Yahoo Finance FTSE 100 Live: ‘We’re in an economic danger zone’ — inflation tops forecasts; US default fears; FTSE down 1.8%
The FTSE 100 closed down almost 1.8% at 7627, as the combination of higher-than-forecast inflation and US default fears led to the biggest sell-off of London stocks in months.
The ONS’s inflation figures shocked the City again this morning, coming in much higher than expected for the third month in a row, at 8.7%.
Economists had expected inflation to decline to 8.2%.
Meanwhile, the FTSE 100 is trading lower as global markets worry about progress on US debt ceiling negotiations.
Click through the graphs to see how markets have reacted to the inflation reading and latest debt ceiling developments.
FTSE 100 Live
Inflation falls by less than expected
Homeowners facing more rate hikes
FTSE 100 lower amid US debt worries
Key market data
16:54 , Daniel O'Boyle
After a rough day in the City, click through the graphs to see how markets have reacted to the inflation reading and latest debt ceiling developments.
In today’s Standard...
16:47 , Daniel O'Boyle
M&S shares soar as sales beat forecasts, City take fright amid rate hike fears and top banks face fines over bonds.
Pick up a copy from any of our distribution points
FTSE closes at 7627
16:39 , Daniel O'Boyle
The FTSE 100 closed at 7627, down 1.8%, with almost all constituent companies losing ground.
The decline was the biggest in more than two months, and the closing figure the lowest since March. It xame as inflation was well ahead of expectations and investors saw little signs of progress in US debt talks.
Housebuilders made up many of the biggest fallers, amid fears that interest rates could rise to as much as 5.5%.
Ocado and Intertek were notable exceptions, finishing up 2.3% and 3.2% respectively to be the biggest risers of the day.
London crowned the ‘founder factory of Europe’ in new report
16:19 , Daniel O'Boyle
London’s tech unicorns generate the highest number of startup spinouts in Europe, new data shows, in signs the capital’s biggest firms are laying the groundwork for the UK’s long-term success in the sector.
As many as 185 startup spinouts have been created from 27 London unicorns, according to a report released today by venture capital firm Accel, 20 more than that produced in Berlin and nearly 50 more than the number made in Paris.
Fintech Revolut tops the London list with 26 spinouts, followed by takeaway app Deliveroo with 24 spinouts and money transfer service Wise with 22.
West End Final: Financial markets aren't angry, they're just disappointed
15:57
“Today’s inflation figures are akin to a hangover that grows worse throughout the day,” Jack Kessler writes.
“You wake up surprisingly chipper, just a sore throat and achy arms. But pretty soon you realise things are heading south, you’re not 21 anymore, and a deep familiarisation with the toilet bowl awaits. Oh, and you didn’t even have fun last night.”
FTSE now down 2%
15:01 , Daniel O'Boyle
The FTSE 100’s fall continued, with London’s blue-chip index now down by 2.1% today.
The index could fall below 7600, in what looks set to be its sharpest daily fall since worries about Credit Suisse sent shockwaves through the European banking sector more than two months ago.
US shares fall further
14:55 , Daniel O'Boyle
US shares fell further this morning after steep declines yesterday, as investors continue to worry about the possibility of a default.
The S&P 500 is down 0.6% to 4119, while the Dow Jones is also down 0.6%, to 32870 and the Nasdaq down by the same amount, to 12486.
Netflix is among the biggest risers, as it rolls out its anti-password-sharing policies across the globe. Regional banks Lincoln National and Comerica are among the biggest fallers.
“Recession has been delayed rather than cancelled”
14:42 , Daniel O'Boyle
A number of major institutions have said they expect the UK to avoid a recession, but Capital Economics’ Paul Dales and Neil Shearing warned that the stickiness of inflation shown in today’s figures mmeans the country may not be able to do so.
“It is striking that the Bank, the OBR and the IMF all now expect that the UK will avoid a recession,” they said. “We are not convinced.
“The latest data make clear that inflation is being driven increasingly by rapid wage growth that is manifesting itself in domestic services prices. Policymakers will need to bear down on demand in order to cool the labour market and bring inflation down to more acceptable levels. Generating sufficient economic slack without creating a recession will be extremely difficult.
“We suspect it is more a case that a recession has been delayed rather than cancelled.”
