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- FTSE 100 finishes 24 points higher
- Royal Mail CEO Simon Thompson to step down
- Rail strikes hit Eurovision
4.40pm: FTSE 100 in the green
The UK’s blue chip index had a muted end to the week but managed to scrape out a gain on the day, finishing 0.3% higher at 7,755 points.
CMC Markets analyst Michael Hewson called it a “softish and subdued” week for equity markets.
“Increasing concerns over slowing demand haven’t been helped by deflation in Chinese factory gate prices for the sixth month in a row earlier this week. This has seen copper prices hit their lowest levels this year, and oil prices on course for their 4th weekly decline in succession,” Hewson noted.
“We’ve not been helped by the political theatre around the US debt ceiling which has dominated the discourse in the media, and where discussions have been pushed into next week. While the risks around this are well-rehearsed it could be argued that the risks appear somewhat overstated given how regularly we’ve seen this scenario play out over the last few years on a regular ‘rinse and repeat’ basis before a late compromise is sealed.”
3.48pm: Northvolt chooses Germany
In another blow to the UK, Swedish car battery giant Northvolt confirmed it plans to build a factory in Germany.
The firm made the decision after Berlin promised financial aid to the project in Heide, northern Germany.
Northvolt also confirmed it is mulling a potential site in either the US or Canada as it looks to ramp up expansion efforts.
The news may come as a blow to the UK and Rishi Sunak, who may have been hoping the Swedish company sets up operations in the UK after Britishvolt entered administration in January.
Britishvolt aimed to power electric vehicles with a factory in the north of England and pleaded with the government for funding, although the cries fell on deaf ears.
3.21pm: Strikes to impact Eurovision
The Eurovision Song contest, hosted in Liverpool, is expected to bring up to £40mln to the north-western city, although rail strikes could rain on that parade.
Data from NatWest said more than 100,000 visitors are expected to enjoy the week-long celebrations.
NatWest estimates that overseas visitors are likely to spend around £28mln, while UK visitors will spend around £12mln in the city on hotels, accommodation and entertainment.
Potentially obvious winners include JD Wetherspoon and Premier Inn owner Whitbread.
However, train strikes have hit smaller businesses harder, and research suggests that with strikes coinciding with the final, the same will happen again this weekend.
Simply Business said over a tenth of SME owners state strikes are having a negative impact, while 38% add the strikes are making it harder to plan in advance.
“This weekend, the final of this year’s Eurovision is taking place in Liverpool, and many will be delighted at the prospect of fans flocking to the city and spending time and money with local businesses,” said Alan Thomas, UK CEO of Simply Business.
“Planned industrial action has almost certainly dampened that excitement. Giving people the means to make journeys which allow them to enjoy the unique offering of small businesses up and down the country is essential to the survival of our SMEs.”
2.35pm: Natural gas futures fall, again
Natural gas futures in Europe fell more than 6% to around €34 per megawatt hour in the second week of May.
It is the sixth consecutive week of losses and the longest losing run in over three years as demand remains subdued in the region recovering from an energy crisis.
Most European countries are experiencing super low power and gas demand, even amid a sharp drop in coal burns.
Strong imports of LNG and high fuel stockpiles after a mild winter have contributed to European gas reserves now being almost 60% full, well above the average of the past five years.
However, the possibility of abnormal heat and drought this summer remains a major short-term risk.
BP edged higher, gaining 1.1% to 483p, while Shell added 0.7% to 2,405p.
London’s blue-chip index is up 21 points, or 0.19%, to 7,752.
2.20pm: European markets
A quick glance at what markets across Europe are doing.
DAX in Germany is up 0.37% to 15,893, while the CAC 40 in France has added 0.24% to 7,398.
Over in Spain, the IBEX 35 is up 0.73% to 9,249.
London’s blue-chip index is up 0.2% to 7,745 while the FTSE 250 is flat, down 0.04% to 19,256.
2.00pm: London’s movers
A quick look at London’s fallers and risers.
