Proactive Investors -
- FTSE 100 drops 57 points
- Shell profits fall less than expected, buyback repeated
- Smith + Nephew issues profit warning
10.05am: Eurozone CPI inflation higher than expected
Eurozone inflation picked up more than expected this month, according to figures just out now.
The consumer price index was up 0.3% on a month ago, up from the 0.1% month-on-month fall in September and higher than the consensus estimate of 0.2%.
Annual CPI inflation picked up to 2.0% from 1.7%, higher than the 1.9% average forecast.
Core CPI remained at 2.7%, having been expected to ease to 2.6%.
European stocks are continuing to wallow in the red, with the DAX down 0.6% and the CAC 40 falling 1%.
9.50am: Budget analysis continues
Another City view on yesterday's Budget, as bond markets continue to reprice UK gilts as traders mull the Budget.
The pivot of UK fiscal policy towards a higher-tax, higher-spending, higher-investment model "is easy to take a pop at - not least as empirically the relationship between higher taxes and growth is a negative one", says Simon French, chief economist and head of research at Panmure Liberum.
It does represent "a gamble" on the government’s main mission to increase the rate of economic growth, he says, but he asks if anyone can "show me which of the big line items of spending the public would support cuts to", then a political alternative is hard to identify.
Secondly, if the downside risk was a forex/gilt market dislocation, "then that risk was, at least for now, navigated" as yields moved higher in the afternoon session and are close to the nominal levels seen around the infamous Truss/Kwarteng budget, "but the move was an orderly one and sterling remains above its pre-election level" in stark contrast to September 2022.
Thirdly, as others have pointed out, the UK interest rate outlook tightened because of Reeves' announcements, as a fiscal expansion requires tighter monetary policy to maintain an inflation equilibrium.
French says Reeves' evening comments that the Budget is a "one and done fiscal event" is the "right messaging and encouraging - but the government will need a fair slice of luck to achieve it", with one of the big risks being whether or not the new costs for employers causes a hard landing in the labour market.
"The second main risk is that sentiment fails to see this as a clearing event and continues its recent inflection lower...The messaging matters and we will be looking for a change in gear in that regard - starting this weekend."
9.34am: Kainos (LON:KNOS) drops on new profit warning
Kainos Group PLC (LSE:KNOS) is a big faller on the FTSE 250, down 14% as its digital services and Workday services divisions continue to be affected by the macro-economic environment and related delays in client decision-making delays related to the Budget.
Analysts at Panmure Liberum said they had spoken to the CFO and expect consensus revenue forecasts to fall 6% and adjusted PBT by around 18%.
9.22am: BHP clarifies it has not exactly 'moved on'
Anglo American PLC (LSE:LON:AAL) is up 1%, having fallen yesterday, after spring suitor BHP Group (LON:BHPB) Ltd (LSE:BHP, ASX:BHP) quickly backtracked on comments yesterday from its chairman that it had "moved on" from its failed bid.
Most sources reported this as meaning it was no longer interested in making another bid for its mining peer, as the six-month bar on it making another bid ends at the end of November, under the City of London's takeover code (Rule 2.8 for those in the know).
But apparently this is not the case, BHP said in a statement this morning, with the Australian mining giant clarifying that chair Ken MacKenzie's comments "were not intended to be a statement to which Rule 2.8 of the UK City Code applies"...read more
8.59am: European markets all down
The FTSE 100 and 250 are down 0.7% and 0.8%, with European stock markets also in the red.
Germany's DAX and France's CAC 40 indices are both down over 0.5%, with Spain's IBEX and Italy's FTSE MIB down 0.3%.
In bond markets, selling of UK gilts has resumed, with the 10yr gilt yield back up above 4.41%.
"Financial markets continue to digest the details of the UK’s budget, and the news is not good," says market analyst Kathleen Brooks at XTB.
The rise in UK gilt yields means the UK’s budget has "fallen like a lead balloon", she says, with Rachel Reeves announcing one of the largest increases in tax, spending and borrowing in the UK’s budget history, only for the OBR to revise down their long-term growth forecasts.
"For a government that planned to boost growth, they have fallen spectacularly at the first hurdle."
With the pound steady against dollar and euro, Neil Wilson at Finalto says, it was a case of bonds "flexing a bit on the idea of more issuance".
"Seriously, where is the supposed growth? It was a Budget for the NHS, not growth," he says.
Gold and oil prices have come back a touch this morning, with eurozone inflation data the big ticket item for this morning, expected to rise a bit to 1.9% from 1.7% a month ago.
"If it’s short of this it could up the ante on bets for a 50bps cut in December (currently around 10% priced)," says Wilson.
8.48am: Sainsbury 's (LON:SBRY) sells Argos cards portfolio
J Sainsbury PLC (LSE:SBRY) has banked £720 million from the sale of its Argos Financial Services cards portfolio to NewDay Group.
The cards portfolio account for around 20% of Argos sales and are held by around two million Argos credit customers.
Sainsbury said the consideration price broadly reflects the expected net value of loan balances and associated provisions when the deal is scheduled to conclude in 2025.
