Speculation over an early rise in UK interest rates continued today after oil prices stayed near multi-year highs and a Bank of England policymaker warned inflationary pressures could become more persistent if action is not taken.
The comments from Michael Saunders that markets are right to start betting on faster rate rises strengthened the pound and pushed the 10-year bond yield close to levels last seen in May 2019.
Brent crude was today trading at a three-year high of near $84 a barrel, which helped the FTSE 100 index to rise on the back of gains for commodity-based stocks. ASOS shares slid 15% after a profits warning and the exit of chief executive Nick Beighton.
Meanwhile, GSK today pressed the button on its £70 billion break-up with plans to put its global corporate HQ in west London up for sale.
FTSE 100 Live Monday
Pound higher on rate rise signal
Brent crude at three-year high
Sentiment weakest since last summer
Oil rally continues
07:37 , Graeme Evans
Oil prices show few signs of budging from their multi-year highs, adding more inflationary pressures at the start of another testing week for global markets.
Brent crude is trading 1.6% higher at a new three-year high of $83.71 a barrel, with the US oil benchmark at a seven-year high of $80.31 a barrel after rising 5% last week on the switch away from soaring natural gas prices.
The inflationary outlook will be tested later this week, with producer price index data in the US and China. On Friday, there were more signs that the US labour market recovery appears to be running out of steam after the weakest non-farm payrolls figure this year.
Most economists had expected the September result to provide the final piece of the jigsaw for the US Federal Reserve to start the tapering of its $120 billion a month asset purchase programme, when it meets in a few weeks’ time.
Despite the weak figure, the impact of rising prices means there's still huge pressure for policymakers in the US and the UK to consider early rate rises.
Michael Hewson, chief markets analyst at CMC Markets, said: “These concerns appear to be being articulated much more loudly in recent weeks, with the Bank of England becoming much more vocal in recent days.
In an interview with the Sunday Telegraph, external monetary policy committee member Michael Saunders said markets were right to start betting on faster rate rises, due to surging energy markets and labour shortages.
Hewson added: “He isn’t alone in thinking along these lines either after new chief economist Huw Pill voiced concerns over longer lasting inflation, something that the UK tends to be especially vulnerable to, while Bank of England governor Andrew Bailey also appears to be leaning in that direction as well.”
The FTSE 100 index is expected to open flat at 7095 in a week when confidence will also be tested by the start of Wall Street's third quarter earnings season, with figures due from JP Morgan Chase and CItigroup among others.
07:55 , Graeme Evans
The recent stock market jitters are highlighted in Deutsche Bank's latest monthly sentiment survey, which shows that the majority of respondents think there's another correction in the pipeline before the year is out.
The survey, which took place last week and covers 600 market professionals worldwide, found that 71% expect at least another 5% off equities at some point in 2021. Short term equity sentiment is as negative as it has been since the summer of 2020.
The biggest risks to the market are now higher bond yields and inflation, alongside weaker growth. Covid-19 is no longer seen as one of the three biggest threats.
Deutsche Bank also finds fairly strong consensus that stagflation of some kind is more likely than not, especially in the UK where over 50% expect it in the next 12 months.
Asos CEO to leave the fashion business
08:03 , Joanna Bourke
Asos chief executive Nick Beighton is stepping down from the London-headquartered online fashion giant.
An announcement that Beighton, who has been boss at the retailer for six years and worked at the company since 2012, came alongside details of the group’s next chairman.
Read more HERE.
FTSE 100 higher, ASOS slides
08:27 , Graeme Evans
The FTSE 100 index is slightly higher at 7112, aided by a further rally for oil stocks after the price of Brent crude lifted 1.5% overnight to $83.71 a barrel. Mining giants including Anglo American also improved by more than 1%.
The pound strengthened slightly against the US dollar, to $1.3644, after external Bank of England policy committee member Michael Saunders said markets were right to start betting on faster rate rises.
Saunders is one of the more “hawkish” members of the committee, but his comments are still significant after governor Andrew Bailey warned of the inflation consequences if the Bank is too slow to act.
Rising wages and higher freight costs are clearly being felt by online fashion giant ASOS, whose shares tumbled 11% after its warning that 2022 profits will be short of City expectations. Nick Beighton is also leaving after six years as chief executive.
Harmony Energy and Pod Point bring battery power to the City
09:31 , Oscar Williams-Grut
Harmony Energy Income Trust, a new fund investing in battery storage infrastructure, and Pod Point, the electrical vehicle charging business, both announced plans to IPO on Monday. Both companies pitched their floats as opportunities for investor to cash in on the race to reach net zero emission
Harmony Energy is seeking to raise £230 million to invest in ‘shovel ready’ battery storage projects underpinned by a contract with electric car maker Tesla. Harmony has struck a deal to buy Tesla’s Megapack batteries, which can be used for 2 hours, and use the car maker’s Autobidder AI software, which manages energy trading with the National Grid.
Separately, Pod Point announced plans to list in London. The company, founded in 2009, installs and runs electric vehicle charging infrastructure across the UK. Pod Point has installed over 89,000 home charge points and 13,000 commercial units, many of them through partnerships with companies like Barratt Homes, Lidl, and Tesco. Revenues grew 123% in the first half of 2021 to £26.5 million.
