Stocks in London were mostly lower at Friday midday, while the FTSE 250 turned to the red after Close Brothers shares fell as it announced it will appeal a court judgement to the UK Supreme Court.
The FTSE 100 index traded down 10.40 points, 0.1%, at 8,258.98. The FTSE 250 was down 15.67 points, or 0.1%, at 20,774.88, and the AIM All-Share shed 1.80 points, 0.3%, at 723.85.
The Cboe UK 100 was down 0.1% at 827.15, the Cboe UK 250 fell 0.2% to 18,349.53, and the Cboe Small Companies was up 0.2% at 16,884.84.
Ahead of Wednesday’s budget, a survey showed consumer confidence in the UK fell again amid further worsening sentiment.
GfK’s consumer confidence index fell one point in October to minus 21, as people’s predictions for the general economy worsened over the coming year despite a slight improvement in their forecasts for personal finances. Caution ahead of the budget was also cited as a factor.
The drop was significantly less than the seven-point plunge in September. Experts said that was also driven by Labour’s gloomy messaging around the spending statement in late October.
But Pantheon Macroeconomics suggested confidence may not be as damaged as the report suggests.
‘The first cut to bank rate in August appears to have quickly fed into the economy, particularly into mortgage rates and the housing market, which we think signals that consumers‘ confidence is not in as desperate a state as the GfK suggests so we expect the headline GfK balance to improve once budget uncertainty has passed.’
Ahead of the budget, Chancellor Rachel Reeves confirmed changes to the fiscal rules, allowing the government more scope to increase borrowing to free up more space for capital spending.
Goldman Sachs estimated that if the updated rules continue to require that debt – now defined as public sector net financial liabilities – must fall as a share of GDP five years ahead, then headroom against the debt rule would likely rise by around £50 billion.
Writing in the Financial Times, Reeves said her fiscal rules would be ‘the rock of stability at the core of my budget’.
PSNFL is a broader measure of the public sector balance sheet than public sector net debt with the addition of illiquid financial assets/liabilities, such as the student loan book and funded pension liabilities.
Kathleen Brooks at XTB Research said the change weighed on UK bonds, although it was hardly a ’Truss-like’ market reaction, referring to the market turmoil which followed the infamous ’mini-budget’ delivered by Kwasi Kwarteng, the chancellor at the time.
Brooks noted Labour has said that its focus will be on growth.
‘Investment is needed to boost growth, and Reeves sounds like she will scrutinize all projects to ensure that they will boost growth and the UK’s woeful productivity. However, the (early) proof in the pudding, will be the [Office for Budget Responsibility’s] growth forecasts.’
‘Will the OBR give a glowing review of Reeves‘ plans and significantly upgrade GDP forecasts?’, she asked.
The pound was quoted at $1.2983 early Friday afternoon, up from $1.2955 late Thursday afternoon. The euro stood at $1.0826, up from $1.0799. Against the yen, the dollar was trading at JP¥151.87, rising slightly from JP¥151.84.
In Europe, the CAC 40 in Paris was down 0.1%, while Frankfurt’s DAX 40 rose 0.2%.
Stocks in New York are called to open higher. The Dow Jones Industrial Average is called up 0.2%, and the S&P 500 and the Nasdaq Composite 0.3% higher.
Stephen Innes at SPI Asset Management noted Tesla’s jump on Thursday has brought some welcome relief to markets.
‘With investors utterly vexed by the US election run-up amid the suffocating tension, the rally couldn’t have come at a better time. The political uncertainty looming over markets has been palpable, with every twist in the polls sending waves of anxiety across trading desks. As Wall Street grapples with the unpredictable outcome, Tesla’s earnings beat was a welcome lifeline.’
‘Bond markets, blazing hot with yields soaring, finally hit the brakes,’ he noted.
On London’s FTSE 100, NatWest rose 3.1% after it raised guidance once more.
The lender now expects to achieve a return on tangible equity above 15%, its outlook raised from ‘above 14%’. Total income excluding notable items is to be around £14.4 billion, up from its previous forecast of ‘around £14.0 billion’. Total income excluding notable items in the third-quarter rose 7.3% on-year and 5.1% on-quarter to £3.77 billion. For the whole of 2023, it totalled £14.34 billion, so it expects growth of around 0.4% for 2024.
NatWest in February had forecast a 2024 outcome in the range of £13.0 billion to £13.5 billion. It maintained its outlook in April, but then raised it in July.
Peel Hunt said the profit beat was driven by higher income and lower costs than expected.
John Moore at RBC Brewin Dolphin thinks NatWest is in a ‘positive position, particularly compared to this time last year, and while it may still be finding its feet with the acquisitions of Sainsbury‘s Bank and Metro Bank’s mortgages the future looks brighter than it has for some time.’
Elsewhere, SSE fell 1.3% after Citi downgraded to ’sell’ from ’neutral’.
‘SSE has an attractive set of networks and renewable assets. However, we are increasingly concerned around the deployment of its offshore wind fleet and see risks of further delays, which could impact EPS and/or returns,’ the broker said.
On the FTSE 250, merchant bank Close Brothers fell 16%.
The company intends to appeal a court judgment to the UK Supreme Court in the Hopcraft case, which upheld the claimant’s appeal against Close Brothers Ltd.
The court has determined that motor dealers acting as credit brokers owe both a disinterested duty and a duty of loyalty to their customers.
‘This sets a higher bar for the disclosure of and consent to the existence, nature, and quantum of any commission paid than that required by current Financial Conduct Authority rules, or regulatory requirements in force at the time of the case in question,’ Close Brothers said.
It added: ‘We will be temporarily pausing the writing of new UK motor finance business while we review and implement any relevant changes to our documentation and processes to ensure compliance with these new requirements.’
Online retailer boohoo climbed 3.2% as the war of words with Frasers Group ramped up.
Sports Direct owner Frasers wants Mike Ashley, who has a 73% stake in the FTSE 100 company, to take over as CEO of boohoo. Frasers owns 27% of boohoo.
The AIM listing said that while it ‘remains willing to discuss board representation with Frasers in a constructive manner’, it must be mindful of the fact that Frasers is an investor in Asos, which operates in a similar market to boohoo.
AJ Bell’s Russ Mould said ‘based on past form, the retail tycoon [Ashley] is unlikely to disappear quietly whatever Boohoo‘s response so we can expect this saga to run for some time to come.’
Also on AIM, Intercede advanced 5.8% after launching a £1.0 million share buyback.
The cybersecurity software firm said this was a response to the ‘share price volatility’. The volatility has been sparked by uncertainty for the AIM market, Intercede says, due to possible inheritance tax legislation and business property relief changes at next week’s UK budget.
Gold ebbed to $2,722.18 an ounce early Friday afternoon, down from $2,729.94 at the time of the London equities close on Thursday. Brent oil was quoted at $74.83 a barrel, up from $74.48.
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