FTSE 100 analysis: Testing one-week lows

FTSE 100 falls

The FTSE 100 is down 0.1% this morning and is testing its lowest level in over a week.

That follows on from a largely negative session in Asia as China’s efforts to ease policy by cutting its key lending benchmarks failed to provide a boost, with traders still concerned about lacklustre growth in the country. We are unlikely to hear anything more about any potential stimulus until a Politburo meeting in July. Meanwhile, we also discovered that the Reserve Bank of Australia’s surprise interest rate increase earlier this month was ‘finely balanced’, according to the minutes of the June 6 meeting, causing markets to scale back expectations of another rate hike in July, boosting shares and allowing ASX stocks to close higher.

The economic calendar today starts off with a speech from the European Central Bank’s chair of the supervisory board Andrea Enria this morning, followed by Elizabeth McCaul this afternoon. US markets return from the Juneteenth holiday yesterday and are focused on speeches from St Louis Federal Reserve president James Bullard and John Williams from New York, as well as US housing starts and building permits data.

UK traders are focused on inflation data out tomorrow ahead of the Bank of England’s interest rate decision on Thursday, which is likely to heighten concerns about rising mortgage rates after two-year deals rose above 6% yesterday.

 

FTSE 100 analysis: Where next for the UK 100?

The UK 100 is on course to lose ground for a third consecutive session today and has already tested the 7,537 level of support that has held firm over the past two weeks. If it closes below here, then the 200-day moving average could come back into play but there remains a risk the index could be on course to unravel back toward the June-low of 7,451.

On the upside, the index needs to break above 7,650, having struggled to do so over the past month. From there, it can look to climb toward 7,710, marking the level of support that held throughout most of May.

  

Top UK stock news

Abrdn is down 0.2% in early trade. It said its subsidiary has sold 21.8 million shares in HDFC AMC on the National Stock Exchange of India and Bombay Stock Exchange for an average price of Rs1,873.00. The transactions generated proceeds of Rs35,466 million, equal to around £337 million. That should be welcome news to shareholders as abrdn is returning a ‘significant proportion’ of capital generated from the sale to investors. It said its subsidiary no longer holds a stake in HDFC AMC.

Saga, which is holding its annual general meeting later today, is up 2.9% after it said it expects underlying profits to be ‘well ahead of the prior year’ after its cruise and travel operations built momentum in the first four months of the financial year. It said it has taken strong bookings for its ocean cruises and that its load factor is well ahead from last year, while its river cruise and travel businesses should return to profit as previously expected. Insurance remains more challenging and is weighing on results, it said.

STEM recruitment firm SThree is down 0.5% in early trade after it said net fees declined 2% year-on-year at constant currency in the six months to the end of May. The drop was attributed to strong comparatives last year when it delivered 25% growth and tougher global macro-economic conditions. Net fees were up 3% at actual rates thanks to foreign exchange tailwinds. It said its contract business, which accounts for 81% of revenue, remains strong and grew 3% in the period as clients continue to require candidates with highly sought after skills.

The Monks Investment Trust is up 0.7% despite its net asset value total return falling 1.6% in the year to the end of April, with its share price total return dropping 7% and underperforming its benchmark, the FTSE World Index, which returned 3.2%. It said this was ‘disappointing’ and admitted that the recent underperformance of growth stocks ‘has wiped out the cumulative gains’ booked in prior years. ‘We are very mindful of the need to return to outperformance, in a variety of market conditions,’ said the trust. It has ‘challenged’ managers about the recent underperformance and reiterated the importance of being disciplined when it comes to valuations. It is paying a single final dividend of 3.15p, up from 2.35p the year before.

Car dealership Lookers is set to be taken over by Canadian outfit Alpha Auto Group for 120p per share, according to reports from Sky News. That represents a significant premium to its closing share price yesterday of 88.7p. Lookers is up over 33% this morning at 119p.

We discovered yesterday that Frasers Group has acquired a stake in electrical retailer Currys, just one week after the company revealed it had taken a stake in AO World. Separately, Frasers Group announced it will buy back up to £70 million worth of shares between today and the publication of its annual results. It said it will purchase up to a maximum of 10 million shares. Frasers Group is up 3.7% this morning, Currys is 2.3% higher and AO World is up 2.1%.

Woodside Energy is up 2.4%. The energy firm said it has made a final investment decision to develop the Trion resource in Mexico, where it hopes to produce first oil by 2028. ‘The expected returns from the development exceed Woodside's capital allocation framework targets and deliver enduring shareholder value,’ said Woodside. It will need to secure approval from regulators and its joint venture partners, which is expected by the fourth quarter of 2023. Woodside holds a 60% stake in the project and is the operator. Capital expenditure for the project is budgeted at $7.2 billion, of which Woodside is responsible for around $4.8 billion.

Airtel Africa is down 1.6% after it said it ‘welcomes’ changes in the foreign exchange market in Nigeria, which has led to the US dollar appreciating against the naira, as it represents a ‘positive move towards a more stable Nigerian FX market’. It previously said a 1% devaluation in the naira would negatively impact revenues and earnings. Nigeria is Airtel Africa’s largest market.

Revolution Beauty Group said it has sent a letter of claim to its founder and former chief executive Adam Minto, alleging he broke his ‘fiduciary, statutory, contractual and/or tortious duties to the company.’ Some of this relates to the delay of the company’s results that led to its shares being suspended. It said it is looking to ‘recover material sums relating to exceptional costs’ incurred as a result. It has not received a response but has set a deadline of July 7. It also said it plans to publish another announcement ‘in the coming days’ to respond to its major shareholder Boohoo, which said yesterday it plans to vote against the reappointment of three Revolution Beauty directors at its upcoming annual general meeting and propose replacing them with its own nominees. Boohoo owns a 26.6% stake in Revolution Beauty Group and is trading marginally higher this morning.

Barclays is trading marginally higher today. Jefferies released a note this morning that said the best and most credible way of reviving its share price is to step-up share buybacks while its valuation is low. The broker pointed toward media reports that Barclays has hired consultants to figure out how best to boost its share price. Jefferies rates Barclays as a Buy.

Peel Hunt rejigged its view on the real estate sector this morning, stating it is less confident that valuations for UK properties has bottomed out while saying there are some reasons to stay optimistic. This saw it upgrade Great Portland to Buy, Capital & Regional to Add and Supermarket Income REIT to Hold. Meanwhile, LXi REIT was downgraded to Hold. Great Portland is down 0.4%, Capital & Regional is up 2.3%, Supermarket Income REIT is up 0.3% and LXi REIT is trading down 1%.