- FTSE 100 down 101 points
- Thames Water delivers cash warning
- Retail sales impress
3.53pm: Interest rates down to 2.75% in 2025, predicts HSBC
HSBC analysts reckon the Bank of England could lower interest rates to as low as 2.75% next year.
The prediction comes after BoE policymakers held rates at 5% at yesterday’s Monetary Policy Committee (MPC) meeting.
HSBC expects rate cuts at every MPC meeting from February 2024 onwards, beginning with a potential cut this November.
“Part of the slightly better medium-term growth outlook reflects monetary policy,” said HSBC analysts.
“With most indicators pointing to a cooling in the labour market, we and BoE have become more confident that the worst of the inflation pressures – and the risk of them becoming entrenched – is behind us.
3.44pm: Dr Martens at record low as investors kick stock to the curb
Shares in British footwear group Dr Martens are at their lowest point since debuting on the London Stock Exchange in February 2021.
It comes amid reports that institutional investors are offloading the stock en masse, contributing to the steady decline in value since the iconic British company’s ill-fated float.
According to MarketWatch, a consortium of investors sold 70 million shares in the company- the real kicker being the 10% discount to yesterday’s closing price.
The capitulation underscores the lack of confidence investors have in recouping their losses in a stock that is now down 89%.
Dr Martens’ sales fell by more than 12% in its last financial year, reflecting what chief executive Kenny Wilson conceded was “continued weak USA consumer demand”.
Shares fell another 19% to 51.4p today.
3.08pm: Nasdaq falls but Apple surprises
The Nasdaq 100 fell 0.4% to 19,761 in opening Friday exchanges, with chipmakers ON Semiconductor and NXP Semiconductor falling 4.3% and 3% respectively.
Tesla Inc (NASDAQ:TSLA) was also off to the tune of 1.8%.
Apple, meanwhile, bucked the pre-market trend and added 0.5% despite futures contracts suggesting a fall in equal amounts. It comes as the Apple iPhone 16 nervously goes live on store shelves.
The Dow Jones Industrial Average dipped 0.26% to 41,916 in opening exchanges, while the broader S&P 500 fell 0.3% to 5,695.
3pm: Flutter’s capital-allocation in focus in next’s week’s CMD
Next week’s Flutter Entertainment PLC (LSE:FLTR) investor day comes as the Paddy Power and FanDuel-owner faces a big decision on its capital-allocation policy.
Specifically, should the betting powerhouse use its rapidly accelerating US-generated profits to give shareholders a short-term serotonin boost in the form of buybacks, or should it play the long game and pursue more company acquisitions?
Flutter’s M&A strategy has a great track record, but as UBS analysts have noted, there are some grumblings among its shareholder base that they’re not getting a big enough piece of the profit pie.
UBS noted that Flutter’s recent additions, such as NSX Group in Brazil and Snaitech in Italy, were in the “lower-multiple and slower-growing ex-US business, where investors may be sceptical of extensive capital deployment”.
Meanwhile, there is a “growing narrative of potential shareholder returns emerging from Flutter’s management, as indicated by the increase in target leverage from 1-2x to 2-5x cited in Flutter’s annual earnings report in March.
So, will it be buybacks or buyouts on the menu going forward? There may be some answers in store during Flutter’s capital markets day next Wednesday.
2.21pm: JD Sports, Frasers, Next hit by fall in consumer confidence
London-listed retail big caps fell across the board on Friday, reflecting the larger-than-anticipated drop in the GfK Consumer Confidence Index.
GfK data showed consumer confidence fell by seven points to -20 in August, making for a considerably worse print than the -13 forecast.
The fall in confidence comes despite retail sales figures for August, also released today, comfortably overshooting guidance.
Economists suggested that the new government’s warnings of a high-tax October Budget are making consumers nervous.
JD Sports Group plc shares took a 2% hit, Sports Direct-owner Frasers Group PLC (LSE:FRAS) fell nearly 3%, B&Q-owner Kingfisher plc fell by 3% and Next plc, which recently hit an all-time high, fell back 2.9%.
2.09pm: FTSE 100 hits intraday lows
The FTSE 100 is currently at intraday lows of 8,238, marking 90 points of losses from Thursday’s close.
Departing FTSE 100 constituent Burberry Group PLC (LSE:BRBY) remains the biggest individual drag on the index, but it’s the retail stocks causing the most trouble.
Following a concerningly low GfK consumer confidence print for September, B&Q-owner Kingfisher plc has dipped 3.2%, Next plc has come off its all-time highs, and Frasers Group PLC (LSE:FRAS) is off by 3%.
