Proactive Investors -
- FTSE higher, investors await US rate call
- Entain (LON:ENT) raises guidance, growth slows at Vodafone
- House price growth slips - Nationwide
9.45am: Manufacturing sector contracts but improves from December's low - PMI
UK manufacturers faced a tough operating environment at the start of 2023, the latest S&P Global/CIPS UK Manufacturing Purchasing Managers Index (PMI) report showed today.
But the seasonally adjusted manufacturing PMI of 47.0 in January was up from December's 31-month low of 45.3 and above the flash estimate of 46.7.
????????The downturn across the #UK manufacturing sector softened in January (#PMI headline at 47.0; Dec: 45.3) but reductions in output and demand were sustained. Read more: https://t.co/4OvYrVUK3U @cipsnews pic.twitter.com/3K8h9sq742— S&P Global PMI™ (@SPGlobalPMI) February 1, 2023
Nevertheless, it showed a contraction for the sixth month in a row.
Output and new orders fell further, leading to job losses for the fourth successive month while weak demand, elevated price inflation, plus raw material and staff shortages all impacted production.
There was some better news, however, as the downturn showed further signs of easing, cost increases slowed and pressure on supply chains lessened, the report said.
The steepest rates of decline in both variables were registered in the intermediate goods category, whereas the contractions seen at investment goods producers were only mild in both relative and absolute terms.
9.33am: Shop prices yet to peak - BRC
Shop prices have yet to reach their peak - despite record highs seen in January, it has been warned.
Prices are now 8% higher than they were last January, up from 7.3% in December and above the three-month average of 7.5%, according to the British Retail Consortium (BRC)-NielsenIQ Shop Price Index.
Overall food inflation rose to 13.8% from 13.3% in December - the highest inflation rate in the category on record.
Today at @the_brc we published the latest Shop Price Inflation report, covering the month of January ????????Shop prices hit fresh highs ???? pic.twitter.com/jACmMLYw1L
— Harvir Dhillon (@HarvirDhillon) February 1, 2023
Helen Dickinson OBE, the BRC’s chief executive said more rises could be on the way.
With “retailers still face ongoing headwinds from rising energy bills and labour shortages, prices are yet to peak and will likely remain high in the near term as a result” she stated.
But she added: “With global food costs coming down from their 2022 high and the cost of oil falling, we expect to see some inflationary pressures easing.”
9.16am: ITV (LON:ITV) shares switch on after reports of interest in ITV Studios
Shares in British broadcaster, ITV PLC, rose 3.25% in early exchanges after a report on Reuters said veteran Hollywood producer Peter Chernin and French TV production group Banijay’s parent have expressed interest in ITV Studios, the maker of hit show “Love Island”.
Citing sources familiar with the matter Reuters noted other private equity-backed studios firms have also assessed the asset on and off in recent months with the business valued at as much as £3bn according to analysts.
The report added that ITV, Britain’s biggest free-to-air commercial broadcaster, is open to selling a minority stake in Studios to a strategic partner such as a larger TV producer or private equity firm with production assets, but it wants to retain majority control.
9.05am: Bestway buys more of Sainsbury's
Shares in J Sainsbury (OTC:JSAIY) edged higher after it emerged Bestway Group has increased its stake in the food retailer.
The owner of Costcutter now owns 4.47% of Sainsbury’s a filing to the London Stock Exchange showed after announcing it had taken a 3.45% holding last week.
At the time the family-owned business said it may make further purchases from “time to time” and it has been true to its word.
Shares were 0.7% higher in early trading.
8.58am: FTSE holds firm
So far so good for the Footsie today with the lead index now up 24 points helped by gains in the US and Asian markets.
But all eyes remain focused on the Federal Reserve with the latest rate call due after London’s close today.
Neil Wilson at markets.com noted the US central bank “is all but certain to raise rates by 25bps but the complacency we see sets up for a volatility-driven event if Powell pushes back hard – and why not?”
Wilson suggested there was “no reason for the Fed to signal a pause – financial conditions have loosened considerably, inflation remains high, the labour market tight and commodity-linked inflation could be rearing its head again.”
