FTSE 100 Live: ‘Inflation at a turning point’, BoE economist says; FTSE closes up 0.3% despite March GDP fall
UK GDP fell by 0.3% in March, but that wasn’t enough to prevent the economy from growing over the quarter, the Office for National Statistics revealed today.
Growth was 0.1%, which is enough to push any risk of recession further into the future, but the continued stagnation of the economy will remain a disappointment.
Elsewhere, ecommerce business THG says it has ended takeover talks with private equity group Apollo, while Jaguar Land Rover and Beazley are among the companies posting updates.
FTSE 100 Live Friday
Former Autonomy boss extradited to the US
Tesco reveals £4.4m pay package for CEO
Hut Group firm ends Apollo bid talks
City Voices: M&S’ Oxford Street proposal is just a generic office block masquerading as a department store
Friday 12 May 2023 17:09 , Daniel O'Boyle
MThe Secretary of State, Michael Gove, has pushed his decision on &S Oxford Street back to July. This will give him more time to reflect on the huge benefits of refurbishment over M&S’s plan for demolition.
M&S have denigrated the existing group of buildings at Marble Arch because they want to demolish their flagship store and replace it with a new “white box” office building. M&S like to present themselves as the voice of Oxford Street retail, yet are actually planning to shrink their shop from 34,837 sq m to 13,653 sq m.
Their proposal is essentially a generic office block masquerading as a department store. And they’ve threatened to leave if they don’t get their way.
FTSE closes at 7754
Friday 12 May 2023 16:40 , Daniel O'Boyle
The FTSE 100 closed at 7754 today, for its strongest day in an otherwise tough week.
Shares closed up 0.3%, led by Beazley, JD Sports and Airtel Africa.
The rise came despite weaker-than-expected GDP figures, as the UK economy shrank by 0.3% in March. Q1 GDP was still positive, though, at 0.1%.
However, it remained down for the week.
City Comment: The economy might be stalling, but be thankful for our strong job market
Friday 12 May 2023 16:01 , Daniel O'Boyle
I have seen the future — and it’s flat.
In contrast to the extraordinary gyrations in output during the deep recessions of the financial crisis and the pandemic the GDP graph is now barely flickering.
Over the winter half of the year output has hardly moved, better perhaps than the long recession forecasters were gloomily predicting last autumn, but still fairly grim. Output is yet to limp over the pre-Covid Plimsoll Line and the outlook for the next two to three years looks little different.
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Friday 12 May 2023 15:20 , Daniel O'Boyle
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Bank of England economist: Inflation at a “turning point"
Friday 12 May 2023 14:38 , Daniel O'Boyle
Bank of England chief economist Huw Pill said today that inflation is at a “turning point”, in what may be a sign that the Bank is considering a pause to its rate hikes.
The Bank raised interest rates to 4.5% yesterday, and many investors believed it signalled plans to raise rates further. But Pill’s comments may suggest the Bank believes the effects of its 12 recent rate hikes will become much more noticable soon.
While the Bank was optimistic about inflation in the short term, its projections were less positive further out, with inflation remaining above the 2% target until 2025.
Burberry investors hopeful of China luxury shopping rebound
Friday 12 May 2023 14:34 , Daniel O'Boyle
Luxury retailer Burberry could prove its buyers have been sheltered from cost-of-living pressures when it unveils its full-year financial results on Thursday.
The historic British brand, which has benefitted from the reopening of the Chinese economy this year, is expected to show a jump in profits and sales for the year ending in March.
City voices: Are we now in the era of the sabbatical?
Friday 12 May 2023 13:06 , Daniel O'Boyle
Earlier this week, Wise CEO Kristo Kaarman said he would be taking three months off work to spend more time with his growing family.
How much have the tech and the wider business worlds really changed in recent years? And how much further do we have to go? Some are arguing that the tide has turned and that people are starting to make up for lost time – but is this really the case?