Bailey: ‘I don’t think spiral is the right word’
14:31 , Daniel O'Boyle
Bank of England governor Andrew Bailey rejected suggestions of a ‘wage-price spiral’, despite particularly high services inflation prompting some economists to warn that one may be starting to form.
Speaking at a Wall Street Journal event, he said: “I don’t think spiral is the right word”.
Bailey also noted that the majority of the Bank’s recent rate rises have not been fully fed through to the economy yet. Amid today’s surprisingly high inflation reading, he noted that the Bank had said in May that the UK appeared on course to fulfil the Government’s goal of halving inflation by the year’s end. However, he said he couldn’t speculate on whether today’s figures would change those projections.
US futures down on default fears
14:19 , Daniel O'Boyle
Shares in US companies are set to open lower today, as the expected deadline before the country risks defaulting on its debt gets ever-closer.
Dow Jones futures are down 0.4% to 33022, while S&P 500 futures are down 0.5% to 4139. Nasdaq futures, containing many of the most rate-sensitive stocks, are down 0.6% to 13641.
London crowned the ‘founder factory of Europe’ in new report
14:09 , Simon Hunt
London’s tech unicorns generate the highest number of startup spinouts in Europe, new data shows, in signs the capital’s biggest firms are laying the groundwork for the UK’s long-term success in the sector.
As many as 185 startup spinouts have been created from 27 London unicorns, according to a report released today by venture capital firm Accel, 20 more than that produced in Berlin and nearly 50 more than the number made in Paris.
Fintech Revolut tops the London list with 26 spinouts, followed by takeaway app Deliveroo with 24 spinouts and money transfer service Wise with 22.
Accel partner Harry Nelis told the Standard: “For every big company now you can create the seeds of seven other companies. That is a flywheel that should both sustain the ecosystem but should grow it as well.
“We’re at a point where the european ecosystem now has the same benefits that Silicon Salley has had for decades.”
‘The stakes are getting increasingly high’
13:50 , Daniel O'Boyle
Commenting on falling inflation but the potential risk of further central bank policy failure, Charles White Thomson, CEO at Saxo UK, said: “The status quo in the UK is increasingly painful and uninspiring - this should not be about celebrating falling inflation or the avoidance of a technical recession.
“The UK continues to underperform its key counterparties and have underserved the majority and their aspirations. We are now in an economic danger zone, pincered between public enemy number one/ inflation, a 19% increase in food and non-alcoholic beverages which reaffirms the cost of living crisis, and a consumer saddled with outsized debt that was once cheap.
“The risk for further policy failure is real and the stakes are getting increasingly high.”
Deal signed for London’s first UFC Gym to open in 2023
13:19 , Joanna Hodgson
Workers and residents near Old Street station will soon have a new place to do kickboxing, Jiu-jitsu and other classes, with a deal just inked for London to get its first UFC Gym.
It is a brand extension of UFC, the world-famous mixed martial arts organisation, and this 7,500 square feet site marks its third UFC Gym in the UK.
Since debuting in 2009, UFC Gym has opened more than 170 locations
Candy shop landlords ‘shamed’ after council letter calling for action
12:42 , Daniel O'Boyle
Oxford Street landlords have been urged to do “all that you can” to throw out American candy stores from their properties.
The leader of Labour-led Westminster council Adam Hug has written to 19 freeholders and long leaseholders of premises where a US candy store, vape store or souvenir shop operates and has “named and shamed” owners that did not respond.
Key data as FTSE falls by 1.8% in morning
12:25 , Daniel O'Boyle
The FTSE 100 has lost almost 150 points this morning, with almost every company falling.
Gilt yields have also risen, amid fears that interest rates could reach as high as 5.5%.
Click through the graphs to see how markets have moved as of lunchtime.
Why is inflation in the UK higher than in other rich countries?
12:21 , Daniel O'Boyle
As Chancellor a year ago, Rishi Sunak stressed the global nature of inflation to underline how it would take time to bring prices back under control.
But today, the UK seems to stand further and further adrift from its economic peers. In the G20 table of inflation, the UK sits in the relegation zone, ahead of only Turkey and Argentina.
Even after a decline into the single-digits in April, the UK’s 8.7% CPI figure in March compares with 7% in the eurozone and 4.9% in the US.