Fallers
THG- down 13% to 64p
Shares tumbled after the company terminated takeover discussions with private equity firm Apollo.
The owner of popular online brands such as Grow Gorgeous and My Geek Box stated that Apollo’s offer significantly undervalued the company.
Risers
Eden Research- up 9% to 4.6p
Shares leapt in the natural pesticides group after it received state approval for products in California and Florida, two of the largest horticultural growing areas in the UK.
Sean Smith, chief executive, said the two states were the most significant addressable markets in the US, where he estimates a total market size of approximately €94mln for grape treatment Mevalone and €189mln for nematodes preventative Cedroz.
Bens Creek- up 9% to 20.6p
Bens Creek PLC was in demand as major shareholder MBU almost halved its holding, selling the stake to Singapore-based commodity trader Avani.
Avani paid 18p a share for its 29.9% holding, a slight discount to the market’s 20p, up 6.7% today.
1.30pm: Tesco boss paid £4.4mln
Tesco’s CEO Ken Murphy was paid £4.4mln in the year to 31 March 2023 with food inflation still at sky-high levels.
Murphy’s total pay package was 6% less than a year earlier when he received £4.7mln.
Despite his fixed pay climbing to £1.71mln from £1.5mln, his bonus was slashed to £2.7mln from £3.2mln.
This was due to falling short of some key targets, such as adjusted operating profit and sales.
Murphy is expected to receive a 3% salary increase this year, with Tesco noting this was “considerably less” than the 8% store staff received.
Supermarkets like Tesco have been bashed for hiking prices of food and profiting from customers amid a cost-of-living crisis.
Food inflation remains at sky-high levels at 19.2%.
Tesco’s shares were little changed, changing hands at 273p.
1.00pm: US futures point to firm start in the US
US stocks are expected to open higher on Friday, enjoying a lift from the softer-than-expected data on prices with both CPI and PPI numbers for April helping strengthen expectations that the US rate hiking cycle will come to a halt.
Futures for the Dow Jones Industrial Average rose 0.4% in pre-market trading, while those for the broader S&P 500 index lost 0.4% and contracts for the Nasdaq-100 were up 0.2%.
The Dow closed Thursday down 221 points, 0.7%, at 33,310, while the Nasdaq Composite added 22 points, 0.2% to 12,329 and the S&P 500 declined 7 points, 0.2%, to 4,131. The small-cap Russell 2000 index dropped 17 points, 1%, to 1,742.
“Ahead of the weekend, traders will be looking to the University of Michigan consumer sentiment and inflation expectations readings as the final key data of the week,” said James Harte, market analyst at TickMill Group.
He noted that soft CPI and PPI data have dented rate hike expectations for June, adding that tech sector equities have firmed.
“The Nasdaq has broken out to fresh highs this week amidst a downturn in US rate expectations. If today’s data comes in weaker than expected also, this narrative will likely be reinforced which will see tech stocks pushing higher in the near term.”
Elsewhere, concerns about the US debt ceiling continue to rumble on with no solution at hand so far, even though a last-minute reprieve is expected.
Back in London and ahead of the restart in the US, the FTSE 100 is up 11 points at 7,742, well below the session high of 7,772.
12.40pm: More rates rises to come says head of German central bank
The head of Germany’s central bank has said eurozone interest rates could still rise in September because underlying inflation measures that strip out energy and food prices are proving too sticky.
“The data don’t allow us to consider changing our view that further rate hikes will be necessary,” said Joachim Nagel, the Bundesbank president who is one of the more hawkish European Central Bank governing council members. “That also applies for beyond the summer break.”
The ECB last week raised its deposit rate to 3.25% and most economists expect it to pause at 3.75% in July.
But Nagel’s comments on the sidelines of G7 meetings in Japan suggest he thinks this is too low.
11.55am: Royal Mail confirms CEO, Simon Thompson, to step down
Royal Mail boss Simon Thompson has confirmed he is to step down, ending a turbulent two-year stint at the helm of the postal operator.
