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FTSE 100 Live: Borrowing below target at £13.5 billion, interest bill surges

 (Evening Standard)
(Evening Standard)

Public sector borrowing in October stood at £13.5 billion, a much smaller figure than the City had expected.

Borrowing is still £4.4 billion more than a year earlier and the fourth highest for October since monthly records began in 1993.

The impact of higher inflation meant the interest payable on central government debt was £6.1 billion in the month.

FTSE 100 Live Tuesday

  • Public borrowing rises to £13.5 billion, below forecast

  • Higher oil stocks boost FTSE 100

  • AO World shares surge after results

CMA launches probe to tackle ‘stranglehold’ of Apple and Google

Tuesday 22 November 2022 15:38 , Simon Hunt

The UK competition watchdog has launched an investigation into the ‘stranglehold’ of tech giants Apple and Google over the mobile browser market.

The Competition and Markets Authority (CMA) said it would c consider whether new rules are needed to drive better outcomes for users and developers.

Web developers have complained of Apple and Google’s restrictions, which lead to added costs and frustration as they have to deal with bugs and glitches when building web pages. Apple and Google have argued that restrictions are needed to protect users.

It follows a year-long probe by the CMA which found that Apple and Google have an effective duopoly on mobile ecosystems that allows them to exercise a ‘stranglehold’ over these markets, which include operating systems, app stores and web browsers on mobile devices. 97% of all mobile web browsing in the UK in 2021 happens on browsers powered by either Apple’s or Google’s browser engine.

Andrea Coscelli, Chief Executive of the CMA, said: “When it comes to how people use mobile phones, Apple and Google hold all the cards.

“As good as many of their services and products are, their strong grip on mobile ecosystems allows them to shut out competitors, holding back the British tech sector and limiting choice.”

New York stocks rise after positive news from big-name Main Street retailers

Tuesday 22 November 2022 14:47 , Michael Hunter

Wall Street’s S&P 500 made gains in opening trade, after reassuring news centred on two of America’s best-known retailers helped lift the mood ahead of the release later in the week of the minutes from the Federal Reserve’s last rate-setting meeting.

The broad New York index opened up almost 20 points at 3968.46, a rise of almost 0.5%. Best Buy rose over 10% after it issued improved sales forecasts at the start of the week of the Thanksgiving holiday on Thursday and the Black Friday sales events the next day.

Drugstore chain Walgreens Boots Alliance rose 2% after a broker upgrade for the stock praised its prospects after a move into healthcare services.

The gains came ahead of details on the US central bank’s last vote on interest rates, when investors will get fresh insight into the chances of smaller rate rises as it fights inflation.

UK on course for biggest recession among G7 nations, says OECD

Tuesday 22 November 2022 14:21 , Michael Hunter

The international trade association says the UK economy is on course for the worst run of any of the major economies in the G7.

According to the OECD’s latest economic outlook, the UK’s economy will contract by 0.4 per cent in 2023 - more optimistic than the Office for Budget Responsibilty’s estimate of 1.4 per cent of negative growth - but still worse than any other major economy.

Germany’s economy is the only other G7 nation set to shrink (by 0.3 per cent) but every other economy is set to grow next year.

Read more here

Chief of FTSE 250’s Assura says London property slowdown is a chance for better doctors’ surgeries

Tuesday 22 November 2022 13:42 , Michael Hunter

A slowdown in the property market could help London catch up with much-needed investment in NHS infrastructure, the CEO of a £3 billion healthcare property trust has told The Standard.

Assura’s Johnathan Murphy said the capital had “the worst healthcare estates of anywhere in the country,” in part due to an industry-wide method of considering land valuations agreed with the NHS that works better elsewhere where values are cheaper.

He said the NHS in London was “keen to have” the kind of bespoke doctors’ surgeries his company provides, but smaller developments and more retrofitting to convert older buildings was more typical in the capital. Lower land values lower could help bring better projects to life. “Those costs might come down a little bit with a recession,” he pointed out.

The wider  drop in property values led to a 55% fall in Assura’s interim profit before tax of £30.9 million in the six months to September 30, but net rental income rose 15% to £70 million.

Shares in the Warrington-based company ticked gained 0.6% to 57p.

