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Jeremy has worked extensively in the world of financial journalism as a reporter at ICV News, deputy editor at S&P Marketscope and as a senior reporter for Thomson Financial’s Marketeye. A qualified accountant, former finance director and with a degree in Economics, Jeremy is well placed to analyse and explain the ups and downs of UK, European and US stockmarkets in Proactive’s daily market report Read more
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Last updated: 16:40 23 Nov 2023, First published: 06:59 23 Nov 2023
At the close, London’s lead index was up 14.07 points, 0.2%, at 7,483.58 while the FTSE 250 eased 20.65 points, 0.1%, at 18,459.52
The FTSE 100 closed near its best levels in a quiet trading session with US markets closed for Thanksgiving.
At the close, London’s lead index was up 14.07 points, 0.2%, at 7,483.58 while the FTSE 250 eased 20.65 points, 0.1%, at 18,459.52.
Sentiment was given a boost by a return to growth in the private sector indicated by the latest PMI figures while minutes from the European Central Bank contained no nasty surprises.
Craig Erlam at Oanda said the PMI data reinforced the view that the economy may once again defy expectations and avoid recession.
“Growth will remain almost flat but the repeated display of resilience is encouraging,” he said, although he added the caveat will this translate into “interest rates staying high for longer.”
“The ECB minutes were largely as you’d expect with policymakers not yet prepared to declare victory over inflation, instead insisting on keeping the door open to another rate hike, while acknowledging that they are on course to bring inflation back to target by 2025,” he added..
A rally in the oil price from the lows seen at London’s close on Wednesday supported blue-chips with index heavyweights, BP and Shell movig higher.
But the gold star in the premier index went to Intertek, up 3.4% after its encouraging trading statement.
Also on the rise was BAE Systems, as JPMorgan raised its price target.
On the wane were shares in Vodafone, Imperial Brands and National Grid – all trading ex-dividend, while Whitbread slipped with traders highlighting some disappointment in results from Travelodge.
Virgin Money was most definitely out of the money, down 6.8% after reporting a spike in bad debts which knocked profits while Jet2 lost altitude after warning of a slowdown in bookings in recent weeks.
That is it from me today, I am back tomorrow from 7am. Have a great evening.
Spare a thought for the population of Turkey where interest rates have been increased to 40%, much more than economists expected.
The central bank increased its one-week repo rate by 5 percentage points to 40%. against expectations for a 2.5 percentage point rise.
Boom! Turkey hikes by 500bps vs expected 250bps, bringing the real policy rate very close to positive territory and a policy anchor closer to reality. The new poster kid of frontloading! pic.twitter.com/ZntcelYIlh
It is the sixth time in a row that policymakers have increased interest rates as they try to bring inflation down to single digits from over 60%.
The main policy rate has been increased from 8.5% in June, and policymakers said that “the pace of monetary tightening will slow down and the tightening cycle will be completed in a short period of time”.
Net migration to the UK hit a record 745,000 last year, 139,000 higher than previously estimated, with big increases in non-EU nationals coming for work, figures from the Office for National Statistics said.
The ONS said there were signals that immigration was now beginning to fall, it added that net migration for the 12 months to June this year was 672,000.
Today, we’ve published provisional long-term migration estimates for the UK, year ending June 2023.
▪️ Immigration was 1.2m
▪️ Emigration was 508,000
▪️ Provisional net migration (difference between people arriving and people leaving) was 672,000
➡️ https://t.co/X0ZCI9Ln5H pic.twitter.com/7qJ5Vy63JO
The ONS said that there were 1.2 million long-term immigrants during the 12 months to June 2023, of whom almost 1 million were non-EU nationals, while emigration totalled 508,000.
“While it is too early to say if this is the start of a new downward trend, these more recent estimates indicate a slowing of immigration coupled with increasing emigration,” it added.
But it noted that the rise in immigration has already led to the fastest population growth in England and Wales for more than 60 years.
Deutsche Bank has taken a more positive view on Anglo American, upgrading to buy from hold.
Analyst Liam Fitzpatrick said 2023 has been a tough year for the Global metals and mining sector, and the first half of 2024 could remain challenging, as sub-trend global demand continues to weigh on prices.
“However, stagnant growth is already priced in, and we believe an eventual end to destocking (which is already advanced) and a subsequent recovery in apparent demand should see prices respond quickly, due to low inventories and inelastic supply,” he thinks.
Fitzpatrick likes iron ore heading into 2024; the consensus remains too bearish for the short and medium term and seasonal factors should support prices in the coming months, he reckons.
He’s nudged his price target down to 3,000p from 3,100p
Jersey Oil and Gas PLC (AIM:JOG, OTC:JYOGF) lifted 22% to 242p after agreeing to farm out a 30% interest in the Greater Buchan Area (GBA) licences.
