Top shareholder Axel Springer withdraws representative from PurpleBricks board
PurpleBricks’ largest shareholder Axel Springer has withdrawn its representative from the struggling online estate agent’s board while the business pursues a sale.
PurpleBricks has struggled in recent years, with shares down more than 98% from their 2017 peak, and put itself up for sale last month – as well as announcing another round of layoffs – following a profit warning.
The PurpleBricks board said at the time that its brand still carried a significant amount of value because of its name recognition, and that it may be more likely to reach its potential “under an alternative ownership structure”.
Now, its largest shareholder – German media giant Axel Springer, which owns a 26.5% stake – said it would withdraw its representative on the PurpleBricks board, due to “the regulatory and governance expectations around equality of information between shareholders during an offer period”.
The board member, Ait Voncke, said he supports the sale process.
“Axel Springer is fully supportive of the strategic review and formal sale process being undertaken by the Purplebricks board,” Voncke said. “We are confident this review and process will benefit stakeholders and support the long term growth of the business.”
Revolution bars shares drop 9% as it slides into the red
Shares in Revolution Bars sunk 9% to 8p today after the firm fell into the red and its boss warned of a slowdown in demand from younger patrons.
The chain, which operates across a number of student towns including Leeds, Durham and Nottingham, posted a pre-tax loss of £100k, reversing profits of £4.3 million last year as it bemoaned “continuous and varied external headwinds” and a “downturn in consumer confidence.”
CEO Rob Pitcher said: “The consumer is finding things very tricky with the cost-of-living crisis and we’re not immune to that.
“The older demographic seem to be less impacted [but] younger people are having a tougher time. The performance of our brand reflects that.”
Revolution said its acquisition of Peach Pubs in October last year was helping mitigate the downturn, as the chain is aimed at over-45s.
FTSE 100 drifts, Premier Foods and Wood lead FTSE 250
Ashtead shares lead the FTSE 100 index after the US-focused plant hire business upgraded profit guidance on the back of a strong third quarter performance
Shares rose 2% or 142p to 5888p in a session when London’s top flight drifted 2.52 points to 7927.27.
In the FTSE 250 index, shares in Premier Foods were 9% or 10.8p higher at 125.8p after the Bisto and Mr Kipling owner upgraded profit guidance.
Wood Group surged 13% or 26p to 220.1p as it revealed another bid approach from Apollo, while retirement income business Just Group jumped 9% or 7.8p to 89.7p in the wake of full-year results.
The FTSE 250 index stood 3.49 points higher at 20,067.60, but Spirent Communications lost 11% or 24.2p to 186.8p due to cautious guidance on the 2023 outlook.
STV records best month in 19 years , but revenue set to drop in Q1 2023
Scottish broadcasting business STV ended 2022 on a high, recording its best month for viewing share in 19 years, but revenue is set to drop by double digits to start 2023 as Holyrood’s Covid ad campaigns ended.
STV’s revenue was down by 5% year-on-year, to £137.5 million, but pre-tax profit was up by 11% to £22.2 million thanks to lower costs.
The broadcaster – which is the ITV network franchisee for Central and Northern Scotland – said it had its best month since 2003 in November of last year, thanks to the World Cup and I’m a Celebrity… Get Me Out of Here.
Viewership of the World Cup was especially high, with rates higher in Scotland than in the UK as a whole, despite both Wales and England qualifying for the tournament.
However, ad revenue for the first three months of 2023 is set to decline by 15%, which STV said was expected due to the Scottish government paying for a number of Covid-related ads in Q1 of 2022. When government campaigns are removed, revenue is set to be flat.
Wood receives new Apollo takeover approach
Wood Group, the FTSE 250-listed consulting and engineering business, has received a fourth takeover approach from US private equity giant Apollo.
The Aberdeen-based company said it is “minded to reject” the latest proposal, which is pitched at 237p a share or £1.64 billion compared with 230p previously.
Wood said: “The board will continue to engage with its shareholders and intends to engage further, on a limited basis, with Apollo.”
Shares rose 22.4p to 217.8p today.
The company is focused on the core markets of energy and materials after bolstering its balance sheet through September’s disposal of its built environment division.
Reach to focus investment on US after cutting costs following “challenging” 2022
Daily Mirror publisher Reach will focus its 2023 investment on the US market and social media, after announcing a cost-cutting plan that included 200 layoffs earlier this year.
Reach, which publishes the Daily Mirror, Daily Express and Daily Star – as well as a number of regional titles – announced a cost-reduction plan in January following a profit warning.
This plan, focused on “more efficient procurement throughout the print supply chain, the simplification of central support functions and the removal of editorial duplication”, included 200 layoffs. Reach said it hoped the plan would lead to savings of 5-6% of operating costs, up to £30 million.
However, the business also hopes to invest in the US and in targeting millennials, having developed a “playbook” for reaching new audiences.
Reach said its focus in 2023 would be on building an American audience, noting that with 9% of online views coming from the US it lagged behind some of its UK competitors in this space. It said it also aims to build a younger audience with the launch of “social-first” brand Curiously.
Operating profit was down by 27.4% in 2022, as print revenue dropped, digital revenue was flat and costs rose rapidly – due mostly to a 60% rise in the cost of newsprint.
Focus on Federal Reserve testimony, FTSE 100 seen higher
China’s disappointing GDP target weighed on the mining-heavy London market yesterday, with the FTSE 100 index down 0.2% compared with gains elsewhere in Europe.
