- FTSE 100 closes down 3 points at 7,613
- Vodafone slips after mixed trading update
- Service sector expands at fastest pace since May 2023
4:40pm: Blue chips end little changed after bright start
The FTSE 100 faded into the close, losing early gains, after strong US economic data further dented hopes of an early cut in interest rates.
At the close, London's blue-chip index was down 2.68 points at 7,612.86.
Strong services sector data in the US confirmed the world's largest economy remains in rude health, putting hopes of an early rate cut on the back burner.
In London, Vodafone shed 3.0% as third quarter trading failed to inspire, but CMC Markets jumped 18% after axing 200 jobs in bid to save £21 million annually.
Informa was lifted by a UBS upgrade, while a Morgan Stanley (NYSE:MS) upgrade supported Land Securities.
3:40pm: FTSE slips into the red after strong US PMIs
More robust data out of the US, putting another nail into those rate cut hopes.
Two surveys, one from S&P and one from SIM, show the US service sector accelerated in January.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "The US service sector started the year in a sweet spot, with output and demand growth accelerating while price pressures cooled markedly"
"The key driver of faster growth was the financial services sector where looser financial conditions tied to expectations of lower interest rates spurred greater activity in January".
The news has sent US markets tumbling and pushed the blue-chip FTSE 100 into the red, down 4 points.
3:25pm: Morgan Stanley (NYSE:MS) sees upside in LandSec, British Land
Morgan Stanley (NYSE:MS) sees improving prospects for Land Securities Group PLC (LSE:LAND) and British Land Company PLC (LSE:BLND) after what it termed "a lost decade" for shareholder returns.
The investment bank upgraded Land Securities to 'overweight' from 'equal weight' and increased its price target to 730 pence from 650p.
It reiterated an 'overweight' rating on British Land and raised its price target to 460p from 405p.
Morgan Stanley thinks stabilising property yields combined with solid total net asset value-based returns could drive a further meaningful re-rating.
Land Securities is up 1.2% and British Land by 0.2%.
2:52pm: US stocks open lower
Stocks in New York opened lower after hopes for multiple cuts in interest rates were dashed.
Shortly after the opening bell, the Dow Jones Industrial Average was down 0.4% at 38,506.99, the S&P 500 was down 0.2% at 4,947.56 and the Nasdaq Composite was down 0.3% at 15,589.38.
Neel Kashkari, president of the Minneapolis Federal Reserve, said policymakers should not rush to cut interest rates as borrowing conditions are more relaxed than many think.
Kashkari, who is on the Federal Reserve’s policymaking committee said real rates had not risen as steeply as the recent fall in inflation might suggest.
Yields in Treasury markets signalled conditions “may not be as tight as we would have assumed given the low neutral rate environment . . . before the pandemic”, he said in an essay on the regional Fed’s website.
“It is possible . . . that the policy stance that represents neutral has increased. [This gives policymakers] time to assess upcoming economic data” before cutting, he said.
The comments followed an interview on Sunday in which Fed Chair Jerome suggested three rate cuts were likely in 2024 compared to the six markets has been pricing in.
Stocks on the move include McDonalds, down 3.0% after it said the war in Gaza has hurt business in the Middle East as it reported weaker than expected sales at its existing restaurants.
2:14pm: Pound slips further after hawkish Powell
Sterling has falle further and is on track for the worst two-day run for the currency since March 2023.
The Federal Reserve Chair Jerome used a TV interview at the weekend to push back against market hopes for as many as six quarter point cuts in rates this year.
He reiterated a belief that three were more likely.
His comments follow a series of strong data releases in the US which culminated in a blow-out IS jobs report on Friday.
The market had initially hoped for a rate cut in March but now even May is open to question.
The pound is down 0.6% at $1.2599.
1.30pm: Here’s a look at the risers a fallers on the market today
Esken Ltd (LSE:ESKN, OTC:ESKNF), the infrastructure company and owner of London Southend Airport (LSA), saw its share plunge around 25% on Monday after warning of funding delays due to an ongoing dispute with a loan provider.
Last month, the group warned LSA could be required to pay more than £200 million to Carlyle Global Infrastructure Fund (CGI) by mid-February over an alleged technical breach of a convertible loan agreement.
