Proactive Investors -
- FTSE 100 loses early gains, down 9 points
- Experian knocked by Credit Suisse (SIX:CSGN) downgrade
- OBR could reduce UK growth forecasts - reports
10.47am: Experian knocked by Credit Suisse downgrade
Other shares on the move today include credit checker, Experian PLC (LON:EXPN), which topped the FTSE 100 fallers, losing around 3% hit by a downgrade by Credit Suisse.
The bank lowered its rating to ‘neutral’ from ‘outperform’ with a reduced price target of 2,900p (down from 3,250p).
“In our view, Experian is a high-quality company with preferred positioning within its core markets, expanding to additional verticals, and executed a 2015-16 turnaround; however, we see it as fairly valued at current levels” analysts said.
Credit Suisse said that near-term catalysts are primarily related to the macro environment “given exposure to consumer credit” but longer-term it believes the group will face increased competition in the next decade-plus across its product portfolio from the expansion of Open Data.
“While we believe the bureaus will be vital to enhancing financial data in the future, Open Data democratises access to data, allowing individuals to control access to their own information, which could decrease pricing power over the core dataset” analysts wrote.
They also noted Equifax’s acquisition of Boa Vista Serviços is likely to increase competition in Brazil.
10.36am: OBR reportedly to reduce UK growth forecasts
The Office for Budget Responsibility (OBR) is set to revise its growth forecasts downwards after warning chancellor Jeremy Hunt that it overestimated the prospects for medium-term growth in the economy.
A report in The Times said the OBR told the chancellor of the news in a private submission to the Treasury, with the downgrade wiping out all of the £9.2bn headroom in Hunt’s autumn statement and limiting his scope for manoeuvre as he draws up plans for the budget in March.
In November the OBR forecast that while the economy would shrink by 1.4% this year it would pick up next year, with GDP averaging about 2.6% over the rest of the forecast period.
But The Times understands that the OBR intends to reduce its forecasts by between 0.2% and 0.5% due to weakness in the economy and shortages in the labour market.
It now believes that, while any recession this year will be “shorter and shallower” than expected, the long-term economic prospects are bleaker.
The forecasts are significant because they could require Hunt to pencil in further savings in his March budget to keep within the fiscal rules he set in November to reduce debt.
The report came a day after worse than expected government borrowing figures for December and as the government wrestles with soaring inflation and a slowing economy.
10.07am: Inland Homes plunges
Shares in Inland Homes PLC (LON:ILND) plunged 30% after the company warned of further losses in the current fiscal year which will mean it has breached a number of lending covenants.
The AIM-listed company said it anticipates losses for the financial year and net assets at approximately £90.0mln and has increased provisions for its remaining construction projects to £28.8mln from £15.4mln.
With the increased provisions and losses Inland Homes said it remains “a going concern”, but it does mean that the group “will have breached the net assets and gearing covenants with one lender and the net asset and quick asset ratio covenants for another lender, where the group's combined borrowings are currently £49.3m.”
The company is in talks to secure waivers for both the existing and any forecast expected future covenant breaches for the two lenders concerned, it said.
“Whilst the board believes that these waivers will be forthcoming, they consider that if required, these borrowings can be refinanced.”
As part of an ongoing review the company also announced plans to sell a number of non-core assets as well as reporting the completion of a £9.5mln sale of its greenfield "strategic land" option portfolio consisting of 2,822 potential plots.
10.02am: Bank of England agrees pay deal
The UK's central bank has averted the threat of industrial action by getting staff to accept a below inflation pay rise.
Workers at the Bank of England will receive a 3.5% pay rise and a one-off 1% salary boost this year in a deal agreed by the Unite union.
The lowest paid staff will receive the largest increases, in order to shield them better against the cost of living crisis, while senior staff will only see their pay packets increase by 1%.
The Bank's governor, Andrew Bailey, declined a pay rise, keeping his compensation at around £598,000.
9.40am: German business optimism rises in January
Over in Europe, and further signs for cautious optimism, as the closely watched IFO business climate index rose to 90.2 points in January from 88.6 in December.
Confidence improved in both manufacturing and the service sector, according to Clemens Fuest, the Ifo president.
German IFO Business Climate Jan: 90.2 (est 90.3; prev 88.6)- German IFO Current Assessment Jan: 94.1 (est 94.9; prev 94.4)
- German IFO Expectations Jan: 86.4 (est 85.3; prev 83.2)
— LiveSquawk (@LiveSquawk) January 25, 2023
In manufacturing, companies said their current situation had improved along with their expectations for the next six months.
Order volumes are still declining, but production is set to increase in the months ahead.
While service firms were less pessimistic about the months ahead, they said their current business was performing less well, in particular in transport and logistics, and hospitality.
