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ADVFN Morning London Market Report: Wednesday 29 May 2024

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London open: Stocks fall but IDS jumps on takeover deal

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London stocks fell in early trade on Wednesday, taking their cue from a downbeat session in Asia, but IDS bucked the trend after the Royal Mail owner accepted a takeover offer.

At 0900 BST, the FTSE 100 was down 0.3% at 8,233.37.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Financial markets are fracturing in terms of sentiment, with AI exuberance continuing to power mighty tech while worries about high interest rates lingering keep investors cautious elsewhere. The FTSE 100 has opened on the back foot, as stubborn inflation remains in focus and the General Election campaign continues to throw up economic and corporate uncertainty.

“A key inflation snapshot is due out later this week in the US, the core personal consumption expenditures price index, the Fed’s preferred inflation barometer. This will be seen as a crucial part of the picture in determining whether high interest rates are set to linger for longer. It’s not expected to have budged much, and the worry is that stubborn prices will keep policymakers ultra-cautious. However, if the snapshot shows an easing of pressures, it’s likely to calm current jitters.”

In equity markets, online supermarket Ocado was the worst performer on the FTSE 100 ahead of its expected demotion from the top-flight index in next week’s reshuffle. St James’s Place – in the same boat – was also trading down.

IWG was under the cosh after chief executive after chief executive Mark Dixon sold 35m shares in the company.

On the upside, Royal Mail owner International Distribution Services rallied after saying it had reached an agreement with Czech billionaire Daniel Kretinsky on a takeover of the 500 year old company worth up to £5.28bn.

Kretinsky’s EP Group is offering 360p a share along with the 2p final dividend for the year to March 31 and a special 8p dividend to be paid if the deal becomes unconditional. He has also pledged to maintain Royal Mail’s guarantee of services six days a week for five years.

Susannah Streeter said: “There is still some caution about whether the deal will go ahead, given that the government has the power under the National Security and investment act to potentially block the deal. IDS comes with a lot of Royal Mail baggage, particularly the obligation to deliver letters six days a week as the UK’s universal postal service, at a time when volumes are in sharp decline.

“But group’s international arm GLS has long been considered the jewel in the company’s crown, enjoying a level of success which Royal Mail has found elusive and EP Group will have been eyeing up the long-term opportunities here, particularly if inflation subsides further which should help margin growth.”

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Fresnillo Plc +3.18% +19.50 633.50
2 United Utilities Group Plc +2.36% +23.20 1,005.00
3 Shell Plc +1.78% +49.50 2,830.00
4 Bp Plc +1.52% +7.40 494.40
5 Severn Trent Plc +1.30% +31.00 2,416.00
6 Admiral Group Plc +1.08% +29.00 2,721.00
7 Bhp Group Limited +0.99% +23.00 2,358.00
8 Associated British Foods Plc +0.53% +14.00 2,655.00
9 Marks And Spencer Group Plc +0.46% +1.40 303.40
10 Next Plc +0.33% +30.00 9,238.00

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Ocado Group Plc -6.41% -26.30 384.10
2 International Consolidated Airlines Group S.a. -3.22% -5.60 168.10
3 Wpp Plc -2.07% -17.20 813.40
4 St. James’s Place Plc -2.02% -10.00 484.80
5 Johnson Matthey Plc -1.95% -35.00 1,759.00
6 Crh Plc -1.85% -116.00 6,166.00
7 National Grid Plc -1.83% -16.00 860.60
8 Prudential Plc -1.80% -13.80 751.20
9 Rentokil Initial Plc -1.67% -6.80 400.00
10 Itv Plc -1.67% -1.30 76.75

 

US close: Nvidia pushes Nasdaq to new high, but Dow sinks

US equity indices finished mixed on Tuesday, the Dow falling more than 200 points on the back of inflation concerns and strong gains for chipmaker Nvidia pushing the Nasdaq to a new record high.

Just seven stocks on the Dow finished in positive territory, with the index closing 0.55% lower at 38,85286 as it continues its retreat from its recent all-time closing high of 40,003.59. The benchmark has now fallen four of the past six sessions since hitting the record on 17 May.

While the S&P 500 finished flat, up just 0.02% at 5.306.04, the Nasdaq Composite set another closing peak of 17,019.88, up 0.59% on the day, with heavyweight chip giant Nvidia surging more than 7% to a new high as it continues its stellar performance.

