Weekly review

The FTSE 100 ended the week down 57.18 points, or 0.77%, closing at 7,360.55 on Friday.

Equity view

After a decent first-half performance, construction group Galliford Try said it remains on track to hit recently upgraded profit expectations. At an annual general meeting on Friday, the board is expected to say they are “encouraged by the momentum in the first half of the year, with a number of recent project wins”.

British housebuilder Redrow has warned that full-year sales and profits would likely be at the lower end of guidance due to a subdued Autumn trading period. All of Redrow’s key performance metrics have worsened year-on-year since the start of the financial year, which began on 3 July, such as the value of reservations, average reservations per outlet, cancellations, selling prices and the order book.

Chemring said in an update on Friday that its performance up to 31 October was in line with both the board’s and analysts’ expectations, with the year’s outcome set to meet targets. The FTSE 250 company expected net debt at year-end to be £14.4m, widening from £7.2m at the end of 2022.

Drinks giant Diageo saw shares plummet on Friday after warning of a slowdown in growth in the first half due to a weaker performance in Latin America and the Caribbean. Diageo had said back in September that it expected first-half organic net sales growth to pick up from the second half of last year, which ended on 30 June.

UK and Europe-focused value retailer B&M has raised its guidance for profits and store openings after a solid first half, with double-digit growth in both revenues and earnings. The company, which operates as B&M and Heron Foods across over 1,100 stores in the UK and France, said revenues were up 10.4% on last year at £2.55bn in the six months to 23 September.

Engineering group IMI has lifted its full-year earnings guidance and showed good growth and margin improvement in the third quarter, which ended on 30 September. The company now expected 2023 adjusted earnings per share to be between 114p and 118p, up from previous guidance in July of 112p to 117p.

AstraZeneca released its financial results for the third quarter and first nine months of 2023 on Thursday, hiking its full-year guidance on robust performance and momentum in several segments. It also announced an exclusive licence agreement with Eccogene for potential obesity treatment and reported positive results from Imfinzi for treating hepatocellular carcinoma (HCC).

Taylor Wimpey highlighted an uncertain market backdrop on Thursday but said it now expects full-year operating profit to be at the top of its guidance range thanks to a “focus on optimising price and sharp cost discipline”. The housebuilder’s profit range is £440m to £470m. It also said in a trading statement that it still expects to deliver full-year UK volumes of between 10,000 and 10,500 homes.

Mining giant Anglo American saw another big slide in diamond sales at its latest tender of De Beers, blaming continuing macroeconomic “challenges”. De Beers sold just $80m of rough diamonds through Sightholder sales and auctions in its ninth-year sales cycle, down from $200m at the previous tender and $454m in the ninth tender of 2022.

On Wednesday, UK retailer Marks & Spencer reinstated its dividend and delivered a 56.2% rise in first-half profits. However, it sounded a caution about future trade in the run-in to Christmas, citing higher interest rates, weather and geopolitical events. The company posted pre-tax profits of £325.6m in the six months to 30 September, compared with £208m a year ago. Revenue rose 10.8% to £6.1bn, driven by a 14.7% rise in food sales, up 11% on a like-for-like basis.

UK government contractor Serco said it had won a £200m contract to deliver electronic monitoring services for the Ministry of Justice. The contract starts in May 2024 and will run for six years. The value could rise to £275m if options to extend the contract for a further two one-year terms are exercised, Serco said on Wednesday.

Housebuilder Persimmon has nabbed the head of finance at sector peer Galliford Try as its new chief financial officer. Andrew Duxbury, who has served as group finance director at Galliford Try since March 2019, will join Persimmon’s board “in due course”.

Food, ingredients, and retail conglomerate Associated British Foods is returning another half a billion pounds to shareholders as it reported double-digit growth on the top and bottom lines in the last financial year. The Primark owner also proposed a final dividend of 33.1p per share and a special dividend of 12.7p, taking the full-year payout to 60p – up 37% year-on-year.

The owner of Pizza Express cited “market conditions” on Tuesday as it confirmed that it does not intend to make an offer for The Restaurant Group. TRG announced on 26 October that it had received a request for due diligence from Wheel Topco, as it was evaluating a possible offer for the Wagamama owner.

4imprint lifted its full-year profit outlook, pointing to further progress since the first-half update. In its interim report in August, the company said it had seen a “very strong” first-half performance versus the same period a year earlier.

UK housebuilder Persimmon has raised its guidance for new home completions despite a 37% slump in finished builds in the third quarter and a significant fall in its order book. The company also said it continued a “disciplined management of costs” and announced that it would reduce headcount by around 700 in 2023.

FTSE 100-listed aerospace group Melrose has signed a new $5bn aftermarket services agreement with engines giant GE Aerospace. Melrose’s GKN Aerospace division is widening its current risk and revenue sharing partnership (RRSP) surrounding GE Aerospace’s high-thrust GEnx engine.

Multinational insurance company Prudential said it continued momentum in the third quarter, though new business sales and profits slowed slightly from the half-year stage. New business profits for the nine months to 30 September were up 37% year-on-year at $2.14bn – down from 39% growth registered for the first six months.

Kosmos Energy reported third-quarter net income of $85m on Monday, equivalent to 18 cents per diluted share for the quarter, with adjusted net income coming in at $126m, or 26 cents per diluted share. The London-listed firm said that in terms of production, it achieved around 68,200 barrels of oil equivalent per day, with sales amounting to about 73,100 equivalent daily barrels during the quarter.

