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London open: Stocks fall amid corporate deluge; Virgin Money surges on takeover
London stocks fell in early trade on Thursday as investors waded through a deluge of corporate news and continued to digest the Spring Budget, but Virgin Money surged on takeover news.
At 0830 GMT, the FTSE 100 was down 0.4% at 7,652.27.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “The dust is already settling on a UK Budget which offered a sweet rush of optimism for consumer-focused stocks, and now some of that positivity is ebbing away with the FTSE 250 dipping in early trade before making up ground.
“Reality appears to be sinking in that although the cuts to National Insurance may fire up some discretionary spending power the fiscal drag of freezing income tax thresholds will counter the effect.”
Figures released earlier by Halifax showed that house prices rose for the fifth month in a row in February.
Prices were up 0.4% on the month following a 1.2% jump in January. This marked the smallest month-on-month rise in house prices since September.
On the year, house prices rose 1.7% in February, easing from a 2.3% gain a month earlier.
The average cost of a home now stands at £291,699, versus £290,608 in January.
Kim Kinnaird, director of Halifax Mortgages, said the figures continue to suggest a relatively stable start to 2024 and align with other promising signs of increased housing activity, such as mortgage approvals.
“In fact, the average price tag of a home is now only around £1,800 off the peak seen in June 2022,” she said. “While it is encouraging that we’ve seen growth in recent months, what happens next remains uncertain.
“Although lower mortgage rates, alongside expectations of Bank of England interest rate cuts this year, should help buyer confidence in the short term, the downward trend on rates is showing signs of fading.
“Even with growing wages and inflation falling back, raising a deposit and affording a sizeable mortgage remains challenging, especially for those looking to join the property ladder, so it remains a possibility that there could be a slowdown in the housing market this year.”
In equity markets, HSBC was the biggest loser on the FTSE 100 as it traded without entitlement to the dividend.
Melrose lost ground despite lifting its profit outlook for this year and posting a jump in 2023 profit.
Ladbrokes owner Entain slumped as it said full-year results were in line with expectations, with underlying earnings hitting the £1bn mark and record-high online customers, but warned of the significant impact from regulatory changes which will dampen profits in 2024.
North Sea oil and gas producer Harbour Energy was weaker as it held production guidance for 2024 and reported a sharp fall in annual profits on the back of lower output and weaker prices.
Door and window parts maker Tyman fell after saying it expects a “challenging” market outlook this year as the building sector continued to struggle amid high interest rates and inflation, reflected in a 19% fall in 2023 profits.
On the upside, Rentokil rallied as the pest control firm reported a rise in full-year profit and revenue as it benefited from the acquisition of Terminix in the US.
Spirax-Sarco advanced after saying it was well-positioned to return to growth in 2024.
Aviva gained as the insurance giant unveiled a £300m share buyback and better-than-expected 9% rise in full-year earnings on a strong increase in general insurance premiums.
Virgin Money rocketed after agreeing to be taken over by Nationwide Building Society in a £2.9bn deal. Virgin shareholders will receive 220p per share, which is a 38% premium to the closing share price on Wednesday.
Broadcaster ITV gained even as it reported a 41% fall in annual profits as weak ad revenues offset a record performance from its studios unit. Pre-tax profit for the year to December 31 came in at £396m from £672m a year earlier.
Beazley and Darktrace also rose after results.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Rentokil Initial Plc | +12.74% | +54.60 | 483.10 |
| 2 |  |
Spirax-sarco Engineering Plc | +7.35% | +755.00 | 11,025.00 |
| 3 |  |
Itv Plc | +4.69% | +2.86 | 63.82 |
| 4 |  |
Aviva Plc | +4.55% | +20.70 | 475.60 |
| 5 |  |
Gsk Plc | +2.00% | +33.40 | 1,706.60 |
| 6 |  |
Anglo American Plc | +1.82% | +32.20 | 1,799.60 |
| 7 |  |
Fresnillo Plc | +1.59% | +7.60 | 486.90 |
| 8 |  |
Ocado Group Plc | +1.53% | +6.70 | 444.60 |
| 9 |  |
Antofagasta Plc | +1.32% | +23.00 | 1,764.50 |
| 10 |  |
Tui Ag | +1.32% | +7.50 | 576.50 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Hsbc Holdings Plc | -4.30% | -26.30 | 585.70 |
| 2 |  |
Melrose Industries Plc | -3.92% | -24.80 | 607.20 |
| 3 |  |
Rio Tinto Plc | -2.96% | -150.00 | 4,925.00 |
| 4 |  |
Burberry Group Plc | -2.60% | -33.00 | 1,236.00 |
| 5 |  |
Marks And Spencer Group Plc | -1.79% | -4.30 | 236.50 |
| 6 |  |
Standard Chartered Plc | -1.68% | -11.40 | 666.20 |
| 7 |  |
Ashtead Group Plc | -1.62% | -84.00 | 5,098.00 |
| 8 |  |
Flutter Entertainment Plc | -1.57% | -270.00 | 16,885.00 |
| 9 |  |
Next Plc | -1.52% | -128.00 | 8,288.00 |
| 10 |  |
Bhp Group Limited | -1.35% | -31.00 | 2,270.00 |
US close: Stocks firmer as Powell signals rate cuts this year
Wall Street staged a recovery Wednesday, with US stocks finishing higher after recent declines.
Investor attention was focussed on labour market data and statements from the Federal Reserve chair.
The Dow Jones Industrial Average gained 0.2% to reach 38,661.05 points, while the S&P 500 index rose by 0.51% to close at 5,104.76 points and the Nasdaq Composite saw an uptick of 0.58% to settle at 16,031.54 points.
In currency markets, the dollar was last down 0.24% on sterling to trade at 78.52p, while it declined 0.36% against the euro to 91.78 euro cents.
