Weekly review

The FTSE 100 ended the week down 110.86 points, or 1.5%, closing at 7,291.28 on Friday.

Equity view

British Airways owner IAG reported a record-breaking third-quarter operating profit of €1.745bn on Friday, marking a substantial increase from the €1.216bn reported in the same period of 2022. The FTSE 100 company, which also owns airlines including Iberia and Aer Lingus, said that performance translated into an operating margin of 20.2%, up from the 16.6% margin it recorded a year ago.

Veterinary group CVS said on Friday that chair Richard Connell has decided to resign immediately due to ill health. Senior independent director Deborah Kemp will assume the role of chair on an interim basis while the board starts appointing a permanent successor.

Replacement window and door specialist SafeStyle UK confirmed the suspension of its shares from trading on Friday in an update on its efforts to secure its future. The AIM company recently revealed concerns about the viability of a proposed sale.

Electrical parts manufacturer XP Power, which disappointed the market earlier in the month after warning on profits due to weaker trading conditions, said it has taken “significant action” to cut costs and preserve cash. On 2 October, the company said it was cutting its dividend with the full-year outlook below prior expectations. Reduced demand led some customers to defer shipments into 2024 while the Chinese market struggled.

Paper packaging specialist DS Smith reiterated its guidance for first-half operating profits thanks to a sequential improved corrugated box volume performance and better-than-expected pricing. Earnings before interest, taxes, and amortisation were seen at roughly £360m over the six months to 31 October.

GSK announced on Thursday that its majority-owned HIV specialist subsidiary ViiV has received approval from the National Medical Products Administration (NMPA) of China for an injection regimen. The FTSE 100 pharmaceuticals giant said the approval was for ‘Vocabria’, or cabotegravir injection, used in combination with Janssen Pharmaceutical’s ‘Rekambys’, or rilpivirine long-acting injection, for the treatment of HIV-1 infection.

In an update on Thursday, automotive distributor Inchcape reported third-quarter revenues of £2.8bn, making for growth of 35%, with organic revenue growth at 10%. The FTSE 250 company said its distribution segment stood out with 13% organic revenue growth, while the Asia-Pacific region continued to be a significant driver with widespread expansion across its markets.

On Thursday, Unilever laid out plans to boost growth as it posted a dip in third-quarter revenues. The consumer goods giant, the owner of Dove, Marmite, Persil and Hellmann’s, among many others, said sales fell 3.8% in the third quarter to €15.2bn, dragged lower by foreign exchange headwinds and a weaker performance in nutrition and ice cream.

Precious metals miner Fresnillo said it remains on track to hit full-year production targets despite both silver and gold output falling in the third quarter. Silver production totalled 14.1m ounces in the three months to 30 September, down 5.1% on the second quarter but up 3.8% on last year, as the ramp-up of its new Juanicipio mine offset lower production at Noche Buena as it nears its end of life.

Government contractor Serco said it had appointed Andrew Head as chief executive of its Asia Pacific operations, effective immediately. Head spent 20 years at road operator Transurban and finished his tenure with five years as CEO of WestConnex, responsible for Australia’s largest road infrastructure project.

Essentra said on Wednesday that full-year adjusted operating profit was set to be “towards the lower end” of its expectations due to a “softer” trading environment. In an update for the 13 weeks to 30 September, the company said that revenue fell 7.1% on the same period a year earlier on a like-for-like and trading day adjusted basis. This is an improvement on the 11.9% decline in the second quarter.

Brick and building materials maker Ibstock maintained annual guidance despite lower volumes as higher prices, and cost controls offset weaker demand in the housebuilding market. In a trading update, Ibstock said it would continue actively managing capacity and costs to “ensure that our capacity is aligned to market demand whilst ensuring we are well positioned to respond when activity levels recover”.

Multi-metal mining giant Anglo American has cut copper production guidance for the full year but said it remains on track to hit all other output targets. Copper production guidance for 2023 has been revised to 830,000-870,000 tonnes, down from earlier forecasts of 840,000-930,000 tonnes.

Irn Bru maker AG Barr said on Tuesday that it had bought the Rio Tropical soft drinks brand from independent brewer Hall and Woodhouse for £12.3m in cash. The brand has been marketed, sold and distributed on an exclusive licence basis by AG Barr’s recently acquired Boost Drinks division since 2021.

Semiconductor group Alphawave IP reported a mixed third quarter, with falls in licence and non-recurring engineering (NRE) contract wins dragging down new bookings by 9%. Alphawave IP, which provides wired connectivity solutions for data to travel faster, said new bookings totalled $72.9m during the three months to 30 September, down from $80m a year earlier.

Multi-asset fintech specialist Plus500 reported a robust third-quarter performance on Tuesday, during a period marked by lower market volatility and trading volumes. The FTSE 250 company’s chief executive officer, David Zruia, expressed satisfaction with its performance, citing a focus on high-value customer acquisition, geographic expansion, and product innovation.

Vistry reiterated its full-year profit guidance on Monday despite house sales failing to pick up as expected. Updating on third-quarter trading, the FTSE 250 housebuilder said it continued to target adjusted pre-tax profits of £450m for the full year.

Addiction treatment drug maker Indivior said it had agreed to pay $385m to resolve the final lawsuit claims against it in the long-running Suboxone anti-trust case. The company, which makes anti-opioid treatments, said it would also take a $228m charge in the third quarter, excluding it from adjusted earnings. It faced claims by direct purchasers it illegally suppressed generic competition for its opioid addiction treatment, Suboxone.

