Senin, 13 Mei 2024

FTSE 100 live: London stocks slide, Boots buyer sought, GameStop to the moon - Proactive Investors UK

  • FTSE 100 down 18 points at 8,414
  • Diploma tops leaderboard after results
  • Shein IPO in London reported to be close

4.50pm: FTSE 100 closes lower

London's blue chips closed the day down 18 points at 8,414.

4.10pm: Mixed global stock markets

The FTSE 100's record-breaking run looks to be coming to an end, with the index down 12 points at 8,417.

European markets are mixed, with Germany's DAX and France's CAC also in the red, but Spain and Italy's benchmarks in the green. 

Wall Street is reminding in the green so far. 

3.40pm: Scottish Mortgage feet still held to the fire

The activist investor in Scottish Mortgage Investment Trust PLC (LSE:SMT) has "barely taken its feet off the desk" but is already "laughing all the way to the bank", analysts reckon, though another broker reckons the board is likely to continue to have their "feet to the fire" for some months yet. 

Less than two months after declaring a 5% stake in the Edinburgh-managed trust, Elliott Investment Management has started to sell down its holding.

It was confirmed in an RNS statement after 5pm on Friday, that the activist fund manager reduced its position in the FTSE 100-listed tech investor to below 5%, following SMT unveiling a significant share buyback programme. 

"We assume that the vast majority and perhaps all of the 35m shares purchased in the buyback at 895p last Wednesday were from Elliott," said nalyst Iain Scouller at Stifel, roughly a halving of Elliott's position.

Analyst Russ Mould at AJ Bell said: "Whereas some previous activist campaigns against investment trusts have had a long list of demands ... it’s fair to say that Scottish Mortgage was a much simpler one to comprehend.

"Do something to narrow the discount to net asset value and sell some of its private holdings as it might get a better price than was attributed by the market.

"Elliott has been laughing all the way to the bank as it has barely taken its feet off the desk, let alone had to flex its muscles in the normal way an activist does to get their message across," Mould said.

But Scouller said the US firm remains one of the largest shareholders and "they are likely to continue to give the board clear views as to how shareholder value could be enhanced in the future and keep their 'feet to the fire'."

"We assume that if any other shareholders also want to exit a large or small position in Scottish Mortgage's shares in the market into the buyback, the board will be quite happy to facilitate this in the same way that they have accommodated Elliott's realisation."

3.27pm: Boots valued at £7bn as buyer sought

Walgreens Boots Alliance Inc (NASDAQ:WBA)  shares are up 6.6% on a report that the US group is talking to potential buyers of its Boots arm.

Advisers have been hired and potential buyers are being sounded out over the £7 billion UK chemist chain, according to a Bloomberg report.

Another notable retail sector riser across the pond is GameStop Corp (NYSE:GME), which has jumped close to 70% after as meme stock trader Roaring Kitty reemerged on social media after a three-year absence.

All that it took was a post on X of Roaring Kitty, a former professional trader-turned YouTuber who made millions from the 2021 meme stock and YOLO trading trend, sharing a sketched picture of a video gamer sitting forward on a chair.

Elsewhre, Squarespace jumped 13% on Monday following news the software company was to be taken private through a US$6.9 billion deal with Permira.

3.07pm: Thoughts on Anglo rejecting BHP

There's a likely reason why BHP's parsimonious offers for Anglo American, according to analysts at RBC Capital Markets' Sydney branch.

BHP would have to go all out (and enjoy a great deal of luck) to achieve the synergies and cost savings to ensure the takeover is earnings accretive.

"We estimate that greater than $11 billion of synergies would be required for BHP to justify the bid at these levels - almost double our estimates- albeit a narrative of undervalued growth and under-supplied copper markets could be used to justify the transaction," said RBC analyst Kaan Peker.

He estimated that at least US$11 billion of synergies would be required to justify a higher offer than £30 per share based on the current Anglo valuation and long-term metal price assumptions.

However, there are long-dated or early-stage copper growth projects not included in the current Anglo base case, including Los Bronces Underground, expansion of Quellaveco and Collahuasi that could account for US$2.5-3 billion or £1.6-1.9 per share of incremental value.

"With these long-term growth projects included, we estimate US$8-9bn of synergies are required to justify an offer >£30/sh."

