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FTSE 100 Live: Australia rates rise surprise, retail sales weaken on cost pressures

·10-min read
 (Evening Standard)
(Evening Standard)

Australia’s bigger-than-expected hike in interest rates today put European markets under pressure as inflation worries return to the fore.

The 0.5% rise was also the Reserve Bank of Australia’s first back-to-back increase in 12 years and follows Monday’s surge in the US 10-year bond yield on fears over how high interest rates might go.

Figures from the British Retail Consortium fuelled concerns that cost pressures are causing consumers to rein in spending, with a 1.5% decline in like-for-like sales in May the third monthly decline in a row.

FTSE 100 Live Tuesday

  • Pound weakens after Boris Johnson leadership vote

  • Interest rate rise fears fuelled by Australia move

  • Retail and technology stocks under pressure

Biffa receives £1.4 billion takeover offer

14:57 , Simon Hunt

Bin collector Biffa today landed a £1.4 billion takeover bid from a US private equity firm.

The offer from Energy Capital Partners of 445p per share represents a 37% premium over yesterday’s closing price of 325p.

The company, which processes waste for two million people in London, said in a statement: “The Board of Biffa has concluded that should a firm offer be made on the same financial terms as the Proposal it would be minded to recommend it to Biffa shareholders.”

Biffa shares soared 28% after markets opening this morning to reach 417p.

It comes as the waste management company said it could end up with a liability anywhere in the range of £170,000 to £153 million as a result of an enquiry by UK tax authority HMRC over how it has classified waste at its facilities.

Biffa said it rejects the concerns but was cooperating with HMRC’s enquiries while seeking advice from accounting firm Ernst & Young.

No tax claim has so far been received from HMRC, the company said, and there was no certainty that it would bring a claim. High Wycombe-based Biffa employs more than 9,000 people in the UK and has a fleet of over 2,900 collection vehicles.

The company posted revenues of £1billion in 2021, with operating profits of £44 million — a 51% drop on 2020 profits of £91 million.

Centrica won’t challenge windfall tax, chairman says

14:41 , Simon Hunt

British Gas owner Centrica won’t launch a legal challenge over the Government’s new windfall tax, its chairman has said.

But Scott Wheway warned of "long-term problems" if the tax is expanded to include power generators.

Mr Wheway was asked by shareholders at the company’s annual general meeting in Leicester if he would challenge the decision to impose a 25% extra tax on North Sea oil and gas.

"We don’t see any scope, or requirement, or necessity for a legal challenge to those things that have been brought forward," he said.

However, he warned that the Treasury could cause problems in the move to decarbonise the UK if it insists on also taxing the profits of energy generators more.

"We’ve got every empathy with the plight of many customers presently that are facing difficulties in managing their energy bills, and we welcome action to help those customers,” he said.

"But we also share a lot of concern around choices that may be made to apply taxes to energy production which - although they may derive short-term benefits - could cause medium- and long-term problems.”

JD Sports faces £2 million fine over football kit price-fixing

13:44 , Simon Hunt

JD Sports is set be fined up to £2 million by the Competition and Markets Authority over price-fixing of Rangers replica kits.

The CMA alleges JD agreed to raise the prices of the Scottish club’s strips after reaching “an understanding” with Rangers and the shirt’s manufacturers, Elite Sports, between September 2018 and July 2019.

JD is accused of raising the price of Rangers shirts from £55 to £60, as well as coordinating the timing of discounts “to avoid competition between them and protect their profit margins.”

JD confirmed it had received a draft penalty notice from the CMA and said it would add a £2 million provision for the fine in its financial statements.

Ted Baker shares slump after preferred bidder exit

10:45 , Simon Hunt

Ted Baker shares slumped this morning after the retailer announced its preferred bidder had withdrawn its takeover offer.

They tumbled almost a fifth to 110p.

The high street fashion brand did not confirm details of the bidder or the terms of the withdrawn offer.

It follows reports that Reebok-owner Authentic Brands was tipped as the preferred bidder for the company.

In a statement, Ted Baker said it would now decide whether to proceed with other offers for the business.

The announcement is the latest in a string of misfortunes for the company after it posted a loss of £44 million in the year to January 2022 and founder Ray Kelvin quit as CEO amid harassment allegations in 2019.

Kelvin continues to control an 11.5% stake in the company worth £22.3 million, according to Bloomberg data.

PwC whacked with £5 million fines

10:21 , Simon English

PwC has been hit with fines totalling £5 million for duff audits of Galliford Try and Kier Group, the latest blow to a scandal-torn sector.

The Financial Reporting Council found failings in the audit giant’s treatment of long-term contracts.

Claudia Mortimore, a lawyer at the FRC, said: “Rigorous auditing of long-term contract accounting is particularly important in the audit of construction companies, where many contracts are spread over a number of years. Auditors must not only ensure that they obtain sufficient appropriate audit evidence to support the accounting of the contracts, but also apply sufficient professional scepticism.”

Sanctions have been imposed against PwC and audit partner Jonathan Hook.