The well flagged departure was confirmed by Royal Mail owner, International Distributions Services PLC (LSE:IDS), in a statement.
IDS said Thompson “believes that, following the negotiators’ agreement between Royal Mail and the CWU, it is the right time for the company to move forward under new leadership.”
The firm is in “advanced stages” of appointing a new CEO, and Simon Thompson has agreed to remain with the business until 31 October 2023 as part of the transition.
Simon Thompson joined the company as a non-executive Director in 2017 and was appointed as CEO of Royal Mail in January 2021.
But his tenure has not been smooth sailing. He was criticised by the unions for his handling of pay talks and accused “incompetence or cluelessness” by MPs on the business committee after appearing before them in January and being recalled over questions about his evidence.
But in confirming his departure Thompson was defiant. “The changes we have made, the infrastructure we have put in place, and the agreements negotiated with our trade unions mean that Royal Mail now has a chance to compete and grow.”
11.23am: Diageo falls as Jefferies downgrades on US concerns
Not such a good day for Diageo PLC (LSE:DGE) which sits top of the FTSE 100 fallers, down 1.9%.
The owner of Johnnie Walker, Guinness and Baileys has been downgraded to hold from buy by Jefferies over concerns of the near-term outlook for the key US market.
The US business accounts for nearly 40% of sales and close to 50% of profits.
The broker predicts organic sales growth in the US of just 1% in financial 2024 below the consensus 0f 4.5% reflecting a slowdown after what it calls the “pandemic super cycle,” the risk of inventory realignment and the slower macroeconomic environment.
While accepting Diageo is a stronger business now than before the pandemic Jefferies pointed out recent data indicates that growth in the US continues to moderate.
“As we enter a period of hiatus for Diageo’s US growth, we see a risk that the shares tread water until growth returns to the med-term trend 4-5%,” the broker said in a note.
Jefferies highlighted three key challenges for the US business – can it grow off a higher base, the risk of destocking and the recession risk.
It noted spirits are “recession resilient not recession proof,” and highlighted there are some early signs of downtrading in categories such as high-end tequila.
The broker sees a risk that the industry pauses for breath after three higher than average years.
Jefferies cut its price target to 3,800p from 4,000p alongside the rating downgrade.
10.54am: Shell faces growing investor backlash
Shell PLC (LSE:SHEL, NYSE:SHEL) is facing a growing backlash from shareholders at its AGM due to dissatisfaction with the oil giant’s climate efforts.
Two more pension schemes, Nest and London CIV, have signalled their intention to vote against the firm’s directors at the meeting, following similar moves by the Church of England Pensions Board and Brunel Pensions Partnership.
Nest and London CIV, which represent approximately £78bn in combined assets under management, confirmed their decision to vote against the oil company ahead of its AGM on May 23 in response to Shell’s plans to revise down its greenhouse gas emissions targets while potentially expanding its investment in fossil fuels.
Nest, the government-backed auto-enrolment provider, said it would vote against the re-election of Shell’s chair and its ‘Energy Transition’ resolution in response, and that it would instead support a resolution calling on Shell to align its carbon reduction targets with the Paris Agreement.
“Following its record profits, we had hoped Shell would step up its activities towards meeting its net-zero ambitions. Instead, they’re kicking the can down the road and increasing the risks on long-term shareholders,” said Nest’s senior responsible investment manager Katharine Lindmeier.
Alongside, criticism om its green credentials the energy giant has ben accused of profiteering, racking up profits as oil prices soared due to war in Ukraine.
Campaigners have called for a windfall tax, a cause championed by the Labour Party.
Shares in Shell are trading around 0.5% higher while the FTSE 100 is 37 points to the good, at 7.767.
10.31am: GSK reports positive trial findings for meningitis drug
More good news from GSK. Further to the news of a favourable court ruling in Canada and raising £800mln from the sale of shares in Haleon, the pharmaceuticals giant has reported positive preliminary results from a phase 3 trial regarding its 5-in-1 meningococcal ABCWY vaccine candidate.
