- FTSE sees small gain at close
- Cineworld files for bankruptcy, report
- Strikes across transport in London
4.50pm: Gains at close
The FTSE 100 index ended essentially where it began on Friday, as a weaker pound fell to a four-week low against the dollar.
At the close, the UK blue-chip index was 8.52 points higher at 7,550.37.
Over on Wall Street, all major indices were in the red, with the S&P 500 down 1.2%, the Dow losing 0.8% and the Nasdaq falling 1.9% as Bed Bath & Beyond continued to plunge after investor Ryan Cohen dumped his holdings.
Back in London, a collapse in the pound helped save the FTSE 100, according to IG senior market analyst Josh Mahoney.
“European equities have been hit hard today, as markets start to show signs of a potential impending bearish reversal coming into play. Fortunately for UK investors, the FTSE 100 has managed to perch itself on an island of green, with a collapse in the pound helping to avoid the seemingly inevitable drop into the surrounding red sea,” Mahoney wrote in a note. “The resurgence in the dollar seen this week serves to highlight the growing feeling that we are on the cusp of another slump, as investors prepare to head for the exit doors once again.”
Meanwhile, UK consumer confidence hit a new low as the latest Gfk consumer confidence survey saw the gauge fall to a record low, with the surge in inflation serving to damage sentiment over and above any of the recessions in the past 50 years.
“Unfortunately, things are unlikely to improve, with the Citi have predicted inflation will keep rising into a 15% Q1 2023 peak,” Mahoney added.
“Unfortunately, the collapse in European currencies does little to help alleviate these inflationary fears, with a weaker pound and euro meaning that imports become increasingly more expensive.”
2.45pm: Cineworld on the brink
More on Cineworld from Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown.
‘’This is the latest twist in what’s been a Covid horror story for Cineworld after it failed to lure back enough movie goers to help pay back its enormous debts."
"Chapter 11 is considered to be a highly complex form of bankruptcy and would ordinarily only be undertaken if the company had exhausted all other avenues."
"It seems the discussions Cineworld had entered into earlier this week with stakeholders to obtain additional funding have not borne fruit but if it does file for bankruptcy, it’s unlikely to be the final chapter for the company."
"This type of bankruptcy known allows a company to stay in business and restructure its debt obligations but the plan has to be in the best interest of its creditors"
"Even as a reorganised entity, Cineworld will face a tough challenge ahead as it’s unlikely that ticket sales will ever fully recover to the heady days of the past, given the huge shake-up of the movie industry and the growing might of the streaming giants.’’
2.31pm: US open
US markets opened lower as expected, with the Dow Jones down 0.47% to 33,840 and the S&P 500 down 0.64% to 4,256.
The tech laden Nasdaq also slipped, falling 1% to 12,841.
2.21pm: Cineworld on the brink
Shares in Cineworld tumbled 53% in what may be the final nail in the coffin for the cinema operator after reports it is preparing to file for bankruptcy.
According to Reuters, which cites a report in the Wall Street Journal, the group is struggling to rebuild its attendance from pandemic lows.
The news comes just days after the chain warned that a lack of big-budget movies was hitting admissions and would persist until at least November.
London-listed, the group is expected to file a chapter 11 petition in the United States and is considering filing for insolvency proceedings in the UK.
1.37pm: Transport strikes
As transport strikes continue, this time with underground and bus services in London disrupted, transport secretary Grant Shapps blamed the unions for not putting a pay offer to members.
Shapps wants the union to put forward a pay rise of 8% over to years to its members.
However, this is below the 10.1% rise in inflation, and would suggest a real-terms pay cut.
“It’s certainly enormously disruptive, particularly in the capital today where the strikes are focused. But look, overall I don’t think there’s any reason to be having these strikes at all,” Shapps told BBC Radio.
“A very fair pay offer has gone on the table on the wider network of 8% over two years. This is no compulsory redundancies in return for modernising work practices that should have gone out with the ark.”
Union members voted last month overwhelmingly in favour to strike last month, with 91.1% agreeing to the action from a 53.1% turnout.
1.31pm: Balfour Beatty also gets a target price hike
Construction firm Balfour Beatty also received a boost from Liberum, with its target price now set at 400p, 40p higher than before.
According to a note, the interims “demonstrated positive momentum in the operating businesses, cash flow and investments valuation.”
The broker also believes inflation is manageable, and that investments are a positive driver of its value.
Liberum is also excited by its pipeline of opportunities, which include modular nuclear, hydrogen and carbon capture.
1.12pm: Rathbone receives target price raise
Wealth management firm Rathbones Group PLC (LSE:RAT, OTC:RTBBF) had its target price upped to 2320p from 2160p by analysts at Liberum.