Royal mail boss to quit
Friday 12 May 2023 11:51 , Daniel O'Boyle
Royal Mail boss Simon Thompson has announced plans to quit, weeks after the postal delivery firm agreed a new pay deal with striking staff.
Thompson will leave the role on 31 October. The board of Royal Mail, which was privatised in 2013, is “in advanced stages of appointing a new CEO”.
Elon Musk steps down as CEO of Twitter as new female boss announced
Friday 12 May 2023 11:13
Elon Musk has announced that he is stepping down as chief executive of Twitter to make way for a new female boss.
Mr Musk said on Thursday that he has found a new CEO for the social media platform and that she will be starting in about six weeks.
“My role will transition to being exec chair & CTO, overseeing product, software & sysops,” he wrote in a tweet.
GSK shares rally in robust FTSE 100 session
Friday 12 May 2023 10:21 , Graeme Evans
GSK shares today lifted 21.4p to 1466.2p as the drugs giant banked £800 million from the sale of a 2.5% Haleon stake and it welcomed a court ruling relating to heartburn drug Zantac.
The biggest boost came from British Columbia as a court dismissed a proposed class action brought against a Canadian company, saying there was no evidence that ranitidine increased the risk for any type of cancer.
The ruling was highlighted in a statement by GSK as it continues to defend itself in Canada and the United States against litigation concerning Zantac.
The cases have overshadowed the company’s attempts to convince the City of its standalone potential after the demerger of consumer healthcare business Haleon last July.
In today’s other development, GSK said it had raised £804 million by selling a 2.5% stake in the Sensodyne-to-Voltaren business at a price of 335p. GSK still holds a 10.3% stake in Haleon, alongside former partner Pfizer with a 32% holding. Both have pledged not to sell more shares in the next 60 days.
GSK’s share price improvement came during a robust session for FTSE 100 index, which rose 33.36 points to 7763.94 to end the week broadly unchanged.
Banking stocks featured heavily on the risers board, with Barclays up 1.1p to 154.6p after RBC analysts upped their price target by 15p to 230p.
It was also a better session for Rolls-Royce shareholders after yesterday’s AGM trading update led to a 7% fall. The stock, which is up by more 50% this year, recovered 2% or 2.6p to 148.5p in today’s session.
The FTSE 250 index fell 7.57 points to 19,258.73, although ASOS shares rose 7.4p to 507.4p at the end of a week in which its half-year results sent shares sharply lower.
Beazley cuts corporate risk appetite as cyber insurance drives growth
Friday 12 May 2023 09:35 , Daniel O'Boyle
Insurer Beazley says it has cut its appetite for corporate risks, in favour of greater focus on other risks like cybercrime, as a slowdown in dealmaking reduces demand for that part of its business.
The underwriter saw 12% growth in premiums written for the first three months of the year, to $1.37 billion, and says it’s still on course for around 15% growth for the year.
This was despite a decline in its specialty arm, which mainly covers corporate risks, which Beazley blamed on “a continued lack of IPO and M&A activity”.
Those declines were more than offset by growth in Beazley’s cyber and property divisions, with cyber insurance growth especially strong in Europe.
Shares in Beazley are up 5% to 616p today.
Tesco boss pays tax in Ireland -- sources
Friday 12 May 2023 09:06 , Simon English
TESCO boss Ken Murphy took home pay of £4.44 million this year, an amount likely to cause ire amidst a cost-of-living crisis and with food inflation running at more than 15%.
The CEO’s pay is down a little from the £4.75 million gained in 2022.
City sources say Murphy, born in Cork, is registered for tax in Ireland and pays a lower rate of tax there than he would here.
Tesco has been approached for comment.
Arch rival Sainsbury’s paid its chief executive Simon Roberts £3.8 million in 2022, 183 times higher than the median worker at the supermarket.
Tesco’s finance director Imran Nawaz was paid £2.27 million up from £1.91 million.