Utilities have partially offset these declines, with National Grid pls up 1.15% and United Utilities Group PLC (LSE:UU.) up 0.7%.
1.30pm: Nasdaq to dip as Apple iPhone 16 store launch kicks off
US tech stocks are expected to open lower this Friday, with the Nasdaq 100 down 0.13% to 19,809 in pre-market trades.
Apple Inc (NASDAQ:AAPL, ETR:APC), the largest of the Nasdaq constituents, is expected to open 0.2% lower on the same day that the new iPhone 1us fina6 hits shelves. Nvidia Corp is expected to open half a percentage point lower.
The Dow Jones industrial Average is tipped to open 01% higher at 42,078, while the broader S&P 500 should open flat.
Back in London, the FTSE 100 is currently down 71 points to 8,257.
1.21pm: Apple shares to fall as ‘unfinished’ iPhone 16 hits the shelves
Apple Inc (NASDAQ:AAPL, ETR:APC) is expected to open half a percentage point lower when US markets open on Friday, reflecting the damp squib that has been its iPhone 16 launch.
The new handset will be available in store from today, but reception to the product has been decidedly mixed.
In its review, The Verge called it “one of the most unfinished products Apple has ever shipped”.
While iPhone 16 buyers will be able to enjoy a slightly better camera and an extra button on the side of the device, they will not be privy to the much-hyped ‘Apple Intelligence’ artificial intelligence features.
That’s because these features, which will include a ChatGPT-powered Siri virtual assistant, an AI-powered writing assistant and some other bits and pieces sprinkled throughout the operating system, will come via a series of software updates starting from October.
Whether these incremental upgrades will be enticing enough for iPhone users to drop $799 minimum (£799 in the UK) on the device en masse remains to be seen.
The latest range of Apple Watch and AirPod devices also hit the stores today.
12.51pm: Unregulated energy brokers face crackdown
The UK government has announced new measures to safeguard businesses from the practices of rogue energy brokers.
Under new regulations currently undergoing consultation, energy brokers will be required to clearly disclose their commission fees to clients, a move aimed at preventing hidden charges.
Ofgem, the UK’s energy regulator, will enforce these rules and has the authority to take action against brokers who do not comply with the new requirements.
The changes seek to protect businesses from misleading contracts and undisclosed fees.
Energy brokers are meant to assist businesses in navigating the complexities of the energy market, often working to find competitive pricing and more favourable contract terms on behalf of their clients.
“Too many families and businesses, already struggling with the effects of the energy crisis, have fallen victim to poor practices by energy intermediaries,” said minister for energy consumers Miuatta Fahnbulleh.
“These unregulated third parties and rogue brokers have had licence to scam consumers without oversight or facing consequences,” she added.
“The energy market can be very confusing to navigate for small firms, and many find brokers are helpful to find the best possible deal,” said Tina McKenzie, policy chair of the Federation of Small Businesses (FSB).
“However, this is not the case for all third-party intermediaries and there is widespread scepticism among small businesses as to whether they truly act in the small business customer’s best interests.
FSB has long called for tougher rules to crack down on questionable practices among a significant minority of third-party intermediaries, to make the energy market work better for small business consumers.”
12.06pm: Another Spirent bid from Viavi bid not off table, reports Reuters
Nasdaq-listed network equipment manufacturer Viavi Solutions (NASDAQ:VIAV) will consider making another bid for Spirent Communications (LSE:SPT) if an agreed-upon Keysight Technologies Inc (NYSE:KEYS) takeover fails to pass muster with the competition watchdog, Reuters has reported.
Viavi was gazumped by Keysight in March with a 201.5p per share offer for FTSE 250-listed Spirent, beating out Viavi’s previous 175p-per-share offer.
Although Spirent shares surged following Viavi’s superior offer, they are currently trading below 175p, representing a 13% discount to the improved offer.
Sources told Reuters that some analysts believe this discount reflects a degree of scepticism that the deal will go through.
Company shares typically rally to match their implied valuation when a takeover offer is declared.
In half-year results posted in August, Spirent disclosed that order intake fell more than 20% year on year, reflecting “some customer hesitancy following the recently announced offer by Keysight” as well as “the ongoing industry-wide slowdown”.
“Keysight and Spirent continue to engage and work constructively with the relevant regulatory authorities in order to satisfy all necessary regulatory conditions,” the company stated.
Spirent shares added 1.5% on Friday.
11.20: Fewer companies going bust
Another number to add to the confused picture of higher retail sales, falling consumer confidence and a surge in government debt is that the number of companies going bust dropped 15% in August.
According to the Insolvency Service, 1,953 businesses in England and Wales stopped trading in August, compared with 2,286 in August 2023.
