FTSE 100 Live: Blue-chips shine lifted by US tech euphoria

• FTSE 100 closes up 42 points at 7,528
• Ofcom proposes cuts to Royal Mail delivery days
• Abrdn to cut 500 jobs, reports funds outflow

4:40pm: FTSE 100 closes near best levels for the day

The FTSE 100 has closed near best levels for the day, up 41.94 points, 0.6%, at 7,527.67 and the FTSDE 250 closed up 179.06 points, 0.9%, at 19,171.68. 

3:57pm: Bank of Canada holds interest rates steady

The Bank of Canada left its benchmark interest rate unchanged on Wednesday, as expected, but said it is "concerned" about stubborn inflation.

The central bank maintained its overnight rate at 5.00%, bank rate at 5.25% and the deposit rate at 5.00%.

The BoC said it expects Canada's inflation to "remain close" to 3% during the first half of this year, before returning to the 2% target in 2025.

"While the slowdown in demand is reducing price pressures in a broader number of CPI components and corporate pricing behaviour continues to normalize, core measures of inflation are not showing sustained declines," the BoC said.

"Given the outlook, governing council decided to hold the policy rate at 5% and to continue to normalize the bank's balance sheet.

3:16pm: US business activity hits 7-month high

Also supporting US stocks on Wednesday, news that American companies are growing their output at the fastest rate for seven months, according to figures just released.

S&P Global's Flash composite US PMI has risen to 52.3, from 50.9 in December, showing faster growth, with the growth driven by the services sector.

The service sector business activity index reached 52.9 in January, a seven-month high, up from 51.4 in December while the manufacturing PMI hit 50.3 in January, a 15-month high, up from 47.9 in December.

Nice lift to US services activity in January linked to looser financial conditions... pic.twitter.com/tbyKSLkBZx

— Chris Williamson (@WilliamsonChris) January 24, 2024

S&P Global said: "Businesses in the US signalled a stronger upturn in activity at the start of the year, as output growth quickened to the sharpest rate in seven months."

"The expansion was driven by service providers, as manufacturers continued to see a drop in production amid intensifying supply issues."

"The report also shows that the prices charged by firms are rising at the slowest rate since May 2020, which may show that inflationary pressures are easing.". 

2:48pm: S&P 500 hits new high as US stocks motor

Stocks in New York jumped on Wednesday - with the S&P 500 hitting a fresh intra-day high - spurred by further gains in technology issues following better-than-expected results from Netflix

Shortly after the opening bell, the Dow Jones Industrial Average was up 111.72 points, 0.3%, at 38,017.17, the S&P 500 was up 24.57 points, 0.5%, at 4,889.17 and the Nasdaq Composite was up 115.71 points, 0.8%, at 15,541.65. 

Netflix shares surged nearly 12% after the streamer said it added more than 13 million subscribers in the fourth quarter, bringing its total subscriber count to an all-time high of 260.8 million.

Revenue also topped analysts’ estimates, as did current-quarter earnings guidance.

Bank of America was among those impressed, raising its price target to $650 from $585.

Plenty of six-handles this am. $NFLX https://t.co/8VvcXJ0yIA

— Carl Quintanilla (@carlquintanilla) January 24, 2024

Away from Netflix, AT&T slipped 2.4% on lower-than-expected earnings while Dupont slipped 12.2% after pre-announcing weak fourth-quarter results and issuing disappointing first-quarter guidance.

eBay is 2.4% higher on its job cut plans.

2:28pm: PM reiterates commitment to 6-day postal delivery service

Prime Minister Rishi Sunak told MPs he is committed to Royal Mail’s universal service obligation “remains as it is”, after Ofcom suggested the six-days-a-week letter delivery requirement could be cut to five, or even three days.

Asked at Prime Minister’s Questions in the Commons if under his watch there will be no reductions in postal services provided by Royal Mail, Sunak said: "I agree about the importance of the Royal Mail’s universal service obligation, and as you will have heard from the minister this morning, we remain absolutely committed to ensuring that it remains as it is.”

2:16pm: Metro Bank’s billionaire majority shareholder joins board

Metro Bank’s white knight investor – the Columbian billionaire who helped rescue the bank in early October – has clinched a seat on the lender’s board. 

