Level 2

Weekly review

By Josh White

Date: Friday 17 May 2024

(Sharecast News) - The FTSE 100 ended the week down 13.5 points, or 0.16%, closing at 8,420.26 on Friday.
Equity view

Business park owner Sirius Real Estate said it had raised €59.9m through a bond note issue to fund a "significant pipeline" of potential acquisitions. The issue was backed by a single unnamed international institutional investor which had approached the company "wishing to support our long term strategy", Sirius said.

Unilever announced the start of its €1.5bn share buyback programme on Friday, kicking off the first tranche of up to €850m worth of shares. The FTSE 100 consumer goods giant first announced the programme, valued at up to €1.5 bn in total, alongside its full-year results in February.

GSK said on Friday that it has sold its remaining 4.2% stake in consumer health business Haleon, which it spun off in July 2022. The pharmaceutical company sold just over 385m ordinary shares in Haleon at 324p each, raising gross proceeds of about £1.25bn.

Commercial properties business Land Securities said on Friday that losses had nearly halved in the twelve months ended 31 March amid continued operational strength, as values for best assets began to stabilise. Land Securities said pre-tax losses had narrowed from £622.0m to £341.0m as roughly 60% of its portfolio was "effectively stable in value" throughout the second half. EPRA earnings slipped from £393.0m to £371.0m, in line with guidance, as occupancy growth and 2.8% like-for-like income growth offset a rise in interest costs and the impact of asset disposals.

Mr Kipling owner Premier Foods said Thursday that its full-year performance was ahead of expectations and it returned to volume growth in the fourth quarter. In the year to 30 March, adjusted pre-tax profit was up 15.1% to £157.9m, with headline revenue also up 15.1%, to £1.1bn.

EasyJet chief executive Johan Lundgren is to step down after more than seven years in the role, the budget carrier said Thursday. The FTSE 100 firm said Lundgren, who has held the position since December 2017, would retire in early 2025. Current chief financial officer Kenton Jarvis will replace him.

Vistry lifted its annual homebuilding target to more than 18,000 driven by a 10% year-on-year rise in forward sales. The target compares with previous guidance of 17,500. Forward sales in the year to May 14 were £5bn and chief executive Greg Fitzgerald said half-year and annual profits expected to be ahead of last year.

AstraZeneca said Thursday that its investigational drug sipavibart had shown positive results in preventing Covid-19 in vulnerable patients. The FTSE 100 drugs firm said the phase III pre-exposure prophylaxis trial had met both its primary endpoints, of showing a relative risk reduction of Covid caused by different variants in immunocompromised patients.

Engineering firm Spirax Group has maintained its guidance for organic sales growth this year despite ongoing weakness in the wider market, though foreign exchange headwinds will impact profits more than previously thought. Spirax Group, which rebranded from Spirax-Sarco Engineering earlier this year, said currency headwinds are expected to persist during 2024, with an impact of around 3% to sales and 6% to adjusted operating profit. The sales impact was downgraded from 5% at the time of its full-year results in March.

Landscaping and building products supplier Marshalls said revenues fell 10% in the four months to April 30 as weak demand in the housing and maintenance market continued, adding that it still expected flat profits for 2024. Revenue came in at £199m for the period, down from £227 a year earlier. Marshalls stuck to its forecast of a modest recovery in the second half of the year "predicated on a progressive improvement in the macro-economic environment".

Burberry Group warned of a challenging first half on Wednesday, after slowing luxury demand dented annual sales and profits. The luxury fashion brand said revenues in the year to 30 March fell 4% to £2.97bn. On a constant currency basis, revenues were flat, while like-for-like store sales fell 1%.

Drinks company Britvic posted a jump in interim profit and revenue on Wednesday and announced a £75m share buyback, as it highlighted "strong" customer demand for its brands. In the six months to the end of March, adjusted earnings before interest and tax rose 17.7% to £100.4m, while pre-tax profit increased to £78.2m from £69.3m. Revenue was 11.2% higher at £880.3m

Logistics real estate investor Tritax EuroBox is to sell a Gothenburg warehouse for SEK385m (£28m) as the company continues to dispose of assets to reduce leverage. Tritax EuroBox bought the 28,900 sqm logistics property situated in the port of Gothenburg in June 2021. The sale, which was made to an unnamed pan-European real estate investment manager, was broadly in line with the asset's valuation last September, the company announced.

