- FTSE 100 closed down 12 points at 7,453
- Hammerson lifted by Morgan Stanley (NYSE:MS) upgrade
- Superdry tumbles on return from suspension
4:45pm: FTSE fails to hold onto early gains with US closed
Stock prices in London faded into the close Monday after a bright start, as enthusiasm waned in the absence of fresh direction from New York, with markets across the pond closed for Labour Day.
The FTSE 100 index closed down 11.78 points, 0.2%, at 7,452.76 while the FTSE 250 ended down 12.76 points, 0.1%, at 18,524.14.
London’s lead index had earlier traded as much as 59 points higher, boosted by Friday’s US jobs report and better news on China’s beleaguered property sector.
Michael Hewson, chief market analyst at CMC Markets, said the early gains “have been tempered somewhat by caution that the rally in Asia might be largely a knee jerk response to a narrow rebound in housing sales in two Chinese cities, with the bigger test set to come tomorrow with the return of US markets.”
4:05pm: Watches of Switzerland top team buy stock
A better day for Watches of Switzerland with shares up 2.8%, after its share price took a hit recently from the acquisition of a rival retailer by key supplier Rolex SA.
Senior management at the retailer have backed thr group, picking up shares in the retailer.
AJ Bell’s Russ Mould said the purchase should reassure investors, “particularly as they are the ones who should know the business best.”
Chief Financial Officer Anders Romberg bought 100,000 shares at £5.85, worth £584,700. Chair Ian Carter bought 35,000 shares at prices from 582.50p to 589.50p, worth £205,690 in total.
3.45pm: Wilko job cuts begin
The FTSE 100 is fading fast as we head into the close and is now sitting down 13 points at 7,452.
Monday marks the first day of job cuts at Wilko as negotiations set on partially rescuing the collapsed budget retailer continue.
Some 269 roles at Wilko’s Worksop support centre in Nottinghamshire will face the axe, according to administrator PwC, alongside 14 roles at subsidiary Kin Limited.
Further cuts could be announced this week meanwhile, as talks for a partial takeover of Wilko continue, with HMV owner Doug Pitman seemingly a front-runner to take on 300 of the chain’s 400 stores.
One spanner in the works could be demands from the likes of Unilever PLC (LSE:ULVR) (Unilever PLC (LSE:ULVR)) and Procter & Gamble (NYSE:PG) (Procter & Gamble (NYSE:PG)) over debt repayment from Wilko.
3:01pm: Fuel prices jump sharply in August – RAC
Forecourt fuel prices rose at some of the most rapid rates in over two decades during August, as rising wholesale costs from the likes of production cuts hit drivers.
A near-7p and 8p rise in the prices of petrol and diesel respectively marked the fifth and sixth-largest monthly hikes in 23 years, automotive services firm RAC said on Monday.
Higher wholesale oil prices prompted by OPEC+ cuts earlier this year largely weighed in, RAC said, as retailers work on tighter margins thanks to a probe by the Competition and Markets Authority (CMA) following stubbornly high prices at pumps previously
2:28pm: Airlines could face crackdown on hidden fees
Airlines could face a crackdown on hidden fees, as part of a new government plan to improve transparency for people shopping online.
A public consultation being launched by the Department for Business and Trade on Monday will look at ways to clamp down on firms that add necessary charges at checkout, bumping up the final price.
It comes as new government research suggests the practice is “widespread” across a range of industries.
In total, this costs consumers £1.6bn a year, the research said.
Susannah Streeter, head of money and markets, Hargreaves Lansdown noted: “Inflight add-ons are highly lucrative for airlines, adding a big cushion to the bottom line.”
She said while this ‘drip pricing’ strategy doesn’t seem to be putting off passengers from splashing the cash, a “deepening cost-of-living crisis” may make passengers “more sensitive to add-on costs.”
“More legroom or another bag might be worth paying the price for, if bank accounts are flush, but as budgets are eroded further these ‘nice to have’ extras will be easy to ditch,” she suggested.
