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FTSE 100 Live: Bank of England holds interest rates, shares higher, YouGov plummets, S&P tops 5500

FTSE 100 Live (Evening Standard)
FTSE 100 Live (Evening Standard)

Dealmaking action and the Bank of England interest rates decision provide much of today’s City interest.

NatWest has picked up Sainsbury’s Bank while Tate & Lyle is buying a US firm for £1.4 billion.

The Bank of England no-change decision comes with traders looking to August or September for a first rate cut.

FTSE 100 Live Thursday

  • NatWest buys Sainsbury's Bank

  • Food firm in £1.4 billion swoop

  • YouGov warning hits shares

Rate expectations: Cut still a possibility in August, says State Street

12:50 , Michael Hunter

City opinion on the likely timing of the Bank of England’s first rate cut since the pandemic – expected this year – is being refined after today’s announcement of a seven-to-two vote margin to hold steady this time around.

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The chances of action in August have grown.

After the decision today was “finely balanced” for some monetary policy committee members according to the statement issued alongside the announcement, the City is looking to late summer for a quarter-point cut from the current 16-year high of 5.25%.

Here is a round-up of some of the early reaction from experts:

Tim Graf, head of EMEA Macro Strategy at State Street Global Markets:

Today’s Bank of England decision and accompanying commentary are meaningful in bringing an August cut more into frame. Noting that the decision to cut rates was ‘finely balanced’ for some voters implies at least a handful of MPC members are close to changing their vote to a cut.

“Given the weakness emerging in the labour market, the June CPI data, released 17 July, and payroll data, released the following day, likely determine whether that first cut comes in August or September.”

Ed Monk, associate director for personal investing at Fidelity International:

The ongoing General Election campaign had already handed the Bank of England a reason not to move on rates this month but even without that a cut was unlikely.

“Wages continue to rise strongly at around 6%, adding to inflationary pressure, even if the Bank has reported some loosening of the labour market. Prices for services are also still running hot. It’s likely that rate-setters at the Bank will focus on that rather than the headline inflation numbers which is - for now at least - back on target.

“It all means the pain for borrowers goes on.”

Nicholas Hyett, investment manager at Wealth Club

“Falling inflation has been driven by lower energy and food prices. As we start to lap the very high prices from last year, core inflation will become increasingly important, and service sector inflation in particular remains high at 5.7%.

The net effect is that inflation will likely start to tick up again later this summer”.

Daniel Austin, CEO and co-founder at ASK Partners:

“As a lender to property developers and investors, we have seen first hand the impact that rate hikes have had on borrowers and the market; continued stabilisation will be welcome news and rate cuts will undoubtedly come later in the year”.

Laura Suter, director of personal finance at AJ Bell:

This is pretty frustrating for the general public, who may see politics getting in the way of interest rates being chopped.

“Every month that rates stay higher we see more people come off their cheap mortgage deals and onto far more expensive rates.

“While a small, quarter of a percentage point cut to rates isn’t going to have a dramatic effect on mortgage-holders’ monthly payments, it would be a step in the right direction for people looking down the barrel of paying hundreds more each month for their mortgage.”

Traders up bets on August rate cut

12:21 , Daniel O'Boyle

City traders have upped their bets on an August rate cut, but they still believe a hold is more likely when the Bank of England next meets.

Markets suggest a 45% chance of a cut in six weeks’ time, up from a little over 30% this morning.

There is a further 25% cut of rates being cut in September, markets suggest.

Two cuts for the year are priced in.

Two votes for a quarter-point cut on Bank of England's monetary policy committee as it holds rates

12:21 , Michael Hunter

There were two votes for a quarter-point interest rate cut on the Bank of England’s nine-member monetary policy committee today.

The other seven backed keeping rates at 5.25%.

The City expected that no change would be made to the benchmark cost of borrowing that sets the rate on millions of loans and mortgages.

