FTSE 100 Live 17 July: US stocks sink, inflation sticks at 2%, HSBC new boss
A 2% inflation reading today failed to boost the chances of an interest rate cut in August.
The focus is on stubborn levels of services inflation, in part due to Taylor Swift concerts lifting hotel prices.
Meanwhile, HSBC has a new boss and Reckitt Benckiser is dealing with the aftermath of a tornado in the US.
FTSE 100 Live Wednesday
Services inflation hits rate cut hopes
HSBC promotes Elhedery to CEO role
Reckitt Benckiser hit by US tornado
FTSE 100 closes higher; shareholders welcome new HSBC boss
16:40 , Simon Hunt
At the end of the day’s trading session in London, the FTSE 100 has closed higher, up 23 points to 7,187.
Shares in HSBC rose slightly, up around half a percentage point, as investors welcomed the arrival of HSBC’s new CEO Georges Elhedery.
Dan Coatsworth, investment analyst at AJ Bell, said: “Safe and boring is arguably what a bank needs, rather than a maverick visionary. Running a bank doesn’t require a thirst for innovation in the way a technology firm does; it needs someone with attention to detail, good communication skills and a sharp focus. Ultimately, Elhedery will need to ensure that each of the cogs that make up the business are running smoothly.
“Elhedery’s background as a numbers man will come in handy as juggernauts of the banking industry such as HSBC continuously need to keep costs under control. If he can make the business run more efficiently, it will create the right kind of platform to look at longer-term strategic growth opportunities.
“Outgoing CEO Noel Quinn has already greased the wheels by offloading various businesses such as operations in Canada, France and Argentina, making HSBC leaner and arguably healthier.”
New regulations as Labour tries to answer public anger over water companies
15:56
The Government is bringing in measures to strengthen regulation of the water industry as it attempts to answer public anger over sewage polluting rivers, lakes and seas.
The Water (Special Measures) Bill announced in the King’s Speech includes regulations to make water company bosses face personal criminal liability for breaking laws on water quality, and new powers for regulator Ofwat to ban the payment of bonuses if environmental standards are not met.
It also establishes a new code of conduct for water companies, allowing customers to summon board members and hold executives to account, and will introduce new powers to bring “automatic and severe” fines for transgressions.
And it requires water companies to install real-time monitors at every sewage outlet with data independently scrutinised by the water regulators – although the government announced last year that all of England’s storm overflows are electronically monitored.
Tech stocks lead declines: US markets open
14:41 , Simon Hunt
Stocks sunk in the opening minutes of trade on Wall Street, with tech firm shares leading the decline amid renewed investor concerns over US-China tensions resulting in a slowdown in the supply of chips.
Shares in GitLab bucked the tech sell-off, with the stock rising as much as 10% amid a report by Reuters that the software platform is eyeing a sale with a number of potential interested parties.
The Dow Jones Industrial Average fell 91.91 0.22% at the open to 40,862.57. The S&P 500 opened lower by 1.01% at 5,610.07, while the Nasdaq Composite dropped 1.74%, to 18,188.19 at the opening bell.
Huge changes to employment rights unveiled
14:18 , Simon Hunt
The Government is pledging to create a new partnership between business, unions and workers with wide-ranging changes to employment rights.
An Employment Rights Bill will be introduced within the first 100 days, as promised by Labour in the run-up to the general election.
Measures will include banning “exploitative” zero-hours contracts, ending policies of fire and re-hire, and making parental leave, sick pay and protection from unfair dismissal available from day one in a job for all workers.
Flexible working will be the default from the first day in a job, while it will be unlawful to sack a woman who has had a baby for six months after she returns to work.
City Comment: Planning is the key takeaway from the King's Speech
13:24 , Simon Hunt
Companies will be keeping a close watch on the King’s Speech today – an early test of whether the new Labour government is as pro-business as chancellor Rachel Reeves has claimed in her bid to woo the City over the past year.
A few proposals hint that a fresh slew of regulation could be on the way: changes to employment rights and zero-hour contracts, more security measures at performance venues, more rules on AI and a rethink on the way sports clubs are structured.
But all of these measures feel more like tinkering and will surely be dwarfed by a subject of greater economic heft: planning reform. Labour has said that “planning decisions for major infrastructure will now be made nationally rather than locally to stop projects being tied up in years of red tape.” It is no understatement to say that this could be the single most consequential reform that the government makes over the next five years.
Levelling-up Secretary Angela Rayner has already signalled her preparedness to get stuck in, last week unveiling a review into two proposals to build data centres in London’s commuter belt which had been blocked by local authorities.
