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London open: Stocks fall but Rolls-Royce bucks trend
London stocks fell in early trade on Tuesday following an uninspiring session on Wall Street, as investors mulled the latest shop price data, but Rolls-Royce bucked the trend as it laid out its latest targets.
At 0830 GMT, the FTSE 100 was down 0.5% at 7,422.76.
Figures out earlier showed that shop price inflation dropped to its lowest in 17 months in November, as retailers stepped up discounting ahead of the key festive shopping season.
The year-on-year growth in retail prices eased to 4.3% this month, down from 5.2% in October, according to the closely watched Shop Price Index put together by the British Retail Consortium (BRC) and Nielsen.
This was below the three-month average of 5.3% and the lowest rate of annual growth since June 2022.
Food inflation slowed to 7.8% from 8.8%, particularly for dairy products, due to lower domestic energy prices reducing overall input costs. Non-food inflation fell to 2.5% from 3.4%.
Over the month of November, prices were flat, slowing from the 0.3% month-on-month growth in October.
“Shop price inflation eased for the sixth month in a row as retailers competed fiercely to bring prices down for customers ahead of Christmas,” said Helen Dickinson, chief executive of the BRC.
“Retailers are committed to delivering an affordable Christmas for their customers. They face new headwinds in 2024 – from government-imposed increases in business rates bills, to the hidden costs of complying with new regulations. Combining these with the biggest rise to the National Living Wage on record will likely stall or even reverse progress made thus far on bringing down inflation, particularly in food.”
In equity markets, Rolls-Royce surged as it set out its medium-term targets ahead of a capital markets day. The engine maker said it plans to deliver operating profit of £2.5bn to £2.8bn, operating margin of 13% to 15%, free cashflow of between £2.8bn and £3.1bn and a return on capital of 16% to 18%.
Budget airline easyJet flew higher as it said it swung to a profit in its annual results after a record second-half financial performance. It also delivered a positive outlook for the year ahead and reinstated its dividend.
EasyJet reported a headline pre-tax profit of £445m in the 12 months to 30 September, versus a loss of £178m the year before and in line with management’s guidance of £440-460m.
IT infrastructure technology and services provider Softcat was in the black as it reported a robust first-quarter performance, achieving double-digit gross profit growth driven by strong demand.
Pets at Home edged up after it backed its full-year guidance as it posted a jump in interim revenues, although profits fell as it continued to invest in its new digital platform and moved to a new distribution centre.
Mike Ashley’s Frasers Group was a high riser after an initiation at ‘overweight’ at Barclays. The bank said Frasers is overlooked by many investors, given a low free float and eclectic operations.
“We think this ignores i) being named by Nike and Adidas as a key partner, and ii) potential MT upside from Financial Services. The group’s approach can be unconventional, but the focus is long term, and its track record is strong,” it said.
M&G nudged higher after an initiation at ‘buy’ at Goldman Sachs, which said the shares are attractively valued.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Rolls-royce Holdings Plc | +6.13% | +14.90 | 258.10 |
| 2 |  |
Smurfit Kappa Group Plc | +3.25% | +88.00 | 2,794.00 |
| 3 |  |
Easyjet Plc | +1.93% | +7.80 | 412.80 |
| 4 |  |
Smith (ds) Plc | +0.82% | +2.30 | 282.90 |
| 5 |  |
Lloyds Banking Group Plc | +0.54% | +0.23 | 42.28 |
| 6 |  |
Mondi Plc | +0.44% | +6.00 | 1,359.00 |
| 7 |  |
National Grid Plc | +0.25% | +2.50 | 1,017.00 |
| 8 |  |
Morrison (wm) Supermarkets Plc | +0.00% | +0.00 | 286.40 |
| 9 |  |
Evraz Plc | +0.00% | +0.00 | 82.68 |
| 10 |  |
Standard Life Aberdeen Plc | +0.00% | +0.00 | 274.10 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Ocado Group Plc | -3.13% | -18.00 | 556.60 |
| 2 |  |
Tui Ag | -2.83% | -13.80 | 474.20 |
| 3 |  |
Burberry Group Plc | -2.73% | -41.00 | 1,463.00 |
| 4 |  |
Pearson Plc | -2.33% | -22.60 | 947.00 |
| 5 |  |
Prudential Plc | -2.09% | -19.00 | 889.80 |
| 6 |  |
Rightmove Plc | -2.06% | -11.00 | 522.60 |
| 7 |  |
Wpp Plc | -1.84% | -13.00 | 694.40 |
| 8 |  |
St. James’s Place Plc | -1.80% | -11.60 | 634.20 |
| 9 |  |
Itv Plc | -1.59% | -0.98 | 60.54 |
| 10 |  |
Rentokil Initial Plc | -1.56% | -7.00 | 441.70 |
US close: Dow and S&P 500 retreat from three-month high
US stock markets inched lower on Monday, pulling back after the Dow and S&P 500 both closed at their highest levels in three months the previous session.
