The FTSE Finish Line: December 16 - 2024
Patrick Munnelly, Partner: Market Strategy, Tickmill Group
FTSE Starts The Week On The Backfoot Ahead OF Central Bank Bonanza
U.K. stocks dipped on Monday, while the pound strengthened in anticipation of the flash PMI data set to be released later in the day. The Bank of England is scheduled to meet on December 19, with analysts expecting interest rates to remain unchanged. The FTSE 100 index fell by 0.3% following a 0.1% decline on Friday. Sterling encountered sellers after an increase following the positive UK December services PMI, which came in at 51.4 compared to the forecast of 51.0 (the services sector is the largest part of the UK economy). Attention is focused on the direction of global monetary policy as the U.S. Federal Reserve, Bank of Japan, and Bank of England prepare to announce their rate decisions this week. The Fed is anticipated to lower rates by 25 basis points on Wednesday, while the BoE is expected to maintain its current rates on Thursday, with similar expectations for the Bank of Japan. On the economic front, British manufacturers have reported the steepest decline in confidence since the onset of the COVID-19 pandemic, attributed to rising costs, including tax hikes from the new government, according to a sector representative. Additionally, average asking prices for newly listed homes and apartments dropped by 1.7% in December, although market activity remained strong, as reported by property website Rightmove.
Single Stock Stories:
UK's Entain experienced a drop of as much as 5.5%, making it the biggest percentage loser on the FTSE 100 index. This decline follows legal action initiated by Australia's financial crime watchdog against Entain's unit, which owns Ladbrokes. The case involves allegations of breaches related to anti-money laundering and counter-terrorism financing laws on its online betting platforms. Entain's CEO, Gavin Isaacs, cautioned investors about the possibility of a significant financial penalty resulting from these proceedings. As of the last close, Entain's stock has decreased by approximately 18% this year.
Shares of Saga rose 5.3% after announcing a 20-year insurance partnership with Ageas, which will pay Saga £80 mln upfront and acquire its Insurance underwriting business for £65 mln. Ageas will handle distribution, pricing, underwriting, claims, and customer service, while Saga retains marketing. SAGA shares are down ~11% YTD.
Broker Updates:
Shares of Videndum, a provider of hardware and software solutions related to content, fell by 10.9% to 228p, making it the biggest loser on the FTSE small cap index. The company projects its FY24 revenue to be approximately 280 million pounds ($353.72 million), down from 306.9 million pounds reported last year. It has indicated a slower-than-anticipated market recovery and expects to achieve 10 million pounds in cost savings for FY24. Analysts at Jefferies noted, "While there is still significant recovery potential and restructuring costs to be realized, management must effectively manage costs and cash, as the market recovery is slower than expected, and debt levels need to be reduced." Including today's losses, the stock has declined by 32.5% year-to-date.
Shares of Bunzl Plc, a specialist in international distribution and services, increased by 1.31%. RBC has upgraded the stock from "sector perform" to "outperform" and raised the price target from 3,350p to 4,000p. According to RBC, BNZL's positive earnings outlook, which is supported by margin growth, mergers and acquisitions, and share buybacks, is undervalued compared to its 'defensive growth' peers. The brokerage also notes that BNZL's robust revenue in North America and expected growth in stable markets indicate it should be valued similarly to other leading growth companies, with a smaller discount. In October, the company reaffirmed its full-year guidance. The average rating from 18 brokerages covering the stock is "hold," with a median price target of 3,515p, according to LSEG. As of Friday's close, the stock has risen approximately 12% year-to-date.
Technical & Trade View
FTSE Bias: Bullish Above Bearish below 8225
Primary support 8000
Below 8000 opens 7855
Primary objective 8600
Daily VWAP Bearish
Weekly VWAP Bullish
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!