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London open: Stocks gain as BP rallies on share buybacks
London stocks rallied in early trade on Tuesday, with BP pacing the gains as the oil giant expanded its share buybacks.
At 0830 GMT, the FTSE 100 was up 1% at 7,686.51.
Investors were also mulling the latest data from BRC and KPMG, which showed that the annual rate of UK retail sales growth slowed to its lowest level in 17 months in January as non-food sales dropped despite an easing of inflationary price pressures.
Total retail sales were up by just 1.2% compared with January 2023, easing from the 1.7% year-on-year growth registered in December and the 2.7% annual increase seen in November, according to the British Retail Consortium-KPMG retail sales monitor.
The last time year-on-year growth was below this level was in August 2022 when it was just 1.0%.
“Easing inflation and weak consumer demand led retail sales growth to slow. While the January sales helped to boost spending in the first two weeks, this did not sustain throughout the month,” said the BRC’s chief executive Helen Dickinson.
“Larger purchases, such as furniture, household appliances, and electricals, remained weak as the higher cost of living continued into its third year,” Dickinson said.
“The milder temperatures meant clothing sales performed poorly, particularly winter clothing and footwear. It was better news for health and beauty products, which continued to sell extremely well.”
Food sales were up 6.3% year-on-year over the three months to January, slowing from 6.8% growth registered in the three months to December, while non-food sales fell 1.8% compared with a 1.5% decline previously.
Dickinson called on the government to prioritise the needs of retailers and their customers ahead of the Spring Budget and the next general election expected at some point in the second half of 2024.
“Employing three million people and supporting families and communities in every corner of the country, retail is the ‘everywhere economy’. By addressing the cumulative burdens, from business rates’ rises, to ill-conceived new recycling proposals to border control costs, the next government can unlock retail investment and boost local and national economic growth.”
Still to come, the S&P Global/CIPS construction PMI for January is due at 0930 GMT.
In equity markets, BP surged to the top of the FTSE 100 as the energy giant announced a $1.75bn share buyback despite a slump in annual profits as oil prices fell during 2023 from the spike caused by Russia’s invasion of Ukraine.
Full-year underlying replacement cost profit – the company’s preferred earnings measure – halved to $13.8bn from $27.6bn a year earlier. Looking ahead, BP expects first quarter 2024 reported upstream production to be higher compared to the final three months of the 2023.
Renishaw gained as it said that higher costs, pay inflation and currency movements hit margins in the first half, leading to a 23% slump in adjusted profits amid challenging market conditions, but that it expects things to pick up in the second half.
Banking group Virgin Money also advanced saying it had delivered a first-quarter performance in line with guidance with growth in new accounts, deposits and target lending activities at stable margins.
On the downside, Entain fell after Barclays downgraded the shares to ‘equalweight’ from ‘overweight’ as it said the stock appears cheap but the risk/reward is fairly balanced.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Bp Plc | +6.15% | +27.95 | 482.10 |
| 2 |  |
Rolls-royce Holdings Plc | +3.03% | +9.40 | 319.20 |
| 3 |  |
Prudential Plc | +2.69% | +22.00 | 839.80 |
| 4 |  |
Kingfisher Plc | +2.52% | +5.30 | 215.40 |
| 5 |  |
Bae Systems Plc | +1.99% | +23.50 | 1,202.50 |
| 6 |  |
Antofagasta Plc | +1.92% | +33.00 | 1,753.50 |
| 7 |  |
Sainsbury (j) Plc | +1.69% | +4.60 | 277.10 |
| 8 |  |
Melrose Industries Plc | +1.68% | +9.80 | 594.00 |
| 9 |  |
Hsbc Holdings Plc | +1.63% | +10.10 | 629.30 |
| 10 |  |
Intercontinental Hotels Group Plc | +1.38% | +104.00 | 7,620.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Pearson Plc | -2.21% | -21.40 | 947.20 |
| 2 |  |
Coca-cola Hbc Ag | -1.46% | -34.00 | 2,291.00 |
| 3 |  |
United Utilities Group Plc | -1.29% | -13.50 | 1,036.00 |
| 4 |  |
Bt Group Plc | -1.14% | -1.25 | 108.55 |
| 5 |  |
Diageo Plc | -1.11% | -33.00 | 2,951.00 |
| 6 |  |
Severn Trent Plc | -0.98% | -25.00 | 2,529.00 |
| 7 |  |
National Grid Plc | -0.91% | -9.50 | 1,037.50 |
| 8 |  |
Sse Plc | -0.77% | -13.00 | 1,666.00 |
| 9 |  |
Fresnillo Plc | -0.75% | -3.80 | 501.00 |
| 10 |  |
Flutter Entertainment Plc | -0.63% | -105.00 | 16,590.00 |
US close: Stocks slump on strong data as Powell dampens rate-cut hopes
US stock markets declined on Monday on the back of disappointing results from fast-food giant McDonald’s and comments from Federal Reserve chair Jerome Powell, who said that the central bank was in no rush to cut interest rates.
