FTSE 100 Live: ‘2024 is looking increasingly concerning’; London shares close up 0.7% on US debt deal hopes

 (Evening Standard)
(Evening Standard)

The struggles of the FTSE 100 index eased this afternoon as shares rose on reports the US is close to a debt deal.

After an initial rise, he top flight fell back to near its opening mark in the late morning, but climbed late in the day. While it has now recovered all of yesterday’s losses, the FTSE 100 remains down for the week.

The pressure on gilts market also continued after yields soared this week amid fears of further interest rate hikes to come.

FTSE 100 Live Friday

  • Retail sales back to growth in April

  • ASOS taps investors for £80m

  • Wall Street tech stocks get AI boost

FTSE closes at 7,627.20

16:38 , Daniel O'Boyle

The FTSE 100 closed at 7,627.20, thanks to a late rally on reports a US debt deal is close.

However the index is still down 1.7% for the week.

Miners made up more of the top risers, with Rio Tinto gaining 3.6% to 4,929p.

Vodafone was the biggest faller, down 1.8%.

London shares follow Wall Street up

16:29 , Daniel O'Boyle

Shares in London have climbed following reports the US is close to a debt ceiling deal.

The FTSE 100 is now up 0.8% to 7633.47, having been down slightly in the late morning.

West End Final: The return of industrial policy is a big deal

16:18 , Daniel O'Boyle

“The chancellor committed news this morning, when he essentially said the quiet part out loud, that sometimes a recession is necessary to bring inflation down,” writes Jack Kessler. “That comment, while certainly noteworthy, drew attention away from a potentially much more consequential announcement.

“The Treasury has revealed a life sciences package worth £650m which it hopes will boost the sector, one of the UK’s most successful, worth more than £94bn to the economy in 2021.

“Whisper it quietly, but is this the return of industrial policy (at least, beyond the five ‘e’s, whatever they are?)”

Read more here

US stocks rise amid debt deal hopes

15:31 , Daniel O'Boyle

US shares soared after markets opened on Wall Street, amid greater optimism the White House and Congress can strike a deal tht would prevent default.

The S&P 500 is up 1% to 4194, while the Dow Jones is up 1.1% to 33112. The Nasdaq is up 1.4% to 12875, having now gained almost 400 points since markets opened yesterday.

AI hopes continued to drive shares up, with tech firms Adobe, Broadcom and Micron Technologies among the top risers

Half-term getaway hit as BA flight cancellations reach 175

15:22 , Daniel O'Boyle

Half-term holiday plans for thousands of families have been thrown into disarray after British Airways’ flight cancellations due to an IT failure reached 175.

Most of the affected flights were on short-haul routes to and from Heathrow Airport.

British Airways said the “technical issue” was resolved on Thursday night, but disruption continued into Friday because of aircraft and crew being out of position.

Read more here

US stocks set to open slightly higher on cautious debt deal hopes

14:20 , Daniel O'Boyle

US stocks are set to open slightly higher with investors cautiously optimistic that the country’s politicans will be able to work out a deal that will prevent a default.

Dow Jones futures are up 0.2% to 32866 and S&P 500 futures are also up 0.2%, to 4168. Nasdaq futures are up by 0.4% to 14025 after big gains yesterday.

The deadline for a deal on the country’s debt ceiling is getting ever-closer with the Treasury’s cash balance falling below $50 billion, but investors are hopeful of progress.

But Richard Hunter, head of markets at Interactive Investor, warned that the deadline to work out a deal would be before the Treasury exhausts its remaining funds.

“Time is running out even to push through any such reform in the required timeframe,” he said.

UK bond yields highest in G7

14:03 , Daniel O'Boyle

The UK’s 10-year bond yields are the highest in the G7, as markets continue to worry about the extent of interest rate hikes that will be needed to bring inflation back under control.

Central London prime office rents get big boost from Elizabeth line

13:58 , Daniel O'Boyle

Prime office rents along the Elizabeth line’s central London section have leapt, in some cases by 20% since pre-pandemic, as businesses look for the most commuter-friendly locations research shows.

The data comes in the same week Transport for London said 150 million journeys have been taken across the Elizabeth line in its first year since opening in May 2022.

Read more here

‘2024 is looking increasingly concerning'

13:49 , Daniel O'Boyle

Oxford Economics' UK team warned that, while the economy appears resilient in the short term, there could be trouble on the way in 2024.

