The FTSE 100 made healthy gains on Tuesday despite US CPI inflation coming in hotter than expected as financial helped propel London’s leading index to the best intraday levels since January.

The FTSE 100 touched highs of 7,764 on Tuesday, a similar level the index had retreated from on several occasions in January. Should the index break above this level, it will attack levels not seen since April 2023.

“The blue-chip UK index was led by a rally in financials including a 3.1% gain from Prudential and a 2% rise from Standard Chartered. Interestingly, nearly all sectors were in positive territory, implying that investors were feeling upbeat across the board which is a healthy situation to have in markets,” said Russ Mould, investment director at AJ Bell.

“Investor sentiment was boosted by slowing UK wage growth which raises the chances of the Bank of England cutting interest rates sooner rather than later.”

The UK unemployment rate has increased to 3.9%, and wage growth slowed to 6.1%. Job vacancies also fell as the recession cooled the UK jobs market. While this isn’t great news for the underlying economy, it is excellent news for traders longing for easier monetary policy.

The FTSE 100 was 1% higher at the time of writing.

US CPI

It was a different story in the US. CPI inflation came in hotter than expected – but not to the extent that it would prevent the Federal Reserve from rates in the summer, and this buoyed equity bulls.

US equities jumped on the open as US CPI rose 0.4% month-on-month and 3.2% in the year to February.

“The recent data series came in slightly above expectations, particularly regarding core inflation. While this doesn’t derail the progress the Fed is making, it highlights the challenge of addressing inflation and getting it back to the 2% target,” said Ryan Brandham, Head of Global Capital Markets, North America at Validus Risk Management.

“US yields have been gradually declining throughout March, but this data might cause them to increase in the coming days as traders debate what it means for potential cuts in the US later this year.”

The merry-go-round of ‘will they, won’t they’ expectations of when the Federal Reserve will cut rates will continue, but, for today at least, the data suggests rate cuts are very much on the table for June/July.

Persimmon

Persimmon was the FTSE 100’s biggest faller, with a 2.2% loss, after the housebuilder said completions would increase only marginally in 2024 compared to 2023. Revenue sank 28%, and operating profits more than halved in 2023.

“Persimmon’s latest set of results will make for tough reading for shareholders after the UK housebuilder reported a 52% drop in profits in 2023, citing build cost inflation and weaker demand hampering performance. Also, the company’s cash position, while still relatively healthy, has fallen considerably,” said Adam Vettese, analyst at investment platform eToro.

“Persimmon shares looked to be mounting a recovery in the last six months, rallying over 40%, and after what has been a torrid few years for the housebuilder, investors would have been eager to see this continue at pace. However, as these results indicate, so much depends on factors outside of Persimmon’s control.”

AIM-quoted pawnbroker H&T (LON: HAT) reported strong growth in profit and further progress is expected this year despite higher wage costs. The pledge book is growing and the acquisition of Marcroft boosts parts of the business with potential for growth.

The AIM-quoted company is benefitting from increasing pawnbroking demand and higher gold prices. The retail side has been tougher, but this is being refocused on lower price points that are more in keeping with customer demand. Pre-owned jewellery margins remain high, but new jewellery margins slumped.

The pawnbroking book grew 28% to £128.9m. Group 2023 revenues were 27% ahead at £220.8m. Retail and other services were the only parts of the business making a lower profit contribution. Pre-tax profit was up from £19m to £26.4m. This enabled a rise in the dividend from 15p/share to 17p/share.

The recent Maxcroft acquisition increases exposure to self-employed and small business pawnbroking loans. The security is the same as for individuals. It also boosts the foreign currency business.

The new £85m debt facility means that H&T has all the cash it requires to expand the business, even after the £11.3m paid for Marcroft. A further 50 stores will be refreshed this year and up to 12 new branches could be opened.

The share price is 10.9% higher at 377p, which means that some of the downgrade-related losses from earlier in the year have been clawed back. The prospective multiple is seven and the forecast yield is 5.3%.

There is no new information about the potential bid for SmartSpace Software (LON: SMRT) but the share price has jumped 27.1% to 75p. The share price has been drifting downwards since the initial announcement that the company had received a bid approach from Sign In Solutions Inc at an offer price of 90p/share. Management says that it would back this offer, which values SmartSpace Software at £26m. This bid is subject to due diligence. Late last year, venue management software supplier Skedda Inc proposed an 82p/share offer for the smart building technology company, but last month it decided not to bid.

