In the latest market update, the FTSE 100 index saw a modest increase of 0.31% at the close on Monday. This uptick occurred amidst concerning data indicating a continuous weakening in Britain's business activity growth for the fourth month in December 2024. According to the S&P Global UK Composite PMI, the index recorded a reading of 50.4, which represents a slight decline from the prior reading and the flash estimate of 50.5.
Notably, this marks the lowest figure since October 2023, as a decrease in demand has prompted a fall in new order volumes, alongside the most significant reduction in private sector employment witnessed since January 2021. Tim Moore, the economics director at S&P Global, commented on the situation: "A post-Budget slump in business optimism persisted in December, with output growth expectations for the year ahead showing no recovery from November's 23-month low.
Concerns regarding the implications of rising payroll costs, in conjunction with an overarching unease surrounding the climate for business investment, were cited as the primary factors dampening growth prospects for 2025." Corporate developments have also taken center stage this week. RBC Capital Markets announced a downgrade of Unilever (ULVR) from sector perform to underperform, highlighting anxieties over the company's excessive share outperformance.
As a direct consequence, shares of the British fast-moving consumer goods giant plummeted by 2.48% during Monday's trading session. The analyst at RBC Capital Markets stated, "Unilever lacks the necessary resources to elevate its volume performance sufficiently to meet its 2% growth goals, particularly considering that it will only hold market leadership in half of its operations post-ice cream.
Moreover, there are concerns over substantial non-core brands and markets contributing to 25% and 15% of sales respectively, alongside a challenging gross margin environment and a noticeable intent to curtail capital investment relative to its competitors. The current valuation is edging towards levels seen in best-in-class companies, which we believe is not justifiable, positioning the risk/reward ratio to favor a downside scenario." In contrast, Citigroup has opted to raise the price target for Rolls-Royce (RR) and has adjusted its rating from buy to neutral.
Following a robust recovery from the adverse effects of the COVID-19 pandemic, the stock has reached levels close to its assessed fair value, according to the banking institution. However, shares of the British aerospace and defense company experienced a decline of 2.56% by the end of trading. To sum up, as the FTSE 100 navigates through a mixed landscape of economic challenges and corporate adjustments, market participants will be watching closely to gauge the implications of these developments on broader economic conditions..