All major economies were forced to drastically increase the money supply to provide support during the pandemic. And all were affected by the war in Ukraine. So what makes the UK different?
FTSE lowest since March
11:46 , Daniel O'Boyle
The FTSE 100 is at its lowest level since March, having now fallen by 1.8% today.
Of the index’s 100 constituent members, 96 saw their shares fall, compared to only four risers. Intertek is a major outlier, with its shares up 3.2%.
Today’s shock inflation figure has also led to a rise in gilt yields, amid growing fears of more interest rate hikes to come.
City comment: Have we avoided a recession, or just delayed it?
11:42 , Daniel O'Boyle
Rarely has good news felt so bad.
Of course it is a huge relief all round that the era of double-digit inflation appears finally to have run its course.
But the bond markets hated what they saw, particularly the rise in core inflation.
The implications of this are fairly profound — and worrying.
Investors take fright as inflation shock fuels rate-rise fears
11:09 , Daniel O'Boyle
City markets today reacted with alarm to the worse than expected inflation figures with gilt yields up and shares falling on fears of further interest rate rises.
The Consumer Price Index dropped to only 8.7% in April compared with economists’ expectations of 8.3%. Even more worryingly core CPI, which excludes volatile food and energy prices, actually rose from 6.2% to 6.8%, the highest since March 1992.
The “sticky” data sent forecasters scurrying to revise their projections with financial markets now foreseeing the Bank of England having to raise rates at least twice more to 5% by August — and probably further still in the autumn.
Supermarket Lidl announces third pay increase in a year
11:01 , Daniel O'Boyle
Supermarket chain Lidl has announced its third pay increase in a year, affecting all of its 24,500 hourly-paid workers.
Store and warehouse staff working outside the M25 will see hourly pay increase to £11.40 from £11.00, rising to £12.30 with length of service.
Hourly pay for those inside the M25 will increase to £12.85 from £11.95, rising to £13.15.
FTSE 100 down 1.5%, Aviva 3% lower after update
10:11 , Graeme Evans
The threat of a US debt default and fears over more interest rate rises meant London’s FTSE 100 index fell sharply today.
Wall Street’s mounting jitters over the debt ceiling contributed to a poor session across Europe as the FTSE 100 index slumped 1.5% or 114.13 points to 7648.2.
Signs of persistently high core inflation also meant selling of housebuilding stocks in London as traders priced in more interest rate hikes.
Aviva shares were caught in the sell-off, falling 3% or 11.5p to 412.3p even though chief executive Amanda Blanc hailed encouraging first quarter results.
This included “attractive levels of profitability” in general insurance despite cost headwinds, as well as an 11% rise in health and protection sales.
Among other insurers, Legal & General fell 7.1p to 230.4p and Prudential lost 39.5p to 1131.5p.
On a shortened FTSE 100 risers board, BT Group rose 1.45p to 150p as Ofcom ruled that new prices at regulated division Openreach are not anti-competitive.
The FTSE 250 index fell 1.4% or 267.27 points to 18,941.04, with travel stocks Carnival and TUI down 5%.
Homeowners warned they could be hit with two interest rate hikes this summer
10:07 , Daniel O'Boyle
Homeowners were warned on Wednesday that they face two possible further interest rate hikes this summer.
Economists sounded the alarm that the Bank of England’s Monetary Policy Committee could be forced to hike rates from 4.5 per cent in June, then possibly again within months, to get a firm grip on inflation.
Great Portland Estates boss joins call for rethink of tourist tax
09:50 , Joanna Hodgson
The chief executive of London property developer Great Portland Estates has joined the growing list of City voices calling on the government to consider scrapping the ‘tourist tax’.
GPE is best known for offices, but it also has a number of retail sites including on Bond Street.
Many bosses have recently raised concerns about the impact on retail from the government abolishing VAT-free shopping when Britain left the EU in 2021.
Banks colluded on bond dealing says watchdog
09:36 , Simon English
FIVE top banks could be heading for big fines after the competition watchdog claimed they shared sensitive information about trading in government bonds.
Those secret online chats could have disadvantaged others investors and hurt both taxpayers and the Treasury.
The Competition and Markets Authority claims Citi, HSBC, RBC, Deutsche and Morgan Stanley swapped data on bond trades rather than competing with each other.
