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London open: Stocks gain ahead of data slew; Next, JD Sports in the spotlight
London stocks rose in early trade on Thursday ahead of a slew of UK data releases, with retailers Next and JD Sports in the spotlight amid diverging performances.
At 0840 GMT, the FTSE 100 was up 0.4% at 7,712.58.
Investors were mulling the latest minutes from the Federal Reserve released overnight. They showed that officials saw rate cuts as likely this year but didn’t give any details on when the central bank might start to loosen monetary policy.
Minutes of the FOMC’s 12-13 December meeting showed that “almost all participants indicated that, reflecting the improvements in their inflation outlooks, their baseline projections implied that a lower target range for the federal funds rate would be appropriate by the end of 2024”.
However, the Fed said that members’ outlooks were “associated with an unusually elevated degree of uncertainty” and that rate hikes could be appropriate if things take a turn for the worse.
Market participants were also digesting the latest data out of China, where the Caixin services PMI rose to 52.9 in December from 51.5 in November. This was above consensus expectations of 51.6 and marked the highest level since July. A reading above 50.0 indicates expansion, while a reading below signals contraction.
Overall new orders rose 2.5 points to 53.7 – the highest since May – while the index for new export orders was up 0.7 points to 52.2.
Pantheon Macroeconomics noted that again, the Caixin PMI showed the opposite picture to the weak official services PMI, which was unchanged at 49.3.
“The mixed picture from the Caixin and official services PMIs points to the regionally uneven nature of China’s recovery and we expect a continued soft recovery in 2024, as households worry about income growth and broad economic prospects,” said chief China+ economist Duncan Wrigley.
On the UK macro front, net lending, consumer credit, mortgage approvals and the S&P Global/CIPS services PMI are all due at 0930 GMT.
In equity markets, fashion retailer Next rallied as it lifted annual guidance after better-than-expected full-price sales during November and December. Full-price sales in the nine weeks to December 30 rose 5.7% year-on-year, £38m better than previous guidance of a 2% rise.
Annual pre-tax profit was lifted by £20m to £905m. Of that increase, £17m came from the sales beat to date and £3m from an upgraded forecast for full-price sales in January.
Primark owner Associated British Foods also gained.
Richard Hunter, head of markets at Interactive Investor, said: “In all, Next has shown its mettle once more in a famously competitive environment, in which it is seen as something of a linchpin. Its share price performance has also defied the odds which tend to follow the retail sector, having risen by 35% over the last year, as compared to a gain of just 1.3% for the wider FTSE 100.
“The warm initial price reaction to the update could initiate some upgrades to a market consensus which has yet to break out of its range for a sustained period of time. Indeed, the general view of the shares as a hold, albeit a strong one, has tended to underestimate the strides which the company has been making.”
Going the other way, JD Sports tumbled as it delivered a profit warning after second-half trading missed expectations due to milder autumn weather and heavier discounting over the peak holiday shopping season.
The company said the “elevated level of promotional activity” during the peak trading period meant that full-year gross margins would be slightly lower than last year, leading it to cut adjusted pre-tax profit guidance to between £915m and £935m, from £1.04bn at the half-year stage.
Sports Direct owner Frasers Group also lost ground.
Elsewhere, Big Yellow and Dr Martens fell as they traded without entitlement to the dividend.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Next Plc | +4.63% | +374.00 | 8,456.00 |
| 2 |  |
Itv Plc | +1.53% | +0.96 | 63.88 |
| 3 |  |
Rentokil Initial Plc | +1.39% | +5.70 | 416.80 |
| 4 |  |
Hargreaves Lansdown Plc | +1.21% | +8.60 | 717.60 |
| 5 |  |
Bp Plc | +1.19% | +5.60 | 477.55 |
| 6 |  |
Persimmon Plc | +1.03% | +14.00 | 1,372.00 |
| 7 |  |
Tui Ag | +0.99% | +6.00 | 613.50 |
| 8 |  |
Prudential Plc | +0.99% | +8.20 | 839.20 |
| 9 |  |
Easyjet Plc | +0.98% | +4.70 | 486.40 |
| 10 |  |
Land Securities Group Plc | +0.86% | +6.00 | 703.20 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Kingfisher Plc | -1.32% | -3.10 | 231.70 |
| 2 |  |
Marks And Spencer Group Plc | -1.06% | -3.00 | 279.50 |
| 3 |  |
Centrica Plc | -1.03% | -1.50 | 144.25 |
| 4 |  |
Bt Group Plc | -0.94% | -1.15 | 121.80 |
| 5 |  |
Experian Plc | -0.75% | -23.00 | 3,034.00 |
| 6 |  |
Scottish Mortgage Investment Trust Plc | -0.68% | -5.20 | 759.20 |
| 7 |  |
Unilever Plc | -0.66% | -25.50 | 3,827.50 |
| 8 |  |
3i Group Plc | -0.56% | -13.00 | 2,301.00 |
| 9 |  |
Burberry Group Plc | -0.48% | -6.50 | 1,352.00 |
| 10 |  |
Flutter Entertainment Plc | -0.47% | -65.00 | 13,645.00 |
US close: Stocks finish firmly lower after FOMC minutes
US stocks dropped sharply on Wednesday with the Dow falling nearly 300 points after minutes from the latest Federal Reserve policy meeting failed to give conclusive evidence of when the central bank might start to cut interest rates.
