Weekly review

The FTSE 100 ended the week 61.65 points higher, closing Friday’s session at 7,500.89.

Equity view

AstraZeneca and Daiichi Sankyo's Enhertu drug has been approved in the US for the treatment of adult patients with unresectable or metastatic non-small cell lung cancer, the companies said on Friday. They added that the approval applied to patients whose tumours have activating HER2 mutations, as detected by a Food and Drug Administration -approved test, and who have received a prior systemic therapy.

UK gambling firm 888 Holdings reported a sharp fall in interim profit on Friday, as the cost-of-living crisis and tougher online gambling safety rules hit the bottom line. Pre-tax profit for the six-months to June 30 fell 66% to £14.4m from £41.9m last year. Revenue fell to £332.1m from £381m.

GlaxoSmithKline said on Friday that it would "vigorously defend" all claims related to its discontinued heartburn drug Zantac. Shares in the pharmaceuticals group tumbled on Thursday, alongside those of Haleon - GSK’s recently spun off consumer healthcare arm - and Sanofi, amid worries about upcoming legal proceedings.

An undisclosed institutional shareholder has sold around £90m worth of Qinetiq shares in a placing. According to terms seen by Bloomberg, the shares have been sold at 352p each, which is a discount of around 5.9% to the closing share price on Thursday.

Investment manager M&G said on Thursday that improved fund flows in the six months ended 30 June had helped it deliver a "resilient" operational and financial performance despite posting sharp declines in profits and assets under management. M&G said interim operating capital generation was up 40% year-on-year at £433.0m, while its shareholder solvency II rating remained "very strong" at 214% despite total capital generation tumbling from £869.0m to £24.0m as a result of increasing yields and falling equity markets.

Infrastructure company Hill & Smith said it has sold its French galvanising and steel lighting column operations, France Galva, to a consortium comprising ZINQ France and Sofigalva. “The disposal is unanimously recommended by the board of directors of Hill & Smith to be in the best interests of shareholders,” the company said on Thursday.

Real estate advisor Savills backed its full-year expectations on Thursday as it posted a jump in first-half revenues but a drop in profits. In the six months to 30 June, revenues rose 11% to £1.04bn, but group underlying pre-tax profit fell to £59.2m from £66.1m and pre-tax profit declined to £50.4m from £63.3m. The company declared an interim dividend of 6.6p a share, up from 6.0p in the first half of 2021.

Spirax-Sarco Engineering hailed a "strong" first half on Thursday despite headwinds, as it reported a jump in profits and said order books remain at record levels. In the six months to 30 June, adjusted pre-tax profit was up 10% to £175.2m, on revenue of £750.1m, ahead 17% versus the same period a year earlier. On a statutory basis, however, pre-tax profit was 8% lower at £138.5m.

Insurance firm Aviva said on Wednesday that it had witnessed "continuing momentum" in the six months ended 30 June, with both operating profits and own funds generation growing in the half. Aviva reported a 14% increase in interim operating profits to £829.0m, while Solvency II operating own funds generation surged 46% to £538.0m.

Around 115,000 Royal Mail workers are set to strike on four days in August and September in a dispute over pay, the Communication Workers Union (CWU) said. Staff at the postal carrier and delivery service will walk out on August 26 and 31 and September 8 - 9. Royal Mail said the CWU had rejected a pay rise offer "worth up to 5.5%" after three months of talks.

Industrial product and service solutions provider RS Group has acquired leading Mexican distributor Risoul y Cia for $275.0m in cash. RS Group, formerly known as Electrocomponents, said on Wednesday that its acquisition of Risoul, which was on a cash- and debt-free basis, was part of an effort to deliver on the group's strategy to accelerate organic growth through "high-quality inorganic opportunities" that expand its geographic reach, extend targeted product adjacencies and develop its product and service solutions offer.

Asia-focused insurer Prudential reported a rise in first-half operating profit on Wednesday but struck a cautious note over the outlook. Adjusted operating profit increased 8% compared to the first half of 2021 to $1.66bn. This was driven by a 6% jump in life and asset management adjusted operating profit, as well as a 32% reduction in central costs, Prudential said.

