Proactive Investors -
- FTSE 100 ticks up 39 points
- UK business confidence falls
- US considers Google breakup
Business confidence falls for first time this year ahead of Budget
Business confidence across the UK has dropped for the first time in a year ahead of this month’s Budget, figures showed on Wednesday.
The Institute of Chartered Accountants in England and Wales’s (ICAEW) Business Confidence Monitor fell from 16.7 to 14.4 in the third quarter.
Though this was still double the pre-pandemic average, the figure dropped for the first time in 12 months as businesses appeared to be bracing for the October 30 Autumn Budget.
ICAEW chief executive Alan Vallance noted firms were becoming “increasingly reluctant to invest” and were “troubled by the tax burden”.
Britain’s new Labour government has previously warned the Budget will be “painful,” with tax hikes expected as ministers grapple with a slated £22 billion “black hole” in public finances.
The survey showed firms still expected an uptick in domestic and export sales over the coming year, though these had weakened compared to the previous quarter.
This came after business reported export growth slowed to 2.7% from 3% previously in the third quarter, while domestic sales climbed by 3.8%, against 3.3% beforehand.
“These figures suggest a slight reality check for the UK economy,” ICAEW Economics Director Suren Thiru added.
“Weaker expected export and investment activity, alongside fears of a painful Budget, dented business confidence.”
Vistry under pressure again as Deutsche cuts targets
Vistry Group (LON:VTYV) led the FTSE 100’s fallers yet again on Wednesday as the housebuilder came under further pressure following a share price target downgrade by Deutsche Bank (ETR:DBKGn).
Shares in the housebuilder had tanked on Tuesday after it warned profits would be lower over the next three years due to an underestimation of building costs.
Costs were said to have been understated by £115 million across nine developments within its southern division, with Vistry noting this would deal an £80 million blow to profit this year, before £30 million and £5 million in 2025 and 2026 respectively.
Deutsche analysts said expectations for profits over the three years were being reduced as a result.
A ‘buy’ rating was reiterated as brokers highlighted Vistry’s assurances that the issues were confined, meaning the housebuilder’s medium-term targets were left unchanged.
However, Deutsche slashed Vistry’s share price target from 1,180p to 1,513p.
“If this proves to be a one-off problem, Vistry's shares have the potential to bounce back strongly,” Deutsche said.
“However, if this proves to be a wider issue, there could be further downside risk.
Vistry shares fell by 2.9% early on Wednesday.
Coventry Building Society ups mortgages in bad news for borrowers
Coventry Building Society is raising rates on selected mortgage products in the first hike by a major lender in weeks.
Lenders have universally been cutting rates in recent months in anticipation of more base rate cuts from the Bank of England.
But with the Budget this month and comments from Chancellor Rachel Reeves that Labour intends to raise allowed borrowing limits to fund its planned spending UK 10-year gilt yields have risen to to 4.20% currently from 3.75% in mid-September.
The situation in the Middle East and mixed signals on the US economy have also increased nervousness in the money markets, said brokers... Read more
‘HS2-light’ reportedly under consideration by ministers
Proposals to extend the HS2 rail link across the north in a more cost-effective way are reportedly being mulled by senior government ministers.
According to The Times, plans for an ‘HS2-light’ railway between Birmingham and Manchester are being considered.
This would see a link built from Birmingham to Crewe to provide a faster service than the existing West Coast mainline, but that was slower than the scrapped high-speed service, reports said.
Transport Secretary Louise Haigh was said by culture secretary Lisa Nandy to be looking “very seriously” at plans to boost transport investment in the north.
Former prime minister Rishi Sunak had ditched plans for the high-speed link beyond Birmingham, with the news coming after assurances on Tuesday that the line would stretch all the way to Euston, rather than ending on the outskirts of London.
US mulls breakup of Google
The US Department of Justice has alluded to a potential break-up of Google after a federal judge ruled it to be a "monopolist" earlier this year.
