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A meeting of European Central Bank policymakers and the fourth quarter US GDP reading will today keep the focus on the interest rate outlook.
China’s central bank earlier stepped up efforts to support the world’s second largest economy by lowering its reserves requirement for banks.
Today’s session in London has also seen a flurry of trading updates, including by Halfords, Wizz Air, Foxtons, Dr Martens, Britvic and Fevertree Drinks.
FTSE 100 Live Thursday
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ECB rates decision and US GDP due
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Halfords sales impacted by mild weather
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Dr Martens warns on currency pressure
Halfords and Fevertree shares under pressure, FTSE 100 holds firm
10:28 , Graeme Evans
A weather-related setback for Halfords and tougher European trading for Fevertree Drinks today kept their shares in the City’s slow lane.
The retailer fell 3% or 4.6p to 169.4p, near its lowest level since April, after mild conditions contributed to a 15.3% sales decline in retail motoring during December.
Boss Graham Stapleton also reported signs that drivers have delayed essential maintenance, leading to “a worrying increase in potentially unsafe vehicles on the road”.
He described the group’s overall performance as resilient after more strong growth in its Autocentres business offset a weaker result in cycling in the third quarter.
House broker Peel Hunt backs the shares to hit 275p, believing the retailer is well-placed for an earnings recovery when demand conditions normalise.
Today’s fall for shares in Fevertree came despite the mixers firm delivering a 6% rise in fourth quarter sales to £364.4 million. The performance was led by the US, now the company’s biggest market following a 22% jump to £117 million.
UK sales dipped 1% to £114.8 million, although this was ahead of guidance due to demand in bars and restaurants. Its European performance was impacted by recession in Germany, where a “refocusing” of its range is set to reduce this year’s revenues by £7 million.
Fevertree’s AIM-listed shares dropped 10.6p to 1001.4p, leaving them down 25% since the summer.
In the FTSE 100 index, shares in wealth manager St James’s Place were back under pressure after reporting quarterly net flows short of City expectations. The stock has fallen 48% since July, including today’s fall of 59p to a multi-year low of 617p.
Scottish Mortgage Investment Trust also dropped 10.6p to 770p following last night’s disappointing earnings update by portfolio company Tesla.
London’s top flight stood 3.98 points higher at 7531.65, aided by gains of 1% for BP and Shell after Brent Crude returned above $80 a barrel.
The FTSE 250 index dropped 27.59 points to 19,144.09, although Royal Mail owner IDS continued its strong week with a gain of 5% or 14.6p to 289.8p.
‘We could be in for a difficult earnings season’
09:51 , Daniel O’Boyle
Russ Mould, investment director at AJ Bell, says: “Numerous UK stocks got the thumbs-down vote from investors as they updated on trading. For example, Fevertree’s full-year sales growth missed expectations and Halfords had a tough December.
“High interest rates are causing longer lasting pain for consumers and businesses than many people thought, meaning we could be in for a difficult corporate earnings season as management teams become cautious about the outlook.”
St James’ Place plunges to bottom of FTSE 100 despite £5bn net inflows
09:26 , Daniel O’Boyle
Shares in St James’ Place have plunged despite net inflows £5.1 billion, in the latest sign of difficulty for fund managers.
The shares lost as much as 9.7% to 610p before a slight recovery, sending it to the bottom of the FTSE 100. Peel Hunt slashed its target price for the firm but kept its buy recommendation.
Boss Mark FitzPatrick said: “As we build on the strong foundations we have established over three decades, we continue to see a huge opportunity to support more clients who need help and advice. I want SJP to capture this long-term opportunity, so as we start planning our vision for 2030 I am reviewing all elements of our business to ensure we are fully fit for the future and best placed to keep delivering for all our stakeholders.”
Yesterday, Abrdn announced 500 job cuts after reporting massive outflows. Baillie Gifford also cut jobs yesterday.
Bank of England ‘could take first step towards cutting rates’ next week
09:07 , Daniel O’Boyle
Ahead of the ECB’s rates decision today, Paul Dales, chief UK economist at Capital Economics, says the Bank of England could take the first step towards rate cuts at its own meeting next week.
He said: “At the policy meeting on Thursday 1st February, the Bank of England will probably throw in the towel on the pretence that interest rates could rise further and take the first steps towards cutting rates from 5.25%. We’ve pencilled in the first rate cut for June and think that rates will fall to 3.00% in 2025 rather than to 3.50-3.75% as priced into the market.”
