- FTSE 100 climbs 20 points to 8296
- Shein reported to be close to filing for London IPO
- GSK says it will appeal Zantac ruling by Delaware judge
11.26am: Raspberry Pi to float next week
Tiny computer manufacturer Raspberry Pi is expected to float in London next week and raise almost £160 million.
A listing offer range of 260p to 280p was reported by Bloomberg News, which said existing backers and the company are hoping to raise around £157 million from selling new shares as well as existing ones.
Previous indications suggested that the maker of small computers for hobbyists was looking to raise £31.5 million of new capital.
The newswire indicated that conditional trading would begin on June 11.
11.04am: Thoughts on manufacturing UK and European PMI
After the UK manufacturing sector rebounded back into positive territory, with the UK May PMI rising to a 22-month high, let's hear some analysis.
Peter Arnold, EY UK chief economist, says the survey "provided further signs that the sector's prolonged downturn may have ended", though the final print of 51.2 for May "still only signalled a small upturn in activity".
With input costs increasing at a slightly softer pace than in April, while prices charged inflation rose to its highest rate in a year, he says the EY ITEM Club "does not expect the survey's higher output price balance to have much impact on official headline CPI".
Boudewijn Driedonks, partner at McKinsey & Co, says it is "a sigh of relief after last month’s decline, which now seems more like a blip on the broader recovery trend".
Eurozone manufacturing PMI also came out this morning, showing tentative signs of recovery, though the sector remains in contraction.
The eurozone manufacturing PMI reached a 14-month high of 47.3, with both input and output prices also showing signs of stabilising.
"Overall, today’s PMI figures signal that economic growth is charting in the right direction," says Driedonks. "Despite lingering fragilities, there has been a marked pick-up in activity as firms report stronger demand and prices seem to be stabilising. With conditions starting to improve, many manufacturers will likely be entering the second half of the year with cautious optimism."
10.44am: Elections and markets
"Elections can make a difference to markets, but it depends on the circumstances," says market analyst Neil Wilson at Finalto.
He points to Indian stocks hitting a record high on the back of exit polls as one example, and another being South Africa’s rand and stocks, which have both come under a fair bit of pressure on the uncertain election outcome and poor showing for the ruling ANC.
"Mexico’s ruling left-wing party seems to have comfortably won the presidential election, but the peso seems to be selling off a bit on the news to reach a 1-month low against the US dollar."
Pondering if elections matter for the UK market, he says: "I think there is a risk of overegging the importance of whether the ruling party is red or blue.
"Labour could borrow more – but as the Truss episode showed, markets and credit and debt are all about faith and trust and less about the specifics. Debts are sustainable until they are not.
"The City may instinctively prefer a Tory win on the whole, but investors could benefit from unlocking growth. Who knows? And Labour has done a good job on the prawn cocktail offensive."
The US presidential election matters "absolutely", on the other hand, he says, with Trump’s guilty verdict in his hush-money case raising the stakes further.
Meanwhile, European parliamentary elections "could show a big swing to the right", while the expectations of an ECB rate cut this week "could see some geopolitical premium in govt bond spreads on the results come the weekend".
"Fragmentation risks are the thing we are going to listen out for – but as yet we are not seeing much in the way of splintering of the core. The French result will be crucial to see how much Macron has lost the people."
10.20am: Another GameStop Reddit-inspired rally
Shares in GameStop Corp (NYSE:GME) are up 65% higher in premarket trading after, you guessed it, someone tweeted some pictures of something.
Keith Gill, the former professional trader who goes by the moniker of Roaring Kitty, issued the first post from his Reddit (NYSE:RDDT) account in a while.
He posted a screenshot in the r/Superstonk chatroom entitled 'GME YOLO update' showing his latest trades in GameStop.
AMC Entertainment is also up 25% premarket, though there are no screenshots that we know of.
10.05am: Monzo breaks into the black
Monzo is cementing its position as more than just a promising fintech challenger but a genuine rising force in the banking sector after reporting its first full year of profitability.
