Market report

FTSE 100 plunges on rate cut delays | DS Smith takeover


Market close: Fed chair urges rate caution

Jerome Powell

Better figures from China failed to halt a slide in the FTSE 100 which closed 145.17 points (1.82%) lower amid geopolitical tensions and concerns that interest rate cuts will be delayed. UK wage growth also continues to trend strongly.

US stocks finished mixed on Tuesday after bond yields climbed on the back of comments from Federal Reserve chair Jerome Powell, who said the central bank needed more confidence that inflation was on a downward trend before cutting interest rates.

Mr Powell cautioned on market expectations for two or three rate cuts in 2024 – projections that were discussed by Fed officials at their latest meeting. “Right now, given the strength of the labour market and progress on inflation so far, it’s appropriate to allow restrictive policy further time to work,” he said.

The Dow Jones snapped a five-day losing streak to finish 0.2% higher, bouncing back after finishing at a three-month low the previous session. The S&P 500 fell 0.2% to 5,051 and the Nasdaq lost 0.1% to 15,865.

New data showed US factory output increased by 0.4% in March, driven by a 0.5% increase in manufacturing, further setting back hopes for early cuts to base interest rates.

In London, technology stocks, miners and banks suffered the steepest falls with a sharp decline in Dr Martens, whose shares fell by a third after the shoemaker issued a profit warning and announced the departure of chief executive Kenny Wilson.

The UK unemployment rate rose in the three months to February to 4.2% from 4% in the previous quarter, while year-on-year growth in average earnings topped expectations.

China economy stronger

China’s economy made a stronger-than-expected start to the year, even as the crisis in its property sector showed few signs of easing.

Gross domestic product expanded by 5.3% in the first three months of 2024, compared to a year earlier, beating expectations the world’s second largest economy could see growth slow to 4.6% in the first quarter.

However, data from the National Bureau of Statistics (NBS) also showed first quarter retail sales growth, a key gauge of China’s consumer confidence, fell to 3.1%.

In the same period property investment fell 9.5%, highlighting the challenges faced by China’s real estate firms.

Full story and IMF growth forecast


Wood Group ‘sell’ call

John Wood Group, the Aberdeen-based energy services company, is facing pressure from a large shareholder to find a buyer or re-list elsewhere.

Chairman Roy Franklin is understood to have received a letter from top ten shareholder Sparta Capital Management indicating dissatisfaction with Wood’s share price and urging it to engage with potential bidders who can drive the share price.

John Wood shares closed 0.3% higher at 140.4p on Monday and rose a further 1.5% (2.1p) to 142.50 on Tuesday, but they are 38% lower than a year ago and 71% lower than five years ago.

Full story here


DS Smith agrees £5.8bn takeover

International Paper Company has announced a recommended all-share takeover of DS Smith with an implied value of £5.8 billion.

The companies say the combination will bring together complementary businesses to create a global sustainable packaging solutions business, with industry leading positions in two of the most attractive geographies of Europe and North America.

The focus on sustainable packaging makes it well-placed to serve a broad set of customers across a wide range of attractive and growing end-markets.

The deal values each DS Smith Share at 415 pence with DS Smith shareholders receiving 0.1285 wew International Paper shares for each share they hold. There is an enterprise value of £7.8bn


Superdry to delist

Superdry

Fashion retailer Superdry has announced a restructuring plan that will see it leave the London Stock Exchange.

Shares in the group have tanked this year, with sales falling and losses piling higher after a disappointing Christmas trading season.

As part of the restructuring plan, “rent reductions” are planned for 39 Superdry sites.

Superdry said: “Together, the restructuring plan, equity raise and delisting constitute a key package of measures that are needed to allow Superdry to return to a more stable footing, accelerate its turnaround plan and drive it towards a viable and sustainable future. 

“Therefore, each element of this package will be inter-conditional upon the others, such that the package as a whole requires each of the restructuring plan, equity raise and delisting to be approved.”

Existing shareholders will vote on two potential equity rounds- one an open offer to raise £6.8 million and the other a £10m placing.


ScottishPower overcharged

ScottishPower will pay customers £1.5m in refunds and compensation, after it was found to have charged them above the price cap during the height of the energy crisis.

The Glasgow-based firm charged 1,699 direct debit customers a higher rate between 2015 and 2023 – across 11 price cap periods – which should only have applied to those who pay by standard credit, or on receiving a bill.

Ofgem said ScottishPower is paying a total of £250,000 in direct refunds to affected customers as well as another £250,000 in goodwill payments, equating to an average of £294 per customer. No action is required by customers as payments will be made automatically.

ScottishPower said it has put additional controls and monitoring in place to reduce the risk of anything similar happening in future.


CVC chooses Amsterdam

CVC Capital Partners, which owns a stake in Six Nations Rugby, has announced plans to list in Amsterdam at a valuation of up to €15 billion in a further blow to the London stock market.

The European private equity firm and its backers are seeking to raise at least €1.25 billion with the initial public offering, after previously postponing its plans due to upheaval in the Middle East.

CVC is majority owned by current and former employees, with institutional investors holding a stake of about 18%. Partners in the company will be subject to lock-in agreements on shares for between three and five years after the initial public offering.

It is one of most successful buyout groups, with assets under management of €186 billion. The firm was spun out of Citigroup in 1993.

Companies listing in London fell to the lowest level since 2009 last year, raising just $1 billion. One of the biggest blows was Japan’s SoftBank listing ­its Cambridge-based subsidiary Arm in New York, despite government lobbying to keep it in London.



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