Cybersecurity provider Avast said on Tuesday that underlying earnings had dropped in the six months ended 30 June as margins contracted and revenues remained broadly flat year-on-year. Avast posted a first-half adjusted EBITDA of $249.7m, down from $270.2m at the same time a year earlier, while adjusted EBITDA margins fell 4.4 percentage points to 52.9%, and adjusted revenues ticked up by 0.2% to $472.0m.

House builder Bellway on Tuesday reported a 13% rise in annual housing revenue, driven by strong home prices which offset pressure from higher costs. Housing revenue for the year to July 31 rose to more than £3.5bn. Completions rose 10.5% to a record 11,198 homes at an average selling price of £314,400, compared with £306,479 last year.

Asset manager Abrdn posted a drop in first-half profit and revenue on Tuesday and struck a cautious note on the outlook. Adjusted pre-tax profit fell to £99m from £163m in the same period a year ago, while adjusted operating profit slid 28% to £115m and fee-based revenues were down 8% to £696m. Abrdn said this was driven by market movements.

Beverage company Coca-Cola Hellenic Bottling has agreed to acquire ESM Effervescent Sodas from Greece's IDEAL Holdings' wholly-owned SICC Holdings subsidiary. Coca-Cola HBC said on Tuesday that the agreed enterprise value amounts to €45.0m, subject to certain closing adjustments, with completion of the transaction expected to take place in the second half of 2022, subject to customary closing conditions and regulatory approvals.

Shipping services company Clarkson reported a jump in interim profit, driven by its broking division. Pre-tax profit rose to £42m from £27.3m. Revenue surged to £266m from £190.1m.

BHP said on Monday that it made an AUD8.3bn takeover bid for Oz Minerals that was rejected. Under the terms of the offer, BHP would have paid AUD25.00 per share for each Oz share. This is a premium of 32.1% to the closing share price on Friday.

PageGroup backed its full-year expectations on Monday as it posted a rise in first-half pre-tax profit and revenue, but also struck a note of caution in its outlook, sending shares in the recruiter sliding. In the six months to 30 June, pre-tax profit grew 80% to £114.5m, while revenues were up 27.5% at £977.3m, as the company hailed a strong performance across its geographies, disciplines and brands.

TheWorks slashed its outlook for FY23 on Monday, pointing to a deteriorating market outlook, low consumer confidence and rising inflation, sending shares in the arts and crafts and stationery retailer tumbling. The company said it now expects underlying EBITDA for FY22 to be around £16.5m, mainly due to a lower-than-expected level of provisions related to stock, up from previous guidance of £15m. However, it "materially lowered" its expectations for FY23 results.

Economic news

The UK economy contracted in the second quarter, according to figures released on Friday by the Office for National Statistics. GDP fell 0.1% following 0.8% growth in the previous quarter. Analysts had been expecting a 0.2% contraction.

UK house prices continued to rise in July and were expected to continue to do so over the year ahead as a result of a "severe lack of stock", the results of a survey revealed. The Royal Institute of Chartered Surveyors said the net balance of respondents reporting higher prices last month hit 63%, moderately lower than the high of 78% recorded in June, but little changed from 65% in June.

More than one hundred retailers have written to police and crime commissioners in England and Wales on Thursday morning, calling on them to commit to making retail crime a priority in local policing strategies. In the letter, retailers expressed increasing concerns over rising levels of violence, abuse, and anti-social behaviour across their operations, and the emotional impact on victims and their colleagues.

The government is working on a new cost-of-living package to support Britons facing monumental uplifts in bills and prices, it was suggested on Wednesday, for the next prime minister to consider. Treasury minister Simon Clarke tweeted that work was being undertaken, amid widespread calls for action from Westminster.

UK retail sales grew in July as Britons spent more in-store than online, according to new figures from the British Retail Consortium and accounting giant KPMG. Retail sales grew by 2.3% year-on-year across all channels last month, decelerating from July 2021 when sales increased by 6.4% from the previous year and below the 12-month average of 2.7%.

PricewaterhouseCoopers and one of its partners have been issued sanctions worth an initial £2.5m, it was announced on Monday, for the audit of BT Group’s 2017 financial statements. The Financial Reporting Council said PwC had been handed a sanction of £2.5m, adjusted for admissions and early disposal to £1.75m.

