Yahoo Finance FTSE 100 Live: Shares soar as banks pass stress test, pound at $1.30 as US inflation falls to 3.0%
Lloyds, NatWest and six other UK lenders today hailed the resilience of their balance sheets after all passed the Bank of England’s annual stress test.
The results were released alongside the publication of the Bank’s financial stability report.
Elsewhere, US inflation fell to just 3% June, while core inflation dipped to 4.8%. That send the dollar down, bringing the pound above $1.30.
FTSE closes at 7,416.11 after 1.8% surge
Wednesday 12 July 2023 16:38 , Daniel O'Boyle
The FTSE 100 closed at 7,416.11 today after gaining 1.8%.
The idnex of London-blue chips rose on the back of positive news from the banking sector on economy-wide stress tests. A decline in US inflation also helped ease some fears about interest rate hikes across the Atlantic.
Miners were among the biggest risers, with Antofagasta on top as its shares rose by 5.2%. But it was a strong day for almost every large-cap London firm, as 97 of the FTSE 100 saw share price gains. The main excepton was British Airways owner IAG, down 2% after a Deutsche Bank downgrade.
City comment: At least our banks aren’t in danger of going bust
Wednesday 12 July 2023 15:35 , Simon English
Some good news from the Bank of England, where optimism has been in desperately short supply.
Our banks are not going bust.
Stress tested every which way, they should be OK almost no matter what happens to the rest of us, Threadneedle Street reports today.
The Bank’s scenario includes unemployment rising to 8.5%, inflation rising to 17% and house prices falling by 31%. If those things happened, banks “would continue to be resilient, and be able to support households and businesses”, the Bank said today.
So that’s something.
Traders see lower Bank of England rate peak
Wednesday 12 July 2023 15:06 , Daniel O'Boyle
City traders now expect the Bank of England’s interest rates to peak at 6.25%, with a serious chance they don’t go over 6%, following today’s banking stress test and US inflation data.
Rates are expected to peak in March at 6.25%, a welcome change from the 6.75% peak that was seen at one point last week.
The central bank’s monetary policy committee next meets in August, and traders see it as close to a 50/50 shot whether it will raise rates by a quarter of a percentage point or half.
New York stocks get off to a strong start after reassuring inflation numbers
Wednesday 12 July 2023 14:53 , Michael Hunter
The S&P 500 rallied at the start of New York trade, powered by inflation data that stoked hope the Federal Reserve’s fight against rising prices is kicking in.
Wall Street’s broad stock index strode 44 points higher to 4483.0, led by financial and banking companies.
The gains came after the annual rate of inflation cooled to 3% in June, falling by a full percentage point from its previous reading in a bigger fall than forecast, and taking it to within one percentage point of the Fed’s 2% inflation target.
On currencies markets, the dollar took a hit, with the numbers looking to give the US central bank time to keep its rate hikes on pause.
Channel 4 boss Alex Mahon gets pay rise to £1.5 million as low-paid freelancers bear brunt of cuts
Wednesday 12 July 2023 14:36 , Daniel O'Boyle
Channel 4 boss Alex Mahon’s pay jumped by a quarter to £1.5 million last year, while low-paid freelancer bore the brunt of cutbacks at the broadcaster.
Mahon was handed £750,000 in bonuses, for a year where revenue slipped by 2% to £1.14 billion. Channel 4 barely made a surplus, or profit, for the year, as this fell from £101 million to just £3 million.
Finances are expected to look worse this year as advertisers reduce their spend. Analysts expect ad revenue to fall by between 10% and 20% over the first half of this year.
Monzo eyes acquisition of Nordic Rival Lunar
Wednesday 12 July 2023 14:17 , Simon Hunt
London fintech Monzo is preparing a bid to merge with its Nordic rival Lunar as it turbocharges its European expansion.
The mobile bank is holding discussions with Denmark-based Lunar over the terms of the deal, according to a report by Bloomberg. It is also considering other acquisitions in Europe.
Lunar, a digital bank with over 650,000 users across Denmark, Sweden and Norway, hit a valuation of $2.2 billion after a fresh funding round last year, while Monzo’s valuation reached $4.5 billion in 2021.
Monzo declined to comment.
