The FTSE 100 staged a rally on Friday morning with the house builders leading the way after suffering sharp declines earlier in the week.

Barrett Developments was the top riser gaining some 5% and Persimmon was 4% stronger while the FTSE 100 was 0.95% higher at the time of writing.

Banks were also gaining as the same sentiments driving housebuilders higher also saw support for Lloyds, Natwest and Barclays. Lloyds shares were 3.4% higher while Natwest gained 2.9%.

In a sign of improving sentiment – albeit from a very low base – defensive names such as Unilever, Reckitt Benckiser, and BAE Systems were all negative on the day.

In what has been an extremely volatile week, there was a general recovery in UK assets on Friday with GBP/USD gaining 0.3% to 1.1148 and UK 10-year yield dropping to 4.07%. A better than expected read on UK Q2 GDP will also help improve the mood after the original 0.1% contraction was revised to 0.2% growth.

This will ease any concerns of an imminent technical recession but the coming quarters could well see the UK slip in contraction and recession.

“The Office of National Statistics has released its revised view of recent GDP data this morning. Growth in Q2 of this year has been revised up from -0.1% to growth of 0.2%. Hardly a blistering pace, but enough to mean that the UK has not already entered recession, contrary to some forecasters,” said Steve Clayton, Fund Manager at HL Select.

Any further pick up in UK assets will hinge on the market’s perceptions of the government’s ability to provide some balance to their radical spending plans and tax cuts. The Tory will hold their conference this weekend and markets will be watching closely for any signals about their intentions to push forward with their proposals.

As we noted yesterday, we will receive updates from consumer facing companies such as Tesco and Greggs next week and investors will be keen to gauge the health of the UK consumer following a raft of retail profit warnings this week.

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.