FTSE 100 Live: Stocks creep higher and Tesco gains on banking sale

• FTSE 100 up 10 points at 7,605
• Barclays buys most of Tesco's banking business
• Victrex tumbles on weak trading

11:20am: BoE's Haskel wants more evidence inflation is falling

Jonathan Haskel, one of two Monetary Policy Committee members who voted to raise rates last week, has said he wants to seee more evidence that inflationary pressures are cooling.

In an interview with Reuters, Haskel said: "The signs that we’ve seen thus far are encouraging. I don’t think we’ve seen quite enough signs yet."

"But if we accumulate more evidence on persistence, then by the very logic I’ve just set out, I’d be happy to change my vote.”

10:47am: Bellway update reflects tough housing market

Russ Mould at AJ Bell notes like much of the housebuilding sector Bellway has seen its shares bounce back strongly since the autumn on hopes a shift in rate expectations can make mortgages more affordable and revive a moribund housing market.

But today’s update shows "what’s in the immediate rearview mirror is ugly."

"Sales volumes have collapsed and average sales prices have gone stale, all the while the company continues to battle cost pressures," he noted.

“More positively, cost pressures are starting to ease and the company is confident enough to point to a return to sales growth in the July 2025 financial year.

“What may prompt some concern among investors is a drop in the company’s cash position."

"The one saving grace for the sector during this market downturn has been its constituents’ relatively strong balance sheets but Bellway’s cash buffer has largely been eroded," he noted.

9:49am: Tesco deal an "outstanding outcome" for shareholders

Shore Capital analyst Clive Black thinks Tesco’s banking deal is an “outstanding outcome” for its shareholders.

He noted Tesco would get £600 million plus proceeds, retain about half of its financial services profit stream with shareholders benefiting through a buyback. 

“The whole deal will take time, some quarters, to complete but in being mildly accretive to shareholders, represents a great deal,” he said.

UBS agreed, noting the deal is expected to be mildly accretive to EPS combined with the incremental buyback. 

“We think this points to a FY24/25e buyback likely at £1bn and we see the deal as positive for shareholders,” it added. 

UBS has a buy rating on Tesco which is its top pick in the sector.

9:16am: Mixed fortunes for Hermes and L'Oreal

Over in Europe, and contrasting fortunes for two leading luxury brands.

Shares in Hermes are more than 6% higher in Paris after the luxury firm’s sales growth easily topped expectations following a mixed earnings season for the industry.

The group, which makes Birkin and Kelly bags, sales in the fourth quarter grew 13 per cent to €3.36 billion.

Annual sales reached €13.43 billion in 2023, up 16% at current exchange rates compared to 2022, while net profit hit €4.31 billion, up 28%. 

But shares in L’Oreal are down 6.3% after it took a hit from a slide in shopping by Chinese travellers. 

Fourth quarter sales missed expectations with a 6.2% decline in North Asia. 

Geographically, L'Oreal noted "outstanding" growth in Europe, where the beauty market proved "very dynamic". Sales in North America also did well, "driven by valorising innovations and channel optimisation".

By contrast, sales in North Asia "continued to be impacted by the reset in travel retail following the change in policy regarding daigous", L'Oreal said.

8:55am: FTSE 100 sluggish, Victrex slides

The FTSE 100 is in a sluggish mood - well it is Friday - little changed as I type.

Richard Hunter at interactive investor said markets had “advanced tentatively in early trade, after a weaker previous session in which there were some earnings disappointments.”

One of those which disappointed AstraZeneca has rallied slightly, up 1.4%, despite a downgrade by Deutsche Bank to ‘sell’.

In the FTSE 250 index, Victrex has lost 7.2% in early trade. 

The Lancashire, England-based polymer solutions company noted a "soft start" to its financial year, as it updated markets on its first quarter, ended December 31.

Looking ahead, Victrex noted an improvement seen in January, the start of its second quarter, but warned that "visibility remains limited."

8:12am: FTSE 100 creeps higher, Tesco up after banking sale

The FTSE 100 crept higher in early exchanges with Tesco boosted by news it would return cash to shareholders after inking a partial banking sale to Barclays.  

At 8:15am, London’s blue-chip index was up 7.00 points at 7,602.48.

Tesco rose 2.1% after selling the majority of its banking assets to Barclays for around £600 million.

It said it would return the majority of the proceeds to shareholders via an incremental share buyback.

Barclays rose 0.5% although analysts questioned whether it was the best use of cash.