Bidstack Group PLC (AIM:BIDS, OTC:FTBGF) plummeted nearly 60% following the publication of a financial update and strategic review.
The in-game advertising company entered into a £2.4 million loan agreement with strategic investor Irdeto last October, but Bidstack today disclosed that Irdeto has not obtained the appropriate disclosures and requisite documentation from its parent company Multichoice.
Sondrel (Holdings) PLC shares rose 11% following the publication of a corporate update.
The chipmaking small cap confirmed £1.5 million of payments from a tier-one automotive supplier, allowing Sondrel to honour previously deferred payrolls and certain creditor payments.
Shares in Burberry rose 1.7% after reports that the Chancellor Jeremy Hunt has asked the Office for Budget Responsibility to review bringing back VAT-free shopping for international visitors.
1:05pm: Burberry up on hopes 'tourist tax' may be scrapped
Shares in Burberry rose 1.7% after reports that the Chancellor Jeremy Hunt has asked the Office for Budget Responsibility to review bringing back VAT-free shopping for international visitors.
The FT had the scoop, reporting that OBR Chair Richard Hughes has been asked to mull "the costs and benefits" of the so-called 'tourist tax'.
The UK at the start of 2021 scrapped VAT-free shopping in an effort to boost government coffers, but the move has caused complaints by British businesses that say they have been put at a disadvantage compared to international peers.
In November, Burberry said its UK performance continued to lag its showing in Continental Europe when it came to "attracting tourism spend compared with pre-pandemic levels".
12:17pm: Stocks seen subdued after Powell comments
Stocks in New York are expected to make a mixed start to the week after the chair of the Federal Reserve played down hopes for significant rate cuts in 2024.
In pre-market trading, futures for the Dow Jones Industrial Average were up 0.1%, while those for the S&P 500 eased 0.1% and contracts for the Nasdaq 100 futures declined 0.2%.
The Federal Reserve’s rate-setters still expect to make about three quarter-point rate cuts this year, its chair Jay Powell said in an interview that aired on Sunday.
Markets had priced in as much as 6 rate cuts this year but these hopes have steadily been pared back, after last week’s Fed meeting, and a series of robust economic data, culminating in Friday’s blow-out jobs report.
The comments pushed yields on rate-sensitive two-year US Treasuries up 0.09 percentage points to 4.46%.
11:38am: UK offshore wind plans a game changer for National Grid - broker
The UK's plan to overhaul its transmission grid to facilitate more offshore wind connections is a "game-changer" for National Grid's growth outlook, according to Jefferies.
The broker has upgraded its rating for the electricity infrastructure and gas utility to 'buy' from 'hold'.
It believes the next 12-24 months could "dramatically increase visibility on a highly compelling investment case of 10% [per annum] regulated asset base growth through to 2030".
The move helped shares in the firm rise 2.0% on Monday,
Jefferies increased its price target for National Grid to 1,330p per share 1,000p before.
The bank explained that in November 2023, National Grid was awarded 17 accelerated strategic transmission incentive projects with a capex opportunity of ''mid-to-high teens'' GBP billion.
This was followed by Ofgem in December 2023 outlining its initial considerations on aligning incentives to encourage grid investments.
"With this, we believe there is now enough visibility to consider the potential upside for NG from higher investments in UK's transmission grid," Jefferies said.
Alongside, the broker thinks the US growth outlook is likely to become more visible with NY subsidiaries' rate decisions due this month.
Jefferies argues that National Grid is on track to be a top-ranked regulated growth utility, with visibility improving in the next 12 months.
10:58am: Vodafone trading update fails to fire shares
Vodafone's trading update has failed to excite the City, so far at least, with shares off 1.0%.
Russ Mould at AJ Bell said that in recent years Vodafone has been a business with "all the alacrity of a beached whale" and there’s nothing in its third quarter statement to get investors "particularly excited."
He noted the firm is trying to shed some "dead weight" with the firm still in active discussions for its Italian business despite turning down a merger offer from rival Iliad last week.
But Matt Britzman, equity analyst, at Hargreaves Lansdown said while there’s scope for upside in the region if a deal can be found, "whether that would translate to a meaningful share price reaction remains to be seen."
