Yahoo Finance FTSE 100 Live: ‘Groundhog day’ as Bank of England raises rates to 5.25%, FTSE down
The Bank of England’s long-running fight against inflation today saw interest rates hiked to 5.25%.
It marks the 14 consecutive meeting that policymakers have voted for an increase, with analyst forecasts split between a 0.25% rise or half point hike to 5.5%.
FTSE 100 Live Thursday
Rates to rise for 14th BoE meeting in row
FTSE 100 deep in red for another session
Next ups profit forecasts again
Despite HSBC blow, Canary Wharf’s future stays bright
15:24 , Daniel O'Boyle
One of my favourite sports quotes is from Canadian ice hockey player Wayne Gretzky: “Skate to where the puck is going, not where it’s been.”
To succeed in any walk of life you need to anticipate the future, and that’s as true in real estate development as it is in ice hockey.
London is undergoing constant reinvention as the needs of its diverse, growing population change. Thirty-five years ago, Canary Wharf 1.0 started its transformation into a new financial centre. Canary Wharf was noted for its investment in striking architectural design, infrastructure and transport.
US market snapshot
14:55 , Daniel O'Boyle
Take a look at our US market snapshot as shares are lower again, with Paypal among the big fallers.
14:21 , Daniel O'Boyle
US shares seem set to follow London down, as futures are lower again today.
Dow Jones futures are down 0.3% to 35,310.00. S&P 500 futures are down 0.4% to 4,519.00. Nasdaq futures, including more tech stocks, are down 0.7% to 15,369.50.
Paypal is among the biggest fallers, with shares set to open 8.8% lower.
Bank of England rate hike adds £24 a month onto average tracker mortgage payment
14:12 , Daniel O'Boyle
Mortgage holders on tracker deals face nearly £24 per month being added to their payments, on average, following the latest Bank of England base rate rise.
Based on the mortgages outstanding, the new 0.25 percentage point rise, which takes the base rate to 5.25%, will add on £23.71 typically to monthly tracker payments, according to figures from trade association UK Finance, adding up to nearly £285 per year.
For homeowners on a standard variable rate (SVR) mortgage, the average payment could increase by £15.14 per month or nearly £182 per year.
SVRs are set by individual lenders and often follow movements in the base rate.
Traders see lower rate peak
13:44 , Daniel O'Boyle
Markets are now pricing in a lower peak to interest rates, with the mostly likely peak rate now at 5.75%, and a serious possibility of rates peaking at 5.5%.
The Bank’s latest decision gave traders hope that it may not raise interest rates as high as was previously feared.
A month ago, the market-implied peak rate hit as high as 6.75%.
Capital rent trap: It’s time to stop Londoners being forced out of their communities
13:29 , Daniel O'Boyle
It is an incredibly difficult time to be a private renter. Rents are sky-high across the board and are only increasing, and there is simply no further room in tenants’ pay packets to weather these hikes.
While many mortgage holders have yet to see their monthly payments increase, most private renters have already faced a rent hike this past year. Generation Rent’s latest survey found that 3 in 5 have faced a rent increase in the last year, and that a third of those for asked for an extra £100 or more per month.
There is a cost of renting crisis added on to the cost of living crisis and it is driving down living standards for private tenants. With these rising costs there is no scope to save for a deposit for a home of their own, if that was their intention, and many are struggling to keep their heads above water.
Tesco allows staff to request flexible working from day one, ahead of law change
13:25 , Daniel O'Boyle
Supermarket giant Tesco has rolled out changes allowing all its staff to request flexible working from their first day at the chain, nearly a year ahead of an incoming change in the law.
The grocery giant brought in its new flexible working policy this week, which gives its more than 300,000-strong workforce the right to ask for part-time or flexible working hours from day one.
Under current rules, employees must wait six months before being allowed to make the request.
Wilko on the brink of collapsing into administration with 12,000 jobs at risk
13:14 , Daniel O'Boyle
High street chain Wilko has said it is on the brink of administration, putting roughly 12,000 jobs at risk.
The retailer said despite buyers’ offers, it did not have an offer to provide “necessary liquidity” to deal with “mounting cash pressures”.
The retailer has emerged as one of the first major victims of spiking interest rates rises that started in December 2021, which on Thursday were put up to 5.25 per cent.
Deputy BoE governor: Real incomes are growing right now
13:12 , Daniel O'Boyle
Deputy Bank of England Governor Ben Broadbent said that wages are growing faster than inflation right now. He noted that while year-on-year inflation was still higher than wage increases in June, the Bank said it believes wages right now are rising faster than prices.