Nevertheless, worries about inflation were weighing on investors’ minds on Tuesday ahead of a key inflation indicator due out on Friday – the personal consumption expenditures index – with a surge in the price of oil not helping matters.

Neel Kashkari, the president of the Minneapolis Federal Reserve, dampened market sentiment after saying that the Fed is looking for “many months” of positive inflation data before it considers cutting interest rates.

He also said that rate hikes weren’t strictly out of the question just yet. “I’ve been asked many times when we take potential interest rate increases off the table,” Kashkari said. “I don’t think anybody has formally taken them off the table.”

The yield on a 10-year US Treasury note was 7.7 basis points higher at 4.547% – its highest in more than three weeks.

Tuesday’s economic data schedule was relatively light. The S&P/Case-Shiller home price index showed price growth accelerated from 7.3% to 7.4% in March – the largest increase since October 2022. Meanwhile, the Conference Board’s national consumer confidence index rose for the first time in four months in May, from 97.5 to 102.0.

Nvidia rally continues

Nvidia‘s share price finished 7.1% higher at a new closing high of $1,141, adding to recent gains after the chipmaker smashed forecasts with its quarterly results last week. The stock has now jumped by a third since the start of May, and by 137% over the year to date.

Walgreens Boots Alliance saw shares sink more than 4%, dropping to its lowest level since 1998. The stock has now fallen by more than 42% since the start of 2024.

Marathon Oil and Chevron were notable risers as they followed crude prices higher. WTI crude was up 3.15 at $80.16 a barrel – its highest in four weeks – on the back of geopolitical uncertainty in the Middle East, along with expectations that OPEC+ may extend output cuts into the second half of the year.

Meme stock GameStop jumped 25% after the video-game retailer completed a $933m equity offering, which it intends to use for “general corporate purposes”. The share sale was first proposed two weeks ago.

Broker comments were supporting a number of blue chips: Norwegian surged after Mizuho lifted the cruise operator from ‘neutral’ to ‘buy’; rental platform Airbnb was helped by a Wedbush upgrade to ‘outperform’; while chemicals giant DuPont was raised from ‘neutral’ to ‘buy’ by Citi.

 

Wednesday newspaper round-up: Ryan Salame, Ocado, Shell

The next government should force all tradespeople who install home heat pumps, solar panels and insulation to sign up to a mandatory accreditation scheme to counter mistrust in the industry, a leading consumer group is demanding. A report from Which? found that households face “significant anxiety” in choosing tradespeople to fit low-carbon heating systems, such as heat pumps, and insulation after “press stories about poor work and rogue traders”. – Guardian

A federal judge on Tuesday sentenced former FTX executive Ryan Salame to more than seven years in prison, the first of the lieutenants of failed cryptocurrency mogul Sam Bankman-Fried to receive jail time for their roles in the 2022 collapse of the cryptocurrency exchange. Salame, 30, was a high-ranking executive at FTX for most of the exchange’s existence and, up until its collapse, was the co-CEO of FTX Digital Markets. He pleaded guilty last year to illegally making unlawful US campaign contributions and to operating an unlicensed money-transmitting business. – Guardian

Ocado is facing relegation from the FTSE 100 following a collapse in its share price, fuelling pressure on the company to consider abandoning London for New York. The London Stock Exchange said the technology company was likely to be kicked out of the blue-chip index in a quarterly reshuffle, after its valuation plunged from a peak of £22bn during the pandemic to just £3.6bn as of Tuesday. – Telegraph

Shell is preparing to axe staff in its offshore wind business, as chief executive Wael Sawan pursues a move away from renewables. The FTSE 100 oil giant is reportedly plotting the cuts after being hit by cost increases which have affected the entire offshore wind industry. They are expected to begin “within months” and will affect staff in Europe, according to Bloomberg. – Telegraph

A wind farm backed by SSE, the London-listed energy group, has been hit with the largest penalty to be issued by the energy regulator for overcharging bill payers to reduce its power generation. Beatrice Offshore Windfarm Limited (Bowl) has agreed to pay £33.1 million in redress after Ofgem found that it had charged “excessive prices” to lower its output. – The Times

 

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