The Bank of England today increased interest rates by 0.25% as policymakers continue efforts to tame inflation.
Some members of the Bank’s monetary policy committee were expected to press for a larger half percentage point rise. Rates are currently at 1% after four consecutive increases.
Pressure for the Bank to take a more aggressive stance intensified last night when the Federal Reserve opted to lift US rates by 0.75%, the biggest rise since 1994.
FTSE 100 Live Thursday
Bank of England to hike interest rates
FTSE 100 falls sharply, consumer stocks hit
ASOS issues profit warning, unveils new boss
Gas prices rise yet further
15:36 , Simon Hunt
Gas prices have risen yet higher after Russia announced it would be cutting back on supplies to Europe.
The Dutch gas spot price is up 54% since Monday, Bloomberg data shows, as German energy business Uniper said supplies delivered from Russia were 25% below the level it was contracted to receive.
State-owned Russian energy business Gazprom said the move was down to technical issues but German Economy minister Robert Habeck said he thought the decision was “politically motivated.”
In April, the UK energy cap rose 54% to £1,971 a year with some analysts suggesting it could rise further to £2,800 when the next price cap rise is announced in October.
Interest rates at highest level for nine years
13:32 , Simon Hunt
The Bank of England raised interest rates to their highest level for nine years today as it grapples with soaring inflation.
Its Monetary Policy Commttee (MPC) ordered a 0.25 per cent rise in its main lending rate to 1.25 per cent.
It is the fifth time at consecutive MPC meetings that the cost of borrowing has gone up since December. It is the fist time that rates have been above 1 per cent since January 2009.
The MPC voted by a majority of 6 to 3 to increase Bank Rate by 0.25 percentage points. The three members in the minority voted for a more dramatic half point rise to 1.5 per cent.
The pound initially slumped one per cent against the dollar after the noon announcement but recovwered to stand down around 0.4 per cent.
London shares slide, Persimmon down 8%
10:32 , Graeme Evans
Consumer-focused stocks skidded today as the FTSE 100 and FTSE 250 index both slumped by 2% on rising interest rate fears.
The London market had initially been priced to open higher after the US Federal Reserve’s blockbuster 0.75% hike in interest rates was taken in Wall Street’s stride.
Analysts said the biggest US rate rise since 1994 had boosted hopes that Fed policymakers may still engineer a soft landing for the world’s biggest economy amid the fight against inflation.
But the mood quickly soured in Europe amid the deteriorating economic outlook and as the retail sector delivered further worrying updates, including from fast fashion firm ASOS and car parts and cycles specialist Halfords.
Their shares lost about a fifth of their value, while blue-chip stocks JD Sports Fashion fell 7% or 8p to 103.35p, Next by 366p to 5676p and B&Q owner Kingfisher by 10.8p to 234.1p.
Housebuilder Persimmon reflected the additional uncertainty caused by rising UK interest rates as its shares topped the fallers board, tumbling 8% or 177p to its lowest price since the early days of the pandemic at 2011p.
The wider FTSE 100 fell by 2% or 149.62 points, surrendering the gains of the previous session to stand at 7123.79. Business intelligence firm Informa topped a shortened risers board after it expanded its share buyback programme to £725 million.
The move sent shares up 3% or 17.8p to 530.4p as Informa also gave full-year guidance at the top end of hopes and said it expected a boost to business events as major China cities reopen following Covid lockdowns.
Oil and gas firm Harbour Energy was also on the risers board, up 6.7p to 374.4p, after it announced the start of a $200 million (£165 million) share buyback programme.
The FTSE 250 fell 451.66 points to 18,864.32, with shares in Sports Direct firm Frasers off 9% and electricals retailer Currys down 7%.
Hornby sales boost
10:03 , Simon Hunt
LOCKDOWN hobbyists expanding their toy train and Scalextric sets boosted sales at Hornby.
Without delays in shipping, those sales could have been even better.
Revenue for the year rose from £48.5 million to £53.7 million. They have been on an upward trajectory for the last four years.
Lyndon Davies, executive chairman, said: "Our sales increase despite difficulties in the supply chain. The company has ambitious plans for the future, it is an exciting time to be at Hornby.”
Profit before tax more than doubled to £3.2 million.
Davies wants to boost digital sales, but admits the move to the internet has been “slow” and “disappointing”. He says it is a long-term plan to boost digital.
“Like a Hornby layout, this will now evolve, develop and change constantly,” he said.
On world events, Davies said this: “Brexit continued to affect us in the first quarter of the financial year, but things settled down, and there are now very few problems arising. With most of the world back to normality, Covid now impacts us most in the supply chain. Recent events in Ukraine have not impacted us so far, although there are some specialist materials we are watching closely.”
