment rate remaining at 4.2% and three-month year-over-year private sector regular pay growth moderating to 6.7% (from 7.3% in October).
The bank thinks the upcoming December inflation print (to be released on Wednesday) to show services and core inflation declining to 5.9% year-on-year and 4.8% year-on-year, respectively.
“Taken together with further declines in food and energy inflation, we expect headline inflation to moderate to 3.6%yoy, well below the BoE's November MPR projection of 4.6%yoy,” Goldman said.
Further out, given the significant decline in energy prices over the past few weeks, Goldman now expects headline inflation to fall below the 2% target in April and end the year at 1.8%, (down from 2.4% previously).
11:20am: Pagegroup facing a struggle as employers turn cautious
Susannah Streeter at Hargreaves Lansdown said PageGroup, the recruiter, is putting a brave face on a difficult jobs market, but it's clearly a real struggle as employers around the world turn cautious amid the uncertain economic climate.
She explained recruitment budgets are dwindling so managers are taking a lot longer to go through the hiring process, particularly when it comes to permanent staff.
The situation has worsened in European markets, and there has been no improvement either across Asia, the United States or the UK, she noted.
Page is also having to deal with a talent shortfall, with a lack of skills flagged among pools of workers, while good potential candidates desire high fees to move.
Shares In Pagegroup, which fell last week after a warning from industry peer Hays, are down 2.0%.
10:38am: Dassault warning hits BAE Systems
Shares in BAE Systems are trading just the wrong side of the line, down 0.6% after a downbeat update from Dassault Aviation on Friday.
Shares in the French firm are down around 5.7% after it saw a decline in orders for its Rafale fighter jets and its Falcon business planes last year.
Deutsche Bank cut the stock to 'hold' from 'buy,' noting the year-end bounce that was expected did not materialise, as supply-chain issues continued to curtail Falcon output.
It thinks the 65% drop in Falcon order intake is more concerning with the resulting 4% drop in order backlog comparing with North American peers posting on average 5-6% growth in backlogs.
10:00am: German economy contracts in 2023
German output contracted 0.3% last year as high inflation, rising interest rates and elevated energy costs weighed on Europe’s largest economy, according to an initial estimate released on Monday.
The federal statistics office, Destatis, said gross domestic product was still above pre-pandemic levels, after last year’s contraction followed two years of rebounding output and left it 0.7% up from 2019.
“Overall economic development faltered in Germany in 2023 in an environment that continues to be marked by multiple crises”, said Ruth Brand at Destatis.
“The year 2023 was the first full year since 2020 in which the German economy contracted,” ING’s Global Head of Macro Carsten Brzeski said.
“What's worse, however, is that there is no imminent rebound in sight and the economy looks set to go through the first two-year recession since the early 2000s.”
9:24am: National Grid boosted by Deutsche upgrade
National Grid rose 0.9% after Deutsche Bank upgraded to ‘buy’ from ‘hold’.
The German investment bank noted throughout 2023, and for 20 months in total, it recommended investors position in integrated utilities.
“However, the sharp outperformance of integrated utilities over pure plays, particularly renewable pure plays causes us to reposition,” it said.
As a result, it has made six rating changes, downgrading integrateds and upgrading pure plays.
In the UK, National Grid is the beneficiary.
In Europe, Elia and Orsted have been moved from ‘hold’ to ‘buy’.
Redeia has been upgraded from ‘sell’ to ‘hold,’ Enel has been lowered from ‘buy’ to ‘hold.’
Verbund has been cut from ‘hold’ to ‘sell.’
Back in the UK, and price targets for SSE, United Utilities and Severn Trent have been increased, supporting shares.
8:54am: Gains evaporate after brigher start
The FTSE 100’s early gains have evaporated with the blue-chip index now nursing modest losses.
Richard Hunter at interactive investor noted UK markets were “undecided” in opening trade in the absence of any major news and with the likelihood of a lighter trading day given the closure of Wall Street later.
Lloyds Banking Group PLC (LSE:LLOY) is down 1.6%.
Analysts at Barclays have taken a look at the FCA’s review of Motor Finance commissions which it believes raises the prospects of banks paying compensation to customers.
While uncertainty is “high,” it suggests a potential provision range of £0.5-1.0 billion for Lloyds.
Another bank in the red is HSBC Holdings PLC (LSE:HSBA), down 1.6%, after Exane BNP downgraded the Asia-focused bank to ‘underperform’ from ‘neutral’.
