Although the FTSE 100’s losses were marginal, there was a clear disparity between the performance of London’s flagship index and the broader European equity space on Monday as a raft of broker downgrades weighed on the index.
The FTSE 100 was trading up 0.1% at the time of writing, while the EuroStoxx 50 index gained 0.8%.
“The FTSE 100 started the week on the back foot, dragged down by consumer non-cyclicals, basic materials and industrials,” said Russ Mould, investment director at AJ Bell.
“Share price weakness in big brand companies including Unilever, Reckitt and Haleon is often a signal that investors are worried about consumer spending and growing inflationary pressures. Renewed cost pressures may prompt companies to hike prices and this could see shoppers switch to cheaper supermarket own-brand items. It’s a major risk for investors in big brand stocks to consider.
“Driving down the shares in the sector this time was negative broker comment as RBC downgraded Unilever to ‘underperform’, which hurt the Marmite maker and took its big brand peers down at the same time.”
News that Aldi had a bumper festive trading period led by its own brand products added to the pessimism around retailers, with Marks & Spencer and Tesco falling on Monday.
Rolls Royce was the biggest loser after a broker downgrade served as a reality check for the engine maker as a multi-year rally.
The company’s rally since the beginning of 2023 has been nothing short of spectacular, but the meteoric rise leaves the stock vulnerable to any suggestion of negativity. The stock fell 3% in early trading as investors booked profits.
“Stock market darling Rolls-Royce saw its engines splutter after Citigroup downgraded its rating on the stock to ‘neutral’ from ‘buy’ on valuation grounds. Even though Citigroup raised its price target for the stock, investors appear to have taken the rating downgrade as a signal to lock in some profit,” Russ Mould said.
“Rolls-Royce has been a runaway success for investors in recent years as its recovery story gained traction. The turnaround opportunity is now looking like old news and investors increasingly want to hear about the next phase of the company’s growth, not simply what it is doing to get back on track as that looks to have already happened.”
JD Sports, one of the UK Investor Magazine’s Top 20 Stocks Picks for 2025, was 2.1% higher, helping offset losses elsewhere. Intermediate Capital was the top gainer, rising 2.8%, bouncing off technical support around 2,000p.