The FTSE 100 lacked direction on Tuesday as positive sounds from China helped support mining companies, but a disappointing update from Croda and weakness in Imperial Brands acted as a counterweight.

London’s leading index traded in a remarkably tight range of around 20 points on Tuesday, with little fresh news to fire traders up.

“The FTSE 100 ticked higher on Tuesday, despite modest losses on Wall Street overnight, as markets found a moment of calm after a series of big macro-economic and corporate announcements,” said AJ Bell head of financial analysis Danni Hewson.

“Mining companies did a lot of heavy lifting for the index, as leading commodities consumer China took steps to bolster confidence in its currency and economy ahead of a big leadership summit which kicks off in Beijing in early March.”

Anglo American was the top gainer, with a rise of 2.5%, while Antofagasta added 1.7%. The promise of measures by China to support its economy is starting to wear thin, and the gains in miners failed to spark a substantial FTSE 100 rally.

The benign trading conditions may not last long. Big US economic data points due for release later this week may provide insight into how the Federal Reserve approaches its next interest rate decisions and spur positioning in equity markets.

“Later tonight a reading of US consumer confidence starts the gun on some big releases across the Atlantic. These could offer insight on whether a soft landing can be engineered for the US economy,” said Danni Hewson.

“The latest estimate of fourth quarter GDP follows on Wednesday, and on Thursday the core PCE reading of inflation is published. This metric is closely followed by the Federal Reserve when it comes to making decisions on interest rates.”

Imperial Brands

Threats of a vaping tax hit, reported by the Times, hit Imperial Brands on Tuesday, sending the shares 3.5% lower. Vapes are taxed differently from tobacco products, and reports suggest this could change in next week’s budget.

Imperial Brands has made a big push in vaping products and is much more exposed than peer British American Tobacco, whose shares fell only 0.25%.

“Although the industry is jostling for position in the vaping market, given the volumes declines in tobacco, these products are still a relatively small part of the picture. Investors had also been expecting greater regulation in the sector, so a potential increase in tax isn’t a wild surprise and given they are global companies a change in UK fiscal policy won’t move the dial too much,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

Croda was the FTSE 100’s biggest casualty after reporting an 18% decline in sales in 2023. Croda was down 5% at the time of writing.

SaaS-based retail technology platform developer itim Group (LON: ITIM) has won a five-year, multi-million pound contract with fashion retailer QUIZ Clothing. This deal provides an opportunity to attract other fashion retailers. The Retail Suite product will be rebranded as UNIFY. The share price jumped 62.8% to 35p.

Plant-based polymers supplier Itaconix (LON: ITX) generated revenues of $7.9m in 2023, up from $5.6m, with Europe growing strongest as new detergent customers were gained. Cleaning sector ingredients achieved revenues of $7.2m due to their performance and sustainability. Net cash was $10m at the end of 2023. The share price recovered 25.5% to 160p. This is the highest the shares have been since September.

Silver Bullet Data Services (LON: SBDS) has extended its contract with Mars Petcare and the deal is worth $2.3m. The original deal was three years ago. Additional services include customer experience activation, data management and data insights. The share price rose 14.1% to 182.5p.

Microbiome-based treatments developer OptiBiotix Health (LON: OPTI) continues to increase its number of partners and is actively managing the existing key accounts. Investment in e-commerce meant that sales from this area were 287% higher in 2023. The overall product range is being rationalised and new products added, including SlimBiome soup. Sweetener SweetBiotix has been included in its first product which is about to be launched. DSM-Firmenich has forecast potential demand for SweetBiotix of more than 100,000 metric tonne/year. That is a suggestion of the opportunity. The share price increased 11.1% to 25p.

FALLERS

United Oil and Gas (LON: UOG) has raised £1m at 0.2p/share, having originally sought £900,000. A subdivision of the shares is required to reduce the par value so that the shares can be issued at this price. The cash will be spent on developing the exploration licence in Jamaica and fund costs while a farm-out partner is secured. There is interest from several interested parties. The share price is 38.6% lower at 0.215p.

Shares in electric drivetrain developer Saietta Group (LON: SED) continue to decline as it seeks to secure additional finance before the end of March. Having failed to secure an electrical steering pump contract manufacturing opportunity and it may sell the relevant production line for £600,000. That would help its short-term financial position. The share price dived 38.3% to 0.5p.