Even with inflation back at the BOE’s official 2% target of 2%, as measured by the consumer price index, policymakers have signalled they expect rates to be higher for longer to ensure price rises are tamed.

And action in the middle of a general election campaign was also seen as unlikely, even as the BO cherishes is independence from government.

The statement issued from Threadneedle Street along with the set-piece decision said:

“The Committee has judged since last autumn that monetary policy needs to be restrictive for an extended period of time until the risk of inflation becoming embedded above the 2% target dissipates.

Bank of England holds interest rates

12:08 , Daniel O'Boyle

The Bank of England has held interest rates at their 16-year high of 5.25%, as was widely expected.

The decision means rates will now be at 5.25% for a full year, as they hit that level in August 2023.

The Monetary Policy Committee voted 7-2 for a hold. Swati Dhingra and Dave Ramsden were the two members calling for a cut.

Bank of England: Decision on rates 'finely balanced' for some MPC members

12:06 , Daniel O'Boyle

No Monetary Policy Committee members changed their vote since May’s decision, but the Bank said that the decision was “finely balanced” for some.

That suggests that more members could vote for a cut soon.

Markets see a hold as near-certain

11:30 , Daniel O'Boyle

Ahead of today’s Bank of England decision, City markets see another hold as effectively a certainty.

Markets are pricing in a near-100% chance of rates staying at 5.25%. September is seen as the most likely timing for a first cut.

Boris backer Cruddas pockets £15m

11:23 , Simon English

CITY banker and Boris Johnson backer Peter Cruddas will take a £15 million pay out after a return to form at CMC Markets, the spread betting house he founded.

After a rocky period when markets floundered, the firm today reported a 52% jump in annual profits to £80 million. That allows for a 12% rise in the dividend to 8.3p, adding to the fortune of the man once named the richest man in the City.

Baron Cruddas campaigned for Boris and was made a member of the House of Lords by him.

He denied chatter that he is considering shifting his support to the Reform Party and said of Nigel Farage only that he has “maybe met him once”.

On the election, he said: “I think the Conservatives will do better than predicted. I am not really involved with political parties anymore,” he claimed.

CMC has benefitted from a shift to institutional business, away from retail clients, and a heft of cost-cutting measures.

Around 200 jobs have gone, leaving about 1000 staff.

Cruddas is among those predicting a bounce back for London markets this year, saying there is “no more downside in the UK” and that shares are cheap.

CMC saw revenues up 15% to £339 million for the year to March, a post Covid high. The shares jumped 24p to 305p which leaves the business valued at £852 million.

Cruddas says CMC is now more like a fintech than an online trading house such as Hargreaves Lansdown and should be measured as such by investors.

It has lately done a deal with Revolut to allow the bank’s customers to trade bonds on the Revolut app.

In the statement to the City, Cruddas said: “Over the past year, a recovery in client trading combined with our diversification strategy through B2B technology and an institutional first approach has delivered strong growth and opened up many opportunities for the company around the world.

“This strategy, based on continuous product launches and multiple application connectivity through the CMC Markets Connect brand, means we are making great strides in a huge market segment of B2B and institutional business, with limited competition from our peers.”

YouGov shares crash

11:07 , Daniel O'Boyle

The busiest year of elections on record has failed to deliver profits for YouGov, as the pollster’s shares crashed today on the back of a shock profit warning.

With well over a billion voters across the globe going to the polls this year, YouGov polls and projections have been all over newspaper front pages. YouGov has published nine public polls since the general election was called less than a month ago, and is likely to see more attention in the run-up to elections in the US and France later this year.

Most electoral polls are not a large source of revenue for YouGov, which makes more of its money conducting market research for businesses. Polling for elections instead exists more as a ‘shop window’, to entice corporate clients to buy its services.

Read more here

FTSE 100 higher as upgrades boost Rolls-Royce and LandSec

10:34 , Graeme Evans

Rolls-Royce shares today rose another 11.3p to 483.8p after Goldman Sachs sweetened the target price on its Buy rating to 545p from 524p.

