• FTSE 100 up 65 points at 7,667
• ONS revises up previous estimates of UK GDP
• Severn Trent raises £1 billion, plans £12.9 billion investment

11:00am: Bank of America upgrades M&S to buy, hikes price target 52%

Marks & Spencer PLC is mispriced and has potential for upward earnings revisions.

That is the view of retail analysts at Bank of America which has upgraded the stock to buy from neutral and increased its price target by 52% to 300p from 197p before.

“M&S is delivering on its turnaround and closing its performance gap to peers,” BofA said in a research note, “yet, it continues to screen as one of the cheapest stocks amongst peers.”

The bank noted it trades on 10x 2025 P/E (peers 12x), 1.1x EV/ROCE (peers 2.0x), FCF yield 10% (peers 8%).

The bank thinks the margin potential for M&S’ clothing & home business remains a key underappreciated part of the group’s turnaround story.

Near-term, BofA expects cyclical cost of goods sold headwinds to reverse (freight, FX, markdowns) and support a 100 basis points margin uplift over 2023-25, way above the current consensus of plus 10bps.

Medium-term, better online efficiencies could help C&H to reach its 10% margin target over five years against the consensus of 8.7%.

The bank also noted the UK consumer backdrop is showing some signs of improvement, which could support consumption and sentiment for consumer discretionary equities.

A softening labour market and elevated mortgage rates remain key risks, however.

Shares in M&S rose 1.1% to 237.70p.

10:35am: Eurozone inflation cools more than expected

Consumer price inflation in the eurozone is expected to cool to 4.3% in September, more than expected, according to a flash estimate from Eurostat.

Inflation is expected to slow to a 4.3% annual rise in September from a 5.2% rise in August. Markets had expected the flash estimate to predict a 4.5% rise this month.

Euro area #inflation at 4.3% in September 2023, down from 5.2% in August. Components: food, alcohol & tobacco +8.8%, services +4.7%, other goods +4.2%, energy -4.7% – flash estimate https://t.co/kEf2Z9hOkH pic.twitter.com/SLY2o2CWEc

— EU_Eurostat (@EU_Eurostat) September 29, 2023

On a monthly basis, Eurostat said the inflation rate is expected to cool to a 0.3% rise in September from a 0.5% rise in August.

Core inflation, which excludes energy, food, alcohol and tobacco, is expected to rise 4.5% on an annual basis in September, slowing sharply from a 5.3% rise in August. 

Markets expected core inflation to cool to 4.5%.

10:12am: Mortgage approvals at six month low

UK mortgage approvals have fallen to their lowest level in six months, the latest sign that the Bank of England’s rate rising spree has punctured the housing market.

The Bank of England said that net mortgage approvals for house purchases fell from 49,500 in July to 45,400 in August.

That’s the lowest number of home loans approved by lenders since February this year, and below the 47,400 consensus.

Net approvals for remortgaging saw “a significant decline” from 39,300 in July to 25,000 in August, the lowest since July 2012, the Bank said.

The ‘effective’ interest rate, the actual interest paid, on newly drawn mortgages saw a 16 basis point increase and now sits at 4.82%.

Net borrowing of consumer credit by individuals amounted to £1.6 billion in August, up from £1.3 billion in the previous month while households withdrew £0.3 billion from banks and building societies in August, following two consecutive months of net deposits. 

9:55am: Aston Martin motors as Stroll ups stake

Aston Martin Lagonda Global Holdings PLC (LSE:AML) shares revved up on Friday morning, as Lawrence Stroll’s Yellow Tree Consortium upped its majority stake in the luxury manufacturer.

Yellow Tree agreed to purchase an additional 26 million shares in the company on Tuesday, lifting its holding by 3.27% to 26.23%, Aston Martin said in a statement.

Led by the Canadian businessman, Yellow Tree had initially built a majority stake in 2020, seeing Stroll become Aston Martin’s executive chairman.

“The company has delivered a major turnaround since the Yew Tree Consortium’s initial investment three years ago,” Stroll commented.

