- FTSE 100 closes 105 points higher
- Consumer confidence hits 2-year high
- Fed's preferred inflation gauge eases in December
4.45pm: FTSE lifted by cooling US inflation
UK stocks concluded the week on a positive note, thanks to a cooling of inflation in the United States and favorable corporate news.
At the close, the FTSE 100 had gained 105 points, or 1.4%, to end the day at 7,635.
3:48pm: Tullow Oil sinks after downgrade
Tullow Oil is down 5% not helped by a downgrade by Stifel to ‘sell’ from ‘hold’.
The broker sees risk to production as capex is cut to preserve near-term free cash-flow ahead of debt refinance.
Its risked NAV falls from 37p to 31p as does the target price.
Stifel explained that it cut production and 2025/26 FCF forecasts following the January update after guidance came in below its forecasts.
3:10pm: Serco rises, and then falls, on bid report
Serco shares have risen and then fallen after a report said a US-based buyout firm made a takeover approach for the FTSE-250 company.
Sky News said American Industrial Partners (AIP) contacted Serco late last year about a potential bid for the company.
The two sides are said to have engaged with one another, although it was unclear whether AIP had lodged a firm takeover proposal during their discussions.
But Sky cited a person close to Serco who insisted on Friday that there were no longer any active talks between them.
Shares jumped as high as 193p before falling 4.0% to 168p.
3:03pm: Croda lifted by Lonza, Sartorius results
Croda has taken over the position of top riser in the FTSE 100, up 5.6%, on a positive read across from results from Swiss firm Lonza and Germany’s Sartorius.
Updates from those two companies suggest a recovery in the life sciences and pharmaceutical manufacturing sectors.
This would be positive for Croda’s pharma division given it has higher profitability than other parts of the group, traders are pointing out.
Lonza shares are up 12% and Sartorius are up 9.9%.
2:45pm: Dow rises as inflation cools but Intel weighs on Nasdaq
US stocks have made a mixed start after the PCE figures with the Dow up but a 11% fall in Intel weighing on the Nasdaq.
Shortly after the opening bell, the Dow Jones Industrial Average was up 0.2% at 38,124.97, the S&P 500 was up marginally at 4,895.48 and the Nasdaq Composite was down 0.2% at 15,476.19.
Back in London, and the FTSE 100 is up 118 points at 7,648.
2:20pm: Fed's preferred inflation gauge eases in December
US inflation pressure eased a touch at the end of last year, according to figures on Friday, strengthening the case for the Federal Reserve to consider cutting interest rates.
According to the Bureau of Economic Analysis, the core personal consumption expenditure grew 2.9% on-year in December, easing from November's 3.2% rise.
The core PCE reading, the Fed's preferred inflation gauge, fell to its lowest level since March 2021, and fell short of FXStreet cited consensus of 3.0%.
The core data excludes food and energy.
The annual headline PCE index grew 2.6%, in line with the rate of expansion in November, again in line with consensus.
Andrew Hunter at Capital Economics said: "The December income and spending data confirm that core PCE inflation has been running at an annualised pace in line with the Fed’s 2% target for seven months now."
"This reiterates the message that there isn’t really any “last mile” of disinflation still to achieve and that, even with real economic growth still resilient, there is plenty of scope for the Fed to start cutting interest rates soon."
1:30pm: Here are some of today's movers
Diageo PLC (LSE:DGE) climbed 4.6% on Friday after investors took heart from results from LVMH and Remy Cointreau.
LVMH’s Wines & Spirits business delivered organic sales growth in the fourth quarter after declining in the two previous quarters.
Fellow FTSE 100 constituent Ashtead Group PLC (LSE:AHT) climbed 2.1%, after the industrial equipment company confirmed its US$850 million senior bonds would pay out a principal amount of 5.8%.
Ashtead Capital Inc., a wholly-owned subsidiary of Ashtead, issued the notes, set to mature in 2034, to be priced at 99.611% of the principal amount.
Ondine Biomedical Inc (AIM:OBI, OTC:OBIMF) climbed 8% after announcing it would present new research at the SPIE Photonics West conference in San Francisco, showcasing the effectiveness of its Steriwave nasal photodisinfection system.
