Proactive Investors -
- FTSE 100 little changed, up 9 points
- Rolls Royce rises as UK confirms Tempest jet fighter project
- InterContinental Hotels lifted by Peel Hunt upgrade
10.41am: Rolls-Royce (LON:RR) rises as UK confirms Tempest jet fighter project
Shares in Rolls-Royce have advanced 1.4% following confirmation that Britain will work to develop next-generation fighter jets with Italy and Japan.
Prime minister Rishi Sunak said the defence partnership will ensure the UK and allies are “outpacing and outmanoeuvring those who seek to do us harm”.
Downing Street aims for the jets, called Tempest in the UK, to take to the skies by 2035 and serve as a successor to the Typhoon.
Sunak will launch the first major phase of the programme during a visit to RAF Coningsby in Lincolnshire on Friday.
Before the visit, he said: “The security of the United Kingdom, both today and for future generations, will always be of paramount importance to this government. That’s why we need to stay at the cutting edge of advancements in defence technology – outpacing and outmanoeuvring those who seek to do us harm.
“The international partnership we have announced today with Italy and Japan aims to do just that, underlining that the security of the Euro-Atlantic and Indo-Pacific regions are indivisible.
The Unite union welcomed the partnership.
The national officer Rhys McCarthy said: “The Tempest fighter aircraft will not only play a key role in defending our nation but also will boost the UK economy by supporting tens of thousands of aerospace jobs across the UK at BAE Systems (LON:BAES), Rolls-Royce, Leonardo, MBDA and throughout these companies supply chains.”
"Our ability to develop cutting-edge technologies to meet global power needs, teamed with our advanced power and propulsion systems means we will play a major part in the next-generation fighter jet strategy to ensure Team Tempest leads the world in the combat air sector." Rolls-Royce says on its website
9.52am: Pendragon tumbles as Hedin Mobility pulls bid
Pendragon Group shares tumbled 26% on news that Scandinavian car dealer Hedin Mobility has withdrawn its takeover approach for its UK peer blaming challenging market conditions and an uncertain economic outlook for the decision.
Hedin made a tentative offer of around 29p per share in September, which Pendragon said it was considering while also carrying out a strategic review of the whole business.
Russ Mould, investment director at AJ Bell said: “Car retailers were in strong demand during the pandemic as a shortage of new vehicles and a sudden jump in demand for used cars made the market red hot.”
“That bubble now seems to have burst as people watch their pennies and find ways to keep their existing motor running for longer rather than seeking an upgrade or changeover.”
9.44am: InterContinental Hotels benefits from Peel Hunt upgrade
Shares in InterContinental Hotels Group plc are having a good morning, up 2.5% and topping the FTSE 100 risers, as Peel Hunt upgraded the stock to buy from hold.
“We believe that IHG’s share price has been left behind in an undervalued UK market and domestically-focused subsector” the broker said.
“Given its primary exposure to a US economy in relatively good shape and a mid-market hotel subsector that has proven to be resilient, we believe its valuation will look increasingly compelling as 2023 goes on.”
Alongside the rating upgrade the broker upped its price target from 4,600p to 5,750p based on a fiscal year 2023 PE multiple of 19x.
9.36am: FCA fines Santander (BME:SAN)
The Financial Conduct Authority has fined Santander £107.7mln for "serious and persistent" gaps in the Spanish bank's anti-money laundering controls for more than 560,000 business customers.
The FCA said that between 31 December 2012 and 18 October 2017, Santander's UK arm failed to properly oversee and manage its anti-money laundering systems.
The failings created a risk of ‘prolonged and severe’ money laundering, said Mark Steward, executive director of enforcement and market oversight at the FCA.
‘Santander’s poor management of their anti-money laundering systems and their inadequate attempts to address the problems created a prolonged and severe risk of money laundering and financial crime.
‘As part of our commitment to prevent and reduce financial crime, we continue to take action against firms which fail to operate proper anti-money laundering controls.’
9.14am: Footsie little changed as City digests financial services reforms
The FTSE 100 is hovering around its opening levels, with falls in oil majors weighing on London’s blue chip index and as the City digested the sweeping reforms to the financial sector announced by chancellor, Jeremy Hunt today.
Victoria Scholar, head of investment, interactive investor said: “Hunt is trying to prove to the financial sector that he is very much pro-business and in favour of the City of London as a key growth engine to the economy.”
“However there is a risk that the Treasury is acting myopically, quickly forgetting the pre-2008 excessive risk taking that ultimately led to the global financial crisis and the introduction of new regulation to prevent another similar catastrophe.”
In the equity markets and InterContinental Hotels Group plc jumped 1.9% as Peel Hunt upgraded to buy from hold raising its price target to 5,750p from 4,600p.
Investment manager Man Group PLC surged 6.2% as it announced a share buyback programme of up to $125m and housebuilder Berkeley Group PLC rose 0.5% after it backed its full-year profit outlook despite reporting a drop in first-half profits.
"Berkeley is battening down the hatches in view of a tightening economic environment, but remains supported by its exposure to London and the South East," said interactive investor's Richard Hunter.
