A calamitous 24 hours for the premiership of Liz Truss unsettled markets early Thursday, with both stock prices in London and the pound lower.
The FTSE 100 index opened down 6.04 points, 0.1%, at 6,918.95. The FTSE 250 opened down 56.08 points, 0.3%, at 17,191.47, and the AIM All-Share opened down 3.54 points, 0.5%, at 782.43.
The Cboe UK 100 opened down 0.3% at 690.74, the Cboe UK 250 opened down 0.6% at 14,722.87, and the Cboe Small Companies opened down 0.3 at 12,328.69.
UK Prime Minister Truss is battling to contain the fallout from the resignation of a senior Cabinet minister and an open revolt in the Commons.
Tory members of Parliament are wondering how long the prime minister can go on following the chaotic events, but a Cabinet ally said ‘at the moment’ Truss will still lead the party into the next election.
Sterling was quoted at $1.1230 early Thursday, lower than $1.1242 at the London equities close on Wednesday.
In London’s FTSE 100 index, Dechra Pharmaceuticals lost 1.9%
Dechra said it was confident of delivering on market expectations for its financial year 2023, and expects the phasing to be weighted to the second half. Consensus estimates for underlying earnings before interest and tax is £191 million, it noted.
Trading in its first quarter ending September 30 was below the prior year - as expected - due to a challenging comparator with higher demand levels due to the pandemic.
At the other end of the list of London blue-chips was Relx, up 1.9%.
The LexisNexis owner said underlying revenue growth in the year to date was 9%. It said momentum remains strong across the group, and it expects growth in revenue, adjusted operating profit and constant currency growth in adjusted earnings per share to ‘remain above historical levels’.
Burberry added 1.5%, in a positive read-across following a cheery update from fellow luxury goods firm Hermes, which was trading up 1.3% in Paris.
In the FTSE 250, Dunelm shed 1.2%, as it reported a dip in first-quarter sales.
For the 13 weeks to October 1, total sales for the furniture retailer came in at £357 million, down 8% from the previous year. This was ‘as expected, given the very strong comparative period, with Q1 last year benefiting from pent up demand and our rescheduled Summer Sale’, it explained.
Looking ahead, it noted a ‘challenging’ macroeconomic environment, including recent volatility in exchange rate movements. However, Dunelm said it is ‘very well hedged’ for the remainder of the year.
The company reiterated the annual guidance it provided last month.
‘Dunelm could benefit from shoppers trading down from the likes of John Lewis but they do have discounters like B&M [European Value Retail] hot on their heels. We expect to see investment in above-the-line advertising to drive customer acquisition,’ said Third Bridge analyst Lara Martinez.
On AIM, online wine seller Naked Wine surged 36%, as it announced a leadership shake-up, and a restructuring programme.
Darryl Rawlings will step down as chair with immediate effect, with David Stead to take his place. Stead has been a director of the firm since 2017, and is currently chair of the audit committee. In addition, Deirdre Runnette will become senior independent director.
Naked Wines said it was in active discussions with James Crawford to assume the role of chief financial officer on a permanent basis.
It now expects revenue to fall by between 4% and 9% in the current financial year, downgraded from previous expectations of between 4% growth and 4% decline. It also announced a restructuring programme, to further its goal of becoming a ‘leaner and more focused’ company.
‘We recognise that in pursuit of rapid growth we have made mistakes,’ said CEO Nick Devlin.
Liberum raised the stock to ‘hold’ from ‘sell’.
In European equities on Thursday, the CAC 40 in Paris opened up 0.3%. The DAX 40 in Frankfurt opened down 0.5%, after German producer price inflation came in hotter than expected.
According to the Federal Statistics Office, the producer price index rose by 45.8% annually in September, the same pace as in August. This came in higher than FXStreet-cited market consensus of 44.7%.
Meanwhile, in Zurich, ABB was down 1.2%. The firm said it saw steady revenue and order growth as the supply chain normalised, but a booked provision hit profit.
In the third quarter of 2022, the Zurich-based industrial conglomerate said revenue rose 5% year-on-year to $7.41 billion, compared to $7.03 billion.
Orders rose 4% to $8.19 billion from $7.87 billion. Growth in orders was seen across most divisions. Price execution was ‘robust’, with volumes supported by easing supply constraints.
Net profit attributable to ABB dropped dramatically, however, coming in 45% lower at $360 million compared to $652 million. Basic earnings per share dropped similarly to $0.19 from $0.33. ‘The decline [was] primarily related to the booked non-operational provision which weighed on income from operations,’ it explained.
The euro traded at $0.9779 early Thursday, lower than $0.9784 late Wednesday.
Against the yen, the dollar was quoted at JP¥149.98, up versus JP¥149.77. The strengthening of the dollar is increasing the likelihood of a further intervention by Japanese authorities to bolster the value of their currency, traders think.
Stocks in Asia were lower on Thursday. In China, the Shanghai Composite closed down 0.3%. The Hang Seng in Hong Kong was 1.8% lower in late trade, having hit an intraday low of 16,010.72 - a 13 year low.
The Nikkei 225 closed down 0.9 in Tokyo, while the S&P/ASX 200 lost 1.0% in Sydney.
Gold was quoted at $1,627.90 an ounce early Thursday in London, lower than $1,631.50 late Wednesday. Brent oil was trading at $93.51 a barrel, higher than $90.83.
Still to come in Thursday’s economic calendar, there are the eurozone balance of payments at 0900 BST and US initial jobless claims at 1330 BST.
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