The study, involving 35 healthy volunteers, showed that photodisinfection significantly reduces nasal pathogens without causing long-term harm to the nasal microbiome.
And finally, shares in Coral Products PLC (AIM:CRU) tumbled 26% to 12.2p after the plastic products maker scrapped the interim dividend it had announced just over a month ago due to a deterioration in trading.
Annual revenues will now be 10% below last year’s £35.2 million with margins hit by the lower sales, said a trading update.
1:10pm: Rightmove to benefit from more conservative market expectations
Rightmove PLC (LSE:RMV) is up 1.7% after Morgan Stanley (NYSE:MS) upgraded the online property portal to ‘overweight’ from ‘equal weight.’
The investment bank sees the stock benefiting from conservative market expectations, priced in CoStar risk, as well as a housing environment turning from a headwind to neutral impact.
MS believes 2028 group targets as achievable, even if growth areas fall short of targets, creating upside risk to estimates.
It has increased its discounted cash flow price target to 600p from 530p.
“At our price target, Rightmove's valuation continues to be at the cheaper end of European vertical pureplays, given its lower FCF/share versus Hemnet and Scout24 over time,” the bank said.
Meanwhile, the FTSE 100 has brought up its century, bat raised, as it tests fresh highs for the day.
12:23pm: UK firms expect pick-up in M&A in 2024
Takeover deals will pick up in the UK this year as British companies and institutional investors are optimistic about the outlook for acquisitions, a survey by investment bank Deutsche Numis showed.
Almost nine out of 10 UK corporates see a positive picture for M&A in 2024, with larger transactions expected.
Nearly a quarter of the survey’s respondents are more likely to go after “transformational” deals, double last year’s figure, reflecting growing confidence as market conditions improve.
“Both UK corporates and investors are starting the year with a sense of positivity on M&A,” said Stuart Ord, co-head of M&A at Deutsche Numis.
“Corporates’ ambitions for larger deal sizes, higher levels of cross-border dealmaking and collaborative deal structures could start to reshape the UK M&A landscape in 2024.”
12:08pm: US markets seen lower ahead of inflation data
Stocks in New York are expected to open lower on Friday as investors await the personal consumption expenditure report which includes the Federal Reserve's preferred inflation gauge.
In pre-market trading, futures for the Dow Jones Industrial Average were down 0.1%, while those for the S&P 500 were down 0.1% and contracts for the Nasdaq 100 futures fell 0.5%.
On Thursday, US economic growth was markedly stronger than expected at the end of last year, numbers showed, suggesting the world's largest economy is still in fine fettle despite interest rates entering restrictive territory.
But while the economy grew at a faster pace than expected, inflation pressure ebbed, boosting hopes for an economic soft landing.
In the fourth-quarter, the personal consumption expenditures index rose 2.8% on-year, easing from a 3.1% rise in the third-quarter.
Monthly PCE data for December, including the Federal Reserve's preferred core measure, are released at 1330 GMT on Friday.
The next Fed decision is on Wednesday next week.
Stocks to watch include Intel, down 10% in pre-market trading after first quarter guidance disappointed the Street.
11:33am: Top-end guidance by Wickes “no mean feat” in tricky market
Wickes is up 4.5% and Russ Mould at AJ Bell reckons that “in a difficult market, to guide for profit at the top end of expectations is no mean feat.”
“One striking feature of this latest update is the decline in so-called do-it-for-me sales as opposed to DIY. It hints at a reduction in appetite or capacity for households to take on large projects,” he suggested.
“In fairness some of the slippage in sales can be attributed to the implementation of new software and the company’s messaging remains fairly bullish,” he noted.
Mould suggested a pickup in the property market, “of which there are nascent signs” thanks to the improved affordability of mortgages, will be supportive to Wickes as people tend to do up their homes to sell or look to change their new place to their own tastes.
11:00am: UK walks away from trade talks with Canada
The UK has walked away from post-Brexit trade talks with Canada.
