Lucky Strike owner BAT’s £25 billion valuation write-down in readiness for a “smokeless world” today triggered a big slide for its shares.
Holidays giant TUI was also in focus after its annual results revealed plans to ditch its London Stock Exchange listing.
Other highlights of today's session include the Bank of England’s Financial Stability Report and a takeover deal for tenpin bowling firm Ten Entertainment.
FTSE 100 Live Wednesday
BAT reveals £25bn US write down
Tui weighs LSE delisting
Ten Entertainment backs £287m takeover
City Comment: Sunak knows immigration is good for Britain — so why the cruel crackdown?
Simon Hunt writes that there seem to be two Rishi Sunaks around
"One of them appeared last week, at the Government’s Global Investment Summit at Hampton Court Palace. The UK had 'the most competitive visa regime,' Sunak boasted to investors, and 'nothing like it exists anywhere else in the world'.
"If you’re a student from a good university, 'you can just come here with your family… to just explore' a gleaming Sunak said, eager to point out just how many of the top British businesses had immigrant founders.
"Then, once overseas investors were on their private jets home, another Sunak re-emerged. There are too many foreigners, he moaned. We need to keep ’em out.
"Employers must stop 'over-relying on migration'. If you want to come here, don’t expect an easy ride. You’ll have to earn about 50% more than you used to so you’re “not burdening the state”, and you can kiss goodbye to your families — there’s no way we’re letting them anywhere near Blighty."
US stocks slightly higher
15:33 , Daniel O'Boyle
US stocks have opened slightly higher, with banks and travel businesses among those gaining ground.
The S&P 500 is up 0.2% to 4,575.08 while the Dow Jones is up 0.3% to 36,219.88. The Nasdaq is up 0.1% to 14,248.12.
Top risers include Campbell's Soup, United Airlines and Citigroup
KFC to buy 200 restaurants from franchisee EG Group
14:31 , Daniel O'Boyle
KFC has said that it will buy more than 200 outlets owned by a franchisee and sister company of supermarket Asda.
The fast food chain said that it would take over the sites in the UK and Ireland, which employ around 7,800 people.
Around half of the 218 sites are drive-through locations, said KFC, which is owned by Yum! Brands, the company behind Pizza Hut and Taco Bell.
Signs of a more competitive savings market are emerging, City regulator finds
14:06 , Daniel O'Boyle
Signs of a more competitive cash savings market have been emerging, with rates increasing and savers moving their money into higher-paying fixed-term deals, according to the City regulator.
The Financial Conduct Authority (FCA) said it has continued to see savers moving deposits out of easy-access accounts and into higher-paying fixed-term and notice accounts.
It wants firms to keep prompting customers in lower-paying accounts to move, and is encouraging savers to shop around.
US stocks to rise as Dow nears record
13:29 , Daniel O'Boyle
US stocks are set to climb slightly higher this morning, as the Dow Jones gets close to a new high.
Dow Jones futures are up 50 points at 36,239.00, while S&P 500 futures are up 11.25 points at 4,586.25. Nasdaq futures are up 42.75 points at 15,951.50.
FxPro senior market analyst Alex Kuptsikevich said: “The Dow Jones index has switched into consolidation mode, joining the S&P500 and Nasdaq100, which did so almost two and three weeks ago, respectively. This could be consolidation before a spurt to new highs, but it's more likely that we're seeing a depletion of growth.
“The Dow Jones index is trading just 0.8% away from its record close in December 2021 and 2% away from its all-time high, having added nearly 12% during the rally over the past five weeks. The rally has been so rapid that the RSI on the daily charts has exceeded 80, an extremely overbought zone. Sometimes, a move into this territory kicks off an even wilder rally, indicating extreme investor greed.
“But a different pattern of behaviour seems to have been chosen this time. The Dow Jones index slowly slid on Monday and Tuesday. The S&P500 and Nasdaq100, the broader equity indices, did not connect to the upside and continued to consolidate at recent tops.
“Equally important is the behaviour of the currency market, where the dollar has been adding since late November, which is usually a bearish factor for the market. And this is clearly visible in the dynamics of other indices. Dow Jones, contrary to simple logic, has accelerated its ascent these days”
Speculative office construction starts rise in central London, as developers bet on good future demand
13:04 , Daniel O'Boyle
Property developer confidence in central London's office market is looking solid, with new data showing speculative construction schemes are on the up.
As well as the latest research, a deal for a West End block completed in another sign that firms are looking optimistic about future occupier demand.
In 2023 to date firms have commenced construction on 51 schemes in central London with no guaranteed occupier in place, according to real estate consultancy Colliers. That is despite a challenging market.
Nearly 5m households to face even higher mortgage costs, says Bank of England
11:59 , Daniel O'Boyle
Almost five million UK homeowners are still set to see their mortgage repayments jump by hundreds of pounds over the next three years, as rising interest rates have heightened risks in the global financial markets, the Bank of England has said.
The Bank’s Financial Policy Committee (FPC) also found that British banks are strong enough to support households and businesses even if economic conditions get significantly worse.
