Proactive Investors -
- FTSE 100 down 56 points to 8197
- Burberry parts with CEO, appoints replacement from US
- UK government sells more NatWest shares
2.30pm: FTSE tumbling
The FTSE 100 is heading lower and lower again. All but two of the top 12 stocks are in the red.
Buberry is down almost 18% now, with other retailers also among the big fallers, Frasers and M&S both down over 3%, JD Sports, B&N and Kingfisher (LON:KGF) all down more than 2%.
2.25pm: ISA reform urged
Investment platforms AJ Bell and Hargreabes Lansdown are urging the new government to overhaul the British savings market to try and channel more investment into London stocks.
The boss of AJ Bell PLC (LSE:AJB) has written to Chancellor Rachel Reeves urging the government to deliver "radical ISA simplification to make life easier for investors", which could unlock around £30 billion currently sitting in cash ISAs.
With the Labour Party having pledged to ‘simplify the Individual Savings Accounts (ISA) landscape to make it as easy as possible for people to feel the benefits of saving and investing their money, CEO Michael Summersgill said the company has long been a campaigner for ISA simplification.
"By combining the best features of ISAs into a single product, the government can make it easier for people to take the first step into long-term investing. In addition, merging cash ISAs and Stocks and Shares ISAs – the two most popular ISA products in the UK – would make it simpler for those holding money in cash ISAs to transition towards long-term investing."
He points to HMRC data indicating there are around three million people in the UK with £20,000 or more invested in cash ISAs and no money invested in stocks and shares ISAs.
"If just half of that money was invested for the long term, an additional £30 billion of investment would be unlocked. That is a conservative estimate and the actual figure may be far higher, given that HMRC’s data indicates many of those individuals hold a Cash ISA balance far in excess of £20,000."
Dan Olley, CEO of larger rival Hargreaves Lansdown (LON:HRGV), told the FT it was essential to "keep things as simple as possible", while Alastair Black, head of savings policy at Abrdn, which owns Interactive Investor, said there were "several competing Isa products acting as a barrier to entry".
1.36pm: Euro boost to economy
England’s Euro 2024 campaign gave a £3 billion boost to the economy, apparently.
This is according to calculations by the Telegraph newspaper.
Yesterday’s final was predicted to drive sales of around £405 million in pubs and supermarkets, with 17 million people estimated to have watched the game at UK hospitality venues.
The UKHospitality trade body said sales were set to jump by 50% during the final, offering a £800 million benefit for the industry.
Meanwhile, economists at Goldman Sachs (NYSE:GS), Barclays (LON:BARC) and Deutsche Bank (ETR:DBKGn) have all lifted their GDP estimates for this year due to England’s journey to the final.
1.12pm: Unilever (LON:ULVR) sells Indian water unit
Unilever PLC (LSE:ULVR) has sold its Indian home water purification business, Pureit, to NYSE-listed AO Smith for $120 million cash.
AO Smith, a water technology company, said it expects to complete the deal by the end of 2024.
Pureit generated annual sales of approximately US$60 million, primarily in India, last year.
Eduardo Campanella, president of Unilever Home Care, said, “This sale of Pureit marks another milestone on our journey to evolve our portfolio towards higher-growth spaces".
12.17pm: European markets down, US futures up
Just after midday, the FTSE 100 is heading lower again, down 25 points or 0.3%, having almost erased its losses two hours ago.
Burberry remains the biggest faller, now down 16% after parting ways with its CEO and suspending its dividend as challenging conditions continue in the luxury market.
Analyst Zuzanna Pusz at UBS said the first-quarter results were "significantly worse than expected", with the appointment of a new CEO and dividend suspension "indicate its current strategy is being reversed".
The FTSE 250 index has turned downward in a similar way to the blue-chip index, though it had broken into positive territory in mid-morning. The mid-cap index is down 37 points or 0.17%.
Ocado Group PLC (LSE:LON:OCDO) is the biggest faller, down 11.5%, while Watches Of Switzerland Group PLC is down 3.2% and Aston Martin 3.1% after the warning from Burberry and another today from Swatch.
In Europe, France's CAC 40 and Spain's IBEX 35 are the laggards, down 0.49% and 0.44%, while Germany's DAX is down 0.23%. The wider Euro Stoxx 600 is 0.3% lower.
US futures on the other hand are all pointing up, continuing the positive momentum from the end of last week.
Dow Jones futures are up 0.54%, Nasdaq 100 futures are pointing to a 0.51% gain, and those for the S&P 500 a 0.42% increase.
Leading the mega-caps, Tesla shares are up 3.7% premarket, Super Micro Computer 3.3%, Apple (NASDAQ:AAPL) 2%, Nvidia (NASDAQ:NVDA) 1.3% and AMD (NASDAQ:AMD) 1%.
