Proactive Investors -
- FTSE 100 down but off worst levels
- Commodity prices tumble on demand fears following Covid protests
- BT (LON:BT) looking at merging Global Services and Enterprise units
11.10am: BT looking at merging Global Services and Enterprise units
BT PLC is gearing up to merge two of its struggling divisions as the telecom giant continues its big squeeze.
The Telegraph reported that the FTSE 100 telco is set to combine its Global Services division, which provides security and cloud computing services, with its Enterprise unit, which serves business and government customers in the UK.
It comes after chief executive Philip Jansen upped the company’s cost savings target by £500mln to £3bn, paving the way for job cuts and simplification of the business.
10.30am: UBS downgrades hit Persimmon (LON:PSN) and Smith & Nephew
Persimmon PLC (LSE:PSN) was top of the FTSE 100 fallers hit by another poor survey of the housing market by Zoopla and a rating downgrade by UBS.
Zoopla forecast house prices will fall by about 5% next year while the average price achieved in recent weeks has been 3% below a seller’s asking price.
The company took another hit from a downgrade from broker UBS which cut the housebuilder to sell from neutral with a reduced price target of 1,230p (down from 1,290p).
“We downgrade to Sell from Neutral on risks of further mean reversion in returns, which would erode the valuation premium to the sector further” it said.
Shares fell 3.9% with other housebuilders also lower. Barratt Developments PLC (LON:BDEV) fell 1.9%, Taylor Wimpey PLC (LON:TW.) slipped 1.6% and Berkeley Group Holdings PLC declined 1.4%.
Smith & Nephew was another faller, down 1.7% as the same broker cut its price target to 970p from 1,116p and put the stock on its sell list.
“Inflation driven margin misses in the near-term and structural price/mix pressure long-term drive downgrade to Sell” it said.
9.57am: BA could double Gatwick operations
British Airways PLC could double its operations at Gatwick Airport, rather than expand at Heathrow Airport Ltd, according to a report in the Sunday Telegraph.
The UK flag carrier intends to potentially double the number of aircraft based at the Sussex airport, going to between 24 and 28 planes from 14 currently, the paper said.
The move comes after Heathrow was forced to limit passenger numbers this summer due to a shortage of baggage handlers and other support staff.
Alongside staffing issues, airline bosses have clashed with Heathrow’s management over landing fees.
The airport would like to raise them to £42 from £30 per passenger.
As things stand, the levy -- which falls on travellers, not carriers -- may fall to £26 next year under a plan by the UK’s Civil Aviation Authority.
The paper quoted Heathrow CEO John Holland-Kaye as saying the airport needed the additional revenue to invest in upgrades and maintenance.
Luis Gallego, CEO of BA’s parent company, International Consolidated Airlines Group (LON:ICAG) SA, said however, that the airport was using its market dominance to enrich shareholders.
9.30am: Apple (NASDAQ:AAPL) to be hit by Chinese disruption
Apple is likely to make 6mln fewer iPhone Pro units than planned this year as a result of turmoil at its key factory in Zhengzhou in China.
Much will depend on how quickly Foxconn Technology Group, the Taiwanese company that operates the facility, can get people back to assembly lines after violent protests against Covid restrictions.
If lockdowns continue in the weeks ahead, production could be set further back, sources told Bloomberg.
The Zhengzhou campus has been wracked by lockdowns and worker unrest for weeks after Covid infections left Foxconn and the local government struggling to contain the outbreak.
9.00am: Just Group gets boost from Jefferies
FTSE 100 still down but has recovered some ground, now down 34 points.
The anti-Covid protests in China have dashed "hopes of an easing of restrictions, given that Xi JinPing will not want to look like he’s backing down in the face of protests" according to Susannah Streeter, senior investment and markets analyst. Hargreaves Lansdown (LON:HRGV).
Together with the falls in oil and mining companies Streeter highlighted that luxury goods maker Burberry, which is highly reliant on the Chinese consumer to even out its own recovery from the pandemic, has also been hit by some volatility.
But one bright spot is Just Group PLC, up 4.7%, as Jefferies initiated coverage of the company with a buy rating and 115p price target.
"Just has implemented a successful turnaround programme since 2019, which the market has given minimal credit for" it said.
"At a 195% Solvency II ratio for 2022F, capital is stronger than ever and capital generation is improving at a rapid pace."
"With Just poised to benefit from the busiest bulk annuity market ever, we initiate with a Buy" analysts at Jefferies wrote.
8.35am: C4X Discovery soars after AstraZeneca (NASDAQ:AZN) link
One share on the up is C4X Discovery Holdings UK.
Shares soared 29% after it signed a licence deal worth up $402mln to develop an oral therapy for the treatment of inflammatory and respiratory diseases using its NRF2 Activator programme with Astra Zeneca PLC.
The British drug discovery company said it would receive pre-clinical milestone payments worth up to $16mln ahead of the first clinical trial, including $2mln upfront.
