Mid-session moves: pound stays perky and gold glistens while China fears knock wider mood
Worries about the outlook for the global growth as China’s economy slows down kept the FTSE 100 under pressure today, while sterling and gold ticked higher.
AI hopes offset inflation worries to help UK business stay confident, says S&P Global
UK business confidence is getting a helping hand from the rise of Artificial Intelligence, helping offset worries on inflation.
A new report from S&P Global has found that plans to up investment in AI mean businesses expect activity to continue to grow over the coming year. Now, 29% of companies expect to invest in it, up from 18% in June.
The index company’s UK Business Outlook report, produced alongside Accenture, found the net balance of firms expecting activity to increase over the next 12 months stood at +40% in June. That was marginally down from +43% in February, but well above the record low registered in October 2022.
But there were also clear signs of the extent of inflation worries. Expectations of higher prices emained “stubbornly high” S&P said, at 51%, down somewhat from 59% earlier in the year. Wage inflation expectations were stark, with a net balance of 72% of businesses expecting higher staffing costs over the next 12 months, down from 77% in February.
Overall 45% of firms expect to increase their prices.
Accenture’s Matt Prebble said: “British businesses continue to be resilient and optimistic, despite the current economic challenges. Although still a concern, businesses expectations on inflation and staffing costs are falling, a trend that is required to ease margin and pricing pressures.”
City Comment: Now UK investors must show faith in our stock market
For many months the complaint has been that the UK stock market is unfairly unloved.
Our finest firms are surely worth more than the deep discounts at which they trade compared with US rivals, goes the complaint.
Fund managers with a UK focus — notably Ashmore and Liontrust just last week — were feeling the pain, as were their long-suffering investors. And the dearth of fresh stock market London listings would continue until this anomaly was corrected.
The complaint was real, and a genuine concern. Though the obvious answer to the CEO moaning his shares were cheap was a simple one: buy some then.
One sort-of solution to the predicament arrived this morning, with a £470 million offer from US private equity house Searchlight for fund group Gresham House. Searchlight thinks Gresham is cheap at that price and is probably right.
Which indicates the problem here isn’t that foreign investors find London uninvestable, are scared by memories of Liz Truss and fears of what Brexit has done to us all. It is that UK investors are the scaredy-cats, the ones lacking the gumption to see the value before their very eyes.
If the London market really is undervalued — it looks it by any number of metrics — some people are going to make a bomb by buying it cheap. It would be nice if that were our pension funds. Rather than far-sighted foreigners.
The Government is doing what it can here in fairness. Some risk-taking from within the Square Mile shouldn’t need a Government incentive though.
That is what it is supposed to be good at all by itself.
FCA faces probe into its effectiveness
The ability of the UK’s financial regulator to do its job is set to come under close scrutiny in a new probe.
The activities of the Financial Conduct Authority, which regulates a swathe of firms in the square mile from High Street Banks to crypto trading apps, are to be reviewed by the National Audit Office in a bid to “examine how the FCA is working with others, particularly HM Treasury.”
The NAO, an independent body which monitors the performance of government operations, said the FCA’s portfolio has swelled in light of new technological innovations like cryptoassets and artificial intelligence, while it also had to deal with a host of new regulatory regimes as well as comply with a statutory objective to “facilitate the international competitiveness” of the UK economy.
The FCA will be assessed on how it plans “take action to meet aspects of the challenges and take advantage of the opportunities posed by recent changes,” the NAO said.
read more here
FTSE 100 lower but JM and Vodafone rally, Aston Martin up 4%
Johnson Matthey is among today’s FTSE 100 risers after a City bank said shares in the clean air firm deserved to be 40% higher.
The backing follows a poor stock market run for the 200-year-old business, which helps leading energy, chemicals and automotive companies reduce harmful emissions.
Having only returned to the premier index in January, the shares have fallen more than 15% this year to leave Johnson Matthey as London’s smallest blue chip.
However, a rebound of 19p to 1773p today gave Johnson top billing in the FTSE 100 as Deutsche Bank sweetened its “buy” recommendation with an improved 2500p target.
Johnson Matthey’s shares were not alone in hitting the recovery trail today as a stronger session for Vodafone lifted the mobile phone giant 0.7p to 72.9p.