Subjects in the trial were healthy individuals aged between 10 and 25 and received two doses of the vaccine candidate given six months apart.
GSK said the study showed no inferiority of the vaccine candidate in the primary endpoints for the five Neisseria meningitidis serogroups A,B,C,W and Y in the individuals when compared to two doses of meningococcal group B vaccine Bexsero plus one dose of the meningococcal group A, C, W-135, and Y conjugate vaccine Menveo.
Neisseria meningitidis bacteria can cause diseases such as meningitis, an infection of the protective membranes around the brain and spinal cord, and life-threatening sepsis.
Chief Scientific Officer Tony Wood said: “It’s particularly encouraging to see the breadth of coverage against the broadest panel of circulating MenB strains to date, as we know MenB is the most common cause of meningococcal disease in the US with the lowest immunisation rate.”
Shares continued to hold in positive territory, up 1.8%, while the FTSE 100 is up 32 points, or 0.4%.
9.53am: Tesla to recall 1.1mln cars in China due to safety risk
Tesla Inc (NASDAQ:TSLA) will recall a total of 1,104,622 vehicles, both imported and China-made ones, China’s market regulator said in a statement.
Starting at the end of May, the US company will take back vehicles that were produced between January 12, 2019, and April 24, 2023, the State Administration for Market Regulation said, citing a plan filed by Tesla with the regulator.
The models to be recalled include imported Model S, Model X, Model 3 and China-made Model 3 and Model 6.
The vehicles have issues that may increase the probability of drivers “mistakenly stepping on the accelerator pedal” for an extended period, which could increase the risk of collision and pose a “safety hazard,” the statement said.
The company plans to make adjustments or add notification features to the recalled vehicles to reduce the risk, it added.
In March, Tesla recalled more than 2,600 imported Model S cars in China, according to the SAMR. The hood of those vehicles could pop open unexpectedly while driving, posing safety risks for the vehicle and other cars.
Tesla shares were trading 1% higher in pre-market trading taking heart from news that a CEO is set to be appointed at Twitter which analysts hope will mean Elon Musk turns his attention back to the EV maker.
Dan Ives at Wedbush tweeted: “Musk stepping down as Twitter CEO sooner than thought is clearly good news overall for Tesla investors. Less time focused on Twitter platform and more time around Tesla SpaceX…balancing act too difficult and needed to make this move sooner rather than later.”
9.35am: Favourable ruling offers investors opportunity to reappraise GSK
Shares in GSK remain in the green after a favourable ruling in Canada that saw a proposed class action made on behalf of users of heartburn drug, Zantac, thrown out.
AJ Bell’s Russ Mould pointed out shares in GSK have been “in the doldrums since the market started to fret about legal action concerning heartburn treatment Zantac and accusations that it causes cancer.”
“Investors have feared it could be forced to pay out billions in compensation.”
“Slowly, GSK seems to be winning the battle after a Canadian court dismissed a proposed class action, following a similar move in the US late last year,” he noted.
Accepting the legal fight is not over, “the latest news gives investors a new reason to reappraise GSK, along with news that it has successfully sold a chunk of its shares in Haleon at a near-market price,” Mould felt.
The business was created from assets owned by GSK and Pfizer, and the two drug companies remained shareholders when the demerger happened.
“They both said they would sell down their positions in time, but the ease at which GSK has placed 240mln shares in Haleon would suggest it won’t have a problem selling the remaining 10.3% stake in the business,” Mould commented.
“Essentially that is also good news for Haleon and the perceived risk to its share price from the significant overhang – there is nothing worse than two major shareholders openly saying they don’t want to keep their shares for long,” he added.
Shares in GSK are 1.7% higher at 1,469p while Haleon is trading 0.1% to the good at 343.30p.
9.11am: Richemont provides boost for luxury brands
It has been a bright start to trading in Europe as well with the CAC 40 in Paris up 0.6% and the Dax in Frankfurt rising 0.3%.
Luxury brands are enjoying a good morning after shares in Cartier-owner Richemont added 4.9% in Zurich.