Shares are 11.6% at 291.40p.

9:23am: JD Sports gets Nike boost

Top of the FTSE risers is JD Sports Fashion PLC (LSE:JD.) – shares up 5.8%, after well received results from Nike after the US close on Thursday.

The Eugene, Oregon-based sports retailer said in the three months to August 31, the financial first quarter, revenue rose 2% to $12.94 billion from $12.69 billion the year prior, but net income of $1.45 billion was down 1% from $1.47 billion.

Revenue was a touch below Street expectations, held back by a fall in North America, but earnings were much better than hoped.

Peel Hunt pointed out within the results, EMEA was one of the better performing regions (N America saw sales fall but in line with hopes, China was a sales miss).

“Of possibly the most significance was that inventory was down by 10%, which may allay fears of a lot of discounting ahead, especially in N America,” the broker said.

Peel Hunt also noted there “was a positive “shout out” to JD as a key partner during the call.”

JPMorgan saw the read across to underlying trends in the sector as overall positive, with better than expected demand in North America, a solid performance in EMEA, expansion in gross margins

8:59am: Future leaps on relief trading is in line

Future PLC (LSE:FUTR) is a big mover on Friday after saying it expects full-year operating profit in line with expectations despite mixed trading conditions.

Shares have jumed 14% to 813.50p on the news.

Peel Hunt said there “no surprises with the trading update today for Future, if anything a relief that there is not another downgrade for the company.”

The platform for specialist media, behind brands such as Marie Claire and Country Life, said it was a resilient performance despite continued macroeconomic volatility impacting the sector.

Audience numbers have stabilised in the second half and the group has had positive month-on-month momentum in the final quarter, it said.

However, Future said overall trading conditions remained mixed, with challenges in consumer spending and the digital advertising market.

As a result, advertising and affiliates product trends are broadly in line with the first half, as expected, despite a robust Prime Day in July.

Go.Compare revenue has accelerated in the second half, reflecting favourable market volumes with consumers looking for value, while magazine revenue has remained resilient, it added.

Foreign exchange has been a headwind in the second half, given currency movements in the period, Future said.

8:46am: UK economy in better shape than thought

The revised economic growth figures has given a boost to equities and the pound.

UK gross domestic product is estimated to have increased by 0.2% in Quarter 2 (Apr to Jun) 2023, unrevised.

It is now estimated to have increased by 0.3% in Quarter 1, revised up from 0.1%, whilst growth across all quarters of 2022 is unrevised.

➡️ https://t.co/H2PEz3rJrw pic.twitter.com/qJ5sznDfD4

— Office for National Statistics (ONS) (@ONS) September 29, 2023

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown said: “The UK economy has shown signs of life. GDP is now 1.8% ahead of pre-pandemic levels as the economy grew 0.2% in the second quarter from the first three months of the year.”

“Crucially, GDP was up 0.6% from the same period the previous year, which was better than expected and has given the pound a shove in the right direction.”

Today’s figures from the Office for National Statistics showed unrevised growth in the second quarter of 2023 of 0.2%, but a better than previously reported outcome for the first quarter – growth of 0.3% compared to 0.1% previously reported.

But it’s the revisions to the post-pandemic era which have caught the eye with UK GDP is now estimated to be 1.8% above pre-pandemic levels by the second quarter of this year.

Previously, the UK economy was assumed to have shrunk, since Covid, lagging other G7 economies.

Today’s GDP report shows that the UK economy grew faster than other G7 rivals in 2022 (with growth revised up from 4.1% to 4.3%), and also in 2021 (with 8.7% growth).

The EY ITEM Club said: “revisions to GDP mean the latest national accounts confirmed a much stronger economic recovery in 2021 than earlier estimates had shown.”

“And the previous story of the economy seeing only negligible growth since then also saw some improvement.”

“However, the EY ITEM Club thinks sluggishness will characterise activity for the near future,” it added.

8:18am: Stocks bounce on brighter economic outlook

The FTSE 100 has opened higher after upward revisions to economic growth figures lifted the mood.

