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Weekly review

By Josh White

Date: Friday 12 Apr 2024

(Sharecast News) - The FTSE 100 ended the week up 84.42 points, or 1.07%, closing at 7,995.58 on Friday.
Equity view

UK equity investment firm Mercantile Investment Trust said managed to grow returns in the year to 31 January despite "a generally unsupportive environment". The company reported a net asset total return based on debt at par value was 4.5% and the total return to shareholders was 6.1%, under the ten-year averages of 6.1% and 6.4% respectively.

The United Arab Emirates' state-owned oil company recently considered buying BP, but the deliberations did not progress beyond preliminary discussions, according to a report. Reuters cited people familiar with the matter as saying that Abu Dhabi National Oil Company (ADNOC) ultimately decided BP would not be the right fit for its strategy. Political considerations also weighed on the potential move, one of the people said.

Petrofac said in an update on Friday that negotiations over tis finances were ongoing, as it remained in discussions with its lenders to restructure its debt, aiming for a substantial portion of the debt to be converted into equity. The London-listed firm said talks were also persisting with potential investors and major shareholders regarding further investment opportunities.

Limestone group SigmaRoc said on Friday it had delivered "solid Q1 performance", with underlying earnings in line with management expectations. SigmaRoc said volumes were 1% ahead of budget, contributing to revenue of £214.0m for the quarter, and noted that with tight control of costs in the period, it had achieved continued margin improvement, resulting in underlying EBITDA in line with guidance.

Biopharma giant AstraZeneca has announced it will increase its annual dividend by 7%, which the board said shows confidence in the company's performance and cash generation. The company said it would raise the annualised payout for 2024 by 20 cents to $3.10 per share. AstraZeneca said the amount takes into account other capital allocation priorities and previously announced acquisitions and business development.

Great Portland Estates struck an upbeat note on Thursday, on the back of strong demand and a likely cut in interest rates. Updating on trading, the London-focused developer and landlord said it had signed 14 new leases and renewals in the fourth quarter, generating annual rent of £5.7m.

Financial services consultancy Alpha FMC has reiterated expectations after an improvement in trading conditions through its fourth quarter and into the new financial year. Alpha FMC maintained its adjusted EBITDA forecast for the year ended 31 March of £42-43m, saying it ended the period with overall consultant utilisation at close to target levels in March.

Cybersecurity specialist Darktrace reported solid growth in both operating and financial metrics in the March quarter on Thursday, as it raised its full-year guidance. The FTSE 250 company said annualised recurring revenue (ARR) as of 31 March stood at $731.1m, making for a robust year-on-year increase of 23.5% at constant currency rates.

Affordable homes developer Vistry has signed two new deals with Homes England to deliver 1,000 mixed-tenure homes in the Midlands. The first deal involves the regeneration of City Hospital in Birmingham, which has outline planning permission for 750 homes, of which more than 50% will be affordable or private rent tenures.

Tesco struck a confident tone for the current financial year on Wednesday, after reporting a jump in both annual profits and volumes. The UK's biggest retailer said group sales excluding VAT and fuel rose 7.2% in the 52 weeks to 24 February, to £61.48bn.

Capita said on Wednesday that it has extended its customer experience contract with a "leading" European integrated telecoms company for two years from January 2024, with an option to extend for a further two years. The contract - worth more than £95m over four years - will see Capita continue to deliver on-shore and near-shore end-to-end customer experience services for the client, including inbound customer inquiries, chatbots, social media engagement and managing customer technical support.

Motor insurance group Direct Line has poached the head of finance from Aviva's general insurance unit to be its new chief financial officer, replacing its CFO of three years just weeks after a failed takeover offer from Ageas. Jane Poole, who has been CFO of Aviva's UK and Ireland general insurance business since 2021, will succeed current Direct Line CFO Neil Manser, who has been with the company since 2011 and been CFO since 2021.

HSBC Holdings on Tuesday said it was selling its Argentina business to Grupo Financiero Galicia for $550m and take a $1bn pre-tax loss in the process as it continued to pivot its operations towards Asia. "HSBC Argentina is largely a domestically focused business, with limited connectivity to the rest of our international network," said HSBC chief executive Noel Quin.