The company reported record annual sales as luxury consumers proved resilient, defying geopolitical volatility, economic uncertainty and soaring inflation.
Pre-tax profit in the year to March 31 surged 62% to €4.75bn from €2.94bn a year ago with revenue hitting an all-time high of €19.95bn, up 19% from €16.74bn.
In London, shares in Burberry benefited, rising 1.1% while in Paris, luxury goods firm Kering, Hermes and LVMH added 1.7%, 1.4% and 1.1% respectively.
Victoria Scholar, head of investment, interactive investor noted: “While Richemont enjoyed sales growth across all regions, distribution channels and business areas, China was a particular bright spot thanks to the release of pent-up demand for luxury goods after the world’s second largest economy emerged from covid.”
Burberry is due to report results next week.
8.55am: FTSE 100 holds firm, Beazley top of the risers
The FTSE 100 continues to push ahead, now up 22 points.
Leading the way is insurer, Beazely PLC, which said it remains confident of full-year guidance as it reported growth in premium income in the first three months of the year. Shares jumped 4.2%.
Adrian Cox, chief executive officer, said: “The first quarter saw us deliver good headline growth in line with our expectations, underpinned by growth in property, where we are taking advantage of the excellent and continuing market conditions.”
The insurer reported gross premiums written increased by 12% to US$1,372mln from US$1,229mln a year prior, while net premiums written jumped 24% to US$1,069mln from US$859mln before.
Jefferies said the update was “better than our expectations”.
The broker explained that based on its conversations with investors “there had been some concern whether Beazley could maintain its growth guidance, so this should be well-received.”
Heading the other way were shares in THG – down 9.6% – after it ended talks with Apollo about a possible takeover deal, saying the private equity firm’s proposal undervalued the ecommerce group.
The company, which owns websites Lookfantastic and Myprotein, said there was “no longer any merit in continuing to engage with Apollo” after a short period of discussion.
“Consideration and rejection of the Indicative Proposal has been on a basis consistent with all previous offers for the Company, some a matter of public record, which were also rejected based upon inadequate valuations and the nature of those offer structures,” THG said.
More encouragingly, the firm said that the profitability and cashflow improvements delivered during the first quarter of the financial year have continued in the second quarter, along with ongoing online sales momentum further supporting the board’s full year guidance.
8.15am: FTSE 100 pushes higher, GSK rises on Zantac ruling
The FTSE 100 made a bright start to trading as the UK economy returned to growth, albeit marginally, which followed a more upbeat assessment of growth prospects by the Bank of England yesterday.
At 8.15am London’s lead index stood at 7,751.36, up 20.78 points, or 0.27%, while the FTSE 250 climbed to 19,298.90, up 32.60 points, or 0.17%.
Gross domestic product grew 0.1% in the first three months of 2023 despite a contraction in March, according to the Office for National Statistics. The rise was in line with forecasts and came despite a fall of 0.3% in March.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown said growth was “eked out despite strike activity which derailed some momentum.”
“The data comes hot on the heels of changed forecasts from the Bank of England. Lower energy prices are expected to stop the UK economy from contracting compared to previous expectations,” she said.
However, while the surprise change in the UK’s economic growth is “certainly welcome”, she pointed out “there are still real hurdles to overcome.”
“There’s no sugar coating the fact that growth remains very sluggish – the UK is hardly on course to shoot the lights out this year.”
The EY ITEM Club expects the extra bank holiday and ongoing strikes to drag on output in the second quarter, to the extent that a small quarter-on-quarter fall in GDP is possible.
“But the recovery should gain greater traction in the second half of 2023 as lower inflation helps to bring about a recovery in household spending power,” the economic bureau said.
Shares in GSK jumped 1.1% after a favourable court ruling in Canada that saw a proposed class action made on behalf of users of a heartburn drug thrown out.
The Brentford, UK-based pharmaceuticals giant noted the court said there was little evidence that ranitidine, or zantac, leads to an increased risk of developing any type of cancer.