And if there was a 10% increase in long-term copper price estimates this would add another US$2.2 billion or £1.4 per share, with these two adding up to a scenario where the top end of estimates would justify an offer above £30 per share.

"Obviously, BHP would be taking on significant project execution risk and copper price risk, under this scenario,"

The market was not much moved by the marginally improved deal, with the shares in both falling 0.2%.

RBC said it see BHP's bid "as a key catalyst to unlock value at Anglo American" and increased its price target to 3,100p.

3pm: US stocks open higher

US stocks have indeed started the week on the front foot despite falls by the tech megacaps creating a large headwind, with the Nasdaq Composite up 0.24%.

This was despite Microsoft, Nvidia, Alphabet, Amazon and Meta - five of the so-called Magnificent Seven - being in the red, with Alphabet and Meta down around 2%. 

Apple and Tesla were the notable Nasdaq exceptions, up 1.1% and 3.7%.

2.45pm: Is renting becoming the preserve of the rich?

The cost of rent has soared compared to the average salary and the income of renting households is rising, suggesting lower-income individuals and households are being priced out of the market, according to new research. 

The average household in the private rented sector is increasingly affluent, according to research by Capital Economics, where senior economist Andrew Wishart says comparing rents to average pay is not as accurate a guide to tenant affordability as it used to be.

While rents normally increase in line with pay, since the pandemic they have risen much more sharply.

Between 2007 and 2021 pay increased by 2.6% a year, and rents by 2.3%, but since 2022, the research finds that pay growth has increased at an average annual rate of 5% a year while rents have grown at a far stronger 12%.

This is due to the sharp increase in the demand for rented property due to high net migration, which has tripled compared to the usual level in the 2010s, Wishart argues, as well as would-be first-time buyers having to rent for longer due to high mortgage rates.

The rise in waiting lists for social housing to a decade high of 1.3 million in March, backs up Wishart's conclusion that the increase in the income of renting households "reflects lower income individuals and families being priced out of the market".

Numbers of people rough sleeping or in temporary accommodation is increasing too.

"But as those that continue to rent have higher incomes, rental affordability for sitting and new tenants hasn’t deteriorated as much as standard metrics suggest," he notes. 

"That makes a sharp slowdown in rental growth due to stretched affordability less likely," he says, adding that he expects growth in market rents to ease gradually.

Rental growth was 10% in 2023 but Wishart sees it easing to 7% this year and 4% in 2025. 

2pm: Anglo rejects another BHP bid

BHP Group Ltd (LSE:BHP, ASX:BHP) said it had another bid rejected by Anglo American PLC (LSE:AAL) last week. 

Last Tuesday, 7 May, it made a revised proposal to the Anglo board, an all-share offer like its first proposal in April, but it was rejected today

BHP said it increased the number of its share that Anglo American shareholders would receive to 0.8132, giving them a bigger stake in the enlarged business of around 16.6%, compared to 14.8% before.

The revised proposal represent little change in the total £34 billion value of the deal, at approximately £27.53 per Anglo American share.

BHP boss Mike Henry said: "BHP put forward a revised proposal to the Anglo American Board that we strongly believe would be a win-win for BHP and Anglo American shareholders. We are disappointed that this second proposal has been rejected.

"The revised proposal represents a 15% increase in the merger exchange ratio and increases Anglo American shareholders' aggregate ownership in the combined group to 16.6% from 14.8% in BHP's first proposal."

1.35pm: Asda moves into residential property 

In the retail sector, Asda is the latest grocer to dip a toe into the residential housing market.

It is teaming up with FTSE 100-listed housebuilder Barratt Developments PLC (LSE:BDEV) to construct a major redevelopment project in Park Royal, London, which aims to create a new town centre with 1,500 homes, an Asda supermarket, various retail spaces, and residential units.

Some apartments will rise a 'landscaped podium' above the new Asda store.

It marks Asda’s first foray into housing developments and follows a similar joint venture launched by John Lewis Partnership and Abrdn in 2022 - though it hasn't all been smooth sailing.

Barratt is not a stranger from partnerships with companies from other sectors, as it has included plenty of work with Lloyds Banking Group's private rental housing arm since 2021.  

1.10pm: Positive US start expected

Wall Street's main stock indices are set to open higher today, led by the tech-powered Nasdaq after a mixed end to last week. 