The Dow Jones Industrial Average and S&P 500 finished 0.2% lower, while the Nasdaq fell 0.1%. On a shortened post-Thanksgiving trading session on Friday, the Dow and S&P 500 closed at their highest levels since 7 August and 1 August, respectively.
“After weeks of gains, it is not surprising to see stocks catch their breath in afternoon trading,” said Chris Beauchamp, analyst at IG. “Things are quiet out there, perhaps a little too quiet, and more than a few investors will be casting a nervous eye on the Vix, which has reached its lowest level since January 2020.”
Weighing on sentiment was government data in China which revealed that industrial profit growth slowed to just 2.7% in October, down from 11.9% in September and 17.2% in August.
“Renewed worries about the outlook for the Chinese economy caused tremors across global markets at the start of the new trading week. There was a slowdown in China’s industrial profit growth during October, causing markets to speculate its government will have to come up with yet another stimulus measure to avoid the economy spluttering,” says Russ Mould, investment director at AJ Bell.
On the macro front, new home sales fell 5.6% to 679,000 in October, according to the Census Bureau, well below forecasts for a print of 723,000, as mortgage rates hit their highest level in twenty years, weighing on buyers’ affordability. The drop follows a downwardly revised reading of 719,000 in September. The median price of new houses sold was $409,300, while the average sales price was $487,000 – compared to $496,800 and $543,300 a year ago, respectively.
Elsewhere, the Dallas Federal Reserve’s general business activity index for manufacturing deteriorated for the third straight month in November, reaching -19.9, its lowest since July. The production index moved into negative territory, falling to -7.2 in November, from +5.2 in the prior month, while the new orders index, which has been negative for 18 months, dropped to -20.5 in November, down from -8.8. The capacity utilisation index returned to negative territory, falling from 5.4 to -10.1, while the shipments index slipped eight points to -9.5.
Retailers gain on Cyber Monday
Black Friday e-commerce spending shot up 7.5% year-on-year to a record $9.8bn, sending shares in retailers higher on Cyber Monday after Friday marked the beginning of the all-important holiday shopping season. Amazon, Walmart, Lowe’s and Home Depot were all in positive territory by the close. Shopify shares also surged, finishing the day 5% higher.
Amazon shares were also up after it was revealed that Jeff Bezos hadn’t sold any stock in recent days – contrary to reports that the billionaire founder was planning to offload a sizeable stake.
Telecoms group Crown Castle International closed firmly higher after activist investor Elliott Investment Management called for a “comprehensive” boardroom shake-up.
Banks were mostly lower with Bank of America, JP Morgan Chase & Co, Citigroup and Morgan Stanley all in the red.
Tuesday newspaper round-up: Shein, private rents, Volkswagen, Twitter
Fast fashion giant Shein has reportedly lodged confidential paperwork with US securities regulators, informing them of an intention to go public in the US. The listing would likely be the largest initial public offering (IPO) in years. – Guardian
Average private rents in Great Britain have soared by more than a quarter since the start of the Covid pandemic and will keep rising, according to an analysis. The typical private rent will end this year 9.5% higher than in December 2022 and then rise a further 6% in 2024 before hitting an “affordability ceiling”, according to the estate and lettings agent Savills. – Guardian
Germany’s Volkswagen has braced its workers for a wave of job cuts as it battles the same high costs and low productivity that are dogging the country’s economy. The carmaker is understood to be drawing up plans for thousands of job cuts as part of a programme to slash outgoings by €10bn (£9bn) over three years, although no firm target has been set. – Telegraph
Twitter has lost almost three million UK visitors to its website since Elon Musk’s troubled takeover, figures reveal. The social media company, now known as X, racked up a total adult monthly audience of 24 million in May this year, down from 26.8 million at the same time last year, according to media regulator Ofcom. – Telegraph
The market value of The Daily Telegraph’s parent company has more than halved after it unearthed a tax liability of almost £30 million. The value of the holding company has been cut from £47.8 million to £20 million after it failed to properly book tax owed by its publications over a number of years. – The Times
The Bank of England will not cut interest rates for the “foreseeable future”, Andrew Bailey has said, warning it was “too soon” to discuss the prospect of large-scale monetary easing. On a visit to the northeast, the governor said that the battle to reduce inflation from 4.6 per cent at present to the Bank’s 2 per cent target would be “hard work”, insisting that price pressures were not sufficiently low to consider bringing down borrowing costs. – The Times
