Proactive Investors -
- FTSE 100 just above session low of 7,879
- Wall Street to extend rally on final session of February
- Ocado (LON:OCDO) Group tumbles as Ocado Retail posts loss
Norse Atlantic bound
Fledgling Norwegian low-cost carrier Norse Atlantic Airways has announced it will serve more US destinations from Gatwick than any other airline this summer, according to newspaper reports.
The airline said it will add Boston, Los Angeles, San Francisco and Washington DC to its transatlantic operations from the West Sussex airport. It already connects Gatwick with New York, and recently announced it will serve Orlando and Fort Lauderdale from May.
Norse began flying between Gatwick and New York in August last year, with return trips available from £255.
The airline – which exclusively operates Boeing (NYSE:BA) 787 Dreamliner aircraft – hopes to succeed where Norwegian Air Shuttle (NAS) failed.
NAS operated transatlantic flights with low fares but axed its long-haul operations in January 2021 due to heavy losses. It was founded by Bjorn Kjos, who resigned as chief executive in July 2019 and holds a minority stake in Norse.
The increase in Norse’s flights signals a ramp-up in competition with legacy carriers such as British Airways (LON:ICAG) and Virgin Atlantic, which has moved most of its flights to London's Heathrow airport with Gatwick slots to be transferred to transatlantic joint-venture partner Delta Air Lines (NYSE:DAL).
Juggling miners
Analysts at US bank Citigroup (NYSE:C) think mining companies face a tricky juggling act in 2023 as price rises tail off while costs continue to rise.
After reviewing the latest results and updates from the big mining sector, the bank's earnings estimates for the miners have come down by between 2-10%, though its analysts said a lot of this stems from a lower coal price assumption.
Two key takeaways from the numbers were the potential for a production pickup in copper (Quellaveco and Los Pelambres ramp up) but only a moderate year-on-year decline in unit cost inflation, implying that comparable unit costs will still go up in 2023.
On the upside, the potential for a release of working capital remains a possible sector cash flow boost.
Glencore (LON:GLEN) and Anglo-American remain the bank’s preferred picks.
1.30pm: Here’s a look at some of the top risers and fallers on the markets so far today
Shares in hedge fund Man Group jumped 7% in the first hour of trade after the hedge fund group’s performance beat market expectations.
A 4% dip in assets under management ranked as a success against a backdrop of stock and bond market falls, alongside a series of central bank rate hikes.
Safestay saw its shares leap 10% higher to 22p in early trade on Tuesday after the hostel operator said its performance is returning to pre-pandemic levels.
Revenues for the 12 months to 31 December 2022 are expected to come in at £19mln, ahead of market expectations and up from £6.4mln the year before, when trading was restricted by COVID-19 lockdowns, the group said.
Shares in Manchester United plc fell 9.2% overnight after rumours that the Glazer family may decide not to sell their majority stake.
None of the bids, of which two have been made public so far – from Jim Ratcliffe’s Ineos Group and Qatari sheikh Jassim bin Hamad Al Thani - are high enough to persuade the Glazers to sell, according to media reports yesterday.
Baron Oil PLC (LON:BOIL) was seen 17.5% lower after a competent person's report (CPR) was published by consulting firm called ERC Equipoise today.
The CPR is an independent document designed to provide stakeholders with an assessment of the potential of oil and gas assets.
Marginal gains seen in the US
US stocks are expected to edge higher at the start of the final trading session of February, however, despite a solid start to the year, the major indexes are on pace for their second negative month in three.
In pre-market trading, futures for the blue-chip Dow Jones Industrial Average (DJIA), the broader S&P 500, and the tech-laden Nasdaq 100 were all up 0.1%.
On Monday, the DJIA closed 72 points, or 0.2% higher at 32,889, while the S&P 500 and Nasdaq Composite gained 0.3% and 0.6%, respectively.
As of Monday’s close, the DJIA is down 3.5% for the month and the only major index negative for the year. Both the S&P 500 and Nasdaq Composite are positive in 2023, but down 2.3% and 1%, respectively, in February.