Wall Street indices finished close to their opening mark but had been much higher. The late retreat came as investors revised their positions ahead of Federal Reserve chair Jerome Powell’s testimony to the Senate Banking Committee at 3pm UK time today.
Michael Hewson, chief market analyst at CMC Markets, said: “The key focus will be on how Powell sees the US labour market, and whether the Federal Reserve thinks that economic conditions have improved or deteriorated since the last Fed meeting.
“Markets will also be paying attention to whether Powell continues to peddle the same narrative of disinflation, which was a hallmark of his last press conference.
“If he acknowledges that inflation could be much stickier than the Fed thought over a month ago, that could prompt a pullback in US equity markets.”
CMC expects the FTSE 100 index to open 13 points higher at 7943.
Foxtons says impact of mini-Budget still being felt in its ‘sales pipeline’
Foxtons, the estate agency chain synonymous with the London property market, said the impact of the mini-Budget is still being felt, with its sales pipeline “reduced” by the turmoil that followed the short-lived measures.
It expected these effects to last “through the majority of 2023.” But it was optimistic for improvement, adding: “ Mortgage rates have started to reduce in recent weeks and buyer activity is picking up, which may result in a more favourable sales market in the latter part of the year.”
For 2022, profit before tax more than doubled to almost £12 million, from revenue of £140.3 million, up 11%. Its sales arm generated revenue of 1% to £43.2 million.
In the lettings market, it said a tend for low volumes and high prices continued into 2023, after revenue from this part of its business rose 17% to £87 million for last year.
Premier Foods ups profits guidance
Premier Foods, whose brands include Mr Kipling, Ambrosia and Bisto, today sweetened its profits guidance after better-than-expected trading in recent weeks.
The St Albans-based company now expects revenue growth in the final quarter of its financial year to be at least 10% ahead of the prior year.
The grocery business led the way, with broad based growth and further market share gains, while Premier also reported an improving trend for its sweet treats division.
Adjusted profits for the year to 1 April are forecast to be around £135 million, which equates to growth of approximately 10% compared to the previous year.
Average house price up in February, London dips
The typical UK property cost £285,476 in February after lender Halifax said annual house price growth stayed at 2.1% for a third month.
The year-on-year increase follows a rise of 1.1% in February, compared with 0.2% in January and a decline of 1.3% in December.
Halifax Mortgages director Kim Kinnaird said: “Recent reductions in mortgage rates, improving consumer confidence, and a continuing resilience in the labour market are arguably helping to stabilise prices following the falls seen in November and December.
“Still, with the cost of a home down on a quarterly basis, the underlying activity continues to indicate a general downward trend.”
Average house prices in London are now £526,842, a 0.9% fall from January’s £530,416.
Halifax said London may be affected by its large proportion of flats – prices for which have broadly stagnated. Despite this slowdown, homes in London still cost over £240,000 more than the UK national average.
Less infamous but longer lasting has been the Halifax House Price Index which was established in January 1983 – the first such index to have mainstream currency.
Today we have a plethora of indices so it’s perhaps difficult to appreciate the impact when the Halifax measure first appeared.
Back then the average UK house price was £26,188 – yes, really – and Bank of England base rate was (wait for it…) 11.0 per cent.
Since then, average house prices have grown 974 per cent to £281,272 and today the base rate may be causing havoc for many but nonetheless sits at a more modest 3.5 per cent.
While the cost of buying a home was at its lowest when the Index began, looking over the past four decades, prices peaked in August 2022 at £293,992 – since then, the index has given four straight months of price falls.
Regionally, London was the most expensive place to buy a home in early 1983, as it is today. Properties in the capital were an average £36,056 in the first three months of that year, compared to £541,239 today.
Yorkshire and the Humber was the cheapest place to buy a property when the Index began (£20,332 then, £205,466 now), whereas the properties with the lowest average cost can now be found in the North East (£169,980 against £21,494 in Q1 1983).
In Scotland, the average property in the first quarter of 1983 was £26,411 vs £200,166 today.
In Wales, the average home now costs £217,547, compared to £21,388 forty years ago.
For Northern Ireland, those buying in the first three months of 1983 needed £23,383 on average, today it is £183,825.
The Halifax index – Britain’s oldest – was created for the media but, in the absence of other tools to measure house prices at the time, it quickly gained a powerful reputation and was used to inform the Bank of England’s monetary policy committee.
Because this significance as a tool for economists overtook its media profile, the index in 2015 was sold off to analytics company IHS Markit.
This firm still produces the monthly index today based on around 12,000 Halifax loan approvals each month, covering all 12 regions of the UK. This represents 15 to 20 per cent of all mortgage offers.
So the index remains effectively powered and sponsored by Halifax but is no longer compiled by the brand’s parent company, Lloyds Banking Group.
It’s now one of around 10 monthly house price measures so inevitably it’s less high profile than before.
Even so and just like Billy Joel, Culture Club, Duran Duran and Rod Stewart – all number one artists in 1983 – the Halifax is still around and well respected.
It could have been much worse … after all, the ill-fated Austin Maestro was launched in 1983 as well.
See you next week…
*Editor of Letting Agent Today and Landlord Today, Graham can be found tweeting about all things property at @PropertyJourn
FTSE 100 consolidates new year gains, Rentokil falls 6%
New year cheer for London investors continued today as the FTSE 100 index shrugged off storm clouds elsewhere to stay at an eight-month high.
This week’s run of gains has been driven by signs across Europe that inflation pressures are easing, as well as the support of Next’s robust festive trading update.
