Falling commodity prices weighed on the FTSE 100 on Wednesday, with declines in iron ore and copper hitting the mining sector as investors eye tomorrow’s Federal Reserve interest rate decision.

Antofagasta, Rio Tinto and Glencore were among the top fallers after a poor Asian session for copper and iron added to recent declines in the metals.

The sector played a big part in the FTSE 100’s record-breaking run during April and earlier May as copper prices rose to the highest point since 2022.

With miners having a respectable run since the beginning of the year, a soft period for metals prices will have spurred some investors to hit the sell button and bank profits.

Traders will also be watching tomorrow’s economic calendar for a potentially explosive series of events that have the potential to move markets.

We will first learn of US CPI for May, which is expected to be flat on April’s 3.4%. After last week’s blow out Non-Farm Payrolls report, any heating of inflation could be taken negatively by equity traders who have already pushed out interest rate cut expectations.

Later in the day, we will hear from the Federal Reserve and receive their interest rate decision. Although the ECB cut rates last week, the Fed is thought to be nowhere near reducing borrowing costs, and any move tomorrow will be a major shock.

The most interesting element of the Federal Reserve’s instalment tomorrow will be commentary. They are likely to say they are data dependent, but any hints of whether they will cut before reaching the 2% inflation target could move markets.

Housebuilders gain

On Tuesday, the Tories released a manifesto they will need a miracle to implement. That said, their big plans for the housing market fired up the housebuilders and Persimmon, Taylor Wimpey, and Barratt Developments were among few gainers on the day.

The housing market is becoming one of the fiercest political battlegrounds in the election campaign, and there is a school of thought Labour – who will likely be in power after 4 July – are likely to try and match the Conservatives on some of their housing pledges.

“A lot of people want to get on the property market but are struggling to do so when interest rates are high and housing supply is tight which props up prices. It’s no wonder the Conservatives have put housing on their priority list for the election, with several measures unveiled as part of their strategy to try and stay in power on 4 July,” said Russ Mould, investment director at AJ Bell.

“A stamp duty cut for some first-time buyers, a new Help to Buy scheme, and tax cuts for landlords who sell to tenants all provide a tailwind for companies on the stock market linked to residential housing.

“Housebuilders including Persimmon and Taylor Wimpey, DIY groups such as Wickes and B&Q owner Kingfisher and estate agents including Foxtons all saw their shares move higher on the news. The big unknown is whether the Conservatives will be able to action these initiatives given they are lagging behind Labour in the polls.”

Apple has revealed its plans to revamp its operating systems with the integration of generative AI tools such as ChatGPT in a broad offensive to encourage hardware sales.

‘Apple Intelligence’ will soon be available on the latest iPhone models, providing users with the power to enhance writing, create images and summarise telephone calls in an intuitive new operating system.

It is a major move by Apple that will bring AI to the general population in a way that will mean deep integration in everyday mobile phone tasks.

To date, people wanting to deploy the benefits of Generative AI tools such a OpenAI’s ChatGPT would have had to visit the application and use its interface. This technology will now be built into your iPhone and will be utilised with little or no need to move away from the task being undertaken.

The software will initially only be available on iPhone 15 Pro and Pro Max phones – a move clearly designed to encourage users to upgrade their current models.

The plans have been met be a sharp response by Elon Musk who said he will ban his staff from using iPhones claiming a tie-up between Apple and OpenAI will be a ‘security violation’.

“Apple has finally broken its AI silence,” said Matt Britzman, equity analyst, Hargreaves Lansdown

“It’s fair to say Apple was caught off guard by the explosion of activity in the AI space, and it’s turned to a partnership with OpenAI to get its foot in the door. This is a key moment for Apple, which has struggled with innovation of late. Gone are the days when each new iPhone was so jam-packed with new features that consumers felt obligated to upgrade every year, most people probably don’t even know what version they’re using. 

“But this is a marathon, not a sprint. It may be late to the party, but the long-awaited AI strategy could trigger a new surge in demand for the latest handsets. Integrating a third-party tool like ChatGPT finally gets things moving while leaving space to develop internal models over the next few years at much lower costs than the first movers. With generative AI capabilities, Apple will have a fierce combination of deep consumer and developer ecosystems alongside the hardware and software to get AI tools into the hands of everyday consumers.”

