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FTSE 100 Live: ‘Inflation slowdown could be short-lived’; FTSE fades to close at 7600 amid slower US growth

 (Evening Standard)
(Evening Standard)

The FTSE 100 opened higher this morning, but gains vanished this afternoon after a closely watched gauge suggested US service-sector growth for May was much slower than expected, leading the index to finsih close to where it started, at 7600.

Oil prices are higher after Saudi Arabia pledged to cut production in July.

FTSE 100 Live Monday

  • Oil price higher as Saudi Arabia cuts output

  • British Airways restarts London to Beijing flights

  • Long-serving Diageo boss steps down

Key market data as FTSE 100 closes at 7600

16:54 , Daniel O'Boyle

Take a look at the key market data as a late decline meant the FTSE finished the day roughly flat.

FTSE closes at 7600 as shares fall in afternoon

16:40 , Daniel O'Boyle

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A sharp afternoon decline meant the FTSE 100 closed at 7600, seven points below where it opened.

The index of London blue-chips was up by close to 0.5% for almost all of the day, before a closely watched gauge from the Institute for Supply Maagement showed slower growth in the US service sector than expected, sending the FTSE down by 50 point and into negative territory.

Abrdn and Vodafone were the biggest risers, while Endeavour Mining and Ocado were the top fallers.

Could the US be heading for a recession?

16:32 , Daniel O'Boyle

After today’s weaker-than-expected ISM numbers, James Knightley, chief international economist at ING, warned that the world’s largest economy hasn’t escaped the risk of a recession.

“The US may be adding jobs in huge numbers but the key ISM business surveys cast serious doubt on how long this can last,” he said. “The manufacturing ISM index is already indicating recession and the service sector will soon join it unless order books turn around dramatically.”

Comment: Britain is the sick man of the West on inflation and now faces bitter medicine

16:25 , Daniel O'Boyle

“First, the good news. Inflation is heading lower,” Stephen King writes. “US inflation peaked at 8.5 per cent late last year and is now running at around five per cent. Eurozone inflation peaked at 10.6 per cent and is now down to 6.1 per cent. UK inflation peaked at more than 11 per cent and has dropped to 8.7 per cent.

“Second, the not so good news. Although inflation in all three economies is lower than it was, prices are still rising too quickly...

“Third, the very bad news — at least from the UK’s perspective... even as core inflation has either flatlined or fallen elsewhere, it’s still heading higher in the UK.”

Read more here

City Voices: Hypocritical corporations should not force young workers back to the office

16:12 , Daniel O'Boyle

As the post-pandemic dust settles, many companies are rolling back the remote or hybrid models they brought in and asking their employees to return to the office. Disney’s chief executive Bob Iger cited “the ability to connect, observe and create with peers that comes from being physically together” as a key motive when he emailed staff earlier this year asking them to come back four days a week.

Amazon, Apple, Twitter and KPMG are also among the corporations positioning this controversial call as a logical step towards normality, but in reality, these mandates are draconian, fraught with hypocrisy and are ultimately a step backwards.

Since more flexible working policies have taken shape, people with disabilities have been enjoying unprecedented rates of employment. In a corporate world focused on diversity, equity and inclusion (DEI), Ben Marks asks, ‘how can reverting to the limits of office working possibly make sense?’

Read more here

In today’s Standard...

15:57 , Daniel O'Boyle

...long-time Diageo boss Ivan Menezes to retire early after a health setback, British Airways resumes flights to Beijing and UBS reveals its acquisition of Credit Suisse could close next week.

Pick up a copy from any of our distribution points

 (Evening Standard)
(Evening Standard)

Key US market data

15:31 , Daniel O'Boyle

US shares are close to flat after two key gauges showed slower-than-expected growth in the economy in May.

Click through the tabs to see all of the data.

London shares fall on US service growth miss

15:23 , Daniel O'Boyle

London shares’ gains this morning disappeared after the Institute for Supply Management reported an unexpected slowing of the US service sectorin May.

The ISM Report on Business services gauge came to 50.3, well below the expected 51.9.

Wall Street shares declined on the news, but London’s blue-chips were harder hit, with the FTSE 100 losing almost 50 points in half an hour. After spending most of the day up by roughly 0.5%, it is now down slightly at 7598.

US shares slightly higher

15:08 , Daniel O'Boyle

US shares are slightly higher this morning, despite private sector growth coming in a little slower than expected.

Shares rose opening with the S&P 500 hitting 4293 15 minutes after the opening bell. However, after the S&P Global US Sector PMI came in at 54.3, below the flash reading of 54.5, shares headed back towards Friday’s close of 4282.

The Dow Jones is down 0.2% to 33,700, while the Nasdaq is up 0.3% to 13273.