The app-based challenger bank achieved a profit before tax of £15.4 million, a big swing from the £116.3 million loss a year earlier.
Net interest income surged to £437.97 million from £164.25 million, while fees and commissions added over $200 million to the top line.
Chair Gary Hoffman said it was an important milestone, which are thoughts to be mulling a potential London listing
9.59am: UK personal finance challenges remain
Mortgage borrowing and consumer spending were down in the first quarter of 2024, a new report from the UK financial industry shows, with with 1.6 million mortgages due to come off fixed rates this year.
There was a "noticeable uptick" in the number of mortgage applications, the UK Finance household finance review shows, though the sort of recovery this might normally indicate is dependent on the Bank of England, where rate reduction expectations have been pushed back to August, September or later.
Consumer spending was "weak", but spending on travel rose at the start of the year.
There was some reversal to the fall in savings levels seen last year, when households ran down their savings to help pay for day-to-day expenses, with overdraft debt at a 25-year low of £4.67 billion.
Credit card debt rose 10% year-on-year, with only 50% interest-bearing, the lowest since 1995.
Eric Leenders, managing director of personal finance at UK Finance, said: “Some households were in a better place financially in Q1 this year, but we are not out of the woods yet.
"Among the more positive signs, we can see that overdraft and interest-bearing credit card debt are at record lows, and many households have stopped using their savings to help with the rising cost of living."
He acknowledged that is not the case across all households, and said "lenders want to support anyone who might be struggling".
Also, Leenders noted that "cost of living pressures remain, and with 1.6 million mortgages due to come off fixed rates this year, there may be challenges ahead for some".
9.43am: Mega week for markets, democracy too
This is a "mega week for financial markets", says market analyst Kathleen Brooks at XTB.
She points to should be a much-anticipated rate cut from the ECB (Thursday), the latest reading on payrolls in the US (Friday), the Indian and Mexican election result (already emerging), Nvidia’s new AI chip announcement and Opec+’s latest decision on oil production cuts - both yesterday.
Brooks also wonders whether the expected float news from Chinese clothing giant Shein will lift the spirits of the FTSE 100, after the index's down-and-up last week.
"If this does happen this week, then it would take London a step closer to being Shein’s IPO destination. While this filing does not indicate when its IPO would take place, it could be in the next few months, with Autumn seen as a likely date," she says.
"The company is expected to be valued at £50 billion, which would put it in the top 15 UK listed companies by market cap, and it would be the second largest UK listing in history."
The first UK election leaders’ debate will take place on Tuesday evening too, with the latest polls suggesting Labour has a big lead over the Tories, with the BBC’s poll tracker predicting Labour will win 45% of the vote, with the Conservatives in second place with 24% of the vote.
"We think that a narrowing of the Labour lead, or signs of a hung parliament are likely to have the most impact on UK asset prices, especially the pound, which is historically sensitive to unexpected political outcomes," says Brooks.
9.36am: UK manufacturing PMI
The UK manufacturing purchasing managers’ index (PMI) rebounded back into positive territory in May, rising to a 22-month high of 51.2 in May from 49.1 in April.
A figure above 50 indicates expansion in the S&P Global PMI surveys.
Output expanded at the quickest pace in over two years on the back of improved intakes of new work, S&P said, with the outlook also having brightened too, with positive sentiment rising rsiong to its highest level since early-2022 as 63% of companies expect output to expand over the coming year.
Rob Dobson, director at S&P, says: "May saw a solid revival of activity in the UK manufacturing sector, with levels of production and new business both rising at the quickest rates since early-2022. The breadth of the recovery was also a positive, with concurrent output and new order growth registered for all of the main sub-industries (consumer, intermediate and investment goods) and all company size categories for the first time in over two years."
He says there were also signs of overseas demand also moving closer to stabilisation.
There was a "mixed picture" on price pressures at manufacturers, with factory gate output inflation strengthening for the fifth successive month, to its highest level in a year, but accompanied by "solid easing in the rate of increase in input costs [that] should help prevent price pressures from becoming embedded".