They did it in Bloomberg chatrooms between 2009 and 2013 in the wake of the global financial crash when the UK government needed to raise money from bond auctions.
Both Citi and Deutsche won praise for admitting to their involvement in the scam so will escape stiff punishment.
The other three banks have not admitted to any wrongdoing.
Michael Grenfell, executive director of enforcement at the CMA, said the insider chats “could have denied taxpayers, pension savers and financial institutions the benefits of full competition for these products, including the minimisation of borrowing costs.”
He added: “A properly functioning, competitive bond market benefits tens of millions of taxpayers and pension savers as well as being at the heart of the UK’s reputation as a global financial hub.”
The CMA said the conversations are alleged to have related to the buying and selling of UK government bonds - specifically, gilts and gilt asset swaps - and included details on pricing and other aspects of trading strategies.
All five banks are already in a privileged position as so-called GEMMs – gilt-edged market makers.
Bloomberg itself is not under investigation, the CMA said. Its findings are provisional and the investigation continues.
The watchdog has a “cartels hotline” for anyone wanting to report similar actions. It is 0203 7386888 or cartelshotline@cma.gov.uk.
Inflation “coming down at a snail’s pace"
09:29 , Simon Hunt
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said further interest rate hikes could trample the early signs of growth in the economy, but they may be the only way to bring price rises back under control.
“’Inflation has soared up like an eagle and taken a ferocious bite out of our standard of living, but it’s coming down at a snail’s pace and leaving a sticky trail of prices in its wake,” she said. “Growing at 8.7% in the year to April the growth in headline consumer prices was higher than expected and more than quadruple the Bank of England’s target. More worryingly, core inflation, which strips out volatile food and energy prices crept back upwards to 6.8%. It shows that the price spiral is still proving to be a stubborn beast to conquer for the Bank of England.
“Another rate rise may have the effect of a herd of rhinos trampling over an economy, which is only just seeing some green shoots appearing as the forecast recession recedes. But policymakers don’t have many other strategies to deploy right now to herd inflation in the right direction.”
Inflation reading offers mixed signals for pound
09:17 , Daniel O'Boyle
The pound is close to flat against the dollar today at $1.2422.
Matthew Ryan, head of market strategy at global financial services firm Ebury, said the latest inflation figures present mixed signals for currency traders, but investors saw more signs of strength than weakness in the immediate term.
“The data has relatively mixed implications for sterling. On the one hand, the persistence of elevated inflationary pressures, particularly in the core index, may raise fresh concerns about the outlook for Britain’s economy,” he said. “We continue to contest that a UK recession in 2023 will be avoided, though clearly the still acute cost of living crisis presents a material downside risk to this outlook. On the other hand, today’s data makes additional Bank of England interest rate hikes increasingly more likely.
“In our view, the latter will be of more pressing importance for investors in the near-term, hence the rally in the pound following today’s data. “
Key data as FTSE opens lower
08:36 , Daniel O'Boyle
The FTSE 100 fell sharply this morning as today’s slower-than-expected decline in inflation - and a shock rise in core inflation to the highest level in 30 years - means the Bank of England is now expected to raise interest rates at least twice more.
Click through the graphs to see how markets have reacted this morning.
FTSE 100-listed builders under pressure, M&S shares jump 8%
08:28 , Graeme Evans
Shares in housebuilders have fallen sharply after today’s stubbornly high inflation print raised expectations of more demand-sapping interest rate hikes.
Taylor Wimpey and Persimmon shares fell by 4%, with wider stock market sentiment not helped by the impact of last night’s weak session on Wall Street.
The FTSE 100 index snapped its recent run of calm trading by falling 1.2% or 94.30 points to 7668.65, with the FTSE 250 index 223.95 points lower at 18,984.36.
Other blue-chip fallers included insurer Aviva, which lost 3% or 14.3p to 409.5p on the back of its first quarter trading update, and Burberry with a fall of 69p to 2189p.
On a brighter note, shares in renewable energy giant SSE rose 30p to 1899.5p after its annual results. And the return of the Marks & Spencer dividend helped the retailer’s shares jump 8% or 12.85p to 176.45p in the FTSE 250 index.
Food inflation gets even worse
08:25 , Simon Hunt
Food inflation has climbed even fast in a number of areas, ONS data shows.
