- FTSE 100 closes 3 points higher
- Retail sales plunge 3.2% in December
- Wincanton snapped up in £765 million deal
4:45pm: Quiet finish in the City
At the close, London's main index finished right around where it had started at nearly 7,462 points.
3:48pm: US consumer sentiment soars as inflation expectations drop
Some upbeat data from the US as the economy continues to hold up across the pond.
Sentiment among US consumers soared in January, boosted by their year-ahead inflation expectations dipping below 3% for the first time since 2020.
Consumer sentiment in January to its highest level since July 2021, according to the University of Michigan, whose consumer sentiment index rose to 78.8 from 69.7 in December.
Year-ahead inflation expectations fell to 2.9%, the lowest since December 2020 and within the 2.3 to 3% range observed in the two years before the Covid-19 pandemic.
“Consumer views were supported by confidence that inflation has turned a corner and strengthening income expectations,” said the university’s consumer surveys director Joanne Hsu.
3:24pm: Goldman sees disinflation process continuing despite this week's surprise
Despite this week’s stronger-than-expected UK inflation figures Goldman Sachs sees a number of reasons to expect the disinflation process to continue rapidly in coming months.
First, wage growth is now cooling clearly, with the year-over-year increase in regular private sector pay down to 6.5% in November.
Second, the labour market continues to rebalance, and third energy prices have declined significantly more than anticipated.
Throw in that as inflation has receded, the UK’s growth prospects for 2024 have improved and Goldman maintain its forecast for the first Bank Rate reduction in May, followed by 25bp meeting-by-meeting cuts until 3% in May 2025.
Source: Goldman Sachs Global Investment Research, Haver Analytics
“While it is possible that the MPC waits until June, we believe that inflation will have slowed sufficiently and that BoE officials will have enough information on the wage settlements to lower Bank Rate in May,” the investment bank said.
2:47pm: London's rally fizzles out despite bright US open
It's been a bright start on Wall Street but the rally in London has run out of steam.
Shortly, after the opening bell, the Dow Jones Industrial Average was up 25.08 points, 0.1%, at 37,493.69, the S&P 500 was up 7.17 points, 0.2%, at 4,788.11 and the Nasdaq Composite was up 58.35 points, 0.4%, at 15,114.00.
Matthew Martin at Oxford Economics said the odds of a recession have declined over the past several months because of a strong labour market, a deceleration in inflation, and looser financial conditions on the back of the impending Fed pivot to rate cuts.
Back in London, the FTSE 100 is now up only 4 points at 7,464.
2:13pm: Ford cuts production of electric truck as EV demand slows
News from the US that Ford is cutting production of its F-150 Lightning electric pick-up truck as it predicts slower EV sales growth this year.
The Michigan carmaker wants to bring the vehicle’s production in line with customer demand, it said on Friday.
“Ford expects continued growth in global EV sales in 2024, though less than anticipated.”
“We see a bright future for electric vehicle for specific consumers,” said chief executive Jim Farley.
"We are taking advantage of our manufacturing flexibility to offer customers choices while balancing our growth and profitability," he added.
But the group wants to offer consumers choices and “has capacity available to scale production of gas-powered and hybrid F-150 trucks based on customer demand”.
1:30pm: Here are some of today’s risers and fallers
Big Technologies PLC (AIM:BIG) tumbled 22% on Friday following a warning revenues from a prisoner tagging contact with a major customer in Colombia were coming to an end.
Costs are also rising to fund an expansion into the US, the statement said, with margins to be affected until sales pick up to reflect the investment.
Deltic Energy shares were lifted 3.4% after the firm’s 30%-owned Pensacola project was confirmed as a “regionally significant” discovery in a competent persons report.
“We are pleased with the potential valuation that (report author) RPS ascribed to the discovery” of up to 21.8 million barrels of oil equivalent, chief executive Graham Swindells commented, “particularly within the context of our current share price”.
MP Evans Group PLC (AIM:MPE), the sustainable palm oil group, said it made "another stride forward" in 2023 meanwhile, with crop and production both increasing.
Shares in the firm climbed by 14p to 744p on the news, after it reported a 7% rise in the total crop of fresh fruit bunches, reaching 1.62 million tonnes, compared to 1.51 million tonnes in 2022.
1:03pm: Labour pledges to work with tech firms seeking London listing
A Labour government will work with technology firms that want to list their shares in London, the party’s business spokesman said, as the UK’s main opposition party looks to broaden its appeal to the business community.