Metro said on Wednesday that Jaime Gilinski Bacal would become a non-executive director, months after ploughing £100 million of emergency funds into the lender in exchange a 53% stake.

Metro Bank’s chair, Robert Sharpe, said: “Jaime’s appointment underscores the commitment he has long shown to the bank as a supportive, long-term shareholder.” 

He brings decades of banking expertise and experience which will prove invaluable on the next stage of the bank’s journey.”

Shares in Metro Bank rose 1.3% to 36.67p.

1:30pm: Here are some of today's risers and fallers

System1 Group (AIM:SYS1) PLC climbed 23% on Wednesday as the marketing firm said recent deals with the likes of Tesco, Pfizer and M&S meant full-year expectations would be smashed. 

Some 60 new clients signed with AIM-listed System1 over the third quarter, including Pfizer, M&S, Tesco, easyJet, Toyota, Muller, B&Q, and Just Eat, taking the number to over 200 for the year so far, the company updated on Wednesday.

Flutter Entertainment PLC (LSE:FLTR) gained 2.1% after Citi upgraded the betting firm’s target price for by £10 a share to £180 ahead of its listing in New York next week. 

Following Flutter's 17% share price rally post its fourth-quarter trading update for 2023, the investment bank's analysts delved into the company's prospects, and specifically its ownership of the fast-expanding FanDual sports book operation.

Revolution Bars Group PLC dropped more than 22% after it lowered profit guidance due to weaker trading and additional headwinds expected in the second half of the financial year.

Underlying earnings for the full year are expected to be between £3 million and £3.5 million, the group said in its trading update for the first half to 30 December 2023.

And finally, Share in ZOO Digital Group Plc (AIM:ZOO) fell 27% as the entertainment media services firm warned full-year losses would be worse than feared following delivery delays in the fourth quarter.

1:04pm: Sainsbury's strategy update a "potential positive catalyst"

Barclays thinks Sainsbury’s Strategy Update on February 7 is a potential positive catalyst.

This reflects expectations for a share buyback, potential margin guidance and clarity on growth opportunities. 

“Although our feeling is that the market does at least partially anticipate the possibility of share buybacks beginning, we think there is scope for Sainsbury to make a more definitive statement about the profit growth opportunity than the market expects.” 

“Consequently, we do see the February event as a potential share price catalyst.”

The bank thinks Sainsbury will be keen to emphasise opportunities to build on its strong momentum. 

Potential opportunities include sales growth, cost savings, Argos and alternative revenue streams (eg retail media, real estate and financial services). 

Barclays thinks it is possible that Sainsbury might feel sufficiently confident to issue some specific margin guidance - something it has not done for quite some time - given: i) commentary on price investment; ii) commentary on cost savings; and iii) low margins by historical standards. 

Sainsbury has also confirmed it will address capital allocation and Barclays expects the food retailer to announce an intention to begin a share buyback. 

“We think Sainsbury can afford to spend £200-300 million per annum on share buybacks,” Barclays said.

12:35pm: Manufacturing downturn shows no signs of abating

Samuel Tombs at Pantheon Macroeconomics notes the CBI survey shows the downturn in the manufacturing sector is showing no signs of abating, even though the wider economy is beginning to strengthen. 

He pointed out that the total orders balance is not seasonally adjusted and usually falls sharply at the start of the year. 

Nonetheless, his seasonally adjusted version of the orders balance dropped to -28 in January, from -26 in December, taking it further below its 2015-to-19 average, -3.

He noted stocks of finished goods also are accumulating rapidly, putting further downward pressure on production. 

“While some manufacturers might seek to hold higher-than-usual levels of inventory over the coming months due to concerns about the dependability of shipping lanes, we think that most of the recent increase in stocks is involuntary,” he added. 

In addition, Tombs pointed out the quarterly net balance of manufacturers planning to invest more in plant and machinery fell again to -15 in January - the lowest level since Q1 2021 - from -11 in October. 

“This year, therefore, looks set to see a further erosion of the UK’s meagre manufacturing base,” he concluded.

12:03pm: US stocks expected to open higher after Netflix boost

Stocks in New York are set to rise again, led by tech issues, after strong results from Netflix gave the market another shot in the arm.