The rate of inflation across fruit, vegetables, soft drinks, beer, wine and spirits has all gone up.
Scroll through the chart below to view food inflation data.
Openreach pricing plan cleared by Ofcom
08:09 , Graeme Evans
New pricing arrangements proposed by BT’s regulated Openreach arm for its full-fibre services have been given the all-clear by Ofcom.
The Equinox 2 offer involved giving lower prices to retail providers - such as BT, Sky, TalkTalk and Vodafone - if they agree to use mainly Openreach's full-fibre products for new orders instead of its legacy copper products.
The proposals mean alternative network operators are now likely to face stronger competition from Openreach. However, the regulator concluded that the conditional terms of the offer did not create a barrier to the use of altnets.
Ofcom said: "Our overriding objective is to bring better broadband to people across the UK, by promoting competitive investment in high-speed networks and making sure there's a level playing field for all companies.
"With this in mind, and based on the evidence available to us, we don't consider Openreach's new pricing discounts to be anti-competitive."
Severn Trent ups dividend and pledges to invest up to £1 billion in current financial year
08:06 , Michael Hunter
Severn Trent, the water utility, has pledged to increase its capital investment in the current financial year to as much as £1 billion as it sticks with plans to increase its payout to shareholders.
It said its final dividend for last year would go up by 9.4% to 116.84p, meaning investors will get around £261 million in total.
With water companies at the centre of a public outcry over the amount of sewage being discharged into rivers and the amount of leakage from the system, Severn Trent said it invested £737 million last year, up by “over £100 million”. It increased its guidance on next year’s spending to a range between £850 million and £1 billion.
Profit before tax for the financial year to the end of March reached £508.8 million, up from £506.2 million.
Bad weather means like-for-like sales dip at B&Q owner Kingfisher
08:00 , Daniel O'Boyle
“Unusually poor spring weather” hit sales at B&Q owner Kingfisher, as like-for-like sales fell by 3.3%.
The group, which also owns Screwfix, made sales of £3.27 billion in the three months to the end of March, including £1.59 billion from the UK and Ireland.
But both those figures were down on a like-for-like basis, which Kingfisher CEO Thierry Garnier blamed on the weather.
“The unusually poor spring weather in the UK and France affected our seasonal sales in the quarter, impacting demand for items such as garden and outdoor products,” he said.
Garnier expects to see better sales as weather improves, which allowed Kingfisher - among London’s most shorted stocks - to maintain its guidance of £634 million in profit for the year.
SSE lifts net zero spending target
07:53 , Graeme Evans
SSE’s plan for spending on net zero projects is to increase by over 40% after the renewable energy giant today revealed annual results showing “profits with a purpose”.
It now intends to set aside £18 billion for its five-year investment strategy up to 2027, with spending across regulated electricity networks, renewable electricity generation and low-carbon thermal generation.
Higher energy prices helped annual profits to rise 89% to £2.18 billion in the year to 31 March, but chief executive Alistair Phillips-Davies said this was below the record £2.8 billion of capital expenditure and investment.
He added: “The results that we have reported today are profits with a purpose. We are creating value for all of our stakeholders and our investments exceed our earnings.”
Could rates hit 5.5%?
07:47 , Daniel O'Boyle
George Lagarias, chief economist at Mazars, warns that there could be more than two more rate rises on the cards. Three hikes would take interest rates to 5.5%.
“Overall, headline inflation remains uncomfortably high and, what’s worse, increasingly dynamic,” he said. “This could lead to more than the two rate hikes the market, perhaps optimistically, expects.
“Until the Bank of England sees evidence of the vicious price-wage cycle breaking and demand conditions sufficiently tame, we should expect increasingly tighter credit conditions and pressures on consumers and businesses.”
Watchdog finds 5 major banks colluded in Bloomberg chatrooms over government bonds
07:34 , Michael Hunter
The Competition and Markets Authority has found that five major banks in London “unlawfully” exchanged information over UK government debt sales in Bloomberg chatrooms.
The banks –Citi, Deutsche Bank, HSBC, Morgan Stanley and Royal Bank of Canada – shared “competitively sensitive information” according to the watchdog.
It said this morning:
“The information exchanges took place in one-to-one Bloomberg chatrooms between a small number of traders who worked at the banks and related to the buying and selling of UK government bonds - specifically, gilts and gilt asset swaps. This included details on pricing and other aspects of their trading strategies.”
The CMA’s said its findings are “provisional”, adding: “Deutsche Bank and Citi have admitted to participating in the alleged one-to-one conversations that apply to them. HSBC, Morgan Stanley and Royal Bank of Canada have not admitted any wrongdoing. At this stage, no assumption should be made that any of the banks have broken the law.”
Marks & Spencer to resume dividend as sales beat expectations
07:27 , Joanna Hodgson
Marks & Spencer has revealed bumper consumer demand even as customer finances are squeezed and outlined plans to resume dividend payments, in the first set of annual results delivered by new chief executive Stuart Machin.
For the 12 months to April 1 sales were ahead of the 7.7% and 10.5% growth analysts had pencilled in for food and clothing and home respectively. They came in at £3.7 billion, 11.5% higher, and £7.2 billion, up 8.7%.
FTSE 100 seen lower on US weakness, oil prices rise
07:21 , Graeme Evans
London’s FTSE 100 index is facing a downbeat session after Wall Street closed last night with the S&P 500 index and Nasdaq Composite off by more than 1%.
The Wall Street selling came amid few signs of progress on debt ceiling talks involving Joe Biden and House Speaker Kevin McCarthy.
Deutsche Bank strategist Jim Reid said: “It’s true that both sides are still talking and the mood music sounds (mostly) positive, but we might only be days away from the deadline in early June, and any deal that’s reached is still going to need to be passed through both houses of Congress.
“So there are real concerns that this could go right down to the wire, and investors are slowly gearing up accordingly.”
CMC Markets expects the FTSE 100 index to fall 35 points to 7728 at the opening bell, having been one of Europe’s more resilient benchmarks during yesterday’s trading.
Oil prices, meanwhile, have risen after comments from a minister in Saudi Arabia fuelled speculation about further OPEC+ production cuts. Brent crude stood at $77.51 a barrel, up from $74.27 at the start of the week.
Highest core inflation in 30 years makes rate rise more likely
07:19 , Daniel O'Boyle
Paul Dales, Chief UK Economist at Capital Economics, said the latest inflation shock makes another rate rise almost certain.
“The smaller-than-expected fall in CPI inflation from 10.1% in March to 8.7% in April (BoE 8.4%, consensus 8.2%, CE 8.0%) means it is now very hard to imagine the Bank of England not raising interest rates from 4.50% to 4.75% in June,” Dales said.
“But much more important was the worrying large rebound in core inflation from 6.2% in March to 6.8% in April (consensus 6.2%, CE 6.1%). That took it above what we all thought was the peak of 6.5% in September of last year and to the highest rate since 1992. Core goods inflation rebounded from 5.7% to 6.6%. And the rise in services inflation from 6.6% to 6.9% left it above the Bank’s forecast of 6.7%. In other words, the recent resilience of economic activity appears to be stoking domestic inflationary pressure.
“With inflation proving stickier than the Bank expected, it now seems all-but certain that the Bank will raise interest rates from 4.50% to 4.75% in June and perhaps a bit further in the months after.”
Inflation still much higher than expected
07:09 , Daniel O'Boyle
Inflation declined in April, but still came in much higher than economists expected, at 8.7%.
The Consumer Price Index, which measures year-on-year price rises, was widely expected to come down significantly because the rapid rise in energy prices last April was no longer part of the calculation.
Food and drink inflation eased slightly, but was still extremely high at 19.1%.
Core CPI, which excludes the more volatile food and energy prices, actually rose to 6.8%, the highest figure since March of 1992.
ONS Chief Economist Grant Fitzner said: “The rate of inflation fell notably as the large energy price rises seen last year were not repeated this April, but was offset partially by increases in the cost of second-hand cars and cigarettes.
“However, prices in general remain substantially higher than they were this time last year, with annual food price inflation near historic highs.”
Recap: Yesterday’s top stories
06:49 , Simon Hunt
Good morning. Here’s a summary of our top stories from yesterday.
French billionaire Patrick Drahi has increased his stake in BT but says he has no takeover plans.
Tech giant Palantir is planning to lay of dozens of employees in London.
Sausage marker Cranswick said the recruitment of 400 butchers from the Philippines, after it struggled to find skilled workers closer to home
