Weekly review

The FTSE 100 ended the week up 129.99 points, or 1.59%, closing at 8,285.71 on Friday.

Equity view

Metro Bank inked a deal to sell a portfolio of residential mortgages to NatWest Group. The portfolio, which had a book value of £2.5bn, was sold for £2.4bn in cash. Metro said that the transaction would contribute to repositioning its balance sheet, rotating towards higher yielding commercial, corporate, SME lending and specialist mortgages.

Online real estate portal operator Rightmove said on Friday that both revenue and operating profits had grown in the six months ended 30 June, driven by continued demand from agents and new home developers. Rightmove said interim revenues were up 7% at £192.1m, as both agents and new home developers renewed contracts, upgraded their packages and invested in additional products.

AstraZeneca's ‘Imfinzi’, or durvalumab, was recognised by the FDA's oncologic drugs advisory committee (ODAC) on Friday for its efficacy in treating resectable non-small cell lung cancer (NSCLC), based on phase three trial results. The FTSE 100 pharmaceuticals giant said the trial showed that Imfinzi met the primary endpoint of event-free survival (EFS) and showcased a tolerable safety profile.

NatWest Group posted a decline in interim profits as net interest margins fell and costs rose, but raised its full-year income guidance. Separately, citing people familiar with the situation, Bloomberg reported that the Chancellor was "leaning" towards selling a "substantial" portion of the government's £5.6bn stake to institutional investors.

BT has reiterated full-year targets after a "solid start" to the year, with strong growth in fibre and customer numbers, though revenues were held back by a weaker performance in the business division. Adjusted revenues in the first quarter ended 30 June were down 2% at £5.1bn due to legacy managed contract declines, reduced low margin sales activity and contraction in the portfolio unit within business.

Lloyds Banking Group reported a drop in first-half profit on Thursday as costs rose. In the six months to the end of June, statutory pre-tax profit fell 14% from the same period a year earlier to £3.32bn. This was due to lower net interest income and higher operating expenses, partly offset by a lower impairment charge, the bank said.

Telecoms giant Vodafone has reiterated its full-year guidance after an in-line first-quarter performance, as strong revenue increases in Africa and Turkey made up for slowing growth in Europe and falling sales in Germany. Total revenues were €9.04bn in the three months to 31 March, up from €8.79bn the year before, with services revenues rising to €7.47bn from €7.24bn.

India-owned, Africa-focused telecoms group Airtel Africa saw first-quarter revenues rise by almost a fifth at constant currencies, but reported sales dropped sharply due to the ongoing currency devaluation in Nigeria. The company, which is majority owned by Indian telecoms giant Bharti Airtel, said revenues totalled $1.16bn in the three months to 30 June, up 19% at constant FX but down 16.1% on a reported basis, mainly due to a falling naira in Nigeria.

Consumer goods giant Reckitt said it was slimming down its portfolio to focus on core businesses and offloading several home care brands. The Durex and Dettol maker said it would look to sell brands including Air Wick, Mortein, Calgon and Cillit Bang. Its Mead Johnson Nutrition business, which makes Enfamil and Nutramigen, is now also up for sale.

Facilities group and government contractor Mitie said it was doubling its share buyback programme, to £100m after good momentum in the first quarter of its fiscal year. Mitie has since April bought 21 million shares at a cost of £25m, and average price per share of 119p each.

Low-cost carrier easyJet reported a significant year-on-year improvement in its third-quarter financial performance on Wednesday, with a 16% increase in headline profit before tax, amounting to £236m. The FTSE 100 airline said that represented a £33m increase compared to the same period last year.

Gold and silver miner Fresnillo said it was on track to meet full year guidance after strong second quarter production. The Mexico-based company said quarterly attributable silver production rose 8.4% quarter on quarter to 14.6 million ounces. Gold production was down 7.7% to 130,000 ounces mainly driven by the lower recovery rate and decrease in ore grade at the Herradura operation and lower ore grade at Saucito, partly mitigated by the higher ore grade at Fresnillo and the contribution from Noche Buena.

Catering giant Compass Group boosted its full-year guidance on Tuesday, following a bumper third quarter. Updating on trading, the world’s largest catering company said organic revenues rose 10.3% in the three months to 30 June. It saw growth in all regions, with sales up 12% in Europe and 9.9% in North America.