In pre-market trading, futures for the Dow Jones Industrial Average were up 0.2%, while those for the S&P 500 rose 0.4% and contracts for the Nasdaq 100 futures climbed 0.7%.

Netflix jumped 8.7% in after hours trading as its revenue and new subscriptions topped estimates. 

Ipek Ozkardeskaya at Swissquote Bank noted more than 13 million people decided that Netflix was worth paying for, and the number of total paid subscribers rose past 260 million. 

“The password sharing ban has been a boon for the company,” she noted, adding “the only thing they regret is not having thought about it before.”

Wednesday sees another batch of earnings hit the wires with one of the ‘Magnificent Seven,’ Tesla, reporting after the market close.

Elsewhere, AT&T is down 1.9% in pre-market trading despite swinging back to a profit in 2023. 

The company said it surpassed its full-year guidance for adjusted Ebitda, mobility service and broadband revenue growth as well as its previously increased guidance for free cash flow.

eBay is up 4.1% after saying it will slash 1,000 jobs, as the online marketplace's costs have "outpaced" its growth.

San Jose, California-based eBay said it estimates that roughly 9% of its full-time workforce will be axed.

"Additionally, we plan to scale back the number of contracts we have within our alternate workforce over the coming months," it added.

Chief Executive Officer Jamie Iannone said: "Our strategy is the right one, but there is more we can do to ensure our success. We need to better organize our teams for speed - allowing us to be more nimble, bring like-work together, and help us make decisions more quickly. 

11:38am: Manufacturing hit by fresh drop in orders - CBI

As with the PMI report earlier, the outlook for British manufacturers is not so bright.

Firms have been hit with a fresh drop in orders and have scaled back their investment plans, according to new figures from the CBI.

The CBI’s industrial trends survey shows a contraction in orders with its quarterly order book balance dropping to negative 13 in the three months to January, its lowest since July 2020.

The survey also shows firms expect to cut back on investment in tangible assets such as buildings, machinery and equipment.

The latest CBI Industrial Trends Survey found that output volumes fell in the quarter to January, after being unchanged in the three months to December. Firms expect volumes to return to growth in the next three months. #ITS pic.twitter.com/xEW2LIzKza

— CBI Economics (@CBI_Economics) January 24, 2024

Anna Leach, CBI deputy chief economist said: “Conditions in the manufacturing sector deteriorated unexpectedly at the start of the year, with output falling and order books at their weakest since the depths of the COVID-19 pandemic.” 

“Uncertainty about demand looks set to weigh on investment in the year ahead,” she added.

The Red Sea disruptions were highlighted with firms facing “potential disruption to their global supply chains” while concerns that access to materials and components could limit output in the quarter ahead remain elevated relative to the long-run average. 

“This is likely to push up the price of some imported inputs at a time when firms are still absorbing the costs of higher energy bills and a still tight labour market,” Leach added.

11:02am: Sticky inflation remains a concern for BoE

Reflecting on today's data, ING’s James Smith notes that unlike the eurozone, the UK's service sector is picking up steam. 

But “the issue for the Bank of England is that inflation is also proving sticky, and the PMI highlights the disruption in the Red Sea.” 

He thinks today's data adds to the case for the Bank of England to wait a little longer before cutting rates. 

“We expect a cut in August,” he said.

Ashley Webb at Capital Economics agreed sticky inflation remains a concern.

“Despite the economy stagnating, the stickiness of price pressures gives us a bit less confidence that services CPI inflation will return to its long-run average of 3.5% towards the end of this year,” he said. 

He thinks these data “will add to the Bank of England’s unease about inflation persistence,” and as a result, the Bank will probably continue to push back against the prospect of near-term interest rate cuts next week.

Nonetheless, Webb said the figures supports “our view that GDP growth has picked up a little bit in recent months, but the big picture is that it remains subdued.”

10:33am: Haleon's top-line could disappoint, JPMorgan thinks

While the miners race ahead, on the other side of the ledger Haleon is the top faller in the blue-chip index, down 1.9%.

JPMorgan reckons the top-line at consumer products outfit, spun out of GSK, could disappoint as the tailwinds that boosted its over-the-counter divisions abate.

