Yahoo Finance FTSE 100 Live: ’Rates are likely to top out above 6%’; FTSE closes at 7588; two-year gilt yields top 5%
London stocks are under pressure as traders focus on China’s economic outlook and the prospect of more interest rate hikes in the UK.
The expectation that the Bank of England will hike borrowing costs by another quarter percentage point on Thursday ensured the pound started the week at its highest level versus the US dollar since April 2022 at above $1.28.
In corporate updates, shares in FTSE 250-listed services firm Kainos fell after its long-serving boss announced plans to stand down.
FTSE 100 Live Monday
Key mortgage rate above 6% threshold
London stocks under pressure
Kainos boss steps down after 22 years in charge
Key market data as FTSE closes down 0.7%
Monday 19 June 2023 16:55 , Daniel O'Boyle
Click through the tabs to see all the key market data as the FSTE fell by 0.7% and two-year gilt yields broke the 5% barrier.
FTSE closes at 7588
Monday 19 June 2023 16:39 , Daniel O'Boyle
The FTSE 100 closed at7,588.48 today , down 0.7%, as investors fear interest rates could rise as high as 6%.
The index of London blue-chips fell upon markets opening and continued to decline as the day went on amid rate-rise fears and lower Chinese growth forecasts.
Miners made up many of the biggest fallers, while Spirax-Sarco Engineering had the biggestr decline.
Next broke the trend, rising by almost 5% after a profit upgrade.
Gilt yields surged even further upwards, with the two-year gilt yielding 5.05% at the end of the day and the five-year gilt at 4.67%.
Bank of England to test mini-budget-style stresses on financial institutions
Monday 19 June 2023 16:34 , Daniel O'Boyle
The Bank of England has kicked off an exercise designed to test the resilience of banks and other financial institutions to weather similar shocks to last year’s mini-budget chaos.
The Bank said that it would put institutions through the stress test to help understand the risks to and those created by financial institutions apart from banks.
It will also probe how these organisations act under stress, and what drives their behaviour.
Today’s Evening Standard business page
Monday 19 June 2023 16:27 , Daniel O'Boyle
Pick up a copy from any of our distribution points
Here’s to fruitier taste and less food waste from ‘Wonky HQ’
Monday 19 June 2023 16:17 , Daniel O'Boyle
Only 25 people work at six-year-old sparkling fruity water business Dash — and they sell 24 million cans a year. As ratios go, it’s an impressive one.
“They drink a lot of it too, the office goes through some 8000 cans a year,” laughs co-founder Alex Wright who, alongside Jack Scott, presides over a familiar-sounding culture for a young drinks start-up.
Dash’s Tottenham Court Road base is named “Wonky HQ” for the odd-shaped raspberries, lime and other fruit that flavours its drinks.
Two-year gilts hit 5% as rate hike fears keep growing
Monday 19 June 2023 15:34 , Daniel O'Boyle
Two-year gilt yields are now above 5% after a rise of more than 10 basis points today, as investors continue to expect greater interest rate hikes.
The two-year gilt is now yielding 5.02%, the first time the yield has crossed the 5% mark since 2008.
Three-year gilt yields have risen to 4.9%, while the five-year gilt is yielding 4.64%. Five-year gilt yields peaked at 4.72% during last year’s mini-Budget fiasco.
Swap markets are now pricing in a 60% chance of interest rates hitting 6% early next year, and a greater than 90% chance that rates hit 5.75%.
TSB latest lender to pull mortgages
Monday 19 June 2023 15:30 , Daniel O'Boyle
TSB has become the latest lender to press pause on sales of some of its mortgages.
The bank said it was removing some mortgages from sale as of 4pm on Monday.
The changes apply to products sold both direct and via brokers and TSB is expecting to reintroduce residential deals on Wednesday.
Boohoo reveals plans for boardroom coup at troubled Revolution Beauty
Monday 19 June 2023 14:36 , Daniel O'Boyle
Revolution Beauty’s biggest shareholder, online fashion firm Boohoo, has called for the removal of top bosses at the troubled make-up retailer.