He cautioned “as we have seen countless times, the market is willing to take a dovish read to just about anything the Fed says.”
Back in London and Entain PLC remained close to the top of the FTSE 100 risers after upping guidance for the full-year. Strong trading during the World Cup helped and the hope this will be reflected across the industry pushed Flutter Entertainment 1.6% higher too.
Matt Britzman, equity analyst at Hargreaves Lansdown (LON:HRGV) said: “BetMGM, the joint venture with MGM in the US, remains a shining star.”
“Recent performance beat expectations and cash profit should start to flow as we move into the second half of the year.”
“The real question here is how long this will remain a joint venture, it seems unlikely both parties will want to continue their US gambling exposure in its current form indefinitely.”
“If we had to put money on it, a bid from MGM to take full control looks the most likely outcome – time will tell.”
Elsewhere and shares in ITV PLC rose on reports of interest in the UK broadcasters ITV Studios arm while Darktrace PLC (LSE:LON:DARK) rallied 2.6% after the cybersecurity firm announced share buybacks, a day after a short-seller report knocked its shares by as much as 10%.
But Vodafone Group PLC (LON:VOD) remained the main drag on the FTSE 100, down 2.6%.
Michael Hewson at CMC Markets noted “New CEO Margherita Della Valle acknowledged the company needed to do better, however apart from the €1bn cost saving program announced a few months ago there is little sign that management have a plan that can stem the recent share price declines, amidst concern that the dividend could be at risk of a cut.”
8.29am: House price growth slows - Nationwide
Annual house price growth slowed to 1.1% in January from 2.8% in December, the lowest rate since June 2020, according to latest figures from Nationwide Building Society (LON:NBS).
Property values fell 0.6% in January from December, following a 0.3% drop in December, marking the fifth monthly decline in a row and the longest string of declines since the financial crisis in 2009. Annual price growth slowed to 1.1% from 2.8%.
Nationwide report UK house prices rose just 1.1% in the year to January 2023.Prices are already below February 2022 levels and 5.6% below their August 2022 peak based on their non seasonally adjusted index. https://t.co/ahaJkrl15o
— Neal Hudson (@resi_analyst) February 1, 2023
The average home is now worth £258,297, down from £262,068 a month ago, and prices are 3.25 lower than their August peak.
Robert Gardner, Nationwide’s chief economist, said there were some “encouraging signs that mortgage rates are normalising, but it is too early to tell whether activity in the housing market has started to recover.”
“The fall in house purchase approvals in December reported by the Bank of England largely reflects the sharp decline in mortgage applications following the mini-Budget” he added.
“It will be hard for the market to regain much momentum in the near term as economic headwinds are set to remain strong, with real earnings likely to fall further and the labour market widely projected to weaken as the economy shrinks” he suggested.
8.16am: FTSE starts February on the front foot
FTSE 100 made a bright start to the month although investors may be wary as central banks in the US, UK and Europe prepare to make their latest decisions on interest rates.
At 8.15am London’s lead index was up 20 points to 7,791 while the FTSE 250 rose 77 points to 19,930.
The Federal Reserve will announce its call after the London market close today with a 25bp rate rise expected while the ECB and the Bank of England will reveal their decisions tomorrow with 50bp increases forecast.
Ahead of that and there were some encouraging trading updates to lift the mood with GSK PLC topping forecasts helped by strong sales of its popular shingles vaccine, Shingrix. Shares edged higher, up 0.4%.
While the owner of Coral and Labrokes, Entain PLC, pulled the punters in during the World Cup which has helped it raise guidance for the full year.
The FTSE 100 listed group now expects full-year group EBITDA between £985mln to £995mln, well ahead of the £925mln-£975mln range given in October. Shares rose 2%.
But Vodafone Group PLC fell 2.4% after it reported a slowdown in revenue growth in quarter three from quarter two and said “we can do better.”
The telco attributed the slowdown to weaker performances in Europe although it continues to target its previously announced guidance of adjusted EBITDA of between €15.0bn to 15.2bn and adjusted free cash flow of around €5.1bn for the full year.