Overturning these two planning decisions alone could be worth several billion pounds to the UK economy. Add up various major projects dotted across the country and it is easy to see how this could run into the hundreds of billions of pounds. The British Private Equity and Venture Capital Association reckons there is some £145 billion in private capital ‘dry powder’ ready to be deployed over the next five years.
Big businesses say that when they choose where to build their next factory or plant, the tedious strictures of the planning system puts them off the UK. And who can blame them: the planning application for one of the UK’s most successful infrastructure projects in modern times, the 2012 London Olympic park, totalled 10,000 pages, one of the longest in European history. Let’s hope the new government chops these down to size as it goes for growth.
Nationwide seeks power to triple executive bonuses
11:37 , Simon Hunt
Nationwide is poised for a tense annual meeting today that will see chief executive Debbie Crosbie cement her controversial takeover of Virgin Money and put in rules to increase her own pay.
The board is recommending moves to pay the CEO and finance chief Chris Rhodes three times their salary in bonuses, up from a mere doubling now.
Critics who are against the £2.9 billion deal to buy Virgin – where Crosbie used to work – see this a further sign that the building society is becoming ever more like the banks Nationwide mocks in TV ads.
Nationwide’s 16 million members do not get a say on either the Virgin deal or the new pay deals, beyond an advisory role.
FTSE 100 lower, gold miners higher on record price
10:25 , Graeme Evans
The FTSE 100 has posted its third loss of the week, down 27.51 points to 8137.39 despite last night’s 1.8% surge for the Dow Jones Industrial Average.
The US benchmark’s record close came amid early signs of a wider switch away from technology towards old economy stocks.
London’s lacklustre performance followed more pressure from the mining sector after copper-focused Antofagasta fell 4% or 79p to 2049p on production guidance towards the lower end of its range.
Its update is another setback after weak China GDP figures triggered selling of Glencore, Rio Tinto and Anglo American shares earlier this week.
Gold miners have been the exception after the price of the precious metal today touched a record $2470 an ounce amid US rate cut optimism.
West Africa-focused Endeavour Mining led the FTSE 100 with a rise of 28p to 1853p, while in the FTSE 250 the Peru-based Hochschild Mining extended gains for this year to 83% following a further improvement of 1.2p to 190p.
The wider FTSE 250 weakened 92.99 points to 21,120.80 as demand for UK stocks suffered due to fading hopes for a Bank of England rate cut in August.
Sterling above $1.30 after blow to August rate cut hopes
09:17 , Graeme Evans
Sterling today crossed the $1.30 threshold as traders bet that today’s services inflation print will keep interest rates higher for longer.
The pound’s latest one-year high comes with the Federal Reserve appearing to be closer to a cut in interest rates, possibly in September.
With services inflation well above Bank of England’s forecast at 5.7%, the market now sees a 33% chance of an interest rate cut on 1 August.
Cirata raises £5 million
09:08 , Simon Hunt
Beleaguered tech firm Cirata today marked the latest step on its bid to restore its reputation after the company raised £5.4 million in an equity fundraise.
The business, formerly known as WANdisco, said it was raising the funds to help its new management make progress after having “instigated a complete rebuild of the company” following a “strategy and execution that failed to deliver sustainable growth” and a “corporate culture was at odds with the company's commercial reality.”
Last year the firm, which had been worth nearly £1 billion, shocked investors after it uncovered “significant, sophisticated and potentially fraudulent irregularities” which threatened it as a going concern and led to its shares being suspended. Senior management at the company departed soon afterwards as it underwent a rebrand.
Cirata announced the fundraise yesterday via an ‘accelerated bookbuild process’. It sold shares at an offer price of 55p, well below the 80p mark they had been trading at early last month. The stock fell another 6.5% today to 53p.
Reckitt hit by tornado in the US
08:37 , Simon Hunt
Consumer goods giant Reckitt Benckiser was today braced for a knock in sales to its Mead Johnson baby formula products after its US warehouses were wrecked by a tornado.
The Durex and Cillit Bang maker said its Mount Vernon, Indiana site was no longer operational after it ‘sustained significant damage’ with inbound deliveries being sent to other facilities in the US.
The damage comes as a further blow to Reckitt, which is facing investor pressure to sell its baby formula business after a US jury ruled in March that one of its formula products had caused the death of a premature infant.
Reckitt said any drop in sales would be ‘largely offset’ by its business interruption insurance.
FTSE 100 struggles as mining pressure continues
08:33 , Graeme Evans
European markets are experiencing another lacklustre session, with the FTSE 100 index down 9.74 points at 8155.16.
