Our head of investment rounds up the morning's big news.
European markets have opened higher with the DAX in Germany outperforming up by more than 1%. The FTSE 100 logged a fresh intraday high amid a busy day for European corporate earnings with Credit Suisse (SIX:CSGN) and Unilever (LSE:ULVR) in focus.
Later this morning Bank of England monetary policymakers, including governor Andrew Bailey, will face questions from the Treasury Committee amid concerns about UK inflation, which is stuck sharply above the central bank’s 2% target.
Precious metals are staging gains with silver, gold and platinum trading higher. Gold is up for the fourth straight session despite risk-on sentiment, lifted by weakness for the US dollar against most major currencies.
UK RICS HOUSE PRICES
The Royal Institution of Chartered Surveyors (RICS) house price balance fell to -47 from -42 in December. The data fell to the lowest level since April 2009 as potential buyers hold off amid expectations that property prices will cool further this year and borrowing rates will ease.
While house prices look set to fall this year, a chronic shortage of supply and an improving view on the outlook for the UK economy look set to prevent a more painful slide. With the Bank of England approaching the peak for interest rates and mortgage lenders having to price competitively amid the drop in demand, there could be a pick-up in borrowing later this year, particularly if inflationary pressures on the cost-of-living continue to ease.
Shares in Entain (LSE:ENT) are trading at the bottom of the FTSE 100, down by more than 12% after MGM Resorts CEO Bill Hornbuckle said the company is no longer looking to acquire the UK sports betting and gaming group. In January 2021, Entain refused an £8.1 billion takeover approach arguing the price was too low. But M&A speculation has buoyed its share price lately with today’s share price drop wiping out most of its year-to-date gains. Last week Entain raised its full-year profit outlook, having benefited from increased demand for betting around the FIFA World Cup. Over a one-year period, shares in Entain are down by more than 10%.
Standard Chartered (LSE:STAN) has surged to the top of the FTSE 100 on a report from Bloomberg that First Abu Dhabi bank is considering a $35 billion offer for the British lender. This is an extension of recent M&A speculation that has helped spur StanChart’s outperformance over the last year.
International businesses and investors have been looking towards the UK market over the last year as an attractive geography in the search for potential takeover targets, given the depreciation of the pound since the May 2021 peak and the corresponding increased attractiveness of sterling-priced valuations. The recent revival of the pound could spur investors to move quickly as valuations become richer again.
StanChart shares are up 15% year-to-date and have rallied by more than 30% over a one-year period.
AstraZeneca (LSE:AZN) reported fourth-quarter revenue of $11.2 billion, just below expectations for sales of $11.3 billion with key oncology drug sales missing consensus estimates. However, adjusted profit hit 1.38 cents a share, ahead of forecasts for 1.34 cents a share. AstraZeneca said China is expected to return to growth and increase by a low single-digit percentage in 2023.
While AstraZeneca delivered a beat on the bottom line, it missed on the top line amid a disappointing performance across some of its key medicines. Plus it suffered with the decline in Covid-19 vaccine Vaxzevira sales as the pandemic shifts into the rear-view mirror. However, the pharma giant has a strong pipeline ahead with a record 34 approvals in 2022 and plans to initiate more than 30 phase III trials this year. China’s economic reopening and the removal of Beijing’s zero-tolerance approach to Covid looks set to provide a tailwind to AstraZeneca’s revenue from the world’s second-largest economy.
As a defensive play, shares look relatively well positioned to navigate the challenging macroeconomic backdrop of lingering inflation and sluggish growth. The stock has logged a strong performance over the last year, up by over 30% but has struggled so far in 2023 amid the revival of risk appetite and the bounce back for growth stocks. The stock is regaining some ground this morning amid the relatively upbeat report.
Redrow (LSE:RDW) reported half-year pre tax profit of £198 million on revenues of £1.03 billion, both falling year-on-year, while its total order book and net cash levels also declined. The UK housebuilders maintained its dividend at 10p per share but announced plans to withdraw its guidance for 2024 amid the economic and political uncertainty and the recent change in market conditions. Looking ahead, Redrow said it has been experiencing a positive start to second-half trading but warned that 2023 will be a challenging year as the market resets.
After a torrid year for UK housebuilders in 2022 with shares in the sector weighed down by rising interest rates, sky-high inflation, the turmoil around the mini-budget and slowing economic growth, Redrow and its peer have enjoyed an impressive start to 2023 as investors increasingly look ahead to the prospect that the rate-hiking cycle could be approaching its peak and hopes that mortgage lending and property demand could pick up later in the year. However, Redrow shares are under pressure today weighed down by the uncertain outlook after guidance was removed and its declines on the top and bottom lines.
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