2:02pm: Superdry tumbles on return from suspension
Heading into the afternoon, and shares in London are wilting a touch – perhaps traders have headed out to enjoy the late Summer sun.
More of a tumble, than a wilt, at Superdy which has returned to trading after suspension and promptly fallen 11%.
Trading in the fashio retailer’s shares was suspended following a delay to the publication of its annual results.
The firm revealed on Friday that it had swung to a £150 million loss as it warned over stunted sales growth this year amid intense pressure on shoppers.
Not a great first day back.
12:50pm: Hammerson boosted by Morgan Stanley (NYSE:MS) upgrade
As mentioned below, Morgan Stanley (NYSE:MS) has been updated its ratings and price targets across the European property sector.
We’ll concentrate on the UK moves, where the investment bank has an overweight skew, and where an upgrade for Hammerson has lifted the share price by 3.4% to 24.76p.
“UK balance sheets screen as sufficiently capitalised in the context of modest asset appraisals, while NAV valuation for many is close to or at all-time lows,” the investment bank noted
“We are alive to the fact that broader UK exposure and offices as a sub-sector are out of favour, but at current valuation the risk reward is compelling in our view,” it said.
On an individual stock basis, Hammerson has been upgraded from equal-weight to overweight with its price target increased by 33% to 36p from 27p.
The broker believes the firm is making significant restructuring progress and it sees value in the shares at current levels.
But Land Securities heads the other way to equal weight from overweight with the price target down to 650p from 750p.
“We see value in the UK diversified names, but the valuation gap with British Land is now at alltime wides, and therefore we see more upside potential in British Land,” the bank commented.
Morgan Stanley (NYSE:MS) also reduced the price targets for most UK REITs with office exposure by 10-15% to reflect more weakness in offices compared to what we previously assumed.
In addition to Land Securities, the target for Derwent (rated overweight) moved to 2,700p from 3,000p overweight, Great Portland (overweight) to 545p from 640p and British Land (overweight) to 450p from 450p.
The price target for Unite (overweight) was raised to 1,25p from 1,050p.
12:16pm: Stocks off highs, property sector in the spotlight
Just after midday, and the FTSE 100 has just eased off its earlier highs but remains firmly in the green, now up 31 points.
US markets are closed for Labour Day, so there may be a lack of catalysts for the rest of the day to provide direction but we will see.
Over in Europe, and the Cac-40 is up 0.5% while the Dax is 0.45% to the good as the feel good mood spreads.
Property stocks seem to be in vogue today.
After news that JP Morgan has downgraded British Land to neutral from outperform, comes a sector review from Morgan Stanley (NYSE:MS) which has changed ratings on five stocks in the sector across Europe.
Hammerson which is 3.7% higher has been upgraded to overweight from equal weight, but Land Securities has been the other way, to equal weight from overweight.
We’ll have the details on this next.
11:39am: Entain a buy despite lower price target, says Jefferies
Entain PLC (LSE:ENT) shares have climbed as Jefferies highlighted the stock’s attractions despite lowering estimates and its price target for the betting operator.
Jefferies noted higher interest, increased minorities (STS) and a higher share count after the recent c8% placing leads it to cut EPS forecasts by 14%, 12% and 12% for the next three financial years.
It also lowered its price target for the owner of Ladbrokes and Coral to 1,460p from 1,850p.
But it has retained a buy rating.
It thinks that despite few shorter-term trading catalysts, “a low valuation, scrutiny around capital allocation and ongoing MGM speculation will underpin” Entain shares.
The broker thinks the 15% fall in the share price suggests downgrades are now priced in.
Jefferies noted the previous MGM deal structure of 0.6 MGM shares per Entain share, equates to c£20.50 per Entain shares now, around 75% ahead of the current share price.
Shares rose 2.6% to 1,183p.
11:17am: Interest rate rises to drive up business failures
Just the brighter news in the markets things in the business world remain tough.