The greenback also dropped on the yen, sliding 0.43% to last change hands at JPY 149.40.
“Equities have dusted themselves down after yesterday’s sudden drop, relieved that Powell’s testimony to US lawmakers has so far not revealed any unpleasant surprises,” said IG chief market analyst Chris Beauchamp earlier.
“‘Need more evidence’ is the Fed’s latest mantra, as it seeks to avoid cutting too early, but it seems stock markets are content with this.
“Should inflation start to pick up more sustainably, and Fed officials talk up rate hikes again, however, and the mood could shift dramatically.”
Fed chair confirms goals for rate cuts this year
In economic news, the chairman of the Federal Reserve reiterated his belief to Congress that interest rates were likely to see a downward trajectory this year, although the precise timing of the first rate cut remained uncertain.
In his semi-annual testimony before the House of Representatives, Jerome Powell emphasised the importance of achieving the Fed’s 2.0% inflation target before implementing any rate adjustments.
Powell also cautioned against delaying policy changes, warning that doing so could potentially weaken economic activity and employment.
Analysts noted that Powell’s remarks provided little new insight beyond reiterating previous statements, with Ian Shepherdson, chief economist at Pantheon Macroeconomics, characterising much of the testimony as standard boilerplate language.
In response to questions from journalists, Powell said policymakers were not waiting for perfect data but rather for further positive indicators before making significant policy shifts.
Elsewhere, fresh data from the Department of Labor showed minimal changes in the U.S. job market at the beginning of the year.
Job openings saw a slight dip of 0.3% month-on-month to 8.863 million, with hiring also falling by 1.7% to 5.687 million.
Notably, the number of voluntary separations, or ‘quits,’ decreased by 1.6%, indicating potential fluctuations in Americans’ confidence in the job market.
“The January Job Openings and Labor Turnover summary report is consistent with a labour market that is still quite strong, with job openings falling slightly and layoffs remaining low,” said Nancy Vanden Houten, lead US economist at Oxford Economics.
“The ratio of job openings to unemployed workers increased, pointing to stubborn excess demand for labour.
“A small decline in the quits rate points to a continued easing of wage pressures, which will be welcomed by the Federal Reserve.”
Across the Atlantic, the UK Chancellor announced fresh tax reforms in what was likely his final Budget before the next general election.
Chancellor Jeremy Hunt unveiled plans to cut National Insurance and overhaul the tax regime for non-domiciled residents.
The move to abolish non-dom tax status, a long-standing Labour policy, aligned with Hunt’s goal of simplifying the tax system, while the reduction in National Insurance was set to save the average employee an additional £450 per year from April.
However, tax thresholds remained unchanged despite concerns over inflation.
Hunt also outlined changes to the non-dom tax regime, transitioning to a residency-based system by 2025 to ensure fairness in taxation.
Additional measures included extending the freeze on fuel and alcohol duty, reducing the higher rate of capital gains tax on residential property, and extending the child benefit salary threshold.
Foot Locker tumbles, NYCB rises on fresh investment
In equity markets, Foot Locker tumbled 29.35% after exceeding expectations in its fourth-quarter 2023 results, but deciding to lower its profit outlook for the 2024 financial year.
Although the athletic retailer managed to increase total sales by 2% in the final quarter of last year, comparable sales faced a slight 0.7% decline attributed to changes in brand mix and consumer softness.
Additionally, increased markdowns to reduce inventory resulted in a decrease in gross margins, leading to a decline in adjusted earnings per share.
On the upside, Crowdstrike Holdings increased 10.76% after surpassing expectations by outperforming both the top and bottom line with its quarterly earnings.
Similarly, New York Community Bancorp climbed 7.45% after announcing a successful equity investment of over $1bn, anchored by former Treasury secretary Steven Mnuchin’s Liberty Strategic Capital investment firm.
Under the terms of the deal, NYCB offered shares at $2, a 38% discount to Tuesday’s closing price.
Additionally, investors were offered convertible preferred stock with a conversion price of $2 and 60% warrant coverage to purchase non-voting, common-equivalent stock with an exercise price of $2.50.
Thursday newspaper round-up: Green power industry, Boots, M&S
Britain’s under-pressure green power industry has received a surprise fillip after a renewables developer pledged to plough £10bn into what would become the largest portfolio of battery storage projects in the country. NatPower, a UK startup that is part of a larger European energy group, is poised to submit planning applications for three “gigaparks”, with a further 10 to follow next year. – Guardian
Boots has ordered thousands of staff to return to the office five days a week as bosses prepare the retailer for a potential stock market float. Seb James, Boots’ UK managing director, sent letters to employees earlier this week informing them of the home-working crackdown, as he vowed to make the business “more effective”. Head office workers in London, Nottingham and Weybridge will be affected by the change, marking a reversal of Boots’ previous policy that encouraged staff to attend the office three days a week. – Telegraph
Middle-class earners will still be paying more tax despite Jeremy Hunt’s £10bn National Insurance (NI) cuts, the Institute for Fiscal Studies has said. Anyone earning more than £60,000 faces a bigger tax bill this year because the Chancellor’s stealth income tax raid will cost them more than they will gain from reductions to other taxes on income. – Telegraph
Katie Bickerstaffe, the joint chief executive of Marks and Spencer, is set to leave the company later this year after only two years in the job. Her departure will leave the high street retailer under the sole leadership of Stuart Machin, who has been driving a turnaround of the struggling clothing and home business. – The Times
Carlyle, the giant US private equity firm, is to take control of Southend airport and plans to turn the Essex terminal and runway into a sixth airport for London. After a tetchy few months of negotiations and rows, Esken, the listed company which owns Southend, has finally thrown in the towel and Carlyle will now take 82.5 per cent control of the airport. – The Times