“The near-term outlook for activity continues to look reasonably good,” Andrew Goodwin and Edward Allenby said. “April saw a rebound in retail sales, while there was another decent outturn for the composite PMI in May.

“But the outlook for the latter part of this year and into 2024 is looking increasingly concerning.

“Our modelling suggests that this is the period when the maximum impact of past monetary tightening will bear down on activity. With further increases in interest rates and a slower fall in inflation adding to the headwinds to growth, we plan to significantly revise down our 2024 forecast when we publish our next update.”

The Standard View: Hunt speaks the uncomfortable truth on inflation

13:34 , Daniel O'Boyle

It is not something you hear a Chancellor say every day, not least 12 to 18 months out from a general election. Asked if he was “comfortable with the Bank of England doing whatever it takes to bring down inflation, even if that potentially would precipitate a recession”, Jeremy Hunt replied: “Yes”.

This is all the more remarkable given that recent economic forecasts from the Bank and the International Monetary Fund have suggested that Britain will avoid a contraction. However, that was before this week’s inflation figures

Read more here

Supercar tycoon denies withholding info from fraud probe into car leasing firm

13:26 , Daniel O'Boyle

A supercar tycoon is alleged to have withheld information from a fraud investigation into a car leasing company which collapsed with debts of £28 million.

Millionaire Tom Hartley, who has appeared on the Sunday Times Rich List, is described on his website as the “ultimate name in luxury, performance, and classic cars”.

Read more here

‘Domestic inflation isn’t going to fall while economic activity is strengthening'

13:10 , Daniel O'Boyle

After Jeremy Hunt said today that he’d be comfortable with a recession if that was what was needed to bring inflation down, Capital Economics chief UK economist Paul Dales said he is still projecting a recession as it’s hard to see how prices could be brought under control without GDP falling.

“It’s become clearer that domestic inflation isn’t going to fall while economic activity is strengthening,” Dales said. “As such, we now think that the Bank of England will have to raise interest rates further, from the current rate of 4.50% to 5.25%, to generate the economic weakness required to quash inflation.

“So unlike the Bank, the OBR, the IMF and most other forecasters, we are not taking a recession out of our forecasts.”

Mormon Church buys Wembley Amazon warehouse for £74 million

13:05 , Daniel O'Boyle

The Mormon Church’s investment arm has bought a 186,455 sq ft Amazon warehouse in Wembley for £74 million.

The property, bought from UKCommercial Property REIT (UKCM), will become part of the Church of Jesus Christ and the Latter Day Saints’ investment portfolio, which was valued at $44.8 billion at the end of 2022.

The property, Wembley180, was bought by Covent Garden IP, which is registered as a charitable company with a goal “to promote and further the religious and other charitable work of The Church of Jesus Christ of Latter-day Saints in the United Kingdom”.

Read more here

Boost for savers as banks unveil new deals

12:48 , Daniel O'Boyle

Savers are being offered a boost as some banks unveiled new deals on Friday.

First Direct is launching a one-year fixed-rate savings account with a rate of 4.60% AER (annual equivalent rate), from Tuesday March 30.

The deal is only available to First Direct customers with a 1st account current account. The bank is currently offering £175 cash to switch to its current account, subject to terms and conditions.

Read more here

Consumers drowning in debt as inflation bites

11:24 , Daniel O'Boyle

Hard-up consumers are in danger of drowning in a sea of debt, relying on loans to pay for everyday bills as inflation rages and interest rates head higher.

Figures from the Bank of England, AJ Bell and Fluro show mortgage, credit card, student loans and other debt has rocketed since Covid ended.

Read more here

Losses widen amid turmoil at Revolution Beauty

11:15 , Simon Hunt

Losses at Revolution Beauty widened to £45 million as the beleaguered makeup retailer finally published its annual results today after months of turmoil that saw auditor warnings over “serious concerns” in its accounts, the departure of its top execs and the suspension of its shares.

Chair Derek Zissman said: “Preparing Revolution Beauty’s first annual report and accounts have, to say the least, been a stressful challenge for all those involved.”

The results show revenue climbed 34% to £185 million while losses ballooned from £18 million to £45 million in the year to February 2022. That comes after £9 million had to be wiped from its reported revenues after the firm confessed that “sales were only undertaken for the purposes of meeting sales targets…and not all of the products ordered were required by the distributors.”

