- FTSE 100 down 48 points at 7,673
- Food price inflation falls to 6.7% in December - Kantar
- Entain appoints activist investor to board
4:40pm: FTSE's downbeat start to 2024 continues
The FTSE 100 closed lower on Wednesday as the downbeat start to 2024 continues for equity markets.
At the close, London's blue-chip index was down 39.19 points, 0.5%, at 7,682.33 while the FTSE 250 closed down 209.05 points, 1.1%, at 19,302.75.
"Repriced rate cut expectations and heightened tensions in the Middle East' dragged stocks lower, said Axel Rudolph, senior market analyst at online trading platform IG.
GSK was a bright feature, up 2.6%, after Jefferies upgraded to 'buy,' while Tesco and Sainsbury climbed after figures suggested the two food retailers had enjoyed a strong Christmas.
Heading sought were mining stocks, Anglo American, Antofagasta and Fresnillo while Burberry was hit by a downgrade by Stifel.
3:56pm: Capital Economics brings forward first rate cut estimate
Paul Dales at Capital Economics has brought forward his prediction for the frist interest rate cut in the UK.
“In a change to our previous forecast, we now think that the first interest rate cut from the Bank of England will happen in June this year rather than in November,” he said.
“We still think that interest rates will be reduced from 5.25% now to 3.00% in 2025,” he added, “a little lower than the trough of 3.25% currently priced into the financial markets.”
3:21pm: British bosses call for early rate cut
Top UK business executives have called on the Bank of England to cut interest rates soon to bolster the flagging economy after “depressed” confidence sank to a four-month low.
Mounting recession fears helped drive the Institute of Directors’ Economic Confidence Index down to minus 28 in December from minus 21 the previous month, hitting the lowest level since August and close to 2023’s low.
The setback suggests “an early cut in interest rates would be justified in terms of helping to kick-start business confidence,” Roger Barker, director of policy at the IOD, said in a statement Wednesday.
He said sentiment among bosses ended 2023 in a “relatively depressed place.”
2:50pm: FTSE remains downbeat after negative US open
US stocks have opened lower, as expected, ahead of the release of the minutes of December's Federal Reserve meeting, as the cautious start to 2024 continued.
Shortly after the opening bell, the the Dow Jones Industrial Average was down 148.45 points, 0.4%, at 37,566.59, the S&P 500 was down 23.58 points, 0.5%, at 4,719.25 and the Nasdaq Composite was down 100.19 points, 0.7%, at 14,665.74.
Deutsche Bank's Jim Reid noted the falls come amid "growing scepticism about the chance of near-term rate cuts."
He noted at the end of 2023, futures were fully pricing in a Fed rate cut by March, but after yesterday’s session that had been dialled back to a 87% probability and overnight it has further moved lower to 85%.
Reid added today's minutes should offer some more clues on the rate cut speculation.
Back in London, and the FTSE 100 remains in the doldrums, down 48 points.
2:20pm: HSBC joins mortgage-cutting battle
HSBC has become the latest big UK lender to announce across-the-board mortgage interest rate cuts, with leading names announcing reductions of up to one percentage point.
The bank’s new deals announced on Wednesday include a five-year fixed remortgage deal of 3.94% for those borrowing up to 60% of the property value.
From tomorrow, HSBC’s two-year fixed rate for remortgages will dip below 4.50% for the first time since early June last year, with the headline rate hitting 4.49%, again for those with at least 40% equity in their home.
For those looking to fix longer term, HSBC is now offering a 10-year fixed rate deal starting from at 3.99%.
1:04pm: Jefferies upgrades GSK, cuts AstraZeneca
A bit more on the Jefferies upgrade on GSK which has helped push shares 1.9% higher today.
The broker has moved the pharmaceutical firm to ‘buy’ from ‘hold’ and raised its price target to 1,900p from 1,550p.
It believes long-acting HIV injectables, vaccines, and new pipeline launches mean profits likely face a "blip" not "cliff" when HIV patents expire around 2028.
