FTSE 100 Live: Shares close at highest level in three weeks; UK ‘a little further away’ from recession

 (Evening Standard)
(Evening Standard)

London’s main stock index started the last trading day of the first quarter of 2023 with gains, after a readout for the economy showed better growth in the final three months of last year.

Elsewhere, Nationwide data revealed house prices declined again, while Dignity announced a £300 million loss.

Highest FTSE close in three weeks

16:35 , Daniel O'Boyle

The FTSE 100 has closed at the highest level in three weeks, following a week of gains.

The index of blue-chip London companies gained every day this week, picking up almost 250 points since Monday to finish the week at 7639. That figure is the hgighest close since 10 March, before Silicon Valley Bank’s UK arm collapsed, and is up more than 6% from lows reached at the start of last week.

However, it still remains some way behind the highs reached in mid-to-late February, when the FTSE cracked 8000 for the first time in history.

Among the top gainers were investment manager M&G and insurance business Beazley.

US shares rise amid positive inflation news

15:29 , Daniel O'Boyle

Shares in New York have risen since markets opened, after key inflation figures came in lower than expected.

The S&P 500 is up 0.5% to 4069, while the Dow Jones also rose by 0.5% to 33024. The Nasdaq Index, meanwhile, is up by 0.7%, to 12095.

The rise comes after the headline and core readings of the US Personal Consumption Expenditures (PCE) price index both came in below analysts’ expectations.

US PCE inflation lower than expected

15:06 , Daniel O'Boyle

The US Personal Consumption Expenditures (PCE) price index came in at 5% for February,, lower than the expected 5.3%.

Meanwhile the core PCE price index came - a key figure for the Federal Reserve’s decision-making - came to 4.6%, lower than the expected 4.7%.

Don’t be gloomy about the economy — it could have been much worse

14:25 , Simon English

On the face of it, today’s economic statistics aren’t exactly encouraging.

House prices have seen the biggest fall since 2009 and economic growth is at as near zero as makes no difference.

But there’s another way of looking at it. On house prices, perhaps what we are seeing here is the froth coming off a fairly extraordinary pandemic related boom. That period when our homes were the only places we were allowed to go inevitably saw them valued higher.

Read more here

US shares set for modest gains

13:37 , Daniel O'Boyle

US shares are expected to post modest gains when trading begins in Wall Street today.

According to futures markets, the Dow Jones is set to open up 83 points to 33127, while the S&P 500 is set to gain 0.2% to 4087.50. It could be tougher for tech stocks though, with the Nasdaq essentially level.

Among the big premarket movers is Donald Trump-linked SPAC Digital World Acquisition Corp, which is set to gain 11.9% following news of his indictment, which came out after yesterday’s closing bell.

Tech Nation poised for eleventh-hour rescue deal

13:27 , Simon Hunt

Tech Nation is poised for an eleventh-hour rescue deal as the industry body launched by David Cameron prepares to wind up operations after losing government funding.

The organisation, which helped scale up as many as 40% of the UK’s tech unicorns through its growth programmes, announced it would be closing its doors at the end of March after the UK government unexpectedly withdrew funding in favour of handing it to Barclays.

But now parts of the business look set to be rescued by serial entrepreneur and Lastminute.com founder Brent Hoberman via his startup investment business Founders Factory, who hopes to preserve the brand and revive its programmes and events.

Hoberman told the Standard: “Tech nation has been a flagship set of brands to promote and support founders across the UK and shine a beacon of attractiveness as a destination for top entrepreneurs.

“I think there is still lots to be optimistic about for the future of the UK tech sector.”

Tech Nation said: “We end this impactful chapter with pride in everything it has accomplished, in awe of the incredible individuals and businesses we have been privileged to champion.”

UK merger activity off to slowest start in a decade

12:00 , Daniel O'Boyle

UK dealmaking is off to its slowest start in a decade, as the value of mergers involving UK companies plummeted in the first quarter.

The value of mergers and acquisitions that had any kind of UK involvement was down 60% year-on-year to $47.0 billion (£38.0 billion), according to Refinitiv.

The total was the lowest for a first quarter since 2013, and was only $500 million away from being the lowest since 2004. In addition, it was the lowest value for any quarter since 2016.