Raspberry Pi has soared on its London IPO, jumping as much as 39% in early trade on Tuesday.

Raspberry Pi has announced the pricing of its initial public offering at 280p, valuing the company in the region of £541m.

“Raspberry Pi made a storming debut on the UK stock market with its IPO priced at the top end of the range and its shares jumping 39% in the first half hour of trading. UK tech stories are few and far between on the London Stock Exchange so let’s hope the success of Raspberry Pi attracts more peers in the tech sector to the market,” said Russ Mould, investment director at AJ Bell.

The total size of the IPO offer was £166m, but Raspberry Pi will receive just £31m of this because the sale of shares by an existing shareholder made up the lion’s share of the deal.

Retail investors using the Peel Hunt REX platform accounted for £6.8m of the total amount.

“The quality of the interactions during the marketing process has underlined our belief that London has the right calibre and sophistication of investor to support growing, ambitious technology businesses such as Raspberry Pi. The reaction that we have received is a reflection of the world-class team that we have assembled and the strength of the loyal community with whom we have grown,” said Eben Upton, CEO of Raspberry Pi.

“Welcoming new shareholders alongside our existing ones brings with it a great responsibility, and one that we accept willingly, as we continue on our mission to make high-performance, low-cost computing accessible to everyone.”

Later today the Mobico Group (LON:MCG) is holding its AGM to approve its 2023 Report & Accounts.

It was not a good year for the business, with its adjusted pre-tax profits dropping 36.3% to £92.9m (£145.9m) despite group revenues having lifted 12.2% to £3.15bn (£2.81bn), leading to earnings falling some two-thirds from 15.0p to just 4.5p, with a similar cut in dividends to 1.7p (5.0p) per share.

The Business

This group, formerly called National Express, has the vision to be the world’s premier shared mobility operator, with a declared purpose to lead the modal shift from cars to mass transit.

It is a leading international transport operator, diversified internationally and by business area; with operations in North America, continental Europe, the UK and North Africa, operating in more than 50 key cities in 12 countries across the world, employing over 47,700 people in its workforce.

It operates a fleet of some 27,700 vehicles, last year more than 1bn passenger journeys were made on the group’s various services.

Some 67% of the group’s revenue is generated through multi-year contracts, which is an impressive figure.

When announcing the 2023 results in late April, CEO Ignacio Garat stated that:

“Our 2023 results are below the expectations we set ourselves at the beginning of the year.

The delays due to the additional work relating to the German rail business was regrettable but it is now concluded.

Although group revenue growth was encouraging, driven by passenger demand and actions taken to recover inflation, this has not translated into an improvement in reported profitability.

Our focus remains on delivering the benefits of our restructuring programs and in recovering inflationary costs through pricing, while maintaining a relentless focus on the quality of our offering to support growth.

Opportunities remain to create a more appropriate and sustainable cost structure and we will not hesitate to take action where there is a clear strategic and financial benefit.”

Outlook

The group has stated that, based on current market conditions, adjusted operating profit for FY 24 is expected to be within the range of £185m to £205m, with a greater bias to the second half of the year, due to the phasing of cost reduction programmes and the timing of price increases.

Analyst Views

There are some 8 analysts following the group, most of whom rate the group’s shares as a Buy.

The highest Price Objective is 100p, while the lowest is 65p, with the average consensus coming out at 78.88p per share.

Berenberg has recently downgraded because its latest update showed the business had stalled.

The broker’s analyst, Jack Cummings, moved his recommendation from ‘buy’ to ‘hold’ and cut the target price from 100p to 66p.

Noting that the company had again missed expectations, while introducing full-year 2024 guidance that was some 9% below consensus expectations.

“We remain of the view that there are not any imminent refinancing needs, but we can no longer, with confidence, say the shares should be meaningfully higher on a 12-month view based just on organic performance.”

Increasing Short Interest

With some 614m shares in issue, around 70% of its equity is held by the leading ten professional holders.

However, it is worth noting that in the last month there has been an increase in short selling of the group’s stock, with at least 2.74% being contracted lower, with Systematica Investments, GLG Partners and Marshall Wace being the main players.

