FTSE 100 holds small gains looking ahead to Wall Street

Proactive Investors -

• FTSE 100 slightly higher, up 9 points
• Chancellor to unveil revised energy support package
• AstraZeneca (NASDAQ:AZN) to pay up to US$1.8bn for CinCor Pharma

2.12pm: OIl price jumps

Brent crude futures rose nearly 3% on Monday, rebounding further from a near one-month low of US$77.6/barrel touched last week, on hopes for a recovery in demand from China and the prospect of a less aggressive monetary tightening from the Federal Reserve.

Brent crude was trading 2.7% higher at US$80.728/barrel while WTI prices were 2.77% higher at US$75.85/barrel.

The spike in prices gave a lift to BP PLC, up 1.4%, and Shell PLC, up 1.8%.

1.40pm: Strong trading spices up Tortilla share price

Shares in Mexican restaurant chain Tortilla Mexican Grill PLC showed some tasty returns for investors today jumping 17% as it revealed that sales jumped by a fifth over the past year despite the impact of train strikes and poor weather.

The 82-strong chain reported a 20% increase in revenues to £57.7mln over the 12 months to January 1, compared with the same period last year, boosted by the opening of 18 new restaurant sites, including in Durham, Canterbury and Coventry.

Tortilla's growth plans were also buoyed by its takeover of smaller rival Chilango in May last year.

1.25pm: BP adds battery storage facility to solar plans

BP said it plans to build its first solar farm with battery storage on a site in Tiln Farm, Retford, which will drive its plans to make the technology the norm globally.

Nick Boyle, the head of energy giant BP’s solar joint venture, said he believes battery storage technology will be widely included as part of solar farms, helping to tackle the problem of intermittent energy.

BP announced in October it was building a solar farm, its largest ever UK solar project, in Retford with construction of the 61MWp project beginning in November.

BP will be investing over £40mln into the project, which when complete will generate enough energy to power the equivalent of 14,230 UK homes.

12.45pm: Mortgage rate pain on the way

More than 1.4mln households are facing the prospect of interest rate rises when they renew their fixed-rate mortgages this year, according to the Office for National Statistics (ONS).

The ONS pointed out that the majority of fixed-rate mortgages in the UK (57%) which are coming up for renewal in 2023 were fixed at interest rates below 2%.

Deals that are due to mature in 2024 include two-year fixed rate deals from 2022 and five-year fixes from 2019, when mortgage rates were generally higher than 2%, the report added.

Based on data from the Bank of England, the ONS said a peak in fixed deals ending is expected between April and June this year.

The ONS said in the first quarter of this year (Jan to Mar 2023), 353,000 fixed rate mortgages will have to be renewed with a peak between April and June of 371,000.

12.02pm: N Brown rises on Allianz (ETR:ALVG) settlement

Shares in the catalogue retailer, N Brown Group PLC, soared over 10% after reaching a settlement in a legal spat with Allianz Insurance Plc.

The group, which owns brands such as Simply Be and JD Williams (JDW), will pay the insurer £49.5mln in full and final settlement which is below the £70mln claimed by Allianz.

The dispute related to a claim issued against JDW relating to significant amounts of redress paid to customers by JDW and the Insurer in respect of certain historic insurance products, including payment protection insurance.

“The settlement removes a significant element of uncertainty and distraction for JDW and allows the company to focus on creating shareholder value through its core business activities as it continues its transformation” the company said in a statement.

After paying the settlement the group said it would retain a strong unsecured net cash position with material additional liquidity facilities remaining undrawn.

11.48am: Further gains expected in the US

Wall Street is expected to open higher after employment and other economic data on Friday opened the way for the Federal Reserve to ease back on interest rate hikes and as traders look to latest inflation data and the start of earnings season for further direction.

Futures for the Dow Jones Industrial Average rose 0.3% in Monday pre-market trading, while those for the broader S&P 500 index gained 0.4% and contracts for the Nasdaq-100 added 0.3%.

Non-farm payrolls data for December came in ahead of expectations but wage growth slowed to 4.6% year-over-year (y/y) from 5% a month earlier, indicating softening inflationary pressure.

Stocks ended the week in the green, with the S&P 500 closing 2.8% higher at 3,895, the Nasdaq up 2.6% at 10.569 and the Dow rounding out the pack with a gain of 2.1% to close at 33,631 points.

“If Friday’s price action tells us anything it’s that investors really want to believe the peak inflation narrative that has helped support the rebound in equity markets that we’ve seen so far this year,” said Michael Hewson, chief market analyst at CMC Markets UK.