In addition, C4XD said it would receive a further potential $385.8mln in clinical development and commercial milestones and tiered mid-single digit royalties upon commercialisation of any treatment.
8.15am: FTSE 100 opens lower, oil prices tumbles
FTSE 100 nursed heavy falls at the open hit by falls in Asian markets sparked by increased protests in China against Covid lock-downs.
Just after the open the FTSE 100 was down 54 points at 7,432 and the mid-cap FTSE 250 was 129 points lower at 19,417.
Dissent spread over the weekend in China as citizens in major cities including Beijing and Shanghai took to the streets to express their anger on the nation’s Covid controls.
The uncertainty sparked sharp falls in commodities with the oil price seeing heavy falls.
Brent crude was down 2.9% to $81.50/barrel while WTI crude was 2.73% lower at $74.23.
In London, the fall in the oil price hit shares in BP PLC (LON:BP.) (down 1.9%) and Shell PLC (down 2.2%), while falling metals prices hit Anglo American (LON:AAL) (down 1.8%) and Rio Tinto (LON:RIO) plc (down 1.8%).
8.00am: Sterling still strong against US dollar, despite slight weekend dip
Cable pushed slightly higher this morning after losing 30 pips during the Sunday session, while UK 10-year gilt yields fell in unison by a quarter of a percent to 3.11%.
Though Sterling is lower against last week’s highs, the GBP/USD pair is still sitting strong at 1.207, supported by a weaker greenback as the market considers a slower pace of rate hikes from the US Federal Reserve following November’s softer-than-expected CPI print.
GBP/USD going strong, despite small Weekend dip – Source: dailyfx.com
The US Dollar Index (DXY) pared back 0.2% in this morning’s Asia trading session, continuing a bearish trend following the release of the Federal Open Market Committee’s minutes last Wednesday.
A majority of Fed officials judged that a slowing in the pace of the fed funds rate increase would soon be the right course of action, prompting cautious sentiment towards the greenback.
EUR/USD is changing hands at 1.037, an incremental gain against the day. The pair remains buoyant due to a persistently hawkish attitude from the European Central Bank.
The euro has been trapped in a two-week losing streak against the pound, with further losses this morning bringing the EUR/GBP pair down to 85.93p.
A quiet economic calendar is scheduled for this Monday, apart from ECB President Christine Lagarde’s speech before the Committee on Economic and Monetary Affairs (ECON) of the European Parliament in Brussels.
7.35am: Demand for houses down 44% since mini-budget
People selling their homes have typically had to settle for below the asking price in recent weeks, according to Zoopla, which is predicting house prices will fall by about 5% next year.
The average price achieved in recent weeks has been 3% below a seller’s asking price, when for much of 2021 and the first half of this year it matched the asking price, the property website said. Zoopla said it expects discounts to increase further in 2023.
Since the start of September, one in nine homes have had their original asking price reduced by 5% or more, Zoopla said, and a quarter have had the price cut to some degree, according to the index covering the month of October.
House prices set to fall 5% next year says Zoopla as price inflation falls to 7.8% https://t.co/LBKi83h4Eg— Residential News (@ResiNews) November 28, 2022
Annual house price growth slowed to 7.8% last month, down from 8.1% in September and the lowest since November 2021, according to Zoopla data. Demand has fallen 44% since September’s disastrous mini-budget, which drove mortgage rates sharply higher and led to hundreds of deals being pulled from the market.
7.22am: Superdry confirms financing talks continue
Superdry PLC (LON:SDRY) has confirmed it is in negotiations with Bantry Bay Capital Limited, a specialist lending provider, to replace its existing up to £70mln asset-backed lending facility.
The retailer was responding to a report in The Sunday Times which said the refinancing plans were close to being finalised.
Talks continue with other lenders as a well and “a further announcement will be made as and when appropriate” it said.
The fashion group, best known for sweatshirts, hoodies, jackets and coats, said last month that the facility is due to expire at the end of January 2023.
Superdry operates 740 branded stores across 61 countries and employs more than 2,500 people in the UK and Ireland.
7.00am: FTSE 100 seen lower after Chinese protests
FTSE 100 expected to post opening falls on Monday unsettled by anti-lockdown protests across several major cities in China which helped send Asian markets lower.
Spread betting companies are calling the lead index down by around 34 points.
On Sunday several major Chinese cities saw people taking to the streets calling for an end to lockdowns and greater political freedoms, in a wave of nationwide protests not seen since pro-democracy rallies in 1989 were crushed.
Asian markets weakened as a result. In China, the Shanghai Composite was down 0.9%, while the Hang Seng index in Hong Kong was down 1.8%.
Michael Hewson, chief market analyst at CMC Markets said this has “prompted further weakness in commodity markets this morning” and “looks set to translate into a lower European open, over concerns that the unrest could prompt a stricter crackdown by Chinese authorities in response.”
In London, half-year results from real estate investment trust Home REIT and building materials firm Brickability are expected.
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