New car sales go up a gear as long journey back from pandemic lows goes on

14:31 , Daniel O'Boyle

The longest drive higher in new car sales in eight years sparked some hope that the UK economy is going up a gear today, with figures showing a continued rise for May.

It meant that the market had its best stretch of uninterrupted growth since 2015. Registrations of new vehicles was up almost 17% to 145,204 according to the Society of Motor Manufacturers and Traders.

Read more here

It’s now or never to regulate crypto, warn MPs

14:14 , Simon Hunt

Time is running out to regulate the crypto industry before more consumers are put at risk and the UK becomes uncompetitive, MPs have warned.

The government has just 12-18 months to introduce fresh crypto rules before being “left behind” as businesses look to set up and grow elsewhere, according to a report by the All Party Parliamentary Group (APPG) for Crypto and Digital Assets.

“Other jurisdictions are making significant headway in delivering legal and regulatory certainty and there is a real risk of the UK being left behind by more advanced and more cryptocurrency and digital asset friendly regulated markets overseas,” the report said.

“The Government must move within a finite window of opportunity within the next 12-18 months to ensure early leadership within this sector.”

The report comes at a turbulent time for the UK crypto industry, with a number of banks blocking customers from transacting with crypto firms and trading platforms such as OKX snubbing London to set up a European hub in Paris. The government’s City minister, Andrew Griffith, has said the UK is committed to becoming a world crypto hub.

read more here

Little movement in US futures

13:54 , Daniel O'Boyle

US stocks appear set for a flat opening today, with debt ceiling drama finally in the rear-view mirror.

Dow Jones futures are down just two points to 33815, while S&P 500 futures are up by two points to 4290. Nasdaq futures are down by 11 points to 14561.

‘Inflation slowdown could prove short-lived’

12:58 , Daniel O'Boyle

Martin Beck, Chief Economic Advisor to the EY ITEM Club, says this morning’s PMI figures are the latest sign that inflation is proving stickier than expected.

“Less robust growth in the services sector was not accompanied by a slowdown in cost pressures,” Beck said. “In fact, May's survey showed the strongest rise in input costs in three months, driven in part by rising wages.

“Prices charged inflation did ease in May, but this slowdown could prove short-lived if higher input costs are passed onto consumers in the future. Following evidence of stickiness in the official inflation numbers, signs of stronger cost pressures will add to the MPC's concerns over inflation persistence and further tips the balance towards a further 25bps rate rise later this month.

However, Beck added that the PMI reading also suggests the economy is on course for growth this quarter.

“Meanwhile, the latest composite PMI is consistent, based on past form, with positive GDP growth in Q2. The economy in May was probably weaker than the PMIs imply, since the business surveys may have struggled to pick up the impact of the extra bank holiday for the coronation. And they won't have captured the direct effects of industrial action on public sector activity. But it’s now looking more likely that GDP managed to expand slightly in Q2.”

Key market data at lunchtime

12:51 , Daniel O'Boyle

Take a look at the key market data as of 12:30pm after a strong morning for the FTSE 100

New mortgage pain as lenders shake up deals

12:45 , Daniel O'Boyle

Homeowners were on Monday facing more economic pain after mortgage rates soared to levels not seen since January as a wave of major lenders withdrew or repriced fixed-rate deals.

The average cost of two and five-year fixes jumped dramatically since Friday, according to latest data from analysts Moneyfacts. The average two-year deal now stands at 5.72 per cent, the highest since January 9, while the average cost of a five-year fix stands at 5.41 per cent, the highest since January 16.

Read more here

City Comment: London is still Europe’s top finance hub, but don’t take it for granted

11:52 , Daniel O'Boyle

It has been a worrying year for anyone who cares about London’s status as Europe’s premier financial services centre.

The steady stream of companies seeking a listing in New York rather than the Square Mile, the collapse in IPOs and M&A activity, and the mounting job losses all pointed to a crisis of confidence in the City after decades of unquestioned domination.

There has often been talk of Frankfurt, Geneva, Paris or Dublin muscling in on London’s territory and there is no doubt that after Brexit many of the global banks that made it their European headquarters after Big Bang have been rethinking their level of commitment.

Read more here

London-based VC IQ Capital raises $400 million to invest in deep tech

10:56 , Simon Hunt

The UK’s tech sector was given a boost today after London-based private equity firm IQ Capital said it had raised $400 million (£320 million) to invest in deep tech businesses.

The two $200 million funds raised are aimed at investing into early-stage rounds in UK and European startups to back founders with the ambition to scale globally in areas like generative AI, space-tech and data security.