Read more here

High street stocks support steady FTSE 250 after fresh signs of economic hope

11:41 , Michael Hunter

Hopes that the UK economy could avoid a recession helped high street stocks offset losses in the energy sector to keep the FTSE 250 steady in morning trade.

After economic data was revised up to show overall growth of 0.1% in the fourth quarter of last year, rather than a flat reading for the period, retailers and leisure stocks supported the mid-cap index.

Pub group Marston’s rose 1p to 36p. Electrical retailer Curry’s was up over 1p to 60p. Pets at Home was 6p stronger at 367p.

In the energy sector, Petrofac fell 6p to 78p. John Wood Group was also down 6p at 200p.

The FTSE 250 was flat overall at 18902.84.

Dignity plunges to loss, admits it needs cash

11:37 , Simon English

A SHIFT to direct cremations and a fall in the death rate post the Covid pandemic has taken a heavy toll on funeral firm Dignity.

Today it said operating profits for the year to December crashed 68% to £18 million as customers opted for lower cost funeral deals.

Overall, the group slumped to a £329 million loss compared to a £32 million profit last time.

The group admits it is short of cash as revenues fall but costs rise. A £281 million takeover by an investment consortium agreed in January looks vital to its future.

That deal with SPWOne, Castelnau Group and Phoenix Asset Management, is awaiting approval by the Financial Conduct Authority and its own shareholders.

Dignity shares fell 3p to 531p, which leaves the business valued at £266 million, below the value of the offer.

There has also been an issue with staff salaries.

Today Dignity said: “Following a benchmarking process in 2022 it was clear that employee remuneration in some areas should be increased and during the year, more than 2,500 people in key operational roles duly received increases. Since then, the Group has seen improvements in its recruitment challenge and a material improvement in vacancies filled.”

Some staff have been made redundant.

On its lack of cash, the firm said: “The Group continues to have a significant need for capital expenditure to maintain its existing asset base, as well as to invest in future growth. Given current cash generation, the Group is presently unable to fund strategic additional capital expenditure from operations and is also limited in its ability to invest in marketing/advertising and promotions in order to accelerate growth.”

Chief executive Kate Davidson said the firm remains “alive to the factors and ongoing challenges” that have “inevitably” impacted its financial performance over the last year.

The average revenue for funerals fell from £2,394 in 2021 to £2,116 in 2022, Dignity said.

There was a drop in the number of deaths in 2022 from 664,000 to 639,000

Ms Davidson added: “Throughout a challenging year we have remained focused on our long-term aims and have confidence that our strategy will deliver sustainable growth and the highest standards of care and service to our customers.”

City Comment: Things could be worse

11:36 , Simon English

On the face of it, today’s economic statistics aren’t exactly encouraging.

House prices have seen the biggest fall since 2009 and economic growth is at near zero as makes no difference.

But there’s another way of looking at it.

On house prices, perhaps what we are seeing here is the froth coming off a fairly extraordinary pandemic related boom.

That period when our homes were the only places we were allowed to go inevitably saw them valued higher.

A correction downwards seems normal and if it does something to relax our national obsession with how much our bricks and mortar are worth perhaps that is healthy.

Today’s slight upward revision to GDP growth in the third and fourth quarters of last year suggests that inflation, torrid though it is, took a somewhat smaller toll on the economy than expected.

Perhaps UK households are more resilient and better prepared for economic shocks than the worst headlines indicated.

And we have just signed a trade pact with 11 Asian and Pacific nations which might not mean much for growth in the short-term, but surely bodes well for the future.

In other news, the Lloyds Bank business barometer shows that business confidence is at a ten-month high. And fears that we were heading towards another banking crisis are receding.

Stock markets are heading back up. We avoided a recession last year and might well do so this year too.

When you consider everything the economy has been through that really isn’t such a bad result.

It could have been much worse.

Banks shares falter after positive week

10:54 , Michael Hunter

THE FTSE 100 is on course for a positive end to the first quarter of the year today, but momentum is fading from this week’s relief rally.