The FTSE 100 fell 23.12 points to 7411.45 but others in fightback mode included United Utilities, which recovered 11.2p to 962.2p after falling 7% in the past month.
Investors also sought out lenders after Friday’s reassuring figures by US banking heavyweight JPMorgan boosted confidence ahead of UK sector results next week.
Lloyds, which is due to report half-year figures on 26 July, rose 0.3p to 44.6p while NatWest added 2.3p to 245.3p and Barclays put on 0.9p to 156p.
In the FTSE 250 index, shares in Royal Mail owner IDS continue to show momentum after the CWU’s recent vote in favour of a pay deal ended long-running strike action.
The shares have risen 15% in the past fortnight and today added a penny to their highest level since April at 251p, with attention now turning to a trading update due on Thursday.
Other second tier risers included Aston Martin Lagonda, which is still firing on all cylinders after doubling in value over the past year. The shares lifted another 4% or 13.2p to 331p in a session when the FTSE 250 index drifted 38.57 points to 18,528.24.
H&M to enter Brazil
H&M has taken another step on its expansion across Latin America as it unveiled plans to set up shop in Brazil.
The Danish fashion brand first launched in Latin American with the opening of a store Mexico in 2012, and today is also present in Peru, Uruguay, Chile and Colombia, among others.
The firm hopes to launch physical stores and a website in Brazil in 2025. Last year its profits took a knock from its withdrawal from the Russian market, as it laid out measures to reduce costs by over £100 million.
H&M said in a statement: “We’ve had good development in Latin America and see great potential in Brazil.
“With a population of over 210 million in Brazil and a strong appreciation for fashion, there is considerable potential for expansion in the market.”
(Mike Egerton/PA)
/ PA WireSales slide at Virgin Wines
Virgin Wines today became the latest e-commerce business to see its post-pandemic fortunes turn sour after it posted a slump in sales.
The Norwich-based drinks subscription service saw a more than two-thirds rise in revenues between 2019 and 2021 as Brits turned to online food shopping during the shutdown of the high street amid Covid restrictions. But in the twelve months to the end of June sales slid 14.5% to £59 million and are now just 4% above 2020 levels, in signs spending on premium bottles of wine has been curtailed by Brits on squeezed incomes.
The firm continued to make a small pre-tax profit of £500,000 and raised hopes for a sales turnaround as it pointed to a positive trend of customer cancellation rates in the most recent quarter.
Virgin Wines shares rose 3.4% to 30p. The stock is down 60% since the start of the year.
Miners struggle but FTSE 100 holds firm, Trainline up 3%
Mining stocks are trading lower on the back of today’s China figures, with shares in Anglo American and Antofagasta the hardest hit following falls of around 2%.
The FTSE 100 index is 4.51 points lower at 7430.06 but that represents a better-than-expected performance and smaller than the declines seen in Europe.
Johnson Matthey posted the best blue-chip performance, lifting 23p to 1777p after analysts at Deutsche Bank enhanced their “buy” recommendation with a new 2500p target.
The FTSE 250 index drifted 41.68 points to 18,525.13 in a session when Trainline was the best mid-cap stock following a rise of 3% or 7.1p to 267.1p.
Sterling holds gains ahead of inflation reading
The pound remains above $1.30 this morning, having recently risen to its highest level since April 2022 on expectations for a pause in US interest rate hikes.
A half point increase in UK rates is still on the cards for next month, although much will depend on the outcome of Wednesday’s inflation reading.
The annual rate of inflation is forecast to fall from 8.7% to 8.3%, but with little change in core prices at around 7%.
The dollar index against six major currencies has been at a 15-month low, drien by last week’s softer-than-expected US inflation figure of 3%.
FTSE 100 seen lower after China GDP miss
European stock markets are facing a downbeat session after China posted a weaker-than-expected second quarter GDP figure of 6.3%.
The Shanghai Composite fell by more than 1% as the latest estimate of growth in the world’s second largest economy came in below forecasts of 7.3%. Markets in Hong Kong and Tokyo were closed today.
Further evidence of China’s faltering recovery from Covid lockdowns was also seen in the rate of annual growth in retail sales, which missed estimates after slowing to 3.1% in June from the 12.7% seen in May.
Having traded sharply higher last week, IG Index expects the FTSE 100 index to open 0.6% or 45 points lower at 7396.