Boohoo – which owns a stake of around 26.6% in Revolution Beauty – said it plans to vote against the reappointment of Revolution Beauty’s chief executive Bob Holt, chairman Derek Zissman and chief financial officer Elizabeth Lake at the firm’s upcoming annual general meeting for shareholders on June 27.
It has also requested a separate general meeting to oust the three bosses and replace them with Boohoo non-executive director and former New Look chairman Alistair McGeorge as interim executive chairman and ex-Boohoo finance boss Neil Catto as chief financial officer.
Next ups profit guidance as good weather and pay rises boost sales
Monday 19 June 2023 14:24 , Daniel O'Boyle
Next upgraded its profit forecasts for the year, as it says it was boosted by good weather and customers receiving inflation-based pay rises.
Sales were up 9.3% year-on-year over the last seven weeks. That marks a rebound after a disappointing update in May, when it predicted a decline in first-quarter sales.
Richard Hunter, Head of Markets at interactive investor, said: “Much as Next underwhelmed the market with its first quarter trading update in May, it has pleasantly surprised investors with a further unscheduled release which notes that trading in the last seven weeks has been materially better than previously anticipated.
“Stagflation nation”?
Monday 19 June 2023 13:41 , Daniel O'Boyle
Capital Economics’ UK team has warned that the UK looks set to be an outlier on inflation and growth among developed nations, leaving it as “stagflation nation” while other countries bring prices under control and return to growth.
“As the UK’s recent problem of higher inflation and slower economic growth than elsewhere is largely due to the lingering effects of the pandemic and Brexit, we think the UK will probably look like the stagflation nation for another couple of years yet,” they said. “Admittedly, we do think that CPI inflation will fall from 8.7% in April to the 2.0% target by the first half of 2024 and that core CPI inflation will decline from 6.8% to 2.0% by early 2025.
“But those falls will be slower than in the US and the euro-zone.
“And we suspect inflation will drop all the way to 2.0% only if the Bank of England triggers a recession by raising interest rates from 4.50% now to a peak of 5.25% and keeps interest rates there until the second half of 2024.”
Abingdon brings saliva-based pregnancy test to UK shops
Monday 19 June 2023 13:36 , Daniel O'Boyle
A new, easier-to-use pregnancy test is coming to the High Streets across London, as the UK becomes one of just a handful of countries with access to the revolutionary technology.
Abingdon Health announced today that it will bring the Salistick tests to 400 branches of Superdrug nationwide. They use saliva to run the diagnosis, meaning tests can be carried out anywhere, with technology developed in Israel that the AIM-listed firm will distribute exclusively in Britain and Ireland.
The price of the kits has not yet been revealed, but they are already available in South Africa and the United Arab Emirates as well as Israel. CEO Chris Yates said: “This novel technology provides women with an enhanced user-experience; the ability to test anywhere, anytime, and for the experience to be shared with a partner and other loved ones.”
Chatbots tipped to offer AI future for online retail
Monday 19 June 2023 12:54 , Michael Hunter
Chatbots running on Artificial Intelligence are looking increasingly like the future for online retailers, with spending on the virtual assistants expected to rocket this year.
Juniper Research, which tracks messaging markets, expects $12 billion (£9.4 billion) to be spent on the text-box back-and-forth tech this year alone. It could reach $72 billion over the next five years.
So-called generative AI models are proving transformative across major economies. In retail, they can handle queries from would-be buyers and can help ensure enquiries are converted into sales. They are also widely used for customer support and payment processing applications, after the recent breakthroughs in the tech has made it cheaper, putting it within reach of more companies
Italy bars Chinese from deciding who steers Pirelli
Monday 19 June 2023 12:44 , Michael Hunter
Italy’s government has slammed the brakes on changes to the way chief executives will be chosen at Pirelli, the world-famous tyre maker.