Futures markets are anticipating a 0.35% rise for the Nasdaq 100, while S&P 500 futures are up 0.26% and for the Dow Jones the premarket gain is 0.18%.

Analysts are all pointing to the consumer price inflation report, due for release Wednesday morning, as the key this week to the market's short-term fortunes, with CPI having been hotter than expected for the past three monthly prints.

A fourth could rule out a Federal Reserve rate cuts this year and sour the market mood.

Strategists at Stifel were of a bearish mind earlier. "The next 500 points for the S&P 500 are down," they say, predicting no rate cut any time soon.

The Fed has "already harvested all the normal post-recession disinflation we would expect. As a result, the sustained 2% core PCE inflation the Fed seeks is a pipe dream".

Market commentator Kenny Polcari at Slatestone Wealth says his guess is if CPI lands in line with forecasts "the market holds steady and churns right here".

But if they are worse than expected "then watch as the algos once again all go running for the door, causing stocks to decline…and if we see a drop beyond the expectation – then I do think they will try to push higher – but will have some difficulty in doing so – again because it feels like it already priced in a ‘better than expected’ result – so I’m not sure there is much more gas in the engine to push us significantly higher just yet."

12.47pm: Haleon gets short-seller badge

Haleon PLC (LSE:HLN, NYSE:HLN), the consumer healthcare company, is faced with its first major short-seller since being spun out of GSK and Pfizer two years ago.

A short position of around £150 million has been taken by hedge fund manager Marshall Wace.

Marshall Wace said it has built a net short position of around 0.52% of the Sensodyne and Advil maker’s £30 billion market value.

Shares in Haleon are trading at around 329p on Monday, roughly flat since it first listed in July 2022.  

12.40pm: NatWest note

While HM Treasury has been selling down its NatWest stake, a leading US investor has been buying large chunks.

This was a story from over the weekend from the Guardian, which noted that Los Angeles-based investment firm Capital Group has been a significant buyer and become one of the bank's major shareholders. 

The US investment giant, which has more than £2.5 trillion of assets under management, has bought over £110 million of shares in the UK high street lender, putting it among the top 30 shareholders.

It bought up 33 million shares at the end of March, roughly a 0.4% stake, with more purchase since, according to the report

Capital has been impressed with NatWest's recent profitability and representatives have met newly appointed chief executive Paul Thwaite earlier this year.

Among its other European investments, Capital Group has also held major stakes in BAE Systems, British American Tobacco and ASML.

12.15pm: FTSE into the red

The FTSE 100 has fallen to its lowest point of the day, down 12 points to 8421 as commodities drag.

Only two of the index's top 10 are in green, with Shell and BP in the red, joining Rio Tinto, Glencore and others.  

This is despite oil prices turning positive, with Brent crude up 0.4% to $83.09.

China could be a concern, with the US tariffs incoming and a weaker-than-expected Chinese data snapshot over the weekend.

This "indicated that the authorities still have an uphill battle in stimulating demand in the fragile economy", says Susannah Streeter at Hargreaves.

"Although the inflation reading came in largely as forecast, with consumer prices rising 0.3% in April, the contraction in new bank lending was being read as an indication that interest rates offered were still too high for companies in struggling sectors to borrow to help expand activity. There will be hopes that the sales of long-term bonds announced today will help fund stimulus spending to mend leaky parts of China’s economic plumbing, but pressure is mounting for more stimulus. However, the People’s Bank of China isn’t expected to budge much on Wednesday, with the medium-term lending rate expected to be kept on hold."

She adds that concerns that higher borrowing costs in the United States will be hanging around for longer have been weighing on oil prices, as high interest rates are expected to sap demand for energy in the economy, with confusion also hanging around about future supplies from major oil producers.

"Although there continues to be distressing scenes of suffering in Gaza, risks of overspill from the Israel Hamas conflict are also considered to be easing, which is also helping bring down prices," says Streeter.

11.57am: Bond markets becalmed or dead?

Some thoughts on whether the bond market is dead as the period since December 2019, just before the pandemic, has seen aggregate fixed income losing 11% whereas global equities have gained 55%.

This is 10.6% per annum for equities and -2.6% for bonds.

"Are bonds dead? We don’t think so," says George Lagarias, chief economist at accountants Mazars.