The performance has been in sharp contrast to losses seen on Wall Street, where traders are increasingly fearful that a tight labour market will make it harder for the Federal Reserve to ease the pace of interest rate rises.
UBS Global Wealth Management warned today: “We believe central banks are still some way from declaring victory in the effort to curb inflation.”
The S&P 500 index fell more than 1% yesterday, while the US dollar has continued its recent resurgence amid the increased chance of another 0.5% rates hike in February.
The impact of a weaker pound on overseas earners meant the FTSE 100 index added another 0.2% or 15.51 points to 7648.96, having risen in every session so far this year.
Commodity stocks including Anglo American and Rio Tinto were among those 1.5% higher, alongside gains for widely-held Rolls-Royce, BT Group and BAE Systems.
London’s resilience came despite weaker sessions for other European benchmarks after figures showed a bigger-than-expected slump in German factory orders.
The FTSE 100 fallers board was led by Rentokil Initial, with the pest control and hygiene services firm down 6% or 30.4p to 490p. Standard Chartered also fell back 9.8p to 695.4p as interest in the Asia-focused banking giant cooled after yesterday’s disclosure of takeover interest from First Abu Dhabi Bank.
The FTSE 250 index weakened 87.54 points to 19,375.89, ending the UK-focused benchmark’s strong start to the year as profit taking left ASOS shares 20.5p lower at 556.5p and Currys down 2p at 59.5p.
On the risers board, shipping specialist Clarkson jumped 5% or 160p to 3305p after upgrading expectations for 2022 results. The company, which brokers deals for the huge tankers that carry crude or for dry cargoes or iron ore or grain, said profits will be at least £98 million.
GSK shares up 10% after court ruling, FTSE 100 oil stocks fall
A courtroom victory sent GSK shares surging today as the drugs giant shook off some of the uncertainty caused by lawsuits relating to heartburn product Zantac.
The US federal court ruling in favour of GSK and two other companies determined that there was no scientific evidence to support claims the treatment was carcinogenic.
Other lawsuits are pending in state courts and there’s the chance of an appeal, but GSK shares jumped by 10% or 137.2p to 1525p today. They had been at 1664p prior to August’s disclosure over the filing of thousands of personal injury claims.
AJ Bell’s investment director Russ Mould said the outcome was the best GSK could have hoped for “given how comprehensively the judge dismissed the plaintiffs’ arguments”.
He added: “It will allow the market to focus on the recent improvements in GSK’s underlying performance and the fact it is now a leaner and more efficient operation.”
Haleon, GSK’s former consumer healthcare division, rallied 4% or 12.5p to 307p. The Sensodyne-to-Panadol firm also benefited from Barclays raising its price target to 360p, well above July’s launch price of 330p.
The health stocks were joined at the top of the FTSE 100 by Ocado, which continued its run of outsized price movements by adding 4% or 29p to 691.2p.
The FTSE 100 index rose 21.26 points to 7542.65, despite Shell and BP shares losing 1% as Brent crude fell to $78 a barrel on US recession fears.
Figures showing the biggest monthly fall in house prices since 2008 heaped more pressure on Persimmon and Taylor Wimpey, which dropped 22p to 1248p and 1.2p to 102.8p respectively.
Commodities giant Glencore also weakened 2% or 10.6p to 545.5p after its production guidance for 2023 disappointed yesterday.
The FTSE 250 index dropped 38.79 points to 19,061.29, with recruitment firm Page down 4% or 20p to 444.8p after a downgrade by analysts at Jefferies.
Glimmers of hope for Naked Wines as it talks up balance sheet strength
There were glimmers of hope for beleaguered subscription service Naked Wines today, as it said it had revised its borrowing terms to supply it with enough resources to continue to operate comfortably for at least the next 12 months. The firm’s future had been in serious doubt, and in September it warned it was considering its options for the next 18 months, sending shares plunging.
The firm posted earnings of £4.6m for the six months to September, nearly four times the prior year, while sales climbed 4% to £166 million.
Boss Nick Devlin said: “We’re being pretty honest in saying the outlook for acquiring new customers has become less certain [but] we’ve got a balance sheet in good health.”
Naked Wines shares climbed 0.7% to 98p.
Inflation may have peaked. There are few signs yet of sweeping job cuts. And the tone from big companies reporting results lately has been surprisingly optimistic. Not exactly jolly, but not despairing either.
Today’s results from Mitchells & Butlers suggests even pubs have a shot. Maybe the last boozer in Britain won’t close in 2038 after all.
And maybe next year won’t be nearly as bad as we feared.
Sadly, in the City of London the opposite sentiment seems to apply.
Last night Morgan Stanley said it would cut 1600 jobs, about 2% of its global workforce.
Other banks have already done the same – a whopping 9,000 at Credit Suisse, but it has its own problems – or are sure to follow.
Last week Peel Hunt, a scrappy, small size broker that typifies the City, reported a 99.7% drop in profits. If you work there, the question you’d be asking yourself is: how much longer have I got?
Peel Hunt has suffered from the lack of flotations and from clients being too nervous to trade. It is far from alone.
The risk is that just as the real economy shows signs of a turnaround, the financial bit panics.
Many, many thousands of well-paid folk (who pay a lot of tax) find themselves out on their ear, a blow to London and the wider economy.
Banks are supposed to be good at reading economic cycles. And post Covid, there was a general idea that they wouldn’t do what they normally do: bring out the axe when times are tough; then rehire like crazy when things turn.
How about the banks sit this one out and keep their staff. Have another look come Easter to see how the land lies…
GSK and Haleon surge on court ruling, FTSE 100 flat
GSK shares have jumped 12% after the drugs giant last night won a crucial court battle relating to claims that heartburn drug Zantac caused cancer.