Oil stocks rally on $80 Brent Crude, Fevertree shares down 3%
08:38 , Graeme Evans
European stock markets are trading in the red, with the FTSE 100 index down 8.87 points at 7518.80 and the FTSE 250 index off 48.25 points at 19,123.43.
Banking stocks have taken the biggest hit in the top flight after Lloyds declined 0.6p to 41.6p and Standard Chartered fell 11.2p to 598.2p.
On the risers board, BP and Shell are up by 1% after the Brent Crude price topped $80 a barrel. Intermediate Capital leads the FTSE 100, up 4% or 58.5p to 1695.5p after the alternative asset manager’s third quarter update.
In the FTSE 250, trading statements by IG Group and Wizz Air sent their shares down by 9% and 5% respectively. Dr Martens shares lifted 3% or 2.55p to 77.9p.
All-Share stock Halfords fell 2% or 3.2p to 170.8p after its sales warning while AIM-listed Fevertree Drinks weakened 3% or 32.25p to 979.75p.
Market snapshot: FTSE 100 slightly lower
08:34 , Daniel O’Boyle
Take a look at our early market snapshot with the FTSE 100 a little lower in early trading
Fevertree results fail to sparkle
08:33 , Simon Hunt
Shares in soft drinks maker Fevertree fell flat this morning after strong sales in the US were offset by a mixed performance elsewhere.
US revenues jumped by almost a quarter to £117 million in 2023, overtaking sales in the UK for the first time, which declined slightly to £115 million. Sales in Europe rose 4% but turnover fell by 14% outside Europe and the US.
Fevertree said it only expected total sales to grow by 8% in 2024, in part because of a “refocusing” of the range of drinks sold in Germany, which it said would lead to a £7 million revenue fall. Shares fell 3% to 981p.
ChapStick lip balm being sold in deal worth $530 million
07:53 , Michael Hunter
One of the most famous names in facial skincare is changing hands in a $530 million (£400 million) deal.
ChapStick – the lip balm accessory with a history dating back to the 1890s – is being sold by UK firm Haleon to Suave Brands.
The buyer owned by US private equity firm Yellow Wood Partners, which invests exclusively in consumer products firms.
The cash component of the deal is worth $430 million. Haleon will also get “a passive minority interest” in Suave Brands worth around $80 million. It will use the cash proceeds to pay down debt.
Brian McNamara, Haleon’s CEO, said: “While ChapStick is a great brand, much loved by consumers around the world, it is not a core focus for Haleon. Selling the brand allows us to simplify our business.”
Doc Martens puts the boot in with latest warning on currency
07:44 , Daniel O’Boyle
Boot maker Dr. Martens warned it could take another £10 million hit from currency changes, as it continues to deal with difficulties in the US.
The iconic brand saw American revenue fall by 31% in the three months to 31 December, which it blamed on weak consumer sentiment.
“The new Americas leadership team continue to take action, particularly in marketing execution and ecommerce trading capabilities, to drive revenue and grow the brand,” the business said.
That meant overall revenue was down 21% to £267.1 million.
That decline was expected, but the business put the boot in when it warned it could face another £10 million hit due to the strength of the pound.
It said: “The appreciation of sterling since the end of H1 means that, if current FX rates persist, we anticipate a currency headwind to the P&L of approximately £5m, together with a non-cash Balance Sheet translation charge, also of approximately £5m.”
Halfords festive season sales ‘much weaker’ in mild winter weather
07:40 , Michael Hunter
Halfords, the motoring and cycling accessories chain, blamed “mild winter weather” today for sales in December that were “much weaker than expected”.
The 400-strong chain also said customers were “balancing difficult spending decisions in the run up to Christmas”. It meant like-for-like sales in the “retail motoring” part of the unit fell 15.3%.
October and November sales helped offset the plunge in the peak-season. The company said those months were “strong”.
Halfords, which was at the centre of takeover speculation last year, stood by its profit guidance for the full-year, pointing to the need to keep cars safe and roadworthy.
It said: “Assuming that markets do not weaken further in Q4, we continue to expect profit before tax to fall within the previously communicated range of £48 million to £53 million.”