Specifically, the broker mentioned that despite a fall in markets hitting the group’s profits and assets under management, “continued positive net flows highlight its strong client engagement.”
“This well-diversified group is also seeing tailwinds from rising interest rates,” and despite earnings forecasts being cut by 15%, Liberum believes the market is undervaluing Rathbones leading position.
12.51pm: RELX on top
London's blue-chip index continues to linger around its start, down by 1 point.
Business publisher and data provider RELX PLC (LSE:REL) leads the index, up 1.7% to 2,459p while British Airways owner IAG sits at the bottom, down 3% to 115p.
12.18pm: US preview
US stocks were expected to open lower on Friday with the focus returning to concerns highlighted by the minutes of the US Federal Reserve's last rate-setting meeting which indicated that the fight against inflation has yet to be won.
Futures for the Dow Jones Industrial Average were trading 0.6% lower pre-market, while those for the broader S&P 500 index were down 0.8%, and contracts for the tech-laden Nasdaq-100 lost 0.9%.
The minutes, released on Wednesday, came in more hawkish than expected weighing on stocks and since then economic data from the world’s biggest economy has come in mixed.
“The Federal Reserve minutes released this Wednesday showed that the US will continue raising the rates and tightening the monetary conditions to bring inflation back toward the 2% level in the US,” noted Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
In the wake of the softer-than-predicted headline inflation number last week, investors had scaled back their expectations for future rate hikes, but the Fed minutes have since forced investors to rethink those expectations. After all, inflation still remains at decades-high levels and there is no certainty it has peaked in this cycle, added Ozkardeskaya.
“The latest data showed that the existing home sales declined in the US, but the Philly Fed manufacturing index came (in) unexpectedly stronger. Jobless claims also fell more than expected last week, defying those calling for recession in the US,” she concluded.
Meanwhile, Federal Reserve Bank of St Louis President James Bullard was on record on Thursday as saying he may be in favor of another big rate hike when rate-setters meet next month as inflation may not have peaked just yet.
Elsewhere, European Central Bank board member Isabel Schnabel noted that the eurozone inflation outlook has also failed to improve since the ECB’s rate hike in July and that she will favor another large interest rate hike next month, even as recession risks harden. Her remarks highlight the dilemma faced by rate-setters across the world.
11.51am: Gulf states set for mega windfall
Oil companies in the Middle East are to set bag an over £1trn windfall over the next four years due to higher oil prices.
The International Monetary Fund (IMF) said the Gulf states were likely to benefit the most from elevated prices following Russia’s invasion of Ukraine.
IMF’s director for the Middle East and North Africa, Jihad Azour, told the Financial Times the Middle could expect to receive an additional £1.09tln more in revenues compared to previous forecasts before the war in Ukraine.
According to the Guardian, the cash will be used to build infrastructure products and invest in overseas initiatives.
Azour said in the FT, “What is going to be really important is how they [Gulf states] manage this new cycle and how they maintain, at the same time, the benefits of the additional liquidity and the policies that will not lead them into procyclicality.”
11.15am: Oil prices stabilising near $90?
Oil prices may be stabilising around the US$90 a barrel mark for most of August, analysts are suggesting.
Prices had surged since Russia’s invasion of Ukraine at the end of February, but have been on a steady decline since June.
“Oil prices are paring yesterday's gains in what is yet another volatile session and week. The list of downside risks has definitely grown lately, with growth certainly top of it,” said Craig Erlam, senior markets analyst at OANDA.
“Iran nuclear talks have not collapsed yet which remains another potential negative for crude prices given the reported potential for a large amount of crude to come to the market relatively soon.”
“We may be seeing oil prices stabilising around these levels, with Brent hovering above US$92 and WTI choppy around US$90.”
“I can't imagine it will last long considering how the rest of the year has gone with a conclusion on the JCPOA talks probably having an impact one way or another.”
10.42am: Retailers with tough decisions to make
Retailers are now facing tough decisions as to the extent they can pass on price increases in this environment,” Rindone said.
“EY’s latest Future Consumer Index (FCI) found that consumers are taking decisive action when reacting to price rises on discretionary purchases – 49% are buying less clothing, shoes and accessories while 43% are purchasing less in the consumer electronics category and 14% have stopped purchasing altogether.”
“Retailers can potentially mitigate the impact of price increases by thinking strategically, segmenting their market, and being smart about how and where they apply price increases. It’s clear that a ‘one-size fits all’ model will no longer work.”
10.02am: JustEat rallies
Shares in JustEat rallied 29% after it confirmed the sale of its stake in iFood, its Latin American joint venture, to Prosus.
The food delivery service agreed to sell its 33% holding for up to €1.8bn in cash, giving Prosus full control of iFood.
Total consideration comprises of €1.5bn in cash upon completion, expected in the fourth quarter if this year, and deferred consideration of €300mln.