Canada said the breakdown in talks came because the UK insisted on maintaining restrictions on its agricultural products, of which beef treated with hormones has been a persistent problem.
The BBC on Friday reported that the beef dispute was a key factor in the failure of talks.
British cars will also face tariffs from the end of April when imported to Canada.
Canada had already imposed a 245% tariff at the start of the year on British cheeses such as stilton and cheddar if they fell outside the already existing quota for non-EU imports.
In a statement posted on X, a British government spokesperson said “we reserve the right to pause negotiations with any country if progress is not being made”.
10:16am: JPMorgan cautious on UK food retailers
Sainsbury and Tesco are weak features in an otherwise buoyant market, down 1.3% and 0.9%, respectively.
JPMorgan has reiterated its cautious view of the food retail sector with ‘underweight’ ratings on Tesco and Sainsbury.
Itt lowered its price target for Teso to 220p from 230p, and for Sainsbury to 223p from 245p.
Interestingly, JPM acknowledged that based on investor feedback the standpoint "appears still to be a contrarian stance."
The reasons behind this stance include a bearish read across from US & European peers to the UK grocers, heightened price competition clouding gross margin outlook, and reduced market share donor-status from Morrison, given prospective balance sheet strengthening.
JPM pointed out new rounds of price cuts have been announced industry wide.
“These shall challenge the market belief that gross margin expansion might offset sticky opex inflation in personnel and other cost lines, clouding operating margin outlook,” it thinks.
M&S, which has a significant food retail business, is also down 0.5%.
9:48am: China announces new bailouts for struggling property sector
Chinese authorities this week unveiling plans to boost the economy and on Friday the housing ministry said it will offer more bailout loans for its struggling real-estate sector with the first funds expected to become available in the coming days.
Troubles in the property industry have been one of the main headwinds facing the world's second-largest economy, with a government clampdown on excessive borrowing in 2020 leaving several developers grappling with massive debt and flagging demand.
"In view of the current financing difficulties of some real estate projects," the official newspaper of Beijing's housing ministry quoted officials as saying, local governments would "propose a list of real estate projects that can be given financing support".
"It is understood that loans will be available for the first batch of project lists before the end of the month," it added.
9:28am: Carnival best fit for Saga's Cruise operations - broker
Peel Hunt thinks news that Sage is actively seeking a partnership agreement for its Cruise business could reduce the debt load of the business and perhaps even at the same time expanding capacity in a capital-light way.
It pointed out that TUI, for example, operates a joint venture with Royal Caribbean.
Strategically, the broker believes the best fit would be with Carnival, which is the biggest player in the ex-UK market (P&O Cruises and Cunard) and could perhaps take a 50% stake in a JV.
The question is which Cruise operator has the balance sheet capacity to execute such purchase, it said.
Earlier last year, the company explored selling its insurance underwriting business, a plan that was postponed due to market circumstances, and Peel Hunt said it "is evident that Saga is pursuing a wide range of options to financially place the business on a firmer footing."
Shares are up 6.0% on Friday.
8:52am: LVMH jumps 8% after reassuring fourth quarter
LVMH is the big story in Europe, with shares up 8.1%, after its strong fourth quarter results which saw the luxury goods outfit end a tricky year in high spirits.
Analysts at Citi highlighted a “relatively confident tone at the analyst meeting,” which suggest 2024 might be a “smooth rather than difficult year of normalisation” for the luxury industry's leader.
Barclays described the results as "reassuring."
It noted the core Fashion & Leather Goods division delivered 9% growth in the fourth quarter, in line with consensus, while the Wine & Spirits business also posted a stronger result, growing 4% (consensus: -7%, Barclays: -11%).
“More importantly, group EBIT margin of 25.6% in H2 beats both consensus (25.0%) and Barclays estimate (24.2%), which in our view reflects strong cost discipline,” the bank said.
“Margin risk has been a key concern among investors and we think the results today largely alleviated the margin concerns for many, and should be well received,” it added.
8:36am: Rightmove upgraded, IHG cut to 'sell'
Other stocks on the move include Rightmove, up 0.8%, after Morgan Stanley (NYSE:MS) upgraded to ‘overweight’ from ‘equal weight’ and set a 600p price target (up from 530p).
