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What to watch: Melrose tops the FTSE 100, SSE fined £2m, and stocks rally

Oscar Williams-Grut and Edmund Heaphy
·5-min read
An SSE vehicle is parked outside the Pitlochry Dam hydro electric power station in Pitlochry, Scotland, Britain, November 8, 2017. REUTERS/Russell Cheyne
An SSE vehicle is parked outside the Pitlochry Dam hydro electric power station in Pitlochry, Scotland, Britain, November 8, 2017. Photo: REUTERS/Russell Cheyne

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Melrose tops the FTSE 100

Engineering turnaround specialist Melrose (MRO.L) jumped to the top of the FTSE 100 on Thursday, as it signalled performance may be turning a corner.

Melrose published its half-year results on Thursday, showing a 25% slump in revenue to £4.4bn ($5.8bn) and a 89% slump in underlying profit to £56m. The company made a statutory loss of £560m in the six months to 30 June.

However, the company said recent trading had been “at the higher end of the Board's expectations, particularly in automotive and key Nortek markets.”

“Despite the shocking fall in profits there’s actually a fair bit of good news,” said Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said.

“The recovery in automotive is gathering pace faster than anticipated and demand for Nortek’s cooling systems looks robust, with new products likely to give sales an extra blast of support in the near future.

“The cash flow statement and balance sheet also tell a relatively upbeat story. The group’s managed to haul cash back into the business and actually driven a small decline in net debt during the half.”

Shares jumped over 11%.

SSE fined £2m

Energy firm SSE (SSE.L) has been fined £2m by regulator Ofgem for misleading the market about its use of coal power.

SSE promised to shut three coal-powered generators in 2016 but struck a last minute deal to keep them online. That deal was not immediately disclosed to the market and Ofgem said that would likely have resulted in customers paying higher than necessary prices.

“SSE’s failure to publish inside information in a timely and effective manner resulted in market participants trading for four working days under a false impression of supply availability in GB’s electricity market,” Ofgem chief executive Jonathan Brearley said in a statement.

“This meant that market participants were likely to have paid higher prices than they needed to, and risked undermining confidence in the wholesale electricity market.”

Brearley said the fine sends a “strong message.”

Amazon to create 7,000 UK jobs

E-commerce giant Amazon (AMZN) has announced plans to create 7,000 new permanent jobs in the UK by the end of 2020.

The online giant plans to hire 3,000 new staff across three new fulfilment centres in Darlington, Durham and Sutton-in-Ashfield, as well as hiring extra staff across its existing delivery network. Amazon will also create new jobs in departments ranging from engineering to HR at its corporate offices in the UK.

Amazon has already hired 3,000 new staff across its UK fulfilment and delivery network so far this year, meaning the company is set to create 10,000 new jobs by the end of 2020. Amazon said many of the new roles would be filled by temporary staff who have been brought on during the COVID-19 crisis.

Amazon also plans to hire 20,000 temporary seasonal workers to help it deal with the Christmas rush, the company said.

Stocks rally

European stocks rose on Thursday morning, after US markets broke fresh records overnight and as France unveiled a €100bn economic stimulus plan.

French president Emmanuel Macron on Thursday unveiled details of a bumper investment plan aimed at helping the country’s economy bounce back from the impact of COVID-19.

The €100bn stimulus plan, dubbed “France Relaunch,” includes tax cuts, wage subsidies, and funding for environmental projects, according to Bloomberg.

The announcement helped France’s CAC 40 (^FCHI) rise 1.6% in early trade, outperforming continental peers.

Elsewhere, the FTSE 100 (^FTSE) rose 0.8% and Germany’s DAX (^GDAXI) rose 1.4%. In Spain, the IBEX 35 (^IBEX) gained 1.8% and Italy’s FTSE MIB (FTSEMIB.MI) rose 1.1%.

US markets had surged overnight. The S&P 500 (^GSPC) closed 1.5% higher to post a new record high above 3,580. The Dow (^DJI) also rose 1.5% to reach a new post-pandemic high, while the Nasdaq (^IXIC) closed up 0.9%.

The rally came amid positive headlines about a potential COVID-19 vaccine. The US Centre for Disease Control has told health authorities across the country to prepare for distribution of a vaccine as soon as November, the New York Times reported on Wednesday.

Stocks were mixed in Asia overnight. Japan’s Nikkei (^N225) gained 0.9%, but elsewhere the Shanghai Composite (000001.SS) dropped 0.6%, the Shenzen Component (399001.SZ) fell 0.6%, and the Hong Kong Hang Seng (^HSI) lost 0.8%. Australia’s ASX 200 (^AXJO) gained 0.8%.

Wall Street looked set for a quiet open. S&P 500 futures (ES=F) were down 0.1% in early trade, while Dow Jones futures (YM=F) were flat and Nasdaq futures (NQ=F) were down 0.3%.

Services PMI

The UK services sector experienced its sharpest rise in business activity in more than five years in August, as consumer spending recovered in the wake of the coronavirus crisis.

A closely watched survey by IHS Markit found that the sector’s purchasing managers’ index (PMI) reading came in at 58.8 in August, above the 56.5 from July and sharply higher than the record low of 13.4 in April.

Though the figure came in below the 60.1 that analysts had expected, it is still the highest result since April 2015.

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