- FTSE 100 closes up 26 points at 7,488
- Compass buys CH&CO for £475 million
- S4 Capital reports in line fourth quarter trading
4:40pm: FTSE 100 ends near best levels for he day
The FTSE 100 has closed near its best levels for the day, boosted by further gains in the US.
At the close, London's blue-chip index was up 25.78 points, 0.4%, at 7,487.71.
Chris Beauchamp, chief market analyst at online trading platform IG said: "Last week’s momentum has carried over into Monday’s session, and investors appear unperturbed by the prospect of an avalanche of earnings heading their way."
"Stocks have once again defied the doubters by moving higher, after their brief outbreak of worry about the path of interest rates in the US and elsewhere."
"A bigger test for the rally comes from tomorrow, thanks to presence of key central bank meetings in Japan and the eurozone, and the full-on pace of earnings season in the next two weeks.”
3:53pm: Barclays cuts Sage, lowers price target
Accountancy software group Sage PLC has been downgraded to Barclays to 'underweight' from 'equal-weight.'
The bank reckons things are currently "as good as it gets" for the stock and has lowered its price target to 985p from 1,050p.
Barclays believes Sage's annual recurring revenue growth, a key performance measure, has already hit its peak.
"Over the past five years, Sage has increased organic growth from 7% to the all-important 10% level. By far the biggest contributor to annual recurring revenue growth is new customer acquisition," analysts said.
Pressure on small businesses could also hurt Sage's top-line progress, Barclays warned.
"With SMB failures on the rise in all of Sage's major territories, we see downside risk to NRR. Overall, we see ARR growth being maintained at 11.5% only as a best case outcome, with a slowdown to 7% in [financial 2025] our base case assumption," Barclays analysts explained.
The investment bank also believes Sage's valuation is already lofty, keeping a lid on further share price progress.
"As the muted reaction to last week's Q1 update suggests, further fundamental upside appears to be required to move the shares on further from here.”
“While we see the attraction of a quality growth company in a lacking UK market, we see better value elsewhere in our European coverage,” the bank added.
3:16pm: Energy bills could fall 16% in April
UK households could see their energy bills fall nearly 16% by spring as prices continue to ease from crisis levels, bringing relief to homes with stretched budgets.
Regulator Ofgem’s annualized price cap is likely to be £1,620 by April, a £308 decrease from January bills of around £1,928, with prices expected to continue to fall throughout the year, according to estimates from consultancy Cornwall Insight.
However, the consultancy ruled out any imminent fall in prices to pre-crisis levels.
“Though recent trends hint at possible stabilization, a full return to pre-crisis energy bills isn’t on the horizon,” Craig Lowrey, principal consultant at Cornwall Insight said.
“Shifts in where and how Europe sources its gas and power, alongside continued market jitters over geopolitical events, mean we are likely still facing costs hundreds of pounds above historical averages for a while.”
2:48pm: S&P 500 hits new all-time high
The S&P 500 hit a new all-time high as US equities continued their recent strong run.
Shortly after the opening bell, the Dow Jones Industrial Average was up 162.10 points, 0.4%, at 38,025.90, the S&P 500 was up 20.92 points, 0.4%, at 4,860.73 and the Nasdaq Composite was up 72.91 points, 0.5%, at 15,383.88.
Equities have shaken off a patch start to the year amid conviction that the Federal Reserve will soon cut interest rates and bets that the artificial-intelligence boom is set to continue.
Meanwhile, the earnings season picks up, with Netflix Inc (NASDAQ:NFLX) (Netflix Inc (NASDAQ:NFLX))., Tesla Inc (NASDAQ:TSLA) (Tesla Inc (NASDAQ:TSLA)). and Intel Corp (NASDAQ:INTC, ETR:INL) (Intel Corp (NASDAQ:INTC, ETR:INL), Intel Corp (NASDAQ:INTC, ETR:INL)). among those due to release results this week.
In company news, fuel distributor Sunoco has agreed to buy pipeline operator NuStar Energy in a $7.3 billion deal, including debt.
Dallas-based Sunoco, which supplies fuel to about 10,000 stations across the US, said the all-stock deal would diversify its business and increase its scale.
