London midday: Stocks stay down; Rolls-Royce, easyJet buck trend

The FTSE 100 was down 0.4% at 7,430.74.

Russ Mould, investment director at AJ Bell, said: “Markets are going through a one step forward, one step back motion at present, struggling to sustain a proper breakout despite investors increasingly taking the view that central banks are done with raising interest rates in the current cycle.

“The problem is that representatives of major central banks don’t want to draw a definitive line in the sand. We keep getting little comments that suggest their work to tame inflation is not finished. The latest example came from ECB President Christine Lagarde who yesterday said that the fight to contain price growth is not yet done. Every time we get such comments, investors lose confidence and equities take a small step back.

“Following a lacklustre session on Wall Street last night, Asian and European equities struggled to find direction on Tuesday.”

Figures out earlier showed that shop price inflation dropped to its lowest in 17 months in November, as retailers stepped up discounting ahead of the key festive shopping season.

The year-on-year growth in retail prices eased to 4.3% this month, down from 5.2% in October, according to the closely watched Shop Price Index put together by the British Retail Consortium (BRC) and Nielsen.

This was below the three-month average of 5.3% and the lowest rate of annual growth since June 2022.

Food inflation slowed to 7.8% from 8.8%, particularly for dairy products, due to lower domestic energy prices reducing overall input costs. Non-food inflation fell to 2.5% from 3.4%.

Over the month of November, prices were flat, slowing from the 0.3% month-on-month growth in October.

“Shop price inflation eased for the sixth month in a row as retailers competed fiercely to bring prices down for customers ahead of Christmas,” said Helen Dickinson, chief executive of the BRC.

“Retailers are committed to delivering an affordable Christmas for their customers. They face new headwinds in 2024 – from government-imposed increases in business rates bills, to the hidden costs of complying with new regulations. Combining these with the biggest rise to the National Living Wage on record will likely stall or even reverse progress made thus far on bringing down inflation, particularly in food.”

In equity markets, Rolls-Royce (LON:RR) surged as it set out its medium-term targets ahead of a capital markets day. The engine maker said it plans to deliver operating profit of £2.5bn to £2.8bn, operating margin of 13% to 15%, free cashflow of between £2.8bn and £3.1bn and a return on capital of 16% to 18%.

Budget airline easyJet (LON:EZJ) flew higher as it said it swung to a profit in its annual results after a record second-half financial performance. It also delivered a positive outlook for the year ahead and reinstated its dividend.

Pets at Home gained up after it backed its full-year guidance as it posted a jump in interim revenues, although profits fell as it continued to invest in its new digital platform and moved to a new distribution centre.

IT infrastructure technology and services provider Softcat (LON:SCTS) rose as it reported a robust first-quarter performance, achieving double-digit gross profit growth driven by strong demand.

Barclays (LON:BARC) was in focus following a Financial Times report the bank is exploring a plan to drop thousands of clients at its investment bank as part of a strategic overhaul that is meant to boost profits and cut £1bn of costs.

Digital 9 Infrastructure (LON:DGI9) tumbled as it said it was launching a strategic review after agreeing to sell its entire stake in Verne Global for up to $575m (£456m).

In broker note action, Mike Ashley’s Frasers Group (LON:FRAS) was started at ‘overweight’ at Barclays. The bank said Frasers is overlooked by many investors, given a low free float and eclectic operations.

M&G was initiated at ‘buy’ by Goldman Sachs (NYSE:GS), which said the shares are attractively valued, while Lloyds was upgraded to ‘overweight’ at Morgan Stanley (NYSE:MS).

Man Group fell after Morgan Stanley cut its stance on the shares to ‘equalweight’.

Market Movers

FTSE 100 (UKX) 7,430.74 -0.40%

FTSE 250 (MCX) 18,322.20 -0.63%

techMARK (TASX) 4,069.47 -0.59%

FTSE 100 – Risers

Rolls-Royce Holdings (RR.) 259.50p 6.70%

Smurfit Kappa Group (CDI) (LON:SKG) 2,792.00p 3.18%

Mondi (LON:MNDI) 1,365.50p 0.92%

Smith (DS) (SMDS) 282.90p 0.82%

Lloyds Banking Group (LON:LLOY) 42.32p 0.63%

International Consolidated Airlines Group (LON:ICAG) SA (CDI) (IAG) 151.70p 0.56%

B&M European Value Retail S.A. (DI) (BME) 553.40p 0.47%

Sage Group (LON:SGE) 1,124.00p 0.45%

National Grid (LON:NG.) 1,018.50p 0.39%

Shell (LON:RDSa) (SHEL) 2,580.50p 0.39%

FTSE 100 – Fallers

Pearson (LON:PSON) 932.80p -3.80%

Burberry Group (LON:BRBY) 1,462.00p -2.79%

Entain (LON:ENT) 829.60p -2.65%

Land Securities Group (LAND (LON:LAND)) 617.40p -2.19%

Ocado Group (LON:OCDO) 562.20p -2.16%

Rightmove (RMV) 522.20p -2.14%

Rentokil Initial (LON:RTO) 439.70p -2.01%

SEGRO (SGRO) 803.20p -1.93%

Prudential (LON:PRU) 891.60p -1.89%

Unite Group (LON:UTG) 962.00p -1.79%

FTSE 250 – Risers

easyJet (EZJ) 416.90p 2.94%

Pets at Home Group (PETS) 293.80p 2.30%

Templeton Emerging Markets Inv Trust (TEM) 151.00p 1.62%

Jlen Environmental Assets Group Limited NPV (JLEN) 97.00p 1.57%

Hilton Food Group (HFG) 719.00p 1.55%

NextEnergy Solar Fund Limited Red (LON:NESF) 86.55p 1.47%

Aston Martin Lagonda Global Holdings (AML) 238.20p 1.45%

Mobico Group (MCG) 67.15p 1.21%

Apax Global Alpha Limited (APAX) 152.00p 1.20%

W.A.G Payment Solutions (WPS) 92.00p 1.10%

FTSE 250 – Fallers

Digital 9 Infrastructure NPV (DGI9) 37.75p -12.21%

Man Group (EMG) 209.10p -3.77%

IP Group (LON:IPO) 50.70p -3.61%

Darktrace (LON:DARK) 346.40p -3.54%

Great Portland Estates (GPE) 379.40p -3.12%

Safestore Holdings (SAFE) 754.00p -2.90%

International Distributions Services (IDS) 243.70p -2.68%

LXI Reit (LXI) 94.80p -2.67%

Grainger (GRI) 256.60p -2.58%

Tyman (TYMN) 267.00p -2.55%