Optimism improved notably in trade while confidence in construction rose only slightly.
ING Economics noted the renewed optimism but said it “is still based on very fragile fundamentals.”
“While the drop in the current assessment component illustrates that the economy is definitely not out of the woods yet, expectations continued to improve” ING said.
“Lower wholesale gas prices and the reopening of the Chinese economy have boosted economic confidence.”
“However, the fact that the German economy seems to have avoided the worst doesn’t automatically mean the outlook is rosy.”
9.20am: Ascential soars on break-up plans
One stock on the move today was Ascential PLC (LON:ASCL), the information, analytics and eCommerce optimisation group.
The company announced a strong trading update alongside plans to split the business.
Ascential said it plans a US public listing for the Digital Commerce business, the sale of WGSN while the remaining Events business will have a standalone UK listing as Ascential PLC (LSE:ASCL).
Peel Hunt said the news today “does not come as a surprise.”
“For Ascential, we have long stressed that the underlying assets are worth more than the combined group and thus management is now taking steps to maximum the value.”
The company also said it expects full-year revenues to be at least £520mln, ahead of forecasts, and adjusted EBITDA to be at least £118mln, again ahead of the top end of the current consensus range.
9.02am: Footsie pushes higher, airlines soar
The Footsie pushed higher in early exchanges helped by a fall in UK producer price inflation in December which hit a nine-month low with factory gate prices up 14.7% in December against 16.2% in November.
At 9.00am the FTSE 100 was 11 points to the good at 7,769 while the FTSE 250 jumped 130 points to 19,986.
But in a sign inflationary pressures haven’t gone away yet, Australia’s annual inflation rate hit 7.8% in the fourth quarter, topping expectations driven by higher food and fuel prices.
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown (LON:HRGV) noted the jump in inflation “led to expectations that the Reserve Bank of Australia will plough on with a rate rise next month.”
Back in London and it was all about the airlines as strong results, and raised guidance from easyJet (LON:EZJ) PLC, propelled International Consolidated Airlines Group (LON:ICAG), the owner of British Airways, to the top of the FTSE 100 risers, up 3.2%, while Wizz Air Holdings PLC (LON:WIZZ) was another beneficiary, up 7%.
EasyJet itself was around 10% higher.
BA Systems PLC was another early riser, up 1.25%, on reports that Germany and the US are planning to send tanks to Ukraine while Aviva PLC (LON:AV) continued to attract support, up 2.3%, after its trading update.
An upbeat trading statement and plans to split its digital assets drove shares in Ascential PLC 25% higher.
The company said full-year revenues and adjusted EBITDA were set to be ahead of market expectations and announced plans to separate its world-wide Digital Commerce assets into an independent, publicly traded company listed in the US, as well as the sale of WGSN, with the Events businesses continuing with a UK listing as Ascential PLC.
But JD Wetherspoon failed to cheer investors with shares falling 2% as it said like-for-like sales in the 12 weeks to 22 January were 17.8% higher than a year earlier but 2% below pre-pandemic levels.
Broker Peel Hunt noted this was a slowdown after previously being up 0.4% over the first 14 weeks to early November while the risk to forecasts was “on the downside”.
8.28am: Profit growth could push easyJet back to FTSE 100
EasyJet PLC remained a star performer in the early exchanges, up 9.8%, and its continued growth could see it back in the FTSE 100.
John Moore, senior investment manager at RBC Brewin Dolphin, said: “easyJet’s results are a classic recovery story, with the airline on track to beat profit expectations in the second half of this year.”
“At a £3.4bn market cap, easyJet is not far away from a return to the FTSE 100 and, if the airline can deliver on expectations, it should get there later this year” he suggested.
He noted more people are beginning to travel again, while the airline has reshaped its routes and proposition.
“Fuel costs continue to be a drag on easyJet and consumer confidence is a potential headwind, but the company is relatively well hedged and bookings are strong for the year ahead” he said.
8.15am: FTSE edges higher
London’s blue-chips nudged higher at the open encouraged by a fall in producer price inflation figures in December.
At 8.15am the FTSE 100 was up 8 points at 7,766 while the FTSE 250 rose 22 points to 19,877.
UK producer input prices rose by 16.5% annually in December, slowing from the 18.0% annual rise seen in November, according to the Office for National Statistics.
On a monthly basis, input prices fell 1.1% in December, compared to a revised monthly fall of 0.2% in November.
In corporate news, easyJet PLC continued to fly high, adding a further 6.6% to the gains already this year after it said full-year profits would beat market expectations.
The budget airline operator has seen strong bookings at the airline and easyJet Holidays as the travel industry continues to rebound following the pandemic.
Shares in insurer Aviva PLC rose 1.1% as it held guidance for the year despite taking a £50mln hit from claims following the cold weather in the UK in December.