The plans make Monzo the latest London fintech to be eyeing European expansion after The Bank of London today said it was hiring 300 staff and had formally applied to the EU for a banking license.
One in three Brits avoid work social events because they’re ‘boring’ and a ‘waste of time’
Wednesday 12 July 2023 14:17 , Daniel O'Boyle
More than one in three Britons say they avoid work parties because they are “boring” and a “waste of time”, according to new research.
A poll by Gallup for events business Togather found that 35% of respondents actively avoided work social events. One in five also said the social events at their own workplace are not inclusive enough of people from under-represented groups.
Togather co-founder Hugo Campbell said: “It is disheartening to discover that 35% of employees actively avoid attending their current workplace parties due to finding them dull and unproductive.
“This places the onus on business owners to create workplace events that are truly captivating and inclusive, reflecting the value they place on their employees. It’s no longer sufficient to rely on beige buffets, standard holiday celebrations, or the usual Friday night trips to the pub. Instead, businesses must provide meaningful experiences that genuinely demonstrate appreciation for their staff.”
Wall Street stock futures strengthen on hopes Fed’s is winning inflation fight
Wednesday 12 July 2023 13:50 , Michael Hunter
Wall Street stock futures picked up today, on hopes that the latest set of US inflation numbers were a sign that the Federal Reseve’s fight against inflation is kicking in.
The S&P 500 was on course for a an opening gain of over 30 points to 4507.75 according to futures trade.
It came after the consumer price index for June dropped further than expected, to 3%. taking its decline from the previous reading to a full percentage point.
The dollar took a knock with the numbers looking to give the Fed more time between rate hikes after it paused them at its last meeting. The index tracking the world’s reserve currency against a basket of alternatives fell 0.7% to 101.07.
US inflation falls to 3% in faster-than-forecast drop but real earnings rise
Wednesday 12 July 2023 13:40 , Michael Hunter
The annual rate of US inflation cooled faster than forecast today, in sharp contrast with the more stubborn price rises blighting the UK.
The consumer price index for June dropped to 3%, falling further than expected, after economists predicted a reading of 3.1% It also took it down a full percentage point from the previous reading of 4%.
June’s month-on-month CPI was also softer than forecast at 0.2%, rather than the 0.3% expected, although it was up on the previous reading of 0.1%.
But the month’s data was not all happy reading for the Federal Reserve, which like the Bank of England, is locked in a bitter fight against inflation using interest rate hikes as its main weapon.
Real earnings were up 0.5% month-on-month, having been expected to fall by 0.1%, in line with the previous reading.
Rental market crisis looms as landlords face ‘hike rents or sell up’ dilemma
Wednesday 12 July 2023 12:28 , Daniel O'Boyle
The UK rental market could be facing a crisis, the Bank of England warned, as landlords facing surging mortgage rates may have to choose whether to force renters to pay more or to sell and drive house prices down.
The rental sector is set to be most affected by the ongoing mortgage mayhem, as fast-rising interest rates “could cause landlords to sell, putting downward pressure on house prices”, the Bank said.
It added: “Alternatively, they may seek to continue to pass on higher costs to renters.”
Boost for London ad market as Havas swoops for Uncommon
Wednesday 12 July 2023 11:27 , Daniel O'Boyle
London’s creative sector received a huge boost today as French ad giant Havas bought a majority stake in Uncommon Creative Studio that could value the agency at £120 million.
As first reported by Campaign, Havas will buy a 51% stake in Clerkenwell-based Uncommon from its three founders, Natalie Graeme, Lucy Jameson and Nils Leonard, who all left WPP to create the agency seven years ago.
Uncommon has made ads for Google and ITV, as well as British Airways’ safety briefing starring Ncuti Gatwa and Emma Raducanu.
The deal is a shot in the arm for London’s creative industry, which is widely seen as world-leading, but has warned of the impact of Brexit on business.
Market snapshot as gilt yields ease
Wednesday 12 July 2023 10:31 , Daniel O'Boyle
Investors poured back into UK bonds today, easing some of the pressure of recent weeks, after all the country’s top banks passed stress tests.
But yields still remain well above the levels seen at the start of the year.
Take a look at all the key market data.