Shares in San Antonio headquartered NuStar jumped 14% while Sunoco’s fell 7.7%.
2:14pm: Bodycote buyback should be taken well
Bodycote is the top performer in the FTSE 250, up 4.9%, after announcing a £60 million share buyback.
The returns to shareholders came after the firm said it had agreed with Stack Metallurgical Group not to complete the acquisition of the business due to a failure to satisfy all closing conditions to the agreement.
Bodycote said it was making the buyback in light of the lower than anticipated acquisition spend.
Analysts at Jefferies said: “We are relaxed about this morning's update, and while the decision to not complete the SMG acquisition throws up a few questions and calculating the impact on profits/earnings is not straightforward, there is nothing untoward here, and the decision to undertake a £60m buyback is a sensible one that should be taken well.”
“The group is in good shape operationally and financially (the Balance Sheet is in very good nick).”
1.32pm: Here’s a recap of the top risers and fallers on the market today
More Acquisitions PLC (LSE:TMOR), the reverse takeover company, flew 50% higher after its newly appointed chairman and a new non-executive director increased their stakes in the group, at almost a 100% premium.
Brickability Group PLC (AIM:BRCK) climbed nearly 7% after announcing further expansion into the cladding remediation market through the takeover of Topek Southern Ltd.
eEnergy plc traded 6% higher on Monday after confirming the disposal of its energy management division.
Shares in Smartspace Software PLC (AIM:SMRT) climbed 24% after the company revealed a possible takeover offer from workplace solutions firm Sign In Solutions Inc.
Shares in Benchmark Holdings PLC (AIM:BMK) rose 12% after the aquaculture genetics specialist announced a strategic review and formal sale process.
Keras Resources PLC (AIM:KRS) shares jumped 13% as the miner announced a joint venture with Phosul LLC through which its sales will be boosted.
United Oil & Gas PLC (AIM:UOG) shares fell over 40% after being served a default notice for $3.8 million.
Shares in Trifast (LSE:TRI) plc dropped 14% within the first hour of trading after the company sounded the earnings alarm.
1:04pm: Goldman likes UK blue-chips, mid and small caps
Goldman Sachs thinks Britain’s stock market will outperform US and EU benchmarks this year and is bullish on small and mid-cap stocks too.
The US investment bank expects British equities will deliver 9% returns over 2024, beating projected returns from the S&P 500, leading eurozone markets and Japanese stocks.
Over the next five years the Wall Street bank expects average annual returns of 6% from UK stocks, which is among the highest returns of all asset classes looked at.
Goldman explained the FTSE 100 trades on a substantial discount to its historical valuation and with heightened geo-political risk, looks “attractive with its heavy weights in oil and large-cap defensives.”
“Finally, buybacks have increased sharply among the larger cap stocks, and we continue to see this as a major support, especially given that the combined yield (dividend and buyback) on UK equities is now above 6%,” it noted.
It is also upbeat on UK small and mid cap indices despite recent strength.
“We think the economic backdrop remains reasonably supportive for UK small/mid cap stocks,” Goldman said.
It highlighted the strong labour market, real wage growth, improved consumer confidence while it expects GBP/USD to rise over the next 12 months to 1.35 (from 1.27), acting as a drag on the larger-cap, more international, names.
12:35pm: Hunt to stay as Chancellor, says PM
Jeremy Hunt will still be chancellor at the time of the general election expected later this year, UK Prime Minister Rishi Sunak has said.
The prime minister said Hunt was doing a "fantastic job" at managing the economy after mounting speculation ahead of the spring Budget about how long he will last in the post.
Asked on a visit to Buckinghamshire whether Hunt would remain in his position at the time of the election, Sunak told broadcasters: "Yes, and I've said that multiple times, it's not new information."
There had been speculation that Sunak wanted to give Claire Coutinho,
secretary of state for energy security and net zero the job.
12:08pm: US stocks expected to open higher
Heading across to the US, and it looks like another posiitve start on Monday as the S&P 500 looks to establish a new record high.
In pre-market trading, futures for the Dow Jones Industrial Average were up 0.2%, while those for the S&P 500 climbed 0.3% and contracts for the Nasdaq 100 futures advanced 0.6%.
