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London open: FTSE edges lower; Ashtead rallies after results
London stocks nudged lower in early trade on Tuesday, taking their cue from a downbeat session on Wall Street, after a stronger-than-expected ISM print fuelled concerns about the pace of Fed rate hikes.
At 0835 GMT, the FTSE 100 was down 0.2% at 7,554.86.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Worries that the Fed could unwrap an unwelcome present of another super-sized rate hike when policymakers meet next week are sprinkling Christmas fear on indices. Wall Street registered its worst day in almost a month after a snapshot from the services industry showed consumer resilience was strong.
“This has fuelled speculation that the US central bank will have to be more Scrooge-like and make borrowing even more expensive to rein in inflation. Companies still appear to be dealing with pent-up demand with the ISM reading showing the services sector is expanding merrily.
“With central bank policies so far having meagre impact on the jobs market, the chances of a 0.75% rate hike being announced on the 14th are now considered to be higher. The potential effect of another rapid tightening round has led to jitters about repercussions for the global economy.”
On home shores, investors were mulling over industry data showing that Black Friday and the colder weather helped boost high street sales last month.
According to the latest BRC-KPMG Retail Sales Monitor, sales in the four weeks to 26 November rose 4.2%, compared to a rise of 5.0% a year earlier.
On a like-for-like basis, sales increased 4.1% from November 2021, when they rose 1.8%.
In the three months to November, food sales jumped 5.5% on a like-for-like basis, while non-food sales fell 0.4%.
The sales figures are not adjusted for inflation, however, meaning the rise in sales likely masked a “much larger” drop in volumes, the British Retail Consortium noted.
Helen Dickinson, BRC chief executive, said: “As the weather began to turn, customers were quick to purchase winter warmers, such as coats, hot water bottles and hooded blankets. Black Friday discounts also boosted sales of home furnishings, as many households traded big nights out for budget nights in.
“However, sales growth remained far below current inflation, suggesting volumes continued to be down on last year.”
In equity markets, broker notes were having an impact. Mondi was knocked lower by a double downgrade to ‘underperform’ at Credit Suisse, while Close Brothers slumped after a downgrade to ‘underweight’ at JPMorgan. Lloyds fell after a downgrade to ‘neutral’ at JPM and United Utilities was also hit by a downgrade to ‘neutral’ at JPM.
On the upside, DS Smith was boosted by an upgrade to ‘outperform’ at Credit Suisse, while Barclays was up after an upgrade to ‘overweight at JPM and Hikma gained after an initiation at ‘outperform’ by RBC Capital Markets.
Rental equipment firm Ashtead was the top riser on the FTSE 100 after it said that full-year results were set to be ahead of its previous expectations as it hailed a strong first-half performance.
Travel food outlet operator SSP Group surged to the top of the FTSE 250 after saying it swung to a full-year profit as passenger numbers rebounded from the Covid pandemic.
Phoenix Group, Tritax and Paragon Banking all rose after well-received updates.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
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| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Rolls-royce Holdings Plc | +2.78% | +2.52 | 93.11 |
| 2 |  |
Ashtead Group Plc | +1.71% | +86.00 | 5,122.00 |
| 3 |  |
Croda International Plc | +1.50% | +104.00 | 7,018.00 |
| 4 |  |
Barclays Plc | +1.38% | +2.16 | 158.44 |
| 5 |  |
Phoenix Group Holdings Plc | +1.31% | +7.80 | 604.00 |
| 6 |  |
Bae Systems Plc | +1.30% | +10.60 | 826.60 |
| 7 |  |
Smith (ds) Plc | +1.21% | +3.70 | 309.00 |
| 8 |  |
Land Securities Group Plc | +1.03% | +6.40 | 628.00 |
| 9 |  |
British Land Company Plc | +0.87% | +3.50 | 404.70 |
| 10 |  |
Hikma Pharmaceuticals Plc | +0.83% | +12.50 | 1,526.50 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
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| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Mondi Plc | -4.61% | -71.00 | 1,470.00 |
| 2 |  |
Carnival Plc | -3.27% | -23.60 | 697.20 |
| 3 |  |
Ferguson Plc | -2.23% | -212.00 | 9,298.00 |
| 4 |  |
United Utilities Group Plc | -2.13% | -22.50 | 1,034.00 |
| 5 |  |
Severn Trent Plc | -2.10% | -58.00 | 2,701.00 |
| 6 |  |
Fresnillo Plc | -1.90% | -17.00 | 880.00 |
| 7 |  |
Auto Trader Group Plc | -1.48% | -8.60 | 571.40 |
| 8 |  |
International Consolidated Airlines Group S.a. | -1.33% | -1.80 | 133.12 |
| 9 |  |
Ocado Group Plc | -1.30% | -8.60 | 654.60 |
| 10 |  |
Easyjet Plc | -1.22% | -4.80 | 387.80 |
US close: Stocks lower as China easing fails to lift sentiment
Wall Street stocks ended the session lower on Monday as market participants digested last month’s non-manufacturing purchasing managers index from the Institute for Supply Management and headlines from China.
