The FTSE 100 sat marginally lower on Thursday afternoon, with share price falls for some of its larger constituents, on the back of broker rating downgrades, almost completely offset by strength in housebuilding shares and packaging firm DS Smith.
Housebuilders climbed after reassuring data for the sector from Halifax. DS Smith said volume trends have improved recently, though its half-year earnings were still weaker.
All-in-all, there was trepidation in global equities, as some nervousness ahead of Friday US jobs data kept enthusiasm to a minimum.
The FTSE 100 index was down 8.75 points, 0.1%, at 7,506.63. The FTSE 250 was down 72.04 points, 0.4%, at 18,594.69, while the AIM All-Share was up 1.82 points, 0.3%, at 719.94.
The Cboe UK 100 was down 0.3% at 749.46, the Cboe UK 250 was down 0.3% at 16,129.84, while the Cboe Small Companies was up 0.2% at 13,848.22.
‘The FTSE 100 took a step back on Thursday amid weak trading in the US and China as some of the excitement about a pivot from central banks dampens down,’ AJ Bell analyst Russ Mould commented.
‘US jobs numbers tomorrow and central bank meetings next week could inform the market if it has got carried away with the level of rate cuts which are now being priced in for 2024.’
The pound was quoted at $1.2576 at midday on Thursday, lower compared to $1.2601 at the close on Wednesday. The euro stood at $1.0769, down against $1.0796. Against the yen, the dollar was trading at JP¥145.12, lower compared to JP¥147.17.
Comments from the head of the Bank of Japan stoked speculation it will tighten its ultra-loose monetary policy, lifting the yen.
Governor Kazuo Ueda said handling monetary policy ‘will become even more challenging from the year-end and heading into next year’, Bloomberg News reported.
In the UK, house prices increased in November for the second month in a row, following a prior streak of six successive monthly falls, according to mortgage lender Halifax.
The average house price index increased 0.5% in November from October. Prices had increased from an upwardly revised 1.2% in October from September. On an annual basis, prices were 1.0% lower, easing from a 3.1% fall in October. The year-on-year reading for October was nudged higher from an initially reported 3.2% fall. The data from October had initially showed prices rose 1.1% on-month.
‘While a shallow recession and a rise in unemployment next year may cause a further modest fall in house prices, with the peak in mortgage rates behind us, prices may well have already bottomed out,’ said Capital Economics analyst Imogen Pattison.
Housebuilder Taylor Wimpey was 1.2% higher, among the best FTSE 100 performers.
Putting pressure on the large-cap benchmark, however, British Airways parent IAG lost 3.3%. JPMorgan cut the stock to ’underweight’ from ’neutral’.
Vodafone fell 2.5% as Exane BNP lowered its rating for the telecommunications firm to ’underperform’. Peer BT slid 2.9%.
DS Smith gained 1.8%, despite the paper-based packaging maker saying half-year profit fell and its chief executive intends to retire in 2025.
Pretax profit in the six months that ended October 31 fell 15% to £268 million from £315 million a year earlier, while revenue fell 18% to £3.51 billion from £4.30 billion.
DS Smith said second-quarter volume performance improved compared to the first quarter, while it expects stronger volume performance in the second half than first half. It maintained its interim dividend payment at 6.0 pence per share. It expects a full-year outcome in line with internal expectations.
Meanwhile, Chief Executive Officer Miles Roberts intends to retire after 13 years with the company. His formal notice period will start on December 1 next year, meaning he would step down no later than November 30, 2025. DS Smith said this will give the company enough time to identify and appoint his successor.
In the FTSE 250, Future lost 16%.
The magazine publisher saw pretax profit fall 19% to £138.1 million in the financial year that ended September 30 from £170.0 million a year earlier.
Revenue fell 4.4% to £788.9 million from £825.4 million, while it declared an unchanged final dividend of 3.4 pence per share.
Looking ahead, it said the stabilisation of trends gives it confidence to return to organic growth in the second half, translating into low single-digit revenue growth for the full-year.
Future also announced that Chief Financial & Strategy Officer Penny Ladkin-Brand will step down later next year.
Coats gained 11%, after it reached an agreement with the trustee of the Coats UK Pension Scheme to switch off pension deficit repair payments from the start of the new year.
The Bristol, England-based industrial thread and footwear component manufacturer said it agreed to pay the scheme a one-off lump sum payment of £10 million to move into an expected surplus position against the technical provisions funding basis.
This will enable the switch off threshold to be ‘comfortably met’, it said.
The agreement will result in a free cash flow benefit of £2 million per month while the payments remain switched off, Coats added.
‘The deficit repair payments will remain switched off so long as the scheme’s assets remain above 99% of its technical provisions,’ the company explained.
Among London’s small-caps, Kin & Carta rose 8.3%.
The business software consultancy said Apax Partners upped its takeover offer to 120p per Kin & Carta share, valuing the firm at £220.3 million on a fully diluted basis, up from a previous offer of £203 million.
Kin & Carta also noted it gives the company an enterprise value of £258 million. It now believes the new bid is fair and reasonable, unanimously recommending to shareholders that they vote in favour of the scheme at the court and general meetings.
Meetings scheduled for Thursday have now been adjourned until December 21 to allow shareholders more time to consider the increased and final offer.
On AIM, Smart Metering surged 41%, after it agreed to a private equity takeover from funds advised by Kohlberg Kravis Roberts.
KKR will pay 955 pence per Smart Metering share, a 40% premium to the stock’s Wednesday closing price. It gives Smart Metering a £1.3 billion valuation on a fully diluted basis and an enterprise value of £1.4 billion.
In European equities, the CAC 40 in Paris was down 0.1%, while the DAX 40 in Frankfurt was down 0.2%.
The eurozone economy contracted slightly in the third quarter of 2023, according to an official second estimate on Thursday.
According to Eurostat, quarter-on-quarter, gross domestic product fell by 0.1%, having risen by 0.1% in the second quarter. The figure was in line with market consensus cited by FXStreet.
On an annual basis, the eurozone economy was stable in the third quarter of 2023, after a 0.6% increase in the second quarter, and below the originally reported 0.1% growth.
Stocks in New York are set for a mixed open. The Dow Jones Industrial Average was called down 0.2%, the S&P 500 index marginally higher, and the Nasdaq Composite up 0.2%.
Gold was quoted at $2,031.54 an ounce in London on Thursday at midday, up from $2,026.89 on Tuesday. Brent oil was down at $74.87 a barrel in London on Thursday at midday from $75.14 late Wednesday.
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