Hornby shares rose 2p to 32p, which values the business at £53 million.
Boohoo sees first UK sales fall
09:47 , Simon English
BOOHOO today admitted the sales boost it enjoyed during lockdown has not been sustained.
The online fashion giant, still reeling from pay and working condition allegations at a Leicester factory, said sales in the last three months are down 8% to £446 million.
Boohoo is increasing the stock it gets from “near-shore” markets to cut freight costs.
In this country sales are down a little to £272 million, its first UK sales drop. Boohoo shares fell 10p to 55p. They are down 83% this year.
CEO John Lyttle said: “We are looking ahead towards our key summer trading season as holidays ramp up and customers look to the latest fashion from across our brands.”
Shares slump at ASOS on new profit warning
09:31 , Simon English
The fast fashion house says profits for the year will be between £20 million and £60 million, far below previous guidance of £110 million to £140 million.
New CEO José Antonio Ramos Calamonte and chairman Jørgen Lindemann have a fight on their hands to turn around a business that was once a stock market darling.
Today the stock fell 290p, 25%, to 870p. Four years ago, the shares were worth about ten times that.
Like everyone else, ASOS warned that inflation and supply chain problems were hitting sales.
Chief operating officer Mat Dunn said: “What is now clear, based on the significant increase in returns rates that we have seen, is that this inflationary pressure is increasingly impacting our customers shopping behaviour. It is too early to tell for how long the current pattern of customer behaviour will continue.”
A profit warning in October led to the former departure of then CEO Nick Beighton. In the last three months, ASOS sales are up 4% to £988 million.
Ramos Calamonte is a former Zara boss.
FTSE 100 weakens, retailers under pressure
08:41 , Graeme Evans
More selling pressure erased hopes for a steady start to the European session as the FTSE 100 index lost 0.9% or 66 points at 7208.
Markets were initially relaxed about last night’s 75 basis point rise by the Federal Reserve amid hopes that it might boost the chances of a softer landing for the US economy.
London’s biggest fallers included house builder Persimmon, which dropped 7% or 156p to 2039p, and retailers JD Sports Fashion and Next after confidence in the sector was dealt another blow by the updates from ASOS and Boohoo,
JD and Next shares were 4% lower, while ASOS crashed 20% and Boohoo slumped 13%.
Business intelligence firm Informa led the FTSE 100 after it increased the scale of its share buyback programme in the wake of a robust trading update. Shares lifted 18.8p to 531.4p, a rise of 4%.
ASOS and Boohoo shares slide
08:12 , Graeme Evans
Shares in fast fashion businesses ASOS and Boohoo have slumped after disappointing updates from the pair.
The 15% slide for ASOS came after it cut guidance for annual profits due to a significant increase in returns rates in the UK and Europe.
Chief operating officer Mat Dunn said: “What is now clear, based on the significant increase in returns rates that we have seen, is that inflationary pressure is increasingly impacting our customers shopping behaviour.”
The rise in returns offset an improved sales performance since the end of February, with an increase in event-led demand helping UK sales to rise 4% and by 21% in the US.
The new guidance points to revenues growth of between 4% and 7% and adjusted profits in the range of £20 million and £60 million.
An update from rival Boohoo, meanwhile, showed that UK sales fell by 1% in the same three-month period despite a return to growth in May. Overall revenues declined by 8%, which analysts at Liberum said was weaker than expected.
Boohoo shares fell 10%.
Markets steady after big US rates rise
07:48 , Graeme Evans
The biggest increase in US interest rates since 1994 today turned up the pressure on the Bank of England to take a more aggressive stance on inflation.
Members of the Bank’s monetary policy committee (MPC) announce their latest decision at noon, when a half percentage point rise in rates from 1% will be one of the options.
Michael Hewson, chief market analyst at CMC Markets, said: “Over the past decade the MPC has been very quick to cut rates and been glacial when it comes to raising them again.
“While there are those who say it is foolish to hike into a slowdown because the economy can’t support it, you can also posit that the economy can’t support inflation at current or higher levels either, so it comes down to what is the lesser of two evils.”
Last night’s move by the Federal Reserve failed to spook Wall Street, having been priced in after speculation of a 75 basis points increase started in the wake of Friday’s biggest-than-expected inflation reading of 8.6%.
Futures markets are pointing to a positive start for US shares later, despite fears that much higher rate rises will tip the economy into recession.
For now, traders appear relieved that policymakers are taking a firm stance on inflation after Federal Reserve chair Jerome Powell also signalled that a half point or 75 basis points rise was on the cards for next month’s meeting.
CMC expects the FTSE 100 index to open 40 points lower at 7,233, having finished more than 1% ahead yesterday.