Intertek Group PLC (LSE:ITRK) lifted 3.2% to 3,952p after it said it would meet full-year expectations in its third quarter update.
United Oil & Gas PLC (AIM:UOG) shares plummeted 22% to 0.75p as the explorer revealed that the “preferred potential partner” in its Jamaican farm-out has decided to exit the process.
Motorpoint Group PLC (LSE:MOTR, OTC:MTPTF) shares skidded 4.8% to near a new all-time low after the company swung to a first-half loss and reported a rapid fall in used car values in the early weeks of the second half.
Paul Johnson, head of the Institute for Fiscal Studies, has been speaking about Jeremy Hunt’s tax cuts pointing out they are effectively paid for by planned real cuts in departmental government spending.
Johnson told a briefing this morning that higher inflation is expected to lift tax receipts in the next few years.
Departmental spending, though, is only forecast to rise a little in the guidance the Treasury gave to the OBR (which is implausible given the demands on government).
He said: “There were two substantial tax cuts – cuts to NICs and making full expensing in corporation tax permanent.”
“Yet the projected tax burden is still set to reach 37.7% of GDP by the end of the forecast period: its highest ever level in the UK.”
“Effectively those cuts offset the additional revenue generated by that additional inflation,” he said.
“Put another way, the tax cuts are paid for by planned real cuts in public service spending,” he added.
The biggest riser in the FTSE 100 is Intertek – up 2.6% – after today’s trading update.
The firm which provides assurance, testing, inspection and certification services to business, said revenue in the year to date was £2.77 billion, up 7.3% at constant curreny.
Recent acquisitions in high-growth, high-margin segments are performing well, it said.
“We are on-track to deliver our 2023 FY target of mid-single digit LFL revenue growth at CCY, with margin accretion and strong free cash flow performance enabling us to deliver an excellent ROIC,” the company said in a statement.
JPMorgan has given BAE Systems a push today, increasing its price target and reiterating an ‘overweight’ rating after hosting the firm’s CEO and CFO.
“We came away from the event incrementally positive on BAE˖s investment case,” it said.
BAE faces a decade of growth and visibility, it has strong free cash flow, which should mean it continues to pay an attractive dividend and buy back stock every year, JPM said.
“We also believe that BAE has a far lower risk profile today than in the past,” it continued.
The December 2025 price target moves to 1,300p from 1,150p (December 2024)
Shares are up 0.7% around lunchtime.
The movement in the pound is the big story in markets today with sterling up 0.4% in the wake of yesterday’s Autumn Statement and today’s PMI.
We reported earlier how top investment banks have pushed back expectations for interest rate cuts into the third quarter of 2024 after lifting growth expectations while today’s PMI seems to be backing this argument.
Martin Beck, chief economic advisor to the EY ITEM Club, said the figures offered “some encouragement,” suggesting that private sector activity flatlined rather than declined that month, in contrast to the surveys of late summer and autumn.
However, he still thinks the economy will struggle to grow in the fourth quarter.
He highlighted a slight uptick in inflationary pressures in the survey which he believes is likely to reinforce the Bank of England’s view that interest rates will have to remain at current restrictive levels for some time.
Shares in Jet2 has slipped back 4.0% now after today’s results in which the budget airline operator highlighted a slowdown in bookings in recent weeks.
Russ Mould at AJ Bell pointed out while the results showed evidence of the strong post-Covid rebound in overseas travel there were also indications that this may be difficult to sustain with bookings having slowed in recent weeks.
“Notably, Jet2 has held firm on pricing but there has to be some risk the cost of jetting off for a break abroad is moving beyond the means of at least some hard-pressed households,” he suggested.
Britain’s household energy price cap is set to increase by 5% in the new year due to a rise in wholesale gas and electricity prices, according to the energy regulator.
Ofgem has raised the price cap for the January to March period meaning bills of £1,928 a year for a typical home, up from £1,834 currently.
NEW@ofgem raises energy price cap by £94 or 5% to £1,928 in Jan.
A further reminder, if it were needed, that the financial pressures for households have not gone awayhttps://t.co/5FlGGB5IQv pic.twitter.com/zvq0wqv4Lw
The figure is significantly lower than in January when it hit £4,059 following a surge in wholesale prices triggered by Russia’s war on Ukraine, but is far higher than pre-2022 averages of below £1,200.
Samuel Tombs at Pantheon Macroeconomics thinks the recovery in the composite PMI to above 50 for the first time since July provides reassurance that the economy is not on the brink of a recession.
“The data imply that aggregate demand is roughly flat, as growth in real wages and the resumption of cost-of-living payments to low-income households bolster consumer spending, offsetting ongoing weakness in the manufacturing sector caused by businesses running down inventories.,” he said.
However, he did note the figure still implies that the risks to forecast for a 0.3% quarter-on-quarter increase in GDP in the fourth quarter lie to the downside.
