FTSE 100 Live: Stocks flat but US markets make early progress

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  • FTSE 100 up 7 points at 7,481
  • Eurozone inflation stronger-than-expected
  • US PCE inflation figures in line with forecasts

4:05pm: Reported sale of Future’s B2B assets makes sense – Barclays

Barclays has taken a look at reports by Sky that Future PLC (LSE:FUTR) is considering offloading its B2B assets, and reckons it makes sense.

The broker was commenting after a report on Sky suggesting Future was looking at disposing its B2B assets: Smartbrief and a few other elements like IT Pro, Music Week, Technology Leaders Summit and TV Tech.

The article suggested that Future has engaged an advisory firm to look at interest from potential bidders for these assets. And it says that the sale would involve “the majority, if not all, of Future’s B2B operations”.

Barclays said a sale of the units, which represent around 8% of revenue, would make sense as the fit with the rest of the group is not too clear and it could highlight value within the portfolio.

“Of course the degree to which this helps the story will all depend on the multiple achieved – if indeed they do look to sell,” the bank added.

“On calendar 2023 EV/EBITDA, Future is currently trading on 4.4x.” 

“If they can raise a significantly higher multiple for these businesses, 1) that would indicate how cheap the rest is (and highlight the SOTP angle with GoCo also likely being worth a clearly higher multiple than the group, when looking at peers); and 2) if they were to use the cash for a buyback then the process would be accretive,” the bank suggested.

Future has been pressured by tough end markets, management transition and fears around AI, with the shares falling hard in 2023, Barclays explained. 

“Anything that highlights that the Future portfolio is diversified and has some hidden value should be helpful,” it added. 

 

3:39pm: BoE’s Huw Pill favours higher rates for longer

The Bank of England’s chief economist has been speaking in South Africa and come out with some unusual metaphors when discussing the future path of UK interest rates.

Huw Pill indicated that he will vote to keep interest rates at their current 15-year high of 5.25% for an extended period rather than raising them much further.

He told an audience at South Africa’s central bank that the BoE still had to “see the job through” and be vigilant with “stubbornly high inflation”, but pushed back against financial market expectations that this meant further interest rate rises.

In slides that the central bank did not publish, Pill compared possible paths for UK interest rates to the Matterhorn mountain in the Alps, with sharp rises and falls, and Table Mountain in South Africa, with a long period of rates around 5.25%, which the BoE considers to be depressing demand.

Pill, said he “tend[ed] to favour the latter” path, resembling Table Mountain, with a “resolute profile [of interest rates] rather than a spike profile”.

But in a sign of his continued hawkish stance, Pill said the BoE’s emphasis was “still on ensuring we are sufficiently restrictive for sufficiently long to meet out target”, adding: “Core inflation remains stubbornly high and doesn’t show any obvious decline.”

3:02pm: M&S challenges decision to block Marble Arch plans

Marks and Spencer Group PLC (LSE:MKS) has launched a legal challenge to Michael Gove’s decision last month to stop it from demolishing its Marble Arch store. 

The retailer threatened to quit the site altogether if it was not allowed to go ahead with the redevelopment on London’s Oxford Street.

M&S’s operations director Sacha Berendji said it believed the levelling-up minister “wrongly interpreted” planning policy. 

“It is hugely disappointing that after two years of support and approvals at every stage, we have been forced to take legal action to overcome a misguided agenda against our scheme, and we will be challenging this to the fullest extent possible,” he said. 

2:50pm: US stocks make a bright start after inflation data

Back to the US for the open and it’s a bright start across the pond with the in line inflation figures boosting the mood.

Shortly after the opening bell, the Dow Jones Industrial Average was up 0.4% at 35,011.87, the S&P 500  was up 0.1% at 4,520.58 and the Nsdaq Composite was up 0.2% at 14,048.12.

Personal consumption expenditures data came in bang in line with Street expectations in a further sign that the central bank’s actions to tackle inflation are bearing fruit.

Paul Ashworth at Capital Economics noted “unfavourable base effects pushed core PCE inflation back up to 4.2%, from 4.1%, but the three-month annualised rate slowed to a two-and-a-half year low of 2.8%, from 3.3% the month before.”