Around 28,000 UK businesses are expected to fold next year, as high borrowing costs put an unbearable strain on companies, according to a new survey.
Economics consultancy the CEBR is predicting that Britain is likely to witness 7,000 business insolvencies per quarter in 2024, as the economic drops into recession.
The CEBR warned that rising interest rates and weaker demand from the cost-of-living crisis will lead to more business failures, with debt repayments hitting unsustainable levels for some businesses.
“If large investments in projects are being delayed, likely due to high borrowing costs, and businesses are collapsing, there will be impacts felt throughout the economy, from suppliers of materials to workers losing their jobs,” the CEBR said.
Firms have already gone to the wall since the Bank of England began its cycle of rising interest rates. There were 6,700 business insolvencies in Britain in the April-June quarter this year – 50% higher than before the pandemic.
10:43am: Abrdn boss calls for double in pension contributions
Abrdn chief executive Stephen Bird has called for a doubling of minimum pension contributions from 8% of pay to 16% in what would amount to a huge change to the retirement saving rules.
Bird reckons millions of people were heading for an inadequate income in retirement because the present minimum 3% contribution from employers and 5% from employees was not nearly enough.
Writing in The Times, Bird said: “To have any chance of achieving decent retirement outcomes, the contribution rate needs to double – taking it closer to the levels seen in other developed economies, or indeed, the Abrdn employee scheme.”
More “visionary thinking and boldness” was needed from ministers, said Bird, whose firm manages £368 billion of savings for pension funds and individual investors.
Minimum contribution rates were initially set at 1% for employers and 1% for employees in 2012 when the auto-enrolment pensions regime was first phased in, and were raised in both 2018 and 2019.
10:15am: FTSE extends gains on US and Chinese hopes
It’s mid-morng already and the FTSE 100 continues to make progress, now up 54 points at 7,519.
Russ Mould, investment director at AJ Bell, explained: “Investors are growing warm to the idea that the Federal Reserve might not rush to raise interest rates again at its next meeting.”
“An increase in unemployment for August and lower than expected wage growth suggest the Fed may sit on its hands and make no change to rates,” he said.
“Judging by the messages from US corporates regarding a slowdown in trading, it does feel like we could be at a turning point for monetary policy,” he thinks.
“Nonetheless, it is impossible to say for certain what the Fed will do, given these are only data points from a brief period of time.”
He also pointed to improved sentiment across Asian markets after the weekend vote by creditors in favour of restructuring a bond repayment by Country Garden.
“Chinese authorities also lowered downpayment requirements for first and second-time home buyers, thereby providing yet another stimulus initiative to drive greater economic growth,” he added.
This latter move has boosted home sales, according to Bloomberg.
It reported existing-home sales for Beijing and Shanghai doubled over the weekend from the previous one, citing CGS-CIMB Securities.
9:53am: JP Morgan downgrades British Land, prefers Derwent, Great Portland
British Land PLC is just the wrong side of the line this morning, down 0.2%, and investment bank JP Morgan reckons City values could fall 20% this year.
The bank said this puts its financial year 2024 NAV forecast 6% below consensus and results in a new price target of 410p, down from 505p.
JPM pointed out while this still implies more than 25% upside, it is less than lower-levered, West End office focused developers like Derwent London (rated overweight) & GPE (overweight.)
Crucially though, sentiment and the value outlook for the City is weak, with British Land’s exposure here standing out, it said, as does LTV at 36%.
“We think this combination will manifest in a miss on NAV at 1H24 results on the 13-November, and if the trend seen in UK values between April 2023 and July 2023 continues to March 2024 then we think British Land could miss FY24 NAV consensus by 9%,” the broker estimated.
While the valuation isn’t stretched, JPM thinks “catalysts for a stock-specific re-rating look hard ahead of a turnaround in City offices.”
The bank has downgraded its rating to neutral from overweight and placed the firm on negative catalyst watch.
