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FTSE 100 Live: Markets bet on big US rates rise, Bank of England meets

·15-min read
FTSE 100 Live: Markets bet on big US rates rise, Bank of England meets

Financial markets are on standby for the US Federal Reserve to increase interest rates by 0.75%, the biggest move since 1994.

Bets on the Fed making the aggressive hike tonight have soared in recent days after US inflation jumped to a 40-year record of 8.6%.

The Bank of England’s monetary policy committee, which begins its two-day meeting today, is under pressure to increase rates by 0.5%. The pound weakened to below $1.20 last night as traders factored in the latest central bank moves.

FTSE 100 Live Wednesday

  • US interest rates seen rising by 0.75%

  • Pressure grows on BoE ahead of Thursday decision

  • Whitbread hails Premier Inn recovery

Bank poised to raise rates tomorrow

16:33 , Simon English

What will the Bank of England do tomorrow?

Raise interest rates for sure, the question will be by how much. Does the Bank’s nine-strong rate setting Monetary Policy Committee (MPC) go for the expected 0.25 point rise, taking rates to 1.25%. Or does it go for something more dramatic?

What will influence its thinking?

It needs to do something to quell inflation. It has already moved rates up from 0.1%, which is where they were in December.

By common City consent it behind the curve, or it dropped the ball, or whichever metaphor you prefer.

read more here

Falling car sales lead drop in US retail sales

15:29 , Simon Hunt

A 3.5% decline in car sales is responsible for a drop in US retail sales in May, which were down 0.3% amid signs rising inflation has softened consumer demand for pricier purchases.

Spending at petrol stations rose 4% as drivers were forced to fork out more money to fill their tanks, while spending on groceries was up 1.2%.

It’s the first fall in retail sales for 5 months. Excluding spending on cars and fuel, retail sales rose 0.1%.

US stocks open higher as Fed decision looms

15:01 , Simon Hunt

Stocks opened higher at the opening of trading in New York this morning following a five-day sell-off as investors had already priced in a rate rise by the Federal Reserve.

Analaysts are predicting the Fed to announce a 75 basis point rise tonight. Fed chair Jerome Powell had previously suggested he would be proceeding with 50-point rises, but worse-than-expected inflation data released on Friday has fuelled speculation the rise will be higher.

Apple shares pared back some of the losses made earlier this week, rising 1%, while Nike shares were up 1.5%. Energy stocks are down following a dip in the price of oil.

Bitcoin slumps 10% in crypto meltdown

13:51 , Simon Hunt

The huge sell-off in the cryptocurrency markets sent the price of Bitcoin fell a further 10% this morning, taking it down to £16,653, while the price of Ethereum fell 16% to £846.

The crypto crash has wiped off more than £300 billion from the value of the cryptocurrency market in the past seven days alone, according to data from CoinMarketCap.

It has prompted crypto exchange businesses to take drastic action to stifle further losses and stay afloat.

Yesterday, US-based cryptocurrency exchange platform Coinbase announced it would be laying off over 1,000 employees “to manage operating expenses in response to current market conditions and ongoing business prioritisation efforts”.

The stock has tanked 86% since its peak in November, wiping £68 billion off its market cap.

Shares in US business MicroStrategy have fallen 24% since Friday as investors feared the company faced a margin call on a $205 million loan it had taken out to buy more Bitcoin. In May, the company suggested the call would take effect if the Bitcoin price dropped below $21,000, meaning it could have to sell off some crypto holdings to meet the call.

H&M sales up as retailer battles supply issues

13:01 , Jonathan Prynn

Swedish high street fashion outlet H&M has released a trading update showing a 12% sales rise in the second quarter from 1 March to 31 May.

However, sales were still down on pre-pandemic levels.

H&M is still dealing with fallout from a rise in raw materials and transport costs. Issues affecting the chain have mainly been in production, transport and ports

The fashion retailer closed its Russian operations in March in protest against the country’s invasion of Ukraine. Its shares on the Swedish stock exchange were down 6% in early trade this morning, taking a year-to-date drop to nearly 30%.

H&M has approximately 4,850 stores in 75 markets including franchises. It will report its full quarterly results on 29 June.

BookTok-fueled sales growth for Harry Potter publisher

12:52 , Simon Hunt

Book review videos posted to TikTok have led to a boom in sales for publisher Bloomsbury.

Chief executive Nigel Newton told the Standard: “It’s not just driving sales but huge sales. Books which are 10 years old are becoming bestsellers.”

Videos posted with the #booktok hashtag has a combined 58.2 billion views on TikTok, with users filming themselves reviewing their favourite books and exchanging recommendations.

It comes as Bloomsbury posted record results with sales in the year to 28 February up 24% to reach £230 million while profits jumped 40% to £26.7 million, led by an increase in consumer sales as well as greater academic sales fuelled by a shift to online learningin the pandemic.

Newton said the surge in people taking up reading during the coronavirus lockdowns was set to become permanent.

