The FTSE 100 gained on Thursday as higher oil prices helped BP and Shell contribute a significant number of points to London’s leading index.

BP shares were 2.9% at the time of writing, while Shell added 1.7%. After a slow start to the week, the FTSE 100 was playing catch up with global equity indices that have so far produced notable gains driven by interest rate hopes.

The FTSE 100 was up nearly 1% shortly before 2pm on Thursday.

OPEC+ are meeting to discuss supply quotas with early reports suggesting they will commit to a 1 million barrel per day production cut. Brent oil was up 1.3% to $84.25 at the time of writing.

The FTSE 100 has been held back this week due to its weighting to commodities and global financial institutions that won’t share in the benefits of lower interest rates hinted at by US central bankers.

The S&P 500 has had a comparatively better week and is set to close the month with its best performance of the year so far.

“US indices are on course to chalk up their best month of the year in November. Data points and commentary from the Federal Reserve have largely reinforced the idea that the current rate hiking cycle is at its end,” said AJ Bell’s Russ Mould.

“It now feels like the market is waiting for the next big kicker to push it higher with forthcoming US jobs figures, inflation readings and central bank meetings as potential catalysts.”

US bond yields continued to fall on Thursday, providing additional support for US stocks, which were set to open higher. High-profile investors are betting on a rate cut in q1 2024, much sooner than the current expectation of June 2024.

Anything that fuels the fire of speculation around interest rate cuts sooner than market pricing will be supportive of equities, although it may not be overly helpful for the FTSE 100’s big banks, such as HSBC and Standard Chartered.

Risk on rally

There was a clear risk-on rally underway on Thursday, demonstrated by the positioning in FTSE 100 shares.

Miners, banks, and housebuilders rallied while utilities and consumer staples slipped. Severn Trent was the biggest faller as the company traded ex-dividend.

Forget the 12 days of Christmas; this is the 12 FTSE AIM shares with a strong chance of staging a Santa’s rally and providing investors with a well-deserved Christmas present after a tough year for UK small-caps.

We have highlighted 12 AIM shares we feel have the potential to close 2023 at a higher point than they were trading 1st December.

UK small-caps are inherently higher risk than larger-cap shares and may not be suitable for all investors. This article is not advice.

Big Technologies

Big Technologies provides monitoring services for individuals through a SaaS model used in healthcare and criminal justice applications. In the half-year ending 30th June, Big Technologies’ revenue grew to £27.3m from £22.9m in the same period a year prior. Adjusted EBITDA increased to £16.1m from £13.7m. Subsequent to the results, Sara Murray, Chief Executive Officer of Big Technologies, purchased around £200,000 worth of the stock at 195p.

Shares have since dipped but are starting to form a gentle uptrend, which could take the stock higher during December.

Van Elle Holdings

Van Elle shares have been undulating in a range since the beginning of 2022 and are currently trading above a support level, which has been held on three occasions over the past two years. On each occasion, the company staged 20%-30% rallies. Despite a challenging economic environment, the groundwork company saw revenue grow to £148m in the year to 30th April and has since said trading is in line with expectations, although profit expectations are lower than last year.

The Van Elle said it has a strong pipeline of Canadian construction projects and has recently acquired a piling business with £10m revenue per year.

From a valuation perspective, it trades at just 8.3x historical earnings.

Tekcapital

Tekcapital has pushed back the proposed listing of their portfolio company, MicroSalt, until mid-December. The listing of MicroSalt could confirm the value of Tekcapital’s portfolio of readily realisable technology companies trading on major exchanges is worth far more than the current market cap. Tekcapital’s management said they saw multi-million revenue for their portfolio companies in 2024, promising a step change in investor sentiment when this is achieved.

Tekcapital shares have dropped below 10p in recent weeks and are primed for a recovery during the festive season.

Angling Direct

Angling Direct has around a 12% market share of the UK angling market, and its revenue has grown 4x since its IPO in 2017. Despite revenue growing exponentially, at 40p, the group’s shares are well below the listing price. This has been picked up by Kelso Group, who took a 3% stake in the business at the end of November. One would expect this to grab the market’s attention and support a rally through December.

Greatland Gold 

Greatland Gold investors are awaiting an updated MRE (mineral resource estimate) for the Havieron gold project in Australia. The project holds one of the biggest gold discoveries of recent years. It could be about to get bigger. If the update MRE unveils a major increase in the resource, one would expect shares to tick nicely higher and provide GGP holders with an early Christmas present.