X-ray imaging technology developer Image Scan (LON: IGE) has launched the AXIS-CI cabinet with AI software, which is for building and mail screening. This helped the shares recover 21.7% to 1.4p.

Primorus Investments (LON: PRIM) is paying a special dividend of 1.5p/share, which will cost £2.1m. The ex-dividend date is 21 March. Primorus Investments received $6.1m from the takeover of Payapps Ltd. The share price rose 15.8% to 5.5p.

Dekel Agri-Vision (LON: DKL) director Lincoln Moore bought 500,000 shares at 1.3p each following yesterday’s production update. February 2024 crude palm oil production of 3,742 tonnes was 70% higher than the previous February. The share price is 15.4% higher at 1.5p.

FALLERS

Renalytix (LON: RENX) has raised £7.8m at 20p/share and this should be enough to fund the company until the fourth quarter of 2024. This will give time for the formal sale process to make progress. A large diagnostics company has made a bid approach to kidney disease diagnostics developer Renalytix. This sparked the formal sale process, so that the company can assess whether there are other potential bidders. It is also possible that there could be a decision to stay independent. The share price slumped 31.3% to 27.5p, which is below the level before the potential bid was revealed.

Digital media services provider Catenai (LON: CTAI) raised £720,000 at 0.3p/share and issued shares to pay creditors £76,600. Sanderson Capital has converted £151,000 of convertible loan notes and £65,100 of associated fees into 72 million shares and it has received 25.17 million warrants exercisable at 0.3p each.  The share price fell back 30% to 0.35p.

The Competition and Markets Authority’s announcement that it has concerns about the pet market knocked CVS Group (LON: CVSG) shares. Concerns include, lack of information, weak competition in certain areas and actions by large groups like vet practices operator CVS Group.  A package of possible remedies has been suggested by CVS Group and its peers and they believe these could be implemented more quickly than an 18-month investigation. The share price has recovered from its low, but it is still down 23.9% to 1108.5p.

Shoe Zone (LON: SHOE) has a history of beating forecasts in recent years, but at the AGM the retailer said that trading is marginally below expectations because of higher wage and freight costs. Also, the end of the autumn/winter season was slower than anticipated. The share price declined 17% to 232.5p.

Persimmon shares fell on Tuesday after the housebuilder announced a full year and operating profit sank in 2023.

Rising mortgage rates were largely to blame for a 27.5% drop in revenue. Operating profit fell to £355m from £1bn.

Persimmon’s numbers today were broadly expected and the focus was always going to be on the outlook. On this front, Persimmon expects to have a marginally better 2024 than 2023, with completions expected to be between 10,000 and 10,500 in 2024 compared to 9,922 in 2023.

The group said it expects the housing market to remain subdued, citing uncertainties around the UK election and mortgage rates.

“Although the near-term outlook for Persimmon remains uncertain, the significant pent-up demand for homes remains unchanged. Persimmon’s average weekly sales rates fell around 16% in 2023, as high interest rates and the removal of the Help-to-Buy scheme have weighed on buyer affordability,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

“As a result, total completions of new homes dropped by around a third to 9,922. These lower volumes, coupled with high levels of build-cost inflation, saw operating profit margins roughly halve. This impact would have been worse if it weren’t for the group’s in-house materials business, which is a key differentiator to peers and offers some relief to inflating costs.”

Persimmon’s net cash took a battering last year, dropping to £420.1m from £1,246m as operating cash flows dried up and Persimmon paid £255m in dividends.

The sharp drop in net cash will raise some eyebrows. Persimmon has been a cash generation juggernaut over the past decade and the halving of net cash demonstrates the challenging time the housebuilder had in 2023.

The reduction of cash will not impact the company’s ability to harness opportunities when growth returns – unless the UK property malaise lasts longer than many expect.

“With interest rates still up at around 5%, this has created something of a standoff between buyers and sellers in 2023, with neither willing to give any ground. The Spring Budget offered little to no incentive for either side, so the focus will now be firmly fixed on the Bank of England and the prospect of impending interest rate cuts later this year,” said Adam Vettese, analyst at investment platform eToro.

The FTSE 100 was dragged lower on Monday as concerns about the US tech sector crept into European equities.

Wobbles started in Nvidia last week after the chipmaker tanked on Friday. This led to a lower close in US equities, sapping some of the enthusiasm for technology shares. Weakness continued on Monday, with Meta falling 3% as the SP 500 started the session in the red.

