The FTSE closed higher as the ECB kept rates on hold (I-Wei Huang)
The FTSE 100 (^FTSE) and European stocks closed higher on Thursday, recovering from early losses, as traders digested chancellor Jeremy Hunt's spring budget, and the latest policy decision from the European Central Bank.
As widely expected, the ECB maintained the deposit rate at 4%, with the main focus being on the timing of any future rate cuts, along with the latest macroeconomic projections.
The latest staff projections show that inflation has now been revised down, in particular for 2024 due to cheaper energy prices. Staff now project inflation to average 2.3% in 2024, 2.0% in 2025 and 1.9% in 2026.
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London’s benchmark index was 0.3% higher afternoon trade
Wall Street opened higher, with the S&P 500 (^GSPC) rising 0.9%, and the tech-heavy Nasdaq (^IXIC) was 1.3% higher. The Dow Jones (^DJI) also gained 0.3%.
Germany's DAX (^GDAXI) was 0.7% up and the CAC (^FCHI) in Paris gained 0.8% during the session
“Stock benchmarks traded sideways in Europe on Thursday [morning] amid lingering economic uncertainty and a lack of bullish drivers for investors," Pierre Veyret, technical analyst at ActivTrades, said.
“The STOXX-50 stayed inside its narrow, short-term trading range, with gains from utility and financial shares offset by losses in all the other sectors, extending the bearish sentiment seen across Asian benchmarks overnight.”
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Pedro Goncalves
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PHG
LaToya Harding
FTSE 250 nears one-year high
The FTSE 250 is looking to close near a one-year high today following the budget announcement of a British ISA designed to encourage investment into UK stocks.
London’s midcap index gained as much as 1.2% after analysts at Citi said the scheme could inject £1.5bn into UK equities.
LaToya Harding
Rentokil on the rise
Rentokil (RTO.L) shares surged 17% in London after the pest control firm reported a 57% jump in operating annual profit, benefiting from the Terminix acquisition.
Organic revenue grew by 4.9% while operating margin was up 1.20 percentage points to 16.6%, even though North American growth was weak.
Rentokil completed 41 acquisitions during 2023 and said that its pipeline of bolt-on prospects "remains strong", with the business expecting to invest £250m this year.
"Transformational acquisitions always bring significant risk to a business. Rentokil's acquisition of Terminix is a case in point," Charlie Huggins, manager of the Quality Shares Portfolio at Wealth Club, said.
"The Terminix deal is by far the largest the group has ever done, establishing it as the leading Pest Control business in North America and opening up substantial cost savings. However, there have clearly been teething issues with the integration.
The North American pest control business is seeing lower organic growth than expected due mainly to weak new customer acquisition. The distraction and complexity of such a large integration has meant the group has taken its eye off the ball. This has been compounded by an increasingly competitive market environment."
Eurozone inflation is now projected to average 2.3% in 2024, down from 2.7%, with energy a key driver.
Growth expectations were reduced to 0.6% in 2024, down from 0.8%, while 2025 growth expectations were unchanged at 1.5%.
Lindsay James, investment strategist at Quilter Investors, said:
"Christine Lagarde has previously linked any decision to cut rates with signals on wage inflation, which according to the ECB’s wage tracker is currently running at around 4.5% - still well above the 3% target the ECB has stated would be conducive with its inflation target. The ECB will therefore be keenly watching how Q1 wage negotiations play out given how decisive they will be in bringing wage inflation, and thus CPI, down.
“With this in mind, the ECB has matched the Federal Reserve’s resolve to maintain a data dependent approach, continuing to emphasise a message of patience despite recent comments from Christine Lagarde that rate cuts ahead of the summer months may be likely.
“The ECB will still be reluctant to move too quickly, however, and we can therefore expect it will hold off on making any cuts until at least the 6 June meeting to allow for further crucial wage data to be considered. This would provide the ECB with more time to see how much of an impact, if at all, ongoing wage increases have on inflation, and we may see it make a more decisive shift in messaging at its next meeting in April.”
Hunt admits NI will not be abolished ‘any time soon’
Chancellor Jeremy Hunt has outlined his wish to abolish "unfair" national insurance tax but admitted that it “won’t happen any time soon”.
The chancellor spent around £10bn on the 2p cut to national insurance in his spring budget and has left the door open for more pre-election giveaways as the Tory party trails behind in polls.
Hunt said he wants to “end the unfairness” of the system but that eliminating contributions altogether would be a “huge thing to do”.
Speaking to Sky News, Hunt said: "We said we want to end that unfairness over time, it's something we will only do when it's possible to bring down taxes without increasing borrowing while also prioritising public services.
"If we are going to succeed as a country, we need to make work pay."
Hunt suggested the government could potentially “merge” national insurance and income tax.
However, talking to Times Radio, he admitted that it would a difficult task.
“That’s a huge job… I don’t think it’s realistic to say that’s going to happen any time soon,” he said.