Graham Stapleton, chief executive officer, added: “Trading in Q4 has begun strongly and we remain focused on everything that we can control”.
And he pointed out that “we are still seeing drivers delay essential maintenance and there is a worrying increase in potentially unsafe vehicles on the road.
“Recent TyreSafe data estimates that one-in-four tyres on Britain’s roads could be illegal, equating to just over 10 million tyres.”
Wizz Air boss: Demand to remain subdued
07:34 , Daniel O’Boyle
There are more signs travel recovery may have run its course as low cost carrier Wizz Air says “overall market capacity is likely to remain subdued for some time”.
Revenue grew to €1.07 billion (£914 million) in the three months to 31 December., but the business swung to a €105 million loss. Its load factor remains well below pre-pandemic levels at 87.6%.
CEO József Váradi said: “We remain committed to effective cost management, utilization of assets and productivity, all of which are paramount in the coming periods, and we are confident in our ability to manage these factors. There are opportunities for us to optimize operations and achieve better trading yields, as overall market capacity is likely to remain subdued for some time due to both the macro-economic environment, and other external pressures.”
Wizz says the ongoing conflict in Israel and Gaza cost it €0.10 of “unit revenue”, which likely means a total hit of around €30 million.
The results follow big losses from easyJet yesterday.
Asia shares surge on bank support, Tesla lower as focus moves to US GDP
07:21 , Graeme Evans
Asia markets have risen sharply after China’s central bank lowered its reserve requirement ratio in an effort to boost bank lending.
Its latest support for the country’s struggling economy, which is expected to free up around $140 billion (£110 billion) in long-term capital, sent the Shanghai Composite up 3% and the Hang Seng index 2% higher.
Europe’s central bank is also in focus today, with today’s monetary policy meeting set to reveal no change in interest rates. However, traders will be looking for any signal on when rates might begin to fall.
While President Christine Lagarde has said it is too soon for the ECB to lower its guard on inflation. Deutsche Bank reported today that investors still see a 64% chance of a cut by the April meeting.
On Wall Street, the main event took place after a broadly flat session as Tesla missed earnings and revenue expectations for the fourth quarter.
The car maker also warned that 2024 volume growth may be “notably lower” than last year, sending shares down 3% in after-hours dealings.
The FTSE 100 rose 0.6% or 41.94 points yesterday but CMC Markets expects London’s top flight to open 19 points lower at 7,508 ahead of this afternoon’s fourth quarter US GDP reading.
Traders expect a slower annual growth rate for the quarter of around 2%.
Recap: Yesterday’s top stories
06:46 , Simon Hunt
Good morning from the Standard City desk
Investing in airlines shares is not for the risk averse.
In 2007, legendary investor Warren Buffett warned that getting caught up in the romance of air travel was a fool’s errand for the smart investor.
He changed his mind later and took multi-billion-dollar positions in some of America’s biggest carriers — American, Delta and United. Then he reverted to his original stance and sold off the shares.
When things are going well for air travel, competition is so intense that profits are thin on the ground. When they are going badly, well, that is usually a sign of some calamity or other.
EasyJet results yesterday show why Buffett is so unsure about airline stocks. Most of the things buffeting the business are far outside of its control — CEO Johan Lundgren can’t solve Middle East political tensions and run a successful airline at the same time (the first task is beyond seemingly anyone).
EasyJet is a brilliantly run business that has helped make air travel available to a wider section of the population than was ever once thought possible.
This doesn’t make flying easyJet a consumer joy — sometimes it is flat-out awful.
For that reason alone it feels like a company to endure as a customer and avoid as an investor.
Here’s a summary of our other top stories from yesterday:
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City job fears as Abrdn confirms 500 jobs to go, mostly in its investments arm where customers have pulled out £12.4bn OBOYLE
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Profit warnings from Revolution Bars amid slump in January trading after bumper Christmas while Wetherspoons sales continue to grow but Tim Martin bemoans competition from supermarkets
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String of London’s largest landlowners, from Grosvenor to Cadogan, reveal sales and footfall growth on their huge estates over Christmas, despite retail challenges
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Tech services provider Computacenter hints at big returns for shareholders as it ends the year with £450m in cash
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Subtitling firm Zoo digital warns it’s “taking longer than expected” to get back to business as usual following last year’s Hollywood strikes – says losses will be bigger than thought
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