Goldman Sachs rose 1% after reporting second-quarter results before the opening bell, showing earnings per share of $8.62 that beat Wall Street expectations, as profits more than doubled thanks to a recovery in dealmaking and strong performance from trading.
Elsewhere, Google's parent company Alphabet (NASDAQ:GOOGL) Inc is in talks to acquire cyber security start-up Wiz for about $23 billion, in what analysts describe as a smart move.
11.50am: UBS on Trump shooting fallout
After the apparent Trump assassination attempt at the weekend, a key question for investors, says UBS chief investment officer Mark Haefele, is how the shooting affects swing voter attitudes.
"President Reagan saw an immediate increase in his popularity following the attempt on his life in 1981, though the bump in support ebbed within three months following the incident," Haefel says.
"In the aftermath of the recent Biden/Trump debate, we revised our election scenario probabilities, now ascribing a 45% probability to a 'Red Sweep,' 30% to a Democratic victory with a split Congress, 15% to a Trump victory with a split Congress, and 10% to a 'Blue Sweep.' For now, on the eve of the Republican National Convention, we leave the aforementioned election scenario probabilities unchanged.
"The attempted assassination of Trump adds a new layer of complexity to an already tumultuous election season.
"We have said that investors should not make major portfolio swings in response to campaign developments or in anticipation of any particular election result, and that applies in this case too.
"Investors looking to navigate the potential for increased market volatility and to reduce exposure to political uncertainty can consider the following strategies: In equities, we think investors should manage exposure to individual stocks and sectors that could be more at risk in different election outcomes. This includes the consumer discretionary sector, which would likely suffer from higher import tariffs.
"To manage potential election-related volatility, investors can use defensive structured investment strategies, such as capital preservation or yield-generating approaches for election-sensitive stocks or cyclical sectors like energy, industrials, and financials."
11.50am: AI smartphone excitement builds
Global smartphone shipments rose 6.5% in the second quarter, according to IDC data, with generative AI smartphones expected to grow faster than any mobile innovation ever seen.
Samsung Electronics (LON:0593xq) (KRX:005930) was in top spot and Apple in second place in the past three months, which was the fourth quarter in a row where shipments had grown, IDC said, but demand remains "challenged in many markets".
While the top five companies all made year-over-year gains, "we are seeing increasing competition amongst the leaders and a polarization of price bands", said Nabila Popal, research director with IDC's Worldwide Tracker team.
11am: BoE rate setter calls for rate cut
Bank of England monetary policy committee member Swati Dhingra is again making her case for interest rates to be cut.
"Now is the time to start normalising (interest rates) so we can then finally stop squeezing living standards the way we have been to try and get inflation down," Dhingra told The Rest is Money podcast in an interview broadcast on Monday.
"I don't see some kind of consumption boom and if we're going to start moderating from the very high level of interest rate that we are at now...it is going to take some time for that to happen, for us to moderate it as well as for that to then feed into the real economy," she said on the podcast hosted by Robert Peston and Steph McGovern.
Dhingra has voted for rate cuts in every MPC meeting since February, though she and deputy governor Dave Ramsden were the only two to support a cut in the past two meetings, with seven colleagues holding the majority to keep rates on hold.
Markets currently are fairly equally divided on whether the 1 August meeting will see a cut, now that inflation has fallen to the BoE's 2% target.
There are higher expectations for a September cut.
10.48am: Government sells NatWest state below 20%
The UK government has sold another chunk of its stake in NatWest Group PLC (LSE:LON:NWG), bringing the shareholding to below 20%.
According to a regulatory filing this morning, UK Government Investments Ltd reduced the stake to 6,645,166,452 shares, or 19.97%, down from 20.92% before.
UK Government Investments Ltd is a wholly-owned vehicle of the Treasury.
10.20am: Harland & Wolff says accounts coming soon
There has been an update from Belfast shipyard owner Harland & Wolff Group Holdings PLC (AIM:HARL) two weeks after its shares were suspended after its results failed to be published on time.
The company said audit work is "undergoing final audit partner reviews" and it aims to publish accounts as soon as possible.
"The company will make an announcement as soon as the audit is complete and the Accounts are published, following which suspension of trading in its shares is expected to be lifted," it said.
10.07am: Lloyds cost-cutting and social housing
Two bits of news on the UK's biggest lender, Lloyds Banking Group PLC (LSE:LON:LLOY), which is tightening the use of taxis and business class flights for its staff as part of a cost-cutting drive.
The UK lender will alter these travel policies across its 60,000-strong workforce to control expenses and reduce its carbon footprint.
This is according to a memo sent by chief operating officer Nick Laird.
There's also a report that the bank plans to convert some of its disused office sites into social housing.
