Trump bounce continues

Credit and equity markets have rallied since Donald Trump’s victory in the US presidential election last week, pushing corporate borrowing costs relative to US Treasuries to their lowest level in decades, as investors bet that tax cuts will boost profits. US investment-grade bond spreads – the premium companies with high credit ratings pay to borrow in bond markets relative to the government – are at their lowest level since 1998. The S&P 500 hit a new record high as inflation held steady in September.

The FTSE 100 was up 0.2% over the week by mid-session on Friday, with the more UK-focused FTSE 250 trading 0.1% ahead.

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Economics

The UK economy contracted unexpectedly in September and third-quarter growth was pedestrian, in a setback for the government’s ambition for sustained pickup in the economy. Gross domestic product (GDP) slipped by 0.1% in monthly terms during September as manufacturing and construction dropped, the Office for National Statistics said. This meant the economy expanded just 0.1% in the third quarter compared with expectations of 0.2%.

Figures released by the Office for National Statistics showed the UK unemployment rate rose to 4.3% in the three months to September, up from 4% in the previous quarter, and ahead of expectations for an increase to 4.1%. Pay excluding bonuses rose 4.8% on the same period a year earlier, which was the lowest since June 2022.

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Federal Reserve Chair Jerome Powell said that strong US economic growth will allow policymakers to take their time in deciding how far and how fast to lower interest rates. “The economy is not sending any signals that we need to be in a hurry to lower rates,” Mr Powell said in remarks for a speech to business leaders in Dallas. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.” Mr Powell also noted that the unemployment rate has been rising but has flattened out in recent months and remains low by historical standards.

Inflation in the US remained stable. The US consumer price index (CPI) rose by 0.2% month-on-month in September, in line with both the previous three months and analysts' expectations. The annual inflation rate increased to 2.6% in October, up from 2.4% in September. Core inflation, which strips out volatile food and energy prices, was up 3.3% on an annualised basis and 0.3% month-on-month.

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Companies

Insurance giant Aviva said it had a "very strong" performance in the third quarter, with growth in all its business areas. There were double-digit gains in general insurance premiums, life insurance and retirement sales, as well as net inflows into its wealth business. Management said its performance was balanced between “strong new business and pricing actions to offset the inflationary environment”. The company said it was confident it would deliver its targets of an operating profit of £2bn by 2026 and cash remittances of more than £5.8bn between 2024-2026.

Water company United Utilities (UU) reported interim revenues that surpassed £1bn after a "robust" performance, although profits dropped due to higher interest payments on its debt. Its interim dividend was raised in line with its payout policy. For the full year ending March 2025, UU is targeting a 10% increase in revenues and said capital expenditure is expected to be in the range of £950m to £1.1bn.

Luxury goods brand Burberry suspended its dividend and launched a review of the business in an “urgent” effort to turnaround its struggling fortunes. The company reported a £80m half-year loss driven by plunging sales in its key Chinese market, which fell by almost a quarter. New chief executive Joshua Schulman launched its turnaround strategy – dubbed Burberry Forward – which focuses on the rebalancing of its product range and inventory levels. The company has been left with too much stock to discount and this lack of scarcity has been damaging the brand as well as a lack of focus on its core outerwear category. Mr Schulman insists the company has all it needs to “reignite brand desire”. The shares were supported by persistent takeover rumours, with Italy’s Moncler named in the press as a potential acquirer.

Struggling DIY chain Homebase has collapsed into administration, despite the purchase of the bulk of its stores by the owner of The Range homeware retailer. Financial advisory group Teneo was appointed as joint administrators of Homebase’s owners, HHGL Limited and Hampden Group Limited.

Boohoo urged shareholders to reject Mike Ashley’s attempts to take control of the fast-fashion group, claiming the Sports Direct owner could have “ulterior motives”. The company wrote to investors requesting they vote against demands being made by its largest shareholder Frasers. Mr Ashley wants to join the Boohoo board, alongside Mike Lennon, its restructuring expert. Interim revenues fell 15% and the company raised almost £40m in an equity issue.

Fluid and thermal engineer Spirax Group maintained its full-year guidance after organic sales rose across all three of its businesses in the third quarter. Management said it continues to expect mid-single digit organic revenue growth in 2024 with an adjusted operating profit margin of 20%, in line with last year when adjusted for currency headwinds.

Intermediate Capital Group said its total assets under management rose by a quarter to $106bn at the end of the first half of the year, as fee-earning assets under management rose 4% to $73bn over the previous six months. However, interim profits fell by 18% due to a weaker investment performance. Net asset value at the end of the period was 788p, down 2p from March.

Credit checker Experian raised its full-year margin guidance after revenues jumped in the first half of the year. Management now expects margin growth at the upper end of its +30 to +50 basis points guidance range. The benchmark trading margin bubbled up by 60 basis points in the period under review to 28%, leading to an adjusted profit of $1.01bn.

Smiths Group raised its growth and margin guidance and increased its share buyback programme after an "outstanding" first quarter of the year led to a record order book. The engineering company now expects full-year organic revenue growth of 5-7%, up from earlier guidance of 4-6%. Operating profit margins are expected to improve by 40-60 basis points (bp) after increasing by 30bp to 16.8% in the year to July 2024.

Vodafone Group saw growing service revenue in the first half of the year, as the telecoms giant said it hopes to wrap up its merger with mobile network Three by early 2025. The Competition and Markets Authority is investigating the deal, which would create the largest mobile operator in the UK but has indicated it is likely to get the green light. The telecoms group reported a 1.6% rise in total revenue to €18.3bn in the first half the year, with service revenue growing 1.7% to €15.1bn. Management reiterated its 2025 financial year guidance.

Companies are paying more than ever to be in the best offices in London, and Great Portland Estates expects rents will continue to rise by as much as 10% this year. In the first half of its financial year, the company agreed 28 new leases and renewals, bringing in £10.5m of annual rent. On average, it got 7% more than valuers had estimated for those deals. The value of its portfolio rose, and management reported a 0.8% rise in its £2.5bn holdings of largely London West End offices and shops.

Land Securities returned to profit at the interim stage and lifted its full-year guidance as the property market continued to recover. The group reported an increase in the value of its nearly £10bn portfolio after two years of steep declines.