There had been hopes of a stronger performance after a rotation in US markets from technology heavyweights towards small cap and value sectors.
The pressure from London-listed mining stocks continued, with copper-focused Antofagasta down 59p to 2069p on production guidance towards the lower end of its range.
Rio Tinto also weakened 31.4p to 5039.5p and Anglo American by 7.2p to 2302.3p.
HSBC shares were broadly flat at 663.7p after it announced the appointment of finance boss Georges Elhedery as new chief executive.
GitLab exploring sale: Reuters
08:20 , Simon Hunt
Software development tools business GitLab is eyeing a possible sale amid a slump in its share price.
The California-based business, which counts Google among its largest investors with a 22% shareholding, has attracted a number of expressions of interest including from cloud business Datadog, according to Reuters.
GitLab trades on the Nasdaq with a market capitalisation of $8 billion (£6.2 billion). Despite posting revenue growth of 33% the firm has seen its shares sink 15% this year amid concerns over customers cutting spending, while CEO and co-founder Sid Sijbrandij said last month that he would be undergoing treatment for osteosarcoma, a form of cancer.
GitLab’s biggest rival, GitHub, was acquired by Microsoft in 2018 in a $7.5 billion deal.
Stubborn services inflation deals blow to rate cut hopes
07:56 , Graeme Evans
Capital Economics said the chances of an interest cut in August look to have diminished, despite today’s 2% headline inflation reading.
The reason is that services inflation stayed at 5.7% in June, well above Bank of England forecasts.
Hotels inflation rose from 7% to 9.8% but Capital Economics said the temporary effects of Taylor Swift’s concerts were only a small part of the problem.
The consultancy said: “It’s not obvious that the BoE can ignore a chunk of the stickiness of services inflation.
“What’s more, the BoE may also be worrying about the possibility that more of the recent rebound in activity is being driven by demand rather than supply. If so, that wouldn’t bode well for the persistence of inflation further ahead.”
Prior to today’s inflation figure, markets had been pricing a 49% chance of a rate cut at August’s Bank of England rates meeting.
Inflation bang on Bank of England's 2% target for second straight month
07:25 , Michael Hunter
The main measure of inflation is bang on the Bank of England’s official target for the second consecutive month according to official data out this morning, in the latest sign that an interest rate cut could be imminent.
The year-on-year reading of consumer price index (CPI) for June stayed at 2% according to the Office for National Statistics. That was slightly higher than 1.9% forecast, but it left it at its lowest in nearly three years.
Members of the Monetary Policy Committee are expected to cut the benchmark cost of borrowing from its 16-year high of 5.25% this summer, in a move that will make mortgages and loans more affordable for millions of borrowers. It would be the first such cut since the pandemic-era’s emergency support measures for the economy.
Rates were hiked for 14 consecutive meetings to the peak to tackle double-digit inflation stoked by high energy prices after Russia’s invasion of Ukraine. Inflation peaked at over 11% in October 2022, at its highest level in four decades.
The second month of on-target CPI will add to hopes that runaway price rises have been tamed, allowing the MPC to cut rates.
HSBC promotes Elhedery to top job
07:18 , Graeme Evans
HSBC today named current finance boss Georges Elhedery as its new chief executive, effective from 2 September.
Elhedery joined HSBC in 2005 and has been a member of its board since January 2023.
He previously served as co-CEO of Global Banking & Markets, where he also led the Markets & Securities Services division.
HSBC chair Mark Tucker said: “ He is an exceptional leader and banker who cares passionately about the bank, our customers, and our people.
“He has a track record of leading through change, driving growth, delivering simplification, containing costs and brings a strong focus on execution.”
Elhedery steps into the role held by Noel Quinn, who is stepping down after five years as chief executive and 37 years with HSBC.
FTSE 100 seen higher after Dow Jones jumps 1.8%
07:09 , Graeme Evans
The release of more strong second quarter earnings figures from the banking sector underpinned another robust Wall Street session last night.
Shares in Morgan Stanley and Bank of America finished higher after their second quarter results, with the Dow Jones Industrial Average up 1.85%.
The S&P 500 index and tech-focused Nasdaq Composite set new records after closing 0.6% and 0.2% higher respectively.
The performance means the FTSE 100 index is forecast to open 25 points higher at 8190, having fallen in both of this week’s sessions.
The pound is just below $1.30, while Brent Crude stands at $83.60 a barrel after a four-day decline driven by uncertainty over the health of China’s economy.