Jennifer Lockhart, partner at law firm Brabners, told PA that while any fall is welcome, the optimism when Labour took in government over is starting to drain away.
“The general sense of optimism felt at the start of the summer, with the change of government, has begun to ease, serving to curb the recent improvement in consumer confidence.”
Scotland saw a 9% decrease in bankruptcies versus August last year at 102 insolvencies, according to the Scottish agency Accountant in Bankruptcy.
FTSE 100 down 61 at 8,267.
10.55am: Footsie heading lower
FTSE 100 continues to head lower on downbeat economic news and a lack of any corporate activity to shift the market’s attention.
National Grid, up 0.8% at 1,031p and gold and silver miner Fresnillo, 0.7% at 592.5p, lead the risers, while Burberry is going out of the main index on a low note.
The luxury fashion group is down 5% ahead of its demotion today with retailers Kingfisher and Frasers also under pressure after today's mixed economic numbers.
FTSE 100 down 70 at 8,258.
10.14am: Nike rallies as industry veteran takes the reins
Nike Inc (NYSE:NKE, ETR:NKE) is up nearly 7% in pre-market trades on the New York Stock Exchange following news that industry veteran Elliott Hill is taking over as chief executive from John Donahue.
Hill, who previously spent more than 30 years with the brand before departing his role and president of consumer and marketplace in 2020, will be hoping to restore Nike’s plummeting share price and general relevance in the sportswear scene.
Although Donahue successfully saw Nike through the pandemic-era shift away from the high street, sales have since lagged and the addition of Bill Ackman’s Pershing Square Capital Management onto the shareholder register raised the prospect of an activist-led management change.
"Together with our talented teams, I look forward to delivering bold, innovative products, that set us apart in the marketplace,” said Hill.
9.43am: Burberry to exit FTSE 100 with a whimper
British fashion icon Burberry Group PLC (LSE:BRBY) bids farewell to the FTSE 100 index today, with shares appropriately off more than 4.5% in early trades.
Burberry first entered the blue-chip index in 2009 at a time when the stock was on the ascent and Emma Watson was the face of the company.
But after a period of decline, in which shares have dropped by 70% amid a substantial reduction in global luxury spend, Burberry is set to be replaced by insurer Hiscox Ltd (LSE:HSX) from Monday.
Burberry has copped derating after derating amid a sluggish rebound in global luxury demand (particularly in China), a departing chief executive and a suspended dividend.
The stock is currently at a 15-year low of 596p.
9.23am: Pound rallies
A combination of macro factors has pushed the pound to a 30-month high against the US dollar.
Interest rate calls on both sides of the pond this week help to keep the GBP/USD pair elevated.
The US Federal Reserve slashed the bank rate by a chunky 50 basis points, while the Bank of England held steady at a flat 5%, thus increasing the attractiveness of the UK money markets.
This morning’s UK retail sales, meanwhile, substantially overshot forecasts. August sales surged by 2.5%, outpacing the 1.5% consensus forecast to mark the strongest month of growth since February 2022.
It has led to the pound-dollar pair touching 1.33 for the first time since March 2022.
8.54am: The morning so far
Blue-chip stocks stripped away a large portion of their Thursday gains when trading got underway this morning.
Within the first 30 minutes, the FTSE 100 fell as much as 50 points to 8,278, though it has since managed to claw its way back to 8,291.
Burberry Group PLC (LSE:BRBY) fell the sharpest among the FTSE 100 set with a 3.6% hit to its share price.
A smashing retail sales print, led mainly by robust sales in the supermarket sector, was not enough to spur a rally on any retail stocks, although J Sainsbury PLC (LSE:SBRY) and Marks & Spencer Group plc have so far managed to keep their share prices in the green.
Retail sales clobbered expectations in August, with the Office of National Statistics declaring 2.5% of yearly growth in the month.
This is significantly above the 1.5% result in July and far above the 1.5% previously forecasted by analysts.
The result contrasts with this morning’s GfK consumer confidence indicator, which fell to -20 in September from -13 in August, hitting the lowest level in six months.
More troubling news emerged from Thames Water this morning. The London water supplier warned that its cash runway will expire in May 2025 unless a refinancing arrangement is not agreed with lenders.
The beleaguered London water supplier faces nationalisation if it is unable to repay its more than £15 billion worth of debt on the book.
Thames Water said this morning that it has £1.57 billion of liquidity available which should see it through until next May.
8.25am: Investec dragged by lower UK profits
Anglo-South African bank Investec PLC (LSE:INVP) reiterated its guidance for the year after despite a lower first-half contribution from the UK.
In a trading update, Investec said profits from its UK businesses, including its wealth management associate Rathbones, would drop by between 5% and 11% from last year’s £235 million, with impairments rising.