Student accommodation manager and developer Unite has said it is still confident in hitting rental growth targets for the next academic year while property values held more or less stable in the first quarter. The company reiterated its guidance to deliver rental growth of "at least 6%" for the 2024/25 academic year, down from 7.4% last year.

Fund, corporate and private client services group JTC has raised its growth guidance for the next three years after smashing its targets in 2023, helped by a record amount of new business wins. JTC said it is targeting organic growth of at least 10% per annum over its so-called Cosmos era, which runs from 2024 to 2027. The upgrade comes after the company delivered 19.9% organic growth in 2023, well ahead of its 8-10% medium-term guidance, helped by a number of recent acquisitions in the US.

Warpaint said on Tuesday that its full-year outlook was set to be "ahead" of the market's current expectations following strong trading in the first quarter of 2024. The company said in January that following continued strong trading in the final quarter of last year, sales and pre-tax profit for 2023 had exceeded previous expectations. That strong trading continued into the first quarter of 2024, which was a record quarter for sales.

FTSE 250-listed investment firm Caledonia Investments saw a solid increase in net asset value in the year ended 31 March, with all three investment pools contributing to growth. The company reported a net asset value of £3.0bn for the year, up from £2.8bn previously, representing a NAV total return of 7.4%.

Cake Box said on Monday that full-year profits were set to be "slightly ahead" of market expectations following strong growth across the business. In an update for the year to the end of March, the egg-free cake retailer said the "increasing momentum" seen at the start of the second half continued for the rest of the year, with further new store openings, positive sales growth from the enhanced marketing campaigns and higher online sales - including the increasingly popular 'click and collect' feature.

Mining giant Rio Tinto announced the appointment of Bold Baatar to the position of chief commercial officer on Monday, responsible for overseeing its commercial and business development operations globally. The FTSE 100 company said Baatar would succeed Alf Barrios, who had decided to retire from Rio Tinto. Currently serving as chief executive of copper, Baatar would bring much experience to his new role, starting to lead business development immediately and officially assuming the position of CCO on 1 September, relocating to Singapore for the role.

Vet services provider CVS Group said on Monday that it had been hit by a cyber attack which will have an ongoing operational impact on its UK business. The incident involved unauthorised external access to a limited number of the company's IT systems. CVS said it took immediate steps to isolate the issue and prevent wider unauthorised access, and took its IT systems temporarily offline.

Economic news

The Financial Conduct Authority (FCA) wrote to motor finance firms on Friday, stressing that they must maintain adequate financial resources at all times. The communication came amid the regulator's ongoing review of historical motor finance discretionary commission arrangements (DCA), revealing varying approaches among firms in accounting for the potential impact of past DCA use on their financial resources.

The UK economy grew a touch in February, according to figures released on Friday by the Office for National Statistics. GDP grew 0.1% following 0.3% growth the month before, in line with consensus expectations. January's figure was revised from a previous 0.2% growth estimate.

The Bank of England's Megan Greene has cautioned against near-term cuts to interest rates, citing ongoing inflationary pressures. Writing in the Financial Times on Thursday, Greene - a member of the Monetary Policy Committee - challenged market expectations that the BoE would cut rates earlier and by more than the Federal Reserve.

The UK housing market continued to strengthen last month, an industry survey showed on Thursday, as prices stabilised and buyer demand improved. According to the latest RICS UK Residential Survey, buyer demand had a net balance of 8 in March, the most positive result since February 2022.

Australian investment bank Macquarie emerged as one of the lenders involved in Thames Water's financial struggles on Tuesday, seven years after its ownership of the utility ended. Thames Water's parent company, Kemble Water Finance, defaulted on its debt last week, prompting speculation about a potential restructuring or even collapse for the water supplier.

The unusually early Easter holidays gave the UK retail sector a big boost in March, according to the British Retail Consortium-KPMG Retail Sales Monitor released on Tuesday Total retail sales rose by 3.5% year-on-year last month, accelerating from the 1.1% annual rise registered in February, above the three-month average growth rate of 2.1% and the 12-month average growth of 2.9%.

International events

China's trade surplus in March was $20bn lower than last year as exports dropped more sharply than expected, according to figures released on Friday by the National Bureau Statistics of China. The trade surplus came in at $58.55bn last month, down from $78.43bn in March 2023 and well below the $70.2bn expected by economists. This was the lowest level seen since October 2023.