9:22am: Ergomed deal shows UK market is undervalued
Ergomed’s takeover by Permira is “another example of the UK market proving a rich environment for private equity to make acquisitions highlighting it remains significantly undervalued.”
That is the view of broker Stifel which pointed out with executive chairman Miro Reljanovic backing the agreement, “we see little impediment to the deal completing.”
“We see no competition issues given Ergomed has a small share of both the CRO and pharmacovigilance markets in which it operates,” it added.
Dr Sean Conroy at Shore Capital said: “We view the offer as an attractive opportunity to lock in returns.”
“In a fragmented sector ripe with consolidation, we had previously highlighted Ergomed could potentially be predator or prey, and we note multiple listed CROs have been taken private in recent history; we see positive read across from other services providers as potential beneficiaries to high PE interest and highlight Uniphar,” he added.
9:05am: UK on course to hit inflation target, says Chancellor
The UK government is still on track to achieve its pledge to halve record inflation this year, according to chancellor Jeremy Hunt.
The government was “taking the right decisions for the long-term of the British economy,” Hunt said on the BBC’s Sunday With Laura Kuenssberg show. “That’s what we’re doing and we can see the plan is working.”
Hunt made the comments after publishing a statement ahead of Parliament’s return on Monday, saying the government will achieve its goal to get the inflation rate to about 5% by year end.
8:40am: Stocks higher but Advanced Medical takes a fall
The FTSE 100 has extended its gains, now up 47 points, at 7,512.
Richard Hunter, head of markets at interactive investor, commented “Markets globally continued to edge higher, with some of the prevailing concerns beginning to dissipate as economic news lifted spirits.
Mining stocks are prominent risers on the perceived brighter economic prospects with Glencore PLC (LSE:GLEN) up 1.7%, Rio Tinto PLC (LSE:RIO) up 1.6% and Anglo American up 1.2%.
Stocks may be purring this Monday morning but one share heading south is Advanced Medical Solutions, down 24% at 189.01p.
The firm has removed any expectations of royalty payments from Organogenesis and cautioned ongoing Liquiband US partner issues are taking longer to resolve.
Analysts at Stifel said: “While the Organogenesis issue is particularly impactful with the removal of 100% margin royalties, it is beyond AMS’s control.”
“Conversely, the US Liquiband issue is AMS’s to resolve and therefore the more disappointing of the two updates.”
The broker has cut its price target to 245p from 285p and retained a hold rating.
Peel Hunt has lowered its revenue and adjusted pre-tax profit estimates for 2023/24/25 ( 5%/3%/3% and 16%/12%/11%) and cut its price target from 290p to 228p.
8:15am: FTSE climbs as global confidence ticks up
The FTSE 100 advanced in early exchanges on hopes for a soft landing in the US and on better news for embattled Chinese property developer Country Garden.
At 8:15am, London’s lead index was up 38.88 points, 0.5%, at 7,503.42, while the FTSE 250 climbed 54.25 points, 0.3%, at 18,591.15.
Susannah Streeter, head of money and markets, Hargreaves Lansdown said: “’The FTSE 100 is set for a positive trading session, with a dose of Monday motivation, as investors assess the slightly sunnier prospects for the world economy.”
“Hopes have lifted that the Fed’s efforts in taming unruly inflation in the US are working and not much more interest rate stick will be needed.”
“There is also relief that Chinese efforts in stimulating demand might finally be paying off.”
Shares in China’s Country Garden rose more than 15% after creditors agreed over the weekend to restructure the repayment of a renminbi-bond debt due last Saturday.
The approval from bondholders provides the cash-strapped real estate company with more time as it scrambles to meet domestic and international repayment obligations.
Investors were also mulling Friday’s US employment report which had something for hawks and doves alike.
Deutsche Bank’s Jim Reid said: “We’ve said this a lot recently but there was something for everyone in the release.”
“The soft landing crowd will be pleased that the labour market is softening without much stress at the moment.”
“However the hard landing argument must be buoyed by the huge downward momentum in recent months and revisions in payrolls.”