The deferred consideration is dependent on the performance of the online food delivery sector over the next 12 months, according to a statement from JustEat.
The food delivery company said it “remains focused on improving its profitability and on a disciplined allocation of capital” and will use the disposal proceeds to maintain its balance sheet strength and to pay back debt.
In a separate statement, Prosus chief executive Bob van Dijk said: "Increasing our stake to full ownership is a demonstration of our committed and disciplined approach to investment and reflects our confidence in the long-term potential of iFood."
9.29am: Quick snapshot
FTSE 100 was little changed in early trading, down 10 points to 7,531. Oil giants Shell and BP lead the index as crude oil inches back above US$90 a barrel.
Just Eat agreed to sell its 33% holding in the Latin American joint venture iFood to Prosus. The deal will give Prosus full control of iFood.
UK retail sales picked up in July but continued to show longer-term signs that consumers are making cutbacks, according to the ONS. Sales were lifted by 0.3% last month.
The annual bonuses paid to water company executives rose by 20% in 2021. This was despite most of the firms failing to meet sewage pollution targets.
Among the small caps, Goodbody Health said revenue rose in the first half of 2022. However, the pace slowed towards the end of the period with an easing in demand for Covid PCR tests.
Made Tech saw revenue accelerate in the year to May, soaring 120. The current year also started strongly.
Joules warned that it expects to report a full-year loss significantly below market expectations. Margins continue to be pressured by a heavily promotional environment.
9.00am: Consumer confidence hits all-time low
Shares in London were slightly lower in early trading as a survey showed that consumer confidence in the UK had hit an all time low and as Government borrowing came in worse than expected.
Gains in the US on Thursday limited the downside while UK retail sales in July also came in better than expected with growth of 0.3% against expectations for a 0.2% fall, providing some support to the market.
By 8.55am the FTSE 100 was trading 10.07 points lower at 7,531.78 while the broader FTSE 250 was down 79.46 points at 20,057.19.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown: said “UK consumer confidence has plummeted to the lowest level since comparable records began, as the soaring cost of living casts serious doubt over people’s personal finances, while wider economic slowdown concerns are also a source of anxiety.”
“In monthly research from GfK, the August index score for consumer confidence fell to minus 44, from minus 41 the previous month.”
“This move is hardly surprising given prices are rising at double digits, while we’re seeing the largest drop in real wages for more than 20 years.”
“The read across of this for the broader economy is that we now know as a certainty that nerves are getting worse, not better.”
“That has far-reaching implications for corporate margins as we’re likely to see increased discounting, as well as a sustained trend of people looking for bargains.”
She said this is precisely what the latest ONS retail figures have shown, where discounts online helped lift retails sales in July compared to June.
But she pointed out that most of this news is already priced into the market “The FTSE is unperturbed by the darkening mood music, largely because this has already been priced in, with the FTSE 100 struggling to find its jumping-off point in the year-to-date. News of further consumer turmoil has been seen coming down the pipes for some time.”
Shares in Next (-1.6%), Kingfisher (down 1.65%) and Marks and Spencer (-1%) fell following the consumer confidence and retail sales news.
Retailer, Joules Group PLC (AIM:JOUL), saw its shares collapse 34% after reporting that trading since its last update had “softened materially” meaning it now expected to report a significant loss in the first half and a full year loss before tax, and before adjusting items, significantly below current market expectations.
Joules said it continues to have positive discussions with its bank on its medium-term financing and that talks with Next regarding a possible investment continue.
8.20am: FTSE slips after weak consumer confidence figures
FTSE 100 fell back in early trading weighed by gloomy consumer confidence data and worse than expected figures on Government borrowing, which offset news of a rebound in UK retail sales in July.
By 8.20am the blue chip index was trading 18.77 points lower at 7,524.80.
GfK’s widely watched survey on consumer confidence showed a fall in August to -44, the lowest level since records began reflecting “acute concerns” about the soaring cost of living and bleak economic outlook.
The public's forecast for the next 12 months is also gloomy, recording a heavy fall in recent months to a new low of minus 60.
The market was also eying worse than expected figures on Government borrowing with public sector net borrowing (excluding public sector banks) reaching £4.9bn in July, above the consensus of £3.2bn and the OBR’s forecast, £0.2bn.
On a brighter note, UK retail sales rebounded in July rising 0.3%, above forecasts for a 0.2% decline, although concerns remain about how sustainable this is as consumers face rising energy cost bills in the Autumn and beyond.
Kingspan Group PLC (LSE:KGP) pleased investors after releasing half year results today which pushed shares 4.26% higher.
Analysts at Shore Capital said full year revenues of €4,153mln were modestly higher than expected and driven by price increases to recover raw material inflation.
