Christmas cheer for Warhammer and UK grocers, as Ashtead turns its back on the FTSE 100

By Kathleen Brooks, research director at XTB

UK markets have opened lower across the board on Tuesday, in line with global trends, however, there are some unique drivers of the FTSE 100 this morning. The bad news first, the UK is set to lose another big hitter from the FTSE 100. Ashtead Group, the industrial machinery rental group is set to bow out of the FTSE 100, instead choosing the US as its primary listing. Stronger valuations and the fact that Ashtead makes 98% of its profits in the US, mean that its shareholders are highly likely to agree to the move.

FTSE 100: Another one bites the dust

Ashtead would be the latest UK firm to move to the US, with Flutter Entertainment and CRH doing so in recent months. While the FTSE 100 has much going for it, the valuation gap with the US is a major problem. Until that starts to narrow then its hard to see how the UK can step out of the US’s shadow.  Analysts think that the FTSE 100 will have a P/E ratio of 11.8 times earnings next year, this is half the 22.2 level that is expected for the S&P 500. This highlights how wide the gap is. Until that is narrowed then international firms listed on the FTSE 100 may continue to think that the grass is greener on the other side of the Atlantic.

Warhammer’s latest foray mainstream sends share price soaring

However, the good news is that Warhammer, the cult miniature games maker, will join the FTSE 100 later this month, and has struck a deal with Amazon to make a Warhammer film and TV series. This could be extremely lucrative for the brand, and Games Workshop, the publisher and owner of the Warhammer franchise, is the best performer on the FTSE 250 so far on Tuesday. Thus, we expect Games Workshop to make a splash when it drops into the FTSE 100 on December 23rd. The share price is up more than 40% YTD, and the miniatures maker is already bigger than the likes of Burberry and EasyJet.

Centrica’s cautious optimism

Elsewhere, Centrica, the owner of British Gas, confirmed that it expects 2024 profits to be inline with expectations, however, it offered a cautious outlook, saying that weather and commodity prices are volatile. Overall, it sees profits in its retail energy firm remaining sustainable for the medium term. Its share price is higher on Tuesday and remains in recovery mode after reaching the low of the year in November.

UK Consumer spends big on food yet again this Christmas

UK supermarkets including Tesco and Sainsburys could get a boost on Tuesday after research firm Kantar predicted that supermarket sales would exceed $13bn in the four weeks of December for the first time ever. Grocer revenues are already up by more than 2.4% in the 12 weeks to December. Supermarkets’ premium line products are leading the charge higher. This could be a sign that the UK consumer will bounce back in December after flagging for most of the second half of this year.

China disappoints with its stimulus programme once again

Elsewhere, stock markets across Europe have opened lower on Tuesday as the market fades news that China will boost stimulus. The Chinese ruling party vowed to embrace a moderately lose monetary policy, in the past they have only pledged prudent monetary policy. However, monetary policy is not really the problem in China and interest rates are low anyway. The bigger issue is fiscal policy. Looser fiscal policy could boost domestic consumption in China, and that is what analysts think is needed to improve the economic outlook. An increase in the budget deficit could be announced next week, after the central economic work conference. If this happens then we could see Chinese stocks get a sustained boost into 2025. However, the decline in Chinese shares and in the FTSE 100’s commodity producers, is a sign that markets remain disappointed with the offering from the Chinese authorities so far.

Dollar given a boost as we wait for US CPI

GBP/USD is down a touch this morning; however, it is still hovering around $1.2750. We think that the FX market could be quiet until we get the US CPI data on Wednesday. The dollar has caught a bid this morning as a risk off tone to the market weighs on equities and commodity currencies like the Aussie and the Kiwi dollars, and it gives the dollar a boost. 

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