Stocks mixed as UK financial services activity steadies after sharp fall

Thames Water's lenders have proposed a new rescue plan with £5.4bn funding to prevent the UK's largest water company from collapsing.

A consortium of investors who hold much of the company’s debts, called London & Valley Water, have been locked in negotiations with the regulator Ofwat for months. The group said £12.5bn of debt will be written off, in what is expected to be the largest-ever loss on a UK infrastructure investment.

Within this, class A investors will write off £4bn of their loans – a quarter of all class A debt – compared with £3.2bn offered in May.

The creditors also said they would invest about £150m more in new equity capital than previously suggested, taking the total to £3.15bn.

Mike McTighe, the proposed future chair of Thames Water under the terms of plan, said “from day one, we will inject billions in new investment”.

He added that under a new company board, there would be a focus on “reducing pollution and rebuilding public trust so that by the end of this decade Thames Water can once again be a reliable, resilient, and responsible company”.

Ofwat said it would review the latest plans.

Gold prices steadied on Thursday, hovering around 0.1% higher after a five-day rally that saw it reach successive records. Bullion traded at $3,900 an ounce at the time of writing, about $20 below a peak set on Wednesday.

The precious metal has pushed higher this week as the US government shutdown began, and as traders added to bets that the Federal Reserve will cut interest rates following weak private payrolls data.

Non-farm payroll numbers, which are due Friday, will now be delayed because of the shutdown, which also risks increasing pressure on the dollar and strengthening gold prices.

Traders have added to bets the Fed will cut rates twice more this year to support a weakening labor market. Lower borrowing costs tend to boost non-yielding gold, which also becomes cheaper for most buyers when the greenback softens.

The precious metal has rallied almost 50% this year, putting it on track for the biggest annual gain since 1979 — supported by central-bank buying and rising holdings in gold-backed exchange-traded funds.

Monthly ETF inflows in September were the largest in three years, according to data compiled by Bloomberg.

Silver also edged up on the day, after rallying to the highest in 14 years during the previous session, while platinum and palladium likewise rose.

Shein has chosen France as the location to open its first permanent physical outlets, occupying concessions in department stores in Paris, and then followed by five others in the cities of Dijon, Reims, Grenoble, Angers and Limoges.

Shein told the BBC on Thursday that France's “influential global fashion market” was a “natural choice” to test for physical stores.

The company has previously opened temporary pop-up stores in cities such as London, Madrid and Paris, but has never operated a permanent physical shop.

The new outlets are being opened through a partnership with retail property group Societe des Grands Magasins (SGM). The French company runs the BHV Marais and Galeries Lafayette department stores that will house what Shein calls “shop-in-shop” outlets.

Shein said the outlets will create around 200 jobs in France, adding that the collaboration aimed to revitalise city centres and department stores in the country.

Responding to Tesco's half-year results, Unite general secretary Sharon Graham said:

Tesco (TSCO.L) has raised its profit outlook after sales were boosted by an unusually hot summer.

Britain’s biggest retailer saw like-for-like sales rise 4.9% in the first half of the year, while across the group like-for-like sales (at outlets open at least a year) climbed by 4.3%.

Overall revenues rose by 5.1% to £33.1bn but profit before tax fell by 6.3% to £1.3bn.

Tesco said it had won market share from its rivals, but highlighted rising competition and “continued pressure on household budgets”. It said it had reduced prices on 6,500 products, with an average reduction of 9%.

The grocer now expects to make an adjusted operating profit of between £2.9bn and £3.1bn this year, up from between £2.7bn and £3bn previously.

Ken Murphy, the chief executive, said:

Shawbrook Group, the British bank backed by BC Partners and Pollen Street, is considering announcing plans for a potential initial public offering in London as soon as the coming days, according to people familiar with the matter.

Bloomberg has the details…

No final decisions have been made and the plans could still change, said the people, who asked not to be identified because the matter is private. A spokesperson for Pollen Street didn’t immediately respond to a request for comment. Representatives for BC Partners and Shawbrook declined to comment.

The bank could seek a valuation of about £2 billion ($2.7 billion), Bloomberg News reported in July. Shawbrook’s listing would be a welcome boost for London’s IPO market, after the UK dropped out of the top 20 global venues for first-time share sales last quarter.

The Essex-based lender offers specialist loans to UK businesses and had £15.8 billion in loans on its balance sheet at the end of June, according to its interim financial report. Its statutory profit after tax reached £119.5 million in the first half of the year, up from £94 million for the same period in 2024, according to the filing.

Shawbrook previously went public in London in 2015 and traded there until BC Partners and Pollen Street led a consortium that acquired the bank in 2017.

The potential IPO would be a boost — and a test — for the London Stock Exchange, which has overhauled its listing rules in an effort to reinvigorate its public markets.

UK financial services activity steadied after a sharp fall, according to the latest CBI financial services survey overnight. Business volumes declined with a weighted balance of -36%, down from -24% in June.

Despite the deterioration in activity, sentiment was broadly flat, rising to +3 after a sharp fall of 52% in the previous quarter.

Firms expect conditions to improve next quarter, with volumes growth forecast at 37%. Profitability fell at a slower rate in the third quarter, coming in at -13% compared with -24% in June, however, it is expected to jump in Q4 (+26%).

Headcount slipped 24%, but firms see the pace of reduction slowing to -7%. The survey also revealed that firms plan to increase IT investment over the next year, with uncertainty about demand cited as the biggest factor limiting investment. The share of firms highlighting this rose to 69%, the highest since 2012.

Louise Hellem, CBI chief economist, said:

Stocks in Asia advanced overnight, with the Nikkei (^N225) rising 0.9% on the day in Japan, supported by robust performance in local mining stocks, while the Hang Seng (^HSI) jumped 1.8% in Hong Kong after resuming trading post holiday. The Shanghai Composite (000001.SS) remained closed.

In South Korea, the Kospi (^KS11) added 2.7% on the day, standing out as the top performer, reaching a record high.

It came after consumer inflation in the country accelerated in September, rising 2.1% year-on-year. This slightly exceeded the 2.0% forecast, and recovered from a nine-month low of 1.7% recorded the previous month.

Across the pond on Wall Street, the S&P 500 (^GSPC) rose 0.3%, reaching another record high despite the shutdown noise and an ADP report showing a contraction in private payrolls.

At the same time, fresh fears over the US labour market saw Treasury yields decline sharply as investors priced in more rate cuts.

The tech-heavy Nasdaq (^IXIC) was 0.4% higher and the Dow Jones (^DJI) also gained 0.1%.

Jim Reid at Deutsche Bank said:

Good morning, and welcome back to our markets live blog. As usual we will be taking a deep dive into what's moving markets and happening across the global economy.

To the day ahead we have central bank speakers including the Fed’s Logan, ECB Vice President de Guindos, the ECB’s Makhlouf and Villeroy, and BoJ Deputy Governor Uchida.

Here's a snapshot of what's on the agenda:

• 7am: Trading updates: Tesco, SSE

• 10am: Eurozone unemployment rate for August