UK bakery chain Greggs maintained full year earnings forecasts as underlying sales grew 7.4% in the first 19 weeks of this year in what it called a "challenging market". Total sales rose to £693m from £609m a year earlier, boosted by increases in delivery sales, evening trade and increased usage of the Greggs App. Like-for-like sales in company-managed shops was up 7.4%.

Headlam slipped Tuesday as it warned on full-year profits, citing a weak housing market and worsening consumer spending. In an update for the four months to the end of April, the floor coverings distributor said revenue fell 12.3% year-on-year, with sales in the UK and Continental Europe down 11.6% and 16.9%, respectively.

Anglo American has announced a "major new phase" in its strategy as it makes radical changes to its business structure to drive shareholder returns and save costs, including the divestment or spin-off of its steelmaking coal, nickel, platinum and diamond operations. The news came just hours after the company received and rejected a second takeover offer from BHP Group worth £34bn.

Savings and retirement group Phoenix has announced that its chief financial officer of four years is to step down later this year. Rakesh Thakrar, who joined the company in 2001, has held various strategic and finance positions, including deputy CFO from 2014 before being promoted to group CFO in 2020.

High-performance polymers group Victrex said underlying profits dropped by a third in the first half after an 11% drop in volumes, though results did see a sequential improvement in the second quarter. The company said interim numbers were in line with guidance as it projected further growth in the second half, compared to the first half and the second half of 2023.

Digital marketing agency Mission Group said on Monday that it had rejected a takeover proposal from rival Brave Bison which valued the group at around 29p a share. Mission said that on 29 April, it received an all-share unsolicited conditional proposal at an exchange ratio of 11.5 Brave Bison shares for each ordinary Mission share.

Unite Group announced the sale of six properties to PGIM Real Estate on Monday, for £184m, with its share amounting to £76m. The FTSE 100 student accommodation provider said the properties, comprising 2,948 beds, were located in Birmingham, Cardiff, Leicester, Liverpool, Nottingham, and Sheffield.

Economic news

The Competition and Markets Authority (CMA) announced Friday that the partnership between Microsoft and Mistral AI did not qualify for a full investigation under the merger provisions of the Enterprise Act. The decision marked the end of the competition regulator's phase one inquiry, which was only officially launched on Thursday.

The Bank of England's chief economist has said it's "not unreasonable" to expect an interest-rate cut from the central bank this summer, as data showed that tightness in the UK labour market may be easing. Speaking at an event by the Institute of Chartered Accountants in England and Wales on Tuesday, Huw Pill said: "It's not unreasonable to believe that through the summer we will begin to see enough confidence in the decline in persistence that bank rate will come under consideration."

Unemployment nudged higher in March, official data showed Tuesday, in line with expectations, despite wages continuing to grow. According to the Office for National Statistics, the UK unemployment rate was estimated to be 4.3% in January to March, up from 4.2% previously.

The Treasury is finalising plans for a significant sale of its remaining stake in NatWest Group, it was reported on Monday, in a bid to expedite the bank's privatisation and stimulate retail investment in the UK. According to City AM, alongside an institutional placing of shares, the Treasury was intending to reduce its stake below 10% by the end of the year in a step towards fully privatising the group by the 2025-2026 financial year.

Britain's busiest airport Heathrow saw a 4.8% year-on-year increase in passenger traffic during April, with 6.7m travellers passing through its gates. Heathrow said April saw significant growth in passenger numbers on flights linking it with other parts of Britain, and those flying to and from Asia/Pacific and the Middle East. It also noted that 19 April marked Heathrow's busiest day for air traffic since October 2019, as a total of 1,337 flights either arrived or departed from its terminals.

International events

Beijing relaxes mortgage, deposit rules in bid to help troubled sector. The Chinese central bank moved again to help the struggling property sector on Friday by relaxing lending rules and offering to buy commercial real estate, as data showed house prices in major cities fell last month.

