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London open: Stocks nudge up ahead of US PCE
London stocks nudged up in early trade on Friday as investors mulled the latest UK house price and retail footfall data and eyed the release of US CPE figures.
At 0830 BST, the FTSE 100 was up 0.1% at 8,239.45.
Data released earlier by Nationwide showed that house prices returned to growth in May after two months of declines.
House prices were up 0.4% on the month following a drop of 0.4% in April and 0.2% in March. Economists had expected house prices to tick up 0.1% on the month.
On the year, prices rose 1.3% in May following a 0.6% jump in April and a 1.6% increase in March.
The average price of a home now stands at £264,249, up from £261,962.
Nationwide chief economist Robert Gardner said: “The market appears to be showing signs of resilience in the face of ongoing affordability pressures following the rise in longer term interest rates in recent months.”
Andrew Wishart, senior UK economist at Capital Economics, said that despite a small increase in the Nationwide house price index in May, the big picture is that the slight rise in mortgage rates since the start of the year has caused house prices to stagnate.
“Taking a step back, house prices have been flat for a year and a half, with the slight increase in May leaving them in line with their January 2023 level,” he said.
“In the near term, house prices will stagnate at best. Delayed expectations of Bank Rate cuts in recent weeks will maintain the upward pressure on mortgage rates, while the RICS survey suggests that the supply of homes on the market is increasing, consistent with modest house price falls over the next few months.
“But if we are right to think inflation will fall below target by year end and that Bank Rate will be cut to 3.00% next year, the resulting drop in mortgage rates should give prices renewed impetus next year. Following a 2% increase this year, we expect house prices to increase by 5% in 2025.”
Elsewhere, industry research showed that UK retail footfall eased in May despite the bank holiday weekends and improving weather.
According to the latest BRC-Sensormatic IQ footfall monitor, total footfall slipped 3.6% in May, although that was an improvement on April’s 7.2% slump.
All types of shopping destinations saw fewer visitors during the month. Footfall decreased by 2.7% on high streets, by 2.3% in retail parks and by 4.5% in shopping centres.
Helen Dickinson, chief executive of the British Retail Consortium, said: “Bank holidays and improving weather failed to entice customers to make in person trips to shopping destinations.
“Retailers will be hopeful that a warm summer, coupled with events such as European Championships and Olympics, will boost footfall.
“Political parties have a role to play too, by having policies that mean retailers can invest in rejuvenating shopping destinations. A broken business rates system and outdate planning laws are holding back the industry.”
Looking ahead to the rest of the day, attention will shift to UK mortgage approvals and consumer credit data at 0930 BST and the US PCE release for April at 1330 BST.
Axel Rudolph, senior market analyst at IG, said: “Friday’s US PCE inflation print should help the Fed in its monetary policy decision making, especially after Thursday’s Q1 GDP growth downward revision as corporate profits unexpectedly fall in Q1 while initial jobless claims rise slightly more than expected.”
In equity markets, British Gas owner Centrica was the standout gainer on the FTSE 100 after an upgrade to ‘outperform’ from ‘sector perform’ at RBC Capital Markets. National Grid also gained as Jefferies reiterated its ‘buy’ rating on the shares.
NatWest was just a touch firmer after the government sold a £1.24bn stake in the bank, as HM Treasury continues to reduce its shareholding in the state-backed lender.
JD Sports Fashion tumbled after it reported lower-than-expected annual profits as it continued to invest in its store estate. Profits before tax and adjusting items of £917.2m were down 7.5%, against forecasts of £920m. Organic sales were up 9%.
Associated British Foods was under the cosh after UBS said it had agreed to sell 10.3m shares in the Primark owner in a placing on behalf of its biggest shareholder, Howard Investments Limited.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Centrica Plc | +3.67% | +5.10 | 144.25 |
| 2 |  |
National Grid Plc | +2.40% | +20.20 | 863.20 |
| 3 |  |
Whitbread Plc | +2.34% | +68.00 | 2,977.00 |
| 4 |  |
Hiscox Ltd | +1.58% | +18.00 | 1,160.00 |
| 5 |  |
Gsk Plc | +1.53% | +26.50 | 1,756.50 |
| 6 |  |
Bhp Group Limited | +1.12% | +26.00 | 2,342.00 |
| 7 |  |
Hargreaves Lansdown Plc | +1.08% | +11.50 | 1,076.50 |
| 8 |  |
Sse Plc | +1.08% | +18.50 | 1,734.50 |
| 9 |  |
Smith (ds) Plc | +1.07% | +4.00 | 378.60 |
| 10 |  |
Rentokil Initial Plc | +0.85% | +3.50 | 413.10 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Flutter Entertainment Plc | -5.21% | -780.00 | 14,195.00 |
| 2 |  |
Associated British Foods Plc | -3.72% | -99.00 | 2,561.00 |
| 3 |  |
Ocado Group Plc | -2.03% | -7.80 | 375.70 |
| 4 |  |
Auto Trader Group Plc | -1.24% | -10.20 | 814.80 |
| 5 |  |
Spirax-sarco Engineering Plc | -1.05% | -95.00 | 8,955.00 |
| 6 |  |
Sainsbury (j) Plc | -0.93% | -2.60 | 276.40 |
| 7 |  |
St. James’s Place Plc | -0.79% | -4.00 | 502.00 |
| 8 |  |
Burberry Group Plc | -0.76% | -8.00 | 1,046.00 |
| 9 |  |
Tui Ag | -0.64% | -3.50 | 544.50 |
| 10 |  |
Marks And Spencer Group Plc | -0.59% | -1.80 | 302.10 |
US close: Dow falls for third straight day as investors await PCE data
US stocks finished firmly in the red on Thursday as indices continue to retreat from their recent record highs on the back of mixed economic data.