"Deals in the UK and Spain failed to stir up too much excitement," he pointed out.
Mould said another area that will "cause some concern" for investors is the slowdown in the recent recovery in its German business – the largest contributor to the group.
German service revenue grew 0.3% in the quarter, slowing from growth of 1.1% in the second quarter, reflecting business phasing and non-recurring revenue from service providers.
HL's Britzman said the sustainability of the dividend was also being questioned.
He pointed out that while Vodafone looks cheap by most measures, with a forward yield of 9.2%, an argument can be made that the dividend is under some pressure in the near term.
He explained a capital allocation review is on the cards post-completion of the sale of its Spanish assets and noted "some analysts are already pencilling in dividend cuts as a result."
10:19am: Services sector sees strongest rise since May 2023
The UK’s services sector has posted its strongest monthly performance since last May.
Services sector firms have reported a faster rise in business activity and new orders in January, spurring them to hire more staff.
This lifted the UK services PMI index up to 54.3 in January, up from 53.4 in December, the third month running it’s been over 50 points (showing growth), and an eight-month high.
"The revival in UK service sector performance gained momentum at the start of 2024, with output growth accelerating to its fastest for eight months amid stronger business and consumer spending. New orders have also rebounded this winter as receding recession risks and looser financial conditions led to greater willingness-to-spend among clients," said Tim Moore, economics director at S&P Global Market Intelligence.
"Inflationary pressures subsided during January, despite stronger demand conditions. Latest data indicated that total input costs increased at one of the slowest rates seen in the past three years. Softer cost inflation reflected lower energy and fuel costs, alongside falling raw material prices."
9:45am: FTSE 100 positive but off highs
The FTSE remains in positive, although earlier highs, now up 10 points at 7,625.
“The markets continue to forge ahead despite a blowout jobs report from the US last Friday which seems to have finally put the nail in the coffin of the idea rates will be cut next month,” says AJ Bell investment director Russ Mould.
“The FTSE 100 clawed its way to its best levels in nearly a month with fairly broad-based strength throughout the index. There are just the first signs that we are inching away from a looking glass world where bad news is good news because of the implications for monetary policy to good news being good news once again"
Stocks to the move include Land Securities up 1.4% after Morgan Stanley upgraded to 'overweight' from 'equal weight' and Informa, up 1.1% after UBS raised 'buy' from 'neutral.'
9:16am: Iran used Lloyds and Santander accounts to evade sanctions - FT
More Lloyds Banking Group PLC (LSE:LLOY), which is down 1.5%, after the report in the Financial Times that Iran used it, and Santander, to covertly move money around the world as part of a vast sanctions-evasion scheme backed by Tehran’s intelligence services.
Lloyds and Santander UK provided accounts to British front companies secretly owned by a sanctioned Iranian petrochemicals company based near Buckingham Palace, according to documents seen by the Financial Times.
The state-controlled Petrochemical Commercial Company was part of a network that the US accuses of raising hundreds of millions of dollars for the Iranian Revolutionary Guards Quds Force and of working with Russian intelligence agencies to raise money for Iranian proxy militias.
Documents analysed by the FT show that since being placed under US sanctions PCC has used companies in the UK to receive funds from Iranian front entities in China while concealing their real ownership through “trustee agreements” and nominee directors.
One of these companies, called Pisco UK, is registered to a detached house in Surrey and used a business account with Santander UK.
Another PCC front company in the UK is Aria Associates, which has an account with Lloyds.
8:48am: FTSE 100 holds gains, Lloyds down on Iran sanction report
The FTSE 100 remains on the front foot, now up 29 points at 7,644.
Lloyds Banking Group PLC (LSE:LLOY) is top of the fallers, down 1.0% after a report in the Financial Times that it was one of two UK’s banks used by Iran to covertly move money around the world as part of a vast sanctions-evasion scheme backed by Tehran’s intelligence services.
Vodafone is down 0.8% after its trading update - a disappointing German performance seems to be the reason after overall revenue topped forecast.
Matt Britzman, equity analyst, Hargreaves Lansdown said there were “some pockets of optimism for investors to cling to” in the update.
