Consumer healthcare business Haleon makes its debut on the London stock market today after completing its demerger from GSK.
Trading in the maker of products including Panadol, Sensodyne and Voltaren begins at a challenging time, with more warnings from London-listed companies today.
Car insurer Direct Line has highlighted the impact of the cost inflation while delivery app Deliveroo has halved its guidance on growth in gross transaction value for this year.
FTSE 100 Live Monday
Deliveroo cuts revenues outlook
FTSE 100 higher as mining stocks rally
Pound up 1% against the dollar
Goldman Sachs banker pay down 40%
US stocks rise as rate hike fears soften
15:00 , Simon Hunt
Stocks made gains in the opening minutes of trading in New York, as fears of a 100-basis point interest rate rise by the US Federal Reserve began to wane.
Analysts are coming round to the view that inflation may be reaching its peak, and so a 75 basis point rise is proving more likely.
Goldman Sachs shares soared 4.1%, after it published second-quarter earnings that beat analyst estimates, while Bank of America shares were up 1%.
The dollar fell 1% against the pound, while US 10-year treasuries stayed flat.
FTSE overtakes S&P for healthcare weighting after Haleon IPO
14:34 , Simon Hunt
GSK’s spin-off of Haleon has pushed the FTSE100 ahead of the S&P for its heathcare weighting, highlighting the growing importance of the heath and pharmaceutical industries to the UK economy.
With Haleon included, healthcare FSTE 100 constituents now have a combined market cap of over £300 billion, giving the sector a weighting of 15.4% of the index, compared with the S&P’s 15.1%,
The weighting is not the highest in Europe, however – it remains behind the German Dax with 16.9%.
Haleon wobbles after good early start
14:24 , Simon English
Haleon shares started well but are wobbling a bit now.
Shares in the biggest City float for, well, ages, opened this morning at 330p, and moved up nicely in early trading.
That was deemed important for the near-term future of the Square Mile, which has lately been starved for deals.
At the moment the stock is down about 2% to 320p, which is not what we wanted to see.
Haleon is the consumer arm of GSK, which has spun it off to focus on vaccines.
(The name Haleon, by the way, comes from “hale”, which means healthy, and “leon” the Latin for lion.)
Despite the share fall, the company becomes one of the 20 largest companies in the FTSE 100.
It is valued at about £30 billion and has £10 billion of debt.
Crypto market cap back above $1 trillion as Bitcoin pares back losses
14:15 , Simon Hunt
The market cap for crypto assets is back above the $1 trillion mark, data from CoinMarketCap shows, after Bitcoin rallied 6%, paring back some of its June losses.
The cryptocurrency has gone up 20% over the past month to reach its highest level since June 12.
The slight rebound hasn’t been enough to allow a number of crypto firms to escape bankruptcy.
Bitcoin remains down 47% since the beginning of the year.
Bank of America shares slide amid profits plunge
13:28 , Simon Hunt
Bank of America shares slid 0.9% in pre-market trading after the North Carolina-based firm posted a drop in profit worse than forecast.
Profits plunged 34% to $5.93 for the quarter ended June 30, despite a 6% rise in revenues to $22.7 billion.
Bank of America CFO Alastair Borthwick said the company had set aside $200 million in relation to a regulatory case concerning the unauthorised use of personal phones, which he said would be settled ‘soon’.
Banker pay down 40% at Goldman after plunge in profits
13:06 , Simon Hunt
Pay and bonuses at US investment bank Goldman Sachs plunged 40% after the company posted a drop in profits.
The total payroll bill for the company came to $7.8 billion in the six months to June 30, 2022, compared to $11.3 billion a year prior, representing a 40.3% fall in pay per head.
The company said in a statement: “The decrease in operating expenses compared with the second quarter of 2021 was primarily due to significantly lower compensation and benefits expenses.”
Profits for the company fell 23% to $11.9 billion, slightly better than market predictions, as revenues from investment banking almost halved to $1.8 billion, partially offset by 26% sales growth in the firm’s investment management unit.
Shares went up 4% in pre-market trading.
Euromoney sells to private equity for £1.6bn
12:51 , Simon Hunt
Financial publishing house Euromoney International Investor has agreed to be taken private in a £1.6 billion deal with private equity suitors which have made four previous offers for the group.