The group’s shares are currently trading at around 51p, valuing it at £313m.

The FTSE 100 started the week firmly in the red after marathon European elections ended with the announcement of a snap election by the French President who suffered crushing losses to the far-right.

There was a broad increase in support for far-right parties pushing anti-immigration agendas in the European elections, but the centre managed to hang on and retain command of the parliament.

The elections will be a warning to incumbent European political leaders, but the actual results produced little market-moving developments. The biggest shock was Emmanuel Macron’s gamble to call snap elections in an attempt to quell the threat posed to his authority by far-right leader Marine Le Pen. Le Pen’s National Rally party received around 31% of the vote – more than double the votes Macron’s pro-European centrist party.

The snap elections in France won’t unseat Macron himself, and he will continue to be able to rule by presidential decree. The risks stem from a wider leaning towards nationalist parties across Europe that poses a threat to the European project.

This risk was evident in European stocks on Monday, and the FTSE 100 opened up sharply lower with the German DAX and French CAC. The FTSE 100 was down 0.42% at the time of writing.

“Political turmoil in Europe saw the FTSE 100 start the week on the back foot with only a handful of names on the index trading in positive territory,” said AJ Bell investment director Russ Mould.

“An unexpectedly strong showing for far-right parties in European elections in France prompted President Emmanuel Macron to call a snap parliamentary election to be held within the next 30 days. This injects a big dose of the uncertainty which markets hate – with the euro dropping sharply in response to the developments.

“Financial stocks were among the worst performers in London as investors digested the news. Also affecting sentiment were Friday’s better-than-expected US jobs numbers which push back against the narrative that rate cuts are imminent.”

Ashtead

In stock-specific news, Ashtead opened on reports the plant hire company was exploring shifting its primary listing to the US. The move would follow in the footsteps of construction company CRH, who recently ditched London for New York, so the news isn’t a major surprise. However, it will be a major disappointment given the string returns the company has provided investors over the years.

“Ashtead is the twenty-fifth biggest company in the FTSE 100, as measured by its stock market valuation of £24.5 billion, so no-one will want to see the company switch its listing to New York, especially as the firm is just one of eighteen in the UK’s elite index that can point to a record of growing its dividend every year for at least a decade,” says Russ Mould.

“If there is any consolation for the London Stock Exchange, and investors in the UK equity market, Ashtead is unlikely to be leaving because its shares are too cheap relative to its US-quoted peers and rivals for reasons that relate directly to the business rather than optics or the share price.”

Suggesting that Warpaint London (LON:W7L) is a great success story of British enterprise, analysts Darren Shirley and Clive Black at Shore Capital recently upgraded their current year forecasts by some 26% to look for adjusted pre-tax growth to £23.3m, generating 22.6p of earnings per share.

Warpaint sells branded cosmetics, its W7 brand is sold in the UK primarily to major retailers and internationally to local distributors or retail chains.

While Technic, the group’s other main brand, is sold in the UK and continental Europe with a significant focus on the gifting market, principally for high street retailers and supermarkets.

Looking For Strong Multi-Year Growth

The brokers suggest that Warpaint is in the foothills for growth, such foothills have a considerable distance to traverse, and they believe that strong multi-year growth beckons.

Their estimates for the year to end December 2025 are for £116.5m sales, adjusted pre-tax profits of £26.6m, with earnings of 25.8p and a 12.9p dividend per share.

Buy On Any Dips

In late April I wrote that patient investors in Warpaint should look to buy on any dips in the price, and that by doing so they will be onto a winner.

The shares were then 465p and fell back to 455p after news that the group’s CEO and Managing Director were sellers of 3.5m shares a piece, some 9.06% of the equity, ‘in response to strong investor demand’ and wanting to increase the freefloat of its stock and broadening the shareholder register.

Following the Placing at 450p a share, Samuel Bazini, CEO, and Eoin Macleod, MD, were each left with 15.95m shares, representing 20.64% each of the equity.

Share Price Strength Subsequent To Placing

That Placing was substantially oversubscribed and was strongly supported by existing and many new institutional investors.

The group’s shares have been on a gradual ascent since then, topping out at 550p late last week – showing a near-21% gain since the Placing.

The company is due to announce its H1 Trading Update this week.