The federal court ruling removed some of the uncertainty hanging over the FTSE 100-listed shares, although GSK and other companies still face lawsuits in state courts.
GSK shares were 159.2p higher at 1547p, while former consumer healthcare division Haleon rallied 5% or 13.8p to 309p.
The FTSE 100 surrendered initial gains to stand close to its opening mark at 7522, with housebuilder Persimmon down 2% in the wake of today’s big drop in the monthly Halifax house price index.
The FTSE 250 index fell 12.83 points to 19,087.25, with pubs chain Mitchell & Butlers up 9% or 13.3p to 155.3p and Moonpig down 16% or 24.7p to 126.5p in the wake of their respective results.
Major investor launches move to oust Topps Tiles chairman
A significant shareholder in Topps Tiles is seeking to remove the chairman of the FTSE 250 building products group.
MS Galleon wants to replace Darren Shapland as non-executive chairman at the Leicester-based company, in which it has built a stake of about 20%. MSG owns Cersanit, another title producer and a major player in the European home improvement market, with a major chain in Poland. It also wants to appoint two representatives of its own to Topps’ board.
Topps says MSG approached it during 2021 suggesting the board appointments and that Topps “should purchase a greater proportion of its tiles from Cersanit,” adding:
“MSG has consistently set out its belief that the proportion of Topps’ tile supply purchased from Cersanit and its representation on the Topps Board should directly reflect its shareholding in Topps.”
Topps said today: “The Board unanimously rejects these proposals, which it believes present a clear conflict of interest between MSG’s objective for Cersanit to be a major supplier of Topps and the interests of all Topps shareholders. In particular, the Board believes it is incompatible for the proposed non-executive directors to have the target of increasing tile purchases from Cersanit to 29.9 per cent., whilst at the same time acting in the best interests of all shareholders of Topps.”
Mitchells and Butlers back in black but CEO warns “the trading environment remains highly challenging”
Pub chain Mitchells and Butlers has returned to profitability as pub-goers came back in their droves after the lifting of Covid restrictions but the firm warned “the trading environment remains highly challenging.”
Pre-tax profits hit £8 million for the year to September, compared to last year’s loss of £2 million, while sales more than doubled to £2.2 billion.
Mitchells and Butlers boss Phil Urban told the Standard: “We’ve seen the city centre recover and wet-led businesses recover [and] we’re cautiously optimistic that people cut back on other things before they cut back ongoing to the pub.”
However, he warned utility and food costs were “still far higher than they were pre-covid” and “whereas historically we could swap out expensive items on the menu, pretty much every category is expensive now.”
Urban said the firm had put pint prices up by 5%, around double a typical price rise.
House prices down 2.3%, third fall in a row
The average house price fell by 2.3% in November, the largest decline recorded by lender Halifax since October 2008 and the third consecutive fall.
The rate of annual growth slowed further to 4.7% from 8.2%, with the typical UK property price now sitting at £285,579.
Halifax Mortgages director Kim Kinnaird said: “While a market slowdown was expected given the known economic headwinds – and following such extensive house price inflation over the last few years – this month’s fall reflects the worst of the market volatility over recent months.
“Some potential home moves have been paused as homebuyers feel increased pressure on affordability and industry data continues to suggest that many buyers and sellers are taking stock while the market continues to stabilise.”
Halifax pointed out that property prices are up more than £12,000 compared to this time last year, and £46,403 above their pre-pandemic levels in March 2020.
Kinnaird added: “The market may now be going through a process of normalisation.
“While some important factors like the limited supply of properties for sale will remain, the trajectory of mortgage rates, the robustness of household finances in the face of the rising cost of living, and how the economy – and more specifically the labour market – performs will be key in determining house prices changes in 2023.”
FTSE 100 seen higher despite Wall Street sell-off, crude at $80
Wall Street weakened and the oil price fell back towards $80 a barrel last night after recession warnings grew louder in the US.
JP Morgan Chase chief executive Jamie Dimon said persistently high inflation is likely to mean the world’s largest economy will be in recession next year.
The selling pressure also reflected fears that interest rates will have to continue rising well into the new year.
The S&P 500 fell 1.4% yesterday and has now unwound the rally seen after last week’s speech by Federal Reserve chair Jerome Powell signalled a slackening in the pace of tightening after four successive 0.75% hikes.
The weaker demand outlook yesterday caused the Brent crude price to fall 4% to below $80 a barrel, the lowest level since January and up just over 2% in the year to date.
The FTSE 100 index fell 0.6% yesterday but is forecast by CMC Markets to open 43 points higher at 7564 this morning, despite more evidence of weakness in China’s economy after today’s publication of disappointing trade figures.
US stocks open higher on robust consumer spending
Stocks opened higher in the opening minutes of trading on Wall Street as investors welcomed news of robust consumer spending in October, as well as signs of a drop in the rate of inflation.
The S&P 500 index rose 0.2% to 4,087, while the Nasdaq rose 0.1% to 11,475.
Streaming service Netflix led the games, up 8.85% as the firm’s turnaround plan to attract new customers with cheaper tiers of membership appeared to please investors.
Next to buy collapsed retailer Joules
Collapsed country fashion brand Joules has been bought up by retail rival Next, administrators have said, in a deal that will see 133 of its staff being laid off.
The retailer has acquired around 100 Joules stores, with approximately 1,450 employees across these stores and head office transferring as part of the transaction.
