FTSE 250 surges as traders revise rate hike bets, Ithaca falls on 2024 production guidance
Rate sensitive stocks are dominating the FTSE 350 risers board after today’s shock decline in UK private sector activity.
With the City scaling back its rate hike bets, shares in the likes of Severn Trent, Taylor Wimpey and Land Securities are all up 2% or more.
London’s top flight rallied 48.71 points to 7319.47 and the FTSE 250 index improved 157.45 points to 18,181.71, with second tier risers including shopping centre owner Hammerson after a gain of 3% or 0.8p to 25.1p.
Elsewhere in the FTSE 250, shares in North Sea firm Ithaca Energy weakened 2.8p at 161p after it warned that production is likely to fall next year due to the impact of the Energy Profits Levy.
The company, which has stakes in six of the ten largest fields in the UK North Sea and two of the largest three prospective developments, has fallen in value since joining the stock market last November in a £2.5 billion flotation.
Ithaca today hailed its robust operating performance but also revealed Energy Profits Levy charges of $223 million (£176 million) in the first half of its financial year. Net income of $159.6 million (£126 million) also included a $73.7 million (£58.2 million) writedown due to a reduction in planned activity in its Greater Stella Area.
Ithaca said it continued to press the UK government to review the current fiscal regime, including an appropriate price floor for the tax.
On AIM, Angling Direct shares rose 1.5p to 40p after the fishing tackle retailer reported a 10.1% rise in first-half sales to £40.9 million.
UK private sector in surprise decline
The UK private sector is declining at the fastest rate in two-and-a-half years, according to the latest PMI figures, in a surprise underperformance that suggests interest rate hikes may now be having a serious impact on the economy.
The August flash PMI reading came to just 47.9, significantly below the 50 mark that seperates growth from decline. That comes despite expectations of modest growth, with economists projecting a reading of 51.
Services fell back into decline, having grown last month, while manufacturing fell further, with a 39-month-low reading of just 42.5.
Dr John Glen, CIPS Chief Economist said: “High interest rates continue to cast a shadow over the UK economy, creating a lull in new orders, stunting output, and ensuring prospects for the private sector remain uncertain.
“This reduction in activity has provided UK supply chains with much-needed respite after the instability of the last two years. High interest rates are starting to have their intended effect of dampening demand and reducing inflationary pressures, leading to moderated input costs and reduced raw material prices for manufacturers. Businesses who had built up stock as a safety net against disruption have now reduced their inventories and created more balanced and efficient supply chains as a result.
“The hope is that more predictable supply chains will help to stabilise the economy and support an eventual rebound in new orders. However, the question remains as to how long elevated borrowing costs will limit demand.”
The stats suggest GDP will decline by 0.2% over the third quarter so far.
Chris Williamson, chief business economist at S&P Global Market Intelligence said: “The early PMI survey for August suggests that inflation should moderate further in the months ahead, but also indicates that the fight against inflation is carrying a heavy cost in terms of heightened recession risks.”
The pound fell below $1.27 on the news.
Costain shares gain 3% as dividend return teased
Contractor Costain has signalled dividend payments could be resumed for the first time since 2019, with the construction and consulting firm’s turnaround plan gaining momentum.
The company, which is working on upgrades to the signalling infrastructure on the Piccadilly line and the HS2 project, said a interim payout for the six months to June 30 is “under consideration” by the board with an “announcement expected to be made shortly”.
Shares in the firm rose 3%, or 1,44p, to 49.34p following the update.
Read more HERE.
FTSE 100 higher as JD Sports rebounds, AJ Bell surges 5%
Shares in mining companies Glencore, Fresnillo and Anglo American have risen 1% to leave London’s FTSE 100 index 27.55 points higher at 7,298.31.
The best performing top flight stock is JD Sports Fashion, which rallied 2.8p to 143.55p after falling sharply yesterday in response to a profit warning by US retailer Dick’s Sporting Goods.
The improvement in risk appetite was seen in a shortened fallers board, with BP among the handful of stocks in negative territory.
The FTSE 250 index rose 67.23 points to 18,091.49, led by investment platform AJ Bell with a gain of 5% or 13.6p to 293p.
PMI suggests bleak outlook for Germany and France
The German economy is declining at the sharpest rate since the heights of the Covid-19 pandemic this month, while France “remains mired in a downturn”, according to a closely watched indicator.
The latest flash PMI figures from S&P Global found that both the EU’s top two economies are in decline. Germany’s PMI reading fell to 44.7, a 39-month low, while France’s remained at 46.6, both readings being well below the 50 mark that separates growth from decline.
Commenting on the German statistics,Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said the figures suggest a 1% decline in GDP.
“Any hope that the service sector might rescue the German economy has evaporated,” he said.