Anglo American's South Africa-based iron ore mining subsidiary delivered what it termed a "solid" performance for the first half of the year. Management did however say that the macro and logistics environment continued to be "challenging". For the six months ending in June, Kumba Iron Ore reported adjusted earnings before interest, taxes, depreciation and amortisation of roughly $800m (R15.6bn).

UK insurance group Beazley has reassured investors that the ongoing IT outage linked to cyber firm CrowdStrike should not affect its profitability. A faulty systems update from CrowdStrike caused a widespread outage on Friday, affecting an estimated 8.5m Windows devices worldwide.

Specialist recruiter SThree left its full-year guidance unchanged on Tuesday, despite posting a slide in interim revenues. The FTSE 250 firm, a specialist in science, technology, engineering and maths roles, said revenues in the six months to 31 May fell 7% to £763.4m, or by 5% on a like-for-like basis. Net fees slid 10%, to £188.7m, or by 7% like-for-like.

Vodafone Group said it had sold a further 10% stake in the joint venture that co-controls Vantage Towers for €1.3bn to reduce its debt. The sale achieves the 50:50 joint ownership structure with the consortium of infrastructure investors led by Global Infrastructure Partners and KKR that was envisaged when the co-control partnership was first announced, Vodafone said on Monday.

US grocery giant Kroger ordered two of Ocado's newest technology solutions for its existing and future customer fulfilment centres. According to Ocado boss Tim Steiner, the solutions came amid a backdrop of "significant" pressures on supply chains to manage higher volumes and increased complexity in the face of headwinds from labour costs and availability.

Shopping centre owner Hammerson said it had sold its interest in Value Retail to consumer-focused investment firm L Catterton for an enterprise value of £1.5bn and also announced a £140m share buyback along with a one-for-10 share consolidation. Hammerson, which held 42% of Value Retail, will receive net cash proceeds of £600m from the sale, of which £350m will be reinvested into core projects and £95m to reduce debt.

Gambling giant Entain announced the appointment of Gavin Isaacs as its new chief executive officer on Monday, effective from 2 September. The FTSE 100 company said Isaacs would bring over 25 years of experience in the sports betting, gaming, and lottery industries, having held significant leadership roles at prominent companies such as Scientific Games Corporation, DraftKings, SB Tech, Bally Technologies, and Aristocrat Technologies.

Economic news

The Competition and Markets Authority (CMA) reported on Friday that weakened competition among fuel retailers had led to UK drivers paying over £1.6bn more than they should have in 2023. According to the regulator’s latest analysis on the cost of living crisis, retail fuel margins had significantly increased, especially at supermarkets, where margins had doubled since 2019.

Four major high street banks - HSBC, Lloyds, TSB, and Allied Irish Banks (AIB) - have been found in violation of rules set by the Competition and Markets Authority (CMA), it emerged on Thursday. The regulator said the breaches pertained to the Retail Banking Market Investigation Order 2017, which mandates transparency and accuracy in customer information.

Automobile output in the UK fell in June as carmakers retooled lines to produce electrified models, a business lobby group said. According to SMMT, the total output of cars shrank at an annual rate of 26.6% in June to reach 62,231, amid multiple model changes. Year-to-date production was down by 7.6% to 416,074, as a result of a 13.9% drop in the output of cars for export.

Private-sector activity in the UK has expanded for the ninth straight month, with new business growth at its highest level in more than a year, according to the composite purchasing managers' index (PMI) released on Wednesday by S&P Global. The S&P Global UK composite PMI increased to 52.7 in July, up from 52.3 in May and marginally ahead of the consensus forecast of 52.6. The headline index hasn't dipped below the neutral 50-point level which separates expansion and contraction since October.

Analysts at Berenberg hiked their target price on consumer goods giant Unilever from £49.60 to £55.70 on Friday, stating that the group's recent H1 results highlighted a return to "high-quality earnings growth". Berenberg noted that underlying sales growth was 3.9% year-on-year, which was a touch below visible alpha consensus of 4.3% – driven by pricing of 1% - while volume/mix growth of 2.9% was slightly better than expected. Underlying operating margins in H1 were 19.6%, ahead of consensus estimates of 17.6%, and underlying H1 earnings per share came in 12% above estimates.

National Grid announced the sale of its final 20% equity interest in National Gas to its current majority owners on Friday, consisting of a consortium of long-term infrastructure investors led by Macquarie Asset Management. The FTSE 100 company said the transaction followed the exercise of the consortium's option agreement.

