Proactive Investors -
- FTSE 100 advances 18 points to 8251
- British Gas owner Centrica (LON:CNA) says performance in-line
- Discount retailer B&M profits hit top end, but no guidance provided
Mid-caps in the red
The FTSE 100 continues to dawdle just above the flatline, while the FTSE 250 has fallen into the red, down 20 points.
Biggest fallers are Ninety One PLC (LON:N91), down 6% after publishing annual results showing lower adjusted PBT, though it was 3% above consensus expectations, principally due to stronger revenues.
The company provided analysis showing that fund flows were more negative than expected, down £9.4 billion, which analysts at Peel Hunt (LON:PEEL) said implies an acceleration in the second half to offset better-than-expected market movements and FX.
It is followed by an oil & gas sector trio, E&P groups Energean Gas (LON:ENOG) and Harbour Energy (LON:HBR) , along with services provider Hunting (LON:HTG), down either side of 2%.
PMIs positive news on inflation
Economists say the PMI survey suggests UK growth will slow in the second quarter compared to the first, but offers good news on inflation.
Rob Wood at Pantheon Macroeconomics says the "big news" in the PMI survey was further signs of easing inflation pressure, which he said provided encouragement for the Bank of Engand's monetary policy committee, as the services input and output price indices both dropped.
"The PMI suggests April’s blowout services inflation print was a flash in the pan and should not be taken as a sign of strong annualised inflation continuing. Slowing services inflation can keep the MPC on track to cut rates in August, as we expect," Wood says.
Peter Arnold, EY UK chief economist, says the PMI indicates quarter-on-quarter GDP growth will slow from the 0.6% increase in Q1.
“On the inflation front, May's services survey reported that input costs rose at their slowest pace for three years, after the large national living wage increase had caused a significant rise in labour costs in April.
"Together with evidence of a further slowdown in prices charged inflation, this is consistent with the idea that services inflation will continue to cool through the summer," says Arnold.
New US alternative stock exchange in Texas?
A story broke last night about a new splinter national stock exchange in Texas, looking to offer an alternative with lower regulation and fees that the New York Stock Exchange and Nasdaq.
The new Texas Stock Exchange group, which is being backed by Wall Street heavyweights BlackRock (NYSE:BLK) and Citadel Securities, has raised approximately $120 million.
The Texas Stock Exchange CEO James Lee told The Wall Street Journal that the group plans to file registration documents with the US regulator, the Securities and Exchange Commission, later this year, to start trading in 2025 and welcome a first listing in 2026.
Net fund inflows for first time in 11 months
New fund flow data from Morningstar points to a turning point, with UK-domiciled funds gathering £861 million in April, the first positive outcome in 11 months.
Flows into fixed-income strategies were the key driver, while passive strategies recorded net inflows at the expense of actively managed strategies, which saw further redemptions.
Investors put money into global large-cap equity funds and those focused on Japan, while the flow out of UK equity funds was continued.
Breaking the trend of previous months, Morningstar said sustainably labeled strategies saw lower inflows compared with their mainstream counterparts.
In terms of individual funds, Fidelity Index World saw continued growth in assets with year-to-date net inflows surpassing £1 billion, while the biggest outflows were from Federated Hermes Short-Term Sterling Prime and Jupiter UK Special Situations.
Private car sales 'remain weak'
The SMMT data "remains weak, suggesting consumer caution", says economist Rob Wood at Pantheon Macroeconomics.
With private sales dropping 12.9% year-over-year, the twelve-month average of monthly private registrations is the weakest since October 2021.
"Seasonally adjusted private sales have fallen 2.6% so far in 2024. Some of that weakness, however, could reflect the strength in Business and Fleet registrations, which continue to rise."
He says car registrations are "performing worse than even the weak major purchases balance of GfK's survey would suggest".
The push-back to expectations of a first Bank of England interest rate cut will depress car sales, Wood said, but he still expects sales to recover later this year "as household real incomes continue to grow strongly and the underperformance of registrations over the past three years suggests leads to strengthening replacement demand".
UK services sector has good news on inflation
The UK services PMI for May is in, coming in at 52.9 as expected, down from the high of 55.0 in April.
Following the manufacturing survey released earlier in the week, the PMIs imply GDP growth of around 0.3% so far in the second quarter.
Hiring activity rises but labour market tightness is a constraint, says S&P Global, which carries out the survey, with better news on inflation, with the slowest increase in prices charged for over three years.
Joe Hayes, principal economist at S&P Global, said the survey showed "another reasonable rate of expansion in the UK service sector".
"Of particular interest to the immediate outlook for the UK economy will be the prices measures, with the Bank of England potentially moving to cut interest rates as soon as this month.
"The PMI surveys show prices for UK services rising at the slowest pace for over three years. That's now three months on the trot that selling price inflation in the service sector has eased – this will be very encouraging to the Monetary Policy Committee and suggests the trajectory of services prices is moving in the right direction.
"It is worth noting however that the PMI's gauge of UK services inflation is still sitting well above its pre-pandemic trend, which may give more weight to those suggesting the Bank of England hold out until August to loosen policy."