"At a near 5% yield, and with inflation coming closer to being under control, the real yield is positive. And while the Fed has paused rates for now, eventually it will have to lower rates."

Second, he says that high rates are "not helpful in a high-debt world, so they are likely to come down and provide some capital appreciation for those already invested".

The negative returns seen in the five-year period is the result of central bank excesses in the years that preceded 2022, Lagarias says, resulting in the subsequent re-rating.

A full mean-reversion is "at best, a low-probability event", he adds.

"Going forward, we don’t expect a quick fixed income rebound, but possibly a dragged-out one. It will take years for those who were fully exposed to the 2022 crash to recuperate their losses by being in a simple fixed-income portfolio."

11.43am: Treasury sells down NatWest stake

The state's stake in NatWest Group PLC (LSE:NWG) has been further trimmed by the Treasury to below 27%.

An announcement this morning confirmed that the stake now stands at below 34.9 billion shares or 26.95%.

The Treasury is planning to reduce its stake below 10% by the end of this year and fully privatise the bank by 2025 or 2026.

NatWest shares are up 0.2% to 319.9p today, up around 45% from close to 220p at the start of the year. 

11.11am: Markets treading water

European markets are treading water this morning with some caution in the air this week due to US inflation data due on Wednesday, says market analyst Joshua Mahony at Scope Markets. 

"With 92% of the S&P 500 having already reported their first quarter earnings, markets will be actively shifting their focus more keenly back towards economic factors in the weeks ahead," he says.

"On a day that is largely devoid of major news, traders will be looking closely at the potential scenarios on Wednesday.

"Given the recent resurgence in US inflation, we could potentially see fresh risk-off sentiment emerge should monthly inflation come in above 0.2% yet again."

11am: New US China tariffs incoming

Anyone concerned over an impending trade war between the US and China in the event of a Trump re-election will be more concerned to note that such a move could come sooner than anticipated, with Joe Biden looking set to announce a major hike in levies on Chinese imports this week.

With US politicians and manufacturers already seeing Chinese EVs as a serious threat, the White House Tuesday is expected to announce a hike to 100% tariffs on electric vehicles imported from China on Tuesday, up from 25%. 

One of the reports was on Friday night from the FT, which noted that the sharp rise in the levies comes amid mounting concern that China could flood the US market with cheap EVs, threatening the American car industry.

The Biden administration's move averts a potential election threat from former president Donald Trump, who brought in many measures to slow Chinese imports as part of a trade war launched in 2018. 

One of the big drivers of Tesla's slump over the past year has been price competition from the likes of China's BYD, which this year cut its affordable EV, the Seagull hatchback, to an equivalent price of just under US$10,000, more than US$50,000 below the average price of an EV in America.

Europe has also been looking at what it can do too, with Chinese EVs on course to make up a quarter of those sold in Europe this year.

10.42am: Retirement mortgage

One of the main stories going around this morning is that the last three years has seen a surge in the number of people locked into mortgage terms that run beyond the state pension age.

Data from the Bank of England highlighted today that is particularly rife among those currently aged under 30.

Interest rates currently sit at 16-year highs, leading house buyers to pick a longer repayment period to reduce monthly payments.

"The challenge of getting on the housing ladder is forcing large numbers of young home buyers to gamble with their retirement prospects by taking on ultra-long mortgages," said Steve Webb, the former pensions minister and partner at LCP, the financial services group.

10.35am: Job moves

The departure of Phoenix finance chief Rakesh Thakrar is hitting shares in the life insurance group, which is down 2.2%.

Capita PLC (LSE:CPI) also had an update about its retiring CFO Tim Weller and his successor Pablo Andres.  

The outsourcing company confirmed that Weller  will step down as a director on 9 August, with Andres appointed as a director and CFO designate on 15 July.

It noted that Andres bought 650,000 Capita shares last week, which though this did not set him back too much as the share price was just over 13.5p.

Elsewhere in the FTSE, reports that Ladbrokes owner Entain PLC (LSE:ENT) is whittling down its potential new CEOs is helping the shares, but not much.

Former Rank casino boss Henry Birch is among the candidates, according to a Sky News report, which adds that he is "one of a small number" being considered to be the group's permanent CEO after it parted ways with Jette Nygaard-Andersen in December.