About half of mortgage holders have moved to a new fixed-rate deal since interest rates started rising in late 2021, amounting to more than five million households.
But a further five million homeowners are still due to face higher borrowing costs by the end of 2026, the FPC said in its latest Financial Stability Report.
Morrisons and M&S used unlawful land deals to block rival shops, says watchdog
11:41 , Daniel O'Boyle
Morrisons and Marks & Spencer broke land use laws to stop rival supermarkets opening nearby stores, according to the competition watchdog.
The Competition and Markets Authority (CMA) said it has taken action against the retailers to address 65 unlawful agreements which restricted local competition.
This included 55 breaches by Morrisons and 10 breaches by M&S.
Morrisons told the regulator it is working to rectify the breaches swiftly.
Stagecoach Group revenue rises despite challenges in London
10:31 , Joanna Bourke
Britain's biggest bus and coach operator today cheered first half sales and profit growth, but showed trading in London has not been without challenges.
Stagecoach Group revenue rose to £773.2 million in the six months to October 28 from £669.6 million, and pre-tax profit jumped to £47.6 million from £24.6 million.
It was helped by growth in regional passenger demand, and revenue from regional bus operations increased by 15.1%
However, it added: “Similar to the experience of other operators, trading in our London bus operations has been challenging with the losses incurred in the period reflecting the impact of upward wage pressure and elevated levels of staff turnover and staff shortages.”
The company, which runs over 1500 vehicles in London, expects profitability to improve (in the capital) as “we address labour market challenges, benefit from lagged inflationary increases in contract revenues and seek to re-price contracts as they are tendered”.
Stagecoach has been led by Claire Miles since October.
Downgrade hits Diageo shares, FTSE 250 firms in dividend cheer
10:25 , Graeme Evans
Paragon Banking Group shares top the FTSE 250 index, up 10% or 49p to 540p after the buy-to-let lender posted underlying profits well ahead of City expectations at £277.6 million.
In addition to the annual results, Paragon is planning a further £50 million buyback of shares and 30.8% jump in dividend to 37.4p.
Redde Northgate shareholders also got a boost after the van hire and automotive services business hiked its half-year payout by 10.7% to 8.3p.
Shares rallied 21.5p to 381p as the 130,000-strong vehicle fleet owner lifted revenues by 30.9% to £911.3 million and forecast full-year earnings slightly ahead of City hopes.
Other big risers today included Baltic Classifieds, up 5p to 212.5p after the online portal bolstered its half-year dividend by 25%. The group reported a record number of advertisers as it upgraded guidance alongside operating profits 36% higher.
The gains by the trio helped the FTSE 250 index to improve 71.89 points to 18,559.42, in line with the FTSE 100's rise of 24.76 points to 7514.60.
Mining engineering services firm Weir was one of the best blue chips after it revealed a 20% operating margin target for 2026. Shares advanced 64.5p to 1929p, taking gains to 10% in the past month.
Guinness-to-Smirnoff drinks giant Diageo remained under pressure after last month’s profit warning.
Shares fell 31.5p to 2781p on UBS’s “sell” recommendation as analysts at the Swiss bank said they favoured Anheuser-Busch InBev and London-listed bottling firm Coca-Cola Hellenic, which cheered 29p to 2255p.
House building slump hurts UK construction sector
10:05 , Joanna Bourke
UK construction sector activity fell for the third consecutive month during November, with elevated borrowing costs and subdued demand for new housing projects impacting the industry.
The closely watched S&P Global/CIPS construction purchasing managers' index was 45.5 last month, down slightly from October.
Anything above 50 is growth. During the period housebuilding was the weakest performing sector while commercial building showed some resilience.
Tim Moore, economics director at S&P Global Market Intelligence, which compiles the survey said: "Residential construction activity has now decreased in each of the past 12 months and the latest reduction was still among the fastest seen since the global financial crisis in 2009.”
But he added that improving supply conditions were evident again in November, linked to rising raw material availability and spare capacity across the supply chain..
BAT slides 7%, Weir margin target boosts shares
08:44 , Graeme Evans
British American Tobacco shares have fallen 7% in the wake of the surprise move to write-down the value of its US brands by £25 billion.
The Lucky Strike maker slid 171p to 2316.5p, while rival Imperial Brands retreated 22p to 1841.5p.
Other blue-chip fallers included Diageo, which reversed 16.5p to 2796p after UBS switched the drinks giant to a “sell” recommendation.
The FTSE 100 index improved 29.55 points to 7519.39, with mining technology firm Weir one of the leading stocks after it revealed a 20% operating margin target for 2026. Shares advanced 69.5p to 1934p.
The FTSE 250 index added 100.39 points to 18,587.92, led by buy-to-let lender Paragon Banking as shares rose 9% or 45p to 536p following annual results.
The response to figures from automotive services business Redde Northgate and Baltic Classifieds was also favourable as they rose 5% and 3% respectively.
