London's strong start to trading in 2022 was halted today as investors reacted to the prospect of US interest rates rising as soon as March.
Wall Street markets fell sharply and the FTSE 100 index is 1% lower after the release of meeting minutes from the Federal Reserve suggested rates could rise “relatively soon”.
The sell-off overshadowed another strong trading performance from Next, with the fashion chain upgrading its profits guidance on the back of a strong Christmas trading.
FTSE 100 Live Thursday
Festive sales cheer for Next
US rates rise fear stalls FTSE progress
Greggs boss to step down
London closes 1% lower even as banks rally
16:46 , Oscar Williams-Grut
The FTSE 100 has closed down 73 points, or 1%, at 7443, dragged lower by rate rise fears.
Design software firm Aveva is bottom of the pile, down over 5% after spending the day in the red. Meanwhile, banks ended the day with handsome gains: Standard Chartered rose 3.7%, while Lloyds, HSBC and Natwest all gained 2% or more.
The rotation out of tech and into banks is being driven by investor bets that interest rates are about to go up.
Danni Hewson at AJ Bell says: “Will this be the tale on repeat for early 2022? Banking and Energy shares heading up and rate sensitive growth stocks heading down?
“Investors shouldn’t have been surprised by the increasingly hawkish tone being employed by the US Federal Reserve and yet just the anticipation of seeing its most recent comments in black and white prompted a tech stock sell off yesterday which has just kept on rolling.
“It certainly feels like the piper is calling to be paid, inflation numbers for the next few months look pretty nailed on if Germany’s latest update is anything to go by.”
Data out today showed German inflation running at 5.7% in December, well above the level economists normally target but down slightly on November’s 6% reading.
That’s all from us on the blog today. Join us again tomorrow for more market action, with Halifax house price data out at 7am.
Small respite for US tech stocks
14:53 , Oscar Williams-Grut
Wall Street has opened slightly higher, with tech stocks stemming the bleeding after a huge sell-off on Wednesday.
The Nasdaq, the main barometer of US tech sentiment, is up about a third of a percent shortly after the open, while the S&P 500 has gained a quarter of a percent and the Dow is down about 0.1%.
The mild bounce for tech is probably being supported by the worse-than-expected US jobs numbers just before the open. A weaker jobs picture could make the Fed less likely to hike rates — though it looks pretty marginal at the moment.
The FTSE is still struggling for direction and is down around 0.8% with an hour and a half of the trading day left.
US jobless numbers overshoot forecasts
14:07 , Oscar Williams-Grut
The latest US jobless numbers have been published in the last hour and they have come in higher than forecast. There were 207,000 initial jobless claims in the four weeks to 31 December, above the 200,000 economists had forecast.
Dan Boardman-Weston, CIO at BRI Wealth Management, says: “Whilst this is a slight negative, it’s worth noting that they remain at historically low levels and continue to show significant strength in the US labour market. This is likely to add further impetus for the Fed to raise rates faster or sooner than the market had been expecting.
“Unless the rapid spread of Omicron starts to put the economy under significant pressure - which markets don’t expect will happen - then the stage looks set for continued economic growth and for monetary policy to become tighter over the coming months.”
Wall Street opens in about 20 minutes, with futures pointing to mixed open — the tech-heavy Nasdaq is called to drop another half a percent at the open, while the Dow should rise 0.2%.
On this side of the pond the FTSE’s mild lunchtime fight back has faded, with the bluechip index down about 0.7%.
Ex-Barclays exec joins startup bank
13:55 , Oscar Williams-Grut
He will take over as CEO at Monument from Mintoo Bhandari, a former managing director at US investment giant Apollo who founded the lender in 2018.
13:25 , Oscar Williams-Grut
Pod Point, which listed in London in November, has said it continues to enjoy “strong trading” and full-year results are on track with forecasts.
The company works with businesses like Tesco and Barratt Homes to install charging infrastructure in public places and private properties.
Shares have improved 8.7p, or 3.5%, to 255.5p on the update.
Perhaps surprisingly, CEO Erik Fairbairn says it’s “exactly the right time” for the government to cut electric vehicle grants, as new figures showed a quarter of vehicles bought at the end of last year were battery powered.
The Society of Motor Manufacturers and Traders (SMMT) said 2021 was the most successful year in history for electric vehicles, with plug-ins representing 18.5% all new cars bought last year. Momentum is accelerating, with battery powered vehicles accounting for 25.5% of the market by December.
“What subsidies are for is to encourage activity before it’s commercially viable,” Fairbairn told the Standard. “I think electric vehicles stand up on their own two feet now.”
Tech sell-off eases in London
13:00 , Oscar Williams-Grut
Having been down as much as 1% earlier in the session, the FTSE 100 has managed to claw back some ground.
The bluechip index is down around 44 points, or 0.6%, at 7473 this lunchtime. Tech companies still foot the index, with industrial design software business Aveva the biggest faller.
Tech stocks have sold off around the world after new minutes from the Fed overnight suggesting rates could rise sooner than expected in the US. When America sneezes, the world catches a cold and there are expectations that other central banks could now follow suite.
Rising rates are bad for high