The FTSE 250 banking awards organiser’s board has backed the latest approach — priced at 1461p per share — having resisted previous offers in a range between 1175p and 1350p. The bidding consortium is made up of the Luxembourg-based Astorg and London’s Epiris private equity funds.
They intend to split Euromoney up, separating its Fastmarkets business, which provides price benchmarking and analysis of commodities markets, into a stand-alone company.
The remainder of the group will contain its financial and professional services operations and its asset management business, which will include the Insurance Insider title and awards nights as well as the International Tax Review and a range of exhibitions for the financial services sector.
Euromoney says its purpose is to “provide clarity in opaque markets” to customers who are usually financial institutions. It employs more than 2500 people on brands including Total Derivatives and BoardEx.
After the separation, the bidders said Fastmarkets will be owned by Astorg, with the rest of Euromoney’s businesses controlled by Epiris.
Pound up 1% against the dollar amid growing Fed rate hike consensus
12:23 , Simon Hunt
The pound has shot up over 1% against the dollar this morning amid growing investor consensus predicting a 75 point interest rate hike by the US Federal Reserve when it meets next week.
Traders had began to bet on a 100 basis point rate rise by the Fed last week, after figures released by the US Labor Department showed inflation soared 9.1% in June, the largest rise in over four decades.
The pound’s surge leaves it at a one-week high of $1.20.
However, senior analyst at Hargreaves Lansdown, Susannah Streeter, said sterling “is still languishing around lows not seen since the first days of the pandemic.”
“Political uncertainty rumbles on in the UK, with increasingly fractious debates between the Prime ministerial contenders exposing the rifts in the ruling Conservative party, when it comes to fiscal policies,” she said.
H&M shares fall as it announces withdrawal from Russia
12:09 , Simon Hunt
Swedish high street retailer H&M is to withdraw operations from Russia, the company has announced, becoming the latest multinational business to fully exit the country.
The world’s second largest fashion retailer said “current operational challenges and an unpredictable future” were responsible for the decision to wind down the company. H&M said stores would re-open temporarily in a bid to sell remaining stock.
It comes after the company paused all sales in Russia, Ukraine and Belarus in March following the invasion of Ukraine.
Sales in Russia accounted for 4% of the H&M’s total revenues of 199 billion krona (£16 billion), according to the company’s most recent annual report.
The fashion firm said it expected the move would cause the company to take a third-quarter hit of two billion krona (£161 million). Shares fell 0.8% on the news.
As of November 2021, H&M employed 6,910 people in Russia across 168 stores.
LV= chief pays price for failed takeover
11:54 , Simon Hunt
The boss of insurer LV= has bowed to pressure for him to resign after the company’s botched attempt to attract a £530 million takeover from US private equity firm Bain capital.
Mark Hartigan will remain as LV= CEO until the autumn while the company searches for a replacement. LV= chair Simon Moore, appointed in June, said Hartigan was asked “to carry out a full strategic review as instructed by the board — which ultimately led to the proposed transaction with Bain Capital”.
“That transaction did not proceed, with members sending a clear message mutuality remains important to them.”
Only 69% of LV= members voted to back the Bain takeover deal.
LV= shares went up 1.3% in morning trading.
FTSE 100 rallies, Fevertree shares improve
10:23 , Graeme Evans
A big week for traders started on the front foot today as oil and mining stocks swept the FTSE 100 index 1% higher for a second session in a row.
Glencore and Rio Tinto shares jumped 4% as global recession fears eased a little after Friday’s better-than-expected retail sales figures in the United States. The mood also reflected hopes that the Federal Reserve is poised for a 75 basis points increase in its funds rate next week, rather than the 100 points seen by some previously.
The shift in rates expectations took some of the steam out of the US dollar, having last week traded at a 20-year high against a basket of six major currencies.
Oil majors BP and Shell rose more than 3% as the price of Brent crude lifted 2% to $103.58 a barrel, a move reflecting ongoing supply concerns after no new production pledges were revealed following US president Joe Biden’s visit to Saudi Arabia.
Having rallied by 1.7% on Friday, the risk-on mood continued today as a strong session in Asia helped the FTSE 100 to add another 1.5% or 104.47 points to 7263.56. The FTSE 250 index lifted 163.57 to 18,997.37.
