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London open: Stocks steady; Tesco rallies on banking arm sale
London stocks were steady in early trade on Friday, but Tesco shot higher after agreeing to sell its retail banking arm to Barclays.
At 0825 GMT, the FTSE 100 was flat at 7,597.47.
Richard Hunter, head of markets at Interactive Investor, said that that overall, “UK markets remain in the doldrums for the time being given a lack of support from global investors despite the increasingly yawning gap on the main indices and their foreign counterparts on valuation grounds”.
“In the year to date, the FTSE 100 has fallen by 1.7% and the FTSE 250 by 2.9%, in sharp contrast to the bouts of optimism being enjoyed in many of the other major global areas.”
In corporate news, supermarket giant Tesco was the standout gainer on the FTSE 100 after agreeing to sell its retail banking business to Barclays for £600m.
The duo also unveiled a 10-year partnership to market and distribute credit cards, unsecured personal loans and deposits using the Tesco brand, as well as explore other opportunities to offer financial services to Tesco customers.
Tesco said it expected to rake in a further £100m after the settlement of certain regulatory capital amounts and transaction costs. Combined with the previously announced special dividend of £250m paid by Tesco Bank last August, this is expected to result in total cash received of around £1bn, the majority of which will be returned to shareholders in the form of an incremental share buyback.
BAE Systems advanced after Kazakhstan-based carrier Air Astana – in which it has a 49% stake – priced its IPO at $9.50 per share, giving it a valuation of $847m.
On the downside, Legal & General slid as Citi cut its 2023 earnings per share estimates and opened a 30-day ‘negative catalyst watch’ on the shares ahead of full-year results on 6 March.
Citi said it expects material EPS downgrades into results “and although this is primarily investment variance driven, this highlights the opacity of Legal & General Capital (LGC) and comes against a backdrop of L&G being the best performing UK life insurer over the past three months and what we see as limited upside capital return surprise potential”.
Polymers group Victrex tumbled as it announced a “soft start” in its first quarter as a result of continued end-market weakness and tough comparatives with the prior year, with group revenues falling by over a fifth.
Bellway nudged lower as the housebuilder said half-year housing revenue fell to more than £1.25bn from £1.80bn a year earlier, in line with the board’s expectations.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Sage Group Plc | +1.66% | +19.50 | 1,192.00 |
| 2 |  |
Ferguson Plc | +1.27% | +195.00 | 15,600.00 |
| 3 |  |
Bae Systems Plc | +1.13% | +13.50 | 1,208.50 |
| 4 |  |
Astrazeneca Plc | +1.11% | +109.00 | 9,932.00 |
| 5 |  |
Bp Plc | +1.08% | +5.15 | 481.40 |
| 6 |  |
Relx Plc | +1.06% | +35.00 | 3,336.00 |
| 7 |  |
Coca-cola Hbc Ag | +1.01% | +22.00 | 2,199.00 |
| 8 |  |
Tui Ag | +1.01% | +5.50 | 550.50 |
| 9 |  |
3i Group Plc | +1.01% | +24.00 | 2,406.00 |
| 10 |  |
Intertek Group Plc | +0.97% | +43.00 | 4,477.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Legal & General Group Plc | -2.98% | -7.20 | 234.10 |
| 2 |  |
Glencore Plc | -1.83% | -7.25 | 389.55 |
| 3 |  |
Croda International Plc | -1.81% | -91.00 | 4,931.00 |
| 4 |  |
British American Tobacco Plc | -1.51% | -37.50 | 2,446.50 |
| 5 |  |
Fresnillo Plc | -1.48% | -7.30 | 485.90 |
| 6 |  |
Easyjet Plc | -1.36% | -7.60 | 550.60 |
| 7 |  |
Aviva Plc | -1.24% | -5.20 | 415.50 |
| 8 |  |
Phoenix Group Holdings Plc | -1.20% | -5.90 | 487.50 |
| 9 |  |
Hsbc Holdings Plc | -1.15% | -7.10 | 610.60 |
| 10 |  |
Direct Line Insurance Group Plc | -1.12% | -1.80 | 158.80 |
US close: Dow, S&P 500 hit fresh highs despite small gains
Wall Street stocks edged higher on Thursday but the Dow and S&P 500 still managed to set new record closing highs, with the latter briefly topping the key psychological mark of 5,000 mark for the first time.
The S&P 500 finished just 0.06% higher at a new high of 4,997.91, having risen to a high of 5,000.40 in afternoon trade, as the index set its ninth record close of 2024, having already gained nearly 5% in the year to date.
The Dow rose 0.13% to a fresh closing peak of 38,726.33, while the Nasdaq gained 0.24% to 15,793.71 as it comes ever-nearer to its record closing high of 16,057.44 reached in November 2021.
