Proactive Investors -
- FTSE 100 gains 40 points at 7,664
- Ocado (LON:OCDO) posts rare profit, but M&S dispute emerges
- British Airways (LON:ICAG) owner IAG profits double
US stocks are expected to extend their decline on Thursday, ahead of key inflation data later, while the FTSE 100 is getting ever stronger as Wall Street wakes up.
In futures trading, the Dow Jones is seen leading the decline, with a 0.28% fall, followed by the S&P 500 down 0.21% and Nasdaq losing 0.16%.
Yesterday, the Nasdaq was the main faller, dropping by 0.55%, with the S&P down 0.17% and Dow down less than 0.1%.
The important macroeconomic release that investors will be watching closely is the core PCE reading of US inflation, which is the Federal Reserve’s preferred measure of prices.
"A higher-than-anticipated reading could put the final nail in the coffin of the idea of a pivot to rate cuts before the summer," said analyst Russ Mould at AJ Bell.
The last update on the PCE deflator for the fourth quarter saw it revised higher from 2.0% to 2.1% and we’ll see January numbers today.
Economists at ING said their expectations are for a 0.4% core month-on-month increase, "which in our view will endorse the recent hawkish repricing of Fed rate expectations. At the moment the Fed Funds future curve prices in 80bp of easing."
This "should be enough to deter another round of Fed dovish repricing for a bit longer".
Wincanton bid shows UK 'investment problems'
The knock-out bid for Wincanton earlier, illustrates some of the problems the UK stock market is facing.
Coming at a huge 103% premium to pre-bid share price, it is "a further illustration of public equity discount in UK markets", says Panmure Gordon's Simon French, as well as reflecting the higher cost of equity capital.
This is due to the UK pensions industry "being only one in the world underweight its own market".
To illustrate this in a tweet, French said that every major pension industry in the developed world is hugely overweight its domestic equity market, in other words pension funds invest much more in domestic companies than overseas ones.
The average overweight of developed countries is 2,089%.
The UK is 41% underweight its own companies, French says.
Every major pension industry in develop world is hugely overweight its domestic equity market - by an average of 2089%. The UK is 41% underweight its own. Even eliminating the anti-home bias would be constructive. And we wonder why we have an investment & productivity problem https://t.co/C2ke3KXriV pic.twitter.com/0tSmwZvKwC— Simon French (@Frencheconomics) February 29, 2024
The FTSE 100 and FTSE 250 are both enjoying only a slightly higher bias so far today.
Howden Joinery and Haleon (LON:HLN) are topping the blue-chip leaderboard, up 7.4% and 5% respectively, with Ocado up 1% and IAG down 1%.
Premier Inn owner Whitbread (LON:WTB) is the biggest FTSE faller, down 5.6%. A note from UBS on the hotels sector noting that the UK competitive position for Premier Inn is "slightly" tougher than pre-Covid, though it "continues to be well positioned".
On the FTSE 250, Drax is the top riser, up 9% on the back of this morning's results.
Energy engineer Hunting (LON:HTG) is up 8.5% as its results showed earnings ahead of previous guidance, a bigger dividend and a record order book boosting confidence about the year ahead.
Bitcoin takes a breather
Bitcoin neared $64,000 overnight but the world’s largest cryptocurrency has flattened off today, with the market possibly pausing for breath as it approaches an all-time high against the US dollar of $69,000.
Bitcoin is moving sideways at either side of $63,000 in the European session.
Yesterday it closed below $62,500 after some selling pressure, daily gains for Wednesday exceeded 9%.
Yesterday was the strongest one-day session in over four months, and up 21% week on week and nearly 50% year to date, thanks to a combination of exchange-traded fund inflows and FOMO, according to our daily crypto report.
BlackRock’s iShares Bitcoin ETF (IBIT) took in a record $612 million in cash on Wednesday, with total net inflows across all 10 ETFs totalling $673 million, also a record, according to Bloomberg data.
Wincanton's knock-out bid
US-listed GXO Logistics has priced its cash offer for logistics peer Wincanton PLC (LSE:LON:WIN, OTC:WNCNF) at £762 million, representing a 104% premium to the London company's share price before a rival offer emerged last month.
The 605p per share offer from the Connecticut companby trounces a previous £605 million bid on 26 February from French group CEVA by 26%, and by 34% compared to CEVA’s original offer of £567 million.
GXO boss Malcom Wilson, who is a Brit (and a Notherner by the sound of his accent on videos), said: "Wincanton is a world-class business, and we have long been impressed by their high-quality people and diverse customer relationships across key industries."
He said the superior offer to that from CEVA "reflects our conviction in the value of this business and the opportunities the combined company will realise.”
GXO’s offer implies an enterprise value multiple of approximately seven times Wincanton's underlying EBITDA for the twelve-month period ended on 30 September 2023, GXO noted.
An M&S spokesperson speaks
On the Ocado Retail bust-up, where Ocado Group PLC (LON:OCDO) suggested in its results this morning that might need to take recourse to legal action to get a payment from joint venture partner Marks and Spencer Group PLC (LSE:LON:MKS), we have a comment from M&S.
An M&S spokesman said: "M&S remains committed to the turnaround strategy for Ocado Retail and our focus is on working with them and Ocado Group to deliver it.
"On the specific issue of the contractual contingency payment, our advice is that the financial performance of Ocado Retail means the criteria for the performance payment was not met."