Proactive Investors -
- FTSE 100 moves higher, up 13 points
- Retail sales fall more than expected in March
- Eurozone PMI hits 11-month high
9.42am: UK PMI hits 12-month high
Growth in the service sector growth underpinned the fastest rise in UK private sector output for one year in April, according to the S&P Global/CIPS Flash UK PMI.
At 53.9 in April, the headline seasonally adjusted figure was up from 52.2 in March and above the crucial 50.0 no change threshold for the third month running. The reading was above analysts’ consensus forecasts of 52.5.
Moreover, it signalled the strongest rate of output growth since April 2022.
#UK private sector firms signalled a further increase in business activity with the rate of expansion accelerating to its fastest in a year (#PMI at 53.9; Mar: 52.2). The rate of input cost inflation slowed, but output charges increased steeply. Read more: https://t.co/lByqsf9t6N pic.twitter.com/eU9raeLl9R— S&P Global PMI™ (@SPGlobalPMI) April 21, 2023
Rising volumes of private sector business activity contrasted with a modest downturn throughout most of the second half of last year.
The latest survey indicated a robust and accelerated increase in service sector output (index at 54.9), with growth the highest for one year.
In contrast, manufacturing production (index at 48.5) decreased for the second month running and at the fastest pace since January.
The contrasting trends for business performance in April largely reflected divergent demand patterns. New order growth hit a 13-month high in the service economy amid rising spending on travel, leisure and entertainment.
Meanwhile, manufacturers attributed a renewed fall in new work to customer destocking, elevated energy costs and subdued demand for big ticket consumer goods.
Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “Flash PMI surveys signalled an acceleration of economic growth to the fastest for a year in April, building on a modest return to growth in the first quarter of the year.
“Growth is lopsided, however, with surging demand for services contrasting with an ongoing downturn in demand for goods.”
The PMI readings in the UK and the eirozone has given a lift to the FTSE 100, now up 13 points.
9.15am: Eurozone PMI hits 11-month high
The Eurozone flash composite PMI soared to an 11-month high in April, reaching 54.4 (Mar: 53.7) amid a resurgent service sector. Inflation levels moderated, but manufacturing output fell back into decline.
#Eurozone flash #PMI soared to an 11-month high in April, reaching 54.4 (Mar: 53.7) amid a resurgent service sector. #Inflation levels moderated, but manufacturing output fell back into decline. Read more: https://t.co/tXGuQfP3GR pic.twitter.com/JBGoZFmHdz— S&P Global PMI™ (@SPGlobalPMI) April 21, 2023
The rise was driven by strong growth in the service sector where the flash PMI rose to 56.6 in April from 55.0 in March, a 12 month high.
But it was not such a bright picture in manufacturing where the PMI hit a 35 month low at 45.5.
The news helped push the FTSE 100 into positive territory, up 9 points. In Europe, the Dax has bounced off early lows to trade down 15 points while the CAC 40 moved into the green after opening lower.
ING Economics said: "Overall, it looks like the economy is rebounding from a feeble winter at the moment, but manufacturing weakness remains a concern and dampens the upturn."
8.56am: FirstGroup looking at Arriva bid - Reuters
British transport company FirstGroup and infrastructure fund I Squared are weighing competing bids for parts of Deutsche Bahn's international transport business Arriva, according to a number of people familiar with the matter, according to Reuters.
FirstGroup would likely bid for Arriva's activities outside the UK because of regulatory hurdles associated with further expansion in the country, two of the people said.
The British transport company may also consider partnering with another bidder for the UK operations, the two added.
Infrastructure fund I Squared, which considered making an offer for FirstGroup last year, is now mulling a bid for Arriva, one of the two and another person said.
The German state-owned railway operator has said it aims to close the transaction next year.
Shares in FirstGroup were flat in London in early trading.
8.49am: Sureserve bid "looks cheap" - Peel Hunt
The FTSE 100 has edged lower now, down 6 points, at 7,897 with the fall in retail sales hitting the mood with the sixth wettest March since 1836 blamed for keeping shoppers away.
