- FTSE 100 down 7 points
- NatWest jumps as results please
- Lloyds tumbles on motor finance ruling
4.56pm: FTSE 100 struggles for direction late on; Lloyds slumps
London’s blue chips bounced between positive and negative territory on Friday and sat 7 points lower at 8,262 come late trading.
This placed the index on course for a weekly decline of 96 points, or 1.2%, as focus turned to next week's Autumn Budget and a string of potential tax hikes.
NatWest Group PLC (LSE:NWG) remained among risers late on with a 2.1% gain after impressing with third-quarter results earlier on, while miners Anglo American PLC (LSE:AAL), Rio Tinto PLC and Glencore PLC (LSE:GLEN) also climbed.
Lloyds Banking Group PLC (LSE:LLOY) emerged as the day’s biggest loser with a 5.3% drop in the meantime following a court of appeal ruling that motor dealers offering loans to customers for car purchases were liable to potential compensation for mis-selling.
Close Brothers Group PLC (LSE:CBG) also slumped over 18% on the news, which analysts said could prompt a harsher view from Britain’s Financial Conduct Authority in its investigation into motor finance discretionary commission arrangements.
“Lloyds has set aside £450 million already and analysts had pencilled in another £500 million for next year” to cover the potential cost of the probe, Hargreaves Lansdown’s Matt Britzman said.
“But, with some rumours suggesting the number could be closer to £2 billion, that leaves a £1 billion hole to be filled in current consensus.
“It’s hard to put an exact number on these things, and Lloyds isn’t the only name with skin in the game.
“But it does have more exposure than most of its peers, and while the broader Lloyds investment case looks solid, this remains one of the biggest risks.”
3.27pm: Applied Nutrition dips as trading kicks off after float
Applied Nutrition headed lower on Friday after Thursday’s float saw the protein-powder maker valued at £350 million in a boost to London’s sluggish IPO market.
Shares had been priced at 140p, with the stock initially climbing to 145p following the float before scaling back to 135p on Friday after conditional trading got underway.
Panmure Liberum analysts initiated coverage of Applied with a ‘buy’ rating and share price target of 165p, noting the company offered “many years of high growth ahead”... Read more
2.54pm: Wall Street sees bright start
Wall Street enjoyed a broadly positive start on Friday as the market looked to close out a volatile week on a better note.
The Nasdaq jumped 0.8% as the market opened, while the S&P 500 and Dow Jones added 0.5% and 0.3% respectively.
This came as benchmark 10-year treasury yields continued to trend lower on Friday to 4.18%, having climbed to a three-month high in excess of 4.25% earlier in the week and in a blow for equities.
It also followed figures showing US core capital goods orders exceeded expectations in September, rising by 0.5% against an anticipated 0.1%.
Durable goods orders slipped by 0.8% in the meantime, weighed down by a drop for transportation equipment.
2.36pm: White Stuff bought by Hobbs owner
High street clothes retailer White Stuff has been acquired by South African-based The Foschini Group (TFG).
The deal was said to be worth around £50 million, according to PA Media, though the companies did not disclose financial details of the takeover.
This will see TFG add White Stuff to its existing portfolio of the Hobbs, Whistles and Phase Eight fashion brands.
Jo Jenkins will continue in the role of White Stuff’s chief executive while founders George Treves and Sean Thomas will leave the business.
“With White Stuff’s strong presence on the high street and significant potential for sustained growth, we are committed to supporting Jo and her talented team with their ambitious rollout strategy,” TFG London head Justin Hampshire commented.
1.49pm: Mortgage rates nudge lower as NatWest among those to cut
Mortgage rates have fallen ever so slightly this week as lenders mull the path of UK base interest ahead.
According to Moneyfacts, average two-year fixed mortgage rates sat at 5.3921% come Friday, against 5.4113% at the start of the week.
A string of major lenders had hiked rates last week, including Barclays PLC (LSE:BARC), NatWest Group PLC (LSE:NWG) and Lloyds Banking Group PLC (LSE:LLOY)’s Halifax.
NatWest was then among those to cut this week, while Halifax upped rates once again.
This comes against the backdrop of expectations for another 0.25% cut to base interest in the Bank of England’s next policy meeting in November.
Orchard Financial Advisors director Ben Perks noted NatWest had “thrown the cat among the pigeons” with its latest cut, which saw rates on selected two and five-year deals reduced by between 0.41% and 0.2%.