IHG is the top faller in the FTSE 100, down 1.3%, after Deutsche Bank downgraded to ‘sell’ from ‘hold,’ while cautious comments from JPMorgan on the food retail sector have put some pressure on J Sainsbury, down 0.7%.
Oil majors BP and Shell are also prominent risers after recent strength in the oil price and GSK is up 1.3% after Citi increased its price target to 1,700p from 1,535p.
8:28am: LVMH, Remy Conitreau boost for Burberry and Diageo
Leading the FTSE 100 risers are Diageo, up 3.6%, and Burberry, up 3.1%, after LVMH reported a pick up sales growth in its fourth quarter.
The Paris-based luxury goods company said after the London close Thursday that organic sales grew 10% to €23.95 billion in the quarter ending December 31, improving from organic growth of 9% in the previous quarter.
This helped LVMH record 2023 revenue of €86.2 billion, organic growth of 13%, up from €79.18 billion the year prior.
It’s been a tough time for luxury retailers with Burberry stock down 45% in the last 12 months so the update provided some welcome relief to the sector.
No more nasty surprises at Remy Cointreau have also given Diageo a boost.
Shares in the cognac maker have jumped 13% % despite the weakness in its Chinese sales, with investors rewarding its strategy to protect margins.
LVMH's wine and spirits arm delivered organic sales growth in the fourth quarter after a tough year.
8:15am: FTSE 100 jumps with consumer confidence at two-year high
The FTSE 100 leapt on Friday as hopes grew of a soft economic landing in the US and consumer hit a two-year high in the UK.
At 8:15am: London’s blue chip-index was up 63.34 points, 0.8%, at 7,593.07 and the FTSE 250 fell 15.45 points, 0.1%, at 19,207.65.
Jim Reid at Deutsche Bank said:”With hopes for a soft landing in the ascendancy, and yet more validation for near-term rate cuts, there was a significant cross-asset rally that saw equities and bonds post gains on both sides of the Atlantic.”
“Next stop will be PCE inflation data out today as part of the US spending and income release.”
“That will be important ahead of the Fed next week,” he said.
The mood was looking brighter in the UK as consumer confidence reached its highest level in two years, according to a long-running survey.
GfK's consumer confidence index rose by three points to minus 19 this month – its best headline score since January 2022.
In company news, Saga rose 4.2% after confirming reports it was reviewing options regarding its stake in its Ocean Cruises arm but Motorpoint fell after forecasting a profit shortfall.
Wickes rose 4.1% after predicting top-end full-year profit.
7:58am: Consumer confidence hits highest level in two years
Consumer confidence in the UK has reached its highest level in two years as optimism for the coming 12 months strengthens, according to a long-running survey.
GfK's consumer confidence index rose by three points to minus 19 this month – its best headline score since January 2022.
Confidence in personal finances gained two points and now stands at zero, ending 24 consecutive months of negative scores and "the best single indicator for how the nation's households feel about their income and expenditure", GfK said.
Expectations for the general economic situation over the next year have increased by four points to minus 21 – 33 points higher than last January.
Meanwhile, the major purchase index, a measure of confidence in buying big ticket items, is up three points to minus 20 – 20 points higher than a year ago.
Joe Staton, client strategy director at GfK, said: "Consumer confidence has started the year well with all measures up and a headline score of minus 19, the best since January 2022.
"Despite the cost-of-living crisis still impacting many households across the UK, consumers appear to be encouraged by the positive news about falling inflation.
7:55am: Saga confirms mulling options for Ocean Cruises
Elsewhere, Saga, the over-50s insurance and travel firm has confirmed it is considering its options regarding its stake in its Ocean Cruises arm, following a report late on Thursday by Sky News.
“It has concluded that a partnership arrangement for Ocean Cruise would be consistent with Group strategy to move to a capital-light business model to support further growth and crystalise value, reduce debt and enhance long-term returns for shareholders.”
WH Smith PLC (LSE:SMWH) said it was “pleased” with the start to the financial year.