Read more here

Wall Street stocks eye opening gains as attention starts to turn to Fed minutes

Tuesday 22 November 2022 13:17 , Michael Hunter

Futures trade was pointing to opening gains for the S&P 500 on Tuesday, with investors keeping wary watch on rising Covid infection rates in China ahead of the release on Wednesday of minutes from the last US monetary policy call.

The Federal Reserve’s discussion ahead of it lifting rates by another 0.75% will be parsed for any sign of a potential shift to smaller increases.

In the meantime, worries about the impact of stubborn anti-pandemic measures in China on global growth kept the mood cautious. The broad New York stock index was expected to gain 15 points to 3972.50, a rise of 0.4%.

‘Sigh of relief’ as five-year fixes drop back below 6%

Tuesday 22 November 2022 12:15 , Simon Hunt

Average five-year fixed mortgage rates have finally dropped back below 6% almost exactly two months after Kwasi Kwarteng sent borrowing costs soaring in his disastrous mini-Budget.

The average rate subsided to 5.95% today down from 6.01% yesterday according to figures from analysts Moneyfacts. However, they are still well above the 4.75% on the day of the former chancellor’s speech on 23 September. Rachel Springall, finance expert at Moneyfacts, said: “Borrowers may well breathe a sigh of relief to see that fixed mortgage rates are starting to fall, but there may be much more room for improvement.

“It is worth noting that rates could fall further still, but there is no clear answer as to how quickly that may be. Indeed, it’s been around two months since both the average two and five-year fixed mortgage rate breached 5% but today only a handful of lenders are offering sub-5% fixed deals.” Meanwhile estate agency franchisor Winkworth said it expected London market activity to pick up once the shock of the mini-Budget had passed.

CEO Dominic Agace, said: “While higher mortgage rates are leading the consensus to point to a weaker property market in 2023, we believe that our performance next year will be underpinned by the unfulfilled needs of homeowners to move, renewed interest in London property from international buyers and rising prices in the rentals market.”

Babcock targets savings amid wage inflation battle

Tuesday 22 November 2022 11:40 , Simon Hunt

Defence contractor Babcock pledged today to focus on the battle against inflation by offsetting rising prices and wages through cost savings and efficiencies as it reported a rise in half-year profits.

The 131-year-old company highlighted “wage inflation” among “external macroeconomic challenges”, saying its pay deal for UK staff 2023 was “93% agreed”. Babcock, which employs 28,000 people globally, pointed to improved commercial processes which would “minimise future pricing risks”. Chief executive David Lockwood said: “We are operating in a macro economic and geopolitical environment that remains volatile,” but added that the “market backdrop” was “supportive for defence”.

Babcock, which provides engineering support to the Royal Navy, reported underlying profit of almost £122 million in the six months to the end of September, up from just over £115 million in the same period a year ago.

It stood by existing guidance for the full year. Babcock shares rose over 3% to 298p.

Telecom Plus surge continues, BP leads FTSE 100

Tuesday 22 November 2022 10:21 , Graeme Evans

Telecom Plus, which owns Utility Warehouse, jumped another 5% in the FTSE 250 index as it continues to benefit from a surge in demand from households looking for ways to tackle soaring bills.

The company, which provides a single monthly statement for services across energy, broadband and mobile, upgraded profit guidance after adding 86,000 customers in the half year to 30 September.

It now has 814,684 on its books but with a medium-term goal to sign up at least one million additional customers over the next four to five years. Joint chief executive Andrew Lindsay said: “With inflationary pressures showing no signs of easing, we expect demand for what we offer to remain high.”

Revenues surged 51.5% to £562.4 million in today’s half-year results, leading to a 22.5% increase in profits to £32.1 million and 7p hike in dividend to 34p. Shares improved 105p to a fresh record of 2440p, meaning they have jumped 50% so far this year.

Its performance was one of the strongest in a largely resilient session for the FTSE 250 index, which climbed 52.92 points to 19,466.27.

Other risers in the second tier included supermarket sausage and bacon supplier Cranswick, which added 66p to 3152p after sticking by forecasts alongside half-year results showing a 3.4% drop in adjusted profits to £66 million.

The FTSE 100 index added 71.07 points to 7447.92 after a recovery in the price of Brent crude helped heavyweight oil stocks jump by as much as 6%.

BP led the way, improving 26.25p to 484.4p after analysts at Citigroup raised their recommendation to 'buy' with a price target of 540p. However, under-pressure mobile phone giant Vodafone fell 2p to 96.15p after Credit Suisse downgraded its target to 90p.