“Right now, real incomes are growing,” he said. “It’s not true to say that real wage growth is negative.
“Our forecast is that average earnings growth will be above inflation.”
How do UK inflation and interest rates compare internationally?
13:06 , Simon Hunt
How do UK inflation and interest rates compare internationally following today’s quarter-point rise? Check out the graph below.
Capital economics: Rates to stay at peak until late 2024
12:56 , Daniel O'Boyle
Paul Dales, Chief UK Economist at Capital Economics, sees interest rates staying at their peak, which he sees as 5.5%, until the second half of 2024.
“Despite the easing in CPI inflation from 8.7% in May to 7.9% in June and core inflation from 7.1% to 6.9%, we think strong wage growth and the continued resilience of real GDP will mean interest rates will rise further, from 5.00% now to a peak of 5.50%.
“We suspect the downward trends in wage growth and services inflation will be slow and core inflation won’t fall to 2% until the end of 2024. As such, interest rates will probably stay at their peak until the second half of 2024, even though we expect the economy will be in recession later this year and early next year.”
Shares in mortgage lenders and housebuilders positive after quarter-point rate hike
12:33 , Michael Hunter
Shares in high street banks were higher after interest rates rose again today, with housebuilders also in positive territory after the Bank of England went back to a quarter-point rate rise.
The move – smaller than the half-point hike at its previous meeting – took the cost of borrowing to 5.25%, a 15-year high and the fourteenth consecutive increase.
After it was made, NatWest shares were up 2.4p to 236p. Barclays gained 1.7p to 148.2p. Banks benefit from higher income when interest rates rise, but can take a hit if volumes of loans and mortgages are constrained if they become too expensive.
Hopes that peak interest rates are near helped housebuilders, who have been exposed to higher mortgage costs. There was room for gains in their shares even as the BOE also signalled rates could stay higher for longer.
Persimmon, rose by 5p to 1145p. Taylor Wimpey added 1p to 118p.
Rates will stay ‘sufficiently restrictive for sufficiently long'
12:22 , Daniel O'Boyle
While it opted against a jumbo hike, the Bank added some hawkish-sounding comments to its monetary policy report, suggesting that interest rates could be at a high level for a long time.
“The MPC will ensure that Bank Rate is sufficiently restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term, in line with its remit,” it said.
Pound falls after BOE reverts to quarter-point rate hike
12:20 , Michael Hunter
Sterling took a hit after the Bank of England went back to a smaller, quarter-point rate hike today, after talk into the meeting that it could go for a second successive half-point rise.
The pound fell by 0.6 cent to $1.2651, a drop of 0.5%, to its lowest level since late June. Rate rises at the BOE have supported the pound in 2023, leaving it up by around 4.5% in a year.
After news of the 6-to-3 vote on the 9-member Monetary Policy Committee, sterling looked somewhat exposed, even as the BOE signalled that it could leave rates higher for longer.
Two members voted for the bigger half-point move, with one voting for no change.
Peak rates for consumers?
12:15 , Daniel O'Boyle
The Bank of England is unlikely to be finished raising rates. But Laura Suter, head of personal finance at AJ Bell, said it could be peak rates for consumers.
“It might feel like madness to call peak interest rates when the Bank of England has just raised rates for the 14th time, and the market is still pricing in another couple of hikes from the Bank this year,” she said. “But for consumers this could be peak interest rates, as banks and building societies have started cutting both savings and mortgage rates.
“Slowing inflation means that interest rates aren’t expected to rise by as much as they previously were – a few months ago we were expecting rates to peak at 6.5% but expectations now are 6% or even 5.75%. This has had the knock-on benefit that banks have reduced rates for mortgage customers. We’ve now seen a raft of big banks trim their rates – not sufficiently to make a dramatic difference to people’s monthly repayments, but homeowners will be breathing a sigh of relief that mortgage rates are headed in the right direction.
“Savers are the losers here, as it means an end to the successive savings rate hikes we’ve seen over the past 18 months. It means that anyone who has been playing the waiting game before locking into a fixed rate deal might be wise to move swiftly before rates drop further.
‘Groundhog day’ as Bank ups rates again
12:12 , Daniel O'Boyle
Michael McGowan, Managing Director of Foreign Exchange, Bibby Financial Services, said: “There’s an air of ‘Groundhog Day’ about the Bank of England’s decision to raise interest rates yet again. This fourteenth hike in a row pushes rates to their highest level since March 2008, and while the 0.25% increase is lower than might have been expected, the continuing upward trajectory seriously undermines the growth ambitions of businesses up and down the UK.