Tesco, as the UK’s biggest grocer, made sales of £57.7 billion last year, on which it made a profit of £2.6 billion.
While that is a relatively narrow profit margin, concerns that the industry is taking advantage of inflation to shove up prices unfairly remain.
Consumers are angry at rising prices and this morning MPs on the Treasury’s environment, food and rural affairs committee said they are opening an investigation into “fairness in the food supply chain”.
In the annual report today Tesco said “our fantastic team of colleagues is at the heart of Tesco”. It recently announced an increase in hourly pay to £11.02 for its 254,000 UK staff.
Murphy’s pay is comparable to his predecessor Dave Lewis, though Lewis did get £6.3 million in 2019.
It is still around 200 times higher than the average Tesco salary, which is typically around £20,000. Tesco points out that it has a high number of part-time staff.
Tesco’s GPG (gender pay gap) increased to 6.9%, which is less than half the UK average of 14.9%.
The annual report says: “Our GPG is attributable to two key factors. The first is having a higher number of male colleagues in our more senior roles. We are committed to increasing the percentage of female colleagues in such roles to ensure our leadership team truly reflects our customer base and wider colleague population. We will continue to drive female representation across all roles to close the gap.”
Beazley leads way as FTSE 100 rallies, ASOS up 4%
Friday 12 May 2023 08:28 , Graeme Evans
The FTSE 100 index is up 0.3% or 20.99 points to 7751.57, with Rolls-Royce among the frontrunners after yesterday’s 7% slide.
Rolls, which fell 10.5p to 146p following its AGM trading update, rallied 2.6p to 148.5p in a session when other blue-chip risers included Barclays and Taylor Wimpey.
GSK rose 15.6p to 1460.4p after a double dose of positive news included the pocketing of £804 million from the sale of a 2.5% stake in former consumer healthcare arm Haleon. The other boost came from the decision of the British Columbia Supreme Court to dismiss a proposed class action relating to heartburn drug Zantac.
Shares in insurer Beazley led the FTSE 100 risers board, adding 23p to 609.5p after its latest update revealed a 12% rise in gross written premiums for the March quarter.
The FTSE 250 index is 2.59 points lower at 19,263.71, but ASOS shares rallied 4% or 18.2p to 518.2p at the end of a week in which its half-year results sent shares sharply lower.
THG shares sink 14% after it walks away from Apollo talks
Friday 12 May 2023 08:20 , Simon Hunt
Shares in THG have sunk 14% to 64p after the firm said it had ended takeover discussions with Apollo Global Management.
Shares in the firm soared last month after it revealed the investment firm had made a non-binding offer to take the company private.
But in an update today the company said: “It has become clear to the Board, supported by shareholders representing a majority of THG’s issued share capital, that there is no longer any merit in continuing to engage with Apollo.”
Billionaire Mike Lynch extradited to the US
Friday 12 May 2023 07:59 , Simon Hunt
Mike Lynch is to be extradited to the US, the Home Office has said.
The entrepreneur is set to face criminal charges over Hewlett Packard’s $11 billion acquisition of his software company Autonomy in 2011.
Lynch has denied any wrongdoing and had been fighting the extradition request by the US, instead arguing he should be prosecuted in Britain.
However, the High Court refused permission to appeal the extradition on April 21.
“Dr Lynch was extradited to the U.S. on 11 May,” the Home Office said in a statement.
GSK offloads Haleon stake for £804m
Friday 12 May 2023 07:53 , Graeme Evans
Drugs giant GSK has made £804 million by selling a 2.5% stake in the Sensodyne-to-Voltaren consumer healthcare business Haleon.
GSK offloaded the shares in its former division at 335p, which compares with Haleon’s share price of 342.85p at yesterday’s close.
The pharmaceuticals company still holds a 10,3% stake in Haleon, alongside former partner Pfizer with a 32% holding. Both have pledged not to sell more shares in the next 60 days. Haleon joined the stock market in July 2022.