Gary Greenwood at Shore Capital said: “Although given the acquisition looks attractively valued at c.0.6x book in absolute terms, we note that Barclays stock currently trades at c.0.4x book and so investors will no doubt rightly question whether this is the best use of capital, with an enhanced buy back potentially preferable”. 

“That said, it will add incremental scale, income and so profitability to Barclays already strong credit card business, which has seen balances shrink in the UK following the pandemic,” he added.

Bellway shares were little moved by its trading statement while BAE Systems climbed after the pricing of the Air Astana IPO in which it holds a large stake.

7:56am: Air Astana set for Valentines debut after oversubscribed IPO

Air Astana has priced its IPO at $9.50 per share giving the airline a valuation of $847 million ahead of its listing on February 14.

The airline, in which BAE Systems holds a large stake, said the IPO was oversubscribed "multiple times". 

BAE will sell 7.5 million GDRs in the domestic offering and 14.2 million in the global offering. 

The IPO will raise $370 million, including an over-allotment option offered by BAE. 

Air Astana will dual list in London and Kazakhstan, with the London Stock Exchange hosting global depository receipts, which represent one share. 

The firm had been targeting a range of between $770 million and $962 million dollars in its flotation.

7:45am: Bellway sees pick in enquiries as mortgage rates tick down

We've also had an update from Bellway which unsurprisingly reflects the tough conditions in the housing market.

The housebuilder said housing revenue tumbled to £1.25 billion in nthe six months to January compared to £1.80 billion the year prior, although the figure was in line with the board's expectations.

Total housing completions of fell to 4,092 homes from 5,695 last year at an average selling price of £309,300 (2023 - £316,929).

But there were signs of encouragement as the reduction in mortgage interest rates throughout the first half led to encouraging levels of customer enquiries in the traditionally quieter winter trading period.

The private reservation rate also ticked up during January to 0.59 per outlet per week (January 2023 - 0.45).

Bellway expects full-year completions of around 7,500, down from 10,945 last time, supported by a forward order book at January 31 of 3,970 homes with a value of £1.01 billion. 

7:35am: Tesco and Barclays strike banking partnership

Tesco PLC (LSE:TSCO) has sold the majority of its banking operations to Barclays PLC (LSE:BARC) for around £600 million after striking a long-term strategic partnership.

The UK’s biggest food retailer said the majority of the proceeds would be returned to shareholders in the form of an incremental share buyback.

Combined with the previously announced special dividend of £250 million paid by Tesco Bank in August 2023, this is expected to result in total cash received by Tesco of around £1 billion, Tesco said.

Chief Executive Ken Murphy said: “The transaction will also significantly reduce our financial liabilities, in turn strengthening our balance sheet and allowing us to focus on continuing to grow our core retail business.”

As part of the initial 10-year partnership, Tesco has sold its credit cards, loans and savings operations to Barclays, removing £7.7 billion of capital-intensive assets and £6.7 billion of financial liabilities from its balance sheet. 

Tesco said it would retain all other existing activities of Tesco Bank, including insurance, ATMs, travel money and gift cards.  

It said these are capital-light, profitable businesses with a strong connection to its core retail offer.

Tesco said the incremental share buyback, plus combined effect of the sale of the banking operations and formation of the partnership is expected to be mildly accretive to earnings per share.

Barclays said the transaction will not materially impact planned financial returns or distributions.

The lender said it would be financed from existing resources, and is expected to reduce Barclays' CET1 ratio by around 0.3% upon completion.

Around 2,800 Tesco staff will transfer to Barclays with the deal set to complete in the second half of 2024.

7:00am: FTSE 100 called slightly higher

The FTSE 100 is expected open slightly on what should be a quieter day in London aftet Thursday's ranings blitz.

Spread betting companies are calling London's lead index up by arounf 12 points after closing down 33.27 points at 7,595.48 on Thursday.

An update from housebuilder Bellway is the main event scheduled in the UK corporate diary with no major events in the the economic diary.

US markets made steady progress with the S&P breaching the 5,000 landmark in the final minutes of trading before closing just below.

In the US, the Bureau of Statistics will release the CPI revisions today, which consists of the revised month-over-month CPI figures for the past five years, incorporating some adjustments. 

In Europe, CPI figures are due from the region's largest economy, Germany, while earnings from French luxury group Hermès will grab the headlines, after L'Oreal and Kering reported on Thursday.