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Weekly review

By Josh White

Date: Friday 20 Jan 2023

(Sharecast News) - The FTSE 100 ended the week down 73.48 points, or 0.94%, closing at 7,770.59 on Friday.
Equity view

Telecoms testing company Spirent Communications said it expected to deliver an adjusted operating profit slightly ahead of market consensus, with good earnings growth over 2021. Full year revenue grew by 5.5% to $607m as the company said it had coped with global economic challenges, supply chain constraints and increasing cost inflation.

4imprint said on Friday that pre-tax profit for 2022 is expected to be above the upper end of the range of analysts' forecasts, and not less than $100m following a particularly strong finish to the year. In a brief update, the company - a direct marketer of promotional products - said unaudited group revenue for the year to the end of December was around $1.14bn, up 45% on 2021.

De La Rue said on Friday that it has suspended banknote printing in Kenya and that the company is implicated in an investigation into the former finance secretary of India. The group's banknote printing operations in India - which are now conducted through a joint venture with the Government of Kenya - have been suspended due to current global market demand, and no expectation of new orders from the Central Bank of Kenya for at least the next 12 months.

Petershill Partners said it was well placed for the year ahead after a rise in assets under management. Updating on fourth-quarter trading, the London-listed investment group - which is operated by Goldman Sachs Asset Management - said its organic gross fee-eligible AuM saw a rise of $60bn for 2022, ahead of earlier guidance for $55bn.

Sage Group reiterated full-year guidance on Thursday, after the technology firm said it had seen a strong start to the year. Updating on trading, the accounting and finance specialist said total revenues in the three months to 31 December had strengthened 10% to £540m, or by 9% on an organic basis.

Landscaping and building supplies provider Marshalls said it expected to deliver full-year profits in line with expectations despite weaker market conditions in the final quarter as inflation started to hit sales. The company said group revenue for the year to end-December came in at £719m. Like-for-like sales rose 1% over the period, including the Marley roofing products business, acquired last year, they were up 22%.

Full-year numbers at Informa are set to come in ahead of expectations, the academic publisher and events specialist said on Thursday, following strong performances across the business. Updating on full-year trading, the blue chip forecast 2022 revenues of more than £2.38bn, with adjusted operating profits over £530m and free cash flow of at least £440m.

Specialty chemicals company Elementis said on Thursday that it was on track to meet market expectations for the full year as it hailed a solid fourth-quarter performance. In an update for the three months to the end of December, the company said it performed well despite weaker trading conditions, as the macroeconomic environment deteriorated through the period.

Housebuilder Vistry said it was on track to deliver annual profits in line with expectations, despite a challenging market after last September's disastrous government mini-budget that sent markets into freefall. In a trading update Vistry said it had started the new year with forward sales of £4.6bn, up from £2.7bn in 2021 when sites had been closed due to the Covid pandemic.

Pearson on Wednesday said it would report better-than-expected annual profit, driven by a strong sales rise across most of its divisions. The educational publisher said it now expected an adjusted operating profit of about £455m for 2022, up 11% and ahead of expectations, on an underlying sales increase of 5%.

Electricals retailer Currys backed its full-year guidance on Wednesday as it said a solid performance in the UK and Ireland has helped to offset weakness in the international segment. In an update for the 10 weeks to 7 January, the company said UK and Ireland like-for-like revenue was down 5%, but profits were better than expected thanks to gross margin increases and continued cost savings.

UK wealth manager Rathbones on Wednesday reported a fall in funds under management and administration (FUMA), citing lower inflows driven by market volatility. The company said FUMA at the end of 2022 fell to £60.2bn from £68.2bn a year ago.

Mining giant Rio Tinto said China's dismantling of Covid-19 restrictions raised risks of labour and supply-chain shortages as it reported a 4% increase in iron ore shipments in the fourth quarter. The coming months would bring "high volatility", Rio said as China faced a surge in coronavirus cases, which would increase short-term risks of supply chain disruptions and labour shortages across the country.

Investment manager Ninety One today on Tuesday confirmed assets under management were flat quarter on quarter at £132.4bn. The figure to December 31 compared with £132.3 billion at the end of last September and was £141.7bn a year earlier.

Inchcape said it was taking a controlling stake in the CATS Group of the Philippines and forming a joint venture with the distributor of luxury vehicles. The deal will expand Inchcape's global distribution footprint as it enters the Philippines, the company said on Tuesday and strengthen its reach and partnerships with Mercedes-Benz, Chrysler, Dodge, Jeep, Jaguar and Land Rover.

M&G said it had appointed former Natixis Investment Managers chief operating officer Joseph Pinto to head up its asset management business. Pinto will take over in March when predecessor Jonathan Daniels retires, the asset manager said on Tuesday.

Food delivery group Just Eat has launched a new partnership with grocery giant Sainsbury's, marking the platform's second tie-up with one of the UK's "Big Four" grocers. The pair said the partnership will launch with more than 175 stores by the end of February in locations including London, Edinburgh, and Bristol, with plans to roll out to many more cities across 2023.

Qinetiq said on Monday that it has won an £80m contract with the UK's Ministry of Defence (MOD). The contract will provide expertise, training and support to accelerate and transform mission data production.

Healthcare property investor and developer Assura reported a net initial yield of 4.86% at the end of the third quarter, an outward movement of 34 basis points since September. This represented a 7% reduction in portfolio value to £2.7bn, the company said on Monday.

Real estate investment trust Derwent London has agreed to sell its 63,170 square foot freehold interest in 19 Charterhouse Street in East London for £54.0m before costs. Derwent London said on Monday that the building, which was purchased in November 2013 for £41.3m after costs, was currently occupied by the London College of Accountancy on a lease expiring in August 2025.