Lloyds is selling a former data and office space in Pudsey, West Yorkshire, to a local housing group with the agreement that 80 new homes will then be rented at about half the usual rate.
The FTSE 100-listed lender has put out a statement this morning saying it will "the first UK bank to actively enter the market to own good quality housing available to house families at risk of homelessness".
Its Citra private rental housing arm will buy the homes and remain the landlord, with local authorities responsible for day to day management, with a pilot site in Cambridge the first to offer households rents priced at 80% of market rates.
9.48am: How markets have reacted to Trump shooting
The US dollar and Bitcoin have gained ground since the assassination attempt on Donald Trump at the weekend.
"The latest twist in the Presidential election had a bigger political impact than it did financial impact," says Kathleen Brooks, head of research at XTB.
"There was a mild rush to safe havens, however, gold is now in retreat, US 10-year Treasury yields fell a mere 3 basis points and the dollar is also giving back earlier gains as we start the European trading session."
Brooks added that bitcoin is worth watching, as it seemed to have had the biggest reaction to Trump’s shooting, jumping from just over $57k on Friday to above $60,000 on Sunday and extending gain this morning to just above $63K.
"It is hard to know exactly why Bitcoin has reacted in this way: does a Trump victory increase the attractiveness of alternative assets? Does political discord and chaos boost crypto? Does the increased chances of a Trump win lead to fears about the future independence of the Federal Reserve, which also feeds into demand for crypto assets? This is a theme worth watching if President Trump can maintain this lead in the polls," says Brooks.
"There is a lot to digest," says Jane Foley, Rabobank's senior FX strategist. "US politics, which was already very divided, has now been marred with violence.
"Market pricing, however, can only respond in a binary manner and, for the markets, the complexities of the US political backdrop have been boiled down to the assumption that the weekend events will lead to an increased chance of Trump winning the November Presidential election."
She adds: "The USD has gained ground today on the back of the assumption that a looser US fiscal policy and greater tariffs under Trump would be inflationary and could limit the degree of Fed rate cuts this cycle.
"That said, market expectations of a September Fed rate cut have been growing over the past couple of weeks on the back of a softening in US economic data, and an interview with Fed Chair Powell later today will ensure the outlook for monetary policy pre-election keeps its place in market headlines."
9.29am: UK v Europe
As if the Euros wasn't bad enough, Spain's economy is also doing better than ours.
Spanish gross domestic product is on track to grow 2.4% this year, compared to less than 1% forecast for the UK.
This was more than expected, Spain's economy minister Carlos Cuerpo said as he released the figures yesterday, no doubt looking for some political points scoring on the back of the football victory.
"Based on the good progress in the first six months of the year (...) we will upgrade our growth forecasts for 2024 and 2025," he was quoted in the El Pais newspaper.
As for markets, we have one over on our Iberian rivals this morning, with the FTSE down just 0.15% now, compared to a 0.42% fall for the IBEX index in Madrid.
Like the London index, losses are being pared across most of the big European benchmarks, with the DAX down 0.12% in Frankfurt, the CAC down 0.45% in Paris, having been down 0.33% and 0.94% respectively earlier.
9.13am: FTSE 100 stages recovery
The FTSE 100 continues to reclaim lost ground after flopping more than 60 points in opening trades.
Stocks tumbled in the opening minutes, reflecting a dour post-Euros mood, or more likely, global anxieties over the shocking attempt on former president Donald Trump’s life.
Burberry’s 15% nosedive following another CEO exit continues to weigh on the blue-chip, though a broader FTSE 100 recovery is underway.
At the time of writing, the index had recovered from intraday lows of 8,192 to 8,238, or around 14 points below Friday’s close.
8.40am: Miners dragging after China data
The FTSE 100 has come off its worst initial levels and is down 44 points now, or 0.53%, while the FTSE 250 is down 88 points or 0.41%.
Miners are among the big fallers.
This is likely to be due to China data.
Market analysts Richard Hunter at Interactive Investor has this: "the focus was firmly on China with Japan closed for a public holiday. Second quarter growth came in at 4.7% higher against expectations of an increase of 5.1% and compared to 5.3% in the first quarter, while retail sales edged up by just 2% compared to the estimated 3.3% level.
"While the government was at pains to highlight improvements in factory output, income and investment, the calls for further stimulus from investors will remain at elevated levels.
"Sluggish consumer demand, high youth unemployment and a beleaguered property sector have all added to the country’s faltering economic recovery, let alone the perennially fractious relationship with the US, particularly with regard to technological developments and security risks. On balance, investors have voted with their feet, preferring the likes of Japan for greater returns in the nearer terms."