Back in London, and Ergomed soared 26.6% to 1,331.76p after agreeing a £703.1 million bid approach from private equity firm, Permira.
“We view the offer as an attractive opportunity to lock in returns,” said Shore Capital analyst Dr Sean Conroy.
John Wood rose 1.3% after striking a new strategic venture for North Sea operations with Harbour Energy in a deal worth around US$330 million.
7:51am: Ergomed agrees £703.1 million takeover
Talking of a renewed appetite for deals, and Permira has agreed terms with Ergomed PLC (AIM:ERGO, ETR:2EM) for a £703.1 million takeover.
The private equity outfit has bid 1,350p per share for the firm which provides specialist services to the pharmaceutical industry.
Ergomed said it considered the cash deal to be “fair and reasonable.”
Miroslav Reljanović, executive chair said: “We believe the Acquisition by the Permira Funds now represents an excellent opportunity for Ergomed shareholders to realise value at a highly attractive valuation and at the same time allow Ergomed to most effectively deliver against its ambitious growth strategy.”
As an alternative to the cash Offer, eligible Ergomed Shareholders may elect for a partial securities alternative to which they will receive 451 pence in cash plus unlisted securities, the statement said.
7:40am: John Wood and Harbour Energy link in North Sea deal
John Wood Group and Harbour Energy have joined forces in a new strategic venture for North Sea operations in a deal worth around US$330 million.
Under the agreement, Wood, a global consulting and engineering company, will provide engineering, procurement and construction (EPC) and operations and maintenance (O&M) services, including digital and decarbonisation solutions, for a number of Harbour’s offshore assets critical to UK energy security.
The strategic partnership will run for an initial term of five years, with five one-year extension options covering Harbour’s operated assets, including its J-Area, Greater Britannia Area, Solan and AELE (Armada, Everest, Lomond and Erskine) hubs.
Harbour Energy is the UK’s largest oil and gas producer.
7:37am: Arm lowers IPO valuation – reports
Starting the day with reports that Arm is targeting a valuation of between US$50-55 billion, down from the US$64 billion valuation given by its owner, Softbank, last month.
The UK computer chip designer is preparing to start its IPO roadshow next week ahead of a long-awaited stock market float in New York.
The Financial Times reported that SoftBank was still optimistic that the final valuation would be higher than the initial range, citing one person familiar with Arm’s plans.
A person involved in the deal said preliminary meetings “testing the waters” with investors had gone well, and said it was a common tactic for dealmakers on large tech listings to start roadshows with a conservative price range to help build momentum.
Arm has been owned privately by the Japanese investment company SoftBank since 2016, when it was taken off the London Stock Exchange in a £24 billion deal.
It’s a big deal in more than ways than one as the market will be closely watching the appetite for the IPO in a market where big deals have dried up.
Could a successful IPO spur others to list and deals to be done? We will see.
7:00am: Bright start expected in London
Good morning and the FTSE 100 is expected to make a positive start to the week on hopes that US interest rates have peaked and actions taken by Chinese authorities will support its faltering economy.
Spreading betting companies are calling London’s index up by around 38 points after closing 25.41 points at 7,464.54 on Friday.
“Last week ended on a positive note, and this week started with a solid risk appetite, as the US jobs data hinted at a finally loosening jobs market, while Chinese stocks rallied on further measures deployed by the Chinese government to support the country’s faltering property market,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Investors in China were looking for further stimulus measures for its property sector, following a series of measures announced last week, which included reducing mortgage down payments and tax incentives.
Embattled developer Country Garden won approval from creditors to extend a deadline for a key bond repayment, narrowly avoiding a potential default, sent shares soaring 13% in Hong Kong, providing some better news for the property sector.
Investors in Asia were eyeing potential further stimulus measures from China for its property sector, following a series of measures announced last week, which included reducing mortgage down payments and tax incentives.
Back in London, and the early focus will be updates from Ashtead technology and Belvoir.