Proactive Investors -
- FTSE 100 slips back to opening levels, down 4 points
- AstraZeneca (NASDAQ:AZN) to buy CinCor Pharma for up to US$1.8bn
- Chancellor to unveil revised energy support package
10.52am: Eurozone unemployment holds steady
Unemployment in the Eurozone held steady at 6.5% in November as labour markets continue to remain robust despite slowing economic growth.
Economists at ING noted many of the larger countries saw rates decline, such as France, Italy and Spain, however these were offset by large increases in Austria and Portugal.
It said “Overall, the resilient labour market is a positive for Europeans who are already seeing incomes come under pressure due to high inflation. This dampens the negative economic consequences of the inflation shock.”
But it said “with a labour market this tight, it is unlikely that unemployment will run up enough to make labour shortages a thing of the past.”
“That makes this a key risk for the ECB at the moment” ING commented.
“While there is no evidence of a wage-price spiral so far, the ECB has taken a hawkish turn and will remain worried about wage growth rising further anyway” ING said.
9.56am: Citi upgrades BT
Shares in BT Group PLC (LON:BT) dialled higher as the FTSE 100 listed telco was upgraded by Citi today.
The broker put the stock back on its buy list with a 160p price target.
It accepted BT is facing headwinds to free cash flow generation that come from record levels of investments, rising taxes and interest costs, as well as labour and energy which it said would normally render any telco unattractive hence why the stock was so weak in the second half of 2022.
But BT has some things that could move in its favour, Citi suggested, as wholesale pricing moves higher while retail prices could see a significant move not just on the back-book but also on the front-book as ISP margins get squeezed.
Shares were marked 0.8% higher in early trading.
9.44am: Chancellor to unveil revised energy support package
The chancellor, Jeremy Hunt, is expected to announce a reduction in the energy support package for business today.
The new measures to help UK firms cope with soaring energy bills are set to be
announced to MPs today, ahead of the expiry of the present support package at the end of March.
Since the start of October, the unit cost of electricity and gas for non-domestic customers has been capped to help them through the winter – which is expected to have cost over £18bn by the end of March.
But chancellor Jeremy Hunt warned UK businesses last week that the current level of energy bill support for firms is “unsustainably expensive” – a hint that support will be cut from April.
The Sun’s Natasha Clark reported Hunt will reveal another £5bn of energy help for businesses under the new measures but suggested some businesses will see support fall by 60% from the current levels.
New - Jeremy Hunt to reveal another £5bn of energy help for businesses for another year. Will today set out new system for after April.But will be sharp drop in support, and not tapered down. Some will see cash drop to 60pc of current level. More for energy intensive industry
— Natasha Clark (@NatashaC) January 9, 2023
She said there would be more support for energy intensive industries.
9.00am: Chinese reopening continues to support FTSE
FTSE 100 extended its gains, hitting a four and a half year high, as the reopening in China combined with Friday’s fall in average earnings figures in the US continued to support demand for equities.
At 9.00am London’s flagship index was up 17 points 7,716 while the upbeat mood extended to the broader FTSE 250 which jumped 97 points to 19,601.
Neil Wilson at markets.com noted “China reopening its borders fully as well as slowing wage growth and a decline in service sector in the US have fuelled a positive first week of the year for equity markets, which saw shares in London hit their highest level in four years.”
But he added a note of caution “whilst China is well positioned now - and earlier than expected - to drive global growth, the outlook on inflation and the Federal Reserve’s reaction function remain uncertain.”
“But we should not overlook the rapid reopening of China going forward, which I would expect to be more positive for UK and European indices vs US peers” he added.
Hopes that the reopening in China would boost economic growth were reflected in the FTSE 100 risers with mining stocks Antofagasta (LON:ANTO) plc, Glencore PLC (LON:GLEN) and Anglo American (LON:AAL) while Asian focused stocks such as Prudential PLC (LON:PRU) were also in demand.
A rise in the oil price gave a boost to index heavyweights, BP PLC (LON:BP.) and Shell PLC (LON:RDSa) while Experian PLC (LON:EXPN) rose 0.6% as JP Morgan reiterated an overweight rating viewing the company “as a core holding in our sector for investors with long-term horizons.”
Elsewhere BT advanced 2% as Citigroup (NYSE:C) lifted its view of the telecommunications company to buy from neutral but FTSE 250 listed Keller Group (LON:KLR) was marked 5% lower after warning that fraud in its Australian business would dent operating profits.
8.29am: Australian fraud to dent Keller profits
Keller Group PLC has fallen 5% in early exchanges after identifying fraud in its in its Austral Business Unit in Australia which is estimated to hit operating profits by around £6mln in the first half of 2022, and £8mln to £10mln relating to prior years.
Two individuals have been dismissed the geotechnical specialist contractor said.
Overall, the FTSE 250-listed company said performance in the second half has been strong meaning it expects full year operating profits slightly below the bottom end of the range of market expectations.
Expectations for 2023 and beyond remain unchanged, it added.
Peel Hunt noted the fraud was spotted by the group's internal systems and looks to be based around overstatement of revenue and profit.