City support also boosted Land Securities near the top of the FTSE 100, lifting 10.5p to 620p as UBS said shares in the Piccadilly Lights and Lakeside Retail Park owner did not deserve to be down 12% this year.

Alongside an improved target price of 730p, UBS noted solid annual results that showed evidence of value stabilisation in large parts of the portfolio.

On the fallers board, United Utilities fell 23.4p to 986.6p and Persimmon lost 13p to 1352p after their shares were marked ex-dividend.

The FTSE 100 index rose 11.43 points to 8216.54, while the second-tier FTSE 250 index put on 0.3% or 54.35 points at 20,435.40.

Gas producer Energean was among the strongest mid-cap performers, lifting 4% or 45p to 1077p after it promised shareholders a special dividend worth up to $200 million from the sale of its assets in Egypt, Italy and Croatia.

The disposal to private equity firm Carlyle for an enterprise value of $945 million increases Energean’s focus on its flagship Karish field in Israel, which began production in 2022.

Chief executive Mathios Rigas said the sale represented an “exciting new chapter” for his firm, having generated a significant return in the four years since acquiring the assets.

In a session of dealmaking action, Alpha Financial Markets Consulting rose 4% or 17p to 496p after its board backed a £626 million takeover by Bridgepoint.

The company, which has been listed on AIM since 2017, surged 88p or 22.5% yesterday after revealing talks with the private equity firm.

Time Out to beat earnings expectations amid strong momentum

10:07 , Daniel O'Boyle

Time Out has said it is on track to surpass earnings guidance after strong trading from both its media and markets businesses over the latest quarter.

The London-listed firm saw shares rise in early trading on Thursday as a result of the upgrade.

Time Out Group boss Chris Ohlund said the firm will “look to the future with confidence” after stronger recent sales.

Read more here

DS Smith boss insists £5.8bn takeover remains on track amid concerns over deal

09:41 , Daniel O'Boyle

The boss of packaging giant DS Smith has insisted the group is pressing ahead with its £5.8 billion sale to a US rival as speculation grows that the deal may be in jeopardy.

DS Smith – which counts customers including Amazon and consumer goods group Unilever – agreed an all-share takeover by Memphis-based International Paper in April, which would leave its shareholders with 33.7% of the combined group.

Read more here

Elections fail to lift YouGov

09:21 , Daniel O'Boyle

The general election hasn’t been enough to ensure YouGov hits its targets, as the pollster issued a profit warning this morning.

The business said it has “seen lower sales bookings than anticipated” and so now expects revenue to fall between £324 million and £327 million. Profits are expected to fall between £41 million and £44 million.

That comes despite 2024 being the busiest year of elections on record, with well over a billion people voting. While election polls are the best-known part of YouGov’s business, market research and data products tend to be a bigger part of YouGov’s profits.

YouGov said: “We continue to see increased demand for our customised research solutions, however, sales in our data products division have remained slow and we continue to see declines in fast-turnaround research services. Geographically we have seen challenges in EMEA, particularly in the DACH [Germany, Austria and Switzerland] region.

“As we move into FY25, we will focus on optimising our cost base and prioritising investment in key growth areas such as upgrading our Data Products, continuing to build out our AI capabilities and enhancing our sales organisation to further capitalise on YouGov's unique asset: its high-quality global panel and proprietary dataset.”

Rishi Sunak walks back into 10 Downing Street after his announcement (AP)
Rishi Sunak walks back into 10 Downing Street after his announcement (AP)

Sainsbury's deal boosts shares, CMC Markets and Energean lead FTSE 250

08:35 , Graeme Evans

Sainsbury’s is the best performer in the FTSE 100 index, up 2% or 5.2p to 264.8p after announcing the sale of its banking operations to NatWest.

Rolls-Royce has also added 7.2p to 479.7p, with BT Group among other stronger blue chips following a gain of 0.9p to 142.15p.

The FTSE 100 index is 13.62 points higher at 8218.73.