Stocks roared back to life on Friday after an up-and-down start to the year.
The S&P 500 broke both its intraday and closing record from January 2022, ending the day at 4,839.81.
Joshua Mahony at Scope Markets noted this week sees the first of the so-called ‘magnificent seven’ stocks report, with Tesla earnings due after the bell on Wednesday.
However, traders have been looking for clues elsewhere over the potential trajectory for AI stocks, with signs of strong demand at Supermicro computer (Cloud) and Taiwan Semiconductor (Chips) helping to lift expectations of how the big tech stocks will perform.
Later this week, GDP figures will be released along with PCE data, including the Federal reserve’s preferred inflation gauge.
Boeing shares were down more than 2% in the premarket after the Federal Aviation Administration advised flight carriers using the 737-900ER aircraft go through an inspection.
This comes after a door plug blew out on a 737 Max 9 midflight earlier this month.
11:38am: NatWest gains as UK government cuts stake
Shares in NatWest roe 2.0% after it emerged the Government has sold another 1% of its stake in the high street lender.
The move from 36.94% to 35.94% was announced in a stock exchange filing.
The banking giant was bailed out following the global financial crisis, but the Treasury has been gradually cutting down its stake.
In March 2022, its stake in the lender fell below the 50% threshold for the first time since 2008.
NatWest has courted controversy in the past 12 months after the Nigel Fraage de-banking fiasco which claimed the head of then boss, Alison Rose.
In last year’s Autumn Statement, the Chancellor Jeremy Hunt revealed plans to sell more shares of NatWest in a retail sale, allowing members of the general public to take part for the first time.
Hunt said the government was "exploring" a possible retail share offer for NatWest over the next 12 months, though this would be subject to market conditions and "value for money".
11:29am: UK economic prospects should improve in 2024 - EY ITEM Club
The UK’s prolonged period of economic stagnation should begin to fade this year as falling inflation, potential interest rate cuts and tax reductions create momentum for growth in 2024 and 2025, according to the EY ITEM Club’s new Winter Forecast.
The economic forecasts expects the UK economy to grow 0.9% in 2024, up from the 0.7% growth projected in October’s Autumn Forecast.
GDP growth expectations for 2025 have also been upgraded from 1.7% to 1.8%, although 2023 growth predictions have been downgraded from 0.6% to 0.3%.
Inflation is expected to fall faster than previously thought, reaching the Bank of England’s 2% target by May and averaging 2.4% in 2024
Bank Rate is also expected to fall significantly in 2024, with 125 basis points of rate cuts predicted to be made this year.
Hywel Ball, EY UK Chair, said: “While challenges remain, the forecast suggests that the UK’s period of economic stagnation is slowly coming to an end.”
“Households and businesses are still facing a tough outlook in 2024, due in part to the lagged effect of interest rate rises, but slowing inflation and anticipated Bank Rate cuts should help build economic momentum as the year progresses.”
Along with expectations of falling mortgage rates, the EY ITEM Club Winter Forecast provides further positive predictions for homeowners.
House prices are expected to broadly flatline in 2024, in contrast to the 4% fall in prices predicted in the Autumn Forecast, with low unemployment levels and healthy household finances expected to support demand and limit the volumes of forced sales.
Consumer spending growth is now anticipated to rise to 0.9% in 2024, up from 0.7% projected in the Autumn Forecast, driven by nominal household incomes comfortably outpacing inflation, while lower energy prices ease cost of living pressures.
10:48am: Betting firms win on news of Kindred takeover
Entain PLC (LSE:ENT), the owner of Coral and Ladbrokes, sits top of the FTSE 100 risers, while 888 Holdings, has also jumped, as news of a big deal in the gambling sector adds to hopes of further M&A activity.
French gambling giant La Française des Jeux is buying online betting firm Kindred for around $2.67 billion.
FDJ said it hoped to “create a European gaming champion” and become Europe's second-largest operator, with the takeover.
The offer for Kindred, a Swedish-listed firm that operates the brands Unibet, 32Red and Bingo.com, is being made at around $12.4 per share in cash.
Shares in Entain are up 3.8%, while 888 Holdings, which owns William Hill is up 3.7%.