IQ, which has invested in a suite of major tech firms in recent years, including fintech unicorn Thought Machine and AI business Bloomsbury, which was acquired by Facebook, said the new funding takes its total assets under management to over $1 billion.

read more here

S&P: Services and manufacturing sectors continue to diverge

10:16 , Daniel O'Boyle

The UK services and manufacturing sectors continued to diverge in May, according to the S&P Global / CIPS UK Services PMI.

The closely watched survey found that business activity grew again in May, with a reading of 55.2, slightly ahead of the flash reading published last month. Any figure above 50 represents growth.

However, while the dominant service sector grew again, manufacturing output had its steepest decline since January.

“The service sector was running in the opposite direction to the declining manufacturing sector in the UK, powering ahead with another strong rise in new orders including work from overseas and rising tourist numbers,” Dr John Glen, Chief Economist, Chartered Institute of Procurement and Supply (CIPS), said.

Oil and telecoms stocks lead FTSE 100 higher

10:10 , Graeme Evans

BP and Shell pushed the FTSE 100 index higher today after Saudi Arabia's production cut added almost two dollars to a barrel of oil.

The plans for a voluntary reduction of one million barrels a day in July came as fellow OPEC+ members announced their overall targets would drop by a further 1.4 million barrels a day from next year.

The efforts to shore up the flagging price initially sent Brent Crude futures up by 3.5% to near $79 a barrel before the benchmark settled 2% or $1.70 higher at $77.83.

BP shares rose 6p to 480.4p, but are still well short of the 534p seen prior to April’s first quarter results. Shell was also more than 1% higher, up 24p to 2314p as the heavyweights ensured the FTSE 100 posted a bigger-than-expected rise of 35.82 points to 7643.10.

The oil pair’s progress was bettered by telecoms stocks Vodafone and BT after their shares jumped 3%, up 2.3p to 78p and 4.15p to 147.8p respectively.

The FTSE 250 index improved 122.85 points to 19,272.16, led by fast fashion chain ASOS after takeover speculation sent shares up 10% or 19.6p to 370p.

The Sunday Times said last December’s approach from Turkish online retailer Trendyol with backing from China’s Alibaba valued ASOS at around £1 billion or between 1000p and 1200p a share, adding that no talks are currently taking place.

Other stocks on the front foot in the FTSE 250 included Dowlais, the GKN automotive and powder metallurgy business that recently demerged from Melrose Industries. Shares rose 3.7p to 129.05p after analysts at Jefferies initiated coverage with a price target of 155p and said Dowlais looked to be an ideal way to play the auto industry recovery.

Female founders hit by ‘dilution gap'

09:52 , Daniel O'Boyle

Female startup founders are forced to give up a larger portion of their businesses than men in order to receive funding, according to a report released today.

JP Morgan’s Top 200 Women-Powered Businesses report found that female founders who pursue equity funding have their stakes reduced by 5.3 percentage points more than their male counterparts.

“For female-founded companies, there is a significant disparity between the equity stakes of equity-backed and non-equity-backed companies,” the report said. “This highlights that women are more adversely impacted by the dilutive effect of financing in contrast to men.

“Businesses that are led by a woman but owned by a man do not distribute wealth creation in the same way as a woman-led and woman-owned business.”

British Airways restarts London to Beijing flights

09:09 , Daniel O'Boyle

British Airways has resumed flights from London to Beijing, with its first flight to the Chinese capital in three years touching down yesterday.

The airline suspended flights to Beijing Daxing Airport in January 2020 during the early stages of the Covid-19 pandemic, and they remained suspended as China kept strict entry restrictions in place.

However, after the country relaxed rules in January, British Airways announced plans to start flying to Beijing and Shanghai again.

(Steve Parsons/PA) (PA Wire)
(Steve Parsons/PA) (PA Wire)

Entry requirements eased further in April, with vaccine requirements removed and self-administered covid tests now accepted.

Louise Street, British Airways’ Director of Worldwide Airports, said: “The restart of one of our most important routes after more than three years is a long-awaited moment for all of us at British Airways.

“Following the successful resumption of flights between Shanghai and London in April, we’re excited to be back in Beijing too, reuniting families and friends and facilitating international student and business travel once again.”

Market snapshot as FTSE opens higher

08:42 , Daniel O'Boyle

Take a look at the key market data after the FTSE 100 rose in early trading this morning, with telecoms companies among the top risers.

FTSE 100 higher as oil stocks rise, ASOS shares up 5%

08:15 , Graeme Evans

Takeover speculation today boosted ASOS shares in a session when the wider London market traded modestly higher.

ASOS shares lifted more than 5% or 19.6p to 370p after the Sunday Times reported that the fast fashion chain was the subject of a £1 billion approach from Turkish online retailer Trendyol backed by Chinese e-commerce giant Alibaba.