Much of the advance came from financial stocks as confidence flowed back into the sector and the wider market. Wider fears over the potential knock-on effects of problems at European and US banks eased consistently.

But the recovery, which ran since Monday, left bank shares looking tired into the weekend and they gave back some of the rebound.

HSBC fell 6p on the session to 550p. Standard Chartered, the UK bank focused on emerging Asian markets, fell by 3p to 612p. NatWest was 2p lower at 263p.

London’s insurance stocks slipped as wider attention stayed on the global financial sector while the shockwaves of Credit Suisse’s rescue deal last week with UBS faded.

Prudential fell 14p to 1101p, with Aviva 5p weaker at 401p Overall, the FTSE 100 was up just 16.39 points at 7,636.82, leaving it up by just over 1% for the year to date.

James Hughes at Scope Markets said: “London’s blue chip index has made no meaningful progress over the quarter but once you put this against a backdrop of ongoing rate hikes and a threatened full-blown banking crisis, the fact we’re still around these levels is commendable.”

Travel and tourism stocks headed north after upbeat broker comment on the sector. Barclays lifted its price target on easyJet’s stock to 570p from 510p, helping it rise by 17p to 518p. British Airways’ owner, IAG, added 3p to 151.4p after Deutsche Bank, upped its price target on the stock to 200p from 180p.

News of the ninth consecutive monthly fall in house prices hit residential developers. Persimmon fell 11p to 1257p. Barratt Developments fell 2.3p to 470p.

Computacentre reported its 18th consecutive year of higher earnings per share and profit before tax of £264million, up 3.2%. Stock in the Hatfield-based IT services firm held steady at 2088p

Eurozone core inflation hits record high

10:27 , Daniel O'Boyle

Inflation in the Eurozone dipped to 6.9% in March, but the core inflation figure rose to a new record high.

The headline number was down from 8.5% in February, the European Central Bank revealed. However, the core figure - which excludes more volatile food and energy prices - rose to 5.7%: the highest since records began in 1997.

Searchlight Capital Partners gets in on Providence’s £481 million Hyve acquisition

09:58 , Daniel O'Boyle

Searchlight Capital Partners will jump in on Providence Private Equity’s £481 million acquisition of exhibition business Hyve, taking a 40% stake in the bid

In a bid recommended by Hyve’s board, Providence Equity Partners agreed earlier this month to pay 108p per share of the event organiser.

However, Searchlight Capital Partners will now take a 40% stake in the bidding entity. The terms of the acquisition will otherwise remain the same.

Is a recession still on the cards?

09:18 , Daniel O'Boyle

Capital Economics deputy chief UK economist Ruth Gregory has warned that the country could still slip into a recession this year, despite positive economic news this morning.

UK GDP for Q4 of 2022 was revised up today, improving the likelihood that the country could escape a recession this year.

However, Gregory said she still expects a decline, as most of the impact of recent interest rate hikes has not yet filtered through to the wider economy.

“Overall, today’s figures suggests households have slightly larger buffer than we had expected to cope with rising interest rates,” she said. “But with the stock of households’ savings now below the pre-pandemic trend in real terms, we still think that savings will be less powerful this year.

“And with around two-thirds of the drag on real activity from the rising interest rates from 0.10% to 4.25% has yet to be felt, the figures do not change our view that the economy will slip into recession involving a peak-to-trough fall in real GDP of about 1.0%.”

Philip Shaw at Investec noted the announcement reduces the likelihood of a recession, but does not change the fact that the economy is struggling.

“The latest release takes the UK a little further away from the recessionary danger zone, although the report does not change the overall picture that the economy’s performance was lacklustre over the second half of last year as the cost of living crisis hit hard,” he said.

FTSE 100 sets course for fifth straight day of gains

08:39 , Michael Hunter

London’s FTSE 100 is making modest gains in early trade, enough to keep it on course for a fifth consecutive positive session on the last trading day of the first quarter of 2023.

The main UK stock index added 8 points to 7628.01, a rise of 0.1%.

Travel and tourism stocks stood out on the leaderboard after upbeat broker comment on the sector. Barclays lifted its price target on easyJet’s stock to 570p from 510p, helping it rise by 17p to 518p, a 3% rise that was the single biggest of the morning.