Economic news

Retail sales continued to fall in December, official data showed on Friday, as hard-pressed shoppers cut back on spending. According to the Office for National Statistics, retail sales volumes were estimated to have fallen 1% last month, compounding a 0.5% slide in November, revised downwards from an initial estimate of -0.4%. Analysts had been expecting a 0.5% improvement in sales in December.

Consumer confidence faltered in January, a well-regarded survey showed on Friday, as concerns about the strength of the economy weighed heavily. The January GfK Consumer Confidence Index fell three points to -45, ending December's weak rally, when the index nudged up two points to -42.

House prices fell sharply in December, a closely-watched survey showed on Thursday, with weakness forecast to continue well into 2023. According to the latest UK residential survey from the Royal Institution of Chartered Surveyors, the national house price net balance tumbled to -42 in December, from -26 in December. The balance measures the difference between the percentage of surveyors seeing rises and falls in house prices.

UK inflation eased in December, but remained close to a 40-year high, according to figures released on Wednesday by the Office for National Statistics. Consumer price inflation eased to 10.5% from 10.7% in November, falling for the second month in a row. Economists had been expecting the inflation rate to be unchanged.

Australian billionaire Andrew Forrest is planning to open an advanced battery plant in Oxfordshire later this year, creating up to 300 new jobs. In an exclusive interview with Sky News, Forrest - founder of Australian iron ore company Fortescue - said he was expanding operations at WAE Technologies, the technical offshoot of the Formula 1 team, which he bought last year.

UK wages grew at their fastest rate in more than 20 years in the three months to November, adding pressure on the Bank of England to raise rates. According to figures released on Tuesday by the Office for National Statistics, regular pay, excluding bonuses, was up 6.4% on an annual basis. Excluding the Covid pandemic, this marks the biggest jump since records began in 2001.

House prices nudged higher in January, industry research showed on Monday, halting two months of falls. According to the latest Rightmove House Price Index, house prices rose 0.9% month-on-month in January, compared to a 2.1% decline in December. It was the biggest January rise since 2020. Year-on-year, house prices jumped 6.3%.

International events

German producer price inflation slowed sharply in December to its lowest rate in more than a year, according to official data released on Friday, in another sign that cost and price pressures may have peaked. Producer price growth slowed to 21.6% year on year from 28.2% and is now at its lowest level since November 2021, statistics office Destatis said.

The head of the Federal Reserve Bank of Boston argued for interest rate hikes to just above 5.0% and then holding at that level "for some time". Her forecast was in line with pricing for future hikes by Fed funds futures at the end of the prior year, but since then futures had moved to discount rates peaking nearer 4.9%.

Builders in the US broke ground on fewer homes in December, roughly as expected. According to the Department of Commerce, in seasonally adjusted terms, housing starts fell by 1.4% month-on-month to reach an annualised pace of 1.382m.

Americans filed new unemployment claims at a slower pace in the week ended 14 January, according to the Department of Labor. Initial jobless claims fell by 15,000 week-on-week to 190,000, the lowest in four months and well and truly below Wall Street expectations for a print of 214,000.

Manufacturing sector activity in the US mid-Atlantic region at the start of 2023 improved a little, the results of a very closely followed survey revealed. The Federal Reserve Bank of Philadelphia's factory sector index rose from a reading of -13.7 for December to -8.9 in January.

The European Central Bank will not stop with one single 50 basis point hike at its next rate-setting meetings, said board member and Dutch central bank governor Klass Knot, who also chided investors for underestimating increases. "It will not stop after a single 50 basis point hike, that's for sure," Knot said. The European Central Bank raised rates four times throughout 2022, bringing its deposit rate to 2%.

A top US central bank official argued in favour of hiking interest rates by 50 basis points at its next meeting to ensure that inflation would fall back to the monetary authority's 2.0% target. Speaking at a Wall Street Journal live event, the head of the St.Louis Fed, James Bullard, also said the Fed should err on the side of caution and raise rates as quickly as possible past 5%.

US retail sales softened by much more than expected towards the end of the previous year. According to the US Department of Commerce, in seasonally adjusted terms, retail sales volumes shrank by 1.1% versus the month before to reach $677.1bn (consensus: -0.8%).

Industrial output weakened noticeably at the tail-end of 2022 as production of business equipment fell sharply. According to the Department of Commerce, in seasonally adjusted terms total industrial production dropped in December at a month-on-month pace of 0.7% (consensus: -0.1%).

Wholesale prices undershot market expectations by a wide margin at the end of 2022. According to the US Department of Labor, in seasonally adjusted terms final demand prices fell at a month-on-month pace of 0.5% in December (consensus: -0.1%).

Consumer price inflation in the eurozone eased in December, according to figures released on Wednesday by Eurostat, in line with an earlier flash estimate. Final inflation was confirmed at 9.2% year-over-year, down from 10.1% in November. This was due mainly to lower energy inflation, with energy prices in the bloc up 25.5% on the year in December, down from 34.9% growth the month before.

The Bank of Japan surprised markets on Wednesday and left its yield curve control (YCC) measures unchanged as it maintained its cheap-money policy, sparking a surge in equities, but sending the domestic currency lower. Markets had been expecting a change to the BoJ's super-loose monetary policy after the central bank in December allowed the yield of the 10-year bond to move 0.5% away from its 0% target, instead of the previous 0.25% range limit set.

China's economy grew by just 3% last year, official data showed on Tuesday, well below government targets and one of the slowest rates since the 1970s. Beijing had been targeting GDP growth of around 5.5% for 2022, already a marked reduction on 2021, when the economy grew by 8.4%. Excluding 2020, when the economy was rocked by the first Covid-19 outbreak, it was the weakest growth since 1976.

Reporting by Sharecast.com staff and contributors.


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