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London open: Stocks rise but Next slides on cautious outlook
London stocks rose in early trade on Wednesday as worries about the banking sector continued to recede, but Next tumbled as it struck a cautious note on its outlook.
At 0840 BST, the FTSE 100 was 0.3% firmer at 7,503.49.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “’With banking worries put on the back burner for now, with no further stresses in the system emerging, investors’ appetite for a bit more risk is returning.”
On the macro front, lending, consumer credit and mortgage approvals data are all due at 0930 BST.
CMC Markets analyst Michael Hewson said: “UK mortgage approvals have seen a sharp slowdown in the last few months as higher interest rates and the rising cost of living serves to crimp demand, even as the lead-up to Christmas tends to see a slowdown in demand.
“In January mortgage demand fell to its lowest level since 2020 at 39.6k, and today’s February numbers aren’t expected to see a significant pickup with expectations of around 40k.
“In January net consumer credit saw a sharp pickup to £1.6bn, after a slowdown at the end of last year that saw consumer borrowing slow to £800m from £1.5bn. This stop start nature of consumer borrowing points to a UK consumer that is very sensitive to the rising cost of living, and while consumer confidence has improved in recent months it remains very fragile.
“Today’s consumer credit numbers for February are expected to show a modest slowdown to £1.2bn, with recent trends in retail sales showing that discretionary demand has started to pick up as energy prices have fallen back.”
In equity markets, WPP was the top riser on the FTSE 100 after an upgrade to ‘outperform’ at Exane, while Tesco was boosted by an upgrade to ‘overweight’ from ‘equalweight’ at Morgan Stanley.
Chemring gained after saying it had won a £43m order for the delivery of critical components used in the Next Generation Light Anti-Tank Weapon system (NLAW).
Essentra advanced after it confirmed its £150m return to shareholders and maintained guidance as it posted lower full-year profits following the disposal of its packaging business.
On the downside, retailer Next slumped after it posted a better-than-expected jump in full-year profit and said selling price inflation was set to be more benign than previously thought, but warned the year ahead will be “difficult” and that it continues to expect a decline in profit.
In the year to January 2023, pre-tax profit rose 5.7% to £870.4m, coming in ahead of company guidance of £860m. Total trading sales were up 8.4% to £5.1bn.
Smith & Nephew was knocked lower by a downgrade to ‘underweight’ from ‘overweight’ at Barclays.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Ocado Group Plc | +4.77% | +21.20 | 465.20 |
| 2 |  |
Prudential Plc | +3.40% | +35.50 | 1,080.00 |
| 3 |  |
Tesco Plc | +2.86% | +7.30 | 262.20 |
| 4 |  |
Wpp Plc | +2.81% | +25.80 | 944.80 |
| 5 |  |
3i Group Plc | +2.45% | +39.50 | 1,650.00 |
| 6 |  |
Legal & General Group Plc | +1.92% | +4.40 | 234.00 |
| 7 |  |
Taylor Wimpey Plc | +1.87% | +2.20 | 120.15 |
| 8 |  |
Bhp Group Limited | +1.83% | +44.00 | 2,454.50 |
| 9 |  |
Persimmon Plc | +1.75% | +21.00 | 1,222.00 |
| 10 |  |
Barclays Plc | +1.73% | +2.38 | 139.56 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Next Plc | -5.98% | -402.00 | 6,324.00 |
| 2 |  |
Tui Ag | -1.99% | -14.00 | 688.00 |
| 3 |  |
Smith & Nephew Plc | -1.37% | -15.50 | 1,117.50 |
| 4 |  |
Associated British Foods Plc | -1.20% | -23.50 | 1,928.50 |
| 5 |  |
Marks And Spencer Group Plc | -1.10% | -1.75 | 157.05 |
| 6 |  |
Mondi Plc | -0.88% | -11.50 | 1,298.00 |
| 7 |  |
Hikma Pharmaceuticals Plc | -0.67% | -11.00 | 1,620.50 |
| 8 |  |
Bae Systems Plc | -0.47% | -4.60 | 983.40 |
| 9 |  |
British American Tobacco Plc | -0.42% | -12.00 | 2,869.00 |
| 10 |  |
Bunzl Plc | -0.23% | -7.00 | 2,995.00 |
US close: Stocks head south as recession fears resurface
Wall Street stocks closed lower on Tuesday as traders digested a number of data points and recession fears returned to the forefront.