“The message is clear; they will not be deterred from lending, they are not fearful of the upcoming Budget and they are very keen to lend in the last quarter of 2024. It's game on for borrowers.”
13.06pm: Lloyds, Close Bros slump on motor finance ruling
Shares in Close Bros and Lloyds banking tanked as a court of appeal ruled that motor dealers offering loans to customers for car purchases were liable to potential compensation for mis-selling.
In the ruling, motor dealers were said to have a fiduciary duty to customers, a decision that prompted Close Bros to say that it would stop new motor finance lending temporarily.
The specialist bank, which said it would appeal the decision, said it was halting new loans while it reviews and implements any relevant changes to our documentation and processes to ensure compliance with these new requirements.
Shares in Close Bros tumbled 19% to 295p while Lloyds, which has already set aside more than £400 million for possible compensation, dropped 3.7% to 59.9p.
12.27pm: Dow Jones, Wall Street in line for better start
A brief quiet period on Friday looked to have Wall Street on course for a better start to the day.
Futures had the Dow Jones up 0.1% ahead of Friday’s opening bell, after its latest drop on Thursday, while the S&P 500 and Nasdaq looked set to tick up a further 0.2% each.
Both had been aided by a 21% jump in Tesla Inc (NASDAQ:TSLA) shares following expectation-beating earnings, which added close to US$150 billion to its market capitalisation.
This came after a surge in treasury yields earlier in the week had put pressure on stocks as markets priced in growing expectations of a win for Donald Trump in next month’s election.
Friday looked to bring a quieter day on Wall Street, with 10-year Treasury yields falling back to 4.19% after hitting a three-month high above 4.25% earlier in the week.
Aon PLC (NYSE:AON) was among the few to report, with shares ticking up 2.3% in pre-market trading after it unveiled a 7% increase in third-quarter revenue to US$3.7 billion.
“With risk events swirling over the horizon next week - including mega-cap results from five of the ‘Magnificent 7’; highly crucial US payrolls data on Friday; and the final lap leading up to a potential photo-finish US presidential election on November 5 - this relative quiet feels like the eye of the storm,” Tickmill Group partner Patrick Munnelly said.
12.04pm: New business numbers drop in UK
Fewer businesses were created across the UK over the third quarter than in 2023, figures revealed on Friday.
Some 75,405 businesses started up between July and September, the Office for National Statistics (ONS) reported, marking a 3.7% drop against the same period last year.
A 10.5% downtick was seen in new firms setting up in the construction industry, while fewer transport and storage business creations also weighed on the figures.
The number of business closures also fell, the ONS said, by 4.2% to 65,180, with the largest drop again seen among transport and storage firms.
11.46am: Pound on course for worst month in over a year as pre-Budget sell-off hits
Sterling has fallen 2.7% against the dollar so far this month as Budget jitters hit, reflecting its worst performance in over a year.
Though trading flat on Friday, the pound’s fall to US$1.2980 from US$$1.3370 at the start of October means it has faced the worst month versus the greenback since September 2023.
This comes as speculation over faster interest rate cuts this side of the Atlantic has coincided with growing focus on next week’s Autumn Budget.
Citigroup analysts noted this had prompted hedge funds and asset managers to sell off the pound ahead of Wednesday's statement.
“Our data suggests the foreign exchange market is positioned slightly bearish sterling ahead of the Budget,” Citi said.
“Both hedge funds and asset managers have been net sterling sellers since the start of September.”
11.29am: Government borrowing costs pare back after chancellor clarifies debt rule tweaks
Bond yields have gone into reverse on Tuesday after chancellor Rachel Reeves signalled plans to change UK fiscal rules in order to open the door for borrowing in next week’s Budget.
Yields on UK 10-year gilts fell back toward the 4.21% mark over the course of the morning, having surged to 4.24% on Thursday as reports of the tweaks broke.
Reeves since firmed up plans to follow ‘investment’ and ‘stability’ rules, which she said would bring down debt as a proportion of gross domestic product and ensure spending aligned with government revenues.
Yields on the benchmark bonds, which signal returns on government debt, had sat below 3.8% last month.
“A backdrop of rising bond yields means that the chancellor needs to be careful not to spook financial markets in this Halloween eve Budget,” XTB analyst Kathleen Brooks noted.
10.49am: Budget set to see spending boosted by £30bn annually - Goldman
Goldman Sachs analysts have laid out forecasts for chancellor Rachel Reeves to up current government spending by £30 billion annually in next week’s Budget.