Burberry is down a further 1.7% after Friday’s profit warning - Goldman Sachs (NYSE:GS) has downgraded the luxury good maker to ‘neutral’ from ‘buy’ while UBS, Stiflel, SocGen and Deutsche Bank are among those broker’s lowering price targets.
8:15am: FTSE 100 makes steady progress
The FTSE 100 posted modest gains at the open on Monday although events may be subdued with US financial closed.
At 8:15am, London’s blue-chip index was up 11.25 points, 0.2%, at 7,636.18.
Stephen Innes at SPI Asset Management said: “It's another week marked by US holidays, with Wall Street observing Martin Luther King Day today, so markets are getting off to a rather sluggish start.”
“That said, there is a lot of geopolitical and macro noise in the market, so it's probably not the time to get over complacent, especially with consumer sentiment apt to get held hostage to the gnarly geopolitical scrim as policymakers, companies and investors struggle to operate in today's highly politically charged environment.”
In London, company news was thin on the ground but two stocks on the wane are PageGroup PLC (LSE:PAGE), down 2.8%, and Crest Nicholson PLC (LSE:CRST), down 4.3% after both lowered profit guidance.
On Crest, analysts at Peel Hunt expect to cut its 2023 pretax profit forecast by 9% from £45 million and for the consensus (currently at £45 million) to fall 15%.
7:53am: House prices rise in January - Rightmove
The average house in the UK jumped by around £4,500 month-on-month in January, according to a property website.
Across Britain, the average price of a property coming on the market rose 1.3% or £4,571 month-on-month, to £359,748, Rightmove said.
Despite the increase, average asking prices are still 0.7% lower than a year earlier.
Rightmove said the volume of new properties coming onto the market for sale is 15% higher than a year ago.
7:48am: Crest Nicholson cuts outlook after identifying further 'legacy' charges
A couple of other stocks to watch include Record PLC (LSE:REC) where Steve Cullen is retiring as CFO after 20 years at the business and Crest Nicholson which has updated on trading conditions.
The housebuilder has identified further costs at Brightwells Yard, Farnham, along with other legacy sites, “ which will impact FY23.”
It now expects adjusted pretax profit to be £41 million for financial 2023.
In November, the company had guided pretax profit to be between £45.0 and £50.0 million for the financial year, having guided for £50.0 million in August.
Crest said it will also take an exceptional charge of £13 million in respect of a legal claim that it has recently received relating to a low rise apartment scheme built by the group which was damaged by fire in 2021.
On a more positive note, the company stated: “Although it is too early to gauge customer behaviour, we have been encouraged by an increase in customer interest levels and inquiries this calendar year.”
7:38am: PageGroup warns of "slightly" lower-than-expected profit
It's quieter day for company news but one stock to keep an eye on is PageGroup PLC (LSE:PAGE) which has followed fellow recruiter Hays in warning of lower-than-expected profits.
The international recruiter said full year operating profit is expected to be slightly below previous guidance of £120 million to £125 million.
Chief Executive Nicholas Kirk said while the firm was “still seeing good activity levels,” albeit a “deterioration in job flow through Q4,” these activity levels “are not all converting into gross profit due to ongoing lower levels of candidate and client confidence.”
The firm said gross profit in 2023 was down 8.9% to £237.3 million from the year before.
In the fourth quarter, gross profit slipped 11.1% with perm down 16.9% but temp up 3.9%.
In the UK, gross profit tumbled 19.9% with EMEA (56% of group total) down 6.5%.
7:10am: Steady progress expected at the open in London
The FTSE 100 is expected to start the week on the front foot although the session may be more subdued than normal with US markets closed for Martin Luther King Day.
Spread betting companies are calling London’s blue-chip index up by around 11 points after closing up 48.34 points at 7,624.93 on Friday.
On Friday, US markets ended mixed, while in Asia, equity markets have made steady progress.
“Today the US is off for Martin Luther King Day which means markets in Europe could well be more subdued than normal, and so far this year there hasn’t been that much to get particularly excited about anyway,” said Michael Hewson at CMC Markets.
“This week the focus is set to be very much on the UK economy in the wake of Friday’s better than expected November GDP numbers, which raised the prospect that the economy may have avoided a technical recession at the end of last year, as a rebound in services activity saw the economy expand by 0.3%,” he added.
“This week we get data for wages and unemployment for November, as well as December CPI and retail sales, all of which have the potential to shift the dial on the timing of a first rate cut from the Bank of England.”
The early focus in London will be housing data from Rightmove plus trading statements from RS Group, Ashmore Group (LSE:ASHM) and PageGroup.