Under the terms of the deal, Joules’ head office in Leicestershire has also been acquired while 19 stores will be closed immediately.
Will Wright, head of Restructuring at Interpath Advisory and joint administrator, said: “Following a highly competitive process, we are pleased to have concluded this transaction which secures the future of this great British brand, as well as safeguarding a significant number of jobs.
“To have achieved this in such a short timetable is testament to the support we’ve received from employees, suppliers and other key stakeholders throughout the administration process, so we’d like to express our profound thanks to everyone involved.”
City comment: employers need to think about both class and race when recruiting
Naomi Kellman, founder of the Target Oxbridge programme, offers her comments on diversity in recruitment amongst City employers:
“Working class people face invisible barriers to progress in the Square Mile, according to the City of London Corporation, which reported this week that banks and other City firms need to do more to nurture those who don’t have posh accents or privileged parentage.
“No sensible person would argue against this. Even so, the adage that ‘it’s all about class, not race’ has become a little too popular lately in public discussions about social mobility. The truth is that it’s not an either/or – as I know, having spent ten years helping Black students, many of them also from lower-income households, get into Oxford and Cambridge, and then to City firms.
“The consistent message from speaking to these students is clear – both class and race affect their ability to access top universities and the most desirable jobs.”
That’s a wrap: film firm snapped up by rival
London-based film services and equipment company Location One is being snapped up by a rival firm, Facilities by ADF, in a deal worth almost £9 million.
The company was founded in 2008 in the garage of its managing director, former location manager Crispin Hardy, with just “ two bowsers, some tables and chairs and battery lights.”
Barking-based Location One now has 80 staff and has gone on to work on a string of blockbusters, from The Crown, above, on Netflix to the BBC’s Peaky Blinders as well as My Lady Jane and The Gentleman. It has grown into the UK’s biggest integrated TV and film location services firms.
ADF says the deal will take it towards being a one-stop shop for the UK’s fast-growing high-end TV and film industry. The country is now Netflix’s third-biggest filming venue after the US and Canada.
Rates outlook lifts tech stocks, buy note boosts Deliveroo
Deliveroo shares were boosted today after a City firm backed the online food delivery sector to weather the cost of living crisis.
The note by Jefferies said current valuations for Deliveroo and other players including Just Eat Takeaway.com mis-priced the potential of their “sustainable” earnings streams.
Jefferies added: “Deliveroo remains the most under-appreciated equity in the sector. It has consistently led on big sector themes and strategy, all of which is now observable in its leadership on growth.”
Deliveroo listed at 390p in March 2021 but languished at 73p in October due to fears over rising costs and expectations for a big fall in takeaway demand.
The shares today rallied by 5% or 4.3p to 91.5p after Jefferies highlighted a potential 80% upside to 155p. Just Eat also improved 2% or 39.2p to 1903.4p.
Their performances were aided by renewed market hopes that the worst of the recent run of interest rate rises are out the way.
Wall Street surged last night as Federal Reserve chair Jerome Powell signalled a slackening in the pace of tightening after four successive hikes of 0.75%.
The FTSE 100 index followed November’s 7% rise by adding another 14.98 points to 7588.03, consolidating its position at the highest level since June.
It was outgunned by the FTSE 250 index, however, as the UK-focused benchmark benefited from a stronger pound to lift 0.7% or 126.58 points to 19,289.91.
Other technology-focused stocks to benefit from the rate rise outlook included Ocado, which jumped 6% or 37.4p to 660p in the FTSE 100. ASOS and Cazoo investor Molten Ventures rose 34p to 665.5p and 16.4p to 406.4p respectively in the FTSE 250.
Auction Technology Group bucked the trend, however, as its shares fell 123p to 734p despite reporting annual profits in line with previous guidance.
City Comment: Stock trading is not like Call of Duty
Two snapshots of how the financial services sector is doing today – and two very different outlooks.
City broker Peel Hunt reports profits down 99% (ninety-nine per cent, the vidiprinter doing the football scores might have felt the need to clarify).
That’s a function of nerves in the Square Mile and among corporate clients. No one wants to float or do risky deals in the teeth of a recession.
Over at AJ Bell, a brilliant business which punts shares to retail investors, things are going swimmingly. New customers are pouring in. Revenues and profits are up smartly. Growth seems easy to come by.
The risk here must be that the City broker is ahead of the game. Retail investors are blithely carrying on, unaware of the turmoil that has left many professionals running scared.
When the retail market plays catch-up with the City, there shall be brunt fingers for tea.
Into this noise marches the Financial Conduct Authority, which is seriously worried about the “gamification” of share trading.
A new breed of apps – not AJ Bell, let’s be clear – are offering incentives to trade as if they were the Tesco Clubcard.
There are points and celebratory messages for making a trade, something that encourages the armchair punter to treat the stock market as if it were Call of Duty.
During lockdown a “meme-stock” trading frenzy encouraged some small investors into the delusion that they could bet against, and beat, giant US hedge funds.
The delusion will be corrected, one way or the other.
FTSE 250 up 0.9%, ASOS shares surge 5%
The FTSE 100 index is 6.35 points higher at 7579.40, keeping London’s top flight at its highest level since June. Big risers included Ocado, which lifted 6% or 39.6p to 662.2p, and insurer Prudential after a gain of 3%.
Some of the stocks behind this week’s strong performance gave up some of their gains, including Rolls-Royce as the engines giant weakened 1.4p to 89.5p. Oil giants BP and Shell were also down by around 1.5%.
