FTSE Fades From Three-Week Highs On Renewed Inflation Concerns

By Patrick Munnelly of Tickmill

Tuesday, November 26, 2024 12:59 PM EDT

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Tuesday saw a decline in U.K. stocks as worries mounted that November's data would mark the end of the downward trend in inflation. Shop prices in the United Kingdom decreased more slowly in November, according to a survey released earlier today by the British Retail Consortium (BRC), suggesting that consumers will likely see more pricing pressure. November had a 0.6 percent annual reduction in the shop pricing index, which was less than the 0.8 percent decline in October. According to BRC Chief Executive Helen Dickinson, "November was the first time in 17 months that shop price inflation has been greater than the prior month, but still generally in negative territory."

Overnight remarks made by U.S. President-elect Donald Trump that, on his first day in office, he would slap tariffs on all goods entering the country from Canada, Mexico, and China also caused investors to react cautiously.

Single Stock Stories:

Shares of British food catering group Compass have decreased by 2.4%. The stock is listed among the top losers on the FTSE 100 index, which has declined by 0.5%. The firm anticipates high single-digit growth in 2025 underlying operating profit, which is marginally below analysts' average expectations of approximately 10%, maintaining annual underlying operating profit of approximately $3 billion, consistent with analysts' average expectations. The business projects 2025 organic revenue growth exceeding 7.5%. Including the session's losses, the stock is up 20.7% year-to-date.
Halfords Group's shares surged by as much as 9%, reaching 141p, making it the top percentage gainer on the FTSE Small Cap index. The British retailer of bicycles and car products highlighted "outstanding results" from its Fusion Motoring Services program, which has delivered "phenomenal returns" with a significant increase in both sales and profits. The company aims to expand the number of Fusion sites from 22 to 40 this year.

Despite reporting approximately a 1% decline in half-year adjusted pre-tax profit and revenue, the interim profit exceeded expectations and highlighted strong growth in Fusion garages. However, HFD anticipates future costs to rise by around £23 million ($29 million) due to increased employer social security contributions following the UK budget in October. The stock recently rose by 6.5%, reducing year-to-date losses to about 31%.

Broker Updates:

Shares of UK retailer Next increased by 0.26%. RBC has upgraded the stock from "sector perform" to "outperform," stating that the company is well-positioned to manage cost pressures. The brokerage also noted that Next's revenue is anticipated to surpass market expectations due to enhanced marketing efforts and increased consumer awareness of its product range and convenience. Last month, Next announced that it expects to report an annual profit exceeding £1 billion ($1.3 billion) for the first time in its history during the current financial year, highlighting the retailer's success. Additionally, the company raised its outlook for the third time in three months following a better-than-expected increase in third-quarter sales. The average rating among 19 brokerages covering the stock is "hold," with a median price target of 10,135p, according to LSEG. As of Monday's close, the stock had risen approximately 22% year-to-date.
Shares in Melrose Industries, which owns aerospace parts manufacturer GKN Aerospace, increased by approximately 7% to 564.2p. JPMorgan has raised its target price from 650p to 850p and maintained an "overweight" rating, stating that the stock is "significantly undervalued. JPMorgan highlighted that the aerospace engine industry has exceptionally long cycles and good visibility, predicting that Melrose will benefit from aftermarket profits from 2025 to 2030 on engines sold over the past 15 years. Last week, Melrose announced that it expects to generate substantial free cash flow in 2025. The average rating from 14 analysts is equivalent to a "buy," with a median price target of 625p, according to LSEG data. The stock's gains for the day nearly offset its year-to-date losses.

Technical & Trade View

FTSE Bias: Bullish Above Bearish below 8225