Richard Hunter, head of markets at interactive investor, commented “Vodafone faces the twin perils of an extremely competitive landscape and some deteriorating economic conditions, and the latest update highlights the effects of both.”
7.54am: GSK tops forecasts, Entain (LON:ENT) ups guidance
Good news from GSK PLC which has reported better-than-expected fourth-quarter results, largely due to strong sales of its popular shingles vaccine, Shingrix.
The pharma giant, which spun out its Haleon consumer business last summer, posted adjusted earnings of 25.8p per share on revenues of around £7.4bn.
Ahead of the figures, the consensus for sales was £7.1bn, while EPS was 21.2p.
Also pleasing investors was Entain PLC which has predicted full-year profits ahead of expectations boosted by the World Cup which drove 11% growth in net gaming revenues (NGR) in the fourth quarter.
The owner of Coral and Ladbrokes (LON:LCL) now expects full-year group EBITDA between £985mln to £995mln, well ahead of the £925mln-£975mln range given in October.
This would represent growth of around 12% year-on-year with NGR also up 12%.
In a trading update the FTSE 100-listed group said quarter four saw record online NGR, up 12% on the previous year reflecting a “successful” men's World Cup, partly offset by weather disruptions to sporting fixtures.
7.37am: Revenue growth slows at Vodafone
Vodafone Group PLC (LON:VOD) said it “can do better” as it held guidance after reporting a slowdown in revenue growth in quarter three.
The FTSE 100 listed company said it was continuing to target adjusted EBITDAaL between €15.0 to 15.2bn and adjusted free cash flow of around €5.1bn.
But Margherita Della Valle, group chief executive said: "Although we're continuing to target our financial guidance for the year, the recent decline in revenue in Europe shows we can do better.”
She was commenting as the telco reported that group service revenues for the quarter were €9,520mln, up 1.8% on a like-for-like basis, but below the 2.5% growth seen in the previous quarter. On a reported basis the number was 1.3% lower on quarter two.
Total revenue for the quarter was €11,638mln, down 0.4% on a reported basis on the previous quarter, and 2.7% higher on an organic basis.
The slowdown in group service revenue growth from quarter two was driven by Europe where declines in Germany, Italy and Spain partially offset by good growth in UK and other European countries.
The quarterly trend was also impacted by lower roaming growth and phasing of business revenue in the fiscal year.
Germany service revenue declined by 1.8% on an organic basis compared to a 1.1% in quarter two largely reflecting customer losses related to the implementation of new sector legislation.
In the UK, service revenue increased by 5.3% compared to 6.9% in quarter two driven by good customer growth and price increases offset by lower roaming and visitor revenue growth, and ARPU dilution from retail price competition.
Vodafone Business service revenue growth of 2.4% driven by its digital services.
7.00am: FTSE seen higher
FTSE 100 is expected to open higher with investors eyeing the latest rate call from the Federal Reserve which is due after London closes, the first of three key interest rate decisions due this week.
Spread betting companies are calling the lead index up by around 10 points.
The markets are expecting a 25 basis point hike from the US central bank. In contrast, half a percent hikes are expected from the BoE and the ECB.
Ahead of that and there is plenty of corporate news in the diary with results from heavyweight names such as GSK PLC, Entain PC, Severn Trent PLC (LON:SVT) and Vodafone Group PLC.
In the US markets rose strongly with the Dow closed up 387 points, 1.1% at 34,086, the Nasdaq Composite adding 191 points, 1.7%, to 11,585 and the S&P 500 improving 59 points, 1.5%, to 4,077.
The last session of January closed a banner first month of 2023 for the benchmarks. The Nasdaq Composite added more than 10% in January, while the S&P 500 and Dow rallied 6.2% and 2.8%, respectively. For the Nasdaq, January was the best-performing month since July, and for the S&P, this was the best January since 2019.
Stocks in Asia were higher, despite some disappointing data about China and Japan's manufacturing sectors.
In Tokyo, the Nikkei 225 index was up 0.1%. In China, the Shanghai Composite was up 0.7% and the Hang Seng index in Hong Kong was up 0.9%.