- FTSE 100 closes up 13 points at 7,459
- Watches of Switzerland plunges after profit warning
- Flutter Entertainment rises as US listing looms
4:40pm: FTSE 100 edges higher at the close
The FTSE 100 closed up 12.80 points, 0.2%, at 7,459.09.
3:39pm: ECB minutes show little talk of rate cuts
Minutes from December’s European Central Bank have showed policymakers gave little time to the prospect of an interest rate cut,
In December, the Frankfurt-based official lender left the interest rate on the main refinancing operations, the marginal lending facility, and the deposit facility at 4.50%, 4.75% and 4.00%, respectively.
The minutes from December's meeting showed that all members agreed to keep the three key ECB interest rates at their current levels.
Focus remained on inflation and the so-called "last mile" to bring it back down to target, minutes showed.
“With services inflation still running at 4% and continued strong wage growth, a potentially challenging 'last mile' was still looming."
There was little talk about rate cuts in the minutes, however.
On Wednesday, President Christine Lagarde said the ECB could start cutting interest rates this summer.
2:48pm: US markets mixed; upgrade boosts Apple
Across the pond and US markets have made a mixed start to the day.
Tech stocks have prospered with Apple boosted by an upgrade and chipmakers by strong TSMC earnings but it has been a tricky start for blue-chips.
Shortly after the opening bell, the Dow Jones Industrial Average was down 58.92 points, 0.2%, at 37,207.75, the S&P 500 was up 18.56 points, 0.4%, at 4,757.77 and the Nasdaq Composite was up 143.36, 1.0%, at 14,998.98.
Jobless claims hit their lowest level in more than a year last week, as the labour market remains robust, further denting hopes of an early cut in interest rates.
Initial claims for US state unemployment claims totalled 187,000 in the week ending January 13, their lowest level since September 2022 and a decline from the previous week’s 203,000, the labour department said on Thursday. Economists had forecast 207,000 new claims.
Despite the market angst, the CME FedWatch tool puts the chances of a rate cut at the March Federal Reserve meeting at 55%, although below recent more optimistic levels.
Stocks on the move included Apple rose 2.0% after Bank of America upgraded the iPhine maker to 'buy' from 'neutral' and raised its price target to $225 from $208.
But sandal seller Birkenstock, fell 12%, after it flagged margin pressures - the company expects a “modest headwind” to adjusted earnings in 2024 as it ramps up production at its facility in Germany, it said on Thursday in its first earnings report since its October IPO.
Elsewhere, shares in Humana plunged 13% after the health insurer cut its earnings outlook because rising demand for medical services has pushed up its costs.
Back in London, and the FTSE 100 is up 6 points.
2:25pm: Superdry hits new all-time low
Superdry's week goes from bad to worse.
The branded goods retailer hit a new all-time low of just 16.79p, before rally a touch to 17.38p, still down 18% today.
This follows a sharp fall on Tuesday after Sky News reported the clothing retailer has enlisted one of the big four accountancy firms to advise on its finances in the wake of a pre-Christmas profit warning.
Superdry, founded by Julian Dunkerton, has appointed PricewaterhouseCoopers to examine its debt-raising options, Sky News said.
In December, the retailer, warned its profit for its current financial year ending at the end of April will suffer amid the "well-documented challenging trading environment".
Shares in Superdry are down 42% in the past five days.
2:12pm: Growth in oil demand to halve - IEA
Growth in oil demand will halve this year, the west’s energy watchdog said on Thursday, standing in contrast to Opec’s forecast of flat demand growth in 2024.
The International Energy Agency cited the impact of China’s Covid rebound fading, slower growth in major economies and greater take-up of electric vehicle rises.
It forecast demand growth would slow to 1.2 million barrels per day this year, compared with 2.3 million boepd in 2023.
The IEA said the extra supply could tip the oil market into a “substantial surplus”.
1:30pm: Here are some of today's big movers
Strategic Minerals PLC (AIM:SML, OTC:SMCDF)’s shares jumped 41% on Thursday after the biggest customer of its Cobre tailings operation in New Mexico returned with a new order for 30,000 tonnes of iron ore.
The (unnamed) customer halted supplies in 2023, knocking a big hole in SML’s deliveries for the year just ended, but this contract is 50% bigger than anything it ordered previously and will give a boost to cash flows this year, said John Peters, managing director.
Travis Perkins (LSE:TPK) shares climbed 6% after it posted a brief but reassuring update, revealing that trading in the fourth quarter of last year was in line with expectations and that it has been cutting costs.
While pricing was stable compared to the previous quarter, sales volumes remained "challenging", the builders' merchant chain said.
