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London open: Stocks edge up but gains muted amid Middle East tensions
London stocks rose in early trade on Wednesday on the 40th anniversary of the launch of the FTSE 100 index, but gains were muted amid escalating tensions in the Middle East and ahead of the latest Fed minutes.
At 0900 GMT, the top-flight index was up 0.2% at 7,732.89.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Caution has returned, as investors have begun to re-assess the prospects for interest rates and just how resilient economies will be over the months to come.
“There is also fresh nervousness about the prospects for conflict in the Middle East to escalate after a drone strike killed Hamas deputy leader Saleh al-Arouni in Lebanon. Israel is bracing for retaliatory action from Hezbollah, another twist in an already highly complex and tragic situation in the Middle East.”
Investors were also looking ahead to the release of the latest minutes from the US Federal Reserve, due after the close of markets.
Richard Hunter, head of markets at Interactive Investor, said: “As ever, the minutes will be closely scrutinised for any changes in Fed rhetoric, with particular regard to its current stance on the likelihood of rate cuts.
“Currently, the consensus is overwhelming that the Fed will keep rates unchanged this month, with the majority expecting the first cut to be announced in March.”
In equity markets, Entain was the standout gainer on the FTSE 100 as it announced the appointment of Eminence Capital founder Ricky Sandler as a non-executive.
GSK was also in the black after an upgrade to ‘buy’ at Jefferies.
Supermarket retailers Sainsbury’s and Tesco advanced after the latest data from Kantar showed that retailers enjoyed their busiest Christmas since 2019.
Luxury fashion brand Burberry was knocked lower by a downgrade to ‘hold’ from ‘buy’ at Stifel.
Elsewhere, budget airline Ryanair fell as it reported a 9% jump in December passenger numbers but cautioned that the removal of its flights from online travel agents will dent short-term load factors and soften short-term yields.
The budget airline said traffic rose to 12.54 million from 11.52 in the same month a year earlier, while the load factor – which gauges how full the planes are – ticked down to 91% from 92%.
The airline also noted that early last month, OTAs such as Booking.com, Kiwi and Kayak suddenly removed its flights from sale on their websites. Ryanair said that while these OTAs only account for a small fraction of its bookings, it expects the removal to reduce short term load factors by 1% or 2% in December and January and also to soften short term yields as it responds by making more low fares available directly to consumers.
The airline does not expect the move to materially affect its FY24 traffic or profit after tax guidance, however.
Hungary-based budget airline Wizz Air was also in the red even as it reported a strong rise in December passenger numbers as demand continued to rebound from the Covid pandemic.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Unilever Plc | +2.30% | +88.00 | 3,912.50 |
| 2 |  |
Gsk Plc | +2.04% | +30.20 | 1,510.00 |
| 3 |  |
Sainsbury (j) Plc | +1.57% | +4.70 | 303.50 |
| 4 |  |
Tesco Plc | +1.33% | +3.90 | 297.00 |
| 5 |  |
Hiscox Ltd | +1.23% | +13.00 | 1,068.00 |
| 6 |  |
British American Tobacco Plc | +1.16% | +27.00 | 2,358.50 |
| 7 |  |
Vodafone Group Plc | +1.13% | +0.79 | 70.55 |
| 8 |  |
Marks And Spencer Group Plc | +0.94% | +2.60 | 278.60 |
| 9 |  |
Hikma Pharmaceuticals Plc | +0.87% | +15.50 | 1,802.00 |
| 10 |  |
Bae Systems Plc | +0.85% | +9.50 | 1,125.50 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Anglo American Plc | -3.29% | -64.80 | 1,903.40 |
| 2 |  |
Fresnillo Plc | -2.73% | -15.60 | 555.40 |
| 3 |  |
Carnival Plc | -2.68% | -34.00 | 1,232.50 |
| 4 |  |
Glencore Plc | -2.51% | -11.75 | 456.95 |
| 5 |  |
Rentokil Initial Plc | -2.43% | -10.50 | 422.00 |
| 6 |  |
Spirax-sarco Engineering Plc | -1.86% | -190.00 | 10,025.00 |
| 7 |  |
Burberry Group Plc | -1.86% | -26.00 | 1,374.00 |
| 8 |  |
Easyjet Plc | -1.79% | -9.00 | 494.60 |
| 9 |  |
Croda International Plc | -1.72% | -85.00 | 4,868.00 |
| 10 |  |
Antofagasta Plc | -1.57% | -26.00 | 1,625.50 |
US close: Tech and cruise stocks lead Wall Street lower
US stock markets finished mostly lower on Tuesday as investors took profits following the recent end-of-year rally, as cautious trading took over ahead of a busy week for economic data.
The Dow Jones Industrial Average finished 0.07% higher at another record high close of 37,715.04; however, the S&P 500 fell 0.57% and the Nasdaq dropped 1.63% on the back of heavy fall from Apple, the world’s largest company by market capitalisation.