At the close, the Dow Jones Industrial Average was down 1.40% at 33,947.10, while the S&P 500 lost 1.79% to 3,998.84 and the Nasdaq Composite saw out the session 1.93% weaker at 11,239.94.
The Dow closed 482.78 points lower on Monday, more than reversing modest gains recorded in the previous session despite a better-than-expected non-farm payrolls report.
Stocks traded lower on Monday, ignoring cues from Asian markets overnight, where shares rallied after China began to ease certain Covid-19 testing rules in a number of cities and hinted that even more relaxations may follow.
IG‘s Chris Beauchamp said: “Stock markets are distinctly underwhelmed by China’s all-too tentative moves towards reopening its economy, and instead have gone back to worrying about the Fed. Friday’s jobs report continues to loom over markets, causing further losses as some dovish bets are pared back. While the pre-meeting blackout means we might be spared any Fed comments, it seems stocks will continue to trade in a negative fashion, at least until the meeting itself.”
On the macro front, the Institute for Supply Management‘s non-manufacturing PMI unexpectedly jumped to 56.5 in November, up from 54.4 in October – the lowest reading since May 2020 – and beating market forecasts for a print of 53.3. Business activity increased faster, rising to 64.7 from 55.7, and employment rebounded to 51.5 from 49.1, while a slowdown was seen in new orders and backlogs of orders. At the same time, price pressures continued to ease, coming in at 70 versus 70.7 a month earlier, while inventories shrank less, rising to 47.9 from 47.2.
Elsewhere, S&P Global‘s composite PMI came to 46.4 in November, little changed from preliminary estimates of 46.3 but down from October’s print of 48.2 and pointing to a fifth consecutive decline in private sector business activity. S&P’s services PMI was revised slightly higher to 46.2, up from preliminary estimates of 46.1, but also continued to point to a fifth straight month of falling services activity as the reading was the second-sharpest decline since May 2020.
Finally, new orders for US manufactured goods rose 1% in October, according to the Census Bureau, following a 0.3% increase in the prior month and above market expectations for an uptick of 0.7%.
In the corporate space, United Airlines shares flew 2.6% higher after analysts at Morgan Stanley upgraded the carrier from ‘equal weight’ to ‘overweight’.
Tuesday newspaper round-up: Rail strikes, housebuilding, Vodafone
Hopes of a deal to avert severe Christmas rail disruption were dashed on Monday night when the RMT union announced additional strike dates and rebuffed a pay offer from Network Rail just before the industry’s deadline. The union said it would put the offer to members in an electronic referendum this week but recommend that they reject it. It affirmed that two 48-hour strikes that will stop much of the railway next week would go ahead either way. – Guardian
Rishi Sunak is to drop compulsory housebuilding targets to see off an embarrassing backbench rebellion, prompting criticism he is putting party unity over the national interest. The capitulation, which comes in the middle of a national housing crisis, will spark fresh concerns that the prime minister is too weak to take on unruly Conservative backbenchers. It followed up to 100 Tory MPs threatening to back an amendment that would in effect force the government to abolish the target of building 300,000 homes a year in England. – Guardian
Vodafone is under pressure from a billionaire French shareholder to accelerate cost-cutting and asset sales after the ousting of its chief executive. The FTSE 100 telecoms giant announced Nick Read’s exit following a nearly 50pc slump in its share price since he took charge four years ago. – Telegraph
The value of London office blocks is forecast to fall sharply over the next few years, with rents predicted to almost halve as rising unemployment and working from home depress demand, according to Citi, the investment bank. Aaron Guy, a real estate analyst at Citi, expects the values of office blocks in the capital to fall by 38 per cent in the next two to three years “driven primarily by likely recessionary impacts on higher unemployment and continued work-from-home office shrinkage”. – The Times
A bank criticised by a former minister for its allegedly poor due diligence work on a pandemic finance scheme has admitted to MPs that more than one in three of the state-backed loans it issued was “not performing”. Anne Boden, chief executive of Starling, the digital bank, told the public accounts committee that 34.3 per cent of the bounceback loans it provided were in “distressed” status – significantly higher than the average rate. – The Times