FTSE 100 higher as downgrade hits IAG shares, Shoe Zone up 7%
Wednesday 12 July 2023 10:21 , Graeme Evans
British Airways owner IAG led the FTSE 100 fallers board today after Deutsche Bank removed its “buy” recommendation and lowered its price target from 200p to 165p. The shares fell 3% or 4.25p to 156p.
The bank’s caution reflects its forecast that average fares for European carriers will fall 6% next year rather than hold firm as previously thought.
It cut profit and share price targets for all the major airlines, with easyJet now valued at 585p rather than 635p and Wizz Air cut by 23% to 2850p.
The downgrades come as the sector gears up for a busy summer, with easyJet’s shares up by almost 50% this year on hopes of a sustained recovery from Covid disruption. They fell 4.7p to 490.3p today, while low-cost Wizz retreated 3p to 2709p.
IAG was joined at the bottom of the FTSE 100 by distribution services firm Bunzl, which shed 70p to 2804p after RBC analysts lowered their recommendation to “underperform” and cut their target price to 2550p.
A strong handover from Wall Street meant London’s premier index rose 64.29 points to 7346.81, a much-needed improvement after a poor July to date.
The risers board included British Gas owner Centrica with a gain of 3.2p to 124.5p, while AstraZeneca added 62p to 10,144p after UBS gave the pharmaceuticals giant a “buy” rating and a higher target price of 13,000p.
The FTSE 250 index lifted 101.43 points to 18,241.52, fuelled by a further rise for Currys shares after it emerged yesterday that Frasers Group had taken its stake to 11.1%.
The electricals retailer jumped another 6% or 3.2p to 54.2p, meaning it has recovered the losses seen after last week’s decision not to pay a full-year dividend.
On AIM, a second upgrade to profits guidance in five weeks meant shares in Shoe Zone surged 7% 17.5p to 252.5p. The discount chain is up 15% this year.
Profit warning at estate agency chain Winkworth
Wednesday 12 July 2023 10:02 , Joanna Bourke
Estate agency chain Winkworth has issued a profit warning and pointed to soaring interest rates and the mortgage crisis hitting home sales.
The company has more than 100 branches nationwide including 58 offices in London, most of which are run by franchisees.
It showed it was not immune from the impact of lenders passing on the Bank of England’s interest rate rises, with a more “challenging” sales market in the second quarter.
Read more HERE.
Ten Entertainment rolls into summer on a high
Wednesday 12 July 2023 09:48 , Simon Hunt
Bowling group Ten Entertainment rolled into summer on a high as the firm unveiled record results.
The Bedford-based business reported 3.2% sales growth in the first six months of the year and said its Easter performance was the biggest sales week in its history as it confirmed its profits guidance and cheered lower-than expected energy costs.
Ten Entertainment has plans to open a new bowling alley in Milton Keynes later this month as well as a new site in Dundee next month and said work has begun on a new entertainment centre in Sheffield.
CEO Graham Blackwell said: “We have been relentless in our focus on value-for-money and high-quality entertainment and our customers have rewarded us with their loyalty.”
Ten Entertainment shares rose 3.1% to 289p.
Wetherspoon says it will pay more than £100 million in extra taxes
Wednesday 12 July 2023 09:29 , Simon Hunt
Pub chain JD Wetherspoon today said it expected to pay in more than £100 million extra in taxes to the Treasury this year totalling £775 million as it promised it would meet City profit expectations.
Sales in the 10 weeks to 9 July rose 11.5% on 2022 and 11% on pre-pandemic levels.
Wetherspoon said it closed or sold 28 pubs from its estate, pocketing £6.5 million in the process. The firm dismissed the suggestion the disposals were a money-raising exercise and said the closures were primarily because “there is another Wetherspoon pub nearby.”
The decision stands in stark contrast to bar-restaurant group Loungers, which today said it had opened 29 new locations and had plans for a further 34 openings in the months ahead. Loungers, which has 232 sites, said it had “Identified potential for at least 600 Lounges across the UK.”
Wetherspoon shares jumped 7.2% to 710p. Loungers climbed 3.4% to 188p.
Two-year buy-to-let mortgage rates jump to near 7%
Wednesday 12 July 2023 09:16 , Daniel O'Boyle
Two-year buy-to-let mortgage rates jumped to near 7%, on the day the Bank of England warned that higher buy-to-let rates could force landlords to sell, causing house prices to drop.