LaToya Harding
ECB leaves interest rates at 4%
President of European Central Bank Christine Lagarde talks to the media after a meeting of the ECB's governing council, in Frankfurt, Germany, Thursday, March 7, 2024. The European Central Bank left its key interest rate at a record high as it waits for more confirmation that toxic inflation is under control for good — even as high borrowing costs drag on the stalled economy. (AP Photo/Michael Probst) (Michael Probst, Associated Press)
As expected, the European Central Bank (ECB) has left interest rates unchanged at 4%.
They have been held at this rate since September in a bid to tame inflation.
Meanwhile its main refinancing operations will operate at 4.5% and its marginal lending facility (overnight loans to banks) sticks at 4.75%.
LaToya Harding
Fall in UK job vacancies
The total number of online job adverts on 1 March 2024 came in 17% below the level in the same period last year, data from Adzuna has shown.
This continues “the downward trend since February 2022”, according to the Office for National Statistics (ONS), as demand for labour has cooled slightly.
Figures from @Adzuna show the total number of online job adverts on 1 March 2024 was 17% below the level seen in the equivalent period of 2023 💻
— Office for National Statistics (ONS) (@ONS) March 7, 2024
LaToya Harding
Budget aftermath: Pensioners who pay income tax to lose £1,000
All eight million taxpaying pensioners will see their taxes increase as income tax thresholds remain frozen, an £8n collective hit from the spring budget.
The Resolution Foundation described pensioners as the biggest losers from the budget, amid falling living standards and stagnating growth.
Torsten Bell, its chief executive, said: “The likely last budget before the general election showed that this has been a parliament of flatlining growth, falling living standards, and notable redistribution from the old and the rich to the young and the poor.”
The thinktank said this is the first parliament in modern history set to see a fall in living standards with real household disposable income to fall by 0.9%.
“The biggest choice Jeremy Hunt made was to cut taxes for younger workers, while allowing taxes to rise for eight million pensioners. This is a staggering reversal of the approach taken by Conservative governments since 2010,” Bell added.
Anyone earning above £12,570 per year has to pay national insurance. This threshold has been frozen for years and is only set to rise in 2028-29.
Ricardo Evangelista, senior analyst at ActivTrades, said:
“Gold prices surged to an all-time high during early Thursday trading, continuing a winning streak of consecutive positive sessions that began at the end of February, resulting in a gain of over 6% so far. This marks the longest winning streak since 2021.”
“Gold traders have been reacting to a subtle yet noticeable change in tone from the Federal Reserve, particularly after its Chairman publicly acknowledged on Wednesday the likelihood of a rate cut in the coming months. Jerome Powell's statement coincided with the release of US labour figures, which revealed lower-than-expected private sector job creation.”
“With the softening of the dollar, lower treasury yields, ongoing geopolitical instability, and concerns over global economic growth, the price of the precious metal is expected to remain well supported, and further gains should not come as a surprise.”
LaToya Harding
Bitcoin recovers after BlackRock shows faith
Bitcoin has rebounded above the $67,000 (£52,541) mark after experiencing a price plunge following the digital asset's ascent to a new all-time high on Tuesday.
The recovery comes as BlackRock's iShares Bitcoin ETF (IBIT) bought bitcoin's brief dip. The fund took in over $778m worth of bitcoin (BTC) on Tuesday. BlackRock's total inflows into bitcoin via its exchange-traded fund (ETF) has now surpassed the $9bn mark.
The US Securities and Exchange Commission (SEC) approved the first US-listed ETFs to track bitcoin (BTC-USD) in January. A spot bitcoin ETF is a financial product that investors anticipate could open the gateway for mainstream capital to flood the crypto market.
Currently, the indications are favourable, with fund managers, such BlackRock (BLK) and Franklin Templeton (BEN), increasing their allocations into the digital asset.
In the past 24 hours, the largest digital asset by market capitalisation has traded flat, changing hands for $66,675, as of the time of writing.
The UK is facing a record low for living standards, the Resolution Foundation has revealed.
Analysis of yesterday’s budget shows there is just £8.9bn to hit the chancellor's fiscal rule to have debt falling in five years.
Torsten Bell, chief executive of the Resolution Foundation, warned that the budget calculations are based on fictional cuts to public services after the election:
"The £19bn of cuts to unprotected public services after the next election are three-quarters the size of those delivered in the early 2010s. The idea that such cuts can be delivered in the face of already faltering public services is a fiscal fiction.
“Budgets are always a big day for Westminster, but the big picture for Britain has not changed at all. This remains a country where taxes are heading up not down, and one where incomes are stagnating.
“Big tax cuts may or may not affect the outcome of that election, but the task for whoever wins is huge. They will need to both wrestle with implausible spending cuts, and also restart sustained economic growth – the only route to end Britain’s stagnation.”
LaToya Harding
The cost of having children later in life
Newly released data shows that we’re having kids later in life than ever. We’re twice as likely to have a baby over the age of 40 as we are to have one when we’re under the age of 20, and more than half of babies are now born to women over the age of 30.
There are some real advantages to starting a family later in life. Plenty of women have children later because they’re studying, and a degree statistically leaves them better off on average throughout their working lives. Couples are also able to get more established in their careers, giving them higher incomes with which to cover childcare, and the ability to negotiate flexibility in working patterns.