11:05 , Graeme Evans
The stagflation fears driving stock market jitters appear to be getting louder after a survey by a City bank revealed rising prices rather than Covid-19 as the biggest threat to sentiment.
Deutsche Bank's poll of 600 market professionals worldwide took place last week and found that 71% expect at least another 5% off equities at some point in 2021. Short term equity sentiment is as negative as it has been since the summer of 2020.
The survey also revealed a “fairly strong consensus” that stagflation of some kind is more likely than not, especially in the UK where over 50% expect it in the next 12 months.
Speculation of an early rise in UK interest rates continued today after oil prices stayed near multi-year highs and a Bank of England policymaker warned inflationary pressures could become more persistent if action is not taken.
The comments from Michael Saunders that markets were right to start betting on faster rate rises strengthened the pound and pushed the 10-year bond yield to around the highest level since May 2019.
Brent crude was also trading at a three-year high of near $84 a barrel, which helped the FTSE 100 index to edge up 4.98 points to 7101.21 after gains of more than 1% for BP and Royal Dutch Shell.
The oil giants were also lifted by analysts at JP Morgan raising their target prices on the pair to 530p and 2,300p, leaving shares 6.8p higher at 360.35p and 34.4p at 1749p respectively.
Higher commodity prices also pushed up mining stocks by as much as 3%. Rio Tinto led the way, up 170p at 5099p as Glencore improved 12.05p to 367.35p and Anglo American rallied 86p to 2777p.
The FTSE 250 index is much more exposed to worries over the UK economy and there’s now less help from takeover activity after Peel Hunt reported that the number of companies under offer was 26 last month, compared with 32 in August.
The second-tier index has fallen 7% since hitting its record high last month and was off another 125.27 points to 22,411.05 in trading today. Cybersecurity firm Darktrace was among the biggest fallers, down 6% or 48.5p to 823.5p.
Hut Group founder Matt Moulding, meanwhile, faced more pressure after THG shares fell another 23.8p to 429p ahead of a big presentation outlining the future strategy for its Ingenuity technology business. The stock has fallen by as much as third in recent weeks.
GSK to quit iconic headquarters as breakup looms
12:21 , Oscar Williams-Grut
Healthcare giant GSK today pressed the button on its £70 billion break-up with plans to put its global corporate HQ in west London up for sale.
The announcement marks a significant step in a four-year odyssey to carve the drug-maker’s empire into two separately listed FTSE 100 companies.
Around 800 staff working for the consumer healthcare division will move from GSK House in Brentford to a new £120 million campus in Weybridge.
The remaining 3500 employees will stay on at GSK House - a landmark tower overlooking the M4 - for at least two years as a search is launched to find smaller offices nearby.
Philip Hammond embraces crypto
13:02 , Oscar Williams-Grut
Copper, which builds cryptocurrency trading tools for institutional investors, said Lord Hammond of Runnymead had joined as a senior advisor to the company. He will provide strategic advice centered around Copper’s global expansion. Copper, founded in 2018, recently opened an office in the US and hopes to expand to Asia.
Lord Hammond called the company a “true pioneer” and said there was an “exciting opportunity” to adapt the technology to mainstream financial services.
More on Asos, with analysts sharing their thoughts
13:27 , Joanna Bourke
Asos earlier revealed that Nick Beighton, who has led the online fashion retailer for six years, is stepping down from the role.
News of him leaving came alongside the company publishing a update that showed sales leapt during the pandemic, but there are headwinds now that could hit growth in the current financial year to August 2022.
A number of commentators have shared their thoughts on the latest management changes and the outlook.
Read more HERE.
Entrepreneurs: Start-up Wagestream looks to change our preconceptions of payday
13:28 , Joanna Bourke
The Evening Standard spoke to one of the co-founders of Wagestream about future growth plans, and how the firm started.
You can read more HERE.
FTSE higher in afternoon trade
14:53 , Oscar Williams-Grut
The FTSE 100 is up 27 points, or 0.4%, at 7124 in mid-afternoon trade. It’s being propped up by commodity stocks: Anglo American and Antofagasta are both up over 4% and Rio Tinto isn’t far behind with a gain of 3.6%.
London crypto startup raises $60 million
16:12 , Oscar Williams-Grut
Big deals are happening outside of public markets - particularly in crypto.
Elliptic builds software to help track and monitor cryptocurrency transaction. Its products are used by banks and fintechs like Revolut amd Coinbase to ensure they are not dealing with stolen or illegal funds. Law enforcement agencies like the FBI also use Elliptic to track the proceeds of crime.
FTSE closes higher
16:42 , Oscar Williams-Grut
The FTSE 100 has closed up 40 points, or 0.56%, at 7135.
Commodity stocks led the index all day. The biggest riser was Anglo American, which gained 4.7%.
The biggest story of the day remains the shock departure of Asos CEO Nick Beighton. The company announced this morning that he was leaving with immediate effect after 6 years in charge. Shares closed down 12.6%.