London’s FTSE 100 went into the afternoon on decent footing, but limped over the line on Wednesday, as a weaker oil price hit BP and Shell.
Hawkish words from a UK central banker did little to stir up enthusiasm for equities, though the OECD set out an encouraging outlook for the domestic economy.
‘With a lack of major economic news on the schedule for Wednesday and only a few big-name corporates reporting results, investors might be taking stock of events and working out their strategy for the months ahead’ said Russ Mould at AJ Bell.
The FTSE 100 index closed down 14.06 points, or 0.2%, at 8,268.70. The FTSE 250 ended down 14.68 points, or 0.1%, at 20,755.44, and the AIM All-Share closed down 1.32 points, 0.2%, at 741.48.
The Cboe UK 100 ended down 0.1% at 827.91, the Cboe UK 250 ended down 0.2% at 18,251.13, although the Cboe Small Companies ended up 0.8% at 16,955.60.
In European equities on Wednesday, the CAC 40 in Paris ended down 0.5%, while the DAX 40 in Frankfurt declined by 0.4%.
On Wall Street at the time of the London close, the DJIA was down 0.5%, the S&P 500 index was down 0.1% and the Nasdaq Composite was up 0.2%.
In London, Monetary Policy Committee member Megan Greene said she believed the risks to activity are to ‘the upside’, and that she favoured a ‘gradual approach to removing restrictiveness.’
She said that there are indications that services inflation is still sticky and that she was not too ‘excited’ by this metric coming in below forecast.
Greene was one of four on the MPC who voted to hold rates in August. The Bank of England ultimately cut rates by 25 basis points to 5.00% in a 5 to 4 split decision. Greene was with the majority last week, however, backing a bank rate hold in an 8 to 1 vote.
The perceived hawkish message put rate sensitive housebuilders on the back foot. Taylor Wimpey fell 1.7% and Persimmon ebbed 2.4%.
Meanwhile, the Organisation for Economic Co-operation & Development has placed the UK joint second in its economic growth forecasts for the rest of 2024.
The prediction of 1.1% growth for the whole of this year puts the UK alongside Canada and France but behind the US.
However, its prediction of 2.7% inflation for this year means the UK is still the country in the G7 with the fastest-rising prices.
Calling the growth forecast ‘a small ray of sunshine through the dark clouds’, AJ Bell’s Mould said: ‘However, the prediction of 1.1% growth for 2024 is hardly indicative of a country powering ahead.’
The pound was quoted at $1.3351 at the London equities close on Wednesday, up compared to $1.3378 at the close on Tuesday. The euro stood at $1.1155, up against $1.1147.
Against the yen, the dollar was trading at JP¥144.44, up from JP¥143.67 late Tuesday.
In London’s FTSE 100, Rentokil jumped 4.2% after an activist investor secured a seat on the board.
Rentokil appointed Brian Baldwin to its board as a non-executive director with effect from October 1.
Baldwin is the head of research of Trian Fund Management LP, an investment management firm, run by Nelson Peltz.
Previously, Trian has agitated for change at amongst others, Walt Disney Co, although it was ultimately defeated.
‘Trian believes Rentokil has significant potential and runway for growth that can be achieved by leveraging its strong brands and market leading positions, particularly in the US. I look forward to working with management and the board to identify options to help drive long-term value that will benefit all stakeholders,’ Baldwin said in a statement.
There has been speculation that Trian will push for the company to take a US listing, where the majority of its business is conducted.
Earlier in September, Rentokil warned slower growth in North America and the strong pound will dent full-year profit. It was the latest blow for the firm, which cut guidance in July, and also back in October 2023.
The recent strength in the gold price continued to support miner Fresnillo, up 3.4%.
Positive comments from JPMorgan boosted British Airways owner International Consolidated Airlines, up 0.5%, and easyJet, up 2.2%.
‘As the sun sets on summer and we look ahead into the final quarter, we see a buying opportunity into winter for the European airlines sector. The sector has started to inflect upwards over the past month, however, remains a large under performer versus the market this year, due to concerns over softer passenger demand as pricing has begun to normalise for the first time post pandemic,’ JPM analysts said.
JPM has an ’overweight’ rating on IAG and easyJet.
Air France, double-upgraded to ’overweight’ from ’underweight’ by JPM, jumped 6.8% in Paris.
Gold was quoted at $2,656.90 an ounce at the London equities close on Wednesday, up against $2,646.07 at the close on Tuesday.
Also in favour, Beazley gained 0.9% as Deutsche Bank raised its price target and reiterated a ’buy’ rating.
Meanwhile, Rio Tinto, up 0.6%, attracted positive comments as analysts visited some of the miner’s Canadian operations.
‘The team laid out plans to improve margins and return on capital employed, which, if achievable, have scope to be supportive for Rio more broadly and add upside to market expectations,’ analysts at Berenberg said.
But Rightmove fell 1.6% as analysts perceived the chances of a bid from Australia’s REA succeeding as fading.
The UK online property portal has failed to engage with its Sydney-based peer and rejected a third bid proposal which it termed ‘unattractive’.
‘We see the probability of deal completion as quite low,’ analysts at Citi remarked, while Jefferies felt it was ‘the last throw of the dice,’ by REA.
Also dragging London lower, index heavyweights BP and Shell ended down 2.3% and 1.4% respectively.
Brent was quoted at $74.38 a barrel at the London equities close on Wednesday, down from $74.85 late Tuesday. Brent has fallen 9.3% in the past month and 19% in the year to date.
Paddy Power owner Flutter Entertainment climbed 7.2% announced a $5 billion share buyback and said it is targetting doubling annual profit by 2027.
In 2027, it is eyeing yearly revenue of $21 billion, which would be a 78% rise from $11.79 billion it achieved in 2023. Flutter’s guidance for 2024 is for US revenue of $6.2 billion, and $8.0 billion for the remainder of the group, so around $14 billion in total.
It expects to achieve adjusted earnings before interest, tax, depreciation and amortisation of ‘over’ $5 billion for 2027, up markedly from $1.68 billion in 2023. For 2024, its guidance suggests an adjusted Ebitda of around $2.5 billion, so it expects profit to double by 2027.
Elsewhere, DFS Furniture rose 6.6% as it sees ‘increasing reasons to be optimistic’ after two years of revenue decline sent the retailer into loss.
‘It is clear that the upholstery market has a long road to recovery given the 20% decline on pre-pandemic levels that we have seen,’ said Chief Executive Officer Tim Stacey. ‘Despite the challenges we have faced, we remain confident that the business is well positioned to capitalise on market recovery.’
The Doncaster, England-based living room and upholstered furniture store chain swung to a pretax loss of £1.7 million in the financial year that ended June 30 from a profit of £29.7 million the year before, as revenue fell by 9.3% to £987.1 million from £1.09 billion.
Revenue had fallen by 5.2% in financial 2023 from £1.15 billion in financial 2022, when DFS had benefited from pandemic-related buying by homeowners.
Thursday’s UK corporate calendar has a trading statement from sensors maker Halma.
The global economic calendar has US GDP, initial jobless claims and durable goods orders and quarterly
personal consumption expenditures numbers all at 1330 BST.
Copyright 2024 Alliance News Ltd. All Rights Reserved.