“For those already struggling with margin erosion and cashflow challenges, ever-higher interest rates signal more pain to come, and the likelihood of yet more insolvencies over the medium term – especially among SMEs.”
Bank of England raises interest rates to new 15-year high of 5.25% in 14th consecutive hike
12:06 , Simon Hunt
The Bank of England raised interest rates for the 14th consecutive time today, upping its base rate by a quarter of a percentage point to 5.25 per cent.
But the hike was smaller than the half-point ‘jumbo hike’ last month, signalling that Threadneedle Street is slowing down in its battle with inflation.
Key market data with rates call imminent
11:52 , Daniel O'Boyle
Take a look at our key market snapshot before the Bank of England announces the monetary Policy Committee’s latest decision.
Traders up bets on half-point hike
11:46 , Daniel O'Boyle
A half-point interest hike appears to be a serious possibiility, with City traders pricing in a 40% chance that the Bank of England opts for a second consecutive jumbo hike today.
That’s up from around a one-in-three chance, as markets saw things yesterday.
William Marsters, financial markets expert at Saxo, said: "The Bank of England is expected to announce yet another interest rate rise today as the UK continues to grapple with high levels of inflation. From the current level of 5%, most are expecting a lift of 0.25%, but another 0.5% increase can’t be ruled out.
"With inflation decelerating in Europe and the US, it is speculated that those Central Banks may be approaching the end of their hiking cycle signalling light at the end of the tunnel. The UK inflation figures also fell last month, but Britons continue to experience the highest inflation across the G7 economies. So, some argue that this macroeconomic backdrop calls for greater tightening.
The Bank will annnounce its decision at noon today.
UK service sector slows to weakest growth for six months
10:58 , Daniel O'Boyle
The UK’s services sector grew at its slowest rate for six months in July as subdued consumer demand and higher interest rates weighed on businesses, according to new data.
The influential S&P Global/CIPS UK services PMI survey showed a reading of 51.5 last month, down from 53.7 in June.
Any reading above 50 indicates growth for the sector, and below means decline.
Another big fall for FTSE 100, TUI shares down 4%
10:19 , Graeme Evans
The FTSE 100 index is down another 1.4% or 107.25 points at 7454.38, having fallen 104 points in Wednesday’s session after Fitch removed America’s triple-A credit rating.
The realisation that the Federal Reserve may not be done raising interest rates dealt another blow to market sentiment as figures yesterday showed the US economy continues to add a substantial number of new jobs.
The selling pressure in London pushed the FTSE 100 index to its lowest level in two weeks and in line with where it started the year. Casualties included miner Anglo American, which weakened 2% or 57.5p to 2195.5p.
A large number of ex-dividend stocks weighed on the index, with Lloyds Banking Group down 2% or 1.2p to 42.1p and BT Group off 6.7p at 112.35p as they traded without the right to their next payout.
Other fallers included the medical devices business Smith & Nephew, which fell 20p to 1131.5p despite nudging up revenues guidance alongside interim results.
A shortened FTSE 100 risers board included Entain after casinos giant MGM Resorts backed the pair’s BetMGM sports betting joint venture to deliver a milestone of second half profitability. Entain shares rose 9p to 1359p.
The FTSE 250 index fared slightly better than its top flight counterpart, although the UK-focused benchmark still dipped 0.6% or 106.34 points to 18,706.54.
Holidays operator TUI led a weaker session for travel stocks with a decline of 4% or 26p to 575p, while Pets at Home lost 1.4p to 371.4p despite a resilient trading update.
There were pockets of cheer elsewhere as Serco rose 2.3p to 157.5p. The outsourcing group lifted its dividend by 21% to 1.14p as strong results revealed £2.1 billion of orders in the six-month period, including £280 million of additional immigration services work in the UK.
Helios Towers, the telecoms infrastructure group, led the FTSE 250 with a jump of 9% or 7.5p to 91.5p after tightening full-year guidance at the top end of its previous range.
Bupa braced for near-£250 million knock from Chile court case
10:09 , Simon Hunt
Healthcare giant Bupa is braced to take a knock of almost a quarter of a billion pounds after a Supreme Court case in Chile threatened the future of its operations in the country.
The ruling, made last year, found that the firm’s policy of setting health insurance premiums based on gender and age were unconstitutional and demanded that compensation be issued to all customers affected.