“We argue given this underappreciated growth profile, the shares offer attractive risk-reward ahead of potential Zantac class action settlement and misplaced concerns on 2024 growth,” the broker said.
Jefferies has moved AstraZeneca to ‘hold’ from ‘buy,’ with shares down 0.9%.
The broker thinks while overhangs have somewhat cleared for dato DXd (TROP2) & Tagrisso, margin concerns now weigh on the shares.
Jefferies argues the company is primarily a top-line growth and pipeline story.
However, margin clarity may be needed for stock upside and 2024 has fewer major pipeline catalysts, with much needed dato DXd approval unlikely until nearer year-end, at best.
However, it still believes R&D assets outside oncology are largely being ignored, offering significant longer-term upside optionality.
Jefferies cut its price target to 11,000p from 12,500p.
12:31pm: ECB to test banks’ response to cyber attack
The European Central Bank said Wednesday it would test lenders' response to cyberattacks this year in a first of a kind stress test for banks in the eurozone.
The critical scenario set out by the ECB assumes that the bank has been "hit by successful cyberattack that disrupts their daily operations", the ECB said in a statement.
Some 109 banks would be tested on their means to "respond to and recover from a cyberattack, rather than their ability to prevent it", the ECB said.
The exercise will examine financial institutions' emergency procedures and their plans to restore normality after such an attack.
A subset of 28 banks from across the eurozone would be subjected to a more rigorous test that would take a closer look at the risks of cyberattacks spilling over into other areas.
The results of the exercise, which will be published later this year, would not have an impact on banks' obligations to build capital buffers against financial risks, the ECB said.
12:04pm: US stocks expected to open lower
Stocks are expected to open lower continuing the subdued start to 2024.
In pre-market trading, futures for the Dow Jones Industrial Average were down 0.2%, while those for the S&P 500 were 0.3% lower and contracts for the Nasdaq 100 futures declined 0.4%.
The US Federal Reserve will release the minutes of its December meeting of the Federal Open Market Committee, late in today’s session.
At the meeting, policy makers decided to keep interest rates at their 22-year high but signalled cuts in 2024, triggering an exuberant stock market rally.
The Fed has since tried to temper expectations of how imminent those cuts are.
Joshua Mahony at Scope Markets said the minutes provide an “opportunity for the disparity between market rate expectations and the Fed outlook to narrow, with traders keeping a close eye on the language behind a meeting that was widely considered to be highly dovish.”
“With many Fed members emerging to reign in expectations following that meeting, there is a good chance that we see a somewhat less expansive view than that expressed by Jay Powell,” Mahony thinks.
“After-all, the dot plot expectations signal a likely three rate cuts this year, bringing risk for equities given the current market pricing for six,” he added.
Separately, economists expect US job openings, a proxy for labour demand, to have fallen to 8.85 million in November from 8.73 million in October, kicking off a series of updates on the labour market.
Elsewhere, the Institute for Supply Management’s manufacturing purchasing manager’s index is forecast to have nudged up to a reading of 47.1 in December from 46.7 in November, leaving the sector within contraction territory.
11:32am: RyanAir hit as travel agent websites delist airline
Budget airline Ryanair is down around 3% in Dublin after confirming its flights have been removed from several online travel agencies.
Europe’s largest airline said that in early December “most” of the larger online travel agent sites – including Booking.com, Kiwi and Kayak – “suddenly removed Ryanair’s flights from sale on their websites”.
The airline said it expects this will reduce short term load factors by 1% or 2% in Dec and Jan and also soften short term yields as it makes more low fares available directly to consumers.
11:04am: Will Fed minutes confirm 'dovish pivot'
The FTSE 100 has taken a turn for the worse with markets firmly in cautious mode.
Part of that is due to nerves ahead of the release of minutes from the last Federal Reserve meeting.
Neil Wilson at Finalto explains the minutes are going to be important since they will “colour in the details from the Dec meeting – if you recall this was when Jay Powell went all dovish and tried to kill ‘higher for longer’.”