“That’s still above the 2% target but, factoring in the coming slowdown in housing inflation, a return to target by mid-2024 is now well within reach,” he thinks.

Ian Shepherdon at Pantheon Macroeconomics felt the “bigger picture here is that it is becoming harder to dismiss the improvement in the inflation numbers as mere noise.”

“The core PCE deflator rose at a 3.3% annualised rate in the three months to July, compared to the previous three months, the lowest on this basis since March 2021.”

“Our base case is that the year-over-year increase in the core PCE will fall to around 3% by the end of the year, setting the stage for rate cuts starting next spring,” he said.

2:26pm: 888 boosted by FTSE 250 promotion and price target hike

One share on the move in London is 888 Holdings PLC (LSE:888) which is one of the new entrants to the FTSE 250 announced by FTSE Russell after the market close on Wednesday.

The stock, which is up 6.7% at 132.68p, is also benefiting from a positive note from Jefferies which has raised its price target to 175p from 145p, due to lower capex assumptions, and reiterated a buy rating.

“We continue to see material upside from successful execution of the William Hill integration – a highly credible CEO arrives soon,” the broker said.

On a discounted cash flow basis the bank sees an upside scenario of 300p.

Jefferies sees catalysts for the share price as the new CEO who starts 16 October; a new CFO with the search “well advanced”; and debt reduction, noting debt is c80% of the current enterprise value and a 5% change in EV results in a c25% change in the share price.

2:20pm: Wilko job losses confirmed as full takeover bid falls flat

Back to London, and a coiple of bits of news, and it’s not a great update for workers at Wilko.

Hundreds of jobs will be cut at the embattled retailer after a last-minute bid to buy the firm by private equity firm M2 Capital fell flat, administrators have said.

Some 269 roles at Wilko’s Worksop support centre in Nottinghamshire will face the axe, according to PwC, alongside 14 roles at subsidiary Kin Limited.

Further cuts will be announced next week after M2 Capital’s bid for Wilko collapsed over an inability to prove funding for the £90 million offer. More here.

1:52pm: US inflation data in line

US consumer inflation picked up slightly in July, but was exactly as expected, according to the measure that is known to be favoured by the Federal Reserve.

The personal consumption expenditures index rose by 4.2% in the year to July, the US Bureau of Economic Analysis said, compared to annual growth of 4.1% in June. The index rose by 0.2%in July when compared to June. 

The core deflator rose 0.2% in July compared to June, and by 3.3% on an annual basis, higher than June’s 3.0%.

Separate data showed weekly jobless claims dropping to 228,000, short of estimates, of 235,000 in the week ended August 26, and compared with 230,000 claims a week earlier.

Futures have climbed after the data with all three major indices looking set to open higher.

1:08pm: More AstraZeneca drugs to be added to US IRA list, Barclays predicts

AstraZeneca PLC (LSE:AZN) faces several negative headwinds for US sales of some of its drugs from the new Inflation Reduction Act’s rules on negotiated price cuts, according to Barclays, with a lesser impact for GSK PLC.

Key measures in the new rules, according to analysts at the bank, include capping annual price increases to inflation rates, altering coverage gap rebates, and initiating direct drug price negotiation from 2026.

The first list of 10 drugs was announced on Tuesday with “limited impact” on EU pharma for the products, which includes Novartis’ Entresto, AstraZeneca’s Farxiga and Novo’s Novolog/Fiasp.

You can read more on this story here.

12:34pm: Glencore faces damages demand from investors

Shares in Glencore PLC (LSE:GLEN) are firmly in the red after dozens of the world’s biggest asset managers accused it of lying in past share prospectuses to cover up corrupt activities, according to reports.

The stock, which is also trading ex-dividend today, is down 4.6% after the Financial Times reported an escalation in an action in London’s High Court that could have significant ramifications for the natural resources industry.

Nearly 200 funds – including some managed by Fidelity, Vanguard, Legal & General, HSBC, Abrdn and Invesco – are seeking damages from Glencore over allegations that the company and its senior leadership made misleading statements that covered up corrupt activities, the report said.