Powell echoed comments made at the Fed’s most recent monetary policy meeting, saying that the “economy’s in a good place” after resilient economic data over the past few months. “Our confidence is rising. We just want some more confidence before we take that very important step of beginning to cut interest rates,” he said.
Adding more weight to his argument was a particularly strong result from the Institute of Supply Management’s non-manufacturing PMI on Monday which came in ahead of analysts’ forecasts.
The Dow finished 0.7% lower at 38,380.12, the S&P 500 fell 0.3% to 4,942.81, while the Nasdaq slipped 0.2% to 15,597.68.
“Markets managed to shrug off Friday’s stellar payrolls report, but today’s ISM services PMI seems to have dealt the death blow to any lingering hopes that a March rate cut was still on the cards,” said Chris Beauchamp, analyst at IG.
The ISM services PMI increased to 53.40 points in January, up from 50.50 points in December 2023 and well ahead of the 52.0 consensus forecast. This was the strongest reading in four months as new orders, employment and supplier deliveries improved month-on-month.
Meanwhile, further dampening market sentiment on Monday was a 14.5 basis-point increase in the 10-year US Treasury yield to 4.168%.
McDonald’s slumps on sales miss
Shares in McDonald’s slumped nearly 4% after the company missed analysts’ forecasts with its fourth-quarter sales. Global comparable sales increased 9% over 2023 as a whole but growth tailed off to just 3.4% in the fourth quarter, which the company blamed on the war in the Middle East. The chain had come under fire in recent months after offering discounts to Israeli soldiers, prompting boycotts across the wider region, while some stores had to temporarily close as a result of protests.
Fourth-quarter adjusted diluted earnings per share rose by 14% to to $2.95, ahead of the $2.82 expected by the market, but revenues of $6.41bn missed the consensus estimate of $6.45bn.
Social media group Snap also finished in the red after announcing plans to cut a tenth of its global workforce – thought to be around 500 people – as part of a restructuring plan that will cost between $55m and $75m.
Novo Holdings, the controlling shareholder of Novo Nordisk, has agreed to buy US drug maker Catalent in a $16.5bn cash deal, causing shares in the latter to jump 10%.
In other earnings news, Caterpillar, Tyson Foods and Estee Lauder all beat forecasts with their latest quarterly results, causing shares in the three stocks to rise strongly.
Tuesday newspaper round-up: EVs, Arrival, Lloyds Banking Group
Ministers need to intervene to boost the secondhand electric vehicle market and allay “uncertainty and concerns” over the health of their batteries, a House of Lords committee has said. Peers on the environment and climate change committee urged the government to step up efforts to encourage electric vehicle adoption amid consumer jitters over the cost of vehicles, the longevity of their batteries and the availability of charging points. – Guardian
Mark Carney has raised $10bn (£8bn) for an eco-friendly investment fund, as the former Bank of England governor seeks to boost funding for net zero projects. Mr Carney has criticised Rishi Sunak’s environmental policies and thrown his support behind the Labour Party in recent months, as he ramps up his campaign to bring more money into green investments. – Telegraph
A British electric van maker once valued at $13bn (£10bn) has gone into administration after burning through $1.5bn without having sold a vehicle. Oxfordshire-based Arrival has appointed administrators at EY to find a buyer for the business, blaming “challenging market and macroeconomic conditions”. Arrival’s Nasdaq flotation in 2021 was the biggest ever for a British company but shares have fallen by 99.98pc as it became clear that the company was unable to service its debts. – Telegraph
Lloyds Banking Group is close to settling a claim from the former owner of the Centre Point tower in central London which relates to the alleged “manipulation” of the Libor benchmark interest rate. Ardeshir Naghshineh claimed he would not have taken on loans from HBOS, which Lloyds rescued in 2009, had he known that Libor, the benchmark against which the products were priced, was being routinely manipulated by Lloyds and other banks and that the rate was therefore “compromised”. – The Times