The investment bank thinks volumes will remain pressured (JPM estimates a 2% frop in the fourth quarter compared) compared to sequential improvement for peers.

This should reflect the unravelling of Covid-led tailwinds and a muted performance in the rest of the business.

JPM has lowered financial 2023 EPS forecasts by 1% on "lower top-line and FX hit" leading to a slightly lower margin expectation of 22.7% (vs 22.8% before) and financial 2024 EPS by c1% on lower top-line and margin.

It has also cut its December 2025 discounted cash flow derived target price to 290p from 295p and retains an 'underweight' rating.

It expects around 2%/7% EPS growth in financial 2024/25, leaving it 6%/8% below consensus.

JPM placed Haleon on 'Negative Catalyst Watch' on November 29.

10:15am: easyJet well placed despite headwinds

easyJet is 4.0% to the good after its upbeat trading statement.

Richard Hunter, head of markets at interactive investor, said: “Underlying progress at easyJet remains strong, despite a marginal impact arising from the Middle East conflict.”

“The group had previously reported that the general nervousness which prevented some passengers from flying due to the conflict would be short-lived, and indeed it was with a strong pick-up in demand from November.” 

The quarter saw group revenues increase by 22%, which included 20% growth in ancillary income. 

“Indeed, the group has seen a true profitable benefit from ancillary revenues which continue to boost revenues, and which include the likes of customer payments for personally allocated seats, baggage and food,” Hunter noted.

He pointed out revenue was also boosted by a strong contribution from easyJet holidays, “which has all but come from a recent standing start to now represent 10% of group revenues.”

He thinks the launch of the holidays unit seems to have come at the right time, “with cost-conscious consumers searching for value packages.”

The other key metrics also showed a positive direction of travel for the most part, with revenue per seat increasing by 3% year-on-year and with costs per seat decreasing by 3%, excluding fuel, Hunter added. 

“Headwinds will continue to present themselves but for the moment easyJet seems well placed,” Hunter reckons.

9:54am: Private sector picks up but Red Sea disruption sees costs rise

The recovery in private sector output gained momentum in January, figures Wednesday showed.

But the Red Sea crisis hit manufacturing supply chains and pushed up input costs, the survey from S&P Global reported.

Chris Williamson, chief business Economist at S&P Global Market Intelligence said: “The survey data point to the economy growing at a quarterly rate of 0.2% after a flat fourth quarter, therefore skirting recession and showing signs of renewed momentum.”

???? flash UK #PMI composite output index (manufacturing and services) rose again in January to 52.5 (December 52.1), a 7-month high... ????

Touch and go whether the UK avoided a technical '#recession' in the second half of last year, but 2024 already looking a lot brighter ???? pic.twitter.com/EnvRB4oDHK

— Julian Jessop (@julianHjessop) January 24, 2024

The headline seasonally adjusted S&P Global Flash UK PMI composite output Index registered 52.5 in January, up from 52.1 in December, the strongest rate of output growth since June 2023. 

The index has picked up in each month since hitting an eight-month low last September of 48.5.

The flash UK Services PMI business activity index hit 53.8 in January, an eight-month high, while the flash manufacturing PMI at 47.3 was a nine-month high. 

Manufacturing supply chains were impacted by longer wait times for container freight during January in the wake of the Red Sea crisis. 

Latest data pointed to the steepest lengthening of vendor delivery times since September 2022, S&P said.

Rising ocean freight rates contributed to a solid increase in cost burdens across the manufacturing sector in January, with the rate of inflation the highest since March 2023.

9:13am: ASML, Netflix add to buoyant mood

European markets are receiving a boost from positive earnings from ASML and Netflix which are likely to keep the rally in tech stocks running.

In Amsterdam, chipmaking equipment manufacturer ASML is up 6.2% after reporting record profits in its fourth quarter reflecting rising global demand.

The Dutch company posted quarterly net income of €2.05 billion. 

Sales of deep ultraviolet lithography equipment rose 60% while those of more advanced extreme ultraviolet lithography equipment grew 30%.

Morgan Stanley (NYSE:MS) highlighted that ASML reported €9.2 billion bookings, well ahead its estimates (€3.7 billion; cons c.€3.1billion) and backlog has reached €39 billion.