Speaking at the World Economic Forum in Davos, Jonathan Reynolds said he had spoken to several technology companies wishing to list in the UK.
He said he was open to introducing incentives, citing measures used in France by President Emmanuel Macron, and pledged to maintain a positive dialog with business.
12:32pm: Tata Steel to axe 2,800 jobs
India’s Tata Steel will close the last two blast furnaces at the UK’s largest steelworks in Wales as part of a sweeping restructuring, cutting up to 2,800 jobs.
The decision is a blow to workforce at Tata’s main site at Port Talbot in south Wales, which is expected to bear the brunt of the job losses.
Tata employs around 8,000 people across the UK.
The group, which has owned the UK operations since 2007, said the furnaces would close by the end of this year as part of a move to greener forms of steelmaking.
Around 2,500 jobs could be lost within the next 18 months, it said on Friday.
12:03pm: Tech-led rally in the US set to continue
US stocks are expected to open higher as Thursday's tech-led rally continues.
In pre-market trading, futures for the Dow Jones Industrial Average were up 0.3%, while those for the S&P 500 climbed 0.5% and contracts for the Nasdaq 100 futures advanced 0.8%.
Joshua Mahony at Scope Markets said the positive sentiment feeds off the gains seen throughout the US tech sector yesterday, with Taiwan Semiconductor Manufacturing citing a strong surge in demand for AI related chips.
“With all the concern around whether Nvidia has overrun on unrealistic expectations, the continued growth in demand does serve to highlight the fact that we actually have no idea how big this market could become as AI grows in importance,” he said.
Sentiment was also given a lift after Congress passed a bill to avert a partial government shutdown.
Stocks to watch include iRobot, down about 40% in pre-market trading, after The Wall Street Journal reported that the European Commission would likely reject Amazon’s bid to acquire the Roomba manufacturer.
10:48am: Retail sales in less than festive dip
The big drop in retail sales is the talk of the town - well the City - at least.
Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown noted the "significantly lower than expected" figure was the largest monthly fall since January 2021 and a clear signal of weakening sentiment.
She explained there is "some distortion from November’s Black Friday, but the overall picture is one of consumer caution over the festive trading season."
It seems as though trading was pulled forwards as shoppers sought bargains earlier, then held back in December, she said.
Creaking consumer behaviour showed up in weakness from sports equipment, games, toys, watches and jewellery, which has landed a particular blow for department store sales, she noted.
Questions will now turn to how prolonged and protracted this cut to discretionary spending will be, she suggested, adding "there’s every chance that households will continue to look for ways to weather the macro-economic storm."
9:57am: Persimmon gets 'double-upgrade' from Morgan Stanley (NYSE:MS)
Shares in Persimmon PLC (LSE:PSN) jumped 1.7% after Morgan Stanley (NYSE:MS) double-upgraded the housebuilder to ‘overweight ‘ from ‘underweight.’
The investment bank has also raised price targets for Taylor Wimpey, Berkeley Group Holdings PLC (LSE:BKG) and Barratt Developments PLC (LSE:BDEV).
The moves came in a note on the housebuilding sector in which the bank said the “bear case (disorderly housing market correction) is no longer part of the debate.”
Morgan Stanley (NYSE:MS) said its “upside scenarios look to frame a plausible near-term upside surprise outcome.”
But they “do not reflect a Blue Sky scenario where volumes quickly recover to pre Covid levels.”
“Persimmon's niche is affordable homes on a UK-wide basis, and our underweight thesis was partly based on rising affordability risks,” the bank said.
But as mortgage rates fall, and affordability improves, “we think the business presents the best leverage to a volume recovery of the stocks under our coverage.”
“Persimmon has most to play for under a near-term upside scenario.”
“The stock benefits from highest operating leverage (volumes down most in 2023 YoY of the 4 stocks under coverage) and largest potential gross margin recovery based on the gross margin embedded in the land bank.”
“Further, the stock is overexposed to the first time buyer, hard hit in 2023,” it pointed out.
Morgan Stanley (NYSE:MS) raised its price target for Persimmon to 1,685p from 1,131p, for Taylor Wimpey to 145p from 115p, Berkeley to 4,516p from 3,920p and for Barratt to 576p from 483p.