London-based NewDay, which according to its website has £4.3 billion on loan and 3.7 million customers via partnerships with John Lewis and AO, is headed by John Hourican and chaired by Sir Michael Rake...read more
8.37am: Results from Haleon and Coca-Cola (NYSE:KO)
Shares in Haleon PLC (LSE:LON:HLN, NYSE:HLN), the maker of Panadol painkillers, Sensodyne toothpaste and Centrum vitamins, are down 1.6% after it reported a 6.1% organic growth for the third quarter
Currency fluctuations meant the consumer health group saw year-on-year reported revenue fall 0.6% though...read more
Elsewhere, shares in drinks bottler Coca-Cola HBC AG are up 1.7% after it increased its full-year outlook to account for strong recent performance across its key markets...read more
8.25am: Smith & Nephew warns on profits
More details on Smith & Nephew PLC (LSE:SN), where shares in the hip and knee replacement group are down 12% after it slashed full-year revenue outlook to account for a downturn in demand and pricing pressures in the Chinese market.
The group now expects full-year revenue growth of 4.5%, compared to 5-6% previously, with challenges in China largely driven by the ongoing effects of the country’s 'value-based procurement' programme, which has impacted pricing for surgical products without corresponding increases in sales volume.
Additionally, S+N's orthopaedics arm saw lower in-market demand, slowing orders as distributors reduced their inventory levels...read more
8.13am: FTSE opens sharply lower, falls across the board
The FTSE 100 has dropped 42 points or 0.5% at the open to 8,118, with the FTSE 250 also falling 0.4%.
It's a broad retreat, with only eight of the blue-chip index in the green.
Biggest faller is Smith & Nephew PLC (LSE:SN), down 10% as it lowered its full-year outlook, primarily due to the impact of China headwinds.
Scottish Mortgage Investment Trust PLC (LSE:LON:SMT) is down 1.6% after the falls in US tech overnight.
Shell PLC (LSE:LON:SHEL, NYSE:SHEL) is up 0.9% after its quarterly results saw it rinse and repeat with its dividend and buybacks.
7.58am: Ocado (LON:OCDO) new chair appointment points at new direction
Ocado Group PLC (LSE:OCDO) has appointed IT and consulting veteran Adam Warby to be its new chairman.
He will join the board as an independent non-executive director from tomorrow, 1 November, before assuming the role of chair on 1 December, when current chair, Rick Haythornthwaite, will step down from the board after four years at the head of the table.
Warby is currently chair of Nasdaq-listed headhunting firm Heidrick & Struggles, having previous been chair of Swiss-based SoftwareOne software advice provider and a founder member and CEO of IT consulting and services provider Avanade Corporation.
Tim Steiner, Ocado's chief executive, says Warby would help the company to "expand the scope and reach of our technology into new markets and sectors"...read more
7.46am: US big tech in focus
For the many UK investors in US stocks, earnings from Microsoft Corp (NASDAQ:MSFT) and Instagram owner Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB) were published overnight, with both stocks down more than 3% in post-market trading.
This was despite Microsoft reporting better earnings than expected for its fiscal first-quarter, with the standout performer being its cloud segment, while there was a slight decline in profit margins reflecting increased investments in research and development.
Meta Platforms turned in results for the third quarter that strongly beat Wall Street estimates but said the new quarter would be below forecasts.
7.29am: Shell adds another share buyback as profits fall less than expected
This morning's corporate results are dominated by Shell PLC (LSE:SHEL, NYSE:SHEL), the second largest company in the FTSE 100, which has unveiled a smaller decline in third-quarter profits than expected and announced a new $3.5 billion share buyback.
The oil and gas supermajor reported quarterly adjusted profits of just over $6 billion, down 4% from the second quarter and compared to a year ago, but around 12% better than the average forecast.
Free cash flow of $10.8 billion was up around $650 on the previous quarter and $3 billion versus a year ago.
Shell paid $5.7 billion of shareholder distributions in the quarter, with $3.5 billion spent on the share buyback declared for the second quarter and $2.2 billion on dividends, and the same dividend of $0.3440 per share and buyback were declared for the third quarter.
7.15am: FTSE to extend losses
FTSE 100 futures are pointing to another day on the back foot for London's blue-chip benchmark, as Rachel Reeves' Budget continues to be digested.
A fall of around 20 points is being called in pre-market trading, further subtracting from the 60 points lost yesterday that saw the index close at just under 8,160, the lowest since 9 August.
The bond market's mulling of Reeves' Budget continued, with gilts rising sharply afterwards before easing back a little and remaining there overnight.
Also overnight, US stocks slide lower, with the tech-heavy Nasdaq leading the way, down 0.6%, while the S&P 500 fell 0.3% and the Dow Jones dropping 0.2%.
This was on the back of a rout for semiconductor companies, with the Philadelphia semiconductor index falling 3.35%, sparked by Advanced Micro Devices (NASDAQ:AMD) falling 11% on underwhelming results and server maker Super Micro Computer plunging 33% after its auditor resigned, citing “integrity” concerns.
Asian markets are mixed, with Japan and India down, but Hong Kong and China up.
In corporate results, Shell and Haleon are among the reporters in London this morning, and after the US market closes this evening, Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) will be in the spotlight.