It noted €5.6 billion of bookings “coming from EUV (both Low and High NA) and strength seen across memory and logic therein As such the company maintains that FY 25 will be a significant growth year. Gross margin guide also unchanged. “

In the US, Netflix leapt 8.7% in after hours trading after reporting 13.1 million net subscriber adds in the fourth quarter - which was a record for the period.

The streaming service said in the quarter that ended on December 31, revenue rose 13% to $8.83 billion from $7.85 billion the year prior while net income jumped to $938 million from just $55 million before.

Revenue was $0.1 billion above its October forecast due to favourable forex movement and stronger than anticipated membership growth.

Fourth quarter operating margin more than doubled to 16.9% from 7.0% the year before, taking it to 21% in 2023. 

This was up from 18% in 2022, and ahead of the company's 20% target.

Global paid streaming memberships rose around 13% to 260.28 million from 230.75 million the year before, with 13.12 million net adds in the quarter - its largest fourth quarter ever.

8:38am: Six-day postal service "sacrosanct" says Minister

Shares in IDS, the owner of Royal Mail, are up 3.2% but analysts remain sceptical that changes to delivery days will get through Parliament.

That scepticism was reflected in comments from Postal Affairs Minister Kevin Hollinrake who said that the Government was committed to a six-day service from the Royal Mail.

Speaking after the Ofcom proposals were announced Hollinrake told Times Radio: “The Prime Minister [has] been very clear on this, six-day delivery is really important for many people in this country, many of our citizens, but also for many of our businesses.”

He was even clearer on the BBC, describing the 6-day service as “sacrosanct.”

'A six day service is really important... Saturday deliveries are sacrosanct'

Post Office Minister Kevin Hollinrake spoke to #BBCBreakfast after a consultation was launched into Royal Mail which could reduce the number of letter deliveries per weekhttps://t.co/ZQirTB8I67 pic.twitter.com/XWWOXOsREI

— BBC Breakfast (@BBCBreakfast) January 24, 2024

Liberum’s Gerald Khoo suggested the political incentives for approving changes are asymmetric and “skewed entirely to the downside.” 

“The government has rebuffed previous requests to reduce deliveries to five days per week, and we see no upside to any government to approving changes until the status quo is imminently untenable,” he said.

Peel Hunt noted the plans would require parliamentary approval, “and unhelpfully, Downing Street indicated it would not support them.”

8:15am: FTSE 100 jumps on China rate cut pledge

The FTSE 100 opened sharply higher on Wednesday after People’s Bank of China Governor Pan Gongsheng said the country will cut the reserve requirement ratio for banks in early February.

At 8:15am, London’s blue-chip index was up 35.53 points, 0.5%, at 7,521.26 while the FTSE 250 was up 88.07 points, 0.5%, at 19,080.69. 

The move saw the Hang Seng soar 3.5% in late trading as well as boosting European equities.

Gongsheng said the cut will unleash more money and help the economy.

A 0.5 percentage-point cut to the ratio, the amount of cash that banks have to keep in reserve, will provide 1 trillion yuan ($139 billion) in long-term liquidity to the market, Pan said during a briefing with the press.

Asia-focused bank, Standard Chartered rose 2.1%, while insurer Prudential climbed 1.7%.

Miners also soared on hopes the move will boost demand for commodities from the world’s second largest economy.

Anglo American rose 4.5%, Antofagasta advanced 2.7% and Glencore gained 2.5%. 

Elsewhere, easyJet leapt 4.6% after an upbeat trading statement despite taking a £40 million hit from the conflict in the Middle East.

IDS PLC, the owner of Royal Mail, rose 1.0% after Ofcom’s proposals to reform postal services which could see delivery days drop to 5, or even 3.

Abrdn is 0.9% lower after announcing 500 job cuts as part of a £150 million cost-cutting drive and reporting a fund outflow in the second half of 2023.

7:51am: Royal Mail delivery days could fall to 5, or even 3, says Ofcom

Ofcom has said the Royal Mail could reduce letter delivery days in the service from six to five or even three, in proposals aimed at modernising the postal service. 

The regulator said the universal postal service risks becoming unsustainable as people send fewer letters and receive more parcels, meaning reform is necessary to secure its long-term future.