The FTSE 250 index, which has lagged the performance of blue-chip stocks so far this year, added 0.9% on the back of a stronger session for the pound.
The UK-focused benchmark rose 173.33 points to 19,336.66, led by private equity firm Bridgepoint after its shares rallied 6% or 12.7p to 209.2p. Fash fashion business ASOS also improved 5% or 37p to 668.5p and publisher Future gained 75p to 1480p in the wake of yesterday’s annual results.
Hotel Chocolat sinks into the red over botched Japan expansion
Hotel Chocolat posted a full-year loss of £9.4 million this morning after its botched Japan expansion plan led to tens of millions of pounds being written off.
The Hertfordshire-based confectioner was forced to write off almost £30 million after its Japanese business went through insolvency.
Hotel Chocolat boss Angus Thirlwell told the Standard: “We thought we should take that on the chin and write the cost off and change the way we approach international opportunities and contain the capital spend and work with partners rather than try to do it ourselves.
“Nobody gets international right the first time straight out of the blocks – it’s very much a case of adapting and taking the learnings and making your work smarter as you go on.”
Hotel Chocolat shares rose 1%.
Inflation hopes fuel strong month for markets
November was a very strong month for markets, with the FTSE 100 up by around 7% to its highest level since June.
Deutsche Bank reported progress for 35 of the 38 non-currency assets in its coverage, the highest number so far in 2022 and a change from the mood for much of this year.
The bank’s strategists said the positive momentum was propelled by a number of factors, including signs that inflation is beginning to ease across key economies.
There was also further encouragement that China is inching away from its zero Covid strategy, leading to a massive outperformance from Chinese assets.
One asset that struggled was the US dollar, with the unwinding risk premium meaning it experienced its worst month in over a decade.
House prices down 1.4% in mini-Budget fallout
Building society Nationwide today reported the biggest monthly drop in house prices since June 2020.
The month-on-month fall of 1.4% follows a decline of 0.9% in October and reduces the annual rate of growth to 4.4% from 7.2% the previous month. The average price stood at £263,788.
Robert Gardner, Nationwide’s chief economist, said the fallout from the mini-Budget continues to impact the market.
He said: ““While financial market conditions have stabilised, interest rates for new mortgages remain elevated and the market has lost a significant degree of momentum.
“Housing affordability for potential buyers and home movers has become much more stretched at a time when household finances are already under pressure from high inflation.”
FTSE 100 Live 01 September: Stock market performance on back foot, Nationwide house price growth continues
London house prices set to rise another £27,000 this year despite economic headwinds
London house prices are set to rise by another £27,000 before the end of the year as cost of living pressures and soaring interest rates are doing little to quell strong demand for homes in the capital.
Kensington and Chelsea will see the biggest jump in property value of any London borough with an average £68,103 rise, according to data from estate agent Benham and Reeves, followed by Westminster with a £47,222 rise.
The City of London will see a £41,519 jump in average property values, while prices in Camden will grow by £41,493. The average UK house price is set to rise 5%.
Benham and Reeves director Marc von Grundherr said: “We keep waiting for house prices to plateau, but it’s just not happening.
Park Plaza says business customers are returning but warns of energy price storm cloud
The finance boss of Park Plaza Hotels has hailed the return of the London business trip but warned of “dark clouds” ahead as the firm braces for surging energy prices and a looming recession.
The company posted a loss of £26 million in the first half of 2022 as Covid restrictions in Europe stifled international travel in the first quarter.
Park Plaza CFO Daniel Kos said: “We’re still gradually improving…in the second quarter we were at around 90% of pre-covid levels [while] July and August exceeded 2019 revenues.
“If we look at our current trading everything looks healthy and solid but we all realise there are some dark clouds in the sky coming at us.”
The company, which owns the Park Plaza Westminster Bridge hotel, is continuing with expansion plans, with work underway to open a Hoxton location in 2024.
FTSE 100 slides 1.6%, Rio Tinto down 3%
The pummelling for London stocks continued today as fears over the deteriorating economic outlook pushed the FTSE 100 index to a six-week low.
Commodities trading giant Glencore was the worst hit, sliding 7% or 32.6p to 440.7p after the price of copper and other key metals came under more pressure.
The FTSE 100 index surrendered another 1.6% or 120.67 points to 7163.48, having been above 7500 prior to Friday’s speech by Federal Reserve chair Jerome Powell backing a “restrictive policy stance” for some time.
His message on interest rates contributed to sterling’s worst month against the safe haven US dollar since October 2016, following a fall of 4.5% in August.
The pound traded just below $1.16 today amid more weak signals from the UK economy, including a report showing a big contraction in manufacturing activity last month. Capital Economics said yesterday it expected sterling to set a record low of $1.05.
In addition to interest rate fears, traders are increasingly worried by the demand impact of the latest Covid restrictions in key Chinese cities. This led shares in Asia-focused luxury goods group Burberry down by 47.5p to 1700.5p.
Other big fallers included car insurer Admiral, which shed 118p to 2004p and Rolls-Royce after losing 2.5p to 74.5p.
Mining giant Rio Tinto lost 3% or 165.5p to 4605.5p after securing a deal worth an improved $3.3 billion (£2.85 billion) for the minority interests of Turquoise Hill, a move giving it control of the giant Oyu Tolgoi copper-gold project in Mongolia.
The FTSE 250 index fell 1.7% or 320.5p to 18,743.25, with Royal Mail down 5% and recruitment firm Page off 8%.
City Comment: The Bank of England needs to go for it
THE letter to the FT is blunt. The banking crisis needed a £150 billion intervention from the Bank of England. The Covid pandemic about the same.
