FTSE 100 edges lower, FirstGroup jumps and Royal Mail plans blocked

© Reuters. FTSE 100 edges lower, FirstGroup jumps and Royal Mail plans blocked

Proactive Investors -

• FTSE 100 edges lower, bond yields jump
• FirstGroup soars on better-than-expected results
• RICS says strong clouds gathering over property market

Government blocks Royal Mail plans to axe Saturday deliveries

Royal Mail’s hopes of ending Saturday deliveries have been delivered a blow by ministers as regulators investigate whether to fine the company for breaching its obligation to deliver six days a week.

Royal Mail, owned by International Distributions Services PLC (LON:IDSI), had warned that its poor financial performance will continue unless ministers let the company abandon Saturday letter deliveries.

It argued that the decline of letters means its current programme of deliveries is financially unviable.

However, business minister Kevin Hollinrake told the company today that the Government has no plans to review its so-called universal service obligation.

"We currently have no plans to change the minimum requirements of the universal postal service as set out in the Postal Services Act 2011 (the Act), including 6-day letter deliveries," he said.

"Postal services have long played, and continue to play, a key role in our society," he added, noting "the ability to send and receive letters and parcels is important both socially and economically."

"This is particularly true for consumers who might be more vulnerable, such as those who are geographically or digitally isolated from their friends and family."

Storm clouds gathering over property market - RICS

The Royal Institution of Chartered Surveyors (RICS) is warning that expectations of further interest rate rises from the Bank of England may put renewed downward pressure on the market in the months ahead.

RICS Senior Economist, Tarrant Parsons said: "“However, it seems storm clouds are gathered, with the UK’s stubbornly high inflation likely undermining the recent improvement in activity by prompting the Bank of England to take further action through interest rate rises, leading to higher mortgage rates and ultimately reducing affordability and buyer demand."

Parsons warned that expectations of further interest rate hikes will hit demand and affordability.

RICS’s monthly health check on the property sector found some improvement in market conditions during May, with the first rise in new instructions since early 2022. House prices continue to fall in much of England, although Scotland and Northern Ireland have witnessed an uplift.

Derren Nathan, head of equity research, Hargreaves Lansdown (LON:HRGV) said the report "mirrors the gloom seen in yesterday’s house price data by Halifax although there were a few glimmers of hope."

"The fall in buyer enquiries was the lowest seen over twelve months although was still down 18%. The rate of decline in agreed sales also fell sharply," he noted.

Yesterday, Halifax reported that house prices experienced their first annual fall in more than a decade last month.

Citi warms to Rio Tinto , JPMorgan upgrades Clarkson

Positive comments from analysts at Citi and JPMorgan Chase (NYSE:JPM) have boosted shares in Rio Tinto PLC (LON:RIO) and Clarkson PLC.

Citi has placed Rio on its buy list, upgrading from neutral. Although the broker's commodities team thinks the recent strength in steel and iron ore prices in the past week are unlikely to be sustained it still thinks hopes for a stimulus in China will support the stock.

"We see clear upside risks regarding potential China stimulus and there has been 3 months of underperformance by the iron ore names," Citi said. Shares in Rio rose 1.1%.

Shares in the FTSE 250-listed Clarkson PLC (LON:CKN) jumped 5.8% to 3,140p after JPMorgan upgraded to overweight.

The investment bank feels the firm is "heading in the right direction," and increased its share price target to 3,840p from 3,740p. It did cut its current financial year EPS estimate by 11.4% but increased the following year by 21%.

Meanwhile, the FTSE has edged 8 points lower.

Crest Nicholson warns more rate rises will dent confidence

Crest Nicholson Holdings PLC (LON:CRST) shares are under pressure, down 3.4%, at 241p, after the housebuilder reported profit plunged 60% as the housing market reeled from the autumn “mini” Budget.

The company flagged the risk of a further downturn if interest rates keep rising.

“If interest rates continue to rise, and remain elevated for a sustained period of time, this will undoubtedly start to impact demand and confidence again,” said Peter Truscott, chief executive.

The FTSE 250 group reported adjusted pre-tax profits of £20.9mln in the six months to the end of April, down from £52.5mln the year before. Home completions fell nearly a fifth to 894.

Analysts at Peel Hunt noted the group has guided to financial year 2023 adjusted pre-tax being in line with market consensus of c.£74mln assuming market conditions remain stable.

"We are currently sat at c.£84mln so need to cut our figures by c.£10mln at least, with a trim to our margin and volume assumptions," the broker added.

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