The claimants allege they “suffered loss” as a result of “untrue statements” and omissions in Glencore’s 2011 prospectus for its listing on the London Stock Exchange and the later, 2013 prospectus for its merger with Xstrata.

The long list of claimants includes sovereign wealth funds such as GIC, Norges Bank, Mubadala, Aabar Holdings, Kuwait Investment Authority, and Oman Investment Authority.

Dozens of pension funds have also joined, including Scottish Widows, Ontario Pension Board, and BP and Shell pension funds.

The 197 funds listed as claimants allege they suffered losses because of “untrue and misleading statements” that covered up corrupt practices within the company.

12:05pm: US futures steady ahead of PCE figures

US stocks are expected to make steady progress on Thursday with all eyes on the personal consumption expenditures (PCE) print, the Federal Reserve’s preferred inflation gauge, to see if inflationary pressures continue to ebb. 

In pre-market trading, futures for the Dow Jones Industrial Average were 0.3% higher, while those for the S&P 500 rose 0.1%, and contracts for the Nasdaq 100 futures were down 0.1%.

Economists expect the core PCE number to tick up to 4.2% on an annual basis in July, slightly higher than the 4.1% reading in June, which was the smallest increase since October 2021.

Ian Shepherdson at Pantheon Macroeconomics sees a decent chance of a 0.3% monthly increase in the July core PCE deflator today, above the consensus, 0.2%.

“This would be an unwelcome development, as this will be the last personal income and spending report before the next Fed meeting, on September 19-to-20,” he said.

“But we doubt that an upside surprise in the July core PCE will materially boost the chances of another rate hike, not least because it would be driven largely by a spike in the hugely volatile financial services component.”

“Moreover, our base case is that the August core CPI, due September 13. will print 0.2% for the third straight month, down sharply from the previous trend of 0.4-to-0.5%,” he added.

Elsewhere, weekly jobless claims figures will give a further indication as to the health of the US jobs market ahead of non-farm payrolls on Friday.

11:21am: UBS plans to axe 3,000 jobs in Switzerland

News of a big profit as well as more jobs cuts as UBS continues to bed in Credit Suisse after its enforced marriage earlier this year.

The Swiss bank said 3,000 jobs will go in Switzerland as part of a US$10 billion cost-cutting drive relating to the merger. 

It would be next to impossible to extract savings from the takeover “without going through people and headcount,” chief executive officer Sergio Ermotti said in a Bloomberg TV interview.

In Switzerland, “we will have around 3,000 jobs that will be made redundant over the next years.”

The news came as the Swiss bank reported a second quarter net profit of US$29.24 billion, including US$28.93 billion of negative goodwill from the Credit Suisse deal and US$830 million integration-related expenses and acquisition costs.

This is a record profit for a bank, according to the Fincnail Times, eclipsing JP Morgan’s US$14.3 billion, reported at the start of 2021.

But excluding the one-offs second quarter pre-tax profit was US$1.14 billion with a cost/income ratio of 80.3%.

UBS said it had stabilised Credit Suisse with net deposit inflows of US$18 billion in the quarter with momentum continuing into the current quarter.

“Two and a half months since closing the Credit Suisse acquisition, we are wasting no time in delivering value for all our stakeholders from one of the biggest and most complex bank mergers in history,” Ermotti said in a statement.

 

10:48am: Another ECB rate hike seen after strong inflation figures

Some reaction to the Eurozone inflation figures which came in above expectations in August.

ING Economics senior economist Bert Colijn thinks the fact inflation did not fall in August, could tip the ECB in favour of a final 25bp hike at the governing council meeting in two weeks’ time.

“Still, overall inflation dynamics remain relatively benign, and we still expect inflation to trend much lower at the end of the year,” he added.

Looking ahead, more declines in inflation are in the making, he thinks.

“In Germany, we expect a significant drop next month as base effects from government support drop from the data.”

Surveys also point to a sizable disinflationary effect for goods prices, while services inflation is set to fall more slowly thanks to higher wage costs, he thinks. 

“For the European Central Bank, these August inflation data were among the most important data points ahead of the governing council meeting in two weeks’ time,” he said.

“While inflation remains stubborn enough to make ECB hawks uncomfortable, it does look like a further deceleration in inflation is in the making for the months ahead.”