Danni Hewson at AJ Bell noted: "“No one wants to hit the high street during a downpour and even the most enthusiastic gardeners were probably holed up in their sheds rather than perusing the plant aisles in what was a ridiculously wet March."
“But the British weather can’t take all the blame for falling retail sales. Inflation weary shoppers have got used to cutting back or cutting out entirely and with prices of essential items like bread and cereal shooting up, some budgets aren’t just feeling the strain, they’re buckling under the weight," she added.
Elsewhere Peel Hunt thinks the 125p per share offer for Sureserve Group PLC (AIM:SUR) “looks cheap” for a “market leader with attractive, defensive positions and a strong management team.”
The bid from private equity firm Cap10 Partners valued compliance and energy services firm at £214.1mln.
Shares in the company soared 33% to 123.18p on news of the approach.
Peel Hunt thinks a competing bid “seems remote,” although it would not discount it.
The broker suggested others have looked at the firm in the past and there may be concerns regarding the outlook for gas boiler maintenance and legacy.
It also pointed out the high level of acceptances for the offer already secured.
Peel Hunt said there was no immediate sector read through, but “would see investors turning their attention to Mears.”
Mears Group shares were 1% to the good in early trading.
8.13am: FTSE muted at the open after weak retail sales
The FTSE 100 made a tentative start to proceedings on Friday with weak retail sales figures adding to the subdued mood as concerns over economic growth rise.
At 8.15am London’s lead index stood at 7,901.63, down 0.98 points, or 0.012%, while the FTSE 250 edged lower to 19,122.99, down 12.88 points, or 0.067%.
Deutsche Bank (ETR:DBKGn) said: “The last 24 hours have seen a stronger risk-off move in markets, thanks to another round of weak data releases that strengthened fears of a US recession once again.”
Richard Hunter, head of markets at interactive investor, agreed: “Mixed company earnings and softening economic data are keeping a lid on sentiment, as investors ponder the timing and depth of a potential recession.
Denting the mood in London were UK retail sales figures for March which showed a 0.9% decline, more than the 0.5% fall the City had expected.
But more encouragingly, sales volumes rose by 0.6% in the three months to March when compared with the previous three months; the first three-month on three-month rise since August 2021.
Gabriella Dickens at Pantheon Macroeconomics said: “The renewed decline in retail sales in March proves the recovery in January and February was a false dawn and suggests that consumers still are grappling with very high CPI inflation and mortgage rates.”
She expects retail sales to benefit from the 10.1% increase in most benefits in April and the likely fall of households’ energy bills in July but predicts only a gradual recovery over the coming months.
The EY Item Club was a little more optimistic pointing out March's weakness was probably partly driven by unseasonably wet weather, and that more fundamental drivers of retail performance are looking healthier.
The economic forecaster pointed out the jobs market remains resilient, household energy bills are set to fall from the summer, and consumer confidence has picked up.
Martin Beck, chief economic advisor to the EY ITEM Club, said: “2023 should prove a better year for retailers than 2022, when the sector felt the effects of the energy price shock and a post-pandemic shift in spending from goods back to services.”
ING Economics agreed. “Pressure on real wages is set to ease over coming months and consumer confidence has risen from its lows. That suggests the worst is behind us for the UK high street, despite a fall in March sales,” it commented.
The improving confidence referred to was shown in figures from market research firm, GfK.
GfK's Consumer Confidence Index rose for the third month in a row to -30 in April, up six points from March and the highest reading since February last year, just before Russia invaded Ukraine and spurred a surge in energy costs in most of Europe.
April's reading was also above the -35 reading forecast by economists.
Joe Staton, GfK's client strategy director, said there had been a "sudden flowering of optimism" among households.
In company news, and news of a competing bid for Network (LON:NETW) International Holdings PLC (LSE:NETW) pushed shares in the payments company 11% higher to 400.40p.
The firm revealed it had received a 400p per share approach from Canada’s
Brookfield Asset Management (TSX:BAM.A) only days after a 387p per share proposal from a consortium comprising CVC Advisers and Francisco Partners Management.