Last month the Bwin, Coral and Sportingbet owner cited regulatory difficulties in various international markets as one of the reasons for its mixed results, with its shares having halved in the past year.

April also saw chair Barry Gibson announce plans to step down, to be replaced by current non-executive director and interim CEO Stella David. 

10.10am: FTSE in the red, Europe too

London's blue-chip index is joining most of its European counterparts in the red, having dropped just a point or two at a few moments in the past hour or so. 

While the FTSE is searching for direction, generally fairly flat, Germany's DAX is down 0.2% and France's CAC-40 is 0.1% lower.

Notable continental fallers include ASML down 0.9%, Orsted down 4.6%, Siemens down 4% and Leonardo down 3.8%.

9.50am: UK wages rising faster than productivity

UK wages over the past year have grown at the fastest rate in 16 years despite any improvement in productivity, according to new research from the Resolution Foundation.

Real wages have risen "without putting further pressure on inflation", the research found, as falling pension costs and import prices have "temporarily severed the link between productivity and wage growth" in Britain. 

However, it is a trend that is not set to last, the think tank reckons.

Real average weekly regular earnings have grown by 2.1% in the 12 months to February 2024, helping recover some of the lost ground from pay rises being well below inflation for several years.

Productivity, as measured by output per worker, fell by 0.6% in the 2023.

The report said there are two key reasons why this unproductive wage growth is affordable for firms and is not fuelling inflation: employer social contributions such as payroll taxes and pension contributions that normally add to a firm’s wage bill actually fell during the period (due to rising interest rates helping reduce pension deficits and allow firms to redirect those contributions back into wage packets) and some rewinding of the rise in import prices during the cost of living crisis.

"After 16 years of wage stagnation, real pay packets in Britain are growing again at a healthy two per cent," said Greg Thwaites, research director at the Resolution Foundation.

He added: "But while this welcome real wage recovery has been affordable so far, it won’t be in the future. Unless productivity picks up, wage growth will peter out, or pay rises will simply be passed on through higher prices and prolong our inflation problems."

9.20am: FTSE 100 back in the red, led by Phoenix Group

The FTSE has slid back into the red, down four points, with BAE Systems PLC (LSE:BA.) still the biggest faller, down almost 3% with no obvious reason why apart from profit taking as it hit all-time highs last week.

Phoenix Group Holdings PLC (LSE:PHNX) has joined the fallers after announcing that its finance chief is stepping down after 23 years at the company. 

The long-term savings and retirement group called Rakesh Thakrar, who joined when it was a much smaller business in 2021, "central" to its acquisition strategy.

Phoenix will begin a formal process to find his successor but in the meantime said it has hired former Abrdn CFO Stephanie Bruce in an interim role.

Shares in the company were down 2.4%.

Ocado, a perennial market mover, is also among those blue chips down more than 1%, joined by housebuilder Persimmon.  

9.05am: Chilled markets, for now...

Stocks advanced last week and the main economic action is later in the week - "it’s a quiet start to the week ... take a chill pill" says market analyst Neil Wilson at Finalto.

"The FTSE 100 continued to make new highs and trades mildly higher this morning above 8,400. The Dow Jones rose 2% for the week, and there were gains for the S&P 500 and Nasdaq. Be careful about the Dow points – Goldman Sachs hit a record on Friday and is up 17% in the last four weeks – accounting for a third of DJIA’s rally during that period. Friday’s consumer sentiment survey from the US was weak. The 13% decline took it to the lowest in six months. Year-ahead inflation expectations rose from 3.2% last month to 3.5%."

"Despite the resilience of US inflation, the message from the Fed remains one of easing to come – cuts are in the mail," Wilson says. 

Strategists at Stifel are of a similar mind. “The next 500 points for the S&P 500 are down," they say, with the Fed having "already harvested all the normal post-recession disinflation we would expect. As a result, the sustained 2% core PCE inflation the Fed seeks is a pipe dream"

Stifel expects the timing of Fed rate cuts to be pushed back further, "causing a middle quarters correction for equities". 

8.51am: Get your Diploma    

Some analyst thoughts on Diploma, one of the FTSE's less well-known constituents, which is topping the index leaderboard this morning.

Like the blue-chip index, the component maker's share price is breaking into new all-time highs, up over 7% so far today, on the back of half-year results.