And finally, Zotefoams PLC (LSE:ZTF) shares were 3.6% higher after the cellular materials technology leader published its unaudited financial results for the year ending 31 December 2023.
The company reported a year-end revenue of £127 million, aligning with market expectations and the previous year's figures.
1:05pm: Ferrexpo jumps after reinstating dividend
Shares in Ferrexpo PLC (LSE:FXPO) are a warm order, up 11.4%, after it reinstated dividends after performing well in 2023 amid higher demand.
The iron ore pellet producer said its second half performance was boosted by improved pricing.
It announced an interim dividend of 3.3 US cents, its first payout since August 2022.
Executive Chair Lucio Genovese said: "We exceeded our expectations in 2023 thanks to improved demand, production optimisation and higher iron ore prices.”
“The new year has also started well for the iron ore industry with signs of an increase in pellet demand, providing the confidence to restart a second pellet line to meet export demand."
12:33pm: BofA downgrades Pearson, Rightmove, prefers Relx
Bank of America has adjusted ratings across its media, gaming and internet coverage in Europe.
It believes the strong rally in equity markets in the fourth quarter calls for increased selectiveness across the Media, Gaming and Internet universe, which spans 33 companies with a combined $400 billion market cap.
Within large caps, its five top ‘buy-rated’ names are quality defensives RELX, Flutter and Universal Music Group while Publicis and Informa are mispriced cyclicals.
Within small/mid-caps, its top five picks are Vivendi, Entain, Auto Trader and it has raises Just Eat Takeaway and JCDecaux to ‘buy’ from ‘neutral’
BofA has downgraded Rightmove to ‘underperform’ from ‘neutral,’ and cut Pearson to ‘neutral’ from ‘buy’.
WPP and ITV are rated ‘underperform’.
12:09pm: US markets seen higher, TSMC boosts chipmakers
Stocks in New York are expected to open higher on Thursday as investors continue to adjust to the likelihood interest rates cut will be delayed.
In pre-market trading, futures for the Dow Jones Industrial Average were up 0.1%, while those for the S&P 500 climbed 0.4% and contracts for the Nasdaq 100 futures advanced 0.6%.
Chipmakers gained in US premarket trading after Taiwan Semiconductor Manufacturing, the main supplier to Apple Inc (NASDAQ:AAPL, ETR:APC). and Nvidia Inc, said it expects a return to solid growth this quarter.
Microchip Technology, Advanced Micro Devices and ON Semiconductor Corp (NASDAQ:ONNN) all rose more than 2%.
Boeing rose after winning an order for 150 of its troubled 737 Max jets from India’s newest airline, Akasa Air.
11:47am: Bank of America warns to “undervalued” Just Eat
Bank of America has upgrades Just Eat Takeaway to ‘buy’ from ‘neutral’, helping drive the shares 4.9% higher today.
The bank pointed out more than half of the business today is sustainably profitable, the balance sheet is strong and there is scope for cash return.
It noted US business cash burn “has significantly been reduced and we believe should improve further, and there is scope for renewed interest in M&A.”
The firm is trading on just 7.7x EV/EBITDA for 2024, and on EV/sales it remains notably below its peer Delivery Hero (ETR:DHER, OTCQX:DLVHF), BofA added.
“With a clear path of profitability improvement”, BofA thinks Just Eat looks undervalued at the current share price.
It has increased its price target to €15.4 from €15.0.
11:08am: Time to look at European small caps - Goldman
Goldman Sachs (NYSE:GS) reckons now could be the time to look at European small-cap stocks.
It argues that improving economic growth should drive the outperformance of small caps, and that their low relative valuation is a tailwind.
The bank pointed out European Small caps are down 16% since January 2022, in total returns, while large caps already got back to their January 2022 levels.
Small caps are still 16% below their January 2022 level
Total returns (%)
Source: Datastream, Goldman Sachs (NYSE:GS) Global Investment Research
Small caps' 12-month forward P/E ratio has derated 36% over the period, tracking the evolution of bond yields and the worries associated to their leverage.
The derating of small caps has closely tracked the rise in bond yields, Goldman explained, but strategists at bank now think that bond yields have peaked.
While the rate tailwind for Small caps is probably limited, the accelerating economic growth that our economists expect should provide further upside.
M&A activity should also provide a spur. Deals were down 30% in 2023 but lower interest rates should help to boost both Private Equity demand for listed stocks and M&A activity.
This usually supports the outperformance of small caps which are typically M&A targets, Goldman said.
Goldman has derived a screen of companies (market cap <€10 billion) which are expected to grow faster than the market, have not had any negative revenue growth over the past two years, and have seen their valuation contract the most since January 22.