Steel business booms

Tuesday 22 November 2022 09:35 , Simon English

Severfield, the construction business behind new stands at both Lords and Fulham FC, is defying economic turmoil and strife in the steel trade.

It said today there is strong pipeline demand for its services as it reported half-year profit up from £7.9 million to £10.2 million. There was a small increase in the divi to 1.3p. Revenue jumped 20% to £235 million, though that partly reflects higher steel prices.

The company built the Fulham Riverside Stand and has worked on several stands at Lords.

Severfield also worked on the The Shard, Emirates Stadium and the Wimbledon Centre Court roof.

Alan Dunsmore, Chief Executive Officer, said: “The group has delivered a strong performance in the first six months of the year against a difficult macroeconomic backdrop. Our high-quality order book reflects our significant market sector, geographical and client diversification and provides us with good earnings visibility.”

Severfield is expanding in India in particular. The shares were today steady at 58p.

Oil stocks boost FTSE 100, AO World jumps 13%

Tuesday 22 November 2022 08:37 , Graeme Evans

Oil stocks have driven the FTSE 100 index into positive territory after gains of at least 3% for Shell, BP and Harbour Energy.

The FTSE 100 index is 43.38 points higher at 7,420.23, with mining companies Rio Tinto and Anglo American also offering support.

The UK-focused FTSE 250 index reversed 45.39 points to 19,367.96, although there was a strong session for Utility Warehouse business Telecom Plus after its interim results.

Shares rose 60p to 2395p as co-chief executive Andrew Lindsay said the business was growing faster than ever at an annual rate of 24%.

Online electrials retailer AO World enjoyed a strong session in the FTSE All-Share after it reported progress in its plan to pivot the business to focus on profit and cash generation

Full-year profits are now expected to be around the top end of previous guidance and expectations for next year has been set above the current City consensus. Shares jumped 13% or 6.65p to 59p.

Borrowing rises to £13.5 billion, below City forecasts

Tuesday 22 November 2022 07:55 , Graeme Evans

Public sector net borrowing came in at £13.5 billion in October, below the consensus forecast of £21.5 billion but well above last October’s £9.3 billion.

It is the second month in a row that borrowing has exceeded last year’s monthly total and was the fourth highest October deficit since records began in 1993.

Borrowing stood at £84.4 billion for the first seven months of the financial year, but this is before the government’s energy price support and cost-of-living payments.

The impact of this support and pressures from the weakening economy means that Capital Economics thinks borrowing will come in at £175 billion or 6.9% of GDP in 2022/23 — some £42 billion above the 2021/22 total.

Ruth Gregory, senior UK economist, said the clearly deteriorating path “will only embolden the Chancellor to keep a tight grip on the public finances”.

AO World losses triple as CEO promises to drive profitability in restructuring

Tuesday 22 November 2022 07:51 , Simon Hunt

Pre-tax losses at online retailer AO World tripled to £12 million in the six months to September as the firm said a major restructuring would save £30 million in costs and drive up profitability to the top end of forecasts.

The firm said it had cut employee headcount after withdrawing from the market in Germany, as well as cutting ties with Tesco in a bid to improve efficiency.

CEO John Roberts told the Standard: “Whether it’s a good idea or not, if it consumes cash or doesn’t make prodit in the short term then we’ve been looking hard at that.”

“Clearly there’s a lot of macroeconomic uncertainty...but this isn’t our first rodeo.”

Brent crude at $87 a barrel, FTSE 100 seen higher

Tuesday 22 November 2022 07:43 , Graeme Evans

A resilient session on Wall Street has set the tone for London’s FTSE 100 index to open moderately higher today.

The FTSE 100 dropped 0.1% yesterday as worries over more Covid outbreaks in major China cities sent the price of Brent crude down by as much as 5%.

Brent steadied at $87.65 a barrel today and CMC Markets expects the FTSE 100 to open 24 points higher at 7,400 this morning.

Speculation over the potential peak for US interest rates continues to drive sentiment on Wall Street, with policymaker Mary Daly yesterday warning about the dangers of going too far on monetary policy tightening.

A clearer picture may emerge tomorrow when the Federal Reserve publishes the minutes of its most recent policy meeting.