Bricks and construction products supplier Brickability (LON: BRCK) has been hit by weak demand. That is in line with other companies in the sector. This weakness is likely to continue into the year to March 2025, but January acquisition TSL Assets will make a full contribution. Brickability remains highly profitable in tough times. Cavendish has reduced its 2023-24 revenues expectations by 7% to £585m, while the pre-tax profit estimate is 8% lower at £35.2m. The 2024-25 pre-tax profit figure is reduced by 4.5% to £37m. The share price had been on an improving trend, but it fell back 11.7% to 67.5p.

Poor weather conditions in the US hampered trading in the autumn at online betting company Webis Holdings (LON: WEB). Interim turnover declined from $6.23m to $5.9m, while the loss increased from $330,000 to $540,000. Management is hopeful that trading will improve in the spring, helped by investment in marketing. There could be partnership or merger opportunities. The share price declined 3.85% to 1.25p.

Premier African Minerals shares were trading water at the time of writing on Tuesday as investors attempted to make sense of an announcement released yesterday that raised questions about the company’s Zulu lithium project.

The lithium miner announced a brief and bizarre update on their Zulu project yesterday, which cast doubt over whether the company would meet production targets in February. Given the plant is not yet fully operational, it seems unlikely targets will be met.

The Premier African Minerals saga has unfolded over many months and the end of February lithium production target has been eagerly anticipated. 

“Premier is both encouraged and simultaneously frustrated as much by the fact that the newly installed mill exceeds expectations and by a number of system and control issues that are interrupting operations right now,” said George Roach, CEO.

“Premier expects the plant to operate continuously, as previously announced, before the end of February 2024.”

Premier African Minerals shares were down 2.5% at the time of writing but had been positive earlier in the session.

Under the terms of an offtake agreement with partners Canmax, Premier is required to produce 1,000t of 6% lithium offtake per month.

This target is yet to be met and the agreement stipulates penalty payments to Canmax, and even the issue of equity in the Zulu project, should Premier not meet the targets. 

Canmax has so far been supportive. Whether they continue to be so remains to be seen.

Premier said they will release another update before the end of February which could be explosive.

HSBC has reiterated its ‘reduce’ rating on the recently rebranded Spirax Group. Equity analysts at HSBC reiterated their view on Spirax Group, previously known as Spirax- Sarco Engineering, ahead of full year results due 7th March.

HSBC Global Research sees little growth for the engineering group over the last year as Spirax’s Steam Specialities business falters and FX headwinds impact income.

HSBC analysts have an 8,400p price target on Spirax, significantly below the current 10,380p share price.

Although analysts see low single-digit revenue growth in the year ahead, they feel the stock is too expensive at 32x 2024 PE estimates.

In a trading statement released in November, Spirax said they were experiencing weak demand from Semiconductor Wafer Fabrication Equipment and Pharmaceutical & Biotechnology sectors.

Smith & Nephew reported robust revenue growth in 2023, driven by the company’s innovation strategy and early progress on its strategic 12-Point Plan.

Full year revenue was $5,549 million, up 7.2% on an underlying basis from 2022. This growth exceeded the company’s initial guidance and was led by double-digit gains in Sports Medicine & ENT and a strong performance in Advanced Wound Management.

Smith & Nephew shares were 4% higher at the time of writing.

The growth reflects the strength of Smith & Nephew’s portfolio, with new product introductions driving gains across all three business units. In particular, the company’s investments in innovation have yielded a strong pipeline of new products that are expected to sustain growth momentum going forward.

“British medtech Smith & Nephew hasn’t delivered any curveballs in full-year results today. There was broad based growth across all business units and geographies and it was pleasing to see a strong performance from the cutting edge CORI robotic surgery platform,” said Derren Nathan, head of equity research at Hargreaves Lansdown.

For 2024, Smith & Nephew expects to deliver underlying revenue growth in the range of 5-6%, driven by the ongoing benefits of its strategic initiatives. The 12-Point Plan, announced in 2022, aims to accelerate growth by prioritising investment in key areas such as advanced technologies and productivity improvements.

Investors will be encouraged by early progress on the 12-point plan has started to translate into improved financial results, according to management. Combined with Smith & Nephew’s robust new product pipeline, the strategic actions position the company to achieve sustainable higher growth over the long term.

