LONDON MARKET MIDDAY: FTSE 100 underperforms ahead of US data

(Alliance News) - European equities were largely higher heading into Wednesday afternoon's US ...

Alliance News 29 November, 2023 | 12:02PM
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(Alliance News) - European equities were largely higher heading into Wednesday afternoon's US gross domestic product reading, though London's FTSE 100 underperformed as China-exposed shares and international earners declined.

The FTSE 100 index traded down 8.26 points, 0.1%, at 7,446.98. The more domestically-focused FTSE 250 was up 45.79 points, 0.3%, at 18,432.79, and the AIM All-Share was up 1.42 points, 0.2%, at 713.99.

The Cboe UK 100 was down 0.2% at 742.95, though the Cboe UK 250 was up 0.3% at 15,974.57, and the Cboe Small Companies was down 0.7% at 13,372.25.

In European equities, the CAC 40 in Paris rose 0.4%, while the DAX 40 in Frankfurt added 0.9%.

The pound was quoted at USD1.2686 early Wednesday afternoon, largely unmoved from USD1.2689 at the London equities close on Tuesday. The euro traded at USD1.0982, a touch off USD1.0987. Against the yen, the dollar was quoted at JPY147.64, up versus JPY147.59.

Though the greenback was regaining some poise heading into the afternoon, the pound and euro had traded as high as USD1.2732 and USD1.1017 earlier on Wednesday, however.

The US Federal Reserve is making good progress in its fight against inflation, senior bank officials said, while voicing differing opinions on the chances of another interest rate hike.

"I am encouraged by what we have learned in the past few weeks – something appears to be giving, and it's the pace of the economy," Fed Governor Christopher Waller told a conference in Washington.

Economic data from October "are consistent with the kind of moderating demand and easing price pressure that will help move inflation back to two percent," he added.

Analysts at Rabobank commented: "Jubilant markets who listened to Waller didn't follow up by listening to [Michelle] Bowman warning that 'it's quite possible that Fed policy will need to be at a higher level than before the pandemic to foster low, stable inflation'."

Stocks in New York are called to open higher. The Dow Jones Industrial Average and S&P 500 are each called up 0.3%, and the Nasdaq Composite 0.4% higher.

In London, China-exposed lenders HSBC and Standard Chartered both fell 2.2%. Asia-focused insurer Prudential was down 1.6%.

"The current wave of respiratory illness in China is understandably causing nervousness despite assurances from Beijing this is not a novel virus but is instead a result of a post-lockdown surge in sickness," AJ Bell analyst Russ Mould commented.

Pressure on the FTSE 100 also stemmed from the likes of bookmakers Entain and Flutter, down 2.3% and 1.4%, consumer goods firm Unilever, which lost 0.6% and telecommunications company Vodafone, 1.1% lower.

The pound, though surrendering some progress heading into Wednesday afternoon, has been in robust territory in recent days, keeping a lid on shares in the FTSE 100's international earners.

On the up, grocer Ocado rose 4.5%. The stock to-and-fros from rise to decline as market sentiment shifts. Shares had fallen 1.3% on Tuesday, however, when markets were in a more risk-off mood.

Also rising, gold miners Fresnillo and Endeavour added 4.3% and 1.8%, on robust precious metal prices.

Gold was quoted at USD2,038.87 an ounce midday Wednesday, higher than USD2,037.08 late Tuesday.

Among London-listed mid-caps, water utility Pennon Group was down 2.6%.

Operating in a sector which has come under regulatory scrutiny, Pennon said it is focused on reducing its impact on river water quality. It also announced a higher dividend despite a dive in profit.

In the six months to September 30, pretax profit declined 60% to GBP9.1 million from GBP22.5 million a year prior. This was despite a 5.4% rise in revenue to GBP448.6 million from GBP425.5 million.

However, Pennon raised its interim dividend by 8.3% to 14.04 pence per share from 12.96p a year ago.

Operating costs increased 11% to GBP224.9 million from GBP202.2 million a year prior, while depreciation and amortisation costs came in 6.7% higher at GBP82.6 million compared to GBP77.4 million.

Pennon remained focused on its plan to reduce and divert groundwater ingress at 30 key wastewater treatment works and six sewer separation projects. It also aims to deliver 43 bathing and shellfish water schemes.

"For South West Water, ensuring quality and compliance is a key underpin, and we have consolidated our top quartile water quality position for Devon, Cornwall and Bournemouth regions," Pennon added.

Edison analyst Neil Shah commented: "Despite challenges, there are positive signs for the water utility company. The commitment to future growth is evident in the well-underway GBP1.6 billion investment, with GBP234 million pledged to the regulated water business, a 65% increase from H1 22/23. Furthermore, the cycle of drought which previously plagued results has broken, with reservoir levels more than doubling compared to 2022."

Elsewhere in London, cycling and motor products retailer Halfords plunged 17% after setting out a downbeat outlook alongside half-year results.

Halfords said trading patterns were "volatile" in its first half to September 29. It has also seen a "softening in our discretionary big-ticket categories" in the early part of the second half.

It is "challenging" to predict whether these trends will persist, the motoring and cycling products retailer added.

The first-half results showed revenue rose 14% on-year to GBP873.5 million from GBP767.1 million, while pretax profit rose 3.3% to GBP19.3 million from GBP18.7 million. It left its interim dividend unchanged at 3 pence.

Shares in takeaway delivery firm Deliveroo rose 2.0%. It reiterated guidance for 2023, predicting gross transaction value growth of a lower single digits percentage in constant currency.

It expects adjusted earnings before interest, tax, depreciation and amortisation between GBP60 million and GBP80 million.

Looking further afield, it expects gross transaction value growth of a mid-teens percentage annually over the medium-term. It aims to hit an adjusted Ebitda margin of 4% of GTV by 2026.

Founder and Chief Executive Will Shu commented: "I'm pleased to be hosting Deliveroo's first capital markets event today. It has been 11 years since Deliveroo was founded and almost three years since our IPO. I am excited as ever about the future of the business - there continues to be significant headroom for growth."

Deliveroo floated back in March 2021 at 390 pence per share, though the stock has shrunk over 60% since, currently trading at 148.20p.

Brent oil was trading at USD82.53 a barrel midday Wednesday, up from USD81.63 on Tuesday. The price was on the up on the eve of the latest Opec+ meeting.

Still to come on Wednesday's economic calendar is a German inflation reading at 1300 GMT, before the US GDP data at 1330.

By Eric Cunha, Alliance News news editor

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Halfords Group PLC 156.00 GBX 2.63 -
Standard Chartered PLC 690.80 GBX 3.48
Ocado Group PLC 476.00 GBX -6.92
Deliveroo PLC 113.00 GBX 2.91
HSBC Holdings PLC 612.80 GBX -0.28
Endeavour Mining PLC 1,324.00 GBX 3.84 -
Pennon Group PLC 671.00 GBX 1.44 -
Fresnillo PLC 463.60 GBX 1.80 -
Entain PLC 916.80 GBX 0.42 -
Unilever PLC 3,868.00 GBX 0.04
Vodafone Group PLC 70.46 GBX 1.94
Prudential PLC 782.40 GBX 0.62
Flutter Entertainment PLC 16,985.00 GBX -0.70 -
Flutter Entertainment PLC 143.50 -

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