Paddy Power owner, Flutter Entertainment, is up a more modest 0.7%.
10:04am: Royal Mail owner, IDS, up ahead of letter delivery ruling
Royal Mail owner, International Distribution Services PLC, is another share on the rise, up 1.8%.
This week, Ofcom is set to present proposals for the Universal Postal Service with key proposals possibly to include ending Saturday letter deliveries.
Broker Peel Hunt reckons any watering down of the timeframe for mail deliveries is likely to improve sentiment towards the stock.
But whilst this could achieve substantial cost savings, it is likely to be replaced with further investment in parcels, building a national seven day delivery service to become more competitive with alternative suppliers such as DPD and Evri.
It also thinks getting the vote through Parliament, “which may be difficult to schedule given other government priorities,” and is far from “guaranteed to be carried even if a vote takes place.”
Sky News said the consultation paper will be released on Wednesday and include reforms such as modifying first and second-class delivery targets with a move to a five-day structure also understood to be among the options that will be presented in the Ofcom paper.
9:44am: Segro boosted by Citi upgrade to ‘buy’
Segro PLC is one of the top performing blue-chips, up 2.7%, after Citi upgraded to ‘buy’ from ‘neutral.’
The bank estimates that, as rates decline, the risk to previous estimates of deep recession rent declines reverses and it now predicts growth.
“Combined with lower debt and bond yield forecasts, our estimates of a c.20% decline in asset value reverses to c.15% growth, significantly increasing our forward NAV estimates,” Citi said.
Downside risk in the real estate sector has eased but has not been eliminated so Citi said the upgrade is “a cautious way to increase investment risk in the real estate sector, while offering downside protection should conditions deteriorate back towards our deeper recession view.”
9:10am: Trifast (LSE:TRI) forecasts slashed after warning
Not such a good morning for investors in Trifast (LSE:TRI) PLC, where shares have tumbled 14%.
The Uckfield, England-based nuts and bolts outfit said performance in December was impacted by significantly lower than forecasted volumes in both its Asia operations and global distribution sales channel.
As a result, it now expects results for the year ending March 31 to be significantly below its previous expectations, with revised revenue at c.£230 million and adjusted Ebit margin percentage of c.5%.
Demand conditions and excess customer inventory levels have pushed recovery further into 2024 and Trifast (LSE:TRI) now expects challenging conditions to persist through to the end of the financial year.
Peel Hunt has reduced revenue forecasts for 2024/25/26 from £255/265/276 million to £230/240/252 million.
Adjusted pretax profit numbers reduce by 45/30/28% to £6/11/15 million for 2024/25/26.
8:46am: City takes comfort trading at S4 Capital hasn’t worsened
S4 Capital has leapt around 5% in early exchanges after confirming trading was in-line with expectations given in November.
Analysts at Peel Hunt said it was “comforting” that trading has not worsened at S4.
“Expectations are low for [financial 2024], and our forecasts assume close to no growth for the year.”
“Acceleration in client spend combined with S4’s cost control could materially lift profits; however, we have yet to see signs of a turn, especially in tech client spend, thus we remain at hold for now,” the broker added.
While S4 expects to see an improvement in Content, and Data & Digital Media to perform at a similar level, the broker noted that “disappointingly,” the company has warned that Technology Services might face a more challenging year.
8:15am: Stocks bounce after US rally
The FTSE 100 has opened higher after strong US gains on Friday, which saw the S&P 500 hit an all-time high.
At 8:15am, London’s blue-chip index was up 29.10 points, 0.4%, at 7,491.03 and the FTSE 250 was up 116.09 points, 0.6%, at 18,987.50.
Deutsche Bank’s Jim Reid noted risk was “briefly shaken” by central bankers pushing back on the market in the first half of last week as rate expectations and yields moved higher.
“Although yields continued to move higher in the second half, risk fought back and we saw a decoupling between rates and equities that is potentially the biggest test of the very tight relationship the two have seen since August,” he pointed out.
In London, S4 Capital PLC (LSE:SFOR) rallied 5.0% after reporting trading in the fourth quarter was in line with reduced expectations.