9:47am: DFS jumps on relief earnings forecasts remain intact
Shares in DFS Furniture are up around 2.% after today’s trading update with some relief in the air that there was no profit warning.
Analysts at Peel Hunt said: “We have little doubt that the shares were discounting a downgrade today, so for numbers to be intact is a nice positive surprise.“
The broker pointed out the first half was a difficult period for everyone in the sub-sector, but DFS Furniture won market share and, crucially, found cost savings, so the company held profit forecasts.
“This could be one of the most sustained downturns in the industry ever, but DFS should emerge strongest, and we see great value in that,” in Peel Hunt’s opinion.
“The PE is very low, and can build from here, and when the market returns, the operational gearing here could drive a much higher earnings profile,” the broker said.
“There's lots to like, in our view. Buy,” it concluded.
9:16am: UK prospects brighter despite retail sales slide
ING’s developed markets economist James Smith said the fall in sales will bolster the chances of another small decline in fourth quarter UK GDP, and that would mean two quarters of negative growth – a technical recession.
But he said this would be “in name only,” noting ING thinks the UK economic outlook is starting to look brighter.
He reckons the anticipation of Bank of England rate cuts and the sharp fall in market rates that has entailed will dampen the ongoing mortgage squeeze.
The outlook for real wage growth also looks solid, inflation is likely to fall below 2% in April and consumer confidence, though still below pre-Covid levels, recovered ground in 2023.
“Our base case is that we get modest but positive quarterly GDP growth through 2024,” Smith said.
“For the Bank of England, remember that policymakers are much more heavily focused on services inflation and wage growth as a driver of policy,” Smith added.
Smith thinks the first rate cut will come in August, “though we’d bring that forward if spring tax cuts are relatively modest and/or the inflation numbers undershoot our expectations over the next couple of months.”
8:48am: FTSE 100 continues bright start
The FTSE 100 remains in rude health on Friday, now up 44 points, nudging above the 7,500 mark.
There are only two fallers with Sage, after yesterday’s trading update, and M&S, after the weak retail sales figures in the red.
Legal & General is up 1.6% and Aviva is up 1.3% after positive comments from JPMorgan.
The investment bank rates both life insurers at ‘overweight’ and has raised its price target for L&G to 305p from 295p, and for Aviva to 575p from 545p.
Persimmon is up 2.2% also benefiting from positive broker comments from Morgan Stanley (NYSE:MS).
Over to the FTSE 250, and 4imprint is the big mover, up 7.3%.
It expects to beat expectations for pretax profit and revenue in 2023 after a strong financial performance.
The company says unaudited profit before tax in 2023 should not be less than $140 million, compared with $104 million in 2022.
8:12am: Stocks prosper despite slump in retail sales
The FTSE 100 opened sharply higher on Friday after a rally on Wall Street and as weak retail sales figures gave a boost to fading hopes of an early cut in interest rates.
At 8:12am, London's blue-chip index was up 52.88 points, 0.7%, at 7,511.97 while the FTSE 250 was up 59.37 points, 0.3%, at 19,007.41.
The plunge in retail sales, down 3.2% in December, was the biggest since January 2021 when coronavirus (COVID-19) restrictions affected sales.
Alex Kerr, assistant economist at Capital Economics said the figure was "far worse than expected," and "suggests that the Black Friday boost to retail sales proved short-lived."
Kerr said today’s release would subtract around 0.15 percentage points from real GDP growth in December, which increases the chances the economy may have ended 2023 in the mildest of mild recessions.
The pound ticked lower on the news while traders pushed bets on interest rate cuts in 2024 up slightly, now seeing 114 basis points of cuts compared with 110 at the close yesterday.
Retail stocks were little changed after the figures, with most having already updating the City on Christmas trading.
Next was up 0.2%, M&S up 0.3% and B&M European Value Retail up 0.5%.
DFS Furniture was down 0.8% after its trading update.
The sofa retailer held guidance but said demand had been weaker-than-expected.
7:50am: Wincanton snapped up in £765 million deal
Another deal hits the wires with French shipping specialist CMA CGM agreeing to buy Wincanton in a deal that values the British delivery and warehousing company’s equity at £765 million.
The board unanimously recommended shareholders accept the offer, worth 450p per share, which represents a 52% premium to last night's closing price.