Although the US tech sector fundamentally has little to do with UK shares, the ‘magnificent 7’ has been a source of optimism for global equity traders. Cracks are starting to appear in the AI-inspired rally, and traders are reacting accordingly.

With a lack of UK-centric news to buoy markets, the Non-Farm Payrolls played on investors’ minds as questions around when the Federal Reserve would first cut rates dented sentiment.

“The UK index’s limited tech exposure may have spared it from losses given the weakness on Wall Street originated in that sector. Artificial intelligence star Nvidia was a notable underperformer as investors absorbed a mixed jobs report,” said AJ Bell investment director Russ Mould.

“The influential non-farm payrolls data was a real curate’s egg of a release. The headline number was higher than expected but revisions to previous data suggested the unemployment rate was at its highest in two years. Lower wage growth will have encouraged the idea rate cuts are on the way but the hints at a cooling economy suggest the landing may not be as soft as the market would have liked.”

Entain was the FTSE 100’s biggest faller, losing 3% and extending a losing streak, which has seen the betting company lose almost 30% of its value.

St James’s Place was also a heavy faller after several brokers lowered their price targets for the beleaguered wealth manager.

The best performers on Monday were shares that had suffered weakness over the past few weeks. Miners and Imperial Brands were stronger.

Housebuilders were among the top risers as bargain hunters stepped into weakness caused by Jeremy Hunt’s dull budget. Rightmove also joined the action.

Admiral was the FTSE 100’s top gainer after Berenberg raised its target to 2,973p from 2,961p. Admiral shares were 3% higher.

HSBC analysts rate crisis-hit wealth manager St James’s Place ‘Hold’ after the company cut its dividend and lowered its share buyback programme.

St James’s Place shares sank earlier this month following news the company would be setting aside £426m for potential client redress related to poor service and high fees.

The provisions accompanied a slashing of the dividend to the extent St James’s Place shareholders will receive less the half of the dividend than they did in the prior year.

HSBC addressed whether there were any further ‘big skeletons in the closet’ and concluded the biggest detractors are now known but suggested there are still questions around pricing, product mix and distribution channels.

Given the uncertain backdrop, HSBC lowered its price target to 550p from 740p and has a hold rating on the stock.

HSBC analysts Steven Haywood and Faizan Lakhani wrote in a note:

“We see near-term uncertainty for SJP given ongoing UK macro uncertainty and management’s comprehensive review of the business. Also, we believe there could be some negative sentiment from the potential under-servicing of clients in the past. SJP trades at 2.3x 2024e TNAV with a 17.3% 2026e RoTNAV, and 8.2x 2025e cash PE with a 3.7% 2024e DPS yield and 2.9% 2024e share buyback yield on top.”

Currys shares were lower on Monday after Elliott Advisors said they were withdrawing there interest in the electronics retailer.

Currys shares traded down by 7% on Monday.

In a statement released on Monday, Elliott said that “following multiple attempts to engage with Currys’ Board, all of which were rejected, it is not in an informed position to make an improved offer for Currys on the basis of the public information available to it. Elliott therefore confirms it does not intend to make an offer for Currys.”

Although Elliott Advisors has publicly said they are no longer pursuing Currys, there is still the chance the company will be taken over by another party. Currys shares are still substantially higher than where they were before Elliot’s interest was first reported suggesting some are still hopeful a deal will be done.

“The decision by Elliott Advisors to withdraw bid interest in Currys doesn’t mean the target is no longer in play. Chinese group JD has already expressed interest and Elliott’s recent approach may have put the electricals retailer on the radar of others,” said AJ Bell investment director Russ Mould.

“There is logic in wanting to own Currys. It is the last major UK-wide seller of electricals still with a physical store presence. There are still plenty of people who like to go into a shop to get advice or technical assistance, compare products in person, and be able to collect items without having to risk a courier losing or damaging their goods during transit.”

The interest in Currys comes after the company took major steps to streamline its business and boost profitability.

“The business has been through a significant restructuring programme and is starting to see some rays of light in terms of the recovery story,” Russ Mould said.

“Elliott says Currys’ management refused to engage which at that point would normally see a bidder go hostile in their attempt to succeed with a takeover. Instead, it has just walked away which suggests that its original approach was highly opportunistic in the hope Currys could be bought on the cheap. Elliott’s statement implied it wanted more information on the group before considering a higher price but it couldn’t get the necessary details.

“Investors like Elliott typically want to pay as low a price as possible with the intention of potentially breaking up the group or driving big changes to realise hidden value in the business.