A preliminary assessment by the Chilean health authorities found that Isapre Cruz Blanca, a subsidiary of Bupa, would face repayments totalling £229 million under draft legislation, a figure which Bupa warned was likely to increase over time.
Market snapshot with FTSE down almost 100 points
09:29 , Daniel O'Boyle
Take a look at our market snapshot as the FTSE 100 fell even further this morning. The index has now lost 200 points in two days.
Can Bank of England achieve ‘Goldilocks’ scenario?
09:19 , Daniel O'Boyle
Victoria Scholar, head of investment at Interactive Investor, notes that the UK economy has proven to be surprisingly resilient to interest rate hikes so far, and wonders whether it is possible that the Bank can successfully bring prices under control without triggering a recession.
“The Bank of England is expected to raise rates for the 14th time in a row at lunchtime to 5.25%, however a more hawkish 5.5% isn’t out of the question,” she said. “With UK inflation still stubbornly high, much more persistent than inflation in the US or eurozone, more work needs to be done to tackle the ongoing price pressures.
“Monetary policy is a notoriously blunt tool and is therefore not good at tinkering around the edges. The choice between 25bps and 50bps today is more about signalling how concerned the central bank is about inflation and growth. Late cycle rate hikes tend to work with a shorter lag suggesting a hike at this stage would have a greater economic impact than at the start of 2022.
“The post-covid supply chain bottlenecks have eased and wholesale energy prices have pulled back. On the other hand, food inflation is still stuck in double digits with supply issues in Russia and India key risks for commodity price inflation ahead. Plus, with wage growth at a record high, labour shortages, and heavy industrial action this year, there’s a resistance to lower wages, which raises the risk of further second round inflationary effects.
“The UK economy has proven to be much more resilient than last year’s forecasts. However, the manufacturing sector has been struggling and there is a chronic longstanding low productivity issue in the UK. The Bank of England needs to strike the balance between taming inflation without inducing too much economic pain. The goldilocks scenario that the US appears to be achieving presently with cooling inflation combined with economic growth, is something to aim towards.”
F&C Investment Trust behind the curve
09:13 , Simon English
F&C Investment Trust, the oldest stock market listed savings vehicle in the world, today admitted its returns are falling behind the curve even as share prices improve.
F&C, founded in 1868, manages £5.3 billion on behalf of many thousands of customers.
The shares fell 9p today to 870p which leaves the business valued aet £4.5 billion, just inside the FTSE 100 itself.
In the half-year the trust made 4.7%, much less than the 7.5% from its benchmark, the FTSE All-World Index.
Many fund managers have struggled lately with markets volatile, though lately both the US and Europe has shown signs of recovery.
The discount – the gap between the share price and the underlying assets of the trust – also widened. A dividend of 3.4p was paid and the board aims to increase the total dividend again this year.
Chairman, Beatrice Hollond, said:
“The valuation excesses in markets overall appear relatively contained and it now seems likely that the United States may avoid a recession. Against this background, we continue to adopt a diversified approach and remain focused on the longer-term opportunities as they emerge.”
Paul Niven, the fund manager, said: “Looking forward, while the unfolding economic environment remains uncertain we do expect performance within equities will broaden and relative value will be an important consideration for prospective returns. We have a relatively balanced approach within our portfolio between the cheaper, but more cyclically exposed areas of the market, and the higher growth, more expensive segments, which have exciting prospects but appear fully priced.”
Next ups profit forecast again
08:47 , Simon English
NEXT fashioned another profit upgrade today, offering hope for the wider high street and reminding the City that it is one of the best run businesses in the UK.
The clothes giant said full price sales between May and July are up 6.9% on a year ago. While that speaks to resilient consumer confidence it will not encourage economists looking for signs that inflation is easing.
The rising sales allowed Next to up full year profit guidance by £10 million to £845 million.
Charlie Huggins, manager of the ‘Quality Shares Portfolio’ at Wealth Club, said:
"Next pulled a rabbit out of the hat on 19 June when it said sales had been much better than expected in the first seven weeks of the year. Since then sales growth has remained robust with Next ending the first half strongly. The group’s end-of-season sale also went better than expected which has led to a modest increase to full year profit guidance.”