Commenting on the S&P 500 hitting 5,000, analyst Chris Beauchamp from IG said: “While it might seem outlandish, Dow 40,000 might not be too far behind, especially if the market continues in its present frame of mind.
“Crucially, indices have remained solid despite the latest strong US data and the diminishing chance of a March cut, showing that there is more to this rally than just hopes of a looser policy environment.”
Jobless claims fall
On the macro front, Americans lined up for unemployment benefits at a decelerated clip in the week ended 2 February, according to the Labor Department. Initial jobless claims dropped by 9,000 to 218,000 from the prior week’s upwardly revised value, slightly below estimates for a reading of 220,000 but firmly above the last two months’ average and pointing to a slowing, yet, strong labor market.
“There is no immediate pressure on the Fed to lower rates as desired by the market,” said Ryan Brandham, head of Global Capital Markets, North America at Validus Risk Management, following the data release. “The US labour market, and the economy more broadly, continues to demonstrate resilience, giving the Fed some time to decide when the time is right to cut rates.”
On another note, wholesale inventories rose 0.4% month-on-month in December, according to the Census Bureau, erasing the prior month’s decrease. It marked the first increase in wholesale stocks since November 2022, driven by durable goods, most notably computer equipment and automotive.
Arm shares soar
US-listed shares in Arm Holdings surged by 48% on Thursday after the British semiconductor company reported record revenues for its third quarter, helped by strong demand for AI applications. Arm said third-quarter revenues were up 14% year-on-year at $824m with record royalty revenues and stronger-than-forecast growth in licensing. “From the most complex AI cloud applications to the smallest edge devices, AI on Arm is everywhere,” the company said in a statement.
Disney was another high riser, gaining 12% after the entertainment giant smashed quarterly forecasts with earnings per share of $1.22 compared with the 99 cents estimate on the back of a stronger-than-expected streaming performance.
Food manufacturer Kellogg rose after announcing the planned closure of one of its major UK factories in Greater Manchester by the end of 2026.
Cigarettes, vaping and tobacco group Philip Morris declined nearly 3% after posting below-forecast numbers for the fourth quarter on the back of higher costs and weaker-than-expected sales of heated tobacco products.
Investment firm Apollo Global Management gained after it beat estimates with its fourth-quarter numbers, posting revenues of $11.05bn, compared to $4.84bn a year previously.
Meanwhile, PayPal was a notable faller, dropping over 11% after disappointing with its outlook. The payments company beat fourth-quarter revenue expectations but said it didn’t expect profits to grow this year.
Friday newspaper round-up: Jes Staley, offshore wind farm, Mexico
The former chief executive of Barclays Jes Staley allegedly stayed in contact with Jeffrey Epstein long after joining the UK bank, according to legal documents that reportedly contradict claims he cut ties with the convicted child sex offender and disgraced financier in 2015. Documents from a now-settled lawsuit, seen by Bloomberg News, allegedly suggest that the two men used an unnamed third person, who “acted as an intermediary for messages between Staley and Epstein”, to stay in contact after Staley took over as chief executive of Barclays in December 2015. – Guardian
A leading business lobby group has urged Jeremy Hunt to resist calls for large-scale tax cuts in his budget next month, saying the government needs to avoid “short-termism” and devote spending to projects that boost the economy. Adding its voice to a growing clamour for green investment, the Confederation of British Industry said pre-election giveaways at the budget should be kept to a minimum to allow for a surge in spending to achieve net zero. – Guardian
Britain’s biggest offshore wind farm is facing a year-long delay to its completion because of a chronic shortage of construction ships. The Dogger Bank site has suffered from significant disruption because of bad weather, storms and a lack of vessels able to build it according to its developer, the power company SSE. – Telegraph
Britain’s working-age benefits bill will hit £100bn for the first time this year amid a surge in disability claims since lockdown. The cost of welfare payments including universal credit, housing subsidies and disability benefit is expected to jump by almost 30pc in real terms to £130bn by the end of the decade, according to forecasts published by the Department for Work and Pensions (DWP). – Telegraph
Mexico has overtaken China as the biggest exporter to America for the first time in 20 years as geopolitics and “friend-shoring” redraw global trade patterns. Mexico exported $475 billion of goods to the US in 2023, a 5 per cent increase on the year, while the value of Chinese exports fell 20 per cent to $427 billion, according to the US Department of Commerce. – The Times
The billionaire family behind Primark and Fortnum & Mason has paid itself £36.9 million in dividend payments after profits across its portfolio grew last year. Wittington Investments, the Weston family’s investment vehicle, handed out £128 million in dividends last year, beating the previous payout of £104 million. – The Times