“Given the significant cost to Royal Mail of delivering the universal service there is an increasing risk it will become financially and operationally unsustainable in the long term,” it said.

Ofcom laid out two primary options: making changes to existing First and Second Class and business products so that most letters are delivered through a service taking up to three days or longer, with a next-day service still available for any urgent letters; and reducing the number of letter delivery days in the service from six to five or three. 

Under any scenario, Royal Mail must modernise its network, become more efficient and improve its service levels, Ofcom said.

It estimated Royal Mail could achieve a net cost saving of £100-£200 million if letter deliveries were reduced to five days; and £400-£650 million if reduced to three days. 

If the large majority of letters were delivered within three days, it could achieve net cost savings of £150-£650 million, Ofcom said.

Downgrading delivery targets is not an option for reform, it added.

IDS, the owner of Royal Mail, has seen its share price rally ahead of the announcement, so let's see what the City makes of it.

7:37am: easyJet loss narrows but takes £40 million hit from Middle East

easyJet PLC reported a narrowed first quarter loss despite taking a £40 million from the Middle East conflict.

The budget airline said its performance has improved year on year, with booking trends giving a positive outlook for the remainder of the financial year. 

Underlying trends in the quarter were strong, although headline results were impacted by the conflict in the Middle East.

The conflict had short term impacts from a pause in flights to Israel and Jordan and a temporary slowdown in flight bookings for the wider industry.

But it said demand and bookings have recovered strongly from late November. while easyJet holidays had another strong quarter, with customer numbers increasing by 48% compared to the same period last year, and a profit of £30 million, a 131% increase year-on-year.

The headline loss in the quarter narrowed to £126 million from £133 million before with passenger growth of 14% and a revenue per seat increase of 3%.

easyJet said it remained on track to deliver disciplined capacity growth of c.9% in financial 2024 with a positive outlook for the summer.

Bookings are strong with seats sold and yield ahead year-on-year with second half revenue per seat well ahead.

easyJet holidays continues to expect >35% customer growth year-on-year in financial 2024. 

7:35am: Abrdn axes 500 job cuts as part of £150m cost-cutting drive

abrdn PLC has confirmed reports that is cutting 500 jobs as part of a transformation programme designed to reduce costs by £150 million per year.

The fund manager said the programme is designed to restore “our core Investments business to an acceptable level of profitability and allow for incremental reinvestment into growth areas.”

Chief Executive Stephen Bird said: “Market conditions have remained challenging for our mix of business, and this is reflected in our year-end AUMA, flow numbers, and margins.” 

Assets under management fell to £494.9 billion in the second half of 2023 from £495.7 million in the first half of the year with net outflows rising to £12.4 billion during the period.

For the group overall, the firm expects 2023 adjusted operating profit to be broadly in-line with consensus, and adjusted capital generation to be above consensus, owing to higher interest income on the group's cash balances.

The company said the cost cuts would come mostly from group functions and support services and largely be implemented in 2024, completing in 2025. 

Around £60 million of the benefit will be seen in 2024, the firm said.

7:00am: Stocks called higher ahead of PMI

The FTSE 100 is expected to post modest gains when trading starts on Wednesday ahead of PMI data  and as the US earnings season rolls on.

Spread beting companies are calling London's blue-chips up by around 28 points after closing down 1.98 points at 7,485.73 on Tuesday.

In the US on Tuesday, Wall Street ended mixed, with the Dow Jones Industrial Average down 0.3%, the S&P 500 up 0.3% and the Nasdaq Composite up 0.4%.

After the market closed, Netflix jumped 8.7%. 

The streaming service reported strong growth in its quarterly revenue, an operating margin ahead of forecast and a record jump in subscriber numbers. Despite recent price hikes,

Netflix said global paid streaming memberships rose around 13% to 260.28 million from 230.75 million the year before, with 13.12 million net adds in the quarter - its largest fourth quarter ever.

"Last night's positive finish in the US looks set to see markets in Europe open higher again today, though we could well struggle to hang onto the gains if recent experience is any guide," commented CMC Markets UK chief market analyst Michael Hewson.

In London, the early focus will be updates from Fresnillo, JD Wetherspoon, easyJet while abrdn is reported to be set to announce job cuts alongside a trading update.

After London's close results from Tesla will be revealed.