But given the ECB mantra over recent months that doing too little is worse than doing too much in terms of hikes, “we still expect another 25 basis point rate rise, despite this being a close call,” he concluded.

 

10:33am: Boohoo climbs after Frasers increases stake

Shares in Boohoo Group PLC (AIM:BOO) have climbed 4.4% after news that Mike Ashley’s Fraser Group PLC has increased its shareholding to 9.1%.

Russ Mould at AJ Bell said: ““Mike Ashley-founded Frasers has developed a reputation for being a vulture – picking at the bones of businesses when they are down.”

“While buying assets out of administration is its preferred modus operandi, it also likes buying equity stakes in companies when their shares are weak,” he noted.

“Frasers is constantly looking for ways to offer a broader range of products to its customer base and there is a natural crossover between people who shop at Sports Direct and Boohoo,” he feels.

“Both sets of customers want casual clothes that don’t cost a lot of money, so there might be an opportunity to put Boohoo’s products into Sports Direct outlets, making it a win/win situation for both parties,” he reckons.

“Sports Direct would give shoppers another reason to visit its stores, while Boohoo gets to benefit from having a distribution channel on the high street.”

“This is all theoretical – it may simply be that Frasers believes Boohoo’s shares are too cheap and it is buying them purely as an investment, with the intention of selling them if the shares go up in value. However, what’s certain is that Frasers is watching the share price closely as it has been regularly buying more stock all summer,” he said.

10:15am: Eurozone inflation stronger-than-expected

Eurozone inflation figures have just been released and the figure has come in stronger-than-expected increasing the likelihood that the European Central Bank will raise rates at its next meeting.

Inflation across the euro area is expected to come in at 5.3% in August, the same as July, statistics office Eurostat said, compared to expectations of a fall to 5.1%.

Food, alcohol and tobacco was the main driver of inflationary pressure, Eurostat said, while energy prices have fallen sharply. 

Eurostat said in a statement: “Looking at the main components of euro area inflation, food, alcohol & tobacco is expected to have the highest annual rate in August (9.8%, compared with 10.8% in July), followed by services (5.5%, compared with 5.6% in July), non-energy industrial goods (4.8%, compared with 5.0% in July) and energy (-3.3%, compared with -6.1% in July).”

The FTSE 100 has shrugged off the news so far and remains little changed.

9:46am: Car production up for sixth month in a row

Some good news from the car industry as well.

UK car production rose year-on-year for the sixth month in a row in July, as the global chip shortage eased and the numbers of electric cars and hybrids rose.

Production from UK factories rose by 31.6% in July compared to last year, according to new data from the Society of Motor Manufacturers and Traders (SMMT), although output remains 29% below 2019.

More than eight-in-10 cars made in the UK were shipped overseas with the top market, the EU, followed by the US, China, Japan and Australia.

Almost two in every five cars were electric, or were hybrids combining batteries with petrol or diesel engines. Electrified volumes rose 73.9% to 30,180.

Mike Hawes, SMMT chief executive, said: “Six months of growth shows that British car production is recovering and, with electrified models increasingly driving volumes, the future is more positive.”

“Recent investment announcements have undoubtedly bolstered the sector but global competition remains tough.”

“If we are to attract further investment and produce the next generation of zero emission models and technologies, we need a coherent strategy that builds on our strengths and supports all aspects of advanced automotive manufacturing.”

9:15am: Business confidence at 18-month high

Despite some recent gloomy data optimism in the business world appears to be holding up.

Lloyds Banking Group PLC (LSE:LLOY)’s latest health check of the businesses shows confidence at an eighteen month high.

The Lloyds Bank Business Barometer for August said business confidence rose by 10 points to 41% in August to reach the highest level since February 2022 (44%), just prior to Russia’s invasion of Ukraine.

The 10-point increase is the largest month on month rise since March 2023.

Business sentiment was largely driven by a more upbeat view of the wider economy, after the latest rise in base rates of 25 basis points was lower than the 50 basis points increase some firms had been expecting.

This led to an overall 15-point rise in economic optimism to 36%.

However, the rise in economic optimism was not consistent among those surveyed last month with smaller businesses and mid-sized firms more optimistic than larger companies.