Following judge Amit Mehta's competition decision, DoJ lawyers said in a filing that they are considering "behavioral and structural remedies" for the business owned by Alphabet (NASDAQ:GOOGL) Inc.
The remedies necessary to restrain Google from maintaining its monopoly "could include contract requirements and prohibitions; non-discrimination product requirements; data and interoperability requirements; and structural requirements," the DoJ said... Read more
Chinese stocks tumble in worst day since 1997
Chinese stocks on Wednesday faced their largest declines in years as a lack of new stimulus measures to buoy the country’s struggling economy continued to hit sentiment.
An 8.2% decline for the Shenzhen Composite Index marked its worst day since 1997, while the benchmark CSI 300 dropped by 7.1% and at the fastest pace since February 2020.
Traders had been awaiting news of a string of new economic stimulus measures at a government press conference on Tuesday, following a week-long holiday in the country.
However, no new major packages were unveiled, in turn hitting sentiment after a range of pledges by the government and central bank to stimulate the struggling economy last month.
News on Wednesday that Chinese consumer spending fell during the latest ‘Golden Week’ holiday knocked confidence further on Wednesday, prompting the Shanghai Composite Index to also nosedive by 6.6% overnight.
“The risk is that unless China engages in a more radical package of fiscal reforms to boost government handouts, the stimulus announced so far may not be enough to sustain a long-term pick up in economic growth and domestic demand,” XTB analyst Kathleen Brooks commented.
Revolution Beauty plummets after sales drop
Revolution Beauty PLC fell more than 8% after reporting sales dipped by a fifth during the first half.
Sales declined by 20% to £72 million in the six months to August, as Revolution assured growth was set to return later in the year and profits would be in line with the last.
This came as the group looked to sell off stock in a bid to refocus on a simplified product portfolio.
Panmure Liberum noted the hit to revenue had been worse than expected so far, with the update painting a “mixed picture” as profit guidance was maintained.
“The shift in strategy [...] is going well with sell-through rates here holding up, but the clearance of non-core products was always the focus and this has not gone as well as hoped,” analysts added.
Shares in the beauty retailer fell 8.38% to 16.4p early on.
Mondi leads early risers after German acquisition
Mondi PLC (LON:MNDI) led the FTSE 100’s early risers on Tuesday morning after announcing it had snapped up German, UK and Benelux business of cardboard box maker Schumacher.
Shares in the packaging firm ticked up 3.2% following news of the €634 million (£531 million) acquisition, seeing Mondi take the spot as the day’s biggest riser early on... Read more
United Utilities Group PLC (LON:UU) and Severn Trent PLC (LON:SVT) also racked up early gains, after coming under pressure on Tuesday on news the water industry had been ordered to return £158 million to customers due to poor performances on the likes of pollution.
Vistry Group PLC remained under pressure in the meantime following Tuesday’s profit warning, while Prudential PLC (LON:PRU) also faced further declines.
Overall, the FTSE 100 gained 37 points as trading got underway, marking a slight bounce back after yesterday’s 113-point drop
8.01am: Government borrowing costs tick up as chancellor signals spending plans
Government borrowing costs moved higher yet again on Wednesday morning, after chancellor Rachel Reeves alluded to plans on Treasury spending.
UK 10-year gilt yields inched up to 4.20% by Wednesday morning, having sat at 3.75% in mid-September.
This came after Reeves reportedly signalled the government was lining up to borrow billions more for infrastructure investment, despite concerns about rising debt costs.
She told the cabinet she aims to revise how the Treasury accounts for capital spending to reflect its long-term benefits - a resetting of the so-called fiscal rules… Read more
Gold heads towards $2,600 mark
Gold has given up further gains on Wednesday, after peaking above the US$2,680 mark late last month.
Another decline through Tuesday evening and into Wednesday took the sport price of the yellow metal to US$2,612 an ounce, marking a 0.85% drop for the day.
This follows a sudden scaling back of expectations for further steep interest rate cuts by the Federal Reserve over the remainder of the year, after stronger-than-expected non-farm payroll figures last week.