Analyst Kean Marden at Jefferies says earnings per share is 1% above the consensus City forecast on organic revenues in-line with expectations and a stronger-than-expected EBITA margin.

"Updated FY24F revenue guidance is in line with expectations, but margin guidance is slightly ahead," Marden says, adding that this should mean the average EPS forecast is likely to rise by low/mid-single digits.

"Diploma’s resilient results contrast with recent softness elsewhere in the distribution sector, and the shares should consolidate recent gains," he adds. 

8.28am: Cautious optimism for markets   

The City mood seems to be cautiously optimistic, with the Footise edging steadily higher now, with 12 points added this morning. 

Of the top 20 largest companies in the index, six are in the red, led by BAE Systems and Rio Tinto.

There is little macroeconomic data for traders to chew over today, but later in the week US inflation numbers should "light up the skies for markets", according to Deutsche Bank's Jim Reid. 

Tomorrow also brings UK unemployment data.  

8.11am: FTSE starts lower, then quickly higher

The FTSE 100 has started Monday in a fluctuating fashion, first falling 10 points and then quickly rising into positive territory. 

After 10 minutes the index was up three points at just under 8434.

Initially leading this hesitant charge is Diploma PLC (LSE:DPLM), up 6.3% on the back of a good set of half-year results. 

The acquisitive seals, gaskets and cylinders maker has reported revenue up 10% and adjusted operating profit slightly ahead of consensus forecasts, with management upgrading its full-year guidance.

Among the main business and finance stories this morning, there's been a surge in the number of households taking out long mortgage terms that would see them locked into mortgages running beyond the state pension age.

Elsewhere, research has shown that UK wages over the past year have grown at the fastest rate in 16 years despite any improvement in productivity. 

This research is from the Resolution Foundation, which says real wages have risen "without putting further pressure on inflation", but its a trend that it does not expect to continue. 

7.59am: Brave bid rejected 

Digital marketer MISSION Group (LSE:TMG) has rejected a possible all-share bid from acquisitive fellow small cap Brave Bison (AIM:BBSN).

Brave Bison (AIM:BBSN) proposed a deal that values MISSION shares at 29.04p apiece, compared to a closing price of 22.7p at the end of last week, based on an exchange ratio of 11.5 Brave Bison (AIM:BBSN) shares for each ordinary share in MISSION.

MISSION said it received the unsolicited conditional proposal regarding a possible offer on 29 April and unanimously rejected it last Wednesday, 8 May, which it "believes to be opportunistic and significantly undervalues the group and its prospects" as well as being dilutive to its shareholders.

MISSION's share price had fallen over 70% in the past three years to a low of 10p in the autumn after it sounded the earings alarm and cancelled its dividend in the face of difficult trading conditions. 

7.33am: IPO dam about to break?

Some London IPO news is emerging that might be linked to the new-found optimism that's crept into the FTSE. 

Chinese online fashion group Shein is reported to be on the verge of getting the OK from Beijing and filing its application with the London Stock Exchange this month, according to Reuters.

After examining a New York listing but getting a stony-faced reaction from regulators and politicians, investment banks and lawyers in the City have now been hired for what would be a sizeable IPO, with the fast-fashion retailer reportedly valued at $66 billion (£53 billion) last year.

Reuters says the US IPO plans, possibly for a secondary listing in future, are still being kept alive in case of a regulatory shift.

New stories are also emerging about Raspberry Pi moving closer to a London float too.

Boss Eben Upton, who has mentioned the possibility of an IPO earlier this year, for a company that in its last fundraising round was valued at just over £440 million.

The Cambridge outfit could list within the next 10 days, according to a Sunday Times report, with the valuation having risen to around £500 million.

7.18am: FTSE to pause for a breather

FTSE 100 was set to pause for breath on Monday after last week’s record-breaking run.

London’s blue-chip index was set to drop around ten points at the open, according to financial spread firms, from the new closing high on Friday of 8,433.76.

It’s a busy week for UK company announcements with BT, easyJet, Flutter, Currys and Greggs all reporting.

Paddy Power owner Flutter is likely to bring the topic of the value of a London listing back into focus after its decision to shift its main quote to the US.

Asian markets should help the mood with the weekend inflation number giving China a lift, though Japan was more muted ahead of this week’s US CPI number.

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2024-05-13 15:10:00Z
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