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- FTSE 100 up 33 points at 7,367
- Consumer confidence picks in August – GfK
- Watches of Switzerland shares hit by Rolex deal
1.33pm: Here’s a recap of the top risers and fallers on the junior market today
Shearwater Group PLC (AIM:SWG) gave its shareholders something to cheer about as the cyber and digital security group said trading in recent months had been much better than expected.
Shares rose 7.5p or 19% to 46.5p.
Panthera Resources PLC (AIM:PAT), the gold mining company, was marked 18% higher after its subsidiary Indo Gold received US$13.6 million in funding to pursue claims against the Indian government.
Proteome Sciences PLC (AIM:PRM) fell 22% following publication of its interim results.
Total revenues fell from £3.24 million in the first half of 2022 to £3.21 million this year.
Mkango Resources fell 7.3% after announcing that it is still negotiating with the Government of Malawi to provide, among other things, a stable fiscal regime in which the company can operate its projects in the country and be attractive to financial partners.
1:00pm: Heineken takes loss as exits Russian
Heineken NV has sold its Russian business to native manufacturing company Arnest Group for €1, incurring a total loss of €300 million (£256 million), becoming the latest company to exit Russia.
The sale means Russia’s largest manufacturer of cosmetics, household goods and packaging will take over seven Heineken breweries and any other remaining assets.
Taking responsibility for Heineken’s 1,800 Russian workers, Arnest Group said it would provide employment guarantees for the next three years.
The exit reflects ongoing sanctions against Russia in the wake of its invasion of Ukraine.
12:35pm: Octopus Energy could buy Shell Energy Retail – Sky
Octopus Energy is in detailed talks to buy Shell PLC (LSE:SHEL, NYSE:SHEL)’s s household energy customer base – a deal that would edge the company closer to challenging British Gas as the UK’s biggest domestic gas and electricity supplier, according to Sky.
Sky said Octopus Energy, run by Greg Jackson, has emerged as the frontrunner to acquire Shell Energy Retail although other parties remain in the frame to buy the business.
If completed, a takeover by Octopus Energy would take the number of homes it supplies in the UK to about 6.5 million – still short of Centrica-owned British Gas but larger than virtually every other competitor in the UK market, the report said.
12:02pm: US futures pointing higher ahead of Powell’s speech
US stocks are expected to rally ahead of Federal Reserve chair Jerome Powell’s speech at the Jackson Hole economic symposium.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.3% higher, while those for the S&P 500 rose 0.3%, and contracts for the Nasdaq 100 futures were up 0.1%.
Susannah Streeter at Hargreaves Lansdown noted, “there is a sense of bated breath ahead of Fed Chair Jerome Powell’s speech later today.”
Powell’s hawkish comments to the gathering of central bankers last year prompted heavy falls in equities as he warned of “some pain” ahead in the battle against inflation.
“It would take a brave person to load up on shares just before Federal Reserve chair Jerome Powell makes his speech later today at the Jackson Hole summit,” said AJ Bell’s Russ Mould.
“Any comments to suggest the Fed is going to keep raising rates for some time could trigger another risk-off mood for investors,” he said.
“August has been generally miserable for markets and a hawkish Powell could easily knock share prices once again before the month is up.”
Ahead of Powell’s speech, the Boston Fed president Susan Collins said more rate increases may be needed to bring inflation down to the central bank’s 2% target.
“I am not yet seeing the slowing that I think is going to be part of what we need for that sustainable trajectory to get back to 2% [inflation] in a reasonable amount of time,” Collins told the Financial Times, later adding that “that resilience really does suggest we may have more to do”.
Aside from Jackson Hole, the University of Michigan will release its final reading of consumer sentiment for July, with economists expecting the level to hold steady at the preliminary reading of 71.2, relatively unchanged from June.
Stocks on the move include Marvell Technology which has fallen back 7% in pre-market trading after reporting a loss in the financial second quarter compared to a profit the year before.
Revenue came in above the mid-point the firm guided to in May and it forecast sequential revenue growth would accelerate in the third quarter driven primarily by AI and cloud infrastructure.
11:33am: Will there be a late twist at Wilko?
Could there be a late twist in the demise of Wilko?
The Times reported that the Canadian tycoon behind HMV has made a last-ditch attempt to rescue the stricken retail chain.
Doug Putman, whose family also owns Toys R Us in Canada, is understood to have been holding detailed talks with Wilko’s management team and administrators from the accountancy giant PwC, The Times said.