Officials from Rome’s Right-wing coalition declared that the firm’s biggest shareholder — Sinochem of China — would have to allow Italian investor Camfin the say-so on succession at the company.
Camfin is the investment vehicle of current Pirelli CEO, Marco Tronchetti Provera. Pirelli was sold for €7.1 billion (£6 billion) in 2015 to a group including Chinese investors. It proposed in March that the terms of the shareholder agreement over nominating the CEO would change, with the Chinese-controlled board making the nomination from 2026
Could rates go above 6%?
Monday 19 June 2023 12:27 , Daniel O'Boyle
While most economists believe interest rates will not reach the levels prices in by markets, Matthew Ryan, head of market strategy at global financial services firm Ebury, says they could rise even higher.
Ryan said: “There is near unanimity that the MPC will hike rates by another 25bps on Thursday and signal that more hikes are likely on the way.
“The combination of persistent inflation, signs of a wage-price spiral and economic resilience is boosting both expectations for the Bank of England terminal rate and the pound. Sterling has been one of our core bets this year, and we are happy to see it at the top of the G10 tables so far - we think it still has more room to run.
“In addition to yet another record-high core inflation print, we expect the Bank of England to hike rates this week and sound a hawkish tone. The vote among policymakers has been split 7-2 in recent meetings, but we think there is a possibility that one or both of the doves could join the rest of the MPC in voting for an immediate hike.
“We believe UK rates are likely to top out above 6% and we maintain our bullish view of GBP.”
New British American Tobacco boss Tadeu Marroco starts with major shake-up of board
Monday 19 June 2023 12:17 , Daniel O'Boyle
British American Tobacco’s new boss today made the first major step towards reshaping the company in his image as he unveiled a major c-suite shake-up.
Tadeu Marroco, who joined BAT’s board in mid-May, created a host of new board positions, including chief operating officer, chief strategy & growth officer, and director of business development in an overhaul described as creating “a sharpened focus on improved execution and operational excellence.”
The roles will replace the previous board titles of chief transformation officer, chief growth officer and ‘new categories’ director.
Gilts hit another 15-year peak as City fears Bank is losing inflation battle
Monday 19 June 2023 11:23 , Daniel O'Boyle
City traders’ interest rate expectations jumped again today, as fears grew that Bank of England attempts to clamp down on inflation are failing.
Short-dated gilt yields continued their relentless march upwards, with the two-year yield hitting yet another 15-year high at 4.97% this morning. That’s almost a quarter of a percentage point above the levels reached during the mini-Budget, as investors think Bank rates will stay high for even longer.
It’s likely to lead to higher mortgage rates, after data released today showed the average two-year fixed-rate deal crossed the 6% threshold on Friday.
FTSE 100 lower on China outlook, Kainos down 6%
Monday 19 June 2023 10:28 , Graeme Evans
China uncertainty hit London stocks today after Goldman Sachs slashed its growth forecast for the world’s second largest economy.
The Wall Street banking giant downgraded its 2023 GDP estimate from 6% to 5.4% as concerns mount about the country’s faltering post-lockdown recovery.
The weaker demand outlook left Brent Crude 0.7% lower at just above $76 a barrel, while a number of London’s commodity-focused stocks also struggled.
They were led by Anglo American, which retreated 2% or 49.5p to 2495.5p and by Chilean copper miner Antofagasta with a drop of 29.5p to 1520p. Other stocks under pressure included Asia-focused luxury goods group Burberry, which dipped 37p to 2252p.
Traders will now be looking to tomorrow’s meeting of China’s central bank, when policymakers are expected to make a cut to their prime lending rate.
AstraZeneca, which generates more than 10% of its sales in the country, also fell 112p to 11,676p as traders digested a report in the Financial Times that the drugs giant may list its China business separately in Hong Kong. The potential move comes amid growing friction between China and the United States.
