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ADVFN Morning London Market Report: Tuesday 28 May 2024

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London open: Stocks edge lower; Persimmon said to weigh bid for Cala


London stocks edged lower in early trade on Tuesday as traders returned to their desks after the long weekend.

At 0910 BST, the FTSE 100 was down 0.2% at 8,305.03.

Guy Lawson-Johns, equity analyst at Hargreaves Lansdown, said: “Last week’s election announcement is causing some short-term volatility in the markets, but longer-term investors can usually take this as background noise. Rishi Sunak is betting on a £2.4bn tax break to win the support of pensioners as he fights to stay in office. Meanwhile, the National Service pitch appears to be a defensive strategy to shore up core Tory voters as the Conservatives look set to gain an unprecedentedly low number of seats.

“Overnight, the European Central Bank sent a clear signal that interest rates will be cut from their record highs next week. This comes amid warnings that cutting rates aggressively ahead of the Fed could cause the euro to depreciate and inflation to flare up as imports become more expensive.

“In the US, despite bright spots and a booming Memorial Day weekend for travel, the usual summer slowdown in stock markets may be more pronounced this year. Inflation concerns and an early presidential debate could weigh on a rally that has pushed the S&P 500 near record highs. With the S&P 500 trading at a premium compared to historical norms and few catalysts for further gains, the traditionally slow summer season could be more turbulent than usual.”

Investors were mulling the latest shop price index from the British Retail Consortium and NeilsenIQ, which showed that shop price inflation slowed to 0.6% in May from 0.8% in April.

This marked the lowest rate of shop price inflation since November 2021, and brought inflation below the three-month average of 0.9%.

Non-food prices continued to deflate, with an annual rate of -0.8% in May, compared to -0.6% in April.

That was the lowest deflation rate since October 2021, and was also below the three-month average, which was -0.4%.

Helen Dickinson, chief executive of the BRC, noted that shop price inflation had returned to normal levels, aided by a reduction in food inflation, particularly in fresh food.

“Meanwhile, ambient food inflation remained stickier, especially for sugary products which continued to feel the effects of high global sugar prices,” she said.

“In non-food, retailers cut furniture prices in an attempt to revive subdued consumer demand for big-ticket items, and football fans have been able to grab some bargains on TVs and other audio-visual equipment ahead of this summer’s Euros.”

In equity markets, investment firm Intermediate Capital Group (ICG) rallied as it said profits more than doubled in the year ended 31 March and reported a huge increase in performance fee income while assets under management rose by nearly a quarter.

Persimmon fell following a report the housebuilder is exploring a £1bn takeover bid for Cala Group, a rival player in the sector which has been put up for sale. According to Sky News, Persimmon is leaning towards submitting an offer for Cala ahead of a bid deadline next week.

Insiders expect Cala, which is being auctioned by Legal & General (L&G), to command a price tag of about £1bn. L&G shares were trading higher.

Softcat nudged lower despite saying that full-year gross profit and operating profit were set to be in line with expectations.

Great Portland Estates tumbled as the shares went ex-rights.


Top 10 FTSE 100 Risers

Sponsored by Plus500
# Name Change Pct Change Cur Price
1 Ocado Group Plc +7.06% +26.40 400.20
2 Tui Ag +3.19% +17.50 566.50
3 Ashtead Group Plc +2.24% +128.00 5,842.00
4 Antofagasta Plc +2.00% +45.00 2,291.00
5 St. James’s Place Plc +1.98% +9.70 500.50
6 Easyjet Plc +1.77% +8.10 465.60
7 British Land Company Plc +1.66% +6.80 416.20
8 Burberry Group Plc +1.59% +16.50 1,052.00
9 Fresnillo Plc +1.51% +9.00 605.00
10 Legal & General Group Plc +1.49% +3.70 251.60


Top 10 FTSE 100 Fallers

Sponsored by Plus500
# Name Change Pct Change Cur Price
1 United Utilities Group Plc -3.74% -37.70 969.80
2 Flutter Entertainment Plc -3.38% -540.00 15,450.00
3 Severn Trent Plc -2.25% -55.00 2,394.00
4 Persimmon Plc -1.72% -25.50 1,455.50
5 Diageo Plc -1.24% -33.50 2,659.50
6 Intercontinental Hotels Group Plc -1.11% -88.00 7,848.00
7 Astrazeneca Plc -1.07% -132.00 12,164.00
8 Auto Trader Group Plc -1.07% -8.00 739.80
9 Associated British Foods Plc -1.07% -29.00 2,693.00
10 Rio Tinto Plc -0.99% -56.00 5,599.00


Tuesday newspaper round-up: Ofwat, Facebook, Deutsche Bank

Ofwat is poised to refuse most water companies’ requests to ratchet up consumer bills, with some getting as little as half of what they have asked for, the Guardian has learned. The decision from the water watchdog for England and Wales, Ofwat, has been formally delayed until 11 July because of the general election. Its verdict, known as a draft determination, comes amid a growing crisis in the water sector. – Guardian

A young social media star with cerebral palsy says Facebook refused to take action after scammers used her content to set up a fake account and make money from her fans. Grace Wolstenholme, 20, who has 1.3m followers on TikTok, says she has lost income from not posting videos after she was advised by the police to stop. Content she put on TikTok and on Instagram was being stolen and posted on Facebook by someone pretending to be her. – Guardian

High interest rates are set to cost British businesses an extra £41.7bn by the end of the decade as cheap loans expire and are replaced with more expensive debt. Businesses’ debt servicing costs are to rise by an average of £4.7bn a year after the Bank of England ended the era of ultra-low rates and pushed borrowing costs to a 17-year high, according to consultancy Baringa. It threatens to push up inflation as companies are put under increasing pressure to raise prices to cover some of the increase in costs, economist and partner Nick Forrest said – as well as raising the prospect that some companies will simply collapse. – Telegraph

Deutsche Bank is poised to wind down Numis’ US operations after slashing the estimated value of the broker following a takeover deal. The German lender will axe US subsidiary Numis Securities and merge most staff into its own head office in New York. Numis’ US office employs around 12 people and half of them will move over to Deutsche, with the remainder to be offered jobs elsewhere in the bank. – Telegraph

A deputy governor of the Bank of England has hit back at critics, including a former governor, who have accused it of failing to control inflation. Ben Broadbent, who is leaving the Bank next month after 13 years with the institution, saidclaims that its ratesetting monetary policy committee had failed to foresee surging inflation over the past three years because its members shared similar backgrounds were “absolute tripe”. – The Times


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