UK names on the list include Keywords Studios, Energean and 4Imprint.
10:38am: Is Argos next after Sainsbury pulls plug on banking?
Russ Mould at AJ Bell notes the writing has been on the wall for Sainsbury’s banking operations for some time.
“With the company openly saying that it has a ‘food first’ strategy, everything else in the business has played second fiddle in recent years,” he pointed out.
He said it was “no surprise” to see Sainsbury’s confirm it will withdraw from this service.
He noted it follows rumours that Tesco is entertaining bidders for its banking arm.
Mould said after toying with ventures in a number of different areas, food retailers are going back to their bread and butter.
“The next question investors will ask is whether Sainsbury’s will look to sell Argos given disappointing general merchandise sales of late and this also being non-core to its food-first strategic focus,” Mould said.
The banking announcement refers to a clear focus ‘on our retail businesses’ rather than simply saying groceries, and “so one could deduce that Argos is safe for now.”
“There will almost certainly be serious questions about its future if it continues to be a drag on the group,” he said.
10:10am: Shell begins round of job cuts - Bloomberg
Shell PLC (LSE:SHEL, NYSE:SHEL) has started to make hundreds of job cuts, with positions in its low-carbon solutions unit among the first to be eliminated, Bloomberg reported, citing people familiar with the matter.
Staff were told details about the cuts this week, after the broader plan for headcount reductions was announced internally in December, the people said.
Workers in the corporate affairs division have also been notified and other departments including projects and technology are to follow, the report said.
9:44am: Flutter boost Entain, Sage slip as in-line trading fails to enthuse
Some others moves to update on.
Entain PLC (LSE:ENT) is up 5.7% on a read across from Flutter’s trading update while heading the fallers is discount retailer B&M European Value Retail SA (LSE:BME), down 4.2%, as the stock went ex-dividend.
Meanwhile, BAE Systems is down 0.9%, as Exane BNP cut the firm to 'underperform' from 'neutral'.
Sage is also down, 2.6%, despite a strong looking trading statement.
The accountancy software provider grew total revenue by 10% to £573 million.
Regionally, revenue in North America increased by 13% to £259 million, with a good performance from Sage Intacct together with continuing growth in Sage 50 cloud and Sage 200 cloud.
In the UKIA region, revenue grew by 8% to £162 million, driven by further success in cloud native solutions.
Analysts at Shore Capital said said it was a “reassuring” update, “albeit not one that is likely to crystallise earnings upgrades or greater enthusiasm in the stock.”
9:15am: Royal Mail owner starting to "deliver the goods"
Royal Mail owner, International Distribution Services PLC is “starting to deliver the goods once more,” according to Matt Britzman, equity analyst, Hargreaves Lansdown:
“That’s welcome news for investors in its parent company, IDS, but we’re far from calling this turnaround a job well done,” he said.
Royal Mail is fundamentally stuck in the past, and to some extent, that’s out of its own hands, he explained.
As the UK’s designated postal service, it must deliver letters six days a week which given the letter business is in structural decline, puts Royal Mail in a “tricky spot” when competitors are free to focus investment on more lucrative areas.
Britzman said Royal Mail must drive top-line growth if it wants to return to profit, and a large part of that needs to come from winning back customers lost while industrial actions wreaked havoc.
“Early signs are positive, but there’s a long way to go.”
Shares have nudged higher, up 0.7%, at 247.70p.
8:48am: Flutter’s US shortfall not a concern; US listing to drive share price
The other big mover today is Paddy Power owner, Flutter Entertainment, which is up nearly 10%, despite reporting US trading had been hit by “customer friendly” sporting results, particularly in the NFL.
But Peel Hunt said given the strength of staking growth in the US, “we are not concerned about the health of the US business.”
It expects Flutter’s additional listing in New York (expected 29 January) to be a significant driver of the share price as US domestic investors invest in a local market leader.
It kept a buy rating on Flutter and 16,000 target price.
8:34am: Investors clock out of Watches of Switzerland
Watches of Switzerland is the big mover, with shares now down 28%, after its profit warning.
It now expects financial 2024 revenue of £1.53-£1.55 billion, down from previous guidance of £1.65-1.7 billion.
Brian Duffy, chief executive said: "The festive period was particularly volatile this year for the luxury sector, with consumers allocating spend to other categories such as fashion, beauty, hospitality and travel."
"Whilst we are disappointed with this trend, we are encouraged by our market share gains in both the US and UK."
Analysts at Peel Hunt noted "management had been flagging decent growth in each of its territories relative to 1H, but that has not happened."
"The US saw some progress, but the UK was troubled, with underlying demand weak and more promotions than usual."