Putman’s offer would involve keeping about half the discount retailer’s 400 shops and 3,000 to 4,000 of its 12,000 workers.
But The Times said Mark Jackson, the chain’s chief executive, is understood, however, to have told senior staff that the Putman deal is unlikely to happen.
11:02am: Tesco could raise guidance with half-year results says Barclays
Analysts at Barclays expect strong results from Tesco PLC (LSE:TSCO) in October 4, and as a result, thinks it may well raise full-year retail Ebit and free cash flow (FCF) guidance.
The broker forecasts UK like-for-like sales growth of 8.9%, retail Ebit of £1,375 million, bank Ebit of £70 million, and retail FCF of £1.05 billion.
“if our 1H forecasts prove broadly accurate, then we struggle to see how Tesco would avoid upgrading its FY23/24 guidance for retail Ebit and retail FCF, even if it takes a very cautious view of how 2H might pan out,” Barclays said.
The broker has raised EPS by around 7% for the 2023/24 financial year and by c4% and c3% for each of the following two years pushing its price target up to 325p from 320p.
It continue to think that Tesco shares look attractive given: ongoing solid market share performance by the core UK business; market share gains being made by Booker; consistent cash generation; and consistent cash return (dividends and buyback).
Barclays reiterated a buy rating and shares are 1.4% at 258.80p.
10:20am: Aston Martin goes through the gears as Jefferies upgrades
Shares in Aston Martin Lagonda Holdings PLC are motoring after Jefferies upgraded the stock to buy from hold and raised its price target by 26% to 420p.
The broker says it “feels like a new start at AML with net debt stabilized, renewed focus on front-engine cars and sharp average selling price (ASP) upgrades.”
“We expect DB12, refreshed Vantage and new DBS will drive volume and margins, as well as support more Specials,” it added.
M&A interest supports the shares and the brand has room to grow volume and ASPs, it believes.
Jefferies reckons it is starting to close the gap to peers and is an attractive opportunity for a brand that could grow from its low liquidity, small cap status to become a compounder over time.
The broker has nudged its full-year revenue forecast up 3% £1.63 billion on higher ASPs with gross margin of 37.2%, an Ebit loss of £53 million and free cash flow (FCF) outflow of £179 million.
For 2024 it expects gross margin to approach 40%, £65 million Ebit and FCF still slightly negative at £39 millio, with upside from working capital as well as potential improvement in cash interest cost.
Shares were marked 4.9% higher at 336.40p.
9:45am: German business confidence deteriorates
Over to Germany, and news that companies are becoming more pessimistic about the economy, according to a closely watched index of business confidence.
The Munich-based Ifo Institute said its business confidence index fell 1.7 points to a 10-month low of 85.7, as companies become more gloomy about current conditions and the next six months. Economists had expected a smaller drop to 86.7.
German business morale falls again to 85.7 vs86.7 expectations
“We are moving from supply side problems to demand problems” (in a nutshell)
– Klaus Wohlrabe, @ifo_Institut
— Joumanna Nasr Bercetche ???????? (@CNBCJou) August 25, 2023
Earlier, revised German GDP data confirmed last month’s estimate that output stagnated in the three months to June, compared with the previous quarter.
The Dax has shrugged aside the downbeat news though, up 0.2% at 15,655.83.
9:28am: Watches of Switzerland shares unnerved by Rolex deal
Watches of Switzerland remains by far the biggest mover in the FTSE 350, down 26% at 510.47p after Rolex bought one of its key rivals, Bucherer.
“Investors seem to fear the tie-up will mean Bucherer gets preferential treatment including better access to the watches that consumers are desperate to buy,” said AJ Bell’s Russ Mould.
“Watches of Switzerland’s efforts to reassure the market that there will be no change in how Rolex allocates stock have fallen on deaf ears. This is what Rolex might have promised now, but that could easily change in the future,” he added.
Mould explained: “There has been a trend among various product manufacturers including the big trainer companies to sell direct to the consumer. In doing so, they learn more about customer preferences and make more margin as they can cut out the middleman for these direct sales.”
“Imagine that happening with Rolex. Theoretically, it could use Bucherer as its channel to sell and not have to bother with other authorised dealers such as Watches of Switzerland,” he added.
But analysts at Jefferies pointed to the strong ties between Watches of Switzerland and Rolex highlighting the “recent launch of Rolex’s Certified Pre-Owned programme in the US in July (with the UK to follow in September) is a good reminder of the strong collaboration between” the two.