Among the small caps and ProCook plunged 19%. after the kitchenware retailer said sales in recent weeks have been weaker than anticipated, as consumer demand softened due to the cost-of-living crisis in the UK.
It now expects revenue for its full year to be between £60mln to £65mln, and underlying profit before tax to be approximately breakeven.
8.22am: FTSE 100 higher, UK unveils "Big Bang 2.0"
London’s blue-chip index has opened higher with the FTSE 100 up around 11 points at 7,483 following the US higher.
The Treasury has announced its reforms to the financial services industry, dubbed Big Bang 2.0, which it said will taking forward its ambition for the UK to be “the world’s most innovative and competitive global financial centre.”
Billed as the biggest shake-up since Margaret Thatcher's wave of deregulation in the 1980s, the Chancellor's proposals - published online this morning - include a relaxation of rules on what banks can do with their money; a new requirement for regulators to make London more competitive internationally; and scrapping red tape that holds back the stock market.
Hunt will set out more details in parliament today.
Banking shares were higher with Lloyds Banking Group PLC (LON:LLOY) up 0.9% and Barclays PLC (LON:BARC) up 0.5%.
Associated British Foods PLC (LON:ABF) was a touch lower, down 0.6%, as it reiterated ull-year guidance but Anglo American (LON:AAL) advanced 1% as it forecast production increases in 2023 and 2024.
7.54am: Pound gains on greenback following softening jobs US data, euro runs hot
The US Dollar Index (DXY) continues to weaken on the back of consistent signs of a cooling US economy.
Initial jobless claims have been edging higher since late August (albeit at a fairly slow pace) while forecasts for today’s producer price index expect a reading of 7.3% compared to last month’s 8%.
DXY ended Thursday’s session 0.4% lower and has so far dipped another 0.15% to 104.29 in today’s Asia trading window.
Cable jumped as a result, adding 0.2% on Thursday and another 0.2% this morning to change hands at 1.226.
The pound maintains the upper hand against the greenback – Source: tradingview.com
Sterling has the upper hand in the EUR/GBP pair this morning, though the pair has primarily range traded on 86p for the past four sessions- the current market price of 86.22p is equal to Tuesday’s closing price.
Currently buying 1.057 US dollars, the euro continues to gain against the greenback, having added 0.4% yesterday and sustaining the upper hand in the EUR/USD pair this morning.
While the UK and US seem to be weighing up the chances of peak inflation, energy costs in the euro area are a going concern, while unemployment remains at record lows and wage growth is accelerating, hence the persistently hot euro on the forex market.
"The core inflation rate is unlikely to peak until mid-2023 and will only fall slowly thereafter," Commerzbank (ETR:CBKG) economist Christoph Weil recently said. "Against this backdrop, the ECB's goal of pushing the inflation rate back to just under 2% on a sustainable basis seems a long way off."
7.39am: AB Foods holds guidance, Aggreko (LON:AGGK) buys Cresthic for £122mln
In corporate news, Associated British Foods PLC has maintained full-year guidance in a trading update.
“Our outlook for the full year is unchanged. We continue to expect further significant input cost inflation, but the volatility of our input costs has diminished” chairman, Michael McLintock said.
"We continue to expect the aggregate profit of our food businesses to be ahead of our last financial year," he added.
"At this early stage, Primark trading in this financial year has been encouraging.“
While Aggreko, the former FTSE-100 temporary power supplier, has swooped to buy Crestchic PLC in a deal that values the specialist equipment provider at £122mln.
The deal values each share in the AIM-listed group at 401p cash, a 13% premium to Thursday’s closing price of 356p and represents an implied enterprise value multiple of approximately 13.7x Crestchic's EBITDA from continuing operations.
Aggreko said Crestchic's business is well-aligned with its objective of supporting its customers through the energy sector's transition to more renewable sources of energy and will accelerate plans to target high-growth attractive end-markets such as renewable energy and data-centres.
7.00am: Footsie set for a bright start
FTSE 100 seen opening higher on Friday as US markets pushed higher following recent losses and as investors look ahead to next week’s central bank meetings.
Spread betting companies are calling the lead index up by around 20 points.
“The main focus of attention continues to be on next week’s central bank meetings of the Federal Reserve, ECB and Bank of England, and guidance on the likely glide path for rates heading into 2023, as well as two important CPI reports, one from the UK, and more importantly the November CPI report from the US” said Michael Hewson, chief market analyst at CMC Markets UK.
The S&P 500 broke its five-day losing streak and other US markets moved higher as an increase in weekly jobless claims numbers was taken as a sign that the pace of interest rate hikes could soon slow.
At the close the Dow Jones Industrial Average was up 184 points, or 0.55%, to 33,781, the S&P 500 jumped 30 points, or 0.75%, to 3,964 and the Nasdaq Composite rose 123 points, or 1.1%, to 11,082.
“We had a strong selloff over the last few days and it doesn’t take much to create even the underpinnings for a modest rally,” Quincy Krosby, LPL Financial’s chief global strategist told CNBC.
In London, a trading update is expected from Diploma PLC (LON:DPLM) while first-half numbers are due from Berkeley Group Holdings PLC (LON:BKGH). Across the pond US PPI figures are due for November along with a reading from the Michigan consumer sentiment index.