As a result it has cut its fiscal year 2022 pre-tax profit forecast from £101mln to £95mln and cut EPS by 6% to c.104p.
But it kept its buy rating noting “excluding the fraud, the group indicated that trading has been pretty robust.”
8.10am: FTSE pushes higher again
FTSE 100 made steady early progress at the open on Monday continuing its bullish path so far in 2023.
At 8.10am the FTSE 100 was up 9 points at 7,708 while the FTSE 250 jumped 63 points to 19,567.
AstraZeneca PLC was in focus as it said it will pay up to US$1.8bn to acquire hypertension and chronic kidney disease therapies developer CinCor Pharma.
The deal gives the pharma giant global rights to the baxdrostat high blood pressure treatment.
The Cambridge-based group will buy outstanding CinCor shares for US$26, plus a possible extra US$10 each depending on regulatory submission of a baxdrostat product.
Under the deal the FTSE 100 listed group will pay US$1.3bn upfront, more than twice CinCor's US$515.5mln market capitalisation with the consideration rising to US$1.8bn if potential contingent value payments are made.
Another deal confirmed today was Vodafone Group PLC (LON:VOD)'’s €1.7bn sale of its Hungarian business, first announced in August. Shares slipped 0.6%.
But AIM-listed Frontier Developments PLC slumped 41% as it warned lower than expected sales from F1 Manager 2022, poor sales across the whole portfolio during the holiday period, and the uncertain contribution from Foundry in the remainder of the fiscal year 2023 meant it lo longer expects to achieve market consensus forecasts for revenue and IFRS operating profit.
On revenue the group still hopes to reach last year’s level of £114mln compared to consensus forecasts of £135mln but it could only pledge to deliver “revenue of not less than £100 million in FY23.”
Operating profits of around £10mln are expected nearly half of the current consensus for £19mln.
In reaction, Liberum downgraded the company to hold from buy and more than halved its price target to 1,000p from 2,110p.
7.42am: Airtel prepares for growth in Nigeria
Another deal to the start the week as Airtel Africa has announced it has bought 100 MHz of spectrum in the 3500MHz band and 2x5MHz of 2600MHz from the Nigerian Communications Commission (for a US$316.7mln.
The telecoms group which operates in 14 countries across Africa said this additional spectrum will support investments in network expansion, including 5G rollout, providing significant capacity to accommodate the continued strong data growth in Nigeria.
Airtel Nigeria is Airtel Africa's largest market, with significant growth potential, the company said in a statement.
7.30am: Vodafone to net €1.7bn from Hungaruan sale
Vodafone Group PLC will receive €1.7bn from the sale of its Hungarian arm, Vodafone Magyarország Zrt, to 4iG Public Limited Company and Corvinus Zrt, a a Hungarian state holding company.
The FTSE 100 listed telco confirmed today it has entered into binding terms in relation to the sale which was first announced in August 2022.
The price agreed represents a multiple of 8.4x adjusted EBITDAaL for the 12-month period ended 31 March 2022 with proceeds to be used for deleveraging.
Margherita Della Valle, Vodafone Group's interim chief executive said: "This combination establishes a scaled converged operator across mobile and fixed communications and supports the Hungarian government's goal of creating a national Information and Communications Technology champion.”
“The combined entity will increase competition and accelerate investment in the ongoing digitalisation of Hungary."
Completion of the deal is expected this month.
7.00am: Bright start to 2023 set to continue
The FTSE 100 is set to continue its winning streak at the open on Monday boosted by strong gains in the US on Friday and hopes that the reopening in China will give a boost to global economic growth.
Spread betting companies are calling the lead index up by around 22 points.
At Friday's close, US stocks were firmly in the green, with the S&P 500 closing 2.8% higher at 3,895, the Nasdaq up 2.6% at 10.569 and the Dow rounding out the pack with a gain of 2.1% to close at 33,631 points.
This came as investors took heart from stronger-than-expected non-farm payrolls figures which were accompanied by weaker than expected growth in average earnings.
As Michael Hewson chief market analyst at CMC Markets UK pointed out “The December payrolls report was at best a goldilocks report with something for everyone, bull and bear alike, with the wider question being as to what it is actually telling us about the wider US economy.”
“Markets latched onto the surprise decline in average hourly earnings which rose by 4.6% in December, well below expectations, while the November numbers were revised down from 5.1% to 4.8%, playing down concerns about upward pressure on wages.”
“in the wake of Friday’s US jobs report and the strong reaction to it, today's European open looks set to be a positive one, with Asia markets also getting a boost as China took further steps to reopen its economy, as it relaxed its zero-Covid policy further resuming travel with Hong Kong” he added.
Asian equity markets were rising on Monday. The Shanghai Composite index was 0.7% higher on Monday afternoon. The Hang Seng in Hong Kong was up 1.8%. The S&P/ASX 200 in Sydney closed up 0.6%. Financial markets in Tokyo are closed for Old Age Day.
Back in London and the corporate diary looks fairly quiet with trading updates expected from Cairn Homes plc and ( Intermediate Capital Group (LON:ICP)) PLC.