According to Moneyfacts, the average rate for a two-year buy-to-let mortgage is now 6.96%, a drastic jump from 6.83% yesterday. For five-year deals, the average rate rose to 6.6%.
Residential mortgage prices kept climbing too after two-year residential fixes hit their highest level since 2008 yesterday. The average two-year fix rose again to 6.70%, while five-year deals rose to 6.20%.
The average tracker deal also crossed the 6% threshold, rising to 6.01%.
Life sciences firm Deepverge cuts all staff
Wednesday 12 July 2023 08:58 , Daniel O'Boyle
AI and life science firm DeepVerge is to lay off all of its roughly 50 remaining staff, three months after revealing that half of its revenues had been misstated.
The AIM-listed firm, based mostly in Yorkshire and Ireland, was worth around £70 million in 2020. It makes lab-grown skin and water monitoring products, while also providing AI technology.
In April, it revealed that it had overstated its revenue for 2022, which was now expected to be 40-50% lower. It said that the majority of this revenue would just be reported for 2023 instead, but some was likely to be lost entirely. Soon afterwards, the firm cut 20 jobs and looked to sell its main business units.
Now, “to avoid incurring additional costs”, it has made all remaining staff redundant. It is still hoping to sell its croe businesses.
Shares were suspended at the start of July as it is yet to publish audited accounts.
PageGroup: Firms are deferring hiring decisions
Wednesday 12 July 2023 08:39 , Joanna Bourke
Cautious employers are delaying hiring decisions and workers are nervous to accept offers as economic uncertainty hits the jobs market, global recruiter PageGroup showed as it posted a fall in profits.
The FTSE 250 company which works with sectors such a tech, finance and marketing also saw temporary recruitment outperform permanent in the second quarter, “as clients sought more flexible options”.
Group gross profit was £263.5 million, 6.5% lower than a year earlier when PageGroup had a record performance.
Read more HERE.
DIY decline hits Selco owner
Wednesday 12 July 2023 08:38 , Daniel O'Boyle
Brits are cutting spending on home improvement and maintenance amid cost of living crisis, according to Selco’s Buiders Warehouse owner Grafton.
Overall revenue was up 3.2% for the year at the FTSE 250 firm, but its UK business struggled amid a cutback in DIY.
“Selco continued to experience challenging trading conditions in the residential RMI market as households reduced investment on home improvements and discretionary spending on repairs and maintenance,” the group said.
CEO Eric Born said: “Grafton achieved a resilient first half trading performance against the backdrop of challenging market conditions and a strong prior year comparator.
“We are maintaining our guidance for the year while mindful of the potential impact of the macro-economic environment on trading.
“Our management teams’ focus in the second half will be on supporting customers in our market leading businesses, tightly managing the cost base and responding quickly to evolving trading conditions.”
Market snapshot as shares open higher
Wednesday 12 July 2023 08:28 , Daniel O'Boyle
Take a look at all the key market data as the FTSE 100 broke back through the 7300 mark, picking up from the lows it reached last week.
Banking stocks lead FTSE 100, Wetherspoons up 3%
Wednesday 12 July 2023 08:28 , Graeme Evans
Lloyds Banking Group shares have risen 3% or 1.1p to 44.5p and NatWest is up 1% after the UK lenders passed the Bank of England’s annual stress test.
Other strongly performing blue-chip stocks include AstraZeneca, which lifted 74p to 10,156p after UBS raised its recommendation on the drugs giant to “buy” with 13,000p target price.
The FTSE 100 index stood 19.11 points higher at 7301.51, with British Gas owner Centrica among others doing well after a gain of 1.7p to 123p.
Distribution business Bunzl led the fallers as RBC analysts cut their recommendation to “underperform”with a lower target price of 2550p. The shares fell 48p to 2826p.
The FTSE 250 index stood 7.61 points higher at 18,147.70, with building supplies firm Grafton and pubs chain JD Wetherspoon both up more than 3% after their trading updates. Virgin Money also rose 3.95p to 150p after passing the Bank of England stress test.