City Comment

10:50 , Simon English

The Bank of England is in the mire, abused for having moved too slowly to control inflation.

This week Governor Andrew Bailey made several big confessions. The Bank’s forecasting models are in error to such an extent they are now being ignored, he said. Moreover, the experts at Threadneedle Street have a communication problem.

There are “very big lessons to learn”, Bailey conceded. It feels as if Bailey has been battered into these sort-of apologies by the weight of economic commentary and by inflation staying higher for longer than he thought.

The old narrative, which at least was consistent, was that no amount of rate-rising in 2021 would have prevented inflation. It would just have made life harder for folk already struggling.

In which case, ratcheting up rates now hardly looks any better, since inflation is going to go its own way, whatever the Bank does.

As we report today, there are 1.4 million homeowners whose fixed rate mortgage deals expire this year (I’m one of them). If rates keep rising, a £1500 mortgage will soon cost about £2000 as fixed deals are renegotiated. Replicated across all 1.4 million of us, that’s a huge chunk of money no longer available to spend on goods, services, holidays.

That in turn must be a hit to the economic growth the Government is betting on to up its tax take and cut borrowing.

The Prime Minister has made halving inflation from 10% to 5% one of this key goals, like he can influence things the Bank cannot (he can’t, to be clear). It looks possible his target will be missed, while borrowing costs rocket.

It’s a mess.

ASOS shares flat after fundraising, housebuilders struggle

10:19 , Graeme Evans

The completion of a £75 million fundraising by fast fashion retailer ASOS today failed to a trigger a revival for the FTSE 250 stock.

Alongside the placing of new shares with City investors, the FTSE 250-listed company unveiled a new long-term £275 million financing facility with an 11% interest rate.

It also hopes to raise £5 million by offering retail investors the chance to buy shares at last night’s closing price of 418.1p. The shares were near to 1500p a year ago but have been stung by falling revenues and uncertainty in the early stages of a turnaround plan.

Shares initially touched 455p this morning as the fundraising ended weeks of speculation over how the company intended to bolster its balance sheet, but later reversed to stand 4.3p lower at 413.8p.

The fallback for ASOS was mirrored by the rest of the London market, with the FTSE 100 index 5.84 points higher at 7576.71 compared with a gain of 0.7% earlier on.

The performance left London’s top flight 175 points lighter in a week of worries about the US debt ceiling and the blow for housebuilding and other rate-sensitive stocks after a shock inflation print of 8.7%.

The prospect of more interest rate hikes by the Bank of England today meant the yield on the two-year gilt today remained above 4.5% compared with 4.18% earlier in the week.

FTSE 100-listed builders came under selling pressure, with Persimmon shares down 22p to 1197.5p and Taylor Wimpey off 1.9p to 115.5p. In contrast, Rio Tinto rose 177.5p to 4935.5p after Morgan Stanley upped its price target to 5800p.

The FTSE 250 fell 44.08 points to 18,796.67, with cyber security firm Darktrace down 19.8p to 272.2p.

Chancellor Jeremy Hunt comfortable with recession if it forces down inflation

09:35 , Daniel O'Boyle

Chancellor Jeremy Hunt on Friday backed the Bank of England hiking interest rates further even if it pushed Britain into recession in order to force down inflation.

He made the startling admission amid fears that the bank’s Monetary Policy Committee may have to raise interest rates from 4.5 per cent to as high as 5.5 per cent to tackle inflation which is proving harder to get down than it had expected.

Read more here

Miners lead FTSE 100 recovery, ASOS shares higher

08:26 , Graeme Evans

A turbulent week for London shares is ending on an upbeat note after the FTSE 100 index traded 0.7% higher, up 53.41 points at 7624.28.

The improvement, which follows worries over the US debt ceiling and the prospect of higher interest rates, was driven by the mining sector.

Rio Tinto shares surged 4% or 190.4p to 4948.4p after Morgan Stanley raised its price target to 5800p, while Antofagasta, Anglo American and Glencore were also up 3%.

Vodafone shares fell another 0.8p to 80.3p, while Persimmon lost 9p to 1210.5p after analysts at Deutsche Bank lowered their price target on the housebuilder to 1212p.