News that an Iranian warship entered the Red Sea was dampening risk appetite, given that the channel handles around one eighth of global commerce, as nations continue to take action against Yemen’s Houthi rebels who have attacked ships bound for Israel.
Danish shipping giant Maersk on Tuesday joined a host of other transport companies to suspend all shipping through the Red Sea and Gulf of Aden until further notice after one of its vessels came under attack from Houthi militants over the weekend.
On the macro front, S&P Global’s US manufacturing PMI fell to 47.9 points in December, down from 49.40 in November and revised lower from a preliminary reading of 48.2. Output returned to a decline and the downturn in new orders gathered pace, selling prices increased at the quickest rate since April, and muted client demand led to a third successive monthly drop in employment. Business confidence, on the other hand, rose to a three-month high.
Elsewhere, US construction spending rose 0.4% in November to a seasonally adjusted annual rate of $2.05bn, according to the Census Bureau. This followed an upwardly revised 1.2% rise in October and fell short of consensus estimates for a reading of 0.6% growth.
Economic data schedule ramps up
With the Federal Reserve resolute in their commitment to watch incoming economic indicators before making any signal about future monetary policy, Wednesday’s Job Openings and Labor Turnover Survey (or JOLTS report) will be closely watched. It is expected to show job openings rising to 8.850m in November from 8.733m in October.
The data comes before Thursday’s ADP Employment Report and the all-important non-farm payrolls figure for December on Friday. Minutes of the latest Federal Open Market Committee meeting will also be released on Wednesday.
“While [Fed chair Jerome] Powell clearly alluded to the possibility of easing, Fed officials since the Dec FOMC meeting have pushed back on the idea of that happening imminently. In that vein, we expect this week’s minutes to show that the FOMC is not entertaining the case for rate cuts just yet,” said analysts at TD Securities.
Apple hit by downgrade
Apple shares were falling sharply on Tuesday after analysts at Barclays cut their rating on the stock from ‘equal weight’ to ‘underweight’. The bank said iPhone 15 sales had been “lacklustre” and that strong growth in emerging markets wasn’t enough to offset sales weakness in China and other developed regions. Barclays also predicted that the iPhone 16 launch would be equally underwhelming.
After a near-50% surge in the share price in 2023, the bank said: “We expect reversion after a year when most quarters were missed and the stock outperformed.”
The stock fell 3.6% to $185.64 by the close of play, along with tech heavyweights Intel, IBM and Microsoft which were also nursing heavy losses.
Cruise operators were also performing badly as investor sentiment soured after record gains in 2023, with Royal Caribbean, Norwegian Cruise Line Holdings and Carnival Corp all falling around 7-8%.
Tesla shares were lower on the news that Chinese rival BYD became the world’s biggest seller of electric vehicles in the fourth quarter of 2023. The automaker sold over 526,000 electric vehicles in the last three months of 2023, more than Tesla’s 485,000.
Oil giant Chevron edged higher despite announcing it would be taking writedowns of up to $4bn in the fourth quarter due to “continuing regulatory challenges” in California.
Wednesday newspaper round-up: Thames Water, BYD, BT Group
The amount of electricity generated by the UK’s gas and coal power plants fell by 20% last year, with consumption of fossil fuels at its lowest level since 1957. Not since Harold Macmillan was the UK prime minister and the Beatles’ John Lennon and Paul McCartney met for the first time has the UK used less coal and gas. – Guardian
One of the biggest investors in Thames Water has slashed the value of its stake in the debt-laden utility by almost two-thirds, weeks after the company admitted that it does not have enough money to make its debt repayments. A fund controlled by Thames Water’s second largest investor, the University Superannuation Scheme (USS), reported a loss of almost £600m last year after writing down the value of the embattled water company as it struggles to shore up its balance sheet. – Guardian
Marks & Spencer shares hit a five-year high as investors predict the high street stalwart will be crowned the best-performing retailer over the Christmas period. M&S was among the biggest risers on the FTSE 100 on Tuesday, with shares rising by as much as 2.5pc to push up the value of the company by more than £70m. Shares later closed the day 1.3pc higher. – Telegraph
Tesla has been overtaken as the world’s bestselling maker of electric cars by a Chinese rival that is backed by Warren Buffett, the renowned investor. The American carmaker run by Elon Musk said it had delivered 484,507 vehicles between October and December, about 11,000 or so more than industry analysts had predicted. – The Times
The prospect of a fine is looming over BT after the telecoms group missed a government deadline to remove equipment made by Huawei from its core network by the end of December. Britain’s biggest telecoms group said that all its 4G and 5G voice calls and data were now delivered by non-Huawei equipment, accounting for more than 99 per cent of traffic over the most sensitive part of its network. However, 2G and 3G services are yet to be migrated. – The Times