He noted growth was in line with the second quarter, “arguably a better result than some had feared.”
But while the key German market managed to scrape its way into growth territory it saw a slowdown, he pointed out.
Elsewhere, National Grid is up 1.4% after being upgraded to buy from hold by Jefferies.
8:15am: FTSE 100 pushes ahead despite hawkish Powell
The FTSE 100 made steady progress on Monday although gains were limited as the chair of the US Federal Reserve pushed back once more against hopes for an early cut in interest rates.
At 8:15am, London’s blue-chip index was up 0.3% at 7,638.36 while the FTSE 250 was up 0.2% at 19,204.84.
On Sunday, the head of the US central bank Jerome Powell said the he still expects to make around three quarter-point rate cuts this year, compared to market expectations for six quarter point reductions.
Rate-setters, on average, expected to make 75 basis points of cuts back in December. Powell said in an interview recorded on Thursday that, while new projections were not due out until March 20, “nothing has happened in the meantime that would lead me to think that people would dramatically change their forecasts.”
Back in London, Vodafone fell 1.2% despite third quarter revenue beat expectations, while CMC Markets jumped 8.4% after it announced 200 jobs cuts, around 17% of its work force.
It said the move would save £21 million per year from 2025.
7:56am: ONS revises unemployment rate down
The Office for National Statistics has published revised data showing the UK unemployment rate was lower than previously estimated in the three months through November.
It shows a rate of 3.9%, lower than the experimental rate of 4.2% published last month, and suggested unemployment has been gradually inching lower since the summer.
The revision was largely driven an by a higher than expected inactivity rate.
7:37am: CMC to save £21 million from axing 200 jobs
CMC Markets PLC (LSE:CMCX) on Monday said it would save £21 million per year after announcing plans to cut 200 jobs, around 17% of its workforce.
The trading platform said it expects to incur a one off charge of £2.5 million in 2024 as part of the move.
Cost reductions have been primarily achieved by merging support functions across multiple business lines, streamlining reporting lines and automating processes, it said.
“The group will continue to seek opportunities to drive efficiencies and control costs while remaining committed to investing in growth opportunities and ensuring its technology remains market leading,” it said in a statement.
Trading remains in line with expectations and CMS is on track to deliver net operating income of between £290-£310 million for financial 2024, it said.
7:28am: Steady progress at Vodafone in third quarter
Vodafone Group PLC (LSE:VOD) reported steady progress in the third quarter driven by momentum in Europe and Africa.
The FTSE 100 listed telco said total revenue rose 4.2% on an organic basis to €11.37 billion, while services revenue climbed 4.7% on an organic basis to €9.38 billion.
On a reported basis revenue fell 2.3% and services revenue declined 1.4%.
Chief Executive Margherita Della Valle said: “We maintained good service revenue momentum in the third quarter across both Europe and Africa, supported by a further acceleration of Vodafone Business, with our Cloud and Internet of Things services growing over 20%.”
“We've made good strategic progress in the first nine months of the year…..with three consecutive quarters of service revenue growth in Europe.”
Vodafone said service revenue growth was broad-based with 14 out of 17 markets growing.
German service revenue grew 0.3%, slowing from growth of 1.1% in the second quarter, reflecting Business phasing and non-recurring revenue from service providers in the quarter.
Vodafone Business service revenue growth accelerated to 5.0% from 4.3% in the third quarter driven by strong performance in digital services.
The firm reiterated financial 2024 guidance of adjusted EBITDAaL of around €13.3 billion and adjusted free cash flow of €3.3 billion.
7:00am: FTSE 100 set for modest gains
The FTSE 100 is expected to start the week on the front foot ahead of a raft of PMI readings.
Spread betting companies are calling London’s lead index up by around 15 points after closing down 6.62 points at 7,615.54 on Friday.
In the US on Friday, markets made further gains despite a blow-out jobs report which killed hopes of a March rate cut across the pond and left analysts wondering if one would even arrive in May.
Andrew Hunter at Capital Economics said the "big picture for now is that markets are no longer convinced that the Fed will cut rates in May, let alone March."
Back in London, and the early focus will be a trading update from Vodafone with a services sector PMI reading to come.