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LONDON BRIEFING: Persimmon warns of tough year as UK house prices fall

1st Mar 2023 07:55

(Alliance News) - Stocks in London were called higher on Wednesday, ahead of manufacturing PMI readings from Europe, the UK and the US.

Asian equities, Hong Kong in particular, got a boost from a stronger-than-expected manufacturing purchasing managers' index for China.

The Caixin manufacturing PMI rose to 51.6 points in February from 49.2 in January. Crossing over the 50-point no-change mark, it shows the sector is now in a state of modest growth. It was higher than the market consensus forecast of 50.2, as cited by FXStreet.

This follows the rollback of the country's strict zero-Covid measures.

In the UK, house prices fell 1.1% on an annual basis in February, according to Nationwide, with prices also seeing the sixth consecutive monthly fall.

Meanwhile, UK shop price inflation accelerated to a record annual rate of 8.4% in February, as food prices rose 15% from a year before.

In early corporate news, Persimmon warned of pressures on margins to come in 2023, while Reckitt Benckiser swung to profit in 2022.

Here is what you need to know at the London market open:




FTSE 100: called up 31.0 points, 0.4% at 7,907.28


Hang Seng: up 4.0% at 20,585.37

Nikkei 225: closed up 0.3% at 27,516.53

S&P/ASX 200: closed down 0.1% at 7,251.60


DJIA: closed down 232.39 points, or 0.7%, at 32,656.70

S&P 500: closed down 12.09 points, or 0.3%, to 3,970.15

Nasdaq Composite: closed down 11.44 points, or 0.1%, to 11,455.54


EUR: unchanged at USD1.0613

GBP: down at USD1.2060 (USD1.2118)

USD: up at JPY136.26 (JPY136.11)

Gold: up at USD1,836.26 per ounce (USD1,827.19)

Oil (Brent): firm at USD83.96 a barrel (USD83.50)

(changes since previous London equities close)




Wednesday's key economic events still to come:

10:00 CET EU manufacturing PMI

09:55 CET Germany manufacturing PMI

09:55 CET Germany labour market statistics

11:00 GMT Ireland unemployment

09:30 GMT UK manufacturing PMI

09:30 GMT UK narrow money and reserve balances

10:00 GMT UK BOE Governor Andrew Bailey speaks

07:00 EST US MBA mortgage applications survey

09:45 EST US manufacturing PMI

10:00 EST US ISM report on business manufacturing PMI


UK house prices fell in February from a year before, according to a mortgage lender. The Nationwide House Price Index fell 1.1% on an annual basis in February, compared to a 1.1% rise seen in January. On a monthly basis, prices fell 0.5% in February, slowing slightly from a 0.6% decline in January. It was the sixth consecutive monthly decline. The average price of a UK house was GBP257,406, down from GBP258,297 in January. House prices in February were 3.7% below their August peak.


Energy suppliers "must be ready" to pass on cuts to wholesale energy prices to UK consumers, Grant Shapps is set to warn. The UK energy secretary is expected to use a speech at Chatham House in London to put suppliers on notice as he sets out his aim of ensuring the UK has "amongst the cheapest wholesale electricity prices in Europe". It comes as Downing Street indicated measures that could see households face a 20% hike in energy bills from April are being kept under review, with the energy price guarantee cap set to rise from GBP2,500 a year for the typical property to GBP3,000 in April.


UK shop price inflation hit a fresh high in February, according to data from BRC-NielsenIQ. Annual shop price inflation accelerated to 8.4% in February, from 8.0% in January. This was above the three-month average of 7.8% and brought shop price growth to a new record. Annual food inflation quickened to 14.5% in February from 13.8% in January, while non-food inflation worsened to 5.3% from 5.1%. Month-on-month, overall shop price inflation picked up to 0.8% in February from 0.7% in January.




Berenberg cuts BAE Systems to 'hold' (buy) - price target 950 (900) pence


Liberum raises Smith & Nephew to 'buy' - price target 1,410 pence




Housebuilder Persimmon said annual revenue rose 5.7% to GBP3.82 billion in 2022 from GBP3.61 billion in 2021. Pretax profit fell 24% to GBP730.7 million from GBP966.8 million, however. This reflects a GBP275.0 million increase in Persimmon's provision for building safety remediation, which relates to flammable cladding. The average selling price in 2022 increased 4.9% to GBP248,616, as new home completions rose 2.2% to 14,868. Looking ahead, Persimmon said its current outlet network would imply 8,000-9,000 legal completions in 2023, but it is too early for any certainty. Margins could be hit by around 500 basis points by lower average selling prices and cost inflation, with another 800 basis point hit from reduced volumes and increased sales incentives and marketing costs. Persimmon proposed a 60p final dividend, which will be the only payout for 2022. "2023 promises to be a tough year, albeit largely for reasons beyond our control," said Chair Roger Devlin.


Consumer goods firm Reckitt Benckiser said net revenue grew 9.2% to GBP14.45 billion in 2022 from GBP13.23 billion in 2021. It swung to a pretax profit of GBP3.07 billion from a loss of GBP260 million. Like-for-like net revenue growth was 7.6%, with a decline in the Hygiene division offset by strong growth in Health and Nutrition. Reckitt raised its annual dividend by 5.0% to 183.3p. Looking ahead, it targets like-for-like net revenue growth in the mid-single digits, excluding the US nutrition impact. "We enter 2023 as a strengthened business with enhanced financial, operational and brand resilience, and continued growth momentum," said CEO Nicandro Durante.




Aston Martin rounded off 2022 with a stronger final quarter. In the year as a whole, the luxury carmaker's revenue rose 26% to GBP1.38 billion from GBP1.10 billion, but pretax loss widened to GBP495.0 million from GBP213.8 million. In the fourth quarter, revenue rose 46% to GBP524.3 million, and the firm swung to a pretax profit of GBP16.3 million from a GBP25.2 million loss. Aston Martin said it exited 2022 with "the strongest order book in many years". In 2023, it expects significant growth in profitability, driven by higher volumes and gross margin in both Core and Special vehicles. It also anticipates 2023 will be the "peak year" of capital expenditure, expecting to fork out GBP370 million for capex and research & development.




Food delivery company Just Eat said revenue rose 4.3% year-on-year to EUR5.56 billion from EUR5.33 billion. Pretax loss widened to EUR5.77 billion from EUR1.05 billion, however. This was mostly due to impairment losses of EUR4.6 billion related to the Grubhub acquisition and Just Eat merger, which Just Eat Takeaway blamed on macroeconomic factors, including rising interest rates. "Management, together with its advisers, continues to actively explore the partial or full sale of Grubhub," Just Eat Takeaway said.


By Elizabeth Winter, Alliance News senior markets reporter

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