- The FTSE 100 was little changed, up 2 points
- Dunelm fell after RBC was relegated to poor form
- Homebuilders tumbled as JP Morgan cut its price target
9:28 a.m.: Five-year fixed mortgages top 6% as the pressure continues
Mortgage continued to climb higher with the average 5-year residential mortgage rate hitting 6.01% today, up from 5.97% on Monday, according to new data from financial data provider Moneyfacts.
Mortgage rates: Five-year repair average rises above 6% https://t.co/iImnMT0bDn
— Housing Agent (@HomeinUrmston) July 4, 2023
That’s the highest level since last November, when mortgage rates were boosted by mini-budget chaos last fall.
Short term mortgage rates also continued to push higher. The average 2-year fixed residential mortgage rate has jumped to 6.47%, up from 6.42% on Monday.
09.02: Dunelm is out of date on RBC
Top of the FTSE 250 fallers is home furnishing apparel, Dunelm.
The stock plunged 6.8% to 1,044p after RBC Capital Markets downgraded the stock to the underperforming sector.
“With continuing cost-of-living pressures, unfavorable moves in the UK housing market and only a moderate story of store expansion, we think growth will be more difficult now,” the brokerage said.
“As such, we see greater upside potential in travel (SSP, WH Smith, Dufry) and Discount (AB Foods, B&M Value Retail) providing strong topline momentum and meaningful expansion for these names.”
RBC still views Dunelm “as a well managed business with a strong position in the UK home appliance market”.
Alongside the downgrade, RBC has slashed its target price to 1,000p from 1,300p.
08.53: FTSE 100, JP Morgan warms up to Centrica and Drax
The FTSE 100 continues its muted start, dropping 1 point.
But despite the weak overall picture, a number of stocks are on the move, up and down.
Heading up, Centrica shares were up 0.8% and Drax was up 1.7% after JP Morgan put both stocks on positive Catalyst Watch ahead of the interim results.
Informa rose 0.7% after analysts at Citi repeated the buy rating with an increased target price to 850p, up from 720p.
But Dunelm remains on top of the FTSE 250’s decline, down 5.2%, following RBC’s downgrade.
Sainsbury’s remains a weak feature despite widely received trade updates.
Sophie Lund-Yates of Hargreaves Lansdown said: “Sainsbury’s has stepped out of the gate, insisting that its efforts to keep prices low have led shoppers to buy more items, with first-quarter sales increasing more than 9%.”
But he was cautious: “The financial year is still in its early stages, and questions about demand and margins may have dimmed but are definitely still there.”
08.37: Recover fall after warning, CEO leaves
Not a good morning for shareholders at Restore. The stock is now down 30%, continuing its previous decline, after the profit warning and news that its chief executive is stepping down.
The company now estimates 2023 pre-tax profit of around £31 million. Broker Peel Hunt noted this compared to his estimate of £41.0 million and a consensus of £41.2 million.
“Ahead of the management talks, we will withdraw our estimates, price targets and recommendations,” the broker said.
The company said that the price of recycled shredded paper has fallen significantly in the past month with this trend anticipated to continue into the second half.
Charles Bligh will step down as chief executive with Jamie Hopkins taking over.
The FTSE 100 is now up 2 points.
0823: Homebuilders fall as JP Morgan highlights forecast risk
British home builders had fallen in the early stock market after JP Morgan reiterated a cautious stance on the sector, downgrading Persimmon and putting Taylor Wimpey and Vistry on a negative catalyst watch.
Persimmon was the biggest dropper on the FTSE 100, down 1.7%, while Taylor Wimpey, Barratt Developments and Berkeley fell 1.6%, 1.0% and 1.0%, respectively.
On the FTSE 250, Vistry was down 2.1%, and Redrow was down 1.9%.
The valuation of the investment bank’s notes remains above October 2022 levels and “we see additional downside risks to the outlook.”
“The potential softening in sales rates from here, given tariff uncertainty, puts the recovery of 2024E volumes in jeopardy while room for affordability-induced reductions in average selling prices remains,” JPM Morgan said.
The bank has downgraded Persimmon to neutral, with a new price target of 1,090p, “as the volume recovery we expected earlier in ’24E now proves vulnerable and our revised PT implies only 6% upside potential.”
“In addition, with one of the biggest declines to the ’24E consensus, we put Taylor Wimpey and the Vistry Group on Negative Catalyst Watch on the H1 update,” the bank said.
The Berkeley Group remains his favorite play in the sector.
Bank cut its targets for Barratt (neutral) to 390p from 430p, for Bellway (overweight) to 2,200p from 2,780p, Crest Nicholson (underweight) to 150p from 200p, Redrow (underweight) to 370p from 440p, Taylor Wimpey (neutral) to 94p from 130p and Vistry (underweight) to 580p from 740p.
