The FTSE 100 experienced another volatile session on Thursday as the Uk government faced growing pressure to provide fiscal forecasts and U-turn on a number of measures unveiled in their mini-budget.

The FTSE 100 hits lows of 6,842, before bouncing back to trade at 6,933 at the time of writing.

Technical analysts will be conscious the index has now put in a short term double bottom in the 6,836-6,842 region which will form a level of technical support. A break of this level could open up the way to 6,800 and then a key Fibonacci retracement level at 6,685.

Bond purchases by the Bank of England have appear to built a floor in markets for now, but in such a highly fluid situation further volatility can’t be ruled out.

“After a highly volatile week, the febrile mood in the markets has been pacified a little by the Bank of England’s intervention to buy large chunks of UK government debt but signs are that investors have taken on a wait and see strategy,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

Government pressure

The UK government’s actions are almost entirely responsible for volatility in markets and the pressure continued on Thursday. Investors had been hoping for a direct response from the government to improve sentiment. Instead Liz Truss choose to appear on local radio stations instead of making direct statements.

The move by the PM further unnerved markets and sterling fell against the dollar while UK-facing FTSE 100 stocks plunged.

The UK housebuilders were heavily hit as more mortgage provider withdrew products from the markets. Barrett Developments crashed 12% to 324p, the lowest level since 2013.

Profit warnings

Next was also heavily hit after the retailer was the latest consumer facing company to warn on profits.

“If Next is struggling, you can be sure the retail sector is in a real fix. Among the most consistent of retailers, the company has an excellent track record and is a highly transparent communicator with the market,” said Russ Mould, investment director at AJ Bell.

“The message it has to deliver is a worrying one. True, Next does have a habit of managing expectations downward, to give it a lower bar to clear.”

“First-half results were strong and while the start to the current financial year was weak in August there was a notable pick-up in September. But there’s no disguising that behind the cuts to guidance lies deep uncertainty about the consumer backdrop.”

Mould went on to highlight next week’s earning and the threat of further profit warnings from companies exposed to the UK economy.

“Profit warnings are becoming a regular occurrence and there are several big names today telling investors to expect lower earnings than previously anticipated, including retailer Next. This raises the prospect of other consumer-facing companies disappointing the market and next week we have three big names reporting: Tesco, Greggs and Wetherspoons,” Mould said.

Porsche have completed the largest ever IPO in Europe today and shares immediately gained, despite wider market turmoil.

It is not uncommon for IPOs to be put back during times of volatility by Porsche took the decision to press on with their Frankfurt listing and raised €9.4 billion in at a €75 billion valuation.

Shares priced at the top end of the €76.50 to €82.50 range in an over subscribed offer.

“Investors were keen to get into the driver’s seat at Luxury carmaker Porsche with shares issued at the top end of the proposed range,” said Laura Hoy, Equity Analyst at Hargreaves Lansdown.

Porsche recorded €33.1bn revenue in 2021 and 24.5% EBITDA margin. In their 2022 half year report Porsche enjoyed €17.9bn, up from €16.5bn in the year prior.

Operating across the sports, gaming and personal finance sectors this global digital publisher connects advertisers and targeted, engaged audiences in helping to build up the brands.

The interim results for the half-year to end June from this XLMedia (LON:XLM) showed revenues of $44.5m ($32.2m) and an adjusted EBITDA of $10.6m ($6.6m).

The group ended the period with $17.7m in cash and short-term investments.

Rationalisation having its benefits

The recent rationalisation of the group’s activities and its online portfolio saw a massive reduction from over 3,000 sites to just around 45 currently. It has also set about cost saving to the tune of $4m a year.

The company saw a very strong performance from its Sports vertical which generated first half revenues of $14m, some 76% of group revenues.

It has a very strong focus upon the US sports sector, especially with an easing of regulations permitting sports betting across various of the US states. After opening its legal online sports betting in New York in January this year and is now operating in 16 US states. 

Strong US Sports advance

The group expects its full year adjusted EBITDA results to be in line with last year, while expecting to return to profits in 2023.

CEO David King stated that:

“Refocusing the business towards the rapidly growing US online sports betting market, managing the reduction in Personal Finance, while stabilising the Gaming vertical, alongside rightsizing the Group’s cost base, remains a key priority to ensuring new XLMedia is well placed for further growth.”

Broker’s opinion

Analysts Andrew Renton and Simon Strong at Cenkos Securities have rated the group’s shares as a Buy. 

They are estimating $69.8m ($66.5m) of revenues for this year to end December and an EBITDA of $16.5m ($17.9m).

The 2023 year could see $72.4m of sales and $17.3m of EBITDA.

The brokers consider that the group will have a healthy cash balance to fund both organic growth and future acquisitions to build its market share in US Sports.

They conclude that XLM’s valuation remains compelling trading on an EV/EBITDA multiple of 5.1x against its peers on 6.0x.

The group, which is a dollar dominated business, has its shares currently trading at 34.5p.

Next has been the latest retailer lower sales and profit forecasts in the face of slowing economic conditions.

After recording a 16% increase in profit before tax to £401m in the first half of 2022, the retailer says they are now lowering their full year profit guidance to £840m from £860m.

Next provided a detailed explanation of the now all too familiar economic pressures causing a downgrade in their guidance including rising prices, cost of living crisis and raised concerns about performance in August.

As the retailer said they saw sales being down 2% this, they did provide the caveat that government actions still had the ability to support the Uk consumer, in which case their 2% drop in sales would be too pessimistic.

Nevertheless, the combination of a reduced profit guidance and a backdrop of market volatility saw Next shares down 10% in early trade on Thursday.

Declining retail sales

Next joins a raft of consumer facing companies recently lowering their outlook. Boohoo this week warned on profit and ASOS have also said they see conditions deteriorating.

However, analysts note that Next’s outlook will be of particular concern for investors due to their place in the psyche of markets.

“Next is seen as a bellwether of the UK High Street and today’s cut to full year guidance lays bare the challenges being faced. Asos and Boohoo’s trading performance has been nothing short of dire. Even Primark’s recent trading update called out significant margin pressures. In this context, Next’s half year results are more resilient than most,” said Charlie Huggins, Head of Equities at Wealth Club.

“The fact that many retailers are struggling shouldn’t be a surprise. This is arguably the most difficult trading environment since the 2008/09 financial crisis. Inflation is at levels not seen for four decades. Sterling is in the doldrums, trading at its weakest level against the dollar since 1985. Add to this, the war in Ukraine and the spectre of further interest rate rises. It’s not exactly conducive to consumers restocking their wardrobes.”