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London open: Stocks edge up as Next, GSK boost outlooks
London stocks edged up in early trade on Wednesday, helped along by well-received updates from the likes of Next and GSK, as investors awaited the latest policy announcement from the US Federal Reserve.
At 0830 GMT, the FTSE 100 was up 0.3% at 7,340.05.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “All eyes will be on the Fed later, as policymakers decide on interest rate policy, and while the pause button is expected to remain pressed, the possibility of another rate hike is set to remain on the table. Fed Chair Jay Powell’s comments will be closely scrutinised for indications of just how long rates are set to stay higher, given the resilience of the US economy.
“Equities have rallied in the last few sessions, but renewed wariness is set to slink in on Wall Street ahead of the rates decision.”
Market participants were digesting the latest data out of China, which showed that the manufacturing industry contracted in October for the first time in three months.
The Caixin manufacturing PMI fell to 49.5 last month from 50.6 in September, surprising analysts who had expected a pick-up to 50.8.
Readings above 50 indicate expansion, while readings below signal a contraction in activity. This was the first contraction recorded since July.
Manufacturing production saw a renewed fall, with companies linking cuts in output to muted sales, particularly from abroad, Caixin said. Purchasing activity also fell as firms made greater usage of current stocks to help control costs. Manufacturing employment also continued its recent decline, with the employment sub-index falling to its lowest since May.
Meanwhile, input cost inflation increased to a nine-month high, with firms citing higher prices for raw materials and oil.
“Overall, manufacturers were not in high spirits in October. Supply, employment and external demand all fell, while domestic demand expanded at a slower pace. Costs and output prices both rose, purchases fell, and inventories of finished goods increased. Business optimism continued to wane,” said Caixin economist Wang Zhe.
“Many of China’s economic data for the third quarter exceeded market expectations. Consumption, especially in the services sector, is resilient. The economy has showed signs of bottoming out, but the foundation of recovery is not solid. Demand is weak, many internal and external uncertainties remain, and expectations are still relatively weak.”
On home shores, the latest survey from Nationwide showed that house prices unexpectedly rose in October amid “constrained” supply.
House prices ticked up 0.9% on the month following a 0.1% increase in September, beating expectations for a 0.4% decline.
On the year, house prices were down 3.3% in October following a 5.3% slump in September.
The average price of a home now stands at £259,423.
Nationwide chief economist Robert Gardner said that nevertheless, housing market activity has remained “extremely weak”, with just 43,300 mortgages approved for house purchase in September, around 30% below the monthly average prevailing in 2019.
“This is not surprising as affordability remains stretched. Market interest rates, which underpin mortgage pricing, have moderated somewhat but they are still well above the lows prevailing in 2021,” he said.
“The uptick in house prices in October most likely reflects the fact that the supply of properties on the market is constrained. There is little sign of forced selling, which would exert downward pressure on prices, as labour market conditions are solid and mortgage arrears are at historically low levels.”
In equity markets, Next was the standout gainer on the FTSE 100 after the retailer boosted its full-year guidance as third-quarter trading beat internal expectations. The fashion retailer said full-price sales in the three months to 28 October rose 4% year-on-year, £23m ahead of earlier guidance for 2% growth.
Next increased its full-year guidance for pre-tax profits by £10m to £885m. It also upped its forecast for full-year sales, which are now expected to be 3.1% stronger at £4.74bn on the assumption full-price sales remain 2% higher for the rest of the year. Next previously forecast full-year sales growth of 2.6%.
Marks & Spencer also gained.
GSK rallied after the drug maker lifted its full-year profit outlook. It now expects turnover to increase by 12% to 13%, up from previous guidance of 8% to 10%, and adjusted operating profit growth of 13% to 15%, up from 11% to 13%. Adjusted earnings per share are set to grow between 17% and 20%, versus previous guidance of 14% to 17%.
On the downside, Aston Martin Lagonda slumped as it posted a wider-than-expected third-quarter loss and downgraded its volume outlook for the DB12 model due to ramp-up delays.
Mining engineering company Weir was also in the red as it reiterated its guidance for “strong growth” this year despite orders slipping in the third quarter.