In the FTSE 250, results by CMC Markets sent shares in the financial markets platform up by 8% or 23.3p to 304.3p.

OIl and gas firm Energean followed, lifting 6% or 63.2p to 1095.2p after promising a special dividend in the wake of today’s sale of assets in Egypt, Croatia and Italy.

Tate & Lyle fell 22.5p to 654.5p after announcing a £1.4 billion US takeover, while the profit warning by YouGov caused its AIM-listed shares to slide by 36% or 296.4p to 523.6p.

Tate & Lyle in £1.4 billion swoop to buy CP Kelco

07:35 , Michael Hunter

FTSE 250 food and drink business Tate & Lyle has announced a £1.4 billion deal to buy CP Kelco of the US.

Kelco makes ingredients including a range of gums used to thicken and stabilise food products.

The deal comes amid a rise in popularity of plant-based and sustainable foods. Kelco has described itself as a “nature-based ingredients” firm.

Tate & Lyle has been turning itself into what it describes as “a growth-focused speciality food and beverage solutions business”.

It said today that the deal “is expected to drive stronger revenue growth and significant adjusted [earnings] ]margin improvement over the next few years.“

Tate also said it will continue with a £215 million plan to return capital to shareholders after the sale of its near-50% stake in Primient, a maker of corn starches, which it completed last month.

Nick Hampton, Tate’s CEO, said the Kelco deal

“Creates a leading, global speciality food and beverage solutions business, ideally placed to benefit from the structural trends towards more plant-based, clean-label and sustainable ingredients and solutions.”

Sainsbury's Bank sold to Natwest in £125 million deal

07:19 , Simon Hunt

Sainsbury’s is to sell its banking arm to NatWest in a £125 million deal.

NatWest Group expects to acquire approximately £2.5 billion of gross customer assets, comprising £1.4 billion of unsecured personal loans and £1.1 billion of credit cards balances, together with approximately £2.6 billion of customer deposits.

As part of the transaction NatWest Group also expects to add around one million customer accounts.

NatWest CEO Paul Thwaite said: “This transaction is a great opportunity to accelerate the growth of our Retail Banking business at attractive returns, in line with our strategic priorities. As well as a complementary customer base, the transaction is expected to add scale to our credit card and unsecured personal lending business within existing risk appetite.”

FTSE 100 seen higher, pound at $1.27 ahead of interest rate decision

07:15 , Graeme Evans

The FTSE 100 index is forecast to open 16 points higher at 8221, a performance influenced by yesterday’s closure of US markets for Juneteenth.

Trading will resume on Wall Street later with the S&P 500 index at a record high after Nvidia overtook Microsoft as the world’s most valuable company.

The Bank of England’s interest rate decision at noon is unlikely to influence matters in London, given expectations for another meeting on hold at 5.25%.

Yesterday’s sticky inflation reading from the services sector means traders are expecting August or even September as the most likely month for a cut.

The pound traded at $1.27 ahead of today’s meeting, while the Brent Crude price continues to be near a seven-week high of $85 a barrel.

Recap: Yesterday's top stories

06:44 , Simon Hunt

Good morning from the Standard City desk.

The FTSE 100 nudged up on Wednesday after data showed that inflation has returned to the Government’s official target for the first time since July 2021.

The blue-chip index rose 14 points to 8,205, a 0.2% rise.

Wednesday’s gains came after official figures on consumer price inflation (CPI) showed the measure has fallen back to the Government’s target of 2%.

Rishi Sunak declared “we’ve got there” after the milestone was confirmed, insisting that it shows the economy has “turned the corner” after a long stretch of above-target inflation.

The news has raised hopes the Bank of England policymakers will to cut the base interest rate from 5.25% this afternoon.

But experts cautioned that a rate cut this summer could be less likely until the majority of the Bank’s Monetary Policy Committee (MPC) feel certain that inflation is under control.

~

Here’s a summary of our other top headlines from yesterday: