Morgan Stanley: British stocks cheapest in world

British stocks are the cheapest in the world and could rally if inflation subsides, according to Morgan Stanley.

The US investment bank told clients: ‘Investor pessimism towards the UK is currently high. However, sentiment could shift if inflation starts to subside.’

Inflation remains stubbornly high at 8.7 per cent – more than four times the 2 per cent target – despite interest rates rising from 0.1 per cent to 5 per cent since December 2021.

Morgan Stanley said the Bank of England may be forced to raise rates to more than 5.5 per cent to get inflation back under control.

But even with a ‘challenging autumn ahead’, the bank’s analysts looked favourably on a host of British stocks, including defence giant BAE Systems (up 1 per cent, or 8.8p, to 897p), oil major BP (up 0.2 per cent, or 1p, to 454.55p), Asian-focused insurer Prudential (up 0.4 per cent, or 4.5p, to 1043.5p), miner Rio Tinto (down 1 per cent, or 46.5p, to 4868.5p), consumer healthcare firm Haleon (up 0.8 per cent, or 2.6p, to 311.4p) and pharma group AstraZeneca (up 0.7 per cent, or 70p, to 10180p).

Warning: Morgan Stanley said the Bank of England may be forced to raise rates to more than 5.5% to get inflation back under control

After the stock market closed last night, BAE secured £280million of orders from the Ministry of Defence to supply munitions in a deal that could rise to £400million and will create 200 jobs in the North of England and South Wales.

The FTSE 100 was back in positive territory after five consecutive sessions of losses.

The blue-chip index rose 0.2 per cent, or 16.85 points, to 7273.79 and the FTSE 250 inched up 0.1 per cent, or 23.99 points, to 18027.96.

Water firms led the way on the blue-chip index following Thames Water’s £750million cash injection.

Severn Trent added 1.6 per cent, or 38p, to 2432p and United Utilities gained 1 per cent, or 9.4p, to 941p.

There was also good news for student accommodation provider Unite Group as it said reservations for the upcoming academic year were at record levels. 

The group said that by the end of June it had sold 98 per cent of rooms for 2023-24, compared to 91 per cent for 2022-23.

Stock Watch –  Totally

Shares in the healthcare provider Totally tumbled after it warned that revenue and profit next year will be affected by ongoing disruption in the NHS.

The group saw its revenue rise 6.5 per cent to £135.7million in the year to the end of March.

But it said it expects a ‘challenging’ year ahead for the NHS. As a result, it anticipates revenue and profit for its next financial year to be lower than the previous 12 months.

Shares plunged 25 per cent, or 4.25p, to 12.75p.

The value of its property port-folio rose 1.2 per cent to £2.9billion during the second quarter of 2023.

Unite also increased its rental growth forecast to 7 per cent for the next academic year, up from a previous range of 6 per cent to 7 per cent. Shares inched up 1.2 per cent, or 10p, to 857p.

Shell rose 1 per cent, or 22.5p, to 2305p after Deutsche Bank Research issued a ‘buy’ rating and raised the oil giant’s target price to 3268p from 2907p. 

The broker pointed towards the blue-chip firm’s ‘reinvigorated team’, having appointed Wael Sawan as chief executive this year, a finance boss 14 months ago and a head of its Upstream division in October 2021.

Online trading platform Plus 500 said it had benefited from a strong performance in the US and was looking to expand its reach in Japan and the United Arab Emirates.

Revenues of £288million in the six months to the end of June were 15 per cent higher than the same period a year ago despite a slowdown in trading across the wider market. 

City broker Liberum also highlighted the company’s ‘very clear commitment to maximising shareholder value’ after Plus 500 said it had returned more than £187million to shareholders so far this year.

Shares were flat at 1470p.

Future outlined plans to return cash to shareholders with a proposed £45million buyback programme.

The magazine publisher behind Country Life, Marie Claire and FourFourTwo said it would seek approval from investors at a general meeting set to be announced soon. Shares surged 6.1 per cent, or 42p, to 735p.

Property landlords traded lower on the back of downgrades from HSBC. Hammerson slid 2.6 per cent, or 0.64p, to 23.98p, Land Securities fell 1 per cent, or 5.6p, to 566.6p and Segro lost 0.5 per cent, or 3.6p, to 706p.

This post first appeared on Dailymail.co.uk