Fusion Antibodies 

Fusion Antibodies provides antibody engineering services for the discovery and development of antibodies to be used in drugs and therapies. The company has a blue-chip client base and has developed over 250 antibodies.

Fusion Antibodies has recently announced an important agreement with a US government agency that will provide further insight into their OptiMAL® antibody platform at little cost to Fusion. Should the tests be fruitful, the sky is the limit for Fusion’s shares, although investors are in for a wait for results. Anticipation could well send shares higher through December. The company is revenue-generating, although a recent trading update revealed revenue would be behind market expectations in the current half-year.

Cadence Minerals

Cadence Minerals is in for an exciting 2024. Cadence recently announced that the licensing process for company’s Brazilian flagship Amapa iron ore project had been accelerated, meaning the new year could see a volley of developments as the project moves towards restarting production.

Anglo American once valued the Amapa mine at more than $600m. Cadence has a 30% interest in the asset and an option to increase its stake. Cadence also has investments in rare earths and lithium, promising positive updates in the coming year.

RWS Group

Intellectual property and technology company RWS Group has rolled out AI-enabled services this year, and we’ll learn more about the new offering’s traction in December. In a year-end trading statement released in October, the company said it was enjoying growth in many business areas but saw revenue falling circa 2% for the period. Shares sank but have since recovered. RWS Group is due to publish preliminary results 12th December and will provide further insight into the year ahead.

Power Metal Resources

Power Metal Resources shares are on their knees, and if a Santa’s Rally can’t pick the share price up, it’s difficult to see what will. The company has a diverse portfolio of mining assets, both geographically and in terms of minerals. Most recently, Power announced positive exploration results from their Canadian uranium prospects. Power Metals shares may prove to be a great stocking filler for mining enthusiasts.

ECR Minerals

We recently summarised ECR Mineral’s upcoming activities on a UK Investor Magazine podcast. We should learn more about these activities during December, and one would think any positive developments would send shares higher into the new year. Listen to the Podcast here.

Boohoo

Boohoo have had a torrid time in 2023. However, starting from a low base, investor sentiment around Boohoo shares is starting to improve. The company still has a lot of progress to make in its turnaround strategy, which promises better news in the coming reporting season than investors have become accustomed to this year. Investor positioning for a better 2024 could see Boohoo involved in any end-of-year rally.

CleanTech Lithium

Lithium companies have been dogged by lower carbonate and hydroxide prices during 2023 and CleanTech shares now trade at just 21p after nearly reaching 90p in early 2023. The company has recently raised £8m to fund the development of their lithium brine projects. Investors are gearing up for strong newsflow in 2024 as the company releases early results from pilot direct lithium extraction projects.

Mitchells & Butlers shares sank on Thursday morning despite the pub and restaurant group saying sales grew in the last year and they had started to see cost pressures subside.

Although the group said like-for-like sales jumped 9.1% in the year to 30th September, adjusted operating profit fell to £221m from £240m and the company swung to an earnings per share loss as cost pressures ravaged the bottom line.

After a material rally from the October 2023 low to around 195p to 250p, Mitchells & Butlers shares dumped around 6% to 227p on Thursday morning.

“The pub chain behind Harvester and Miller & Carter had no problem filling seats at its tables last year. The focus on meeting punters’ preferences translated to LfL sales and volume growth across all brands. Mitchells & Butlers has something to offer most budgets,” said Derren Nathan, head of equity research at Hargreaves Lansdown.

“The continuing investment in the estate and customer service is translating into impressive outperformance in takings compared to the wider market. That’s likely to continue. And despite a 13.2% decline in pubs and restaurants in business since the outbreak of COVID-19, there could yet be more supply to come out of the market.”

However, investors want to see a profit and Mitchells & Butlers have failed to deliver. Top-line growth is encouraging, given the problems the industry faced during the pandemic, but if this doesn’t translate to greater earnings, shareholders are showing they will not hang around.

“It’s been more challenging to get the bottom line moving in the right direction. Sales growth wasn’t quite strong enough to offset cost headwinds of £175m faced in the period,” Nathan said.

Should the company secure material cost savings in the year ahead and maintain its strong market position, profit will likely return in the coming periods.

The FTSE 100 was again a laggard in the global equity arena on Wednesday as London’s leading index failed to partake in a rally spurred by US interest rate optimism.

The FTSE 100 underperformed Europe on Wednesday as the composition of the index meant it wasn’t as well placed to benefit from dovish US central bank comments as European peers.

Indeed, the German Dax was 0.95% higher at the time of writing, while the FTSE 100 languished in negative territory, down 0.1%. The S&P 500 was 0.3% higher.