Companies hiring intentions rose to a 15-month high and pricing expectations increased in August, with the net balance up three points to 56%.

8:52am: FTSE struggling for direction

The FTSE 100 is bumping along around opening levels in early trading, around 6 points higher at 7,479.

Persimmon PLC (LSE:PSN) is top of the risers despite its pending exit from the lead index while property companies, Land Securities and Segro are also firm features.

On the downside, Glencore PLC (LSE:GLEN) is the biggest faller, as it trades ex-dividend, as mentioned earlier.

Susannah Streeter , head of money and markets, Hargreaves Lansdown added news from China was also once more lim iting enthusiasm for equities.

‘’China’s economic weakness has again been exposed in the latest manufacturing data, indicating attempts to stimulate consumption have fallen short,” she said.

“Factories have been churning out fewer goods again in August as demand wanes, marking the fifth month in a row of contraction,” she explained.

8:32am: M&S returns to FTSE 100 after four-year break

More on the FTSE reshuffle announced after the market close on Wednesday with Marks and Spencer Group PLC (LSE:MKS) making a return to the FTSE 100 four years after it dropped out, in the latest sign of the changing fortunes of the UK retailer.

Index complier FTSE Russell confirmed the move on Wednesday afternoon, adding that technical products provider Diploma PLC (LSE:DPLM), Hikma Pharmaceuticals PLC (LSE:HIK, OTC:HKMPF) and Dechra Pharmaceuticals PLC (LSE:DPH) would also join the blue-chip index following the reshuffle.

M&S chief executive Stuart Machin posted on X, formerly Twitter, “Good news today but it’s just another day. Although we’ve made progress, theres still so much more opportunity as we reshape for growth.”

Leaving the top table are asset manager Abrdn PLC (LSE:ABDN), insurer Hiscox Ltd (LSE:HSX), manufacturer Johnson Matthey PLC (LSE:JMAT) and housebuilder Persimmon PLC (LSE:PSN) will leave the FTSE 100 and enter the FTSE 250.

Joining the FTSE 250 alongside those four are 888 Holdings PLC (LSE:888), Breedon Group Plc (LSE:BREE), CAB Payments Holdings PLC (LSE:CABP), Ceres Power Holdings PLC (LSE:CWR, OTC:CPWHF), Foresight Group PLC and Moonpig PLC.

Leaving the FTSE 250 are Capita PLC, CMC Markets PLC, Molten Ventures PLC, Synthomer PLC, Vanquis Banking Group PLC and Warehouse REIT.

The quarterly review, which allows a handful of companies to move up and down, is based on the market capitalisation of companies at the close of trading on Tuesday and will take effect from the start of trading on September 18.

8:15am: Blue chips inch lower ahead of inflation updates

It’s a subdued start in London with the lead index index a touch lower at the open, with ex-dividend stocks weighing, and ahead of inflation indicators from Europe and the US later today.

At 8:15am, the FTSE 100 was down 4.96 points at 7,468.71 while the FTSE 250 rose 37.56, 0.2%, at 18,602.08.

Richard Hunter, head of markets at interactive investor said: “In early exchanges, the muted moves were driven by a broad mark-up and some bargain hunting within the beleaguered telecom and housebuilding sectors, including the soon to be relegated Persimmon.”

“These gains were offset by stocks being marked ex-dividend, such as mining stocks Antofagasta, Endeavour and Glencore, and Croda,” he added.

Investors are also eyeing inflation updates in Europe and the US later today.

Michael Hewson at CMC Markets noted: “As we look towards today’s European session, the focus today returns to inflation, and more importantly whether there is enough evidence to justify a pause in September from both the ECB as well as the Federal Reserve, as we get key flash inflation numbers from France, Italy, and the EU, as well as the latest core PCE inflation numbers for July from the US.”

“EU headline CPI is forecast to slow to 5.1% from 5.3%, with core prices expected to slow to 5.3% from 5.5%, although given the divergent nature of the various CPI readings of the big four eurozone economies there is a risk of an upside surprise,” he said.

Back in London, and Grafton Group crept into the green, up 0.3%, after its results and news of a new share buyback.

