By Patrick Munnelly, Market Strategist, Tickmill
On Wednesday, the FTSE 100 ticked marginally higher, up 0.34% by the close. The industrial metal mining sector saw a 2.2% increase as the prices of various base metals and iron ore went up. Additionally, precious metal miners experienced a 1.1% rise due to higher gold prices.
British American Tobacco impairment charge
Shares of British American Tobacco LON:BATS, the maker of Dunhill cigarettes, dropped by 6.4% to a four-and-a-half-year low of 2,329 pence, making it the top loser on London’s FTSE 100 index. The company announced that it will take an impairment charge of around 25 billion pounds ($31.50 billion) as it reassesses the value of some of its U.S. cigarette brands. It also expects low-single digit revenue growth and adjusted profit from operations in 2024, with continued headwinds impacting its U.S. businesses. While non-combustible products may contribute to the bottom line in 2024, the long-term outlook for margins remains unclear. Negative attention surrounding Juul and underage vaping has slowed BAT’s business prospects in the U.S., according to Third Bridge analyst Orwa Mohamad. The company also expects group organic revenue at the lower end of its 3-5% forecast range, and its stock is down 24.2% year-to-date.
Prudential benefits from JP Morgan sector outlook
On the positive side of the ledger J.P.Morgan maintains a positive outlook on European insurance in 2024, citing several factors such as peak yields, no threat from peak pricing, earnings growth, and low credit risk. The brokerage believes that peak yields will be beneficial, particularly for stocks with high capital returns, such as UK life and Benelux names. Historically, the insurance sector has performed well during periods of falling yields. The sector is expected to remain well-capitalised, offering a strong return on capital with a higher premium compared to risk-free yields. While commercial property and casualty pricing is approaching its peak, reinsurers are still benefiting from solid and expanding pricing. Additionally, personal line pricing is increasing. The sector’s earnings momentum appears attractive after the implementation of IFRS17, and the credit risk outlook is favourable for insurer investment grade portfolios. Prudential LON:PRU benefited most from this report, sending the insurer on to the leaderboard of the blue chip index, gaining 3.59% on the session.
BT Group LON:BT.A continues to benefit from yesterday’s announcement of their tie up with TNT to acquire rights to broadcast Premiership Football adding another 4.9% to yesterdays gains
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