The company made a string of acquisitions during the financial year, including American academic publishing business ABC-CLIO in December 2021 for £16.7 million and the purchase of the assets of student e-book publisher Red Globe Press in June 2021 for £3.2 million.

Shares in Bloomsbury were up 5% to reach 400p in early trading.

Steel giant Severfield on a winning run as UK and European orders set new record

11:48 , Jonathan Prynn

Steel contractor Severfield, which helped build the new stands at Lord’s, below, and Fulham’s Craven Cottage today said its UK and European order books are at record levels despite the weak construction market.

The company, which also provided steel for the Shard, said it has orders worth £486 million, including the new stadium for Premier League footballclub Everton as well as a rail bridge for HS2, Google’s HQ at King’s Cross and the new Sky Studios.

For the year to March 26 revenues were up 11% to £403.6 million and underlying profit before tax rose 11% to £27.1 million.

Chief executive Alan Dunsmore said: “Although inflation and supply chain pressures remain, we are managing these well and the earnings visibility gives us confidence in maintaining our positive performance expectations for 2023.”

Whitbread bounces back from £1bn loss

10:28 , Simon English

TOURISTS are back in London and pent-up Brits are seeking weekends away leading to booming sales at Premier Inn.

The budget hotel chain’s parent Whitbread saw first quarter sales rocket 281% in the UK. The German business soared 660%.

That’s a comparison with a period when Covid was still rampant, but the sales figures are still up smartly, 11%, when compared to the pre-pandemic year.

In April, Whitbread posted a record £1 billion loss for 2020. Back then, there were fears that corporate travel would be forever replaced by Zoom calls, an overblown fear it seems.

Chief executive Alison Brittain said the recovery in the UK “continues to be ahead of expectations”. The contraction of the independent hotel market has helped.

Brittain is facing speculation about her own future. She has been CEO since January 2016 and may be looking to move on.

Like all leisure businesses, Whitbread is struggling for staff. It plans to invest between £20 million and £30 million this year in labour and hotel refurbs .

read more here

FTSE 100 rallies, LSE up 6% after upgrade

10:24 , Graeme Evans

Pressure on the Bank of England to ramp up the pace of interest rate rises contributed to a stronger session for lenders NatWest and Lloyds Banking Group today.

Their shares rose by more than 2% amid hopes of a margins boost if the Bank’s monetary policy committee opts for a half percentage point increase at its meeting tomorrow.

Michael Hewson, chief market analyst at CMC Markets, said the Bank had already lost the battle in avoiding a recession, meaning it faces the choice of hiking hard now in the hope that it is able to cut later once inflation has come under control.

Hewson said: “It’s either that or continue to fiddle around the edges and watch inflation become entrenched for longer, and for the economy to remain mired in stagflation.”

Shares in the banking sector have not responded to this year’s upward rates trend, even though balance sheets are better placed to deal with an economic downturn and unemployment is still low.

NatWest, which is regarded as the UK lender with the most upside from rising rates, rallied 6.5p to 227.9p and Lloyds lifted 1.1p to 44.5p.

Their improvement came as the FTSE 100 index gained 81.69 points to 7269.15, with stronger consumer-focused stocks aiding the recovery following encouraging updates by Whitbread and WH Smith.

The leaderboard included discount retailer B&M European Value Retail and grocery technology stock Ocado, with both rebounding by 5%.

London Stock Exchange surged 6% or 412p to 7150p after analysts at UBS said a 20% fall for shares since April represented an attractive entry point for a business that can grow revenues by 5% a year. UBS upgraded LSE to a “buy” recommendation, with a price target of 8,500p.

A shortened FTSE 100 fallers board reflected the weakening of Brent crude to $120 a barrel as BP eased 4.15p to 430.8p and Shell fell 12p to 2296p.

The UK-focused FTSE 250 index jumped by more than 1.5%, up 320.18 points to 19,365.21.66. WH Smith rose 7% after its better-than-expected update and there was also a gain of 5% for bootmaker Dr Martens.

London property back on the up

09:57 , Simon English

THE FLOOD of folk looking to escape London in search of more space has slowed to a trickle, figures from estate agency Dexters suggest.

It saw revenues for the year bounce 32% to £143 million thanks to a large increase in deals across the capital.

The London focussed firm suffered a bit last year due to the mooted “race for space” that saw home workers seek bigger properties with gardens outside town.

This year profits rose 75% to £41 million due to strong home sales, lettings and conveyancing.

Around 200 new staff joined the Dexters Academy in Pimlico, which trains up estate agents.

Chief executive Andy Shepherd said: “London has bounced back from the disruption caused by the COVID-19 pandemic the business has seen a significant increase in transactions across the capital.”

He added: “The Dexters brand is highly rated by both Londoners and international customers. This rating, alongside our office expansion programme and enhanced digital activities creates a strong foundation for continuing to increase revenue and future expansion.”

While rising interest rates which make mortgages more expensive ought to cool the housing market, there is not much evidence of that so far.

Since 2020, London house prices have soared to an average of around £710,000.