The Dow finished 0.9% lower at 38,111.48, having now fallen 2.5% in the past three days. The index is now 4.7% lower than its latest record closing high of 40,003.59 reached on 17 May.
Meanwhile, the S&P 500 declined 0.6% to 5,235.48 while the Nasdaq dropped 1.1% to 16,737.08, with both also continuing to pull back from all-time highs..
“Markets tend to move in waves and currently we’re in a repositioning phase where investors are coming to terms with the prospect of interest rates staying higher for longer,” said Dan Coatsworth, investment analyst at AJ Bell. “While that has knocked some of the wind out of the sails, it might only take one or two positive economic data points to perk up investor sentiment once again.”
Weighing on sentiment this week has been a two-day surge in the 10-year US Treasury yield on Tuesday and Wednesday to 4.62% – a level not seen since the end of April – as projections for interest-rate cuts by the Federal Reserve continue to be pushed back following hawkish comments from a number of policymakers. Yields eased somewhat on Thursday, with the rate on the 10-year bond falling back down to 4.55%.
There was a flurry of economic indicators released on Thursday, as investors await the Federal Reserve’s preferred gauge of inflation on Friday. The price deflator for personal consumption expenditures, or PCE, is predicted to have held steady at 2.8% in April.
Economic data paints mixed picture
Back to Thursday’s schedule, according to the Department of Labor, the seasonally adjusted number of initial unemployment claims over the week ended 24 May increased by 3,000 to 219,000, more or less in line with economists’ expectations.
US gross domestic product expanded at a revised annualised pace of 1.3% over the three months ending in March, according to the Department of Commerce. This was down from the initial reading of 1.6% due to lower-than-estimated consumer spending, and well below the 3.4% expansion seen in the fourth quarter.
“The new data does not alter our subjective odds that the first rate cut will occur in September, but this is contingent on inflation moderating over the next couple of months,” said Ryan Sweet, chief US economist at Oxford Economics.
Meanwhile, US pending home sales slumped 7.7% in April, the biggest monthly drop since September 2022, reversing the 3.6% gain seen in March. The consensus estimate was for a fall of just 0.6%.
Salesforce, UiPath and Kohl’s plummet
Salesforce was down 20% after the company cited “elongated deal cycles, deal compression and high levels of budget scrutiny” that impacted first-quarter results, with revenues rising a less-than-expected 11% to $9.13bn. Sales guidance for the current quarter also disappointed.
Another notable faller was software group UiPath which plunged 34% after the abrupt exit of its CEO, leading to the reappointment of its co-founder who stepped down earlier this year. The company also missed forecasts with its second-quarter guidance by a long way.
Department-store chain Kohl’s tanked 23% after reporting an unexpected first-quarter loss and missing sales forecasts.
PC maker HP surged 17% after topping earnings estimates for its fiscal second quarter, with the company expressing optimism for its AI-powered computers.
Friday newspaper round-up: Royal Mail, fossil fuels, Anglo American
The union that represents workers at Royal Mail has called for a new business model for the company that would see workers given a stake in the company and pay tied to growing services and meeting certain social benefits. Dave Ward, the general secretary of the Communications Workers Union (CWU), said that the potential takeover by the Czech billionaire Daniel Křetínský should provide a moment to overhaul how the company is structured, which could mirror that of US-style public benefit corporations. – Guardian
The world has enough fossil fuel projects planned to meet global energy demand forecasts to 2050 and governments should stop issuing new oil, gas and coal licences, according to a large study aimed at political leaders. If governments deliver the changes promised in order to keep the world from breaching its climate targets no new fossil fuel projects will be needed, researchers at University College London and the International Institute for Sustainable Development (IISD) said on Thursday. – Guardian
The maker of “dirty” luxury sneakers worn by Taylor Swift is planning to float on the Italian stock market in a transaction that could value it at more than €3bn (£2.6bn). Venice-headquartered Golden Goose has announced plans to raise €100m (£85m) listing at least 25pc of the company on the Euronext market in Milan. – Telegraph
Rolls-Royce has secured a multimillion-pound contract to supply engines for a new class of Japanese warship. The British engineering giant confirmed on Thursday it will provide a propulsion machine for Tokyo’s planned Aegis system equipped vessels (ASEVs). Each of the Japanese ships will have a propulsion system powered by two of Rolls’s MT30 engines. – Telegraph
After a failed bid by BHP, Anglo American is facing a backlash from local politicians over plans to cut spending on the Woodsmith mine, as the focus shifts back to the FTSE 100 miner’s radical restructuring plan. A cut in capital expenditure on the polyhalite fertiliser mine in North Yorkshire was a key part of the London-listed group’s defence in fending off a £39 billion takeover by its larger rival, but it leaves about 2,000 jobs hanging in the balance. – The Times