The UK private sector returned to growth in November after three months of contraction, supported by a pick-up in the service sector, a report showed today.
A softer downturn in the manufacturing production also helped.
The headline seasonally adjusted S&P Global/CIPS flash UK PMI composite output Index registered 50.1, up from 48.7 in October and above the crucial 50.0 no change level.
UK Manufacturing PMI Report, November Prelim 2023 – CIPS/IHShttps://t.co/WbjAHMPseA pic.twitter.com/INAtWQL079
The flash UK services PMI business activity index climbed to 50.5 (October 49.5), a four-month high, while the flash UK Manufacturing PMI at 46.7 (Oct: 44.8) was a six-month high
However, total new order intakes decreased for the fifth month running, which suggested that subdued underlying demand conditions persisted.
There were also renewed signs of sticky inflation in November as both input costs and average prices charged increased at faster rates than in October.
Service providers reported the sharpest rise in their average charges since July, which was overwhelmingly linked to higher staff costs.
BT is holding firm, up 1.3%, following yesterday’s confirmation that full expensing will be made permanent.
However, the telco also held a briefing on its business division yesterday, which, according to analysts at Berenberg was a “sobering affair.”
Starting with the good news, Berenberg explained the news full expensing is being made permanent will act to reduce BT’s tax payments in the second half of the decade.
Berenberg currently forecasts a tax charge of £155 million in 2026/27 and £294 million in 2027/28, but with full expensing being made permanent, these costs have scope to reduce towards the c£50 million level.
Tax costs will in time creep back up to normal, as full expensing is ultimately phasing, rather than a tax rate reduction, the broker pointed out.
But it wasn’t such good news at the business division presentation.
“We came away from the presentation with the clear takeaway that management was trying to get consensus expectations down for the division,” the team at Berenberg said.
“At three different times in the presentation, BT Business CEO Bas Burger said the “short-term pain of radical modernisation will lead to long-term benefits for our customers, our partners, our people and ultimately the shareholders of BT”.”
Berenberg thinks the BT Business consensus needs to reduce.
Cheap on earnings, but expensive on cash flow, was how Berenberg described BT, keeping a hold rating for now.
Over at Goldman Sachs (NYSE:GS), the telco team have set a 290p price target for BT.
The pound has risen following yesterday’s Autumn Statement with economists suggesting the measures could result in interest rate cuts being deferred.
The reason tough is good news, in that growth forecasts have been nudged higher following the decision to cut employee national insurance to 10% from 12%.
James Moberly at Goldman Sachs (NYSE:GS) has slightly increased his 2024 growth forecast to 0.7%, from 0.6% previously.
“At the margin, though, a slightly more solid growth outlook reinforces our view that the Bank of England is likely to start cutting rates in 2024Q3 rather than in Q2, especially when taken together with the slight upwards pressure on wage growth likely to result from the change in the National Living Wage,” he said.
Economists at JPMorgan agreed that rates cut would likely be deferred although they pointed out in cutting taxes the government there was little left over for the next government to address the real terms squeeze on public services – or much headroom for future growth disappointments.
JPM has raised 2024 GDP forecasts by 0.2%, reflecting the main announcement of a 2% cut in employee NI tax.
“Depending on how much the measures boost supply, this alone is unlikely to prompt the BoE to hike again. But it should incline them to further push back on early expectations for lower rates,” the bak said.
The FTSE 100 has pushed higher, up 22 points at 7,491, although volumes are thin given US marekets are closed today.
Richard Hunter, head of markets at interactive investor, commented “Markets continued to grind higher, consolidating what has been a positive November on hopes of monetary easing after an aggressive bout of central bank interest rate rises.
“Global trading volumes will be much lighter today, with Wall Street closed for Thanksgiving and the Japanese market also enjoying a public holiday.”
Ex-dividends are limiting gains with Vodafone down 5.1%, Imperial Brands down 3.1% and National Grid down 2.2%.
BT has extended its gains, up 1.6%, following the confirmation of tax changes in yesterday’s Autumn Statement.
The telco has also got the backing of analysts at Goldman Sachs (NYSE:GS) which has increased its price target to 290p from 280p with the stock on its Conviction Buy List.
Anglo American is 0.9% higher after Deutsche Bank upgraded to buy from hold, while Deliveroo is up 0.9% as UBS started coverage with a buy rating and 215p price target.
The FTSE 100 opened modestly higher supported by a rally in energy stocks after the oil price rebounded following sharp falls on Wednesday.
At 8:15am, London’s blue-chips were up 7.98 points, 0.1%, at 7,477.49 while the FTSE 250 fell 22.40 points, 0.1%, at 18,457.77.
Oil prices recovered lost ground in the wake of the cancellation of the Opec+ meeting on Sunday helping index heavyweights BP and Shell advance by around 1%.