And the present energy crisis? A cool £200 billion, magicked out of thin air via quantitative easing, money-printing if you prefer, though the actual process is electronic.
Learned professors David Blanchflower, Lord Sikka and Richard Murphy aren’t long on optimism. A sample: “millions of jobs will be lost”, “mortgage repossessions will increase”, “the likelihood of recession on a scale not seen since the 1930s is very high”.
Are you cheered up yet? The Profs point is that none of these disasters have to happen. The Bank just needs to go big, because it is the only entity that can really save us all from catastrophe.
Since it seems a matter of near inevitability that the next Prime Minister will have to tell the Bank to take radical action, it’s not clear what the point is in waiting.
Let’s assume we won’t actually allow the poor and the old to freeze to death this winter. That when it comes to it, we will find, or invent, the money to cover fuel bills, making vague talk from politicians about cuts to income tax or VAT look rather twee.
The objections to the Bank spaffing money about will be that it could fuel inflation and that well, it sounds like a lot.
But inflation is driven by global forces that there isn’t a lot the Bank can do about it.
And not spending money now to avert disaster later won’t be cheaper in the end.
FTSE 100 down 1%, Reckitt Benckiser falls 6%
The FTSE 100 index is at a six-week low of 7210 after London’s top flight fel by another 1% or 73.39 points.
Heavily-sold stocks included mining giant Glencore and Rolls-Royce with declines of 5%, while car insurer Admiral dropped 4% and luxury goods group Burberry by 3%.
As well as fears over the impact of sharply higher interest rates on the economic outlook, sentiment has weakened on the back of fresh Covid restrictions in China.
Reckitt Benckiser shares fell 6% or 378p to 6270p as the consumer goods group announced that chief executive Laxman Narasimhan is leaving at the end of the month.
The FTSE 250 index fell 1% or 197.87 points to 18,865,88, with big fallers including Watches of Switzerland and recruitment firm PageGroup after declines of 5% and 8% respectively.
Annual house price growth slows to 10%
House prices lifted by 0.8% month-on-month in August, Nationwide said today as it reported a softening in annual growth to 10% from 11% in July. The average price stood at £273,751, which represents a near £50,000 increase over two years.
A shortage of housing stock has meant that price growth has remained firm, despite the impact of inflation and higher borrowing costs.
Nationwide chief economist Robert Gardner added: ““There are signs that the housing market is losing some momentum, with surveyors reporting fewer new buyer enquiries in recent months and the number of mortgage approvals for house purchases falling below pre-pandemic levels.”
He expects the market to slow further as pressure on household budgets intensifies in the coming quarters.
FTSE 100 weakens, pound below $1.16
The new month is continuing where the last one left off, with CMC Markets forecasting the FTSE 100 index will decline 40 points to 7,244.
London’s top flight fell by 1.9% during August, but the damage caused by the deteriorating economic outlook was greater for the FTSE 250 index after a decline of 5.5%.
Stock market sentiment has weakened since last Friday’s Jackson Hole speech by Federal Reserve chair Jerome Powell, in which he highlighted the need for a “restrictive policy stance” through higher interest rates for some time.
US stock markets have since fallen for four sessions in a row, with the Dow Jones Industrial Average down by another 0.9% last night.
Demand fears caused by the economic outlook and the latest Covid restrictions in China have left Brent crude at $95 a barrel, compared with $105 on Monday.
And the flight to the safe haven dollar has continued, with the pound now below $1.16 despite the prospect of another big interest rate rise by the Bank of England this month. Capital Economics warned yesterday sterling is heading for a record low of $1.05.
City braces for summer jobs cull
Bankers are bracing themselves for a summer jobs cull as business dries up and financial firms cut back after over-hiring in a race for talent in the last two years.
The market for new stock flotations, buoyant last year, has almost entirely dried up.
Fund managers are suffering massive outflows of cash as people pull money out of the market. Brokers say they can’t even get finance for the most promising new tech firm floats.
While there has been no big job cuts announcements in the City so far, insiders say there is a drip-drip of redundancies and fears of thousands more to follow unless there is a turnaround in markets.
Berenberg has already cut jobs in London and New York. Credit Suisse, Numis, RBC Capital are among those said by City insider to be at least pondering laying people off.
Numis had no comment. Morgan Stanley has insisted it will “keep hiring good people”, taken as code for job cuts in the City.
FTSE 100 ends half year sharply lower
Today’s performance by European stock markets is in keeping with the first half of the year after the FTSE 100 index tumbled 1.8% or 131 points to 7180. Benchmarks in Paris and Frankfurt dropped by more than 2%.
Richard Hunter, head of markets at Interactive Investor, said the absence of any immediate positive catalysts and the circumspect outlook comments from central bankers in Portugal yesterday contributed to the selling pressure.
He said: “The losses are broad-based, with particular weakness feeding through to the retailers and the miners, while the housebuilders are under further pressure given the challenges facing the UK economy.”
The FTSE 100 index is down by more than 2.5% at the end of the half year, but this compares favourably with markets elsewhere. The Nasdaq is off by almost 29% in the year to date, while the S&P 500 is heading for its worst first half performance since 1970.
Nationwide reports slower house price growth
The price of a typical UK home climbed to a new record high of £271,613 in June, with Nationwide reporting that the average prices increased by over £26,000 in the past year.
