Must read: FTSE 100 rebounds, oil, central banks, house prices, Pearson, Asos

GLOBAL MARKETS

European markets have opened higher with the FTSE 100 leading the gains. It comes after two straight weeks of declines for the UK blue chip index. Airtel Africa Ordinary Shares (LSE:AAF) is trading at the top of the index after reporting first half results.

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Oil prices are giving back some of Friday’s gains, with Brent crude down over 1% ahead of a busy period for economic data from the US and China, while the Israel-Hamas war remains in focus. 

It is a very major week for central bank action, with key rate decisions from the Bank of Japan, the Federal Reserve, and the Bank of England. Interest rates look set to remain on hold in the UK and the US following the European Central Bank's decision last week to keep rates unchanged for the first time in over a year. 

Earnings continue to take centre stage this week with key reports from Apple Inc (NASDAQ:AAPL), BP (LSE:BP.), Shell (LSE:SHEL), and Sainsbury (J) (LSE:SBRY) among others. 

ZOOPLA HOUSE PRICES

According to Zoopla, UK house price inflation slowed from 9.6% a year ago to -1.1%. House prices are falling in 80% of local housing markets, with the South of England hit hardest. The property website anticipates that UK house prices will fall by 2% in 2024 but rising incomes will improve affordability. 

Higher mortgage rates and the cost-of-living crisis have weakened buyer demand, which is languishing 25% below the five-year average in October. Transactions are being taken up by an increasing proportion of cash buyers up from 1 in 5 to 1 in 3 over the last five years. Many buyers are in wait-and-see mode, holding off for now hoping that house prices will fall further and mortgage rates will ease next year.

However, strong wage growth, low unemployment and strict affordability testing rules have prevented an even steeper slide in house prices. Plus, there is a shortage of housing supply in the UK that is also stemming a more aggressive downturn in property prices. 

Individuals and families are faced with the difficult choice between expensive rents and high mortgage rates, with Zoopla estimating that for first-time buyers’ mortgage repayments are still cheaper than rental costs even at 5.5% borrowing rates. 

PEARSON 

Pearson (LSE:PSON) has upgraded its full-year guidance – it now anticipates that 2023 group revenue growth will be at the higher end of the low to mid-single digit range. It also expects full-year group adjusted operating profit to come in at £570 million to £575 million, an improvement of around £20 million. The education publisher said it's on track to achieve £120 million of cost efficiencies this year, helping to lift its full-year group margin outlook. 

In the third quarter, assessment and qualifications revenue rose by 11% thanks to a strong performance in Pearson VUE computer-based testing, helping to lift shares this morning. Workforce skills revenue and English language learning revenue both increased by 3% and 21% respectively. However higher education was down 5% and virtual learning slumped by 29%. CEO Andy Bird said Pearson has received positive initial feedback from its Generative AI tools. 

In September, Bird announced plans to step down. Microsoft executive Omar Abbosh will take over on 8 January next year. 

After a difficult start to the year, Pearson shares are enjoying a boost today, extending recent gains, with the stock up over 23% in the past six months. 

ASOS 

According to media reports, ASOS (LSE:ASC) is exploring the sale of Topshop which it bought less than three years ago alongside other Arcadia brands in a £265 million deal. The Telegraph reported that Topshop could be sold to Authentic Brands in the United States which already owns retailers like Ted Baker, Reebok, and Forever 21. 

Asos is in the midst of a 12-month turnaround plan announced last October. It has been battling with the weak consumer backdrop, intense competition from cheaper rivals and cost pressures. Last month it reported a 15% drop in fourth quarter sales and said it expects earnings to come in towards the bottom end of its expected range. Meanwhile, Frasers Group (LSE:FRAS) has been opportunistically increasing its stake in Asos this year. 

The potential disposal of Topshop has lifted shares in ASOS this morning, helping to reverse some of its year-to-date decline. However, the e-commerce fashion business is still down over 24% since the start of January. 

Asos will deliver its annual results this week after publication was recently delayed.