Spain's Ferrovial is reportedly exploring options for its 25% stake in London's Heathrow and has held preliminary talks with external advisers on the future of its holding in the airport. Reuters cited sources as saying that the early stage discussions come amid interest from private equity firm Ardian, which has held talks with its own advisers on a possible joint proposal with Saudi Arabia's Public Investment Fund (PIF).

International events

Industrial production in Europe’s common currency rose more than expected in June, according to fresh data on Friday morning, although analysts were warning of a serious softening in the second half of the year. The European Union’s statistics office Eurostat said eurozone industrial production rose by a seasonally-adjusted 0.7% month-to-month in June, after an upwardly-revised 2.1% increase in May.

A fall in energy prices saw wholesale inflation in the US register its first outright fall since April 2020. According to the US Department of Labor, so-called final demand prices retreated at a month-on-month pace of 0.5% (consensus: 0.3%).

A top US central bank official argued in favour of a 50 basis point interest rate hike at the next policy meeting, instead of a 75bp move, even as she cautioned that much was still left to do. In an interview with the Financial Times, the head of the Federal Reserve Bank of San Francisco, Mary Daly, reportedly said that a lot of uncertainty was still out there so acting "great confidence" and hiking rates by 75bp would not be "optimal".

Americans lined up for unemployment benefits at a slightly accelerated pace in the week ended 6 August, according to the Labor Department. Initial jobless claims rose by 14,000 week-on-week to 262,000, slightly better than expectations for a reading of 263,000, while the previous week's level was downwardly revised by 12,000 to 248,000.

US inflation slowed more than expected in July, according to the Bureau of Labor Statistics, advancing at an 8.5% clip in July, down from June's 40-year high of 9.1%. Compared to the previous month's rate, CPI was unchanged after rising at a 17-year high print of 1.3%, below forecasts of 0.2%.

German inflation fell slightly in July to 7.5%, confirming initial estimates, according to official data released on Wednesday. The figure compared with the 7.6% recorded in June, and reflected the impact of government interventions.

Inflation in China hit a two-year high in July, driven by surging pork prices, according to official data released Wednesday. The headline consumer price index rose by 2.7% in July, missing forecasts of a 2.9% increase. Pork prices rose 20.2% year on year - the first increase since September 2020.

Ukraine halted the flow of Russian oil to southern Europe in early August due to the inability to process oil transit fees as a result of sanctions. Russian pipeline monopoly Transneft reportedly made the payments to its Ukrainian counterpart Ukrtransnafta on 22 July, but the payment was not accepted by European banks who are not allowed to process it barring permission from their national regulators , leading to flows being cut off from 4 August.

US non-farm labour productivity and unit labour costs improved by less than expected during the second quarter. According to the Department of Labor, productivity fell at a quarter-on-quarter annualised rate of 4.6% over the three months to June (consensus: -4.5%).

JPMorgan Cazenove said on Monday that the risk/reward for equities is "not all bad" as we head into year-end. In an equity strategy note, the bank said: "While the activity prints are likely to remain challenging – its M1 lead indicator points to further PMI weakness, and the earnings are finally having a reset, with negative weekly EPS revisions, we believe that risk/reward for equities is not all bad as we move into year-end.

China's trade surplus hit a record high in July, providing the world's second-largest economy with some much needed support. China's trade balance rose to $101.0bn last month, with exports growing 18% year-on-year in dollar terms - ahead of expectations for a 14.1% gain.

Tesla boss Elon Musk has sold 7.9m shares in the electric maker in case he loses a legal battle with Twitter and ends up having to buy the social media platform. According to regulatory filings, the $6.9bn sale took place after Tesla’s annual shareholder meeting last week.

BioNTech reported a larger-than-expected drop in quarterly revenues, even as it progressed on the roll-out of new Covid-19 vaccines and its pipeline of potential cancer treatments. The German biotechnology giant reported a 40% drop in sales versus the comparable year earlier period to reach €3.2bn (FactSet: €3.88bn).

Reporting by Josh White, Michele Maatouk, Frank Prenesti, Iain Gilbert and Alexander Bueso and Sharecast.com.