The broker has cut forecasts from £163 million to £130 million for this year and from £182 million to £150 million for next year.
It sticks with a "hold" recommendation, but believe "the shares are really only of any interest to long-term investors."
8:15am: Stocks flat, Watches of Switzerland crashes
The FTSE 100 stablised after a bruising day on Wednesday as investors continue to adjust to the likelihood interest rates will be pushed back further into 2024.
At 8:16am, London’s blue-chip index was little changed at 7,445.36 while the FTSE 250 was up 35.07 points, 0.2%, at 18,899.44.
ING said: “Yesterday's release of above-expected UK inflation has demonstrated how financial markets can react to a sticky inflation scenario.”
“Understandably it saw investors rein in their expectations of Bank of England easing.”
In company news, Watches of Switzerland plunged 25% after cutting its revenue guidance for the full year and saying it expects “challenging conditions to remain” for the rest of the year.
Chief Executive Brian Duffy said: “The festive period was particularly volatile this year for the luxury sector, with consumers allocating spend to other categories such as fashion, beauty, hospitality and travel.”
Elsewhere, Flutter Entertainment jumped nearly 10% after its trading update and news that its US listing is on track for the end of January.
The Paddy Power owner said US results were hit by customer friendly NFL results but that the underlying momentum in the business remains very strong heading into 2024.
7:55am: Royal Mail reports best Christmas performance for 4 years
Another stock to watch is Royal Mail owner, International Distribution Services PLC, which said it achieved its best Christmas operational performance for four years.
The group saw a marked improvement in performance in the three months to December 31 it said.
Royal Mail said it met its customer commitment to deliver items posted by the last recommended posting dates in time for Christmas.
Group revenues were up by 9.8% on the previous year, with Royal Mail winning back customers following last year's industrial action.
IDS said for the first nine months of the year group revenue has risen by 3.8% with greater volumes in both Royal Mail and GLS.
But this has however been offset by increased costs, including pay increases and inflationary pressures.
It expects a second-half operating profit, on an adjusted basis, to broadly offset the £169 million operating loss in the first half, so guidance for the full year remains at about breakeven excluding voluntary redundancy costs.
7:46am: Flutter's US arm hit by unfavourable NFL results
Flutter Entertainment PLC (LSE:FLTR) has updated investors on trading and reported fourth quarter revenue in the US was impacted by customer friendly sports results of $343 million, partially mitigated by expected gross revenue margin being better than anticipated.
Overall, fourth quarter US net revenue of £1.14 billion was around £147 million below previous guidance.
Excluding the US, the group, which owns Betfair and Paddy Power, said performance was in line with previous guidance.
Peter Jackson, Chief Executive, said: “While sports results were very customer friendly, particularly on the NFL in November, the underlying momentum in the business remains very strong heading into 2024.”
Flutter said the US listing was on track for January 29.
7:34am: Sainsbury's plans phased withdrawal from banking
Plenty of company updtaes flooding in to digest and we start with news that Sainsbury’s is following industry rival Tesco and exploring options for its financial services business, which overtime will see a “phased withdrawal” from its core banking business.
The decision follows a review of its Financial Services division and comes ahead of the food retailer’s strategy update on February 7.
Chief Executive Simon Roberts said: “"We have been clear since we launched our Food First strategy in 2020 that we would concentrate our efforts on our core retail businesses and today's announcement reflects that strategic focus.”
“It's business as usual for now at Sainsbury's Bank and there will be no immediate changes to products and services as a result of today's announcement.”
7:00am: London expected to stabilise after heavy falls
The FTSE 100 is expected open little changed, after a gllomy session for global equities on Wednesday.
Spread betting companies are calling London's blue-chip index unchanged after closing down 112.05 points, 1.5%, at 7,446.29 on Wednesday.
Wednesday's falls followed weak economic data from China plus the prospect of interest rate cuts being pushed back later into 2024 after strong inflation figures in the UK, robust retail sales data in the US and comments from ECB President Christine Lagarde who hinted at summer rate reductions.
In the US on Wednesday, markets closed lower as hopes for a rate cut in March fell closer to a 50/50 bet.
James Knightley at ING said: "The jobs market is tight, inflation is above target, consumer spending is holding up and recent Fed commentary suggests they are in no hurry to loosen policy. As such we continue to favour May as the start point for interest rate cuts rather than March as the market currently favours."
Back in London, and the early focus will be updates from betting firm Flutter, fast fashion outfit boohoo, electricals retailer Currys and iconic boot maker Dr Martens.
In the UK, investors will be keeping an eye out for comments from Chancellor Jeremy Hunt, as he visits Davos in Switzerland.