Wilson pointed out this triggered a big rally for risk assets as money markets significantly brought forward expectations for rate cuts in 2024.
“Therefore, they are important since the market reaction to the meeting and press conference was as big as it was. Stocks are priced for a perfect landing and rate cuts – surely we can’t get both…?”
Wilson suggested the minutes can do a couple of things.
They could “confirm the dovish pivot in all its glory”, or more likely in Wilson’s view, they may confirm that members were maybe “not all quite as dovish as Powell sounded at the post-meeting press conference.”
The minutes will be released after the London close.
10:32am: Sandler appointment at Entain welcomed
Victoria Scholar, head of investment, interactive investor thinks news that Eminence Capital founder, Ricky Sandler has been appointed a non-executive director of Entain could pave the way for a divestment of its state in US betting joint venture BetMGM, something he previously suggested.
Scholar said his role could also help to appease other activist investors who were unsure of Jette Nygaard-Andersen, who quit at the end of 2023.
She was criticised for her handling of the takeover of STS Holdings, Poland’s largest bookmaker and her leadership has been clouded by a Turkish bribery scandal, Scholar noted.
Analysts at Jefferies saw the announcement as a "positive share price catalyst" but pointed out comments from Sandler that he looking foward to achieving "long-term success" and creating "lasting value" may imply that a short-term solution may not be top of Eminence’s agenda.
9:53am: GSK boosted by Jefferies upgrade to 'buy'
GSK is enjoying a good morning, with shares up 1.9%.
Jefferies has taken a more positive view of the pharmaceuticals giant, upgrading to ‘buy’ from ‘hold’ and increasing its price target to 1,900p from 1,550p.
It has moved AstraZeneca PLC (LSE:AZN) the other way to ‘hold’ from ‘buy’ and cut its price target to 11,000p from 12,500p.
Astra still has its supporters though with UBS reiterating a ‘buy’ rating and Barclays an ‘overweight’ rating.
Elsewhere, Deliveroo is up 1.1% after positive comments from Jefferies (buy) andf Morgan Stanley (NYSE:MS) (overweight).
Heading lower are shares in Burberry, down 2.1%, after Stifel downgraded to 'hold' from 'buy' with a revised 1,550p price target, down from 1,950p.
"We see the progress on Burberry’s turnaround and elevation journey as being held back by an adverse external environment in 2024," the broker said.
"It is still early days in Daniel Lee’s era and worsening sector trends since last September will likely make it tougher for Burberry to decouple from the sector trends and deliver the proof points that investors have been waiting for," Stifel reckons.
9:31am: Christmas tills ringing at Tesco and Sainsbury
A bit more on the Kantar figures which have helped propel Tesco PLC (LSE:TSCO) and J Sainsbury PLC (LSE:SBRY) higher today.
The data showed British supermarkets last year enjoyed their best Christmas trading period since before the pandemic.
Supermarkets collectively turned over £13.7 billion in the month to 24 December 2023, Kantar said, as customers made some 488 million trips.
Average household spend hit a record high of £477, meanwhile, as a year of mounting inflation looks to have taken its toll.
Discounters Aldi and Lidl emerged as the strongest-performing supermarkets over the period, scoring sales growth of 9.9% and 13.8% respectively, as per Kantar figures.
J Sainsbury then came out best among the traditional supermarkets as sales jumped 9.3% compared to the same period last year.
Tesco also enjoyed strong sales growth of 7.5%, with each gaining market share over the period.
9:10am: FTSE 100 falls back after bright start
The FTSE 100’s early promise has faded with the birthday celebrations a bit of a damp squib for now.
Richard Hunter at interactive investor notes that for many, “the index is at something of an inflection point.”
“Undoubtedly cheap, but without the propulsion of technology shares,” he explained.
“Well regarded, regulated and respected yet unable to attract new companies which are more highly valued among larger pools of capital elsewhere,” he added.
“Rumours of regulatory reforms to the market which could improve new listing prospects, but as yet without any firm details.”
