London midday: Stocks tick up; UK construction data in focus
By Michele Maatouk
Date: Thursday 05 Dec 2024
(Sharecast News) - London stocks were still just a smidgen higher by midday on Thursday as investors mulled the latest reading on the UK construction sector and political developments in France, with Frasers Group under the cosh after cutting its profit outlook.
The FTSE 100 was up just 0.1% at 8,341.74.
Kathleen Brooks, research director at XTB, said: "France has been plunged into a political crisis, the question now is, will it trigger a crisis for financial markets? Late on Wednesday, the French government lost a no-confidence vote linked to its budget. This was widely expected, and it leaves France rudderless at the same time as its budget deficit has swelled to 6% of GDP.
"In the immediate term, the President will need to appoint a new PM, however, we could be in a situation where any new PM will face the same challenges as Barnier if they try to pass a budget that contains measures to bring down the budget deficit.
"The crisis is ostensibly over the Budget; however, it was precipitated by June's election, which resulted in no clear winner and a fractured parliament. France cannot hold another parliamentary election until next summer, however, Marine Le Pen has made it clear that she is the Kingmaker. After the vote she said that her party will work with the new government to pass a budget. However, that will likely mean far fewer tax hikes and spending cuts, which may not do much to dent the budget deficit."
On home shores, data out earlier showed that activity in the construction sector picked up in November.
The S&P Global UK construction purchasing managers' index rose to 55.2 from 54.3 in October, coming above the 50.0 mark that separates contraction from expansion for the ninth month in a row.
The upturn was driven by the strongest rise in commercial work for two-and-a-half years, but house building remained by far the weakest-performing category of construction work in November.
Tim Moore, economics director at S&P Global Market Intelligence, said: "The construction sector bucked the slowdown seen elsewhere across the UK economy in November, according to the latest S&P Global PMI survey. Total industry activity once again expanded at a robust pace and there has been a clear acceleration in growth compared to that seen in the first half of 2024.
"However, the recovery in construction activity remains somewhat lopsided. Strengthening demand for commercial work and civil engineering projects contrasted with a sustained downturn in house building. Commercial construction activity expanded at the fastest pace for two-and-a-half years in November, while residential work declined at the steepest rate since June. Elevated borrowing costs and fragile client confidence meanwhile acted as a brake on new order growth in November, with the upturn in sales the slowest for five months."
In equity markets, Admiral was the top gainer on the FTSE 100 after an upgrade to 'buy' from 'hold' at Deutsche Bank, which said it was becoming more positive on the wider UK motor insurance space, particularly for those that are larger players such as Admiral, and those that are more disciplined.
"With tailwinds to come through to earnings over 2024-2026 from UK pricing of 2023, along with improvements in the group's international businesses and the addition of the RSA policies in home and pet, we view the group as strongly positioned to keep growing the top and bottom lines," it said.
"Trading on a 2025 price-to-earnings of circa 13x versus a historic average closer to the circa 16x, we see re-rating potential."
Vistry gained after saying it had agreed to build nearly 950 new homes near London's Olympic Park as part of a 50:50 joint venture with the London Legacy Development Corporation.
Future surged to the top of the FTSE 250 after well-received full-year results, while Wood Group advanced as it secured three "major" agreements with BP to provide engineering and project delivery services for their capital projects worldwide.
Watches of Switzerland rallied as it reported a jump in first-half revenue amid solid US demand, but a dip in profit.
Vodafone rose after the Competition and Markets Authority cleared the proposed merger between it and Three on the proviso that the companies promise to invest billions to roll out a combined 5G network across the UK.
On the downside, Shell gushed lower even as it said that it and Equinor were combining their British offshore oil and gas assets to create what they said would be the UK North Sea's biggest independent oil and gas producer.
Frasers Group tumbled as it lowered the upper end of its full-year profit forecasts, citing weaker consumer confidence leading up to and after the government's recent Budget and a tougher trading environment. The company now expects adjusted pre-tax profit for the 2024/25 fiscal year of £550m to £600m down from prior guidance of £575m to £625m. Interim profits were down 1.5% to £299.1m on the same basis.
DS Smith fell as it posted a slide in half-year earnings, hit by "challenging" market conditions, including weaker prices and higher costs. The paper and packaging firm said revenues in the six months to 31 October fell 4% to £3.4bn, while adjusted operating profits slumped 39% to £221m. Like-for-like box volumes grew by 2%, however.
Housebuilder Taylor Wimpey was on the back foot after a downgrade to 'neutral' from 'overweight' at JPMorgan Cazenove.
Market Movers
FTSE 100 (UKX) 8,341.74 0.07%
FTSE 250 (MCX) 21,028.06 0.11%
techMARK (TASX) 4,712.47 -0.07%
FTSE 100 - Risers
Admiral Group (ADM) 2,691.00p 2.55%
Whitbread (WTB) 2,934.00p 2.23%
CRH (CDI) (CRH) 8,192.00p 1.69%
BT Group (BT.A) 157.85p 1.58%
Vistry Group (VTY) 668.50p 1.52%
Barclays (BARC) 265.60p 1.34%
British American Tobacco (BATS) 2,969.00p 1.30%
Centrica (CNA) 130.10p 1.28%
Intertek Group (ITRK) 4,810.00p 1.14%
Aviva (AV.) 485.70p 1.10%
FTSE 100 - Fallers
Frasers Group (FRAS) 658.00p -11.20%
British Land Company (BLND) 371.20p -4.38%
Taylor Wimpey (TW.) 126.95p -1.89%
LondonMetric Property (LMP) 188.90p -1.87%
Intermediate Capital Group (ICG) 2,162.00p -1.73%
Melrose Industries (MRO) 578.00p -1.57%
Associated British Foods (ABF) 2,270.00p -1.48%
SEGRO (SGRO) 765.40p -1.21%
Shell (SHEL) 2,501.50p -1.15%
Smith (DS) (SMDS) 570.50p -1.13%
FTSE 250 - Risers
Future (FUTR) 1,110.00p 13.27%
Watches of Switzerland Group (WOSG) 564.50p 13.13%
PPHE Hotel Group Ltd (PPH) 1,330.00p 9.47%
Wood Group (John) (WG.) 70.10p 8.35%
Bakkavor Group (BAKK) 150.50p 3.79%
Close Brothers Group (CBG) 230.20p 3.60%
W.A.G Payment Solutions (WPS) 82.80p 3.50%
NCC Group (NCC) 162.20p 2.92%
Bridgepoint Group (Reg S) (BPT) 354.80p 2.48%
Harworth Group (HWG) 174.00p 2.35%
FTSE 250 - Fallers
Genus (GNS) 1,648.00p -5.18%
Pets at Home Group (PETS) 228.60p -3.54%
PureTech Health (PRTC) 162.80p -3.33%
Energean (ENOG) 988.00p -3.23%
PayPoint (PAY) 830.00p -2.92%
Dunelm Group (DNLM) 1,122.00p -2.86%
Indivior (INDV) 876.00p -2.50%
TBC Bank Group (TBCG) 2,990.00p -2.29%
Harbour Energy (HBR) 254.60p -2.23%
Discoverie Group (DSCV) 714.00p -2.19%
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