Given the advertising agency, run by Sir Martin Sorrell, warned several times in 2023 on earnings, this may come as a relief.
Compass PLC is flat after it splashed out £475 million to CH&CO, a provider of contract and hospitality services in the UK and Ireland.
Elsewhere, Segro PLC rose 2.8% after Citi upgraded to ‘buy’ from ‘neutral’ but Sage Group PLC dipped 1.8% after Barclays downgraded to ‘underweight’ from ‘equal weight’.
7:55am: Compass serves up £475 million CH&CO deal
Compass Group PLC (LSE:CPG) has bought CH&CO, a provider of premium contract and hospitality services in the UK and Ireland for an initial enterprise value of £475 million.
CH&CO currently generates annual revenues of c. £450 million and operates across a range of sectors, including Business & Industry, Sports & Leisure, Education, and Healthcare.
CH&CO’s diverse client base and broad geographic spread would complement Compass Group's existing footprint in the UK and Ireland, the FTSE 100 firm said in a statement.
Chief Executive Dominic Blakemore said: “Our strong cash generation and balance sheet give us the flexibility to invest in organic growth and to acquire high quality businesses with exceptional management teams, enabling us to further accelerate growth and enhance shareholder returns."
On top of the initial enterprise value, an additional earn out over the two years following closing, dependent on the profit growth of the business, could be paid.
7:41am: Begbies Traynor (AIM:BEG) reports shap rise in businesses in trouble
Begbies Traynor (AIM:BEG) has reported a sharp jump in businesses in ‘critical’ financial distress in the final quarter of last year.
Its latest Red Flag Alert report the accountancy firm said it has found that there were more than 47,000 businesses near collapse in the UK at the start of 2024.
That’s a 25% jump on the 37,722 recorded at the end of the third quarter, and the second quarter in a row in which critical financial distress grew by around a quarter.
Every sector was affected, the consultancy’s report showed on Monday, driven by construction, real estate and support services in particular. Of 22 sectors, 18 saw at least double-digit growth.
7:30am: S4 Capital reports fourth quarter trading in line, client caution to persist
S4 Capital PLC (LSE:SFOR) on Monday said trading in the fourth quarter of 2023 was in line with the reduced expectations outlined in November.
Sir Martin Sorrell’s advertising agency endured a difficult year in 2023, forcing it to lower guidance more than once.
Executive Chair Sorrell said that trading was hit by “volatile macro conditions and, consequently, cautious spending from clients, particularly those in the technology sector and from smaller project-based assignments. “
He doesn’t expect 2024 to show macro-economic improvement, and client caution on marketing spend “will likely persist,” although not at last year's level,
“Initial indications are for an improvement in performance in the Content practice, reflecting cost reductions, broadly similar performance in Data&Digital Media to last year and a more challenging outlook for Technology Services,” he added.
It anticipates a like-for-like net revenue decline of around 4% and an operational Ebitda margin in the range of 10-11% for the full year 2023.
S4 Capital said operational Ebitda margin performance improved in the second half of the year as a result of significant cost reductions.
Net debt is expected to be towards the lower end of the guided range of £180-220 million, with circa £10 million of merger payments delayed to 2024.
7:00am: Bright start expected after strong US gains
The FTSE 100 is expected to start the week on the front foot after strong gains on Wall Street on Friday.
Spread betting companies are calling London’s blue-chip index up by around 28 points after closing up 2.84 points to 7,461.93 on Friday.
In the US on Friday, stocks jumped, with the Dow Jones Industrial Average up 1.1%, the S&P 500 up 1.2%, reaching an all-time high, and the Nasdaq Composite up 1.7%.
"The current divergence between US and European markets is probably down to the belief that the US economy is in much better shape than its European counterparts, a belief that is likely to be reinforced further this week by the latest US Q4 GDP numbers, ahead of next week’s Fed meeting," said CMC Markets UK chief market analyst Michael Hewson.
This week sees the earnings season step up in the US with Tesla, Intel, Netflix and GE among those reporting earnings.
In Asia, China's central bank left its key interest rates unchanged on Monday, as expected by the market.
Back in London, advertising agency, S4 Capital, will update the market on trading after its recent struggles.