“Following an extended period of underperformance, Smith & Nephew set out a “12 point plan” to shareholders last year in a bid to improve productivity, strengthen profit margins and overhaul the company’s orthopaedics group which has seen its market share begin to slip in recent years. This morning’s earnings report suggests the plan is starting to pay off,” said Mark Crouch, analyst at investment platform eToro.

After a storming 2023, the Rolls Royce share price has continued its ascent in the new year after a positive full-year earnings release supported the investment case.

When the engine maker released full-year earnings last week, Rolls Royce provided the justification investors needed to continue to hold the stock. At least for now.

Rolls Royce issued solid results for the last year and an outlook which suggests the CEO is far from done with his turnaround plan.

Rolls Royce shares are up 146% over the past year and were the best performing FTSE 100 shares of 2023. For this rally to continue, Rolls Royce investors will need to see the company meet and even exceed the 2024 guidance set out last week.

The company said they were targeting £1.7bn-£2.0bn operating profit in 2024 after recording £1.59bn in 2023.

Although the rise in profit over the past year warrants multiple expansion to a degree, Rolls Royce will be vulnerable to any suggestions issued guidance may not be met. 

Rolls Royce is currently priced for what investors think they’ll achieve in 2025 or 2026. The underlying business performance needs to maintain momentum or investors will be looking for the exit.

That said, Rolls Royce is operating in an extremely favourable environment. 

The stars have aligned for the company. An ambitious CEO not scared of making difficult decisions has come in at a time when the macro environment is highly supportive of companies with exposure to travel.

During the cost of living crisis, consumers have opted to allocate their discretionary spending on holidays. Consumers are happy to cut back on other nonessentials but are not willing to sacrifice a holiday. This is the case across most of the Western world.

Travel demand has increased flying hours feeding straight into Rolls Royce’s top line. In addition, the bounce back from the pandemic has bolstered demand for air travel, and airlines are being forced to expand capacity with new plane orders.

Just this week, the Ryanair boss said they are experiencing a shortage of planes after the delivery of a number of Boeing planes was delayed.

Brokers have reacted positively to the news and a string of price target upgrades followed last week’s update. JP Morgan have bumped their price target up to 475p from 400p.

The FTSE 100 was slightly lower on Monday as global equities looked set to take a break from the rip-roaring rally that has pushed US, Japanese and European equities to record highs.

London’s leading index was down 0.3%, while stocks across Europe were mixed.

“This of course follows record trading last week, so the slow down signals a pause for breath rather than anything more sinister,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.

“Investors are looking ahead to the monthly personal consumption expenditures price index reading, which is the Federal Reserve’s preferred measure of inflation, on Thursday.”

Last week was a week for the corporates to drive equity performance. With a raft of economic data coming in the next two weeks, one would expect the focus to shift back onto the macro picture and interest rates in the coming days.

Investors should note that while Nvidia almost single-handedly drove US stocks to fresh record highs, the US small caps did not join the rally which signifies underlying weakness in the breadth of investor confidence in the rally.

Housebuilders

The FTSE 100 was fighting to offset weakness in the housebuilders on Monday following the launch of a  Competition and Markets Authority investigation into information sharing that may have impacted the pricing and availability of housing in some areas of the UK.

Barratt Developments, Bellway, Berkeley, Persimmon, Redrow, Taylor Wimpey, and Vistry were named by the CMA as companies they would look into amid concerns about anti-competitive practices.

“A regulatory probe is the last thing the sector needs. It is just finding its feet again after a tricky period for the property market as demand dried up thanks to higher borrowing costs.

“Housebuilders may also argue the proposed introduction of more red tape, including the establishment of a New Homes Ombudsman, will clip the sector’s wings. However, previous issues around build quality and treatment of customers means they are reaping what they have sown.”

Taylor Wimpey and Persimmon were the most heavily hit FTSE 100 homebuilders with declines of over 3%.

Ocado was the FTSE 100’s top faller ahead of full-year results due to be released on Thursday.

After a storming session on Friday, Standard Chartered was again the best performer adding 2.8%. The Asia-focused bank recorded strong profit growth in the last quarter, and Berenberg and JP Morgan have increased their price targets as a result.