Proactive Investors -
- FTSE 100 falls 3 points to 8,281
- UK flash PMI survey shows services inflation pressures easing
- JD Sports reports improved sales growth in second quarter
- Recruiter Hays (LON:HAYS) heavily impacted by rapid hiring slowdown
Miners and ex-divs weigh, US futures dip
Despite JD Sports leading the way with a near-8% gain, dragging Frasers (LON:FRAS) and other retailers like M&S and Primark owner AB Foods (LON:ABF) with it, the FTSE has fallen into the red.
They are being offset by falls from miners such as Glencore (LON:GLEN) and Anglo American (JO:AGLJ), along with ex-dividend stocks including Legal & General and Imperial Brands (LON:IMB), down 2.7% and 1.05%.
When a share goes ex-div, any investors buying on that date or after will not receive the most recently declared dividend payment.
US futures have also dropped from earlier levels, though are still positive.
US yields rose after Kansas City Fed Bank president Jeff Schmid, when asked about jobs revisions, said more data is needed before the FOMC cuts rates.
In a CNBC interview, the noted central bank hawk said there had been some cooling in the labour market but it generally remained pretty strong.
"We've got some data sets to come in before September," Schmid said at the sidelines of Jackson Hole, Wyoming, in reference to policy meeting in four weeks' time.
NatWest one of the most popular new investments for international funds
Morgan Stanley (NYSE:MS) reckons UK equities are among the "stand out" investments around at the moment, along with AI stocks and weight-loss drug maker Novo Nordisk (CSE:NOVOb).
Strategists at the investment bank noted that international funds increased their exposure to UK stocks across all long-only fund types (ie not hedge funds that take short positions against stocks).
In fact, they note, five of six new additions to the top 35 "conviction overweight" are from the UK: 3i Group PLC (LON:III), Haleon PLC (LON:HLN), Ferguson PLC, NatWest Group PLC (LON:NWG) and BAE Systems (LON:BAES).
In terms of specific UK stocks, "NatWest stands out" with a jump in international fund positioning.
JD Sports the top riser in Europe
Just past midday and like for much of this week, the FTSE 100 is butting its head against a wall of indifference - or maybe there's just a similar amount of buyers as sellers.
The London benchmark is up 12 points or 0.15%, which is shy of the gains across the Channel, with the Paris and Frankfurt indices up 0.2% and 0.3%, while the IBEX 35 in Madrid is up 0.7%.
JD Sports is the top riser in the Euro Stoxx 600, up 9%.
US stocks are also set to head higher, with futures for the tech-powered Nasdaq up 0.3%, while the S&P 500 futures are up 0.2%.
Energy firms object to windfall tax changes
More than 40 oil and gas producers and services firms have sent an open letter to the government to object to the confirmed 3% increase to the UK's energy profits levy, aka the windfall tax, which now stands at 78% and has been extended to 2030.
The government has also removed the investment allowance and a reduction in capital allowances, which allowed the companies to offset how much tax they paid.
This "risks thousands of jobs" at companies that are "critical to the UK Government’s industrial strategy and progress towards its net zero targets", the letter from Offshore Energies UK to HM Treasury and Sarah Jones, Minister of State for Industry and Decarbonisation, says.
The firms express "grave concern" and say the plans threaten £200 billion of investment in all forms of domestic energy, including renewables.
"Sufficient investment in the UK energy transition can only happen if we support, not undermine our domestic oil and gas sector," the letter says.
Good news for the Bank of England
Economists are giving their thoughts on what August's UK composite PMI means for the Bank of England's next monetary policy committee meeting or two.
The flash PMI data "provides further evidence that some of the recent strength of activity in the first half of this year may have been due to catch-up growth following the mild recession in the second half of last year and GDP growth is slowing towards a more normal rate in Q3", says economist Ashley Webb at Capital Economics.
The small fall in the services output prices "suggests services inflation will continue to grind lower" and is consistent with services inflation continuing to ease from 5.2% in July to around 4.0% in about six months’ time.
"Overall, today’s release probably won’t be enough to trigger a back-to-back interest rate cut in September, but it lends some support to our view that services inflation will continue to fade and rates will be cut from 5.00% now to 4.50% by the end of this year."
The services inflation data "is very good news for the MPC", says Sanjay Raja, chief UK economist at Deutsche Bank (ETR:DBKGn).
But, given some of the details in the PMI report, he expects some downward revisions in the final report due at the start of September, and he think UK GDP growth continues to track at "around a 0.4% quartter-on-quarter pace for Q3-24. And we still expect 2024 GDP to expand by 1.2%."
Also on the services inflation details, Peter Arnold, EY's chief UK economist, says, "with a majority on the monetary policy committee now less data-dependent, and signalling a cautious approach to loosening policy going forward, there was nothing in today's data that is likely to alter the MPC's thinking ahead of the September meeting".