08.13: Flat FTSE homebuilders hit by JP Morgan’s cautious comments
The FTSE 100 opened slightly lower due to a muted trading session with US markets closed for Independence Day.
At 8:15 am, the London blue chip index was down 3.88 points at 7,523.38 while the FTSE 250 was little changed at 18,507.26.
Shares in Sainsbury’s fell 1.8% despite the trading update looking solid.
Britain’s second-largest retailer said in the 16 weeks to June 24 its like-for-like sales were up 9.8%, and excluding fuel it was up 9.2%.
Sainsbury’s continues to expect a base profit before tax for the 2023/24 financial year of between £640 million and £700 million and generate at least £500 million of retail free cash flow.
Chief Executive Simon Roberts said: “Food inflation is starting to come down and we are fully committed to delivering savings to our customers. “
Zoe Gillespie, investment manager at RBC Brewin Dolphin, described the update as “tough”.
“In an environment that many fear will see customer trade fall, supermarkets have continued to increase sales and their guidance for the year has been largely unchanged,” he said.
“With a relatively strong balance sheet, excess cash flow and growing market share, Sainsbury’s looks well positioned among its peers,” he thinks.
Home builder Persimmon slipped 1.8% as JP Morgan was downgraded to underperform with a target price of 1,090p.
Brokers put Taylor Wimpey, down 1.5%, and Vistry, off 2.1% on negative catalyst readings.
Dunelm slumped 4.6% as RBC moved the stock into underperformance with a 1,000p price target.
Another part heading south is Restore after the company warned that pre-tax profit would be lower than previously forecast by around £31 million this year.
The company said that the price of recycled shredded paper has fallen significantly in the past month with this trend anticipated to continue into the second half.
Charles Bligh will step down as chief executive with Jamie Hopkins taking over.
The current chairman, Sharon Baylay-Bell, has agreed to become executive chairman, also with immediate effect.
The stock plunged 26% to 60.60p.
07.44: The number of Wizz Air passengers is flying high
Another airline updating traffic numbers is Wizz Air.
The low-cost carrier said it carried 5.3 million passengers in June, a 22.5% increase over June 2022, with a 92.2% load factor.
In the 12 months to June, Wizz Air carried 54.2 million passengers, 49% higher year-over-year, with a load factor of 89.4%, an increase of 7.6 percentage points.
The company announced the addition of 10 new routes to its Albanian network adding nearly 100 extra weekly flights to its winter schedule.
07.38: RyanAir flies a record number of passengers in June
A more powerful figure from the aviation industry. Ryanair flew a record 17.4 million passengers in June, the highest in one month and an increase of 9% from the previous year.
The previous traffic record of 17 million was set in May.
The Irish airline, which carries the largest number of passengers in Europe, canceled more than 900 flights, affecting around 160,000 customers, mainly because of last month’s air traffic control strike.
Flights average 95% full in June, unchanged from the previous year.
07.23: Sainsbury’s back guide, food inflation begins to fall
J Sainsbury’s supports full year guidance as it reports inflation pressures are starting to ease.
Chief Executive Simon Roberts said: “Food inflation is starting to come down and we are fully committed to delivering savings to our customers. “
After facing accusations of profiteering, Roberts stressed: “Prices on our top 100 best-selling products are now lower than they were in March, compared to markets where prices have gone up.”
The food retailer said in the 16 weeks to June 24 its like-for-like sales were up 9.8%, and excluding fuel it was up 9.2%.
The company reported continuing strong wholesale momentum, with sales up 11%, as volume growth returned and market share strengthened.
General merchandise sales were up 4%, with Argos sales up 5.1%, with strong consumer electronics sales offsetting weaker early Summer seasonal performance.
Sainsbury’s continues to expect a base profit before tax for the 2023/24 financial year of between £640 million and £700 million and generate at least £500 million of retail free cash flow.
07.02: FTSE 100 set to lower edge
London blue chips are expected to see modest losses when trading begins Tuesday with US markets closed for Independence Day and Asian markets mixed.
The spread betting company calls the FTSE 100 down about 10 points.
“Today’s European session looks set to be quiet with the US off for the July 4th holiday, and little economic data ahead of tomorrow’s services PMI figures for June will likely make for a better reading of the economic resilience point. views,” said Michael Hewson at CMC Markets.
London’s large cap index closed down 4.27 points, 0.1%, at 7,527.26 on Monday.
In the brief session on Monday, US markets closed little changed despite the weak manufacturing numbers.
Tesla and Rivian were star performers after better-than-expected production numbers.
The Reserve Bank of Australia kept its main interest rate unchanged on Tuesday, with Governor Philip Lowe saying that while inflation had “past its peak”, the economic outlook remained uncertain.
Back in London, and the initial focus will be a renewal from food retailer J Sainsbury’s.
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