US firms continued to retain their workers over the past week. According to the Department of Labor, in seasonally adjusted terms initial unemployment claims fell by 10,000 over the week ending on 11 May. Economists had anticipated a drop to 220,000.

Factory activity in the US mid-Atlantic region slowed a tad more than expected in May, the results of a closely-followed survey revealed. The Federal Reserve Bank of Philadelphia's manufacturing sector index slipped from a reading of 15.5 in April to 4.5 for May. Economists had pencilled in a decline to 8.

The European Commission has launched formal proceedings to investigate whether Meta may have breached the Digital Services Act (DSA) through how it treats and protects minors on Facebook and Instagram. Meta will be investigated over whether it is exploiting the weakness and inexperience of minors to cause addictive behaviour on Facebook and Instagram, which has the potential risk to harm their physical and mental wellbeing, a statement said on Thursday.

Japan's economy unexpectedly shrank in the first quarter as consumers tightened their belts in response to stagnant wage growth, companies cut spending and exports fell. Gross domestic product contracted 2% on an annualised basis in the three months to March 30, the Cabinet Office said on Thursday. The figure compare with a forecast contraction of 1.2% and now clouds the outlook for the Bank of Japan's plans to lift interest rates.

American consumers reined in their spending last month, especially on motor vehicles and parts, and online. But economists were quick to point to payback from the expiry of a one-off Amazon sales event as a key - and therefore temporary - factor behind the decline.

Consumer goods and services prices increased 0.3% in April, according to the Bureau of Labor Statistics, principally due to higher oil prices and housing costs. However, the increase was below last month's and short of the 0.4% forecast by economists.

US mortgage applications rose 0.5% in the week ended 10 May, according to the Mortgage Bankers Association of America, following on from a 2.6% jump in the previous week. Last week's drop comes alongside a 10 basis point reduction in the average mortgage. Applications to refinance a mortgage jumped by 5% from the previous week, while applications to purchase a home dropped by 2%.

Eurozone inflation is set to fall faster than initially expected this year, the European Commission forecast on Wednesday. Publishing its latest spring economic forecast, the EC said that Eurozone inflation was likely to fall from 5.4% in 2023 to 2.5% this year and 2.1% in 2025.

Eurozone economic growth ticked higher in the first quarter of 2024, official data showed Wednesday. According to flash estimates from Eurostat, the official statistics office of the European Union, seasonally-adjusted GDP increased by 0.3% in both the Eurozone and wider bloc. That compares to a 0.1% decline in the previous quarter in the Eurozone.

The International Energy Agency (IEA) has slashed its oil demand forecast for 2024 due to poor industrial activity and mild winter temperatures, which have sapped gasoil consumption so far this year. The IEA's monthly Oil Market Report for May projects oil demand will rise by 1.1m barrels of oil per day (b/d) this year, down 140,000b/d on its April forecast, as weak deliveries, especially in Europe, moved OECD demand into contraction in the first quarter.

US producers prices rebounded more than expected in April after a downwardly revised fall the previous month, with the annual rate of inflation rising to its highest level in a year. The Bureau of Labor Statistics said US producer price index (PPI) increased by 0.5% over the month of April, compared with a 0.1% fall in March, which was revised from the 0.2% increase initially recorded.

Optimism among US small businesses has risen for the first time this year, but remains well below the long-term average as inflation continues to weigh on confidence. According to the National Federation of Independent Business (NFIB), the Small Business Optimism Index rose by 1.2 points in April to 89.7, as the sales outlook and job-creation expectations both improved.

German investor sentiment kicked higher in May, a closely-watched survey showed on Tuesday, reaching a two-year high. The latest ZEW Indicator of Economic Sentiment came in at 47.1, a 4.2-point increase on April. The highest level since February 2022, when Russia invaded Ukraine, it was also better than expected, with most analysts forecasting a reading closer to 46.0.

The Biden administration announced significant tariff increases on $18bn worth of Chinese imports overnight on Monday, targeting sectors such as electric vehicles (EVs), solar panels, steel, aluminium, and more. According to CNBC, the hikes are set to take effect this year. The hikes were introduced as part of an effort to shield American industries from what the White House deemed as unfair competition.

Reporting by Sharecast.com staff and contributors.

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