The report said the proposal in late December valued the FTSE 250-listed business at between 1000p and 1200p but that no talks are currently taking place. Danish billionaire Anders Holch Povlsen holds a 26% stake in ASOS, with Frasers Group majority owner Mike Ashley having 7.4%.

The FTSE 100 index rose 0.4% or 31.05 points to 7638.33, with Shell and BP shares up 1% after Saudi Arabia’s latest production cut boosted the Brent Crude price to $77 a barrel. The FTSE 250 index was 61.06 points higher at 19,210.37.

UBS says acquisition of Credit Suisse to go through as early as next Monday

07:38 , Michael Hunter

UBS said this morning that it expects to complete the acquisition of Credit Suisse as early as next week.

Credit Suisse’s shares will be delisted from the stock exchange, ending its 166-year history as an independent company and. drawing a line under the rescue deal, which represented the peak of the crisis this year in the European banking sector.

The government-brokered shot-gun marriage of the two giants of Swiss finance came as rising interest rates at central banks led to big unrealised losses in the value of government bond portfolios, spooking investors and leading to worries about Credit Suisse’s financial health.

It led to  £55 billion ($68 billion) in capital outflows for the first three months of 2023, even as the Swiss National Bank pledged to stand behind the lender. As the crisis stuck, the resucue deal with the bank’s biggest rival was struck, and could now go through by 12 June, according to UBS.

It said today:

“Upon completion, Credit Suisse shares and American Depositary Shares (ADS) will be delisted from the SIX Swiss Exchange (SIX) and the New York Stock Exchange (NYSE). Credit Suisse shareholders will receive one UBS share for every 22.48 outstanding shares held. The exchange of Credit Suisse ADS may be subject to certain fees.”

Life sciences firm DeepVerge to cut jobs as it manages remaining cash

07:36 , Daniel O'Boyle

AI and life science firm DeepVerge is to downsize three of its divisions, cutting 20 jobs, as it aims to “carefully manage” its remaining working capital.

The group intends to cut the size of its Labskin, Skin Trust Club and Rinocloud business units, as it continues to look for ways to improve its financial position. The divisions are based in York and Ireland.

In addition, it said its 2022 financial results would be delayed after auditor Jeffreys Henry stepped down in May. The accountants said they “did not have sufficient capacity to satisfy regulatory requirements and as a result resigned as auditor to a number of quoted companies”.

If it doesn’t publish its accounts by the end of June, DeepVerge’s shares will be suspended.

FTSE 100 steady after rally for US markets, oil price higher

07:23 , Graeme Evans

US markets finished last week strongly as Congress approval for the debt ceiling bill and the latest robust jobs market figures helped the Dow Jones Industrial Average to rally 2%.

The S&P 500 index gained 1.5% to reach its highest level since August last year and the Nasdaq touched its best level since April 2022.

Non-farm payrolls came in at a bigger-than-expected 339,000 but this failed to shift the majority view that the Federal Reserve will pause interest rate hikes on 14 June. Inflation figures for May are published the day before.

The resilience of the world’s largest economy boosted European markets on Friday, with the FTSE 100 index up 1.6% to finish the week broadly unchanged. CMC Markets expects the FTSE 100 to open 13 points higher at 7620 this morning.

Meanwhile, Brent Crude futures rose 1% in Asia trading to stand at $77 a barrel after Saudi Arabia announced an additional one million barrel-a-day production cut in July in an effort to shore up prices.

OPEC+ also revealed in Vienna that overall production targets would drop by a further 1.4 million barrels a day from next year.

Diageo CEO quits after complications from hospital operation

07:09 , Simon Hunt

Diageo’s long-serving CEO Sir Ivan Menezes is to end his tenure a month early after complications from a medical procedure, the spiritmaker said today.

Diageo said Menezes, who has been CEO since 2013, “is currently in hospital receiving treatment for medical conditions including a stomach ulcer. Over the weekend, we learned that Ivan’s recovery suffered a significant setback due to complications, which followed emergency surgery on the ulcer.”

“Our thoughts are with our much-loved colleague, Ivan, and his family.”

Debra Crew has been appointed Interim Chief Executive Officer a month before her agreed start date as the company’s new CEO.

 (Diageo)
(Diageo)

Recap: Friday’s top stories

06:45 , Simon Hunt

Good morning. Here’s a summary of our top stories from Friday:

  1. The board of vet pharma company Dechra have approved an offer to take the company private in a £4.5 billion deal -- lower than a previous offer made in April.

  2. The billionaire Issa brothers’ EG Group shifted over £3 billion in debt to cover obligations in the US prior to their Asda merger, filings show.

  3. London has the highest proportion of female led companies in UK - but still only 19% of total according to new Index.

  4. The bosses of London’s biggest tech firms have warned of serious challenges threateneing the industry’s future.