“Instead, the service sector is about to join the recession in manufacturing, which looks to have started in the second quarter. Our GDP nowcast model, which incorporates the PMI flash estimate, now indicates a deeper fall of the whole economy than it did before, at almost -1%.”
On the French data, Norman Liebke, economist at Hamburg Commercial Bank, said: “The French economy is stuck in a rut, showing signs of struggle once again. For the third month straight, we’ve seen Europe’s second-largest economy shrinking, as indicated by the HCOB PMIs.
“Despite hopes of a positive economic outlook, the latest PMI data is throwing a curveball, hinting that we might be headed for a contraction in the third quarter.”
UK PMI figures will be published at 9:30.
Market snapshot: FTSE rises modestly again
The FTSE 100 has continued its modest gains after ending its losing streak yesterday.
Big risers include JD Sports, rebounding from a sharp fall yesterday, and miners Fresnillo, Glencore and Anglo American.
Taske a look at all our key market data.
Morgan Stanley fined £5 million after energy market traders use WhatsApp to discuss deals
Morgan Stanley has been hit by a multi-million pound fine by regulators for failing to follow rules covering the way in which traders in wholesale energy markets discuss deal making.
The bank will pay £5.4 million after staff used WhatsApp messages on private phones to discuss transactions. That breached requirements to “record and retain” communications over the market, which were uncovered by the energy market regulator Ofgem. The rule-breaking took place between January 2018 and March 2020.
Ofgem said it was the first ever fine issued in Britain over the so-called “REMIT Enforcement Regulations” which cover record-keeping in the wholesale energy markets, and are designed to prevent market manipulation and insider trading.
Ofgem’s regulatory director of enforcement, Cathryn Scott, said the breaches risked “a significant compromise of the integrity and transparency of wholesale energy markets,” adding: “This fine sends a strong message to market participants that they must comply with all REMIT rules or face enforcement action.”
While Morgan Stanley prohibited traders from using WhatsApp, Ofgem said the bank “did not take sufficient reasonable steps to ensure compliance with its own policies.”
Morgan Stanley “fully co-operated with Ofgem’s investigation”, the regulator said, and agreed to settle the case.
The bank declined to comment when contacted this morning by The Standard.
M&S set for FTSE 100, four stocks in relegation danger
Marks & Spencer is on course to end its four-year exile from the FTSE 100 index, with housebuilder Persimmon poised to make way.
The retail giant starts today’s session with a market value of £4.3 billion, putting it in the running for promotion when the September quarterly reshuffle of London’s top flight is calculated using next Tuesday’s closing prices.
FTSE Russell, the global index provider, said last night that seals and controls business Diploma and Hikma Pharmaceuticals are also on track to secure blue-chip status. And Dechra Pharmaceuticals is set for a brief stay ahead of its private equity takeover.
Persimmon, Johnson Matthey, the asset manager Abrdn and former Electrocomponents business RS Group are the stocks currently in danger of losing their places in the FTSE 100.
Klarna booms in Europe as shoppers on squeezed incomes turn to Buy Now, Pay Later
Swedish fintech Klarna is booming in Europe as shoppers turn to Buy Now, Pay Later products amid inflationary pressure and high interest rates.
The firm today said GMV (the value of goods sold through Klarna) had grown 26% in the UK and 14% across Europe in the second quarter of the year, having amassed 100 million European consumers and striking deals with over 470,000 merchants.
But Klarna did not say whether the increased demand was profitable or whether it would increase the company’s losses. The firm continues to offer interest-free instalments on products bought using credit, despite the fact that central bank interest rates have tripled over the past year. In 2022, Klarna posted a loss of $1 billion.
Klarna CEO Sebastian Siemiatkowski said: “While other, smaller players dial back their commitment or leave the region altogether, we’re doubling down, further strengthening our position in Europe, as well as the US.”
Klarna’s new payment cards
/ KlarnaFTSE 100 seen higher as Hang Seng rallies 1%, US banks hit by downgrades
The FTSE 100 index is set to remain in positive territory after last night ending its longest losing run since 2019 with a gain of 13 points to 7270.76.
The predicted improvement of 10 points comes ahead of flash PMI figures that should provide insight into the pace of Europe’s economic activity during August.
US markets finished broadly unchanged last night after an initially strong start, with the banking sector particularly under pressure after S&P downgraded the credit ratings of several firms.
Nvidia shares traded at a record before closing in the red ahead of the semiconductor giant’s second quarter results after tonight’s Wall Street closing bell.
In Asia, the Hang Seng index is 1% higher and the Nikkei 225 up by 0.5% after Japan posted a robust set of PMI figures for services and manufacturing. However, the Shanghai Composite is 0.6% lower.