Another UK mid cap - @wincantonplc - set to be taken off the public market at a large premium (+52% to closing price) - evidence continues to mount of dislocation between embedded value and public market valuations https://t.co/qaympcbdQG
— Simon French (@shjfrench) January 19, 2024
James Wroath, chief executive of Wincanton, said the deal would enable “the pursuit of both existing and new growth opportunities”.
He added: “Our work in automation and technology has been industry-leading and has allowed us to take advantage of trends towards outsourcing and eCommerce while continuing to improve service for our long-term customers.”
7:42am: Deliveroo sees earnings slightly ahead of guidance
Deliveroo PLC (LSE:ROO) on Friday said it expects adjusted earnings to be slightly ahead of guidance after a return to growth in its international arm.
The food delivery outfit said gross transaction value (GTV) growth of 3% was in-line with guidance of lower single digits percentage growth in constant currency.
Adjusted Ebitda is expected to be slightly above the £60-80 million guidance range.
In the fourth quarter, Deliveroo said GTV growth remained resilient, with an improving trend in orders with GTV up 4% year-on-year (YoY) constant currency.
Order growth improved slightly to flat YoY, while food price inflation moderated, but with GTV per order still up 4% YoY in constant currency.
UK and Ireland GTV growth was 7% YoY, with underlying GTV trends remaining steady.
International GTV returned to growth of 1% YoY in constant currency, with improving trends in most markets and continued strength in Italy and UAE.
Group revenue growth of 1% in constant currency lagged GTV growth due to a mix shift in marketing spend towards promotional marketing activity, as well as some targeted investment in consumer fees, to capitalise on ongoing signs of stabilisation in consumer behaviour.
7:31am: DFS backs guidance despite weak demand
Following on from the retail sales we have had an update from DFS Furniture PLC which backed guidance despite reporting that market demand has been weaker than anticipated.
The company has reduced revenue guidance, slightly, but this is expected to be offset by progress lowering operating costs.
The sofa seller said group order intake dropped 1.1% in the twenty six weeks to December 24 compared to last year, noting it had outperformed a challenging market.
DFS said overall market demand has been weaker than anticipated, down around 9% year on year in volume terms.
“We believe this performance was particularly impacted by record hot weather in September and early October when footfall and demand proved to be especially weak.”
It said demand has since recovered and profit guidance assumes market volumes are down 5% year on year through the remainder of the second half.
Gross sales were down 5.6%/£39 million year on year.
DFS expects first half underlying profit before tax and brand amortisation (PBTu) to be up slightly year on year, supported by continued progress on gross margin and cost base improvements.
Full year guidance was left unchanged at £30-35 million for PBTu.
7:16am: Retail sales plunge in December
Retail sales saw the biggest drop since January 2021 in December increasing the likelihood of a technical recession in the UK.
Figures from the Office for National Statistics showed retail sales fell 3.2% in December following a rise of 1.4% in November (revised up from an increase of 1.3%).
The figure was well below City forecasts for a decline of 0.5%.
Retail sales fell 3.2% in December 2023, down from a rise of 1.4% in November 2023.
— Office for National Statistics (ONS) (@ONS) January 19, 2024
Non-food store sales fell by 3.9% in December, following a 2.7% increase in November 2023 when earlier Black Friday sales, and wider discounting, increased sales.
Food store sales fell by 3.1%, and non-store retailing (predominantly online retailers) sales fell by 2.1% and automotive fuel sales fell by 1.9%.
7:00am: Bright start expected in London after US gains
The FTSE 100 is expected to open higher after US stocks reversed early falls and closed in the green.
Spread betting companies are calling London’s blue-chip index up around 21 points after closing up 12.80 points, 0.2%, at 7,459.09 on Thursday.
"Yesterday saw a modest stabilisation in European markets after 3-days of losses, although the performance of the FTSE 100 left a lot to be desired, lagging the rest of Europe with modest weakness in utilities and consumer staples acting as a drag on the UK blue-chip index," noted CMC Markets UK chief market analyst, Michael Hewson.
On Wall Street on Thursday, the Dow Jones Industrial Average rose 0.5%, the S&P 500 climbed 0.9% and the Nasdaq Composite jumped 1.4%.
Apple enjoyed a 3.3% bounce after Bank of America upgraded to ‘buy’.
The early focus in London will be retail sales figures for December which will give a further guide as to whether the UK economy will avoid a technical recession in the fourth quarter.
Trading statements from 4imprint, Close Brothers, Deliveroo and DFS Furniture will also be in the spotlight.