Weekly review

By Josh White

Date: Friday 22 Sep 2023

(Sharecast News) - The FTSE 100 ended the week down 27.47 points, or 0.36%, closing at 7,683.91 on Friday.
Equity view

Chemicals group Croda International has appointed the chair of Direct Line as the successor to Anita Frew, who has been at the helm of the board since 2014. Danuta Gray, who is also currently a non-exec at Burberry and has held board positions across a range of FTSE 100 and FTSE 250 companies over the past two decades, will join the board as a non-exec and chair designate in February 2024.

Mike Ashley's Frasers Group on Friday confirmed it had asked a New York court to order Morgan Stanley chief executive James Gorman to hand over evidence for a UK lawsuit against the bank over an almost $1bn margin call covering trades in Hugo Boss. Frasers launched the suit in 2021, alleging the bank acted "arbitrarily" and "incorrectly" in maintaining the margin call by trying to force the retailer to close options positions it had established in Hugo Boss, losing the company millions as a result.

Catering giant Compass has announced that director Gary Green is retiring from the board later this year. Green, the group chief operating officer of North America, has been with the company for nearly 40 years but said "now is the time to hand over the business to the extremely capable team".

New high-level results from AstraZeneca's TROPION-Breast01 phase three trial, released on Friday, carried encouraging news for patients with inoperable or metastatic hormone receptor (HR)-positive, HER2-low or negative breast cancer. The FTSE 100 pharmaceuticals giant said the trial showed that the drug datopotamab deruxtecan (Dato-DXd) achieved a statistically significant and clinically meaningful improvement in progression-free survival (PFS) compared to traditional chemotherapy.

Safety equipment group Halma said it expects to deliver good underlying growth in the first half, as it maintained full-year guidance. The company reported on Thursday that it has made "further progress [...] despite varied market conditions" in the six months to 30 September.

Outsourcing group Capita said it has signed two new contracts with the UK and Northern Ireland governments worth a combined £565m. Four months after Capita was selected as the preferred bidder, the group has now confirmed it has sealed the deal to deliver Functional Assessment Service (FAS) assessments in the Midlands and Wales for the Department for Work and Pensions (DWP), and in Northern Ireland for the Department for Communities (DfC).

Shares in SSP Group were in the red on Thursday morning, after it flagged earnings per share guidance at the lower end of expectations. The FTSE 250 travel caterer said earnings for the year would be nearer 7p per share, having previously issued guidance of up to 7.5p.

Shares in Strix Group plunged on Thursday, after the Aim-listed firm reported a slide in half-year profits. The group, a kettle safety and filtration technology specialist, reported a near 29% jump in revenues, to £65.2m, after sales were boosted by its 2022 acquisition of Australian water systems firm Billi.

Close Brothers on Wednesday said it was buying Bluestone Motor Finance, a provider of motor finance in Ireland for an undisclosed cash sum. The transaction is expected to complete in the fourth quarter of this year. Bluestone Motor Finance has originated more than €450m since inception in 2014 and had loans under management of €132m at the end of the last year.

UK homewares retailer Dunelm reported a 7.8% fall in annual profits as hard-pressed shoppers reined in spending amid the cost-of-living crisis, but expects earnings growth this year on higher volumes. Pre-tax profit for the 12 months to July 1 came in at £192.7m from £209m a year earlier while sales rose 5.5% to £1.6bn.

Judges Scientific on Wednesday posted record interim adjusted earnings on the back of higher order intake and a recovery in China and Hong Kong. The company, which focuses on buying and developing firms in the scientific instrument sector, said adjusted pre-tax profit rose 33% to £12.8m. Revenue rose more than a third to £61.3m.

Shares in Finsbury Food Group surged by a fifth on Wednesday after agreeing to a £143.4m takeover by asset management firm DBAY. Finsbury shareholders will get 110p a share in cash, a premium of 23.6% to the stock's Tuesday closing price of 89p.

Pharmaceutical giant GSK has announced that its Apretude drug for HIV prevention has received approval from the European Commission. ViiV Healthcare, a specialist HIV company co-owned by GSK, Pfizer and Shionogi (GSK is the majority shareholder), showed in a clinical trial that Apretude demonstrated "superior efficacy" to the standard oral PrEP option in reducing the risk of acquiring HIV, which affects 100,000 newly diagnosed people each year in Europe.

Travel giant TUI on Tuesday held annual guidance on the back of a strong summer and solid bookings for this winter, underpinned by higher prices and despite extreme weather such as wildfires and floods in Europe. Summer bookings rose 5% to 13.7 million, the company said in a trading statement, with the positive momentum continuing into winter with an expanded programme and overall bookings up 15% year on year and prices increasing by 4%.

Financial services provider Hargreaves Lansdown reported a robust set of full-year results on Tuesday. Net new business reached £4.8bn, marking a 13% decrease from the prior year, but still contributing heavily to its overall growth.

Kingfisher lowered its profit expectations for the full year on Tuesday despite reporting a slight increase in first-half sales of 1.1% to £6.88bn, with like-for-like sales slightly ahead of expectations. The FTSE 100 home improvement retailer recorded a 0.1% decline in gross profit for the six months ended 31 July, to £2.495bn, as its gross margin dipped 40 basis points to 36.3%.

HICL Infrastructure announced the sale of its equity interests in the 'Bradford Building Schools for the Future' (BSF) first and second phase public finance initiative projects on Monday, for an estimated £37m. The FTSE 250 company said the sale price was an 8% premium over the company's valuation as at 31 March.

Car dealership operator Pendragon on Monday said it was selling its UK motor and leasing business to US firm Lithia for £250m. The two companies also agreed to form a partnership including the rollout of Pinewood - Pendragon's dealer management software (DMS) business - to Lithia Motors' existing 50 UK sites and creation of a joint venture to accelerate Pinewood's entry into the North American DMS market.