“The December payrolls report was at best a goldilocks report with something for everyone, bull and bear alike, with the wider question being as to what it is actually telling us about the wider US economy.”

The positive news continued with a services PMI which dipped into contractionary territory, lending further weight to hopes of a soft landing for the economy, with expectations for an interest rate rise of 0.25% in February now in pole position, commented Richard Hunter, head of markets at interactive investor.

“The consumer price index (CPI) number due on Thursday now takes on additional significance, with forecasts suggesting a further slowdown in both headline and core inflation numbers,” Hunter added.

The Bureau of Labor Statistics releases December’s inflation data on Thursday, with the CPI expected to have eased to around 6.5% y/y from 7.1% in November.

“This week also marks the start of the earnings season, with proceedings being opened by the likes of Bank of America (NYSE:BAC), Citigroup (NYSE:C) and JP Morgan,” Hunter continued. “The consensus is that the banks will have shown little to no year-on-year growth and, in more general terms, earnings are expected to have fallen across the board in the face of margin compression resulting from the inflationary backdrop.”

11.24am: Potential lifeline for Britishvolt

News of a potential lifeline for troubled UK battery start-up Britishvolt.

In a statement this morning it said it is “in discussions with a consortium of investors concerning the potential majority sale of the company”.

“The discussions aim to secure legally binding terms that would provide Britishvolt with the long-term sustainability and funding necessary to enable it to pursue its current plans to build a strong and viable battery cell R&D and manufacturing business in the UK” it said.

She said there would be more support for energy intensive industries.

9.00am: Chinese reopening continues to support FTSE

FTSE 100 extended its gains, hitting a four and a half year high, as the reopening in China combined with Friday’s fall in average earnings figures in the US continued to support demand for equities.

At 9.00am London’s flagship index was up 17 points 7,716 while the upbeat mood extended to the broader FTSE 250 which jumped 97 points to 19,601.

Neil Wilson at markets.com noted “China reopening its borders fully as well as slowing wage growth and a decline in service sector in the US have fuelled a positive first week of the year for equity markets, which saw shares in London hit their highest level in four years.”

But he added a note of caution “whilst China is well positioned now - and earlier than expected - to drive global growth, the outlook on inflation and the Federal Reserve’s reaction function remain uncertain.”

“But we should not overlook the rapid reopening of China going forward, which I would expect to be more positive for UK and European indices vs US peers” he added.

Hopes that the reopening in China would boost economic growth were reflected in the FTSE 100 risers with mining stocks Antofagasta (LON:ANTO) plc, Glencore PLC (LON:GLEN) and Anglo American (LON:AAL) while Asian focused stocks such as Prudential PLC (LON:PRU) were also in demand.

A rise in the oil price gave a boost to index heavyweights, BP PLC and Shell PLC while Experian PLC rose 0.6% as JP Morgan reiterated an overweight rating viewing the company “as a core holding in our sector for investors with long-term horizons.”

Elsewhere BT advanced 2% as Citigroup lifted its view of the telecommunications company to buy from neutral but FTSE 250 listed Keller Group (LON:KLR) was marked 5% lower after warning that fraud in its Australian business would dent operating profits.

8.29am: Australian fraud to dent Keller profits

Keller Group PLC has fallen 5% in early exchanges after identifying fraud in its in its Austral Business Unit in Australia which is estimated to hit operating profits by around £6mln in the first half of 2022, and £8mln to £10mln relating to prior years.

Two individuals have been dismissed the geotechnical specialist contractor said.

Overall, the FTSE 250-listed company said performance in the second half has been strong meaning it expects full year operating profits slightly below the bottom end of the range of market expectations.

Expectations for 2023 and beyond remain unchanged, it added.

Peel Hunt noted the fraud was spotted by the group's internal systems and looks to be based around overstatement of revenue and profit.

As a result it has cut its fiscal year 2022 pre-tax profit forecast from £101mln to £95mln and cut EPS by 6% to c.104p.

But it kept its buy rating noting “excluding the fraud, the group indicated that trading has been pretty robust.”

8.10am: FTSE pushes higher again

FTSE 100 made steady early progress at the open on Monday continuing its bullish path so far in 2023.

At 8.10am the FTSE 100 was up 9 points at 7,708 while the FTSE 250 jumped 63 points to 19,567.

AstraZeneca PLC (LON:AZN) was in focus as it said it will pay up to US$1.8bn to acquire hypertension and chronic kidney disease therapies developer CinCor Pharma.