It was fined £3 million for its 2018 and 2019 audit of Galliford and another £2 million for its work on Kier’s 2017 account.

read more here

FTSE 100 steady, retail and tech stocks fall

10:17 , Graeme Evans

A Jubilee boost for retail stocks was cut short today as the focus of investors quickly returned to the ongoing pressure on households from rapidly rising prices.

Marks & Spencer and Next were among the retailers to give up share price gains from yesterday as the British Retail Consortium (BRC) reported that total sales for May were 1.5% lower than a year ago on a same-store basis.

Its figures are not adjusted for inflation, meaning the drop in sales masked a much larger fall in volumes. Higher value items, such as furniture and electronics, took the biggest hit as shoppers stalled on major purchases amid the economic uncertainty.

Today’s update offset cheer from the Jubilee weekend after the BRC had earlier revealed that UK footfall increased by 6.9% compared with the average for May.

There are few expectations in the City that this will mean the start of a summer feel good factor, with M&S today down 3% or 4.35p to 146.45p and Next off 40p to 6460p.

Other fallers in the FTSE 100 included B&Q owner Kingfisher after a decline of 5p to 261.8p. M&S joint venture partner Ocado was also impacted by weakness for technology-focused stocks amid fears over how high interest rates might go.

Jitters ahead of Friday’s inflation figure in the United States left Wall Street lower last night, while sentiment was further weakened when Australia’s central bank raised rates by a bigger-than-expected 0.5%.

Stocks whose valuations are built around future cash flows featured on the FTSE 100 fallers board as Scottish Mortgage Investment Trust dropped 18.2p to 780p and house market platform Rightmove retreated 7p to 586.8p.

European benchmarks were 1% lower but the FTSE 100 index stayed close to its opening mark thanks to progress for defensive plays such as British American Tobacco and miners Rio Tinto and Anglo American.

The top flight was 3.91 points lower at 7604.31, whereas the UK-focused FTSE 250 index lost 0.4% or 81.18 points to 20,452.62. Fallers include cyber security firm Darktrace, which dropped 3% or 12.7p to 362.1p.

09:36 , Simon English

THE pound wobbled today in the wake of Boris Johnson’s leadership victory as the City fretted about the prospects for the UK economy – and feared turbulence ahead.

With a recession possible and inflation heading towards 10%, the PM’s relationship with the Square Mile and the wider business community is tense.

Sterling fell 0.7% to $1.243 against the dollar. It is down from $1.42 a year ago. It also fell half a cent against the euro.

There is concern in the City at what the PM might do to shore up his support among the public.

you can read more here

FTSE 100 steady, Biffa surges 28%

08:48 , Graeme Evans

The FTSE 100 index is near its opening mark at 7600, with gains of 1% for heavyweight mining stocks Rio Tinto and Anglo American offset by weakness in the retail sector.

B&Q owner Kingfisher fell 2% and Ocado dropped 1.5%, while there were also falls for financial stocks St James’s Place, Abrdn and Hargreaves Lansdown.

The FTSE 250 index weakened 59.92 points to 20,446.88, led by National Express as shares fell as much as 5% in the wake of a trading update.

Recycling business Biffa surged 28% or 92.8p to 417.8p as it revealed it had received a £1.4 billion takeover approach from a US private equity firm.

Retail sales fall before Jubilee boost

08:12 , Graeme Evans

Retail sales for May dropped 1.5% on a like-for-like annual basis as the cost of living crunch hampered demand, according to the British Retail Consortium (BRC).

There was some cheer over the Jubilee weekend, however, as the BRC also reported that UK footfall increased by 6.9% compared with the average for May.

Myron Jobson, Interactive Investor’s personal finance analyst, said: “The hope now for retailers is this will create momentum, along with the summer feel good factor, to bolster sales despite the raging cost-of-living storm.

“But the outlook for consumer confidence remains bleak with inflation predicted to hit double digits, while the revision of the energy price cap in autumn is expected to add an additional £800 a year onto the typical energy bill.”

Inflation jitters weaken markets

07:50 , Graeme Evans

European markets are facing a weaker start as fears over how high interest rates might go fuelled investor caution.

The selling pressure follows a surge in the US 10-year bond yield, which moved beyond 3% towards its 2018 high ahead of Friday’s consumer prices index release.

An inflation figure above the forecast 8.3% may put paid to Wall Street hopes that US policymakers might pause interest rate rises in the autumn.

The worries were not helped by developments overnight after the Australian central bank announced a bigger-than-expected 0.5% rise in its cash rate to 0.85%.

It cited the strength of the labour market and warned further monetary policy tightening was on the cards after today’s first back-to-back rise in 12 years.

The rise in the US bond yield put pressure on Wall Street shares towards the end of yesterday’s session, meaning the FTSE 100 index is expected to open 23 points lower at 7,585.

There was little in the way of a reaction by the pound to the outcome of yesterday’s confidence vote in Prime Minister Boris Johnson.

Michael Hewson, chief market analyst at CMC Markets, said: “Markets are more concerned about the direction of the UK economy and the Bank of England’s attempts to address it.”

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