Savings and retirement group Phoenix lifted its interim dividend by 5% after smashing forecasts with cash generation in the first half. The company said it is now on track to deliver positive group net fund flows from 2024 for the first time in its history.

Diversified Energy announced a number of changes to its executive leadership structure on Monday, as its executive vice-president and chief financial officer Eric Williams stepped down with immediate effect to explore new professional avenues. The FTSE 250 company said that despite his immediate resignation, Williams had committed to assisting the company until the end of September in a bid to ensure a seamless shift in leadership.

Economic news

The UK's manufacturing sector continued to struggle in September, a survey showed on Friday, as higher costs weighed heavily. According to the latest CBI Industrial Trends Survey, total orders fell to a five-month low of -18 in September, from -15 a month previously. Analysts had been looking for a total orders balance of -17.

UK output unexpectedly fell in September, a closely-watched survey showed on Friday, dragged lower by a weaker service sector. The latest flash S&P Global/CIPS UK PMI Composite Output Index came in at 46.8, down on August's 48.6 and a 32-month low. It was also the fastest rate of decline since January 2021, or March 2009 once pandemic disruptions were stripped out.

UK retail sales rebounded in August from the rain affected prior month, rising 0.4% on the back of strong food and clothing purchases by consumers, according to official data published on Friday. The rises in food and clothing were partially offset by online sales, which dropped slightly as some people returned to shopping in person after a very wet July - which recorded a sharp 1.1% fall.

UK consumer confidence pushed higher in September, a long-running survey showed on Friday. The GfK Consumer Confidence Index increased four points to -21, the highest reading since January 2022.

The Bank of England has left interest rates unchanged for the first time in 15 meetings, the central bank announced on Thursday - though the decision was finely balanced. The Monetary Policy Committee decided to maintain the Bank Rate at 5.25% following 14 consecutive meetings to tighten monetary policy since November 2021.

Britain's budget deficit in August was slightly higher than expected, according to official data published on Thursday, meaning Finance Minister Jeremy Hunt will have less scope for tax cuts ahead of the General Election. Public sector net borrowing excluding state-owned banks was £11.6bn in August, above consensus forecasts of £11.1bn, but below the Office for Budgetary Responsibility's £13bn estimate.

The rise in UK house prices slowed dramatically in July, according to data out on Wednesday from the Office for National Statistics. The average selling price was £290,000 in July, up from £288,000 in June. However, the year-on-year growth in prices slowed to just 0.6%, from a revised 1.9% the previous month.

UK inflation unexpectedly fell in August, with the core measure of price growth slowing dramatically, adding to hopes that the Bank of England's next interest-rate hike could be its final one in the current cycle. The year-on-year change in the consumer price index (CPI) eased to 6.7% last month, from 6.8% in July and surprising economists who had forecast a slight tick-up to 7.1%.

A subdued August left UK house prices largely unchanged, industry research showed on Monday. Subdued August weighs on UK house prices. According to the latest Rightmove House Price Index, house prices nudged up just 0.4% in September, following a 1.9% fall in August. The rise was below average for this time of year.

International events

German private sector business activity remained in contraction territory in the third quarter, according to Friday's HCOB flash composite purchasing managers' index (PMI) output index. It showed a minor improvement in September, rising to 46.2 from August's 39-month low of 44.6, but below estimates of 47.2.

Equity strategists at Bank of America sounded a pessimistic note on the outlook for European equities now that the European Central Bank was likely done hiking rates. Historically, the key to how stocks would fare had depended on whether the economy was already in a recession when rate increases stopped.

Eurozone output nudged higher in September, a closely-watched survey showed on Friday, but the struggling manufacturing sector continued to weigh on growth. The flash HCOB Eurozone composite PMI output index came in at 47.1, up from 46.7 in August and marginally above forecasts, for a slight dip to 46.5.

The Bank of Japan left its monetary policy unchanged on Friday with rates left at -0.1%, in line with expectations. The central bank also capped the 10-year Japanese government bond yield at around zero.

Home selling activity in the U.S. slowed a bit further last month. According to the National Association of Realtors, in seasonally adjusted terms existing home sales fell at a clip of 0.7% month-on-month to reach an annual pace of 4.04m. Economists had pencilled in 4.1m.

The Swiss National Bank left interest rates unchanged on Thursday, ending a run of five consecutive hikes. Following its quarterly monetary policy meeting, the central bank kept its main policy rate at 1.75%. Most analysts had forecast a further 25 basis point rise.

The Federal Reserve stood pat on interest rates, even as it left the door open to a further interest rate hike before the year was out. However, the economic projections submitted by the central bank's top officials showed that the median forecast for the Fed funds rate for 2024 had been raised by 50 basis points to 5.1%.

Eurozone construction output nudged higher in July, official data showed on Wednesday, following gains in the bloc's major economies. According to Eurostat, the European Union's statistics office, seasonally-adjusted production in the construction sector rose by 0.8%, reversing much of June's 1.2% fall.

Homebuilding activity in the States fell sharply last month, although a key lead indicator pointed to somewhat more buoyant conditions in coming months. According to the U.S. Department of Commerce, in seasonally adjusted terms housing starts fell at a month-on-month pace of 11.3% to reach an annual rate of 1.283m (consensus: 1.439m).

Inflation in the Eurozone unexpectedly slowed last month, as Eurostat revised down earlier 'flash' estimates for August on Tuesday. The annual rise in consumer prices across the single-currency region eased to 5.2% in August, from 5.3% in July and 5.5% in June. The initial estimate showed inflation as unchanged at 5.3%.

Reporting by staff and contributors for Sharecast.com.


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