James Hughes, Global Head of Brand at Scope markets commented: "US futures made a solid start to the overnight session but momentum has been ebbing away since ... A mixed session in Asia and a weaker start in Europe is doing little to lend support here, whilst month-end position-keeping also has the ability to provide a degree of influence."
He added: "US economic data remains something of a mixed bag with yesterday’s better-than-expected pending home sales print again adding weight to policy hawks at the Federal Reserve.
Later in today’s session, the Chicago PMI print and Consumer Board Confidence figure will both be in focus, with upbeat prints here unlikely to offer any respite for equities, either."
Also on the economic front on Tuesday, investors will eye wholesale inventories and the S&P Case-Shiller home prices index.
On the corporate front, in after-hours moves following news, Zoom Video rose after posting strong earnings, while Occidental (NYSE:OXY) Petroleum fell after posting a top-and-bottom line miss.
More retail earnings reports are due for release on Tuesday, including results from Target (NYSE:TGT), AutoZone, Rivian Automotive, Norwegian Cruise Line Holdings and AMC Entertainment.
Ahead of the US open and the FTSE is standing at 7,900.11, down 35.00 points, or 0.44%.
12.30pm: AB Foods (LON:ABF) extends gains, Citi and Deutsche raise target
Heading into the afternoon and the FTSE 100 has recovered some ground lost earlier in the session but remains in the doldrums, down 28 points.
Banks have provided support with NatWest (LON:NWG), Lloyds, Barclays (LON:BARC) and HSBC all higher. Strong inflation figures in Spain and France together with record food price figures from Kantar suggested interest rates may have to move higher from current levels, an environment which is generally supportive to banks.
Elsewhere in the sector Spanish rival Santander (BME:SAN) said it intended to pay 50% of profits out to shareholders today, sending shares higher.
AB Foods gained a further 1.7% following yesterday’s strong statement in which it raised guidance for the coming year. Citi raised its price target to 2,100p from 1,900p while Deutsche Bank (ETR:DBKGn) was more bullish, lifting its target from 2,180p to 2300p.
Reiterating a ‘buy’ rating the German bank said: “The pre-close trading update reinforced our positive view on AB Foods with a better Primark sales and margin performance and robust performance across the Food businesses more than offsetting the weaker sugar performance.”
The broker raised EPS estimates for the next three years by 4%, 5% and 9% respectively.
“AB Foods remains one of our top picks in the European retail space given the strong Primark LFL, new space and margin recovery in addition to the robust Food businesses performance and benefit from £500m share buyback.”
IEA warns increased Chinese demand could lift gas prices
The International Energy Agency has warned of a possible rise in natural gas prices to new records, spurred on by unpredictable consumption rates in China.
Although prices fell in recent months, this could change in the current year as demand in Asia and especially China picks up, the IEA said in its gas market report published in Paris on Tuesday.
As the world's largest importer of natural gas, China recently lifted the Covid restrictions that dampened domestic demand last year, the report noted.
After last year's turmoil, global natural gas markets are set to remain tight in 2023Our latest report forecasts the world's gas demand will be flat this year, but major uncertainties persist around the potential for further Russian supply cuts ⬇ https://t.co/Wf6tneoBBc
— International Energy Agency (@IEA) February 28, 2023
In an optimistic scenario, renewed demand growth for liquefied natural gas in China could be as high as 35%, according to the IEA. This would trigger fierce competition in international markets and could lead to gas prices returning to the unsustainable levels of last summer - a particular concern for European buyers.
"Last year was exceptional for global gas markets. Prices are returning to tolerable levels, especially in Europe, where a mild winter and a drop in demand contributed to cooling markets," said IEA's director for energy markets & security, Keisuke Sadamori.
"China is the big unknown in 2023, and if global LNG demand returns to pre-crisis levels, it will only increase competition in global markets and inevitably drive prices up again."
Santander plans to return up to half of profits to shareholders
After the disappointing UK bank reporting season comes better news from Santander.