At the close, the Dow Jones Industrial Average was down 0.12% at 32,394.25, while the S&P 500 slipped 0.16% to 3,971.27 and the Nasdaq Composite saw out the session 0.45% weaker at 11,716.08.
The Dow closed 37.83 points lower on Tuesday, taking a modest bite out of gains recorded in the previous session.
Rising bond yields were in focus throughout the session, with the two-year note breaking above 4% yet again, weighing on tech stocks and, as a result, the Nasdaq. Investors continue to fear that higher interest rates from the Federal Reserve may very well tip the US economy into a recession.
IG‘s Chris Beauchamp said: “While the banking crisis seems to have subsided, stocks have been unable to find a reason to push higher this afternoon. The return of recession fears further dims the appeal of equities, and with tech stocks down sharply this afternoon it looks like there isn’t much chance of further upside for now.”
Multiple macro points were in focus on Wednesday, with an advance reading of the Census Bureau‘s goods trade balance revealing the US trade deficit widened from a revised print of $91.09bn in January to $91.63bn in February, driven by weakening global demand stemming from the cost of living crunch and heightened borrowing costs.
On another note, an advance reading of February’s wholesale inventories report revealed wholesale inventories increased 0.2% month-on-month, rebounding from an upwardly revised 0.5% drop in January. According to the Census Bureau, inventories were up 0.6% for durables, while non-durable inventories decreased 0.4%,
Elsewhere, the Conference Board‘s consumer confidence index rose from 103.4 in February to 104.2 in March, ahead of preliminary expectations for a reading of 101.0. “Driven by an uptick in expectations, consumer confidence improved somewhat in March, but remains below the average level seen in 2022,” said the Conference Board’s Ataman Ozyildirim. “While consumers feel a bit more confident about what’s ahead, they are slightly less optimistic about the current landscape.”
Finally, the Federal Housing Finance Agency‘s US housing index increased to 393.17 points in January, up from 392.39 points in December.
In the corporate space, transatlantic pharmacy giant Walgreens Boots Alliance reported second quarter results that came in line with expectations as it said it was on track to meet full-year guidance, while Cholula hot sauce maker McCormick beat quarterly estimates as higher prices pushed sales to a record high despite volume declines.
After the close, semiconductor giant Micron Technology warned that third-quarter revenues were on track to tumble almost 60% year-on-year but said artificial intelligence will boost sales in 2025.
Wednesday newspaper round-up: Bulb, Twitter, Royal Mail
The bailout of the bust energy supplier Bulb is expected to cost the government billions of pounds less than originally feared because of a sharp fall in wholesale gas prices, according to the National Audit Office. The public spending watchdog said the government may end up spending £246m on saving the supplier, which has 1.5 million customers and was acquired by Octopus Energy late last year. – Guardian
Twitter’s feed will promote only the tweets of users paying its £8 monthly subscription service, Elon Musk, the site’s owner and chief executive, has tweeted. From 15 April, the “For you” tab on the site, which attempts to algorithmically curate popular posts for users, will feature only “verified accounts”, Musk tweeted, describing the decision as “the only realistic way to address advanced AI bot swarms taking over”. – Guardian
A looming British ban on the sale of new petrol and diesel cars was thrown into chaos on Tuesday after Brussels watered down its own restrictions amid opposition from the German auto industry. Experts and politicians warned that British rules due to take effect in 2030 are untenable following the European climbdown, which will allow internal combustion engines as long as they burn carbon-neutral petrol alternatives. – Telegraph
Regulators are to look at ways of tightening bank liquidity rules after the collapse of the British division of Silicon Valley Bank, which they called the fastest bank implosion since Barings. Andrew Bailey, governor of the Bank of England, told MPs on the Commons’ Treasury select committee that he had been taken by surprise by the speed of the depositor run. “It was probably the fastest passage from health to death really since Barings,” he said. – The Times
The union representing about 115,000 postal workers at Royal Mail is threatening to announce new strike dates, raising renewed concerns about the future of the lossmaking British business. The Communication Workers Union is understood to be preparing to outline plans for industrial action next month, dealing a blow to hopes of a breakthrough in protracted talks with Royal Mail about below-inflation pay rises and changes to working conditions. – The Times