Separately, GSK said it welcomed the decision of the British Columbia Supreme Court to dismiss a proposed class action relating to heartburn drug Zantac.
FTSE 100 seen higher despite US weakness, oil below $75
Friday 12 May 2023 07:23 , Graeme Evans
The FTSE 100 index is expected to begin today’s session 22 points higher as the lacklustre week for global markets draws to a close.
The opening bell call by CMC Markets to 7752 comes after the Dow Jones Industrial Average and S&P 500 index fell 0.7% and 0.2% respectively. The FTSE 100 index finished 0.1% lower yesterday.
Wall Street’s sell-off came amid mounting concerns about the economic outlook, as well as the US debt ceiling and plight of regional banks.
One bright spot came from the tech sector as the Nasdaq edged up 0.2% on hopes that US interest rates are at their peak.
Brent crude futures today stood at $74.39 a barrel, having fallen sharply yesterday as China’s disappointing trade figures added to concerns about the global economic outlook.
‘This is not the mark of an economy in good health'
Friday 12 May 2023 07:20 , Daniel O'Boyle
Jeremy Batstone-Carr, European Strategist at Raymond James Investment Services, says the economy certainly is in good health, but continues to show its resilience with continued quarterly growth.
“The British economy managed to eke out a slither of growth in the first three months of the year, with growth standing at 0.1%,” he said. “This is not the mark of an economy in good health, but it does continue to demonstrate its underlying and surprising resilience.
“The slight growth shows the economy has managed to dodge the worst of a number of negative pressures, including still high inflation, the lagged effects of earlier rate rises, and, with a sigh of relief from the government, widespread industrial action.”
UK GDP down by 0.3% in March, but up in Q1
Friday 12 May 2023 07:07 , Daniel O'Boyle
UK GDP was down by 0.3% in March, underperforming expectations, but the economy still grew by 0.1% in Q1.
“Despite the UK economy contracting in March, GDP grew a little over the first quarter as a whole,” ONS Director of Economic Statistics Darren Morgan said.
““The fall in March was driven by widespread decreases across the services sector. Despite the launch of new number plates, cars sales were low by historic standards – continuing the trend seen since the start of the pandemic – with warehousing, distribution and retail also having a poor month.
“These falls were partially offset by a strong month for manufacturing as well as growth in gas production and distribution and also in construction.
“Across the quarter as a whole growth was driven by IT and construction, partially offset by falls in health, education and public administration, with these sectors affected by strikes.”
With the economy growing for the quarter, the UK now cannot meet the technical definition for a recession until the third quarter at the earliest. Yet the March decline and slow growth for the quarter as a whole will not give much reason for optimism.
Deal’s off with Apollo, says THG
Friday 12 May 2023 07:07 , Simon Hunt
THG has ended takeover discussions with Apollo Global Management, the e-commerce retailer said today.
Shares in the firm soared last month after it revealed the investment firm had made a non-binding offer to take the company private.
But in an update today the company said: “Following receipt of the Indicative Proposal, the Board of THG entered into a short period of discussion with Apollo to provide it with an opportunity to improve the proposed valuation and confirm the structure of its Indicative Proposal.
“It has become clear to the Board, supported by shareholders representing a majority of THG’s issued share capital, that there is no longer any merit in continuing to engage with Apollo.”
Recap: Yesterday’s top stories
Friday 12 May 2023 06:58 , Simon Hunt
Good morning. Here’s a summary of our top stories from yesterday.
The Bank of England raised interest rates and said it doesn’t expect to hit its inflation target before 2025.
The CFO of London fintech Revolut has abruptly quit the company, citing ‘personal reasons’.
A slump in advertising sales led to a dip in revenue for broadcaster ITV in the first quarter.
The head of a UAE government-controlled telecoms firm has joined the board of Vodafone amid a new strategic partnership.