IAG, the owner of British Airways, was in second place, up over 3p to 151.4p, rise of almost 3%. It was given a lift by separate analysis from Deutsche Bank, which upped its price target on the stock to 200p from 180p.

News of the ninth consecutive monthly fall in house prices hit residential developers. Persimmon fell 11p to 1257p. Barratt Developments fell 2.3p to 470p.

Cybersecurity shares under pressure as two firms post profit warnings

08:15 , Daniel O'Boyle

Cybersecurity shares are under pressure after two firms in the space announced profit warnings this morning.

NCC Group shares plummeted as it announced its profit for the year was now expected to be £28 million — 40% lower than previously thought.

Meanwhile, the Shearwater Group now expects essentially no profit, with revenue set to come in “significantly behind market expectations”. Its shares fell by almost 40%.

Both companies put the declines down to the wider declines in the tech sector, which led to their customers reducing or delaying spend on cybersecurity services.

The announcements had an effect on other cybersecurity businesses, with Darktrace shares down by 2.1%.

Rolls-Royce top-level reshuffle begins as new CEO Erginbilgic selects his top team

07:55 , Michael Hunter

The new chief executive at Rolls-Royce, Tufan Erginbilgic, has started to shake up top level management at the world-famous engineer he compared to a “burning platform” shortly after taking up the job.

BP executive Helen McCabe will join and become chief financial officer, replacing Panos Kakoullis, who will stay on at the Derby-based company in the role until the end of August at the earliest.

Insider Rob Watson will step up as president of Rolls-Royce’s civil aerospace division, with immediate effect. His predecessor, Chris Cholerton, will be group president, taking on responsibility for the company’s nuclear operations, including its small modular reactors (SMR )business and its submarines business. Tom Samson is leaving the SMR business “with immediate effect”.

Adam Riddle will head up Rolls’ North American business straight away, a role previously held by Tom Bell.

Erginbilgic said: “With the leadership changes announced today we are acting at pace and gaining the momentum we need to transform Rolls-Royce.”

Virgin Orbit on the brink after sacking 85% of staff

07:48 , Simon Hunt

Richard Branson’s Virgin Orbit is on the brink of collapse after the firm said it would let go of 85% of its staff after being unable to secure enough funding.

Nearly 700 employees are set to leave the firm, whose inaugural rocket launch attempt earlier in the year unexpectedly failed.

“We have no choice but to implement immediate, dramatic and extremely painful changes,” Virgin Orbit chief executive Dan Hart told employees, according to CNBC.

read more here

Nationwide: House prices fell in March for the 9th month in succession

07:27 , Jonathan Prynn

House prices fell by 3.1% in the year to March, the fastest rate of decline since July 2009, according to latest data from Nationwide. It was the ninth consecutive month of price drops, the building society said. London recorded a 1.4% fall to an average price of £511,293

Gains expected for FTSE 100 after GDP revised up — UK economy grew in Q4

07:10 , Michael Hunter

A brighter picture for the UK economy in the final quarter of last year is helping the FTSE 100 head toward its fifth consecutive rise of the week, helping confidence flow back into the market.

Revised numbers from the Office for National Statistics show that the size of the economy grew by 0.1% quarter-on-quarter in the last three months of 2022, rather than holding steady.

The better showing in the updated data is the latest piece of good news for the UK economy, after the Bank of England and OBR both announced earlier this month that they no longer expect a recession this year.

According to opening calls for the stock market from spread betting firm CMC, the FTSE 100 will add 10 points in opening trade to 7,630, setting it on course for its fifth consecutive day of gains.

Recap: Yesterday’s top stories

07:05 , Simon Hunt

Good morning. Here’s a summary of our top stories from yesterday:

  1. Hiring in London for March declined at close to the fastest rate since 2020, but employers are becoming more optimistic about their hiring outlook over the next year.

  2. Water regulator Ofwat has unveiled plans for a crackdown on excessive bonuses for bosses of suppliers that pump pollution into rivers or provide a poor service to customers.

  3. A long-running cycle of weak public investment represents an “institutional failure of the British state” which has undermined economic growth and key services, according to a leading think tank.