The sector had been slightly unnerved by a warning from online insurer, Direct Line, earlier in the month.
Tullow Oil PLC (LON:TLW) was also in favour as the West Africa-focused oil producer said it expects its 2022 free cash flow at US$267mln. slightly ahead of previous guidance and up from $245mln in the previous year.
Shares jumped 3.4%.
Elsewhere and Royal Mail (LON:IDSI) boss Simon Thompson has been asked to clarify a number of statements to the Business, Energy and Industrial Strategy (BEIS) committee last week "at the earliest opportunity", the committee's chairman Darren Jones said.
7.55am: Bookings flying at easyJet, profits seen above City forecasts
Upbeat trading news from easyJet PLC.
The budget airline operator, forecast full year profits ahead of current City guidance as it reported a big fall in pre-tax losses in quarter one.
“Based on current high levels of demand and strong bookings, easyJet anticipates beating the current market profit expectations for fiscal year 2023” the company said.
Quarter one pre-tax losses were £133mln, down from £213mln last year, with a 47% increase in passenger numbers, a 36% advance in revenue per seat (RPS) and a 10 percentage point rise in the load factor.
Ticket yields were 21% higher year-on-year while easyJet Holidays delivered a £13mln pre-tax profit compared to a £1mln loss last year.
Looking ahead and quarter two RPS is expected to continue the trends seen in quarter one with the airline and easyJet holidays delivering record revenue booking days in January.
This booking strength has continued across quarter two and into summer 2023 and the company has upgraded expectations for customer growth at easyJet Holidays to around 50% from over 30% previously.
EasyJet also said first half pre-tax losses are expected to be “significantly better” than the first half of 2022.
7.36am: Producer price inflation eases in December
Producer input prices rose by 16.5% in the year to December 2022, down from 18.0% in the year to November, and down from 20.2% in the year to October, according to the Office for National Statistics (ONS).
Producer output (factory gate) prices rose by 14.7% in the year to December 2022, down from 16.2% in the year to November and down from 17.5% in the year to October, the ONS said.
We’ve published data for November and December 2022’s producer price inflation (PPI), as well as an updated back series.➡️ https://t.co/oUOtloBNPp
— Office for National Statistics (ONS) (@ONS) January 25, 2023
Inputs of other parts and equipment, and petroleum products provided the largest downward contributions to the change in the annual rates of input and output inflation, respectively.
On a monthly basis, input prices decreased by 1.1% and output prices decreased by 0.8% in December 2022.
Services producer prices rose by 5.2% in the year to quarter four, down from a record high of 6.2% in the year to Quarter three.
The ONS added Producer Price Index (PPI) weights for 2021 and 2022 have been corrected, which has resulted in a small number of revisions within the previously published data back to January 2021.
7.27am: Aviva holds guidance, cold weather costs £50mln
Aviva PLC’s general insurance businesses in the UK, Ireland and Canada continued to trade positively over the closing months of 2022, demonstrating the clear benefits of our diversification across GI products and geographies.
In a trading update, the FTSE 100 listed insurer forecast a full year 2022 group combined operating ratio of c.94.6%1, consistent with the guidance given at its quarter three trading update in November.
Aviva said its dividend guidance and outlook for capital returns also remain unchanged.
The company said weather claims for the full year were broadly in line with long-term averages and marginally above in quarter four with claims slightly higher in the UK & Ireland (+0.4 percentage points) but lower in Canada (-0.9 percentage points).
Aviva put the cost of December’s freezing weather in the UK at around £50mln.
“We continue to price appropriately for the high inflation environment, in particular in UK Personal Lines, responding at pace to emerging data and trends” Aviva concluded.
7.00am: FTSE 100 expected to open slightly higher
The FTSE 100 is expected to edge higher on Tuesday with investors awaiting the latest UK producer price inflation figures before the market opens and the interest rate decision from the Bank of Canada later in the day.
Spread betting companies are calling London’s blue-chip index up by around 5 points.
The German IFO business sentiment index is also due with January number expected to show an improvement to to 90.3, with the current assessment also set to improve to 94.9, and expectations set to rise to 85.3, from 83.2.
In Canada, the Bank of Canada is widely expected to increase interest rates by 25 basis points with analysts expecting this to be the last rise.
In the US the Dow led the way at the close with a gain of 0.3% to finish at 33,734 points, but it was the only winner out of the three main indices: the S&P 500 finished flat at 4,012 and the Nasdaq had dropped 0.3% at 11,334 points.
Results from the bell from Microsoft (NASDAQ:MSFT) were mixed with earnings beating Street forecasts but revenues coming in below. Shares rose in after hours trading though.
Back in London and trading updates are expected from easyJet PLC and CMC Markets.