FTSE 100 analysis: UK house prices fall for 4th successive month – Top UK stocks

FTSE 100 falls

The FTSE 100 is down 0.3% at the start of a new week.

The economic calendar is quiet at the start of the new week, with the headline event today being a speech from the Federal Reserve’s Michelle Bowman, who said over the weekend that she believes the central bank will need to raise interest rates further to bring inflation down to desired levels.

The key economic events later this week are inflation figures out from China on Wednesday and the US on Thursday, with UK GDP figures to cap the week off on Friday. ‘Markets essentially want to see core CPI in the US fall harder and faster to justify their bets that the Fed are done hiking rates. And we’ll also find out if China’s annual inflation rate falls below zero for the first time in over two years,’ said our analyst Matt Simpson.

FTSE 100 analysis: Where next for the UK 100?

Let’s take a look at the UK 100, which tracks the performance of the FTSE 100.

The 50-day moving average has proven a reliable ceiling for the past two sessions and is continuing to provide resistance today. A sustained move above 7,540 is needed to clear this hurdle before it can look to recapture the two longer-term moving averages. From there, it needs to reclaim 7,650 before it can hope to test the upper trendline.

There is some evidence that the index is finding support at 7,500 but there is a safety net at 7,450. The lower trendline that can be traced back to the pandemic-induced lows we saw in early 2020 are then back in play.

Top UK stock news

Housebuilders like Persimmon, Barratt Developments, Taylor Wimpey and Redrow are mixed this morning after the Halifax House Price Index showed prices were 0.4% lower in July compared to June, and down 2.4% over the past 12 months, as higher interest rates continue to bite. That is the fourth consecutive month of lower prices.

NatWest is down 0.1% amid reports it has started to consider who will succeed former CEO Alison Rose following her recent departure, but the bank will only appoint someone after it has found itself a new chair, according to unnamed sources speaking to the Financial Times. NatWest was already looking for a new chair before Rose stepped down following the debacle involving politician Nigel Farage’s bank accounts at subsidiary Coutts.

Private equity group Inflexion is among the potential suitors for Nicotinell, the second largest smoking cessation brand in the world owned by London-listed Haleon, according to Sky News. The price tag for the brand is thought to sit around $800 million, the report said, as Haleon looks to sell off non-core brands in an effort to raise cash, pay down debt and narrow its portfolio of products. Haleon, which was spun-out of GSK last year, is down 0.1% in early trade.

Iron ore giants like Rio Tinto and Anglo American are down 0.8% and 1.4%, respectively, after commodity prices took a hit following a note from Goldman Sachs that warned China could cut steel output in the second half of 2023, sending iron ore to its lowest level since early June. Goldman Sachs warned the iron ore market risks a ‘clear bearish demand shock’ if China does reduce steel production.

PageGroup is down 0.3% soon after the opening bell after it said earnings were down heavily in the first half as it experienced tougher conditions in Asia, the UK and the US as candidates become more reluctant to take new job offers. Revenue was up 5.8% from last year at £1.03 billion but earnings plunged, with pretax profit falling almost 45% to £63.3 million. Profits fell more than expected considering analysts had forecast £65.2 million. ‘The challenging conditions we saw towards the end of 2022 continued into H1 2023, with lower levels of both candidate and client confidence resulting in delays in decision making and candidates being more reluctant to accept offers. Reflecting the uncertain macro-economic conditions, temporary recruitment outperformed permanent, as clients sought more flexible options,’ said PageGroup. Still, PageGroup raised its interim dividend by 4.5% to 5.13p and it announced a special one-off payment worth another 15.87p per share. PageGroup reiterated its full year guidance and said there are still candidate shortages, a ‘good level’ of vacancies and ‘high fee rates’.

Kosmos Energy is down 5.8% in early trade after becoming the latest oil and gas producer to report a sharp fall in profits in the first half as the boost provided from higher prices last year unravels. Revenue dropped to $667.5 million from $1.28 billion the year before, causing pretax profit to drop to $192.8 million from $207.0 million. The company’s new Jubilee South East field began production in July, just after the first half ended, and it is now producing 100,000 barrels of oil per day! That marks an inflection point for Kosmos considering it only produced 58,000 barrels daily from its other operations in the first half. ‘The start up of the first of three key development projects for Kosmos is an important step to realizing the free cash flow inflection point we expect as production rises and capital spending starts to fall. With the additional production from Jubilee year-to-date, we are currently around half way to achieving our 50% production growth target from 2022 levels,’ said Kosmos. Two more projects are expected to come online in the first quarter of 2024.

Clarkson is up 0.5% after it upped its dividend after reporting higher revenue and earnings in the first half of 2023, giving it the confidence to reiterate its full year expectations. The shipping giant said revenue jumped to £321.1 million from £266.7 million the year before, with undeyling pretax profit rising 25.8% to £53.1 million. Clarkson raised its interim payout to 30p from 29p. ‘While mindful of the currency headwinds and softening rate environment, which are expected to result in a more balanced split between the first and second half, our expectations for the full year are unchanged,’ said CEO Andi Case.

LSL Property Services is down 0.7% this morning after it said its results in the first half of 2023 were hit by the challenging mortgage market, which has reduced demand for its surveying and financial services. The company said it was hoping for things to moderate in the second half but it has since seen a further reduction in demand for home purchases and re-mortgaging following the larger than anticipated rate rise by the Bank of England in June. ‘Whilst group underlying operating profit was broadly in line with our expectations in the first half, the recent change in mortgage market conditions will significantly impact second half group profits which are now expected to be lower than our previous expectations,’ the company warned.

Carr’s Group CEO Peter Page will not be seeking re-election when it holds its annual general meeting in early 2024 and plans to step down, prompting a search for his successor. The agricultural and engineering services provider is up 0.2% this morning.

Rolls Royce has been upgraded to Neutral by JPMorgan and given a price target of 235p. The airplane engine maker is up 0.7% today at 208p.

Unite Group has been downgraded to Sector Perform by RBC, which has a price target of 1,100p on the student accommodation provider. The broker said it has become more difficult to justify its earnings yield relative to the wider sector. The stock is down 2.1% today at 943p.