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said:
“Next has got into a habit of beating market expectations on the upside lately, and today’s second-quarter trading statement continued the hot streak. End-of-season sales were ahead of group expectations in the period, adding to the positive tailwinds that Next seems to be catching lately. The group still has a strong high street presence too, with sales here also heading in the right direction. Next’s certainly weathering the storm of economic uncertainty admirably, and looks well-placed to prosper further when the cycle turns.“
Next shares rose 24p to 6876p which leaves the business valued at £8.7 billion.
FTSE 100 under pressure, Wizz Air falls 5%
08:29 , Graeme Evans
The FTSE 100 index has slumped another 90.14 points to 7471.49, defying expectations for a steadier session after yesterday’s sharp sell-off caused by the US credit rating downgrade.
The fallers board included London Stock Exchange, which dropped 252p to 8034p despite the financial data business nudging up its full-year revenues guidance alongside interim results.
It was a similar story for medical devices firm Smith & Nephew as an increase to sales estimates was met with a fall of 21.5p to 1130p.
Lloyds Banking Group dropped 2% or 0.86p to 42.4p and BT Group lost 5.55p at 113.4p after their shares began trading without the right to forthcoming dividend payments.
The FTSE 250 index fell 0.5% or 91.82 points to 18,721.06, with Wizz Air 5% or 126p cheaper at 2236p in the wake of the low-cost airline’s trading update.
Serco wins another £280 million contract on high immigration demand
08:10 , Daniel O'Boyle
Contractor Serco is set to make a further £280 million because of high demand for immigration services, as the Government faces a record backlog in asylum cases.
Serco provides staffing for UK immigration centres among many other services, and it said that an increase in the number of migrants to be processed at these centres led to it securing an extra £280 million worth of work.
The firm made £188 million in profit for the first half of the year, up 52%, as its immigration services, in Australia as well as the UK, helped to offset the reduced need for covid testing.
Its shares are up 2.8% to 159.5p today.
Wizz Air becomes the latest carrier to break records as travellers take back to the skies
08:01 , Michael Hunter
Wizz Air, the short-haul carrier, reported a record high in traffic for three months to the end of June, adding to the trend of strong numbers from the sector into the peak summer getaway season.
Over 15 million people took to the skies with the company in the period, helping revenue up 53% to £1.2 billion. It returned to profit in the period, of £61.1 million, up from a loss of over £452 million a year ago.
CEO József Váradi said “Summer is going well operationally and from a revenue perspective.”
Markets steady after US downgrade, China figures boost Hang Seng
07:17 , Graeme Evans
European stock markets are set for a steadier session after they fell sharply yesterday on the Fitch downgrade to the US AAA credit rating.
The FTSE 100 index closed 1.4% lower last night, but CMC Markets expects today’s session to start just below the opening mark at 7551.
US markets also experienced heavy selling yesterday as the Nasdaq Composite fell 2.2%, the S&P 500 index by 1.4% and the Dow Jones Industrial Average 1%.
Futures markets are pointing to a flat start to trading in New York this afternoon, despite last night’s negative reaction to figures from companies including PayPal.
The mood has been helped by the latest signs of resilience in the US economy after a stronger-than-expected increase in private payrolls.
Asia markets have experienced a mixed session, with Tokyo’s Nikkei 225 down 1.5% but the Hong Kong-based Hang Seng up 0.5% as it emerged that China’s services activity expanded at a faster pace in July.
Morning refresh: What you need to know to start the day
06:44 , Simon Hunt
Good morning from the City desk of the Evening Standard.
City eyes are on the Bank of England today as its Monetary Policy Committee is widely expected to unveil another interest rate rise to curb persistently high UK inflation. But will it be a quarter or a half-point rise, and will this mark the end of a string of consecutive rate hikes? Our reporter Michael Hunter has written a helpful preview here.
PayPal was the stock to watch overnight — the fintech firm’s shares fell as much as 7% in after-market trading on Wall Street after margins were squeezed and provisions for bad debt increased. The firm was once run by Elon Musk, who was ousted as CEO after he unveiled a radical rebrand to change the company’s name to X.com. He finally saw those plans out after rebranding his social media site Twitter last week.
Here’s a summary of our top headlines from yesterday:
The Russia-Ukraine war offered a boost to BAE Systems as its order book swelled to a record £66.2 billion and revenues soared.
Taylor Wimpey’s first half profits slumped 29% as home sales fell on mortgage turmoil.
There was more trouble at property investment trust Home REIT as one if its biggest tenants went bust.
Tech entrepreneur Euan Blair signed new larger office in Paddington for his fast growing Multiverse business.
This morning we’re also expecting results from The London Stock Exchange Group, Rolls Royce engines and contractor Serco.