8.24am: Burberry second CEO change since turnaround started
Some analysts' thoughts on the Burberry change of CEO, which has been made after profits fell 34% last year but was amid a wider slowdown in the luxury market.
The fashion group also reported a disappointing first quarter update, saying it expects to report an operating loss for the first half and has decided to suspend dividend payments.
Jelena Sokolova, analyst and luxury goods expert at Morningstar, sees some issues that are ays: "Burberry have been underperforming in the industry for many years now – it’s the second CEO and creative director they have had since the turnaround efforts started.
"I think they have done a good job in taking control over distribution and reduction of subpar distribution channels both wholesale and retail, but with current collections, it looks like they have pushed pricing too far and too quickly."
She says Burberry also have "issues with their product mix" and while the brand "still has potential ... it will not be an easy fix."
Chris Beauchamp, chief market analyst at IG, calls it a "bombshell" set of announcements.
"Sales continued to fall, and no improvement is expected for some time. Meanwhile, the dividend has also been suspended in a bid to save money, and to cap it all, the CEO is to depart immediately.
"This is a kitchen sink exercise par excellence, and underscores the enormity of the challenge facing Burberry in a world where Chinese sales can no longer be taken for granted.
"However, as one of the more heavily-shorted FTSE shares, and trading at 11 times earnings, perhaps today might see at least a short-term pop for the share price, on the basis that most of the bad news is now firmly in the price."
8.08am: FTSE flops hard
The FTSE 100 has conceded early doors, plummeting 61 points or 0.74% to just under 8192 in the first minutes of trading.
Burberry is the big faller, down almost 10%, after looking in the mirror and deciding that a change of CEO was what it was missing.
Copper miner Antofagasta PLC (LSE:LON:ANTO) is down 2.9% and NatWest Group PLC (LSE:NWG), down 1.75%, are next in line.
There are only four blue chips in positive territory so far, and none of them by very much. Entain (LON:ENT) and Darktrace (LON:DARK) top, up 0.56% and 0.31%.
7.55am: Burberry changes CEO
Burberry Group PLC (LSE:LON:BRBY) has parted ways with immediate effect with chief executive Jonathan Akeroyd, who joined in 2021 with a turnaround brief, but seems to have paid the price for a sharp fall in profits last year amid wider struggles for luxury brands.
The FTSE 100-listed fashion house has appointed former Michael Kors (NYSE:CPRI) and Jimmy Choo boss Joshua Schulman as his replacement, joining this week.
Group chair Gerry Murphy said Akeroyd "has set out a clear strategy for growth that we will build on".
He added that Schulman "is a proven leader with an outstanding record of building global luxury brands and driving profitable growth. He has a strong understanding of our brand and shares our ambition to build on Burberry's unique creative heritage."
7.24am: UK home sales increase 15%
UK house prices dropped this month but the numbers of agreed sales increased 15% on a year ago, according to Rightmove data.
Average asking prices for new houses on the market dropped 0.4% this month to £373,493, which the property website said was a bigger July drop than usual.
Market activity was said to have remained steady throughout the general election campaign, shown in part by the increase in numbers of sales, which was up from the 6% increase a month earlier, while the number of new sellers was steady at 3% above last year.
"Three major uncertainties hanging over the property market at the start of the year were when the first interest rate cut would be, and the timing and the result of the general election. We’ve now got the political certainty of a new government with a large majority, which we expect will help home-mover confidence," said Tim Bannister, Rightmove’s director of property science.
Current market expectations are that the first Bank of England Base Rate cut may interest rates in August or September, which is expected to give a boost to the housing market.
7.16am: FTSE set to start lower
The FTSE 100 is set to start lower on Monday as the sombre mood continues from England’s defeat by Spain in the Euros final.
Spread-betters have tipped the London equity benchmark for a 30-point drop, after the index inched higher last week to finish at just shy of 8253.
As well as the downbeat mood for English stock traders, the financial world will also be assessing what the attempted assassination of Donald Trump in the US means for the Presidential race and for markets, says Deutsche Bank strategist Jim Reid.
There’s been little move yet, but US government bond futures are falling this morning, giving up much of the gains seen after Thursday's weak US inflation print, “so expect yields to open a handful of basis points,” he says.
The most consequential event for markets this week could come today as US Federal Reserve chair Jerome Powell is interviewed at the Economic Club of Washington DC at 5pm London time.
Also today, US earnings season gets into gear as two more big Wall Street names report, Goldman Sachs and BlackRock (NYSE:BLK), after a mixed start last week from JPMorgan (NYSE:JPM), Citigroup and Wells Fargo (NYSE:WFC).
Later in the week we have UK inflation and jobs numbers, and a European Central Bank meeting to provide more fuel for markets, while UK company news includes Burberry, Ocado, AJ Bell and Hargreaves Lansdown.