FTSE 100 Live: Stocks jump on hopes interest rates have peaked

© Reuters. FTSE 100 Live: Stocks jump on hopes interest rates have peaked

Proactive Investors -

• FTSE 100 up 45 points at 7,724
• Retail sales rise 0.4% in August
• Business activity slips in August

Phoenix Group hit by JPMorgan downgrade

One stock on the wane today is Phoenix Group Holdings PLC, down 1.7%, knocked by a downgrade by JPMorgan (NYSE:JPM).

The investment bank has downgraded the insurer to underweight from neutral and slashed its price target to 500p from 655p.

It's part of a number of changes made by the broker.

It has raised the price target for Admiral (underweight) to 1,700p from 1,650p and kept an underweight rating, cut Prudential (LON:PRU)'s price target (neutral) to 1,500p from 1,630p and Legal & General's price target (overweight) to 290p from 315p pence.

Hiscox (LON:HSX) has been upgraded to overweight from neutral with the price target lifted to 1,300p from 1,200p with Lancashire downgraded to neutral from overweight with a 715p price target, down from 750p.

Just Group (LON:JUSTJ)'s price target (overweight) goes to 125p from 120p.

Lloyds is Deutsche's preferred UK banking play

Lloyds Banking Group PLC (LON:LLOY) is motoring along, up 3.0%, lifted by positive comments from Barclays (LON:BARC) and Deutsche Bank (ETR:DBKGn).

The German investment bank said Lloyds is its preferred UK banking play, reiterating a ‘buy’ rating on the high street lender despite nudging its price target down to 62p from 63p.

“Our preference among UK domestic banks is Lloyds which we believe has a more stable deposit base; lower NIM sensitivity to deposit outflows; lower consensus expectations; and with a substantial yield,” analyst Robert Noble said.

Noble expects monetary policy to have incrementally negative impacts on the outlook for UK banks.

“As liquidity tightens we expect banks' will shrink and cost of funding will increase,” he said, adding “there is risk that the BOE passes more costs onto the banks through rate reform.”

However, he explained the current valuation of UK banks more than adequately compensates for these risks.

Noble rates Barclays PLC at hold with a price target of 200p, down from 230p, NatWest Group PLC (LON:NWG) buy with a price target of 320p down from 370p and Virgin Money UK PLC (LON:VMUK) hold with a price target of 210p, down from 220p.

Shares in Lloyds were 3.0% higher at 45.74p.

Stocks jump in weak PMI signals peak in interest rates

Ashley Webb, UK Economist at Capital Economics reckons the fall in the activity PMI further below the boom-bust level of 50.0 in September suggests the economy may well already be in recession.

"This helps to explain why the Bank of England didn’t raise interest rates yesterday (it saw the data in advance), and all-but confirms that interest rates have peaked," he notes.

"Overall, growing signs of weaker activity and easing price pressures supports our view that interest rates are now at their peak," he said, adding he given he core inflation to fall only slowly, the Bank will keep rates at their peak of 5.25% until late in 2024.

The market seems to have taken the bad news is good news for equities view, jumping 40 points, on expectations that interest rates have ideed paused.

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