Banks have lately reported a surge in mortgage applications as people chase property deals in the expectation that they might not be able to afford them later.

Dexters itself has been expanding in North London especially, buying up estate agents in Hendon, Finchley and Finsbury Park. It now has 70 offices across the capital, including 12 in central London.

Dexters says it has 160,000 customers on the books looking to buy or rent a London home.

Used car sales face inflation and supply chain problem

09:51 , Simon English

USED car specialists Motorpoint today shrugged off the challenge from new players such as Cinch and Cazoo, but warned that supply chain issues will hit sales this year.

A lack of computer chips has limited new car production, sending the value of used cars soaring.

Motorpoint saw sales for the year to March jump 83% to £1.32 billion, while profits rose 121% to £21 million.

It has a plan to double revenues to at least £2 billion a year. Internet sales should be half of that.

The company said inflation and supply issues are “very likely” to reduce sales.

It added: “The used car market is evolving rapidly and becoming more complex. Many traditional competitors are changing their models, refocusing and diversifying, while several other large and well-capitalised players are entering our markets and competing aggressively, albeit not all of them are proving successful business models.”

Chief executive Mark Carpenter says the company will fend off the competition. “We have always successfully adapted our business to meet every challenge and remain profitable since our inception 24 years ago.”

FTSE 250 up 1%, BP shares under pressure

09:00 , Graeme Evans

The FTSE 100 index rose 39.56 points to 7227.02 as consumer-focused stocks benefited from this morning’s encouraging updates by Whitbread and WH Smith.

Premier Inn owner Whitbread rallied 5% and B&Q owner Kingfisher lifted 3%, although their progress was offset by weakness among commodity-focused stocks.

BP and Shell led the fallers board with declines of more than 2% after the Brent crude price dipped below $120 a barrel overnight.

The UK-focused FTSE 250 index jumped by more than 1%, up 251.63 points to 19,296.66. WH Smith rose 5% and there were also gains of 3% for easyJet and 6% for bootmaker Dr Martens.

Travel stores boost WH Smith recovery

08:31 , Graeme Evans

WH Smith shares have rebounded 5% after the FTSE 250-listed retail chain lifted full-year profits guidance on the back of particularly strong trading for its travel stores this summer.

The group said overall revenues in the 15 weeks to June 11 were ahead of pre-pandemic 2019 levels for the first time amid a recovery for passenger numbers at airports and train stations.

The travel division, which includes sites in the United States, is at 123% of 2019 levels compared with 81% in the second quarter period. However, high street stores fell back to 79% from 84% to leave the overall group figure at 107%.

WH Smith expects its full-year profits performance to be at the higher end of analysts' forecasts, sending shares 70p higher to 1428.5p.

Whitbread upbeat as Premier Inn sales surge

08:13 , Graeme Evans

Whitbread today said Premier Inn's pandemic recovery in the UK continues to be ahead of expectations after a “particularly strong” first quarter performance.

The leisure group, which has 820 hotels in the UK and also operates the food brands Beefeater and Brewers Fayre, said total accommodation sales in the UK were 235.6% stronger than the same quarter last year and 31% ahead of their pre-pandemic level.

Whitbread expects additional costs of £20 million to £30 million through labour, refurbishments and IT expenses in the current financial year, which it plans to offset though high levels of occupancy and continued strong sales.

Chief executive Alison Brittain said first quarter trading increased confidence that the company will deliver a strong first half performance and remain ahead of the market.

Shares opened more than 4% higher at 2684p today.

Traders braced for big US rates rise

07:45 , Graeme Evans

Rate rise expectations for tonight’s US Federal Reserve meeting have shifted from 0.5% to 0.75% after Friday’s inflation reading came in at a 40-year high of 8.6%, much higher than forecast.

According to CME’s FedWatch Tool, markets are betting on a 94% chance of a 0.75% move. The Fed’s increasingly aggressive stance on inflation has boosted the US dollar and left the pound trading at below $1.20 versus the greenback last night.

Michael Hewson, chief market analyst at CMC Markets, said: “The reality is that central banks are so far behind the curve, that they can’t see the curve. That said, it doesn’t mean a move by 75 basis points today is a good idea.

“It’s not, coming as it does so late in the day, especially given the consistent guidance for a 50 basis points move over the past few weeks, and gives the impression of a Fed which is losing control of events and exhibiting a certain level of panic about the path of inflation.”

Hewson said it was important for Fed policymakers to take note of yesterday’s producer price index release, which showed that inflation is already slowing as core prices hit their lowest levels since November at 8.3%.

If the Fed does increase by 0.75% tonight, there will be additional pressure on the Bank of England to hike interest rates by 0.5% tomorrow.

Ahead of the Fed meeting, IG Index has forecast that the FTSE 100 index will open 0.7% higher at 7240. The S&P 500 fell another 0.4% last night, marking its fifth straight decline as investors worry that higher interest rates will spark a global recession.

European futures markets picked up this morning after reports emerged that the European Central Bank governing council is to hold an unscheduled meeting today.

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