Events with the potential to turn the dial on stock market sentiment include this week’s readings on UK unemployment, pay and inflation. The European Central Bank meets on Thursday, when policymakers are due to hike interest rates for the first time in more than a decade.
The US earnings season also continues with results from Netflix after Tuesday’s closing bell and Tesla, Twitter and Snap later in the week. Updates from UK companies include Royal Mail, SSE and Ocado.
The potential for negative shocks was highlighted last week by Fevertree Drinks, when its shares tumbled 26% on the back of a warning over a significant deterioration in margins.
The AIM-listed tonics firm traded at its lowest level in six years on Friday, but rallied 7% today as shares improved 69.5p to 936p. The recovery came despite broker Peel Hunt halving its price target to 800p.
FTSE 100 up 1%, Scottish Mortgage leads way
08:54 , Graeme Evans
The FTSE 100 index has produced a better-than-expected performance, despite today’s latest warnings over consumer headwinds and inflationary pressures.
The top flight rallied 1% or 78.66 points to 7237.66, with the main support coming from the commodities sector after gains of more than 2% for BP, Shell, Glencore and Rio Tinto.
Scottish Mortgage Investment Trust led the risers board as shares rallied 4% or 28.6p to 810.6p. The FTSE 250 index stood 0.8% higher, a gain of 153.12 points to 18,986.92.
GSK spin-off Haleon, which is set for admission to the FTSE 100 index after being valued at more than £30 billion in today’s listing, rose 4p from its opening price of 330p. GSK fell 19% or 321.2p to 1398p as shares took into account the loss of the consumer healthcare business.
Direct Line warns over claims cost inflation
08:41 , Graeme Evans
Direct Line Insurance shares have fallen 12% to 190p after the FTSE 250-listed company revised 2022 profits expectations in the wake of significant claims inflation in the first half of year.
It highlighted factors such as higher used car prices, as well as rising third party claims costs, longer repair times and inflation in the cost of car parts.
The company, whose other brands include Churchill, Privilegeand Green Flag, now estimates overall motor claims severity inflation for 2022 of around 10%.
It said it had increased prices in the second quarter to restore margins: “In addition, the group has recently launched an updated motor risk pricing model which it believes materially improves risk selection.”
Deliveroo lower sales outlook
08:24 , Graeme Evans
Deliveroo pointed to increased consumer headwinds today as it made a significant cut to forecasts for its gross transaction value in 2022.
It now sees full-year growth in the range of 4% and 12%, which compares with its previous guidance of between 15% and 25%.
The revision comes after a slowdown in UK second quarter growth to 4%, from the 12% reported in the previous quarter. Overall, gross transaction value for the half year was £3.56 billion, a rise of 7%.
Deliveroo, which is run by founder Will Shu, left margin guidance unchanged and said its balance sheet remained strong.
It said: “Management is confident in the company's ability to adapt financially to a rapidly changing macroeconomic environment, through gross margin improvements, more efficient marketing expenditure and tight cost control.”
Shares fell 3% to 85.1p, which compares with 390p when it listed in March 2021.
FTSE 100 higher, focus on UK inflation
07:57 , Graeme Evans
London’s FTSE 100 index is set to open higher at the start of a week due to include the latest UK unemployment, wage and inflation readings as well as a rise in interest rates by the European Central Bank (ECB).
The US earnings season also continues with results today from Goldman Sachs before Netflix after Tuesday’s closing bell and Tesla, Twitter and Snap later in the week.
Their outlook statements will be significant at a time when the US economy is facing another big rise in the Federal Reserve funds rate later this month.
Expectations are now focused on a 75 basis points increase rather than the 100 points seen by some traders last week.That shift has taken some of the momentum out of the US dollar, which weakened slightly today to stand at $1.19 versus the pound.
The monetary policy approach of policymakers at the Bank of England has been much less dramatic than US counterparts, although an inflation figure above the forecast 9.2% on Wednesday will ramp up pressure for a 0.5% rise in August.
The ECB is expected to raise its key rate for the first time since 2011 when it raises by 0.25% at its meeting on Thursday, with a pledge to do so again in September.
Ahead of these developments, CMC Markets expects the FTSE 100 index to open 35 points higher at 7194.