The developments in Asia meant the FTSE 100 index stood 32.68 points lower at 7610.04, with other fallers including speciality chemicals firm Croda International as the fallout from a profit warning earlier this month continued.
Shares in the East Yorkshire-based firm fell 108p to 5422p as analysts at JP Morgan Cazenove cut their price target from 6200p to 5000p.
Gaming group Entain led the risers board, putting back 15.5p to 1236.5p after last week’s heavy losses. Rolls-Royce also rallied a penny to 152.25p.
The FTSE 250 index fell 72.17 points to 18,958.72, led by a slide of 6% or 79p to 1338p for IT services group Kainos after CEO Brendan Mooney announced he is stepping down following 22 years at the helm of the Belfast-based business.
Having listed on the London Stock Exchange in 2015 with an initial £161 million valuation, Mooney helped to turn Kainos into a billion-pound business. He will be replaced in September by digital services director Russell Sloan, who has been with the company since 1999.
City Comment
Monday 19 June 2023 09:37 , Simon English
One unfortunate side effect of Covid was that the public got used to the idea that government bailouts are right there when you need them.
Been furloughed? We’ll cover most of your salary. Struggling with mortgage payments? Take a few months off. Can’t pay the taxman? Oh, have a tax holiday on us.
These were all Rishi Sunak schemes while he was Chancellor, and during the pandemic they were vital.
Some of us wondered then what would happen later, when still struggling consumers and homeowners wanted further help that couldn’t realistically be forthcoming.
Today Sunak, now the PM, said there will be no support for mortgage holders dealing with dramatic rises in borrowing costs as they come up to renew deals that are suddenly much more expensive.
It is hard to see how he could do otherwise, nor where that extra support might stop. Would it be just to those remortgaging this year? What about folk facing similarly large jumps in rent?
Would buy-to-let mortgage borrowers also qualify?
No – the best thing here would be for the Bank of England to reverse ferret and delay the rate rise it has heavily pencilled in for Thursday.
That might at least give mortgage and gilts markets time for a breather and time to reassess.
This would be an egg-on-the-face situation for the governor Andrew Bailey, prompting further barracking from the terraces that he doesn’t know what he’s doing. It would also be the right thing to do and a brave thing to do.
Today’s market snapshot
Monday 19 June 2023 08:59 , Daniel O'Boyle
Take a look at the key market data as the FTSE 100 opened lower, while gilt yields continued to creep upwards, albeit more slowly.
Two-year fixed mortgage rate crosses 6% threshold
Monday 19 June 2023 08:40 , Daniel O'Boyle
The average interest rate on a two-year fixed-rate mortgage broke the 6% barrier on Friday, new data from Moneyfacts shows.
The rate increased from 5.98% to 6.01%, after a surge in the yields of short-dated gilts as markets expect the Bank of England to hike its interest rates to 5.75%.
There could be more repricing on the way, as another 240 mortgage products were taken off the market.
The average five-year fixed rate was up to 5.67%.
Buy-to-let rates grew even faster, with two-year rates up from 6.21% to 6.3% and five-year rates up from 6.17% to 6.23%.
FTSE 100 lower, China-focused stocks under pressure
Monday 19 June 2023 08:25 , Graeme Evans
The FTSE 100 index is 28.08 points lower at 7614.64, with shares exposed to China’s economy among those under pressure.
They included Hong Kong-based insurer Prudential, which dropped 10p to 1114.5p, while luxury goods firm Burberry is off 28p at 2261p.
Among other stocks on the fallers board, BP weakened 2.55p to 457.05p following a decline of more than 1% in the price of Brent Crude to $75.77 a barrel.
Gaming group Entain led the risers board, putting back 2% or 24p to 1245p after last week’s heavy losses. Rolls-Royce also rallied 2.1p to 153.3p.
The FTSE 250 index fell 79.76 points to 18,951.13, with Belfast-based IT services firm Kainos down 3% or 37p to 1380p after it announced that long-serving CEO Brendan Mooney plans to leave the business in September.