The price of Brent dropped to around $77/barrel on Wednesday afternoon before rebounding back above $80 in US trading hours – it is currently trading at $81.17, well above the levels seen at the London close yesterday.
BAE Systems was another firm feature, up 1.1% as JPMorgan increased its price target to 1,300p from 1,150p and reiterated an ‘overweight’ rating.
The Autumn Statement continues to attract plenty of attention.
Economists at JPMorgan have raised their 2024 GDP estimate by 0.2%, reflecting the main announcement of a 2% cut in employee national insurance.
Depending on how much the measures boost supply, this alone is unlikely to prompt the BoE to hike again, the investment bank thinks, although “it should incline them to further push back on early expectations for lower rates.”
In company news, PZ Cussons (LSE:PZC) rose 2.1% as it reported strong trading in Nigeria but Jet2 eased 1.2% after highlighting a slowdown in bookings in recent weeks.
A mixed bag from Virgin Money saw shares slip 0.5% – bad debts ate into profits which came in below City hopes but the lender did launch a fresh share buyback.
We’ve also had results and a share buyback from Virgin Money UK PLC although it also reported a drop in profit and a rise in bad debts.
The FTSE 250-listed lender plans a £150 million buyback, above prior guidance, taking buybacks for the financial year to £200 million, plus a 5.3p full-year dividend.
Income rose 8% to £1.87 billion with net interest income also up 8% to £1.72 billion.
But provisions leapt to £309 million from £52 million the year before while statutory pre-tax profits fell to £345 million from £595 million.
“”e saw a higher credit impairment charge this year, equivalent to a cost of risk of 42bps (2022: 7bps), as we incorporated a more conservative economic outlook and updated credit bureau data”, the bank said.
Virgin Money said it expects a net interest margin of 190-195bps in the new financial year, supported by structural hedge re-investment, deposit mix & ongoing growth in target segments.
This compares to 1.91% reported in the current financial year and 1.85% the year before.
The Tier 1 equity ratio stood at 14.7% at the year-end, down from 15.0% and is forecast between 13-13.5% in the year ahead.
There was good news on cost savings which are now expected to total £200 million, up from £175 million previously.
PZ Cussons (LSE:PZC) PLC reported trading remains in line with prior guidance with robust growth in Nigeria and Australia and New Zealand offset by a dip in Indonesia.
The owner of Imperial Leather and Carex was commenting ahead of today’s AGM and said trading has been consistent with the outlook provided at full year results in September.
As a result, the company expects to report low-single-digit like-for-like revenue growth for the first half of the current financial year.
This reflects strong growth in Nigeria and ANZ offset by a decline in Indonesia.
Europe and Americas business is stable overall, with significantly improving momentum in UK washing and bathing brands offset by a decline in the Beauty business.
It expects to deliver a robust year-on-year operating margin improvement in the first half and both revenue growth and operating margin to improve in the second half compared to the first.
In Nigeria, trading in the first half of the year has continued to be strong with most brands holding or gaining market share.
The company added forex market liquidity has shown tentative signs of improvement.
Plenty of company news to update on we will start with Jet2 PLC which backed its outlook for the financial year despite reporting a slowing in bookings in recent weeks.
The low-cost airline said bookings for the winter 23/24 season have been a “little slower in recent weeks” with average load factors currently 1.3 percentage points down on Winter 2022/23 at the same point, although average pricing remains robust.
Nonetheless, Jet 2 said it was currently on track to deliver profit before forex revaluation and taxation for the financial year of between £480 million and £520 million, in line with previous guidance.
For the half year ended 30 September, the firm reported a 24% jump in revenue to £4.41 billion from £3.57 billion the year prior, while operating profit increased by 19% to £617.0 million from £516.6 million.
Looking ahead, current seat capacity for Summer 2024 at 17.19 million seats is approximately 12% higher than Summer 2023 and bookings and pricing at this early stage are “encouraging,” with average load factors 2.0 percentage points ahead of the year before.
The firm said seat capacity increased 7% and the business achieved an average load factor of 90.7% – unchanged from the previous year – with higher margin per passenger Package Holiday mix of total departing passengers up 4.9ppts to 70.8% from 65.9%.
The interim dividend was increased to 4p from 3p.
The FTSE 100 is expected to post modest gains when trading starts on Thursday after US markets climbed ahead of Thanksgiving.
Spread betting companies are calling open up by around 5 points after closing down 12.48 points, 0.2%, at 7,469.51 on Wednesday.
With US markets closed, activity may be quieter than usual although investors will be digesting yesterday’s Autumn Statement with flash PMI figures to come later.
In the US, markets posted strong gains with the Dow up 0.5%, the S&P 500 up 0.4% and the Nasdaq up 0.5%.
Back in London, updates from Jet2, Intertek, FirstGroup, Mitie and Virgin Money UK will be the early focus.
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