It feels the best-judged reaction has come from the group itself which said “the highest level of Rolex management at Rolex HQ in Geneva and locally in the UK and US’ have confirmed ‘this is not a strategic move into retail by Rolex.”
Jefferies reckons the investor event in the autumn will provide the firm with the opportunity to “assuage potential new fears in the market.”
8:55am: FTSE extends gains, Tesco in favour
The FTSE 100’s steady progress continues with the index now up 18 points at 7,352.
Tesco PLC (LSE:TSCO) is top of the risers, up 1.8%, boosted by a posiitve note from Barclays which has nudged its price target up to 325p from 320p.
The broker expects a strong first half results in October and sticks with an overweight rating.
Rolls-Royce Holdings PLC (LSE:RR.) is still feeling the warmth of UBS’s upbeat comments on Thursday when the Swiss bank painted an upside scenario where the stock could hit 600p.
Over in the FTSE 250, Aston Martin is going through the gears following the Jefferies upgrade to buy but CMC Markets and Watches of Switzerland are the big movers, and in a good way, down 14% and 26% respectively after news reported this morning.
8:35am: Watches of Switzerland tumbles on implications of Rolex deal
A big early mover is Watches of Switzerland Group PLC (LSE:WOSG), down 28% in early exchanges, after Swiss watch brand Rolex announced the acquisition of Bucherer, one of the world’s largest luxury watch retailers.
In a statement reacting to the news, Watches of Switzerland said the acquisition doesn’t represent a strategic move into retail by Rolex, and there will be no change in the product allocation or distribution of Rolex watches.
Watches of Switzerland said it had this “confirmed by the highest level of Rolex management” in Geneva.
Analysts at Shore Capital said “the deal is unlikely to impact Watches of Switzerland’s sales of Rolex in the short term.”
“There is limited geographical overlap between Bucherer and Watches of Switzerland’s physical presence, with the majority of Bucherer stores situated in Continental Europe, while Watches of Switzerland’s stores are primarily located in the UK and the US,” it noted.
But “while we sense that the deal may not carry significant strategic weight for the UK, where Bucherer operates only 5 stores, it does raise more considerations for Watches of Switzerland’s strategy in the US,” where it owns 47 stores compared to Bucherer’s 30.
“While this prompts us to approach Watches of Switzerland’s investment case with caution rather than undue optimism, we are refraining from jumping to premature conclusions,” the broker added.
“While the news could indeed pose challenges,” to the investment scenario and could induce investor caution in the absence of a management statement, “we can envisage a scenario where Rolex directs its attention to Continental Europe, where the majority of Bucherer’s stores are situated.”
“Meanwhile, Watches of Switzerland’s could persist in its international expansion, particularly in the US and the Nordics,” it suggested.
8:15am: Improved consumer confidence gives FTSE a lift
The FTSE 100 has edged higher in early trading with better news on consumer confidence offset by caution of a speech by Federal Reserve chair Jerome Powell at the Jackson Hole symposium.
At 8:15am, London’s lead index was up 13.15 points, 0.2%, at 7,346.78 while the FTSE 250 was down 51.66 points, 0.3%, at 18,142.91.
No fireworks are expected from Powell’s speech later today, but as always markets will be searching for the nuances of his language hunting for clues as to future monetary policy.
Susannah Streeter at Hargreaves Lansdown noted, “there is a sense of bated breath ahead of Fed Chair Jerome Powell’s speech later today.”
“Comments from Fed president Susan Collins have already laid the ground for the fact rate increases may be needed to stifle inflation, with more work to be done to get it in line with targets within a reasonable timeframe,” she added.
Back in the UK, and brighter news on consumer confidence which picked up 5 points in August according to the closely-watched GfK survey, although it remains firmly in negative territory at minus 25.
Joe Staton, client strategy director at GfK, said: “Although the headline figure remains strongly negative at minus 25, hopes for our personal financial situation for the coming year are heading back towards positive territory, a metric that is key to indicating the future financial position of households.
Gabriella Dickens at Pantheon Macroeconomics said: “A renewed recovery in consumers’ confidence makes sense, given the fall in energy bills in July and the drop back in mortgage rates over the past few weeks.”
“The improvement was broad-based, with consumers’ more upbeat about the year-ahead outlook for both the economy and their personal finances.”
But HL’s Streeter pointed out: “While the sun may have been shining on moods when this survey was taken, there has now been a slew of data that suggests the UK is slipping into recession.”