9.29am: Zantac ruling is 'tough'
The ruling that Zantac litigation in the US can proceed to trial creates a significant overhang for GSK, says Deutsche Bank, but it has maintained a positive rating due to a long-term view.
Analyst Emmanuel Papadakis acknowledged that, while the market had somewhat anticipated this negative legal outcome, it still poses a considerable challenge for GSK.
The decision, based on the Daubert standard, means the evidence presented by the plaintiffs' experts is deemed sufficiently reliable to be heard at trial.
While expectations that a judge would dismiss had "significantly moderated in recent months", we a negative reaction in the shares is because "not only because this will drag out the remaining state litigation overhang but it will do so in tough fashion", Papadakis writes.
Meanwhile, the FTSE 100 is up 0.23% but being outdone by its little sibling, with the FTSE 250 up 0.84%.
8.57am: Footsie gains pared
The big fall for GSK, the seventh largest company in the index, is holding back gains for the Footsie, with AstraZeneca and Haleon also in the red.
Miners Rio Tinto, Anglo American and Glencore are also in the red, down between 0.6% and 0.4%, along with utilities Severn Trent and United Utilities, both down 1%.
The FTSE is now up just 13 points, having leapt almost a hundred higher at the open.
Oil giants Shell and BP are in the green despite oil prices falling to the lowest since February, just over $80 for a barrel of Brent crude or $76.50 for WTI, in the early hours.
Yesterday, the OPEC+ cartel agreed to extend supply cuts to the third quarter but will gradually return barrels to the market over the following 12 months.
Analyst Ipek Ozkardeskaya at Swissquote Bank says: "The fact that OPEC has a clear time in mind for waning its supply cut policy is not supportive of oil bulls."
But crude prices rebounded on the back of a stronger-than-expected Chinese manufacturing PMI, she says, with the Caixin index pointing at the strongest expansion in nearly two years.
"Expected interest rate cuts from major banks could temper a soft OPEC decision this week, but they may not be enough to send oil prices on a sustained bullish journey unless global growth expectations improve alongside a softer monetary policy outlook from major central banks."
8.46am: Indian election gains
Stock indices around the morning are up, but India's have surged the most, on what is most likely to be the anticipation of an election win for current Prime Minister Narendra Modi’s party.
The Sensex and Nifty indices have galloped more than 3% higher after exit polls showed a decisive majority for the BJP, adding a third term for Modi.
There is a unanimous finding across six polls published by local media that the BJP will secure 300 or more seats out of 543 in the Lok Sabha lower house of parliament.
While exit polls have a patchy track record in India, says Shilan Shah at Capital Economics, if they are accurate, "it would put paid to the view in some quarters that popular support for PM Modi had been wavering, and would leave the BJP with a very strong mandate from which to continue enacting gradual growth-enhancing structural reforms".
He said a rally in local financial markets was despite "the stretched valuations of Indian equities".
The full results of the general election are due on Tuesday.
8.23am: GSK falls 10%
Some of the initial bells and whistles have been shed by the FTSE after that initial surge, with the London benchmark retreating to a gain of 43 points or 0.5%.
It seems to have caught an ebullient wave across Europe this morning, and most of Asia.
The FTSE 250 index is also up 0.5%, to 20,842.
JD Sports is the top riser across the 350 largest companies, up 5.3% as its numbers from Friday are reassessed.
Similarly, Hollywood Bowl, which is up 4.8% after its half-results this morning showed a boost from overseas expansion.
Biggest faller is GSK, down 10%, after a Delaware judge ruled that more than 70,000 lawsuits over discontinued heartburn drug Zantac can proceed.
8.06am: FTSE leaps at open
The FTSE 100 has rocketed up almost a hundred points at the start of the month.
In early trades the blue-chip index surged to 8370, up 95 points or 1.1% from where it finished last week.