At 8:15am London’s lead index was up 50.65 points, 0.7%, at 7,652.50 while the FTSE 250 leapt 153.46 points, 0.9%, at 18,252.14.

Figures from the Office for National Statistics show UK GDP increased an unrevised 0.2% in the second quarter of the year, although the estimate for the first quarter was revised up to 0.3% from 0.1%.

The ONS also reported that the UK economy’s recovery from the Covid-19 pandemic has been faster than previously thought.

UK GDP is now estimated to be 1.8% above pre-pandemic levels by the second quarter of this year, the ONS said.

Samuel Tombs at Pantheon Macroeconomics said for now it means the UK “no longer is the G7’s straggler.”

“Nonetheless, a stable picture might take some time to emerge, given that statistical authorities in other countries are revising their data too,” he added.

On today’s figures, Tombs said he continues to think that a recession will be avoided in the second half of this year. 

In company the big story was Severn Trent’s £1 billion fundraise and plans for £12.9 billion of investment between 2025-2030.

It seems to have gone down well in the City with shares marked up 3.5%.

Future PLC (LSE:FUTR) is also higher, up 8.4%, after it said it expected profits in line with expectations.

Peel Hunt said there “no surprises with the trading update today for Future, if anything a relief that there is not another downgrade for the company.”

8:00am: GDP grows 0.2% in Q2, first quarter growth revised up

We’ve had the latest estimate for UK gross domestic product in the second quarter and it confirms the economy grew marginally between April and June.

The figures from the Office for National Statistics show UK GDP increased an unrevised 0.2% in the second quarter of the year, although the estimate for the first quarter was revised up to 0.3% from 0.1%.

In output terms, growth in the latest quarter was driven by a 1.2% increase in the production sector while the household saving ratio grew by 9.1% up from 7.9% in the first quarter.

Separately, the ONS reported that the underlying current account deficit excluding precious metals increased by £7.1 billion to £28.5 billion in the second quarter of the year.

7:50am: Severn Trent in £1 billion fundraise; plans to cut leaks and spills

Big news from Severn Trent today.

The water firm plans to raise £1 billion including a £500 investment from Qatar Investment Authority and a £500m placing.

The announcement came as the water company unveiled plans to invest £12.9 billion between 2025-2030 as part of its business plan for the regulatory period beginning April 1 2025 and ending March 31 2030.

Severn Trent said the plan includes £12.9 billion of total expenditure across its network, including £5.0 billion of investment focused on enhancing capacity and service beyond current levels, almost all of which is focused on the environment.

It said it would ensure Severn Trent Water is responsibly funded from the outset, with average gearing of 65.2% expected as it continues to target investment grade credit rating of BBB+/Baa1.

Under the plan and calculated at 2022/23 prices, the average annual household bill will be £518 by 2029/30 (2024/25: £379), an average monthly increase of £2.32 over the five-year period. 

It said measures would include a 16% reduction in leakage and a 30% reduction in spills from storm overflows.

The water company said it has made a good start to the financial year though the expected reduction in finance costs will be less than previously guided as a result.

Capital investment is expected towards the top end of our guidance range, at around £1 billion.

The business plan is expected to create up to 7,000 jobs directly and will be submitted to Ofwat in October.

Alongside the placing, a retail offer of €8 million will also take place.

7:00am: Sluggish start expected in London

The FTSE 100 is expected to make a sluggish start on Friday ahead of GDP figures in the UK and inflation data in the Eurozone and the US.

Spread betting firms are calling London’s lead index up by just 2 points after closing up 8.63 points at 7,601.85 on Thursday.

“As we come to the end of the week, month, and quarter it’s not been a great quarter for equity markets. There’s been a significant shift in sentiment over the summer as economic data has deteriorated and expectations around how long interest rates are likely to stay high have shifted well into 2024,” said Michael Hewson at CMC Markets.

On a quiet day for corporate news, the final reading for second quarter GDP will provide an early focus while later in the session the Federal Reserve’s preferred inflation gauge, personal consumption expenditure figures will be released.