Shoe Zone latest retailer to experience summer sales boost
Wednesday 12 July 2023 07:24 , Daniel O'Boyle
There was a further sign of the unexpected resilience of the UK High Street today, as Shoe Zone cited “exceptionally strong trading” as it upped its profit guidance for the second time in five weeks.
Retailers had been bracing for a downturn as interest rate hikes have been expected to reduce disposable spending, but many of the country’s top brands have instead seen unusually strong trading. Next said last month that pay rises were boosting its sales, while Primark, JD Sports and Boots also reported especially good trading.
“Trading has significantly exceeded management expectations due to continued strong demand with volumes up double digit on last year, despite no price increases on our core ranges,” the Shoe Zone board said.
“Alongside exceptional trading, the Company has also experienced margin improvements due to the lower container rates and favourable foreign exchange rates with management expecting these improved margins to continue for the rest of the financial year.”
The business now expects profit of at least £13.5 million this year.
FTSE 100 seen higher ahead of US inflation reading
Wednesday 12 July 2023 07:23 , Graeme Evans
US inflation figures for June will today provide insight into whether the Federal Reserve is nearly done raising interest rates.
Wall Street traders expect a fall in the headline rate from 4% to 3.1%, a level that compares with a peak of 9.1% a year ago. However, core prices are proving to be more stubborn at a forecast 5% compared with 5.3% previously.
Last week’s robust jobs report means that Federal Reserve policymakers are still likely to increase interest rates by another quarter percentage point later this month.
But today’s inflation reading is likely to go some way to determining if they need to do the same at their September meeting.
Deutsche Bank strategist Jim Reid said: “Even though headline inflation has fallen considerably in recent months, the core numbers have been much more persistent.
“In fact, the monthly core numbers have been up at least 0.4% for six months running, so the Fed will be hoping for a slower pace before they can be comfortable about inflation trends again.”
Wall Street approached the release of this afternoon’s figures with cautious optimism after the S&P 500 index closed 0.7% higher and the Dow Jones Industrial Average improved 0.9% last night.
The performance of Asian stock markets has been mixed, although the Hang Seng in Hong Kong rose 0.7% to extend gains to a third consecutive session.
CMC Markets expects the FTSE 100 index to open 17 points higher at 7299.
Morning refresh: What you need to know to start the day
Tuesday 11 July 2023 16:52 , Simon Hunt
Good morning from the City desk of the Evening Standard.
Investor eyes are on Bank of England governor Andrew Bailey this morning as he unveils details of the Bank’s latest Financial Stability Report.
UK financial markets have been rocked over the past year by a wave of turbulence, from the troublesome Liz Truss mini-Budget in October which sent bond yields soaring, to the collapse of Silicon Valley Bank and of Credit Suisse shortly thereafter, to the woes of stubbornly high inflation and months of consecutive interest rate rises in an attempt to bring it under control.
The Bank’s previous Financial Stability Report, published in December last year, warned of a “deterioration in the global economic outlook, together with heightened uncertainty and the potential for further adverse geopolitical developments.” Bailey will hope to show that the UK’s biggest banks remain well-capitalised and have the financial might to withstand future shocks.
The full report will be released at 7am before a press conference is held at 9.
Here’s a look back at our business news headlines from yesterday:
The pound hit a 15-month high of $1.29 as traders doubled down on their bets of further interest rate rises, with talk of the possibility of 7% interest rates. Regular pay went up 7.3% in May, a record rise, defying forecasts of a fall to 7.1%.
Two-year mortgage rates hit a fresh 15-year high, but brokers continue to price in further rate rises.
Insolvency specialist Begbies Traynor said it foresaw a continued rise in the number of companies going bust well into 2024.
Fintech bosses have voiced their frustration at the FCA after data obtained by the Standard showed approval of applications for e-money licenses plunged to just 8% in 2022.
This morning we’re expecting annual results from investment manager Ashmore Group and bar-restaurant group Loungers.
Fresh on the heels of yesterday’s unemployment data, we’re also expecting a trading update from recruitment business Page Group, as well as one from bowling alley business Ten Entertainment.
As we move into the afternoon, we’ll get inflation data from the US ahead of the opening bell on Wall Street, which investors will watch with a keen eye to decipher whether further Fed rate rises are on the cards.