The Federal Open Market Committee (FOMC) discussed at its 12-13 December meeting that members’ inflation outlooks mean interest-rate cuts would likely “be appropriate by the end of 2024”. But the path was “associated with an unusually elevated degree of uncertainty” and that rate hikes could be on the cards if things take a turn for the worse.
Nevertheless, minutes showed that policymakers talked about the “diminished” upside risks to inflation, while some participants were worried about how long the current restrictive monetary policy should continue given the “downside risks to the economy” from elevated interest rates.
The Dow finished 285 points lower at 37,430.19 (-0.8%), pulling back from another record high, while the S&P 500 declined 0.8% and the Nasdaq dropped 1.2%.
Adding to the uncertain outlook was Richmond Fed president Tom Barkin, who on Wednesday hinted that the US economy was probably heading for a soft landing but indicated that geopolitical tensions meant a cautious approach was still needed by policymakers. Barkin said interest rate hikes remain “on the table” even though officials at their most recent meeting in December indicated that this round of policy tightening was probably over as inflation continued to fall.
Economic data comes in mixed
On the macro front, the manufacturing downturn in the US eased a little more than expected in December, according to the Institute for Supply Management’s purchasing managers’ index, which increased to 47.4 from 46.7 in November. While this was the 14th straight month in negative territory – indicated by any reading below 50 – economists had expected a smaller increase to 47.1.
US job openings decreased by 62,000 in November, hitting their lowest level in almost two years, according to the Bureau of Labor Statistics. November’s job openings and labour turnover statistics survey came in at 8.79m, below consensus estimates for a reading of 8.85m.
On another note, US mortgage applications sank by 10.7% in the week ended 29 December, according to the Mortgage Bankers Association, the fastest weekly decline seen since February and despite lower Treasury yields and mortgage rates. Applications to refinance a mortgage crashed 18.1%, following a 0.1% drop a month earlier, while applications to purchase a new home slipped 7.6% to fully erase the 2.4% increase seen a week earlier.
Xerox tanks
Shares in Xerox Holdings dropped 12% after the American digital printing and office solutions group unveiled a “reinvention and operating model evolution” which will see it cut 15% of its workforce. The new plan, which will be actioned in the current quarter, will affect an estimated 3,450 workers of the total 23,000 employed according to its latest annual report.
Charles Schwab was another notable faller after the broker was hit by a downgrade by Goldman Sachs from ‘buy’ to ‘neutral’, while pharma group Eli Lilly was lifted by Bank of America analysts who named the stock a top biopharma pick.
Meanwhile, Apple was declining for the second straight day after Barclays lowered its rating on the stock citing an underwhelming sales season for the iPhone 15.
Thursday newspaper round-up: Electric cars, Vodafone/Three, Joules
Several of the world’s biggest carmakers lobbied the UK government to try to weaken or delay rules to accelerate electric car sales and cut Britain’s carbon emissions. Toyota, Jaguar Land Rover (JLR) and Nissan were among the companies to ask for delays in enforcement of the zero-emission vehicle (ZEV) mandate that obliges them to sell increasing proportions of electric cars or face heavy fines, according to documents seen by the Guardian. – Guardian
The bosses of Britain’s biggest companies will have made more money in 2024 by Thursday lunchtime than the average UK worker will earn in the entire year, according to analysis of vast pay gaps amid strike action and the cost of living crisis. The High Pay Centre, a thinktank that campaigns for fairer pay for workers, said that by 1pm on the third working day of the year, a FTSE 100 chief executive will have been paid more on an hourly basis than a UK worker’s annual salary of £34,963, based on median average remuneration figures for both groups. – Guardian
Depressed UK share prices have led to more foreign buyers acquiring London-listed companies, according to a top City broker. Peel Hunt said there was a surge in overseas acquirers taking advantage of cheap British stocks last year, which sparked a rise in takeover premiums. The proportion of buyers from overseas rose to 55pc in 2023, breaking the long-run trend of a 50/50 split between UK and non-UK buyers. – Telegraph
Labour shadow ministers are pressing the government over national security risks from the £18 billion merger between Vodafone and Three in the UK. The proposed combination of Vodafone and Three, owned by the Hong Kong-listed conglomerate CK Hutchison, would create Britain’s biggest mobile network. However, it has triggered an initial investigation by the Competition and Markets Authority and is subject to government approval under the National Security and Investment Act. – The Times
The taxman is expected to be repaid £5.9 million in overdue VAT after the collapse of Joules. The fashion and lifestyle brand is seeking to repay its creditors and the sale of its assets is said to be on course to deliver a full repayment of tax due to HM Revenue & Customs. Joules called in administrators when it failed to secure a refinancing in November 2022, putting about 1,600 jobs at risk. The company had hoped to raise equity and to cut its rental bill using a company voluntary arrangement before appointing Interpath to find a buyer for the business. – The Times
