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Europe mixed and Wall Street lower as BoE governor says UK recession may be over
The FTSE 100 (^FTSE) and European stocks had a rollercoaster Tuesday, opening lower, before later recovering, to close in the red again, as Andrew Bailey raised hopes that Britain’s “very small recession” may already be over thanks to “distinct signs of an upturn”.
Speaking to the Treasury Select Committee, the Bank of England (BoE) governor said that inflation does not need to reach Threadneedle Street's 2% target before it starts cutting interest rates.
Goldman Sachs (GS) said that it now expected the BoE to deliver an interest rate cut in June from a prior forecast of May.
It also came after a reduction in China’s key interest rate added to worries about the world’s second largest economy. Elsewhere, stocks on Wall Street were lower on the day as hopes for early interest rate cuts weighed on investor sentiment.
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London’s benchmark index was more than 0.1% down as the pound (GBPUSD=X) held steady.
Germany's DAX (^GDAXI) dipped 0.1% and the CAC (^FCHI) in Paris headed 0.4% higher.
The pan-European STOXX 600 (^STOXX) was 0.1% lower.
Barclays is set to return £10bn to shareholders despite profit drop.
Industrial miners fell as copper prices traded lower against a firm dollar.
The Dow Jones Industrial Average (^DJI) was treading water by the European close as Walmart (WMT) shares jumped almost 6% after the bell.
The S&P 500 (^GSPC) opened lower by 0.5% while the Nasdaq Composite (^IXIC) dropped 1%.
Read more: Trending tickers: Nvidia, Walmart, Home Depot and InterContinental Hotels
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Baby formula prices to be investigated
File photo dated 20/11/23 of a baby in a high chair looking towards her bottle of milk in the foreground. A new probe into the supply of baby formula milk has been launched by Britain's competition watchdog after it found that average prices had soared by 25% in the past two years. The Competition and Markets Authority (CMA) said it has begun a market study into formula supply following findings last November of an initial review into the sector. Issue date: Tuesday February 20, 2024. (Andrew Matthews, PA Images) A new probe into the supply of baby formula milk has been launched by Britain's competition watchdog after it found that average prices had soared by 25% over two years.
The Competition and Markets Authority (CMA) said it has begun a market study into formula supply following findings last November of an initial review into the sector. It said while prices had fallen a little, they remained "at historically high levels".
Two companies — Danone (BN.PA) and Nestle (NESN.SW) — control the majority of the market through brands such as SMA Nutrition and Cow & Gate.
The regulator said it would aim to publish its final report in September 2024, adding that it would consider whether there are problems in the baby formula market and if so what actions should be taken to address these.
Interest rates could be cut before inflation hits 2%
Bank of England Governor Andrew Bailey (Justin Tallis, Associated Press) Andrew Bailey is speaking to the Treasury Select Committee today, and has said that inflation does not need to reach the Bank’s 2% target before it starts cutting interest rates.
MPs are hearing from the BoE governor as well as, deputy governor Ben Broadbent, and external committee members Swati Dhingra and Megan Greene.
Bailey said:
I’m looking for more sustained progress on three things which really are the more persistent elements. We’ve seen, I think, encouraging signs on them.
So, services inflation is still above 6%, there are some signs of it coming down now. I think some signs that pay is now adjusting down towards the lower headline inflation, which is what I’d expect to see.
The quantity side of the labour market remains tight, there’s no question about that. But it’s the progress of those three things.
We don’t need inflation to come back to target before we cut interest rates, I must be very clear on that, that’s not necessary. We’ll be looking for sustained progress on those things to reach that judgment about how long this period of restrictive policy needs to be.
Bitcoin, gold & London property make for best investments
File photo dated 08/06/2016 of a couple of women studying the house price signs in an estate agents window, in Kentish Town, London. Homes in London took twice as long as properties in Scotland to sell on average last year, according to a website. In 2023, the average sale took 34 days - from the property first being launched to the market to a sale being agreed, subject to contract - Zoopla said. Issue date: Friday February 16, 2024. (Yui Mok, PA Images) The latest market analysis by lettings and sales estate agent brand Foxtons, has shown that when it comes to the returns seen over the last 10 years, the London property market ranks as one of the best places to have invested, with just Bitcoin and gold bringing a stronger return.
Foxtons analysed the performance of the capital’s residential property market against nine other popular investment options, from wheat to crude oil, and natural gas to the FTSE 100 (^FTSE).
Based on the latest sold price data from the Land Registry (Dec 2023), the average value of a London home has increased by 44.3% over the last decade.
In December 2013, the average London home commanded £352,028, but today it averages £508,037 - an increase of more than £156,000.
Of all the investment assets analysed by Foxtons, just two have seen a greater return on investment over the same period.
Bitcoin sits top of the table having increased by 4,963%, while the price of gold is up 66.8% in the last 10 years.
However, London’s property market has outperformed all seven of the other investment assets analysed by Foxtons.
In the last decade, silver has increased by just 22.9% in value, while investing in the FSTE 100 would have seen a return of 15.7%, with corn increasing in value by 7.9%.
Wheat, on the other hand, has seen a decline of -2.5% in value over the last 10 years, with WTI Crude Oil (-26.3%), Brent Crude Oil (-30.2%) and natural gas (-41.5%) also seeing a decline in value.
Holiday Inn owner boosted by travel demand
Holiday Inn Express logo sign on a weathered building facade. The hospitality company is part of the InterContinental Hotels Group business. (Felix Geringswald) Full-year profits at InterContinental Hotels Group (IHG.L) rose to more than $1bn (£794m) from $540m for the first time ever, thanks to booming travel demand.
The company, which owns hotel chains such as Holiday Inn, Crowne Plaza and Regent, pledged to launch a new $800m share buyback programme, which together with ordinary dividends, is expected to return more than $1bn this year.
Operating profits were up 23% on the previous year after revenues increased 19%.
The group added that revenue per available room, a key performance measure for hotel companies, rose 16.1% and was 7.6% higher in the final three months of 2023.
Meanwhile, global revenue per available room was 10.9% higher than in 2019, before the COVID pandemic.
Elie Maalouf, chief executive, said:
Travel demand was strong across all markets, with revenue per available room up 16% on last year and 11% ahead of the 2019 pre-pandemic peak. The travel industry has attractive, long-term drivers of demand.
Barclays shares rise as it returns £10bn to shareholders
Barclays has revealed a drop in its full-year earnings as it spent £1 billion over 2023 on efforts to restructure the bank (Ian West, PA Images) Barclays (BARC.L) has pledged to hand £10bn ($12.59bn) back to shareholders by 2026 despite a drop in its full-year earnings.
The FTSE 100 (^FTSE) lender is also launching a £2bn cost-cutting drive across the business over the next two years as the British bank vowed to boost profits.
Barclays reported a 6% decline in annual pre-tax profits to £6.6bn. Over the fourth quarter, its profit plunged by 92% from £1.3bn the previous year to £110m.
It came as the bank revealed £927m worth of structural cost actions in the final quarter, including £300m related to staff.
Chief executive CS Venkatakrishnan, known as Venkat, said the bank’s new three-year plan will improve performance.
He said:
"Our new three-year plan.... is designed to further improve Barclays' operational and financial performance, driving higher returns, and predictable, attractive shareholder distributions."
Shares rose as much as 6% on the back of the news in London.
Watch: How does inflation affect interest rates?
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