RBC Capital Markets downgraded Lloyds Banking Group on Friday to ‘sector perform’ from ‘outperform’ after the shares hit its 60p price target. RBC said that trading at around 1x 1 year-forward TBV, Lloyds now looks expensive relative to peers, and it believes that the re-rating story will be much tougher from here.

Instructure Holdings said on Thursday that it has agreed to be bought by investment funds managed by KKR in a $4.8bn cash deal. Instructure is a global provider of learning management, education-tech effectiveness and credentialing solutions. Under the terms of the transaction, KKR will pay $23.60 per share, which represents a premium of 16% to Instructure’s share price on 17 May, the last trading day prior to media reports regarding a potential deal.

Cineworld will reportedly unveil a sweeping overhaul this week that will cost hundreds of jobs and reduce its British footprint by at least a quarter. According to Sky News, the cinema chain will publish details of a restructuring plan on Friday that will result in the closure of around 25 sites across the UK. City sources told Sky that around half a dozen Cineworld cinemas would begin a closure process immediately and close their doors for the last time later in the summer.

Over at Berenberg, analysts hiked their target price on ventilation equipment business Volution to 600.0p from 500.0p on Wednesday following the group's full-year trading update. Berenberg stated that while the macro backdrop has "remained challenging" given subdued levels of new construction activity, high interest rates and weak consumer confidence, Volution has continued to be "resilient", with management confident about the brands and strategy.

International events

Americans lined up for unemployment benefits at a slower-than-expected rate in the week ended 20 July, according to the Labor Department. Initial jobless claims fell by 10,000 to 235,000, below market expectations for a reading of 238,000 and down from the prior week's upwardly revised print of 245,000.

America's economy grew more quickly than expected last quarter as companies ramped up investment and amid inventory accumulation. According to the US Department of Commerce, gross domestic product expanded by 2.8% in quarterly annualised terms during the second quarter.

German business sentiment unexpectedly deteriorated in July, according to a survey released on Thursday by the Ifo Institute. The Ifo business climate index fell to 87.0 from 88.6 in June, coming in below consensus expectations for an uptick to 88.9. Meanwhile, the current conditions index fell to 87.1 from 88.3 and the expectations index dropped to 86.9 in July from 88.8 the month before.

The Bank of Canada on Wednesday cut its key policy rate for the second month in a row, as expected, and said it would trim again if inflation continued to fall. The key policy rate was cut by 25 basis points to 4.5%. “We are increasingly confident that the ingredients to bring inflation back to target are in place,” said BoC Governor Tiff Macklem, He reiterated that inflation should return to its 2% target in the second half of 2025.

Activity in the euro area's private sector nearly stalled by surprise in July, the results of two closely followed surveys showed, with growth in France and Germany underperforming. S&P Global's manufacturing sector purchasing managers index dropped from a reading of 46.1 for June to 45.3 in July (consensus: 46.1). A separate PMI for services meanwhile fell from 52.8 to 51.9 (consensus: 53.0).

Consumer sentiment in Germany has risen to its highest level in more than two years, according to a closely watched survey from GfK and the Nuremberg Institute for Market Decisions (NIM), as income expectations and the economic outlook improved significantly. The GfK Consumer Climate index for August increased to -18.4, up from a revised -21.6 in July and ahead of the -21.0 expected by economists. This was the highest reading since April 2022.

Rate-setters in China lowered their short-term policy rate for the first time since the summer of 2023. On Monday morning, the People's Bank of China trimmed its seven-day reverse repurchase rate by 10 basis points to 1.70%. The one and five-year Loan Prime Rates were also cut.

American industrial conglomerate 3M announced a strong set of second-quarter results on Friday, comfortably beating market expectations as it narrowed its guidance for the full-year towards the top end of its previous expectations. The company reported quarterly sales of $6.3bn, down 0.5% year-on-year, although adjusted sales reached $6bn, reflecting a 1.2% increase in organic growth on the year.

American Airlines reported its highest-ever quarterly revenue for its second quarter on Thursday, at $14.3bn, although that still fell short of its own expectations, as the airline also lowered its full-year earnings guidance. Its outlook for full-year adjusted earnings per diluted share were slashed to now range between 70 cents and $1.30, down from a previous $2.25 to $3.25.

Shares in Universal Music Group (UMG) experienced their steepest slide since going public on Thursday, after the Amsterdam-traded company’s subscription and streaming revenue growth failed to meet investor expectations. The world’s largest record label reported a 6.9% increase in subscription revenue in recorded music in its second quarter, falling short of the 11% growth anticipated by analysts surveyed by Bloomberg.