“As it currently stands, the index runs the risk of mature companies – admittedly providing stable returns – holding back the index given the lack of true growth potential,” he said.
“The index will look rather different in another 40 years’ time, but in the interim it will need a seismic shift to protect its long-term future.”
8.20am: FTSE 100 on the front foot
The FTSE has started Wednesday, the 40th anniversary of the launch of the index, with a positive start, climbing 19 points or 0.25% to 7,741.
Topping the early leaderboard is Entain after its new board appointment (see below), with the shares up 2.5%.
Not far behind is GSK PLC (LSE:GSK, NYSE:GSK) and a few other classically defensive stocks, Unilever PLC and British American Tobacco PLC (LSE:BATS).
Supermarkets J Sainsbury PLC (LSE:SBRY) and Tesco PLC (LSE:TSCO) are in the green after grocery industry figures from Kantar showed it was the busiest Christmas since 2019.
A record £13.7 billion was spent at supermarkets in the four weeks to 24 December, as 488 million shopping trips were made over the period.
Grocery price inflation fell to 6.7% in December, marking the fastest month on month drop that Kantar has recorded
The traditional retailers accounted for a combined market share of 70% during the 12 weeks to 24 December, while the discounters Aldi and Lidl hit their highest ever market shares for the festive period.
7.45am: Sprinkling of FTSE news
There's not a whole lot of big company news about this early in the year - next week things will kick in properly - but there are a few titbits.
Ladbrokes and Sportingbet owner Entain PLC (LSE:ENT), for example, which had a tumultuous 2023 that ended with the departure of its CEO, has just appointed a director from one of its four new activist investors.
The blue-chip bookmaker has appointed Ricky Sandler, founder and boss of New York hedge fund Eminence Capital, as a non-executive director with immediate effect.
Sandler is being made a member of the FTSE 100 company's capital allocation committee and its people & governance committee, with the latter allowing him to work on identifying an additional non-executive director "mutually agreeable to Eminence and the company", it said.
Elsewhere, Wizz Air Holdings PLC (AIM:WIZZ) said December saw it carry 4.96 million passengers, representing an 18.8% increase compared to December 2022, at a load factor of 82.1%.
On a rolling 12 month basis, passenger numbers were up 32.1% as capacity rose 26.1%, with load factor up over four percentage points to 90.8%.
It hailed a record-breaking calendar year Wizz Air Abu-Dhabi, which doubled the number of flights to 15,000 and carried more than three million passengers.
7.05am: FTSE 100 to start in the red
The FTSE 100 is predicted to extend its losses on Wednesday morning, the day of its 40th anniversary, after a big session of falls for US tech giants overnight.
London’s blue-chip index is heading for a fall of around 10 points, according to spread-betting platforms.
Yesterday the Footsie closed in the red on the first trading day of the year, down 11.72 points, 0.2%, at 7,721.52.
The mid caps of the FTSE 250 fell 177.83 points, 0.9%, to 19,511.80.
Last night was mostly worse on Wall Street, with the Nasdaq tumbling 1.6% and S&P 500 falling 0.6% as all of the ‘Magnificent Seven’ tech megacaps declined, led by a 2.2% fall for Nvidia and 1.5% slide for Meta Platforms. The Dow Jones meanwhile inched up 0.07%, led by big pharma, health companies and banks.
Later this morning we will get some data on UK grocery prices and sales for the past month.
The last UK grocery report before Christmas revealed food price inflation fell again in November, with annual grocery inflation slowing to 9.1%, while take-home supermarket sales from the likes of Tesco PLC (LSE:TSCO), J Sainsbury PLC (LSE:SBRY) and their rivals were predicted by Kantar will surpass £13 billion for the first time ever during the month.
But the day’s macreconomic focus is mostly the US, with minutes from the last Federal Reserve policy meeting, plus a raft of data, including MBA mortgage applications, ISM manufacturing PMI, ISM prices, Redbook index, crude oil inventories and JOLTS job quits.