“Our Travel business is growing strongly across all our divisions and we have seen a notably strong performance in the UK, our largest division, with total revenue up 15% and like-for-like revenue up 14%.”
It said it is on track to open over 50 new stores in North America this financial year and over 110 stores in total.
Group sales in the 20 weeks to January 20 were up 8%, with a fall of 4% in Retail sales, offsetting the growth in travel.
On the Beach Group (LSE:OTB) PLC said financial 2024 total transaction value is 27% ahead of the equivalent period in 2023.
It remains “confident in delivering FY24 profit in line with current market expectations.”
Motorpoint Group PLC (LSE:MOTR, OTC:MTPTF) warned that as a result of the “pricing corrections in Q3….in addition to the disruption caused by the Derby store closure, profitability for [financial 2024] is now likely to be £5 million-£6 million below expectations, even with an anticipated strong Q4.”
“Expectations for FY25 profitability remain unchanged,” it added.
It also launched a buyback of up to £5 million.
S4 Capital is another to launch a share buyback for an initial £2.7 million.
7:40am: Wickes sees top-end profit but sales performance patchy
Wickes Group PLC (LSE:WIX) expects full-year profit to be at the upper end of guidance after strong sales to Trade in the fourth quarter.
In the 52 weeks to December 30, the home improvement specialist said like-for-like sales (LFL) fell 0.3% from the year before.
Adjusted pretax profit is expected to be at the upper end of market consensus range of £44.9-£48.3 million.
Wickes said full-year sales in its Core business (product sales to Trade and DIY customers) were in line with the prior year with a positive fourth quarter which saw sales growth of 1.2%.
This was driven by positive volume growth, with slight selling price deflation in the quarter.
Do-It-For-Me (DIFM) LFL sales were slightly down in the full-year and down 13.7% in the fourth quarter reflecting a more subdued consumer environment for larger projects.
In the first few weeks of the first quarter, trading in Core has been in line with the prior year but DIFM sales are expected to be lower year on year.
7:28am: Superdry sees challenging Christmas trading, half-year sales slide
Superdry PLC (LSE:SDRY) warned market conditions are unlikely to improve in the short-term as it reported a fall in sales and widened losses.
Julian Dunkerton, founder and chief executive Officer, said: “This has clearly been a difficult period for Superdry.”
“A challenging consumer retail market, set against a backdrop of macroeconomic uncertainty and some remarkably unseasonal weather conditions have all combined to weaken the financial performance of the group.”
The branded retailer said Christmas trading “proved challenging,” due to the milder weather and heavy discounting, and “we expect full year results to reflect the more challenging environment seen to-date.”
In the 12 weeks to January 20, revenue fell 13.7%, with wholesale sales down 38%.
The news came as Superdry released half-year results which showed sales in the 26 weeks to October 28 fell 23.5% to £219.8 million from £287.2 million the year before.
The challenging consumer retail market, unseasonal weather, as well as the underperformance of the Wholesale segment was blamed for the sales shortfall.
Retail sales fell 13.1%, Wholesale sales plunged 41.1% and Ecommerce sales dipped 19.1%.
The retailer expects to deliver £40 million of cost savings this financial year, ahead of the initial target of £35 million.
Net debt fell to £28.9 million from £38.0 million.
7:00am: Stocks called higher after US gains
The FTSE 100 is expected to open higher after positive economic data sent US stocks higher.
Spread betting companies are calling London's lead index up 23 points after closing 2.06 points higher at 7,529.73 on Thursday.
Sentiment will also be boosted by news consumer confidence in the UK has reached its highest level in two years, according to GfK.
In the US on Thursday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.6%, the S&P 500 up 0.5% and the Nasdaq Composite up 0.2%.
"Across the Atlantic, the US released its latest GDP update and the data was as good as it could possibly get," noted Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Economic growth forged ahead while inflation pressures - according to personal consumption expenditures index - eased during the fourth quarter.
Later today, PCE figures - the Federal Resewrve's preferred inflation gauge wiull be released.
Back in London, and the early focus will be updates from WH Smith, Superdry and YouGov.