Coca-Cola HBC to buy Finlandia vodka brand for £220 million
Monday 19 June 2023 07:52 , Michael Hunter
FTSE 100-listed drinks bottler Coca-Cola HBC is buying the Finlandia vodka brand from £220 million from Brown-Forman Corporation.
Finlandia dates back to 1970 and is a leading brand in Central and Eastern Europe, with annual volumes of almost 3 million cases and is already distributed by Coca-Cola HBC.
Zoran Bogdanovic, Coca-Cola HBC’s CEO, said: “We view this as an attractive investment and a natural evolution of our role as one of Finlandia’s distribution partners, further attesting to the strength of our time-tested and wide-ranging partnership with Brown-Forman.”
Kainos boss steps down after 22 years in charge
Monday 19 June 2023 07:28 , Graeme Evans
The boss of FTSE 250 software firm Kainos will resign in September after 22 years in charge, after joining the business as a graduate trainee.
Brendan Mooney started at Kainos in 1989 after leaving university, when the business had only 34 employees, before becoming chief executive in 2001.
Under Mooney’s leadership, Kainos floated on the London Stock Exchange in 2015, at an initial £161 million valuation and since then it has grown into a billion-pound business.
Russell Sloan, who is currently digital services director, will become the new CEO.
Mooney said: “My decision to step down as CEO of Kainos was not an easy one, but made easier knowing the talent and motivation of the team leading the business today. I have complete confidence in Russell to lead us successfully into the future and I look forward to supporting him and the wider team over the next twelve months.”
An Evening Standard analysis estimates Mooney’s wealth at more than £200 million, making him one of the richest people in the UK tech sector.
Shares under pressure amid rates rise focus, sterling above $1.28
Monday 19 June 2023 07:25 , Graeme Evans
Selling in Friday’s Wall Street session means CMC Markets expects the FTSE 100 index to open 35 points lower at 7608 when trading resumes in London today.
The cautious mood comes ahead of Tuesday’s interest rate decision by China’s central bank as concerns mount about the pace of the country’s economic recovery.
On Friday, the S&P 500 index fell 0.4% and the Nasdaq Composite by 0.7% but both benchmarks still registered weekly gains for the fifth and eighth times in a row. Their progress reflects hopes that the peak for US interest rates is close.
Attention now turns to the monetary policy decisions of the Swiss National Bank and the Bank of England on Thursday, with both expected to increase rates by another 0.25%.
UK inflation figures are due on Wednesday, when May’s headline CPI rate is forecast to drop from 8.7% to 8.5% with core inflation unchanged at 6.8%.
The UK rates outlook has boosted sterling, which today remained at its highest level versus the US dollar since April 2022 at above $1.28.
Asia stocks are mostly lower at the start of the week, while US markets will be closed for the Juneteenth holiday.
Sales slide at Music Magpie
Monday 19 June 2023 07:19 , Simon Hunt
Sales slid at second-hand phone and technology retailer Music Magpie as the firm was beset by ‘postal strikes and low consumer confidence.’
Consumer Technology revenue for the six months to the end of May fell to £41.2m from £46.0m in the previous year, while sales of disc media and books continued their decline, falling to £20.8m from £25.3m.
However, EBITDA rose 7.7% to £2.8 million while gross margin increased by 3.1%.
Recap: Friday’s top stories
Monday 19 June 2023 06:47 , Simon Hunt
Godo morning. Here’s a summary of our top stories from Friday:
Broker and investment bank Peel Hunt said the London IPO market was ‘effectively closed’ as it swung to a loss.
The boss of Tesco has said he has seen encouraging signs of inflation starting to ease but warned slowing price growth was “not all straightforward.”
ITV is considering Fleabag and Midsomer Murders maker All3Media in a deal which could value the company at over £1 billion.
The competition regulator has approved the £1.3 billion takeover of between robitic vacuum maker iRobot by Amazon.