German inflation fell in March, matching the lowest level since mid-2021, according to secondary estimates released on Friday by the Federal Statistical Office, Destatis. The harmonised index of consumer prices rose at a year-on-year rate of 2.3% last month, in line with the preliminary estimate and analysts' estimates.

Rate-setters in Frankfurt stood pat on rates on Thursday, but said that it would be correct to lower interest rates if its next set of projections, in June, increased their confidence that inflation was headed lower. The policy statement also stated that the European Central Bank's Governing Council would take decisions on a meeting by meeting basis and that rates were not a pre-set path.

US Wholesale prices rose by a tad less than anticipated last month amid a decline in energy costs. According to the US Department of Labor, in seasonally adjusted terms so-called total final demand prices were up in March by 0.2% month-on-month (consensus: 0.3%).

Initial jobless claims decreased in the week ended 6 April, according to the Labor Department, dropping to 211,000 from 222,000 in the previous week, for the lowest reading in a month, and below market expectations for a print of 215,000. Last week's decline follows an upwardly revised two-month high in the previous week and continues to outline a tight labour market, giving the Federal Reserve more room to hold interest rates higher for longer to combat inflation. Continuing claims fell by 72,582 to 1.96m, while the four-week moving average, which aims to strip out week-to-week volatility, was 214,250, a decrease of 250 from the previous week's figure.

Inflation in China rose slightly last month, official data showed on Thursday, missing forecasts. According to the National Bureau of Statistics, consumer price index inflation slowed to just 0.1% year-on-year, down from February's 0.7% rise and below forecasts for a 0.4% increase.

The cost of living in the US rose more than expected last month amid gains in the cost of energy, clothing and medical care services. According to the Bureau of Labor Statistics, in seasonally adjusted terms the country's Consumer Price Index increased at a month-on-month pace of 0.4% in March.

A senior European Union court has lifted sanctions against Russian billionaires Mikhail Fridman and Petr Aven, it was confirmed on Wednesday. Both men are major shareholders in conglomerate Alfa Group, which owns Russia's Alfa Bank. Their funds and economic resources were frozen in the aftermath of the invasion of Ukraine, after the EU Council deemed they provided "material or financial support" to Russian decision-makers.

Fitch Ratings has reduced its outlook on China to 'negative' on the back of the country's increasingly uncertain economic prospects. In a note published overnight, the rating agency said it had revised the outlook on China's long-term foreign currency issuer default rating (IDR) to 'negative' from 'stable'. It affirmed the IDR at 'A+'.

The National Federation of Independent Business' small business optimism index fell for a third consecutive month in March, dropping to 88.5 - the lowest reading since December 2012 and well below forecasts for a print of 90.2. Inflation was given as the single most important problem in operating businesses for 25% of those surveyed, with higher input and labour costs and up two points from February. Additionally, the net percentage of owners who expect real sales to be higher decreased by eight points from February to a reading of net -18%.

TSMC, the world's largest chipmaker, has struck an $11.6bn deal with the United States to bolster president Joe Biden's ambitions in AI chip development, it was revealed on Monday. The agreement entailed constructing cutting-edge facilities in Arizona by 2028. According to the Financial Times, the deal would see TSMC manufacturing the latest two-nanometer chips at a fabrication plant in Phoenix in an upgrade from the company's initial plans.

Interest rates in the US could rise to "8% or even higher" in the coming years, according to the head of JPMorgan Chase, who said that they bank was preparing for a wide range of scenarios in light of current high government spending and geopolitical volatility. In a 61-page annual letter to shareholders on Monday, JPMorgan Chase chief executive Jamie Dimon attempted to quash some of the unbridled optimism in financial markets, with analysts currently expecting the Federal Reserve to begin cutting interest rates in the coming months.

Eurozone investor morale improved again in April, marking the sixth gain in a row, according to a widely watched survey published on Monday. The Sentix index for the single currency block rose to -5.9 points in April from -10.5 in March, its highest level since February 2022, and beating forecasts of -8.5.

Industrial production increased at the fastest rate in more than a year in February after an impressive performance from the construction industry, according to figures released on Monday by the Federal Statistical Office Destatis. Industrial production rose by 2.1% over the month, the second straight rise after a revised 1.3% increase in January (initial estimate: 1.0%).

Reporting by staff and contributors.


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