BP was knocked lower by a downgrade to ‘underweight’ from ‘neutral’ at JPMorgan.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Next Plc | +3.49% | +240.00 | 7,124.00 |
| 2 |  |
Marks And Spencer Group Plc | +2.49% | +5.40 | 222.20 |
| 3 |  |
Smurfit Kappa Group Plc | +2.24% | +60.00 | 2,744.00 |
| 4 |  |
Centrica Plc | +2.00% | +3.15 | 160.45 |
| 5 |  |
3i Group Plc | +1.78% | +34.50 | 1,969.00 |
| 6 |  |
Associated British Foods Plc | +1.53% | +31.00 | 2,057.00 |
| 7 |  |
Hikma Pharmaceuticals Plc | +1.47% | +28.00 | 1,929.50 |
| 8 |  |
Legal & General Group Plc | +1.32% | +2.80 | 214.20 |
| 9 |  |
Sainsbury (j) Plc | +1.28% | +3.30 | 260.60 |
| 10 |  |
Carnival Plc | +1.19% | +10.00 | 847.40 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Segro Plc | -2.97% | -21.20 | 691.60 |
| 2 |  |
Bp Plc | -2.09% | -10.50 | 492.10 |
| 3 |  |
Coca-cola Hbc Ag | -1.41% | -30.00 | 2,102.00 |
| 4 |  |
Fresnillo Plc | -1.34% | -7.40 | 546.40 |
| 5 |  |
Ocado Group Plc | -1.18% | -5.50 | 459.80 |
| 6 |  |
Spirax-sarco Engineering Plc | -1.07% | -88.00 | 8,104.00 |
| 7 |  |
Easyjet Plc | -0.96% | -3.50 | 362.50 |
| 8 |  |
Halma Plc | -0.95% | -17.50 | 1,827.50 |
| 9 |  |
Sage Group Plc | -0.87% | -8.40 | 962.20 |
| 10 |  |
Experian Plc | -0.76% | -19.00 | 2,472.00 |
US close: Stocks higher as investors digest data
US stocks closed higher on Tuesday as investors digested a flurry of data in a busy week for economic indicators, earnings and central bank action.
At the close, the Dow Jones Industrial Average was up 0.38% at 33,052.87, while the S&P 500 was 0.65% stronger at 4,193.80 and the Nasdaq Composite saw out the session 0.48% firmer at 12,851.24.
The Dow closed 123.91 points higher on Tuesday as economic data came in mixed, with leading indicators very much in focus ahead of the two-day policy decision meeting of the Federal Open Market Committee which concludes on Wednesday.
On the macro front, the Chicago manufacturing PMI fell from 44.1 to 44.0 in October, its 14th straight month below the 50-point level which separates contraction with expansion.
Elsewhere, the Conference Board’s consumer confidence index fell to a five-month low of 102.6 this month, from a revised 104.3 in September, though above the 100 reading expected.
Finally, the S&P/Case-Shiller home price index increased 2.6% year-on-year in August, after a 1% rise in July, with prices now at an all-time high. However, analysts at Oxford Economics said that prices will likely come under renewed pressure “given the steady climb in mortgage rates, which sat at a multi-decade high of nearly 8% as of last week.
“Though the recent surge in bond yields will likely keep the Fed on hold at tomorrow’s FOMC meeting, rate cuts are not on the immediate horizon, and a higher-for-longer approach from the Fed will keep mortgage rates elevated.”
In terms of earnings, Pinterest surged 19% as the photo-sharing app’s third-quarter results beat expectations. Adjusted earnings rose 154% year-on-year to $0.28 a share, ahead of the $0.20 estimate.
Drugmaker Pfizer fell was broadly flat after swinging to a worse-than-expected net loss of $2.38bn in the third quarter, compared with a net income of $8.61bn a year earlier.
Caterpillar dropped 5% despite posting a jump in third-quarter profit amid solid demand for its high-end construction equipment in North America, while JetBlue Airways tanked as it cautioned that fourth-quarter losses would be wider than expected. Sector peers American, United, Delta and Southwest also fell.
Wednesday newspaper round-up: WeWork, energy bill payers, The Telegraph
WeWork plans to file for bankruptcy as early as next week, a source familiar with the matter said on Tuesday, as the SoftBank Group-backed company struggles with a massive debt pile and hefty losses. – Guardian
Bill payers could be on the hook for almost £6bn to cover the cost of bailing out suppliers that went bust during the energy crisis, according to the government’s spending watchdog. The public accounts committee (PAC) has issued a “sobering reminder” that the government has no guarantee that it will be able to recover almost £3bn in costs for rescuing about 1.5m households affected by the collapse of Bulb Energy. – Guardian
Britain’s middle classes are working closer to state pension age than any other cohort of society amid a surge in economic inactivity, the Institute for Fiscal Studies (IFS) has said. Workers in the squeezed middle are less likely to retire in their late 50s or early 60s than either the rich, who can afford it, or the poor, who are more likely to be out of work because of sickness or disability, a report by the think tank found. – Telegraph
Metro Bank, Starling, TSB and Monzo are the mainstream banks that received the highest rates of fraudulent payments last year, according to research that sheds light on which firms are being targeted by scammers. The Payment Systems Regulator yesterday released industry figures for so-called authorised push payment (APP) fraud, which is when a bank customer is conned into sending a payment to a fraudulent account they believe is legitimate. – The Times
The government is under pressure to intervene in the Barclay family’s £1 billion Middle East-backed bid to regain control of the Telegraph group. Danny Kruger, the Conservative MP for Devizes, a former Daily Telegraph writer, wrote to Lucy Frazer, the culture secretary, last week urging her to step in to ensure that the Barclays’ deal is subject to “proper scrutiny”. – The Times