Specialist geotechnical contractor Keller Group said in an update on Monday that it anticipated full-year underlying operating profit to exceed current market expectations significantly. The FTSE 250 company put the performance down to several factors across different regions, reporting that in North America, it had surpassed expectations due to resilient pricing in Suncoast and continuous operational improvements in the foundations business.

Horizonte Minerals remained upbeat on progress on the construction of the Araguaia Nickel Project in Brazil on Monday, despite some challenges requiring an increase in the project’s budget of more than a third. The AIM-traded firm said it had achieved zero lost time injuries during nearly 5.1 million hours of work, with milestones including the installation of rotary kiln sections on support piers and the completion of the furnace shell, with roof installation in progress.

Economic news

High street sales rose slightly last week after three straight weeks of declines, as online growth made up for weakness in store. According to the BDO’s High Street Sales Tracker, like-for-like sales increased by 0.97% in the week ended 22 October, from a flat base of +0.27% the same week last year.

Retail sales volumes tumbled in October, industry research showed on Thursday, as higher interest rates and cost of living pressures continued to weigh heavily. According to the Confederation of British Industry’s latest Distributive Trades Survey, the retail sales balance fell to -36 from -14 in the year to September, the sixth consecutive monthly fall.

UK carmakers increased output by nearly 40% in September, but industry leaders have warned of the imminent threat of new Brexit rules that could increase the cost of electric vehicles by over £3,000. Car manufacturing across British factories increased 39.8% year-on-year to 88,230 vehicles last month, some 25,105 more than in September 2022, according to the figures published Thursday by the Society of Motor Manufacturers and Traders (SMMT). This was the strongest month of 2023 so far and the best September output since 2020.

Financial watchdog, the Financial Conduct Authority, warned about common issues with crypto marketing on Wednesday after a change in legislation brought crypto-asset promotions under its remit. Since 8 October, the FCA has supervised firms against a new regime designed to give consumers the correct information and risk warnings. It now expects authorised firms approving the financial promotions of crypto-asset firms to “take their regulatory obligations seriously”.

The Prudential Regulation Authority (PRA) has removed a limit on bonuses in the banking sector after finding that pay and “allowances” have been creeping up over the past decade. Banks have long complained that the bonus cap, which limited bonuses to double the number of fixed salaries, is preventing them from securing the best senior banking talent from overseas.

According to a survey by the Confederation of British Industry, UK manufacturers saw the worst monthly fall in orders in October since January 2021. The CBI’s monthly industrial orders balance declined to -26 from -18 in September, missing expectations for an improvement to -16.

According to a survey released on Tuesday, business activity in the UK services sector fell again in October. The S&P Global/CIPS flash services business activity index dipped to 49.2 from 49.3 in September, falling for the third month in a row. Economists were expecting the reading to be unchanged on the month.

The UK unemployment rate ticked up to 4.2% in the three months to August from 4.0% in the three months to July, according to figures released on Tuesday by the Office for National Statistics. This was the ONS’ first month using a new methodology to calculate the rate.

International events

America’s economy accelerated during the third quarter, bolstered by household spending, while price pressures ebbed further. According to the US Department of Commerce, gross domestic product expanded at a quarterly annualised clip of 4.9% (consensus: 4.5%).

Jobless claims in the US rose as expected during the preceding week, reflecting companies’ efforts to hold onto workers. According to the Department of Labor, in seasonally adjusted terms, initial unemployment claims rose by over 10,000 during the week ending on 21 October to reach 210,000.

As widely expected, the European Central Bank left interest rates on hold on Thursday after 10 consecutive hikes. The Bank left its key deposit and refinancing rates unchanged at 4.00% and 4.50%, respectively, in line with consensus expectations. As expected, the marginal lending facility rate was also left on hold, at 4.75%.

New home sales in the US came in at an accelerated clip in September, rising 12.3% month-on-month to the highest level seen since February 2022. According to the Census Bureau, sales of new homes totalled 759,000 in September, up from 676,000 in August and ahead of consensus estimates for a reading of 680,000.

Business sentiment in Germany strengthened in October, a closely watched survey showed on Wednesday. The latest Ifo Business Climate Index came in at 86.9 in October, up from 85.8 a month previously. Respondents’ view of the current situation was essentially unchanged, edging up to 89.2 from 88.7. But the expectation index for the months ahead rose to 84.7 from 83.1, the highest since May.

Beijing has backed a major sovereign bond issue as the authorities look to boost China’s faltering economy. According to state media, the Standing Committee of the National People’s Congress - China’s most senior legislative body - has backed a 1trn yuan (£110bn) sovereign bond issue. It also passed a bill allowing local governments to frontload part of their 2024 bond quotas.

US business activity picked up a little in October while inflationary pressures eased, according to a survey out on Tuesday. The S&P Global flash composite purchasing managers’ index - which measures activity in the services and manufacturing sectors - rose to 51.0 from 50.2 in September. A reading above 50.0 indicates expansion, while a reading below signals contraction.

The economic downturn in the Eurozone deepened in October, with private sector output declining at its steepest rate in 35 months, according to ‘flash’ purchasing managers’ indices (PMIs) out on Tuesday. The flash Eurozone composite PMI dropped to 46.5 in October, down from 47.2 in September, surprising economists who had expected a slight tick-up to 47.4.

Consumer sentiment in Germany declined for a third straight month in October as hopes of a recovery before the end of the year began to fade. The GfK’s forward-looking forecast value for the consumer climate in November dropped to -28.1 points, compared with a revised -26.7 the previous month. Analysts were expecting a figure closer to -26.5.