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On Tuesday, the primary stock index in the UK encountered a dip, primarily due to the struggles in the communications sector. This decline was set against a backdrop of cautious global market sentiment, fuelled by looming trade tensions between the US and China. Despite this initial setback, there was a glimmer of hope as global risk sentiment started to rebound, with markets eagerly anticipating a crucial discussion between the Presidents of the US and China. The outcome of this pivotal call holds the potential to sway market dynamics significantly. The communications sector took a significant hit on the benchmark index, with Vodafone leading the decline by plunging 6.4% following reports of continued setbacks in its largest market, Germany, during the third quarter. Meanwhile, the oil and gas sector suffered the most among its peers, experiencing a 1.1% drop attributed to a nearly 2% decrease in U.S. crude prices triggered by the imposition of tariffs on China by the United States. Diageo saw a substantial decline of up to 4.7%, hitting its lowest point since November 6, after the spirits company decided to abandon its medium-term organic sales growth target in response to the impact of U.S. tariffs on its tequila and Canadian whisky products. The beverages sector also faced a downturn, with a decrease of 0.5% adding to the overall market challenges. In terms of macroeconomic developments, the Bank of England is anticipated to lower interest rates by 25 basis points on Thursday. Additionally, on that day, markets will receive the PMI data for Britain for the month of January.Single Stock Stories:
Vodafone’s shares plummeted by as much as 6.5% to 65.44p, securing its position as the top percentage loser on the FTSE 100 index. The European mobile giant faced a tumultuous period as its performance in Germany, its largest market, deteriorated during the third quarter. This decline was underscored by a significant 6.4% drop in service revenue for Germany in the same period, primarily attributed to the repercussions of changes in pay TV legislation. Despite these challenges, CEO Margherita Della Valle remains optimistic, emphasising ongoing investments in the revitalisation of the German operations and observing positive trends in customer engagement, albeit within a demanding mobile market landscape. In a strategic move, the company initiated a 480 million euro share repurchase program to bolster investor confidence. Year-to-date, Vodafone’s stock has experienced a modest decline of around 2%, reflecting the broader challenges faced within the telecommunications sector.
Diageo, the renowned spirits maker, saw its shares dip by approximately 2.4% to 2,308.5p, marking a near three-month low and positioning itself as one of the prominent losers on the FTSE 100 index. The company’s decision to retract its medium-term organic sales growth target reflects the impact of U.S. tariffs, prompting strategic measures to counteract these challenges. Diageo is considering various approaches such as pricing adjustments, inventory management enhancements, reallocation of investments, and optimisation of the supply chain to alleviate the effects of tariffs. Previously, the company had set a target of 5% to 7% medium-term organic net sales growth. In the first half of the fiscal year 2025, organic net sales increased by 1%, surpassing analysts’ projections of 0.4% growth. However, in 2024, the stock experienced a notable decline of over 11%, reflecting the complexities faced by the company within the spirits market.
Shares of Crest Nicholson, a British homebuilder, fell 4.7% to 16.9 p, making it the biggest loser on the FTSE 250 index. CRST mentioned that it has identified a “severe but plausible” scenario that could lead to a breach of its loan agreements as early as April, raising concerns about its viability as a going concern. Investec analyst Aynsley Lammin stated that the company’s warning regarding the substantial risk of going concern was an “incremental risk” that the market had not anticipated. He also noted that this risk seems manageable since it is based on a “severe but plausible” downside scenario. CRST indicated that while it remains cautious, it expects more stabilisation in the trading environment during the second half of 2025. For the fiscal year 2024, which ended on October 31, adjusted pre-tax profit plummeted 53% to £22.4 million ($27.81 million), slightly below analysts’ predictions of £22.8 million according to LSEG data. As of the last close, the stock is up approximately 3.7% year-to-date.
Broker Updates:
Shares of Reckitt Benckiser, a British consumer goods firm, decreased by 1.4% to 5,526p after Barclays downgraded its rating from “overweight” to “equal weight.” The brokerage pointed to limited EPS growth anticipated between 2025 and 2027 as a primary factor for the downgrade, indicating it does not perceive Reckitt to be a superior business compared to competitors like Danone, Diageo, Haleon, and Unilever. Barclays also lowered its target price for the stock from 5,530p to 5,360p. They acknowledged the potential advantages of broader portfolio alterations but expressed that these are only adequate to balance the risks associated with executing the transformation. In July, Reckitt indicated it was exploring options for its nutrition segment and planned to divest a selection of homecare brands by the end of 2025 in order to concentrate on healthcare and hygiene. Among the 20 analysts monitoring the stock, 10 rated it as “buy” or higher, 9 as “hold”, and 1 as “sell” or lower, with a median price target of 5,500p according to LSEG data. Reckitt’s shares fell approximately 11% in 2024.
Technical & Trade ViewFTSE Bias: Bullish Above Bearish below 8400
Primary support 8400
Below 8400 opens 8225
Primary objective 8600
Daily VWAP Bearish
Weekly VWAP Bullish
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