The Spanish bank said on Tuesday it intends to increase pay-outs to shareholders to 50% of profits from 40% as the lender laid out plans for higher profitability and growth alongside full-year results.
The Madrid-based lender which bought UK building society Abbey National in 2004 is targeting a return on tangible equity of 15-17% for the next three years (2023- 2025), while delivering double-digit average annual growth in tangible net asset value per share plus dividend per share through the cycle.
By 2025, it is aiming to add 40mln customers, which would take its total to 200mln.
"This will help to grow revenues by 7-8% per year on average in constant euros in 2023-2025. Furthermore, through its ongoing transformation, the bank expects to improve its efficiency ratio from 45.8% to 42% by 2025," Santander added.
In 2023, the bank expects to continue to generate further, profitable growth, targeting double-digit revenue growth; a ROTE of above 15%; cost of risk below 1.2%; a cost to income ratio of 44-45%, and CET1 above 12%.
In 2022, attributable profit rose to €9.61bn, 18% more than 2021, a new record. Underlying profit also amounted to €9.61bn, up 11% year-on-year.
The lender declared a 5.95c per share final dividend, taking the annual pay-out to 11.78c which was an increase of 18%.
In the UK, underlying attributable profit totalled €1.4bn in in 2022, down 9% compared to 2021, hit by rising bad debt provisions and a €127mln charge relating to a settlement agreed with the FCA regarding AML controls prior to 2017.
Total income was up 12%, driven by strong net interest income growth (+13%) benefitting from higher mortgage volumes and margin management in a rising interest rate environment.
Costs rose 3% and bad debt provisions increased to €316mln.
Shares in Santander rose 4.9% in Madrid on Tuesday to €3.72 per share. In London, banking shares were a firm feature helping pull the FTSE off its lows.
Lloyds Banking Group PLC rose 1.6%, Barclays PLC 1.1% and HSBC Holdings PLC 1.1% leaving the Footise at 7,907.82, down 27.29 points, or 0.34%, well off earlier lows of 7,884.75.
FTSE 100 line-up seen unchanged in latest reshuffle
The latest FTSE reshuffle is set to see Moonpig fly out of mid-cap index and a sausage-skin maker staging a temporary entry, according to Susannah Streeter at Hargreaves Lansdown (LON:HRGV).
She said the FTSE 100 line-up is set to stay unchanged but Moonpig, 888 Holdings (LON:888) and Videndum look set to be relegated from the FTSE 250.
Heading upwards are sausage skin maker Devro, STEM recruiter SThree while North Sea oil producer Ithaca Energy is set to join the FTSE 250 following its IPO.
The FTSE All Share Index quarterly review is based on closing prices and market capitalisations today and will be announced by FTSE Russell on 1 March with changes taking effect the close of business on 17 March.
Sterling edges higher but NI deal not seen as boosting UK growth
Sterling edged higher on Tuesday extending yesterday’s 1% gain lifted by the the announcement of a deal between the UK and the EU over post-Brexit trading arrangements for Northern Ireland.
While retail data from Kantar showing grocery inflation hit a record high of 17.1% in the four weeks to 19 February which followed last week’s strong PMI figures increased concerns that the Bank of England may increase interest rates again. There had been hopes that the central bank would pause the current tightening cycle.
Economists doubt whether the UK/EU deal over Northern Ireland will change the growth picture in the UK enormously but it does remove a deal of uncertainty.
Samuel Tombs at Pantheon Macroeconomics said the deal is “unlikely to provide a material boost to economic growth.”
He said evidence that the current arrangements have dampened economic activity are not compelling.
He did feel that it would improve the economic performance of some import-intensive businesses, such as retailers.
Oxford Economics agreed and thinks it is “overly optimistic” that the deal would provide a big boost to business investment.
The pound was 0.2% higher at US$1.2080 mid-morning in London. Meanwhile, the FTSE 100 is back above 7,900 at 7,902.99, down −32.12 points, 0.40%.