Building materials group Kingspan said on Monday that it was on track to deliver record full-year profits despite year-to-date sales coming in slightly lower than a year earlier. Kingspan said sales in the nine months to 30 September were €6.14bn, down a touch on the same period in the prior year, while sales pre-currency and acquisitions were down 7% year-to-date.

Economic news

According to figures released on Friday by the Office for National Statistics, the UK economy stagnated in the third quarter. GDP was unchanged in the three months to September, versus consensus expectations for a 0.1% contraction. Activity in the services sector shrank 0.1%, while construction grew 0.1% and production was flat.

According to figures released Thursday by UK Finance, the number of mortgages in arrears increased in the third quarter of 2023, with buy-to-let (BTL) mortgage holders suffering the worst. Between the July and September period, there was a total of 99,470 mortgages in arrears – defined as when arrears reached 2.5% of the outstanding balance – up from 90,880 in the second quarter.

The Bank of England’s chief economist backed keeping interest rates at their current record levels on Thursday, as the central bank continued to prioritise tackling inflation. In a speech to the Institute of Chartered Accountants in England and Wales, Huw Pill said that now monetary policy was in “restrictive territory”, the central banks did not need to raise rates “in order to bear down on inflation”.

UK house prices remained under pressure in October, a closely watched survey showed on Thursday, although the pace of decline appeared to be steadying. According to the latest RICS UK Residential Market Survey, October’s house prices indicator was -63.

UK house prices rose in October amid constrained supply after six consecutive monthly falls, but demand remains weak overall, according to data released by Halifax on Tuesday. House prices ticked up 1.1% following a 0.3% fall in September.

UK retail sales growth slowed to an annual rate of 2.5% in October, according to figures released Tuesday by the British Retail Consortium and KPMG, as milder weather and deal-hunting delayed seasonal spending. The BRC-KPMG Retail Sales Monitor revealed that growth fell from 2.7% in September and 4.1% in August. This was well below the three-month average of +3.1% and the 12-month average of +4.2%.

British Steel confirmed plans that unions warn could lead to the loss of 2,000 jobs in Scunthorpe on Monday afternoon. The company, owned by Jingye Group, said it would close the blast furnaces at its Scunthorpe facility and replace them with two more cost-effective and environmentally friendly electric arc furnaces (EAFs), with one in Scunthorpe and the other in Teesside.

UK new car registrations rose roughly 14% in October, marking the 15th consecutive monthly increase as the automotive industry recovers from supply chain issues from the Covid-19 pandemic. Registrations of new vehicles rose 14.3% year-on-year to 153,529 in October, according to the Society of Motor Manufacturers and Traders, while year-to-date registrations were up 19.6% at 1.60m.

Output in the UK construction sector fell again in October, weighed down by weakness in housebuilding, according to a survey released on Monday. The S&P Global/CIPS construction purchasing managers’ index ticked to 45.6 from 45.0 in September but remained well below the 50.0 mark, separating contraction from expansion.

International events

China fell back into deflationary territory in October as pork prices slid, according to data released by the National Bureau of Statistics on Thursday. The consumer price index fell 0.2% compared to the same month last year, compared to expectations for a 0.1% decline. The data showed that pork prices tumbled 30.1%.

Mortgage applications in the US jumped last week as fees on borrowing dropped in the wake of data showing a softening labour market, though levels remain low. According to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey, applications were up 2.5% in the week ended 3 November.

Federal Reserve chair Jerome Powell gave no hints at future monetary policy in an eagerly awaited speech in Washington on Wednesday but called on economists to be “flexible and dynamic” in their economic outlook assessments. A week after the Fed kept interest rates unchanged, expectations have risen that the central bank may be done with further rate hikes in the current cycle, particularly with labour-market conditions beginning to soften. And so all eyes are turning to every speech by policymakers in hopes that they may indicate when monetary policy may start to ease.

According to data released on Wednesday by Eurostat, retail sales in the eurozone fell by 0.3% in September, declining for the third month. The decline was slightly worse than the 0.2% fall expected by analysts, though data for August was upwardly revised to -0.7% from the initial estimate of -1.2%.

According to final figures released Wednesday by the federal statistics office, German inflation dropped to its lowest level in over two years last month, as energy prices sank and food inflation slowed. The annual rate of consumer price increases eased to 3.8% in October, according to Destatis, matching the initial estimate previously published and its lowest rate since August 2021.

General demand weakness persisted across European sectors in October, with the latest S&P Global Europe sector purchasing managers’ index (PMI) data indicating sluggish growth.

China saw a steeper-than-expected fall in exports last month, trade data showed on Tuesday, while imports surprised to the upside. According to official customs data, China’s exports fell 6.4% year-on-year in October, following a 6.2% slide in September. The decline was far steeper than forecasts for a fall of 3.5%.

Australia’s central bank lifted interest rates to a 12-year high on Tuesday in response to persistent inflation. The Reserve Bank of Australia increased the cost of borrowing by 25 basis points to 4.35%, the first increase in five months. The rise, the first under new governor Michele Bullock, aligned with forecasts.

According to fresh survey data released on Tuesday, eurozone construction activity experienced its most significant decline in 10 months in October. The S&P Global/HCOB eurozone construction PMI showed that the housing sector remained particularly weak, driven by a sharp drop in new orders as demand conditions deteriorated.

German industrial production dropped much more than expected in September, according to figures released Tuesday from the federal statistics office Destatis. Output was down 1.4% on the month, falling for the fourth straight month, dragged lower by a 5% drop in production in the automotive industry.

South Korean stocks surged on Monday in response to a reinstated ban on short-selling from financial authorities. Regulators in Seoul decided to re-impose a ban on the practice until the end of June next year.