The FTSE 250 index rose 26.76 points to 18,867.51, led by ASOS as shares lifted 32p to 450.1p on the back of moves to bolster the retailer’s balance sheet. The efforts included a £75 million share placing, which was priced at last night’s close of 418.1p.

“Light at the end of the tunnel"

08:08 , Daniel O'Boyle

Phil Monkhouse, Head of sales at global financial services firm Ebury, said today’s retail sales figures show a “light at the end of the tunnel”.

“Following months of consumers tightening their belts to the detriment of retailers, April’s uptick in spending suggests that there is light at the end of the tunnel for the businesses hit hardest by the cost-of-living crisis’ impact on sales.”

“With summer well on its way, it’s important for retailers to take full advantage of the good weather and holiday spending, having ready stock and the ability to act quickly and cost-effectively will be key to prospering from this upswing in spending.”

ASOS taps investors for £80m, agrees new loans

07:52 , Graeme Evans

ASOS shares are in focus today after the fast fashion retailer last night announced a £75 million City fundraising as part of efforts to strengthen its balance sheet.

Alongside the fully underwritten placing, the FTSE 250-listed company has entered into a new long-term £275 million financing facility with specialist lender Bantry Bay Capital.

It is also planning to raise up to £5 million from retail investors by offering new shares through the PrimaryBid platform at last night’s closing price of 418.1p. That compares with a level of more than 1,500p just under a year ago.

Economists warn high street slowdown is still to come

07:44 , Daniel O'Boyle

Ashley Webb, UK economist at Capital Economics, warned that, while April retail sales were strong, it was only a matter of time before sky-high interest rates hit high-street spending.

“The rebound in April was widespread. Food sales rose by 0.7% m/m, and sales rose in four of the other six main categories. The largest increases were in “other” store and department store sales, which rose by 2.1% m/m and 1.7% m/m respectively. Online sales rebounded in April by 0.2% m/m following a 1.4% drop in March. Household goods sales slipped by 0.2% m/m and fuel sales fell by 2.2% m/m, which may have been due to an increase in the use of public transport as there were no strikes in April.

“Overall, while the outlook for retail sales appears to be improving, we expect further rises in interest rates, from 4.50% now to a peak of 5.25%, and for them to stay high until late next year. That will mean real consumer spending is more likely to decline later this year than rise.”

US tech stocks soar, FTSE 100 steadies after big losses

07:28 , Graeme Evans

Stocks in the technology sector dominated Wall Street trading yesterday after Nvidia’s stronger-than-expected quarterly results.

Buyers focused on semiconductor and AI-related stocks as the Nasdaq Composite rallied 1.7% and the S&P 500 index lifted 0.9%, even though only 40% of its constituents were in positive territory. Nvidia shares finished 24% higher.

Marvell Technology kept the momentum going after the closing bell by posting better-than-expected results and forecasting a doubling in AI-related revenues this year.

Its shares rose 17% in after-hours trading, on top of the 8% seen in regular dealings.

In contrast to the tech-focused gains elsewhere, the Dow Jones Industrial Average fell for a fifth straight session as US debt ceiling talks continued ahead of the 1 June default deadline.

Deutsche Bank strategist Jim Reid said: “We still don’t have a deal yet, but the latest developments yesterday raised hopes that an agreement can be reached ahead of the deadline.”

The uncertainty has contributed to the FTSE 100 index losing 200 points in the past two sessions, although CMC Markets expects a steadier session today after forecasting an unchanged start at 7570.

Retail sales back to growth in April

07:09 , Daniel O'Boyle

Retail sales were up 0.5% in April as shoppers returned to the high street following a decline in March.

The growth was ahead of the expected figure of 0.3%.

Food store sales volumes were up by 0.7%, while non-food store sales were up 1%. Other volumes, which are mostly online sales, were up more slowly, at 0.2%.

However, March’s figure was also revised down. The ONS now says sales that month were down by 1.2%, rather than 0.9%, as bad weather kept shoppers at home.

ONS Chief Economist Grant Fitzner said: “Retail sales grew, partially rebounding from a poor weather affected March, with jewellers, sports retailers and department stores all having a good month. Despite continued high food prices, supermarkets also recovered from the fall in March.

“However, these were partly offset by a drop in the amount of fuel sold, despite prices also dropping.”