“Comments from a usually hawkish Fed policymaker that there could be room for cuts to interest rates if the price spiral keeps heading in the right direction look set to push Wall Street higher at the open,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“But the FTSE 100 has opened on the backfoot with little to spark a wave of buying. Central bank policymakers in Europe have been more guarded, with Christine Lagarde of the ECB stressing that wage pressures remain elevated, and Andrew Bailey of the Bank of England warning that higher rates will be needed for a prolonged period.”

The FTSE 100 was held back by heavyweight financials reacting adversely to the prospect of lower rates.

“Financials helped to drag the FTSE 100 lower amid speculation about rate cuts given the potential implications for their profitability,” said AJ Bell investment director Russ Mould.

The FTSE 100’s banks have been beneficiaries of the global rate hiking cycle as rising interest rates drove higher income margins.

As the narrative around interest rate cuts starts to grow, it is likely banking institutions will increasingly fall out of favour for fear of lower earnings in the coming periods.

This was most evident in Asia-focused Standard Chartered and HSBC on Wednesday HSBC slipped 1.8%, and Standard Chartered gave up 2%.

Silver-focused precious metals miner Fresnillo was among the best performing FTSE 100 stocks as the dovish Federal Reserve comments buoyed gold and silver prices. 

Ocado displayed its ‘tech stock’ attributes and jumped over 4% on hopes interest rates would soon be cut and provide support for technology growth shares that thrive as discount rates fall.

Fusion Antibodies shares have continued a rip-roaring rally after announcing an agreement with the US National Cancer Institute.

Fusion shares added another 15% on Wednesday after more than doubling yesterday. The company’s stock is up in excess of 150% over the past five trading sessions.

Fusion Antibodies has signed a 2-year agreement with the National Cancer Institute (NCI) to use Fusion’s OptiMAL technology to discover novel antibodies against cancer targets selected by NCI.

Under the agreement, Fusion will provide NCI access to OptiMAL to develop potential therapeutic antibodies against an agreed number of primarily cancer targets.

The parties will collaborate to ensure successful validation of OptiMAL and may jointly publish results.

Validation will occur at NCI labs by NCI staff. Any identified antibodies would be retained by NCI, part of the US National Institutes of Health and the leading US government agency for cancer research and training.

The deal represents a major validation of Fusion’s OptiMAL technology and presents an opportunity to test it in conjunction with a world-class institution, without major cost to Fusion.

Adrian Kinkaid, CEO of Fusion Antibodies, commented: 

“At the time of our fundraise in May, we said that we would be seeking the support of third parties to continue to progress the delivery of OptiMAL^®. We are delighted to have been able to secure a partner with the expertise of NCI to provide validation to the technology without Fusion being required to commit significant resource to the project.”

Halfords shares were sharply lower on Wednesday after the group said in was facing a ‘challenging and volatile trading environment’ and reduced their profit before tax estimates for 2024FY.

Halfords narrowed their profit before tax guidance to £48m to £53m from prior guidance of £48m to £58m.

The downbeat amendment to profit guidance saw Halford shares crash more than 20% in early trade on Wednesday.

“A profit warning less than a fortnight since takeover talk surrounded Halfords certainly changes the narrative. No sooner were investors excited about the prospect of Halfords buddying up with van hire group Redde Northgate, we’ve now got reduced earnings guidance amid weak sales of bikes and tyres. The share price has understandably taken a beating,” said AJ Bell investment director Russ Mould.

“Apart from a fruitful period during the start of the pandemic where everyone was clambering to get hold of a bike, cycling hasn’t been kind to Halfords for a long time. One has to question the long-term future of bikes within the business.

“While it has a competitive strength in being one of the few national brands to sell bikes, thereby making it front of mind for consumers looking to buy such products, this remains a highly discretionary purchase and therefore earnings visibility is poor.”

Halfords has increased sales by 13.9% over the past year but the concern lays with sales growth over the coming periods should discretionary spending on big-ticket items such as bikes starts to waver.

The group’s autocentres were a major source of growth with a 33% jump in sales, including the impact of acquisitions. The company said these types of acquisitions form a base for growth and had earmarked capital to expand this side of the business.

Russ Mould added “the future for Halfords seems to be in motoring services where there is a more of a defensive element to its earnings. People rely on their cars to get from A to B and if something goes wrong most have no choice but to pay for repairs. On the whole this is non-discretionary spend and that creates opportunities for Halfords to find more ways to earn from drivers,”