Trading profit of €434mln was also 5% than management had guided in June.
Analyst Graeme Kyle said “Overall, we expect to retain our bottom-line forecasts.”
“We expect to increase our full year 2022 revenues by c9% and decrease our full year 2022 trading profit margin to take account of the margin reported in the Insulation segment.
Shares in Volex PLC (AIM:VLX) rose 1.5% after it said the group’s performance in the first quarter has been strong, in line with management's expectations and the new, five-year growth plan.
Revenues grew organically by 4.9% reflecting positive customer demand and our ability to deliver against the backdrop of a challenging supply chain environment, it added.
7.50am: Retail sales "holding their ground for now"
Holding their ground for now” was how Samuel Tombs, chief UK economist at Pantheon Macroeconomics described this morning’s UK retail sales figures, with the resilient showing helped by financial support from the Government.
Prices continued to rise rapidly but households upped their nominal expenditure by just enough to generate a marginal increase in sales volumes, he said.
While non-food store sales fell by 0.7%, reflecting sharp declines in clothing and household goods store sales, non-store sales rebounded by 4.8%, and food sales edged up by 0.1%.
Tombs said he thinks retail sales volumes will continue to hold their ground over the next couple of months, given that households’ incomes were boosted significantly in July by both the increase in the threshold for employees’ NI contributions and by the payment of a £326 cost of living grant.
In addition, wages likely will rise at a similar quarter-on-quarter rate to prices in quarter three, given that electricity and natural gas prices won’t rise until October and motor fuel prices will be lower than in quarter two.
But the real challenge for retailers will come this winter, as the increase in the energy price cap in October looks set to deliver a near-4% hit to real disposable incomes, he pointed out.
Tombs said he remained hopeful that a combination of further fiscal support from the next Prime Minister and a drawdown of savings by mid-to-high income households will suffice to keep households’ expenditure broadly steady in quarter four and quarter one.
But with the government yet to reveal its cards and consumers’ confidence sliding a new record low in August, a consumer-led recession cannot be ruled out, he warned.
7.25am: London seen flat, consumer confidence drops to all time low - GfK
Trading in London is expected to make a subdued start on Friday despite gains in the US, and a rebound in UK retail sales in July, which came in better than expected.
Spread betting companies see the lead index broadly unchanged at the open.
UK retail sales volumes rose by 0.3% in July 2022, better than expectations for a 0.2% decline, although June’s number was revised down to -0.2% from -0.1%, the ONS said.
Sales volumes were 2.3% above their pre-coronavirus (COVID-19) February 2020 levels, but down over the past year, and the ONS said the for three months to July 2022 sales volumes fell 1.2%.
Automotive fuel sales volumes fell by 0.9% in July 2022 on evidence that the heatwave may have reduced travel and non-food stores sales volumes fell by 0.7% over the month because of falls in other non-food stores (negative 1.5%), and clothing stores (negative 1.2%).
Food store sales volumes rose by 0.1% in July 2022; sales volumes were 0.1% below their February 2020 levels.
The proportion of retail sales online rose to 26.3% in July 2022, from 25.3% in June 2022; despite this pick-up, it continues a broad downward trend since its peak in February 2021 (37.5%), but remains above pre-pandemic levels (19.8% in February 2020).
Another survey released today showed UK consumer confidence at all time low.
GfK’s Consumer Confidence Barometer showed a fall in August to -44, the lowest level since records began reflecting “acute concerns” about the soaring cost of living and bleak economic outlook.
The public's forecast for the next 12 months is also gloomy, recording a heavy fall in recent months to a new low of minus 60.
"A sense of exasperation about the UK’s economy is the biggest driver of these findings," said Joe Staton, GfK's client strategy director.
6.55am: FTSE seen slightly higher
FTSE 100 seen opening slightly higher on Friday after gains in the US overnight although a survey showing consumer confidence in the UK at an all time low may hit sentiment.
Spread betting companies are calling the FTSE 100 up by around 4 points.
GfK's Consumer Confidence Barometer, which has run since 1974, said consumer confidence was at an all-time low in light of "acute concerns" about the soaring cost of living and bleak economic outlook.
The group's index decreased by three points in August to minus 44, the lowest level since records began.
All five measures - which include confidence in personal finances, general economic outlook, and savings - were down in comparison to the same time last month.
In the US the Dow closed Thursday up 21 points, less than 0.1%, at 34,001, the Nasdaq added 27 points, 0.2%, to 12,965 and the S&P 500 improved 10 points, 0.2%, to 4,284.
It was a rocky day of trading for the benchmarks, particularly the Dow, which spent the majority of the day underwater. Investors reacted to initial jobless claims, which fell to 250,000 in the week ended August 13, according to the US Department of Labor. Analysts had projected 260,000 claims.