8.34am: Autotrader downgraded
Autotrader is third on the fallers list this morning, as broker Panmure Liberum downgraded its rating on the car-selling platform to ‘hold’ from ‘buy’.
“The aftermath of the disastrous deal builder rollout has been worse than our expectations,” says analyst Sean Kealy, trimming EPS by 3% as benefits of a share buyback are offset by higher finance costs.
“Autotrader is still a good business, capable of delivering mid-single-digit top-line growth in the medium term.”
He says the “wheels haven’t come off entirely” but management’s guidance “presumes recovery in paying retailer customers, and the end-market remains weak”.
8.15am: Kingfisher helps FTSE opens higher
The FTSE 100 has sprinted 79 points higher to almost 10,546 in initial Tuesday trading, as UK investors catch up with gains elsewhere on the back of seeming progress in US-Iran negotiations.
Kingfisher has flown to the top of the early risers, up 6% on the back of its relatively robust Q1 update.
Miners and airline-related shares are also among those flourishing, with Endeavour Mining up 5.1%, British Airways owner IAG rising 3%, and Glencore, Rio Tinto and Rolls-Royce all just below that.
Melrose is down the bottom, falling 4.5% after the Orange County incident (see below).
Other fallers include BP and Shell after the sharp fall in crude prices compared to last week.
7.50am: Wet weather for Kingfisher, explosion risks for Melrose
Kingfisher saw like-for-like sales shrink 0.7% in the first quarter but the B&Q and Screwfix owner said it remains on track to meet full-year guidance.
The DIY retailer reported total sales up 1.4% to £3.3 billion for the three months to 30 April.
Chief executive Thierry Garnier called it a “resilient start… gaining market share against a soft market backdrop… even as a late start to spring impacted footfall and seasonal demand”.
Elsewhere, Melrose Industries has sought to reassure investors after a chemical incident at a GKN Aerospace facility in California triggered evacuations of 50,000 residents and warnings from emergency crews that a storage tank risked exploding.
Authorities said the wider crisis was not yet over, however, warning there remained a risk of a smaller explosion or chemical leak. Evacuation orders have been reduced but still cover around 16,000 residents.
The aerospace and engineering group said a “thermal issue” involving a storage tank containing methyl methacrylate, a highly flammable chemical used in aerospace acrylics, was identified at its Garden Grove site in Orange County on 21 May.
However, local officials and media reports suggested the situation was significantly more serious than the company’s brief update implied.
7.29am: Market catch-up
Asian stocks are mixed this morning with small losses slightly outnumbering small gains, while oil prices are well down on recent levels.
Brent crude futures, which fell from $107 on Thursday to as low as $96 a barrel on Monday, are up 2% at $98.22 this morning.
Here’s Jim Reid, macro strategist at Deutsche Bank, with a catch-up.
“Since the weekend, the real hope is that the days may also be numbered for the war in Iran as well, with momentum building since the start of the weekend that a deal could be in the works.”
He notes that Brent saw its lowest levels of the month “before news overnight that US and Israeli jets conducted fresh strikes in Southern Iran, hitting missile launch sites and mine-laying boats”, with these actions described as “defensive” and not an end to the ceasefire with Iran.
“Net net, optimism is still elevated that an agreement can be made to end the war.
“We have been here before, of course, but it has felt for some time that the move towards peace has been three steps forward and one or two back.
“It is now 48 days since the main kinetic encounters, and my view for a while has been that such a prolonged truce and ceasefire would not have held if the US genuinely wanted to continue strikes, unless there was absolutely no alternative.
“Last night’s targeted action is clearly a warning shot that the ceasefire is fragile though, so we will have to see what the next few days of negotiations bring.”
Reid flags that 10yr European bonds were around 9-to-12bps lower across the curve yesterday and this morning 10yr USTs have reopened five points lower after the long weekend.
The Euro Stoxx yesterday climbed 1.1% to close within a whisker of pre-Iran War levels, “and if you’re looking for a highlight then the FTSE-MIB (+2.24%) finally cleared its all-time high last seen back in the year 2000!! So a momentous day for Italy!”
Market open:
The FTSE 100 on Tuesday may be playing catch-up after the long weekend, as large gains were seen in Europe at the start of the week but a final US-Iran ceasefire deal continues to remain out of reach.
European investors reacted with optimism yesterday after Donald Trump said a “memorandum of understanding” in talks to end the US and Israel’s war on Iran “has been largely negotiated”, sending Germany’s DAX and other indices up around 1.8-2%.
Today, FTSE futures are up around 23 points, but investors on spread-better IG are predicting around a 60-point fall.
For Wall Street, which was also closed for a public holiday on Monday, futures are currently pointing to mid-sized rises, with the Dow Jones and S&P 500 called 0.7% higher, and the Nasdaq 100 predicted to jump 0.9%.
The US launched strikes on southern Iran overnight, targeting missile launch sites and boats allegedly laying mines, in what Washington described as “defensive” action during the seven-week ceasefire.
This came despite a senior delegation of Iranian negotiators, including the foreign minister, parliament speaker and central bank chief, travelling to Qatar for fresh talks with the US over frozen financial assets and a possible wider deal.