Building materials group Marshalls appoints next CEO
08:14 , Joanna Bourke
Building materials supplier Marshalls has said Matthew Pullen will become the group’s next chief executive from March 2024.
He will succeed Martyn Coffey in the top job role. The latter will remain available as an adviser to support the transition. Pullen was most recently COO of piping manufacturer Genuit Group.
Marshalls has faced challenging conditions in 2023. But Coffey said Pullen inherits "a business that is ready to resume growth when markets improve".
BAT faces £25 billion US impairment charge
07:42 , Daniel O'Boyle
British American Tobacco will write down the value of its US brands like Lucky Strike by a massive £25 billion as it transitions away from cigarettes and faces “macroeconomic headwinds” in the world’s largest economy.
The group has made an effort to transition to vapes as countries crack down on cigarettes. Last month, Rishi Sunak announced a plan to create a “smoke free generation” in the UK by raising the smoking age by one year every year.
But BAT now expects this transition in the US to lead to an eleven-figure impairment charge. BAT’s market cap is currently £55.69 billion. It said a failure to prevent the sale of illegal vapes was also hurting its business there.
Boss Tadeu Marocco, who took over from Jack Bowles earlier this year, said: “Consistent with our vision to 'Build a Smokeless World', and in combination with the current macro-economic headwinds impacting the U.S. combustibles industry, in 2023 we will take an accounting non-cash adjusting impairment charge of around £25bn.
“This accounting adjustment mainly relates to some of our acquired U.S. combustibles brands, as we now assess their carrying value and useful economic lives over an estimated period of 30 years. Accordingly, we will commence amortisation of the remaining value of our U.S. combustibles brands from January 2024.”
Tui weighs delisting from London Stock Exchange
07:39 , Simon Hunt
Travel giant Tui is considering delisting from the LSE to pursue a primarry listing in Frankfurt.
The firm said today: "In the past four years, the ownership of TUI AG’s shares and the liquidity on the exchanges has evolved significantly with a notable liquidity migration from UK to Germany.
"In light of the views expressed by shareholders and any further feedback from shareholders, the Executive Board is currently considering, if an Upgrade to a Prime Standard listing in Frankfurt with MDAX inclusion and a delisting from the London Stock Exchange would be in the best interest of shareholders."
Tui today posted revenues of 8.5 billion euros for the year to September, an increase of 11% on last year, while earnings more than doubled to just shy of 1 billion euros.
The travel firm said it expected a further sales rise of 10% and earnings increase of 25% for the year ahead.
Ten Entertainment to be sold for £287 million
07:31 , Simon Hunt
Bowling firm Ten Entertainment is set to be sold to a US private equity firm for just shy of £300 million.
The offer was made by Texas-based firm Trive and represents a 33% premium on yesterday's closing share price.
Ten Entertainment said: "Notwithstanding the opportunities to accelerate this growth, the TEG Directors are conscious of the need to be balanced against the uncertainties and risks that exist in the short and medium term. TEG is not immune to the highly unstable national and international political outlook together with a volatile economic backdrop, all of which have impacted UK economic conditions and UK consumer confidence as well as having led to significant inflation in certain input costs."
Apple shares rally, FTSE 100 seen higher
07:20 , Graeme Evans
Gains of 2% for Apple and Nvidia shares were the highlight of a dour Wall Street session, with the Nasdaq the only major benchmark in positive territory.
The S&P 500 index and Dow Jones Industrial Average were slightly lower as traders awaited Friday’s key jobs market report for clues on the outlook for US interest rates.
The FTSE 100 index mirrored the US performance with a decline of 0.3%, whereas Germany’s Dax index rose by 0.8% to close at a record high.
London’s lacklustre showing followed heavy selling of mining stocks, while oil majors have been impacted by the decline of Brent Crude to a five-month low of $77 a barrel.
The Hang Seng index, which fell by more than 2% following the downgrade of China’s credit rating by Moody’s, has recovered to stand 0.7% higher.
CMC Markets expects the FTSE 100 to open today’s session up 25 points at 7514.
Recap: Yesterday's top stories
Tuesday 5 December 2023 22:48 , Simon Hunt
Good morning. Here's a summary of our top headlines from yesterday:
On The Beach wins £2 million legal case over cancelled Ryanair flights. Says it is "engaging with Government and regulators on the market power of airlines"
Pub and bar groups today looked to be in line for bumper Christmas party trade in London, but £500 million could be knocked off total spend across the capital's hospitality sector as train strikes cause disruption, according to a new forecast.
Thames Water: London’s heavily indebted 15 million customer tap water provider reports half-year earnings of £627 million, up over a fifth from revenue of £1.2 billion, up 11%, but debt nears £15 billion and there were reports this week that what it said was new equity funding from a shareholder was actually a loan.
Video game maker tinybuild says it will run out of cash if it can't get new funding by end of January, aftering being hit by combination of poor sales and two legal settlements
Moonpig uses AI to upsell gifts to personalised greetings card to its 4 million customers, helping it take revenue over £150 million, up almost 7% to £152.1m and profits of £89 million, up over 15%