The FTSE 100 listed firm also confirmed it had sold part of its stake in Haleon, the consumer healthcare business it demerged last year.
GSK has agreed to sell 240mln shares at a price of 335p per share raising around £804mln reducing its stake in the owner of Sensodyne toothpaste, Panadol and Advil painkillers and Centrum vitamins to 10.3% or 955mln shares down from 13% before.
Shares in Haleon also rose, up 1.5%.
Heading the other way were shares in Diageo, down 2.0%, as Jefferies downgraded the stock to hold from buy with a price target of £38.
7.52am: GSK gets favourable Zantac ruling, sells down Haleon stake
GSK said it welcomed a legal ruling in Canada that saw a proposed class action made on behalf of users of a heartburn drug thrown out.
The Brentford, UK-based pharmaceuticals giant noted the court said there was little evidence that ranitidine, or zantac, leads to an increased risk of developing any type of cancer.
“Given the uncontroverted evidence that neither ranitidine nor NDMA are reliably associated with increased cancer risk, and the absence of evidence that ranitidine or NDMA cause cancer in humans, the plaintiff has failed to raise a bona fide triable issue regarding injury due to the ingestion and/or purchase of ranitidine,” the court said.
N-Nitrosodimethylamine, or NDMAs, are a type of chemical compound.
GSK commented: “GSK will continue to vigorously defend proposed class actions by ranitidine users that have been filed in Ontario and Quebec as well as individual actions filed by ranitidine users in Canada.”
The case was brought against Sandoz Canada, part of Sandoz, which is itself a unit of Novartis.
Separately, the FTSE 100-listed pharma group confirmed it has sold part of its stake in consumer healthcare business, Haleon PLC (LSE:HLN, NYSE:HLN), which it demerged last year.
GSK has agreed to sell 240mln shares at a price of 335p per share raising around £804mln.
This reduces GSK’s stake in the owner of Sensodyne toothpaste, Panadol and Advil painkillers and Centrum vitamins to 10.3% or 955mln shares down from 13% before.
GSK and Pfizer (which holds a 32% stake in Haleon), have each undertaken not to dispose of any further shares in Haleon for a period of 60 days following settlement of the placing.
7.10am: UK economy posts marginal growth in first quarter
The UK economy grew marginally in the first three months of 2023 despite a contraction in March, according to the Office for National Statistics.
The ONS said in the first quarter GDP rose 0.1%, in line with economists forecasts, while in March the economy contracted by 0.3% after showing no growth in February (unrevised).
The services sector fell by 0.5% in March, after an unrevised fall of 0.1% in February, and was the main contributor to the fall in monthly GDP.
Output in consumer facing services fell by 0.8% in March, after unrevised growth of 0.4% in February.
Production output grew by 0.7% in March, which was its strongest monthly growth since May 2021, following a fall of 0.1% in February (revised up from a 0.2% fall).
The construction sector grew by 0.2% in March after growth of 2.6% in February (revised up from a 2.4% growth).
Services and production both grew by 0.1% in the three months to March 2023, while construction grew by 0.7%.
7.00am: Bright start seen by FTSE, GDP figures in focus
Good morning. The FTSE 100 is expected to make a bright start on Friday with investors awaiting the latest health check of the UK economy after the Bank of England yesterday said it no longer expects a recession in the UK.
Spread betting companies are calling London’s lead index up by around 23 points.
On Wall Street, the Dow Jones Industrial Average fell 221.82 points, or 0.7% at 33,309.51. The S&P 500 shed 7.02 points, 0.2%, at 4,130.62 points while the Nasdaq Composite bucked the weaker trend once more rising 22.07 points, 0.2%, at 12,328.51.
In Asia, markets were mixed. The Nikkei 225 in Tokyo was up 0.9% in late trading. The Shanghai Composite was down 0.8%, while the Hang Seng in Hong Kong was 0.4% lower.
Back in London and the early focus will be a GDP reading and updates from Beazley and Balfour Beatty.
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