The deal gives the pharma giant global rights to the baxdrostat high blood pressure treatment.

The Cambridge-based group will buy outstanding CinCor shares for US$26, plus a possible extra US$10 each depending on regulatory submission of a baxdrostat product.

Under the deal the FTSE 100 listed group will pay US$1.3bn upfront, more than twice CinCor's US$515.5mln market capitalisation with the consideration rising to US$1.8bn if potential contingent value payments are made.

Another deal confirmed today was Vodafone Group PLC'’s €1.7bn sale of its Hungarian business, first announced in August. Shares slipped 0.6%.

But AIM-listed Frontier Developments PLC slumped 41% as it warned lower than expected sales from F1 Manager 2022, poor sales across the whole portfolio during the holiday period, and the uncertain contribution from Foundry in the remainder of the fiscal year 2023 meant it lo longer expects to achieve market consensus forecasts for revenue and IFRS operating profit.

On revenue the group still hopes to reach last year’s level of £114mln compared to consensus forecasts of £135mln but it could only pledge to deliver “revenue of not less than £100 million in FY23.”

Operating profits of around £10mln are expected nearly half of the current consensus for £19mln.

In reaction, Liberum downgraded the company to hold from buy and more than halved its price target to 1,000p from 2,110p.

7.42am: Airtel prepares for growth in Nigeria

Another deal to the start the week as Airtel Africa has announced it has bought 100 MHz of spectrum in the 3500MHz band and 2x5MHz of 2600MHz from the Nigerian Communications Commission (for a US$316.7mln.

The telecoms group which operates in 14 countries across Africa said this additional spectrum will support investments in network expansion, including 5G rollout, providing significant capacity to accommodate the continued strong data growth in Nigeria.

Airtel Nigeria is Airtel Africa's largest market, with significant growth potential, the company said in a statement.

7.30am: Vodafone to net €1.7bn from Hungaruan sale

Vodafone Group PLC (LSE:VOD) will receive €1.7bn from the sale of its Hungarian arm, Vodafone Magyarország Zrt, to 4iG Public Limited Company and Corvinus Zrt, a a Hungarian state holding company.

The FTSE 100 listed telco confirmed today it has entered into binding terms in relation to the sale which was first announced in August 2022.

The price agreed represents a multiple of 8.4x adjusted EBITDAaL for the 12-month period ended 31 March 2022 with proceeds to be used for deleveraging.

Margherita Della Valle, Vodafone Group's interim chief executive said: "This combination establishes a scaled converged operator across mobile and fixed communications and supports the Hungarian government's goal of creating a national Information and Communications Technology champion.”

“The combined entity will increase competition and accelerate investment in the ongoing digitalisation of Hungary."

Completion of the deal is expected this month.

7.00am: Bright start to 2023 set to continue

The FTSE 100 is set to continue its winning streak at the open on Monday boosted by strong gains in the US on Friday and hopes that the reopening in China will give a boost to global economic growth.

Spread betting companies are calling the lead index up by around 22 points.

At Friday's close, US stocks were firmly in the green, with the S&P 500 closing 2.8% higher at 3,895, the Nasdaq up 2.6% at 10.569 and the Dow rounding out the pack with a gain of 2.1% to close at 33,631 points.

This came as investors took heart from stronger-than-expected non-farm payrolls figures which were accompanied by weaker than expected growth in average earnings.

As Michael Hewson chief market analyst at CMC Markets UK pointed out “The December payrolls report was at best a goldilocks report with something for everyone, bull and bear alike, with the wider question being as to what it is actually telling us about the wider US economy.”

“Markets latched onto the surprise decline in average hourly earnings which rose by 4.6% in December, well below expectations, while the November numbers were revised down from 5.1% to 4.8%, playing down concerns about upward pressure on wages.”

“in the wake of Friday’s US jobs report and the strong reaction to it, today's European open looks set to be a positive one, with Asia markets also getting a boost as China took further steps to reopen its economy, as it relaxed its zero-Covid policy further resuming travel with Hong Kong” he added.

Asian equity markets were rising on Monday. The Shanghai Composite index was 0.7% higher on Monday afternoon. The Hang Seng in Hong Kong was up 1.8%. The S&P/ASX 200 in Sydney closed up 0.6%. Financial markets in Tokyo are closed for Old Age Day.

Back in London and the corporate diary looks fairly quiet with trading updates expected from Cairn Homes PLC (LON:CRN) and Intermediate Capital Group PLC.

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