There are tentative signs of a slowdown, however, with the number of mortgages approved for house purchases falling back towards pre-pandemic levels and surveyors reporting some softening in new buyer enquiries. Average prices rose by 0.3% month-on-month in June, compared with 0.9% in May, and annual growth reduced from 11.2% to 10.7%.
Overall, Nationwide chief economist Robert Gardner said the housing market has retained a surprising amount of momentum given the mounting pressure on household budgets from high inflation.
He said: “Part of the resilience is likely to reflect the current strength of the labour market, where the number of job vacancies has exceeded the number of unemployed people in recent months.
“Furthermore, the unemployment rate remains close to 50-year lows. At the same time, the stock of homes on the market has remained low, which has helped to keep upward pressure on house prices.”
Downward move for markets, Bitcoin below $20,000
A turbulent first half of the year is ending with European stock markets under pressure, as IG Index predicts the FTSE 100 index will open 61 points lower.
The downward trend follows a lacklustre session in New York, where the S&P 500 index is heading for its worst first half of the year since 1970.
The benchmark was slightly lower last night after a gathering of central bank leaders, including Federal Reserve chair Jerome Powell and Bank of England governor Andrew Bailey, failed to provide fresh guidance about the pace of future interest rate rises.
Oil prices were also little changed this morning as the latest meeting of Opec ministers looks set to conclude with little prospect of an increase in production quotas to ease price pressure. Brent crude is up by about 50% so far this year at $116 a barrel.
As interest rates and recession fears rise, the downward move for cryptocurrencies has continued with Bitcoin today trading below $20,000.
WIZZ Air today predicted it was on track for a record summer, even as it fought pilot shortages, spiralling fuel costs, travel chaos at airlines and warned that customers face price rises of at least 10%.
The Ryanair rival, which flies to cities across Europe as well as North Africa and the Middle East, made losses for the year to March of e642 million (£550 million).
That follows an e576 million loss for the previous year – part of a wider picture of many billions lost by the airline sector due to Covid.
Wizz Air carried more than 27 million passengers in the year, up from 10 million last time, as travel opened up. It plans to go for it this summer.
CEO Jozsef Varadi said: “We stand ready to deliver our largest ever summer flying programme and the fastest growth in the industry, enabled by more than 6,000 colleagues across the business.”
Banks under pressure, Melrose surges 7%
GKN owner Melrose Industries leads the FTSE 100 index after it announced plans to return £500 million through share buybacks.
The aerospace-to-automotive engineering conglomerate surged 7% in a session when the FTSE 100 index stuck close to its opening mark at 759. Next and JD Sports Fashion also featured on the risers board, putting back their losses from the previous session.
Banking stocks fell after the Credit Suisse profits warning, with HSBC and Standard Chartered down 2% and 1% respectively.
In the FTSE 250 index, defence countermeasures business Chemring dropped 7% and Wizz Air eased 2% following their respective interim and full-year results. Frasers Group and Marks & Spencer rose 2% as the FTSE 250 overall held firm at 20,398.
Wizz Air encouraged by booking trends
Wizz Air today reported a full-year loss of 642.5 million euros (£546.7 million) and said it expects to be in the red for the current quarter.
However, the low-cost operator is encouraged by recent booking trends.
It said: “Summer demand indicators remain excellent at this point, supported by strong consumer dynamics: an urge to travel, improved household savings ratios in key markets, near-full employment and wage inflation.”
Capacity growth for the first two quarters of the financial year is expected to top 30% and 40% respectively, enabled by a fleet of 182 aircraft.
Chief executive József Váradi added: “The industry is witnessing supply chain issues across airports, including in our network.
“Shortages of staff in air traffic control, security and other parts of the supply chain are impacting airlines, our employees and our customers directly. We are deploying extra resources to minimise disruptions and urge all other stakeholders to do the same.”
Credit Suisse warns of Q2 loss
Credit Suisse has warned of a second quarter loss due to the impact of challenging trading conditions on its investment bank operation.
It said a combination of factors including the Ukraine war, rising interest rates and the unwinding of Covid stimulus measures had created heightened market volatility, weak customer flows and client deleveraging, notably in the Asia Pacific region.
The Swiss bank said low levels of capital markets issuance and a widening in credit spreads had also depressed the investment banking performance in April and May, leading to a loss for the division and for the wider group in the second quarter.
It added: “As we look forward to the second half, the year 2022 will remain one of transition for Credit Suisse.
“Given the economic and market environment, we are accelerating our cost initiatives across the group with the aim of maximising savings from 2023 onwards.”
Asia markets rally, FTSE 100 steady
Asia’s main markets have moved higher after Wall Street recovered from a weak start to record a second positive session in a row.
Hong Kong’s Hang Seng index reached a two-month high by lifting 1.5% and the Nikkei is at a 10 week peak following better-than-expected figures from Japan’s economy.
US markets rallied after Europe’s close, with the Dow Jones Industrial Average, S&P 500 and Nasdaq all finishing the session up by almost 1%.
Wall Street’s improvement came despite retailer Target cutting guidance as it warned that this quarter’s operating margin will be around 2% amid the need for price cuts to reduce inventory.
The calm reaction to the warning reflects the focus on Friday’s US inflation reading, which if higher than the 8.3% forecast may stoke interest rate expectation later this year.
Michael Hewson, chief markets analyst at CMC Markets, said traders continue to sway between recession fears and hopes of a soft landing for the US economy.
He added: “While we’ve seen a modest rebound in equity markets, there remains a significant overhang of uncertainty as to how much further this rebound has to go.”
CMC expects the FTSE 100 index to open 20 points higher at 7,618, having posted a moderate decline yesterday.