Analysts at Stifel said the results were in line with expectations.

“We are Buyers of Grafton at the current valuation (one-year forward P/E 11.4x), given the group’s geographic diversity and balance sheet strength, with the latter providing significant headroom for M&A and potentially further buybacks,” the broker said.

Marks & Spencer Group PLC celebrated its return to the FTSE 100 after a four-year absence rising 0.4% but Persimmon’s PLC exit failed to stop its recent rally continuing, rising another 1.5%.

A solid trading update from Kainos Group PLC (LSE:KNOS) lifted shares 0.8%.

“Given the healthy order book reported at the end of last year and a strong recent Q2 report from Workday Inc (NASDAQ:WDAY), we think the company will continue to do well, and we scope for upgrades at the half-year results or later in H224,” analysts at Stifel said.

7:54am: Mike Ashley’s Frasers’ increases stake in boohoo 

Frasers Group PLC (LSE:FRAS), the retailer controlled by Mike Ashley which owns Sports Direct, has raised its stake in online fast-fashion firm Boohoo Group PLC (AIM:BOO) again.

It now has a 9.1% stake in the company, up from 7.8% when last disclosed, a disclosure said.

Frasers has been picking up shares in a number of other UK retail names this year, including Asos and electronics retailers Currys and AO World.

7:48am: Kainos reports strong trading, holds guidance

A solid looking update from Kainos Group PLC (LSE:KNOS) which said trading remained strong in the first half as customers maintain spending on digital projects.

In a trading statement, the IT provider said as a result it expects results for the full year ending March 31 2024 will be in line a company compiled consensus for revenue of £418.2 million – £434.2 million and adjusted pre-tax profit of £72.6 million – £78.1 million.

Kainos said its Digital Services division has delivered a solid performance with sustained demand from Public Sector clients while its Workday Services division continues to generate strong growth.

Within the Workday Products division, its three products, Smart Test, Smart Audit and Smart Shield continue to deliver very strong growth, Kainos said.

Looking forward, Kainos said a robust pipeline, strong balance sheet and significant contracted backlog supports confidence about the future.

7:30am: Grafton hikes dividend, new buyback but profit drops

Results from Grafton Group PLC (ISE:GFTU) start the day and it’s mixed bag for shareholders with a new buyback, an increased dividend but a drop in profit all within today’s updates.

The international building materials distributor and DIY retailer said revenue in the six months to June 30 3.2% to rose £1.19 billion from £1.15 billion the year before although pre-tax profit fell 27.3% to £104.3 million from £143.4 million.

Grafton said the results were in line with its expectations and backed full-year guidance despite cautioning market conditions are expected to remain challenging over the remainder of the year amid a backdrop of high inflation, high interest rates and cost of living pressures.

Despite the lower profit, Grafton launched a new £50 million share buyback and raised the dividend 8.1% to 10.0p from 9.25p.

Grafton said underlying market fundamentals remain strong despite current challenges and described the first half performance as resilient despite challenging distribution markets.

7:05am: FTSE set to edge higher with inflation in focus

Good morning. Looking ahead to the open and the FTSE 100 is expected to edge higher on a day set to be dominated by inflation updates in Europe and the US.

Spread betting companies are calling London’s lead index up by around 11 points after closing up 8.68 points at 7,473.67 on Wednesday.

A flash inflation print for the EU and the US personal consumption expenditures index – the US Federal Reserve’s preferred inflationary gauge – will be released today as investors continue to look for a peak in interest rates.

Soft economic figures in the US in the past few days have driven a rally in equities with US stocks advancing once more on Wednesday.

The Dow Jones Industrial Average closed up 0.1%, the S&P 500 rose 0.4% and the Nasdaq Composite advanced 0.5%.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said a bad surprise on the topside for the US data could “wash out” the past days’ optimism regarding the future of the Fed policy.

“So, fingers crossed, we really need the US inflation to fall, and to stay low,” she said.

Asian markets were mixed with gains in Tokyo and falls in Hong Kong and China.

Back in London, and M&S is celebrating promotion back to the top table after being promoted to the FTSE 100 after a four-year absence.

We’ll have all the details on the FTSE reshuffle later.



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