The South Africa segment will be around 15% ahead of the previous period at £206 million.
FTSE 250-listed shares fell 2%.
8.20am: FTSE 100 pares Thursday gains
The FTSE 100 shed 50 points this morning, bringing the blue-chip index down to 8,278 and stripping away two thirds of yesterday’s gains.
Some of the biggest fallers include Burberry Group PLC (LSE:BRBY), which is down 4.5%, and DS Smith PLC (LSE:SMDS) and Frasers Group PLC (LSE:FRAS), which are both down 1.8%.
8.15am: Net debt reaches 100% of GDP
Government borrowing soared to £13.7 billion in August, representing a 44% annual increase.
It was the third-highest rate of August borrowing, which is determined by the difference between public sector spending and tax income, since records began.
Office of National Statistics’ chief economist Grantz Fitzner stated: “Central government tax receipts grew strongly, but this was outweighed by higher expenditure, largely driven by benefits uprating and higher spending on public services due to increased running costs and pay.’
As a result, net debt as a percentage of gross domestic product has hit 100%, a level not seen since the early 1960s.
The data is likely to fortify chancellor Rachel Reeves’ resolve to increase tax rates in the upcoming budget, which is due on 39 October.
7.58am: Retail sales smash forecasts despite dip in consumer confidence
Retail sales in the UK far exceeded expectations in August, with the Office of National Statistics declaring 2.5% of yearly growth in the month.
This is up from 1.5% in July and far above the 1.5% forecast. It also represents the strongest month of growth since February 2022.
ONS chief economist Grant Fitzner said: “Retail sales rose in August as warmer weather and end of season promotions helped to boost sales, most notably for clothing and food shops.
“Supermarkets, in particular, contributed to the largest annual rise for food sales since the summer of 2021.
“Looking at the broader picture, retail sales have also increased across the three month and annual period, following strong growth from online retailers. However, sales overall remain slightly below their pre-pandemic level.”
The result contrasts with this morning’s GfK consumer confidence indicator, which fell to -20 in September from -13 in August, hitting the lowest level in six months.
Rob Wood, chief UK economist at Pantheon Macroeconomics, stated: “Granted the sharp drop in consumer confidence this morning, with households' major purchase intentions falling to -23 in September, from -13 in August, suggests a risk that retail sales pull back in September and more generally poses a downside challenge to our growth outlook.”
7.45am: Volution expands Australian presence with Fantech acquisition
FTSE 250-listed ventilation manufacturer Volution Group PLC (LSE:FAN) has agreed to acquire Aussie group Fantech Australasia from UK parent company Elta Group for AUD$220 million (£112.9 million).
Volution will takeover the full suite of Fantech’s brands, which include Ideal Air, NCS Acoustics, Air Design, Major Air, Systemaire and Burra Steel.
Ronnie George, Volution’s chief executive, stated: "This acquisition, our largest to date, gives Volution a great platform to continue our growth in Australasia.
“We are excited by the opportunities available to us through owning such a well-respected and successful group of brands.
“The combination of Fantech's strong and longstanding trading in the region with greater access to Volution's wide product portfolio gives us an enviable platform for growth."
The acquisition will become immediately earnings accretive, said Volution, and the business is expected to comprise over 30% of Volution’s total revenues.
Fantech generated revenues of AUD$177.0 million (£90.8 million) in its latest financial year.
7.32am: Thames Water warns cash reserves have eight-month runway
Thames Water has warned that its cash runway will expire in May 2025 unless a refinancing arrangement is not agreed with lenders.
“We’re looking into a range of options to extend our liquidity runway,” a company source told the Guardian. “This includes delaying when some money is due back to lenders.”
The beleaguered London water supplier faces nationalisation if it is unable to repay its more than £15 billion worth of debt on the book.
Thames Water said this morning that it has £1.57 billion of liquidity available which should see it through until next May.
It is also pursuing equity financing options.
“We, together with our financial stakeholders, are considering options for the extension of our liquidity runway to enable time to complete a recapitalisation transaction,” the company said in a statement.
“In parallel, we continue to undertake contingency planning as a matter of good corporate practice.”
7.10am: Stocks to fall
The FTSE 100 is expected to chip away at yesterday’s 75 points worth of gains when trading commences today.
Pe-market trades for the blue-chip index have it opening 56 points lower at 8,280. It comes after the Bank of England decided to hold interest rates steady at 5%.
Today’s retail sales data print from the Office of National Statistics vastly outpaced market expectations, with year-on-year sales in August coming in at 2.5% against the 1.4% forecast.
Consumer confidence, however, fell back more than expected.