MARKET REPORT: City subdued as Rolls and Unilever are downgraded

There was little New Year cheer on the London stock market yesterday after analysts downgraded heavyweights Rolls-Royce and Unilever.

On a subdued start to the first full week of trading of 2025, the FTSE 100 added 0.3 per cent, or 25.68 points, to 8249.66 and the FTSE 250 rose 0.1 per cent, or 21.25 points, to 20612.65.

Rolls-Royce, whose shares rose more than six-fold between the start of 2023 and end of 2024, drifted 2.6 per cent, or 15p, to 570p after Citigroup cut its rating on the engineering giant to ‘neutral’ from ‘buy’. 

The bank said the strong recovery in the share price over the past couple of years means it is now fairly valued rather than a bargain.

‘Rolls-Royce has been a runaway success for investors in recent years as its recovery story gained traction,’ noted Russ Mould, investment director at AJ Bell. 

‘The turnaround opportunity is now looking like old news, and investors increasingly want to hear about the next phase of the company’s growth, not simply what it is doing to get back on track as that looks to have already happened.’

Downgrade: Rolls-Royce, whose shares rose more than six-fold between the start of 2023 and end of 2024, fell 2.6% after Citigroup cut its rating to ‘neutral’ from ‘buy’

Citigroup also trimmed its target price for Marks & Spencer to 400p from 420p and for JD Sports to 150p from 180p. 

Shares in M&S, which is due to publish its Christmas trading update on Thursday, fell 2 per cent, or 7.7p, to 382.8p but JD gained 4 per cent, or 3.78p, to 97.94p. 

Also in analysts’ crosshairs was consumer goods giant Unilever after RBC downgraded the stock with a warning that it does not have the ‘wherewithal’ to raise sales enough to meet its targets.

Shares in the group, whose brands include Hellmann’s, Marmite, Domestos and Dove, fell 2.5 per cent, or 113p, to 4448p and rival Reckitt Benckiser, the home of Dettol, Nurofen and Durex, lost 1.2 per cent, or 60p, to 4809p.

Airline stocks were on the slide with British Airways owner IAG – like Rolls-Royce, one of the standout performers of last year – down 0.8 per cent, or 2.3p, to 296.6p as Easyjet fell 1 per cent, or 5.2p, to 535.2p and Wizz Air dropped 0.9 per cent, or 12p, to 1378p.

All in all, it marked a shaky start to a week in which a host of household names will update investors on Christmas trading, starting today with Next, whose shares added 0.3 per cent, or 32p, to 9554p yesterday. 

Tesco (up 0.2 per cent, or 0.7p, to 373p), Sainsbury’s (up 0.3 per cent, or 0.8p, to 277.2p), B&M (up 1.3 per cent, or 4.6p, to 364.5p) and Greggs (up 0.1 per cent, or 4p, to 2800p) follow suit later in the week along with M&S. 

Investors are also due to hear from oil giant Shell (up 0.4 per cent, or 11p, to 2577.5p) tomorrow.

Alongside the high-profile downgrades, there were more positive reports from the City, with analysts at Exane BNP Paribas upgrading Currys, sending shares up 0.3 per cent, or 0.3p, to 93.9p.

Among the housebuilders, analysts at Redburn upgraded their ratings on Persimmon (up 1.9 per cent, or 22p, to 1161.5p) and Barratt Redrow (up 1.5p, or 6.3p, to 426.8p) but trimmed their recommendation on Berkeley (down 0.4 per cent, or 14p, to 3838p).

Stock Watch – Avon Technologies

Shares in Avon Technologies continued their recovery after it won a £14million order from the US Defence Logistics Agency for combat helmets.

The helmets will be made by the Wiltshire-based company’s Team Wendy unit, set up in 1997 by US entrepreneur Dan T Moore in memory of his daughter Wendy, who died from brain injuries after a skiing accident.

Avon bought Team Wendy in 2020. 

Avon shares gained 1.9 per cent, or 28p, to 1490p.