With the share price sitting above the level of the latest approach investors are expecting this battle to hot up.
Mining companies were in focus. Glencore PLC (LSE:LON:GLEN) fell 1% despite reporting first quarter figures in line with its forecasts and holding full year production guidance.
Shares in Sureserve Group PLC (AIM:SUR) soared 37% after it reached an agreement with Cap10 4NetZero Bidco, a company indirectly owned by Cap10 Partners, on an all-cash takeover for the energy services provider.
Cap10 will pay 125p for each Sureserve share valuing the firm at £214.1mln.
7.50am: Consumer confidence picks up - GfK
While retail sales may be falling a survey of consumer confidence in the UK suggests people are more upbeat than before.
GfK's long running consumer confidence survey showed consumers were their most upbeat in more than a year this month, despite the surging cost of living, as they took a more positive view of their finances and the health of the wider economy.
GfK's Consumer Confidence Index rose for the third month in a row to -30 in April, up six points from March and the highest reading since February last year, just before Russia invaded Ukraine and spurred a surge in energy costs in most of Europe.
April's reading was also above the -35 reading forecast by economists.
All measures were up over March, with consumers' expectations for Britain's economy in the next 12 months at a 15-month high and they saw the prospects for their personal finances as the brightest since February 2022.
While the country's economy is expected to avoid a recession this year, the broader picture remains weak with double-digit inflation proving harder to tame.
However, Joe Staton, GfK's client strategy director, said there had been a "sudden flowering of optimism" among households.
"The brighter views on what the general economy has in store for us ... could even be seenas the proverbial 'green shoots of recovery'," Staton said.
7.30am: Rival approach for Network International
A battle for Network International Holdings PLC (LSE:NETW) has broken after the payments company revealed a second bid approach.
The company confirmed it has received a “highly preliminary” 400p a share cash offer from Canada's Brookfield Asset Management (TSX:BAM.A).
The offer for the FTSE 250 firm trumps a proposal from a consortium comprising CVC Advisers and Francisco Partners Management worth 387p per share announced on Monday.
“The board of Network is currently evaluating the Brookfield Proposal with its financial advisers and a further statement will be made in due course,” the company said in a statement.
7.10am: Retail sales fall more than expected
Retail sales fell in March by more than City commentators expected after the bounce back in February, according to the Office for National Statistics.
The fall of 0.9% in March, compared to consensus expectations of a 0.5% decline, and followed February’s rise of 1.1% (revised from a rise of 1.2%).
More encouragingly, sales volumes rose by 0.6% in the three months to March when compared with the previous three months; the first three-month on three-month rise since August 2021.
Non-food stores sales volumes fell by 1.3% in March following a rise of 2.4% in February, with feedback from retailers that poor weather conditions throughout most of March affected sales.
Food store sales volumes fell by 0.7% in March following a rise of 0.6% in February.
Non-store retailing (predominantly online retailers) sales volumes fell by 0.8% in March, following a rise of 0.3% in February.
Automotive fuel sales volumes rose by 0.2% in March, following a fall of 1.2% in February; sales remain 8.5% below their pre-coronavirus (COVID-19) February 2020 levels.
7.00am: Subdued start seen in London
FTSE 100 is expected to open flat ahead of retail sales figures which will give a further indicator as to the confidence levels of UK consumers.
Spread betting companies are calling London’s lead index down by around 2 points.
On Wall Street, stocks ended lower as disappointing earnings from AT&T and heavy falls in Tesla weighed on equities.
The Dow Jones Industrial Average closed down 110.46 points, or 0.3%, at 33,786.55. The S&P 500 declined 24.71 points, or 0.6%, at 4,129.81, while the Nasdaq Composite slipped 97.67 points, or 0.8%, to 12,059.56.
In Asia, markets fell. The Nikkei 225 index was down 0.3%. the Shanghai Composite was down 1.4%, while the Hang Seng index in Hong Kong was down 1.2%.
Back in London the early focus will be retail sales figures while a slew of PMI prints are due later today in the UK, EU and US.
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