Top risers are relegation-bound St James's Place PLC, up 5.5%, retailer JD Sports Fashion PLC (LSE:JD.) which reported results last week, up 5%, and British Gas owner Centrica PLC (LSE:CNA) up 2.8%.
7.59am: Looking back at May
Deutsche Bank has released its monthly performance review for May and for the year to date.
Last month saw most assets rebound after a weak April, with the S&P 500 and STOXX 600 reaching new record highs during the month, with a late surge in the last 20 minutes of month-end trading on Friday helping the former "regain some poise after a more challenging last week of the month", says macro strategist Henry Allen.
Most indices recovered after their losses in April, with a 5% gain for the S&P 500, the 3.5% for the STOXX 600, 0.75% for the FTSE 100 and 0.2% for the Nikkei.
Tech stocks outperformed, with the Magnificent 7 group up 9.1%.
"May got off to a positive start, as the Fed’s meeting at the beginning of the month proved to be less hawkish than some had anticipated... This momentum was at its peak around the middle of the month, as a succession of news leant in a more dovish direction."
This included the US CPI inflation release for April, where core CPI slowed to a 0.29% monthly pace, the slowest so far this year, while the Swedish Riksbank became the second central bank with a G10 currency to cut rates this cycle.
"However, from around the middle of the month, the market rally began to stall. That was mainly because several data points were looking more resilient, and inflation prints were coming in stronger than expected," says Allen. "So this cemented the 'higher for longer' narrative on interest rates, and markets moved to price in a much more gradual cycle of rate cuts."
Biggest losses were seen in euro sovereign bonds ("stickier inflation and stronger growth meant investors priced in a more gradual cycle of rate cuts from the ECB"), oil ("the geopolitical environment was relatively calmer") and the US dollar ("expectations for Federal Reserve policy were broadly stable, [but] investors now expect that other central banks will have a more hawkish stance of policy than before").
7.42am: Hipgnosis shareholders get one cent more
Blackstone and the board of Hipgnosis Songs Fund Limited (LSE:SONG) have agreed the terms and conditions of an increased and revised recommended cash takeover deal of $1.31 per share.
The revised offer price is up from the $1.30 that was agreed on 29 April, with the take-private deal to be implemented by way of a scheme of arrangement.
It represents a 49% premium of to the closing price of 71p per share before a first offer was agreed with rival music rights group Concord on 18 April.
Hipgnosis is valued at roughly $1.58 billion (£1.27 billion) at the new price.
The increase of $0.01 per share is partly because Hipgnosis incurred lower adviser fees than previously expected.
7.25am: GSK agrees with Zantac judge ruling
GSK PLC (LSE:GSK, NYSE:GSK) has issued a statement to say that it disagrees with a decision by a court judge in the US state of Delaware who has allowed more than 70,000 lawsuits over discontinued heartburn drug Zantac to go forward.
The ruling, from late on Friday by judge Vivian Medinilla of the Delaware Superior Court, was that expert witnesses can testify in court that the drug may cause cancer.
In her statement, the judge wrote that "Delaware courts are loath to step into the heart of technical debate between opposing scientists".
GSK, Pfizer and Sanofi, the companies that used to make the drug, have argued that the expert witnesses' opinions lacked scientific support,
GSK said it will "continue to vigorously defend itself" against all Zantac claims and will immediately seek an appeal.
7.15am: FTSE 100 to start (much) higher
The FTSE 100 rebound should continue with all guns blazing on Monday, as we begin a new month with news of a big IPO that could add further a positive mood in the City.
London's blue-chip index has been predicted to start 74 points higher on spread-betting platforms, having finished the past rollercoaster month only slightly higher at 8,275.38.
The initial public offer news is that online fast fashion group Shein could be on the verge of filing for a London listing this week.
Sky News reported that an application with the Financial Conduct Authority could come later this week or be moved to later in the month (although City chatter was saying the same last month).
However, the company, which is expected to be valued around £52 billion, has faced called from both UK political parties for greater scrutiny due to allegations of unethical business practices.
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2024-06-03 09:26:00Z
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