However, it comes with some costs you need to plan for. One key will be to prioritise your pension. Having children later will squeeze the "empty nest" period before retirement, when traditionally people focus on retirement savings.
With little or no empty nest period you’ll need to maintain pension payments throughout as much of your years as parents as you can — and prioritise it above the nice-to-haves.
Tobias Gruber, chief executive of My Community Finance, said:
“All eyes are on Nationwide as it boldly asserts its presence amidst the competition. Just weeks ago, the building society hit the headlines with its humorous advert which promised to keep branches open, which ruffled the feathers of its rivals, who complained about its content.
"Today's development will certainly grab the attention of major banks again.
“While Nationwide has long been associated with security and safety, in recent times we’ve seen it reinvent itself, underscored by a recent brand refresh.
"As disruptors like Monzo and Revolut reshape the banking landscape, established banks have been sluggish to adapt. In contrast, Nationwide appears to have emerged from the shadows, seizing the opportunity to lead the charge in confronting the digital challenger banks head-on.
"It remains to be seen how its bold reinvention among potential customers will be received, but it's certainly an intriguing journey to watch.”
LaToya Harding
Nationwide to buy Virgin Money for £2.9bn
General views of a Nationwide store in Portsmouth, Hampshire, UK. (Sam Stephenson)
Nationwide Building Society has struck a deal to buy Virgin Money for £2.9bn, creating one of the UK's largest mortgage and savings groups.
The 220p-a-share price offered comes as a 38% premium to Virgin Money's closing share price on Wednesday.
The move is not set to make any material changes to Virgin Money's 7,300 employees "in the near term," Nationwide confirmed.
It plans to initially keep the Virgin Money brand but it will later be phased out over six years once the takeover is completed.
Nationwide is UK's biggest building society with more than 17 million customers, while Virgin Money is the UK's sixth largest retail bank with around 6.6 million customers and 91 branches.
The combination of the two will create a group with 696 branches, second only in the UK to Lloyds Banking Group.
LaToya Harding
Northern Ireland sees strongest regional growth
Regionally, Northern Ireland showed the strongest growth, with house prices rising by 5% annually to an average of £195,956.
The North West, North East, and Wales also saw significant increases.
London’s average house price remains the highest at £536,996, marking a 1.5% annual increase, the first positive growth since January 2023.
Eastern England experienced the most considerable decline last month with an average price drop of 0.8%.
Tom Bill, head of UK residential research at estate agent Knight Frank, said: “The regional breakdown shows how affordability remains a big constraint on the market, with better-value areas seeing stronger price growth over the last year.”
LaToya Harding
UK house prices rise for fifth month running
UK house prices rose for the fifth month straight in February, as buyers bet that mortgage rates will drop.
The typical price of a home is now £291,699, Halifax said, only £1,800 off the all-time high seen in June 2022.
The Halifax House Price Index showed a 1.7% year-on-year rise in UK house prices in February, slowing from 2.3% in January.
Month on month, the index added 0.4% compared to 1.2% the previous month.
Prospective buyers are being encouraged by easing mortgage costs and a rosier economic outlook but the lender warned that there is uncertainty on the horizon.
Kim Kinnaird, director at Halifax Mortgages, said:
“Although lower mortgage rates, alongside expectations of Bank of England interest rate cuts this year, should help buyer confidence in the short term, the downward trend on rates is showing signs of fading.
“Raising a deposit and affording a mortgage remains challenging, especially for first-time buyers, so there could be a slowdown in the housing market this year.”
LaToya Harding
Asia and US stocks
Asian shares were lower overnight, despite Wall Street recovering some losses from the day before after the Federal Reserve chairman’s comments that interest rates will likely fall this year.
The Nikkei (^N225) slipped 1.2% on the day in Japan, while the Hang Seng (^HSI) fell 1.3% in Hong Kong. The Shanghai Composite (000001.SS) was 0.4% lower by the end of the session.
It came as Jerome Powell reiterated that cuts to interest rates may be coming this year, but that the Fed needs more data proving that inflation is cooling before it will act.
The S&P 500 (^GSPC) rose 0.5% to 5,104.76 while the Dow Jones Industrial Average (^DJI) gained 0.2%, closing at 38,661.05. The Nasdaq composite (^IXIC) ended 0.6% higher at 16,031.54.
LaToya Harding
Coming up...
Good morning, and welcome back to our blog. Here we will be covering what's moving markets and happening across the global economy.
Let's take a quick look at what's on the agenda for today:
7am: Trading updates: Aviva, Admiral, ITV
7am: Halifax House Price Index
9am: Resolution Foundation: Assessing the Budget’s economic, and electoral, impact
10.30am: Institute for Fiscal Studies presents its Budget analysis
12.30pm: Challenger report on US job cuts
1.15pm: European Central Bank interest rate decision
1.30pm: US Initial Jobless Claims
1.45pm: European Central Bank press conference
Watch: How does inflation affect interest rates?
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