Dickens agreed. “Consumers’ confidence, however, still is well below its average since 1974…..suggesting households will remain cautious in the near-term, with some saving the additional cash from lower energy bills, while others will prioritise paying off debt.”
In company news, CMC Markets PLC (LSE:CMCX) tumbled 10% after it warned of “challenging” trading conditions in August.
Peel Hunt noted CMC now expects net operating income for the year to March 2024 to be £250-280 million which at the mid-point, “would be c.£49 million less than the £314 million we previously expected.”
The broker has placed its rating and price target under review.
One share motoring was Aston Martin Lagonda Global Holdings Ltd as Jefferies upgraded to buy from hold.
7:56am: Consumer confidence picks up in August – GfK
Better news on consumer confidence with is showing “renewed optimism” as inflation starts to ease, according to a new survey.
GfK’s closely-watched consumer confidence Index ticked up five points in August, with all measures reversing the drop seen in July, although it remains firmly in negative territory at minus 25.
Joe Staton, client strategy director at GfK, said: “Although the headline figure remains strongly negative at minus 25, hopes for our personal financial situation for the coming year are heading back towards positive territory, a metric that is key to indicating the future financial position of households.
“This renewed optimism can also be seen in the similar turnaround for our view on the general economic outlook for the next 12 months, and the eight-point advance in major purchase intentions is potentially better news for retailers as we move into autumn.
Confidence in the general economic situation for the next 12 months improved by three points to minus 30 – 30 points better than last August – against a backdrop of falling core inflation, higher interest rates and rising average weekly earnings, GfK said.
The forecast for personal finances over the coming year increased four points to minus three – 28 points higher than this time last year.
7:46am: Energy price cap to fall to £1,923 – Ofgem
Ofgem has announced the latest energy price cap for households in Great Britain and the magic number is to fall to £1,923 a year in a typical household, it has said.
The cap, which does not apply to Northern Ireland, was set at £2,074 for July to September.
The energy #PriceCap will change on 1 Oct 2023
If you pay by direct debit it’s £1,923 – pre-pay is £1,949
It’s based on typical use of an average home on a supplier’s standard default tariff
It’s a cap on energy unit price, not a cap on total bills
➡ https://t.co/E7kjQqdAUu pic.twitter.com/1lclX8TqRf
— Ofgem (@ofgem) August 25, 2023
Ofgem said the change will bring the average dual-fuel energy bill below £2,000 a year for the first time since April 2022, saving households an average of £151 on the previous quarter.
The drop, the lowest level since October 2021, reflects further falls in wholesale energy prices, as the market stabilises and suppliers return to a healthier financial position after four years of loss making, Ofgem said.
7:31am: CMC Markets reports fall in trading revenue in “challenging” environment
Kicking off Friday with news from CMC Markets PLC (LSE:CMCX) which reported subdued market conditions have continued through August in what it called a “challenging” environment.
The online trading and platform technology group said in August trading and investing net revenues trended 20% lower year-on-year with “markedly lower monetisation of client trading activity due to a higher proportion of lower margin institutional volume.”
As a result, the FTSE 250-listed firm expects full-year net operating income will be between £250 and £280 million.
Core KPIs including client money, assets under administration, and active clients across both the trading and investing businesses remain robust with no material change seen through recent weeks, the firm said.
Cost expectations, excluding variable remuneration, are also unchanged at £240 million.
Interim results for the six months to September 30 are due to be released on November 16, 2023.
7:00am: FTSE seen subdued ahead of Jackson Hole
The FTSE 100 is expected to start make steady progress Friday ahead of Federal Reserve chair Jerome Powell’s speech to the Jackson Hole economic symposium in Wyoming.
Spread betting firms are calling London’s lead index up by around 14 points after closing up 13.10 points, or 0.2% at 7,333.63 on Thursday.
“As we already know from recent comments from various Fed officials it is clear the Fed believes the fight against inflation is far from over, and in that context it’s unlikely he will deliver any dovish surprises,” CMC’s Michael Hewson predicted.
Ahead of Powell’s speech Boston Fed president Susan Collins said more rate increases may be needed to bring inflation down to the central bank’s 2% target.
“I am not yet seeing the slowing that I think is going to be part of what we need for that sustainable trajectory to get back to 2% [inflation] in a reasonable amount of time,” Boston Fed President Susan Collins told the Financial Times, later adding that “that resilience really does suggest we may have more to do”.
It’s looking like a quiet company news day in London but we’ll keep you updated, as always, on all the major developments.
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