FTSE 100 dips as eyes turn to the ECB
The FTSE 100 is down 0.1% this morning, changing course following three consecutive days of gains.
That follows on from a largely positive session in Asia, despite lacklustre industrial output and retail sales in China that provided the latest sign that the reopening of the economy isn’t happening as swiftly as hoped. China also cut its medium-term lending rate following the cut to its short-term rate earlier this week.
Following the ‘hawkish hold’ we saw from the Federal Reserve yesterday, when the central bank left rates unchanged but signalled there could be two more rate hikes in 2023, attention now turns to the European Central Bank meeting today with its interest rate decision due at 1315 BST. A press conference will follow at 1345 BST.
The ECB is widely expected to push ahead with its eighth consecutive 25bps increase today and signal that the pace of quantitative tightening will pick up. More hikes are anticipated in July and September as the battle against inflation continues, even as economic growth slows.
Meanwhile, the Bank of England’s Jon Cunliffe will be speaking at a summit in London at 1635 BST. The central bank is due to meet to make its own interest rate decision next week.
The US economic calendar is busy this afternoon as we will have data out on retail sales, manufacturing, industrial production, business inventories and initial jobless claims.
FTSE 100 analysis: Where next for the UK 100?
The UK 100, which tracks the FTSE 100, has drifted between a ceiling of 7,650 and the June-low of 7,452 over the past two weeks. We are waiting for the index to break out of this range to decide where it is headed next.
Notably, we have seen signs that this range has narrowed over the last week considering it has found support at 7,573. A slip below here would bring that 7,452 floor back into play, which must hold to avoid the risk of falling back toward the 2023-lows of 7,307.
A break above the ceiling would mean a move toward 7,710 is possible, marking the level of support that held throughout most of May.
Top UK stock news
Bunzl is down 2.2% in early trade today. The firm said revenue at constant currency should be ‘slightly higher’ than last year in 2023 as it raised its operating margin guidance for the full year, stating it will be ‘slightly lower’ than what we saw in 2022. The distributor said revenue should be up 4% to 5% year-on-year in the first half of 2023, boosted by favourable exchange rates considering growth will be around 1% at constant currency, and that operating margins should remain flat. It said inflation should continue driving good underlying growth in Europe and the UK & Ireland but said the topline will ‘decline moderately’ in North America due to weakness in volumes. The Rest of the World is being impacted by a decline in sales related to Covid-19.
Informa is up 3.1% after raising its full year guidance this morning following strong trading in the first five months of 2023. It upped its revenue guidance by 7% to a range of £2.95 billion to £3.05 billion and raised its operating profit guidance by 10% to a range of £750 million to £790 million. That puts Informa on course to grow its topline by up to 35% this year while profits could jump as much as 59%! That came as underlying revenue grew 24.5% in the first five months. It also said it is accelerating shareholder returns thanks to healthy profits and strong cash conversion, with a pledge to pay out at least 40% of adjusted earnings to shareholders. It said it will return at least £650 million this year, up from its previous goal of £550 million.
Halma is down over 8% despite revealing it delivered record revenue and profits in the year to the end of March as it marked its 44th consecutive year of dividend growth. The company said revenue rose 21% to £1.85 billion and that adjusted pretax profit climbed 14% to £361.3 million, but that bottom-line . Reported profits dipped 4% because a gain on disposal from the year before didn’t repeat. It raised its dividend 7% to 20.20p. Return on sales came in at 19.5% and Halma said this will rise to 20% in the new financial year. Order intake in the last three months has been broadly in-line with revenue and ahead of the year before.
Legal & General is down 1.2% after announcing it has appointed Antonio Simoes as its new chief executive to replace veteran Nigel Wilson. That may be a surprise for some that were anticipating an internal candidate to succeed Wilson. Simoes is joining from Santander, where he has been regional head of Europe since 2020, and will take up his new role at the start of 2024.
UK supermarkets Sainsbury’s, Tesco and Marks & Spencer are worth watching today amid reports that prime minister Rishi Sunak is scrapping plans to introduce price caps on basic groceries following a backlash from retailers, says The Telegraph. Sainsbury’s is down 0.2%, Tesco is up 0.1% and M&S is trading 0.9% higher in early trade today.
ASOS is up over 15% after it said it earnings before interest and tax in the three months to the end of May came in around 20% higher than the year before, marking a return to profit as the online fashion retailer tries to escape the red. It reiterated hopes of delivering £40 million to £60 million of Ebit over the full year. Improved profitability came despite a sharp 14% drop in sales at constant currency in the quarter. It has delivered £200 million worth of cost-savings over the past nine months and this should hit £300 million over the full year. ASOS reiterated its full year guidance targets. ‘I am confident in the direction we are going, we have restored profitability in the period and made good progress in clearing through our inventory to generate cash. We retain ample balance sheet flexibility and reiterate our expectations for improved profitability, cash generation and reduction in net debt in H2 FY23 and beyond,’ said CEO Jose Antonio Ramos Calamonte.
RHI Magnesita is up 1.9% after it said the trend of improving profitability and margins reported in the first quarter continued in April and May as refractory pricing remained stable and costs declined, which should lead it to beating expectations in 2023. Refractory sales volumes were down 7% in the first five months of the year due to weaker demand from end markets like steel, cement and glass, but demand for non-ferrous metals was ‘resilient’. Its refractory Ebita margin was better than expected in the period, but profitability at other divisions remains ‘subdued’. That resulted in an overall adjusted Ebita margin of 12.1% in the five-month period, up from 11.6% the year before to see the sum rise to EUR174 million from EUR155 million. It said it now expects to deliver a ‘modest outperformance’ in terms of Ebita over the full year.
Diageo has been downgraded to Neutral from Buy by Goldman Sachs, which lowered its price target on the alcoholic drinks giant to 3,700p from 4,500p. The stock is down 2% at 3,308.50p this morning.
Next has been given a Market Perform rating as Bernstein initiated coverage on the clothing retailer with a price target of 7,000p. The stock is up 0.9% at 6,512p this morning.
Associated British Foods has been given an Outperform rating as Bernstein initiated coverage on the Primark owner with a price target of 2,500p. The stock is up 1.5% at 1,908.5p this morning.
Segro has been raised to Buy from Hold by Goodbody, which has a price target of 840p on the company. The stock is up 1% at 762.5p this morning.
Severn Trent has been raised to Buy from Add by Investec, which has a price target of 2,975p on the water utility company. The stock is trading broadly flat at 2,705p today.