This would take spending to 0.9% of UK gross domestic product (GDP) by 2029, as Reeves looks to prevent real-terms cuts to government budgets.
Tax increases worth £25 billion will likely be unveiled in the meantime, according to Goldman, equating to 0.75% of GDP in 2029.
“The government could raise revenues through reforms to capital gains and inheritance tax, removing the national insurance exemption on employer pension contributions, and extending the freeze on personal income tax thresholds,” Goldman said.
Reeves had firmed up plans to change UK fiscal rules on Thursday, which she said would ensure day-to-day spending equated to government revenues and bring down debt against GDP.
Goldman noted Reeves was unlikely to use the full £50 billion headroom unlocked through the tweaks though, in order to prevent market turmoil similar to that seen under Liz Truss.
“Nonetheless, with the debt rule unlikely to bind, there is considerable uncertainty around exactly how much public investment could increase,” Goldman added.
Either way, Goldman suggested spending increases “would be phased in gradually over several years,” leaving “a limited impact on the current deficit at the five year horizon”.
10.00am: Mondi takes £83mln hit as paper mill shut after fire
Mondi PLC (LSE:MNDI) has unveiled a €100 million (£83.4 million) impairment charge due to the closure of one of its paper mills following a fire last month.
The Stambolijski mill in Bulgaria will be shut for good after the fire in late September, Mondi said on Friday, affecting around 300 employees.
Production at the site had since stopped due to extensive damage on a 100,000-tonne per annum brown kraft paper machine, the company noted.
“Mondi has concluded that closing the mill and serving customers out of its network of other kraft paper mills is the best course of action overall,” Mondi added.
This comes “after evaluating the options for repairing the mill and the ongoing investment required for the mill to remain competitive into the future”.
Everyone at the site was said to have remained safe during the fire, which took place on September 24.
Shares in the FTSE 100 firm were flat on Friday.
9.48am: Gold retreats further from record
Gold moved further from its record on Friday as the yellow metal slipped below the US$2,720 mark.
Having surged as high as US$2,758 for a new all-time high earlier in the week, gold slipped to US$2,719 on Friday morning.
This marked a 0.67% drop for the day and comes as traders “consolidate after [the] fresh record and cycle highs,” Saxo Strategy analysts said.
Fresnillo PLC (LSE:FRES) had been among London’s blue chips to benefit on the back of the rise, with shares in the Mexico-based precious metals miner dropping 2% on Friday.
9.22am: Mercedes’ profit slumps on lacklustre demand
Mercedes-Benz Group AG has unveiled a 54% drop in third-quarter profit on the back of sluggish global demand.
Net profit fell to €1.72 billion (£1.44 billion) over the three months to September, the luxury carmaker said on Friday, on the back of a 7% drop in revenue to €34.53 billion.
This came as sales in the likes of China and Germany fell by 16.6% and 25% respectively on weak demand.
Some 503,600 cars were sold over the period, against 510,600 a year earlier.
Chief financial officer Harald Wilhelm noted the results did “not meet ambitions,” but said the carmaker continued to generate cash flows “in challenging times”.
“We are taking a prudent view about market evolution going forward and we will step up all efforts on further efficiency increases and cost improvements across the business,” he added.
Shares fell 2.6% following the update.
9.03am: Chancellor’s debt rule changes risk spooking markets - analyst
Chancellor Rachel Reeves on Thursday signalled plans to change UK debt rules in order to unlock funds for investment in next Wednesday’s Budget.
This included following “stability” and “investment” rules, she unveiled in a Financial Times article, which will see day-to-day spending funded by public revenues and bring debt down as a proportion of gross domestic product, according to Reeves.
Given in-depth detail wasn’t offered, XTB analyst Kathleen Brooks noted the reception of the plan would hinge on the Office for Budget Responsibility’s growth forecast.
This had predicted the UK economy would grow by 0.8% over the course of 2024 in the last Budget in March, before a 2% uptick in 2025.
Tweaks to the forecast this time around would therefore be under scrutiny, Brooks said, alongside the forecasted path of debt ahead.
“If debt levels are not falling significantly on the back of tax hikes, trimmed spending in some areas and the change to the second fiscal rule, markets could be disappointed,” Brooks added.
“From a financial market perspective, this is a high-stakes Budget, and one that could have big ramifications.
“The OBR and the Chancellor need to convince the markets that her debt rule change is best for the country and will reap growth benefits, otherwise UK bond markets could get spooked.”
8.47am: Airtel Africa leads index lower, NatWest bounces
London’s blue chips briefly rose as trading got underway on Friday before falling back into the red for a 4-point decline to 8,264.
This took its fall over the week to 93 points, or 1.1%, as market sentiment appeared downtrodden in the run-up to the Autumn Budget next Wednesday, 30 October.
Airtel Africa PLC (LSE:AAF) led the fallers early on Friday, after the telecommunications provider unveiled a drop in reported revenue and profit for the first half of the year.
This showed revenue down 9.7% at US$2.37 billion and operating profit 20.3% lower at US$706 million, prompting shares to drop almost 5% early on.
NatWest Group PLC (LSE:NWG) topped the risers with a 4.5% gain in the meantime following its report of better-than-expected profits in the third quarter.
8.24am: Thames Water floats liquidity extension plan
Thames Water has unveiled plans to secure a £3 billion lifeline from creditors to shore up its finances into late next year as the supplier grapples with a £15 billion debt pile.
Following reports creditors were lining up to offer cash for London’s struggling water supplier, Thames said on Friday that a consent process would be launched for the liquidity extension.
This would include an initial tranche of £1.5 billion from some creditors, followed by the rest once regulator Ofwat had confirmed spending and bill rules for the sector covering 2025 to 2030.
Maturities of all of Thames’ class A and B debt would also be extended by two years under the plan, after the firm warned it only had enough cash to last until May.
“Today's news demonstrates further progress to put Thames Water onto a more stable financial footing as we seek a long-term solution to our financial resilience,” chief executive Chris Weston commented.
Creditors holding some £6.7 billion worth of Thames’ debt were said to have backed the plan.
8.10am: NatWest impresses with results
NatWest Group PLC (LSE:NWG) shares ticked up early on Friday after the lender upgraded its outlook in third-quarter figures.
It did so on the back of a 26% increase in third-quarter profit, driven by expanded lending and stable profit margins despite declining central bank rates.
For the July-September period, the high street lender reported a pretax profit of £1.7 billion, an increase from £1.3 billion the previous year and surpassing analyst predictions of £1.5 billion... Read more
Shares climbed 3.9% on Friday morning.
8.06am: Kooth regains after reassuring on California contract
Kooth PLC (AIM:KOO) has reassured on a US$188 million contract in California and said an article which prompted its shares to fall by over 18% on Thursday was based on “outdated information”.
“The company's contract in California has not changed since it was announced,” Kooth said on Friday, following a report that a director of the state’s mental health commission had worked to prevent cuts which could have defunded the deal.
KFF Health News had reported the director, Toby Ewing, travelled to London this summer funded by Kooth and had pushed legislators to maintain the contract... Read more
Shares climbed almost 8% as trading got underway on Friday.
7.23am: Consumers in “despondent mood” ahead of Budget - GfK
GfK has reported a drop in consumer confidence through October as households braced for speculated tax hikes in next week’s Autumn Budget.
The group’s consumer confidence index fell by 1 point over the month to -21, reflecting its joint-lowest reading of 2024.
Though optimism around consumers’ finances and major purchases ahead ticked up, concerns around the UK’s broader economic state weighed on the index.
“The largest drop though was in our view of the general economic situation over the last 12 months, down five points to -42,” GfK consumer insights director Neil Bellamy said.
“As the Budget statement looms, consumers are in a despondent mood despite a fall in the headline rate of inflation.
“This month’s consumer confidence barometer paints a picture of people holding their breath to see what’s in store for them on 30 October.”
7.13am: Stocks seen lower
Futures had the FTSE 100 almost entirely giving up Thursday’s gain on Friday morning, pointing to an 8-point drop to 8,303.
Barclays PLC (LSE:BARC) had helped to buoy the index after results on Thursday, alongside the likes of Anglo American PLC (LSE:AAL), Unilever PLC (LSE:ULVR) and London Stock Exchange Group PLC (LSE:LSEG).
However, uncertainty around next week’s Autumn Budget was said to be holding back gains, with chancellor Rachel Reeves having firmed up plans to raise taxes and tweak UK debt rules in order to unlock funds for further borrowing.
Overnight, Asian markets were mixed, with a 1.6% gain for China’s Shenzhen index placing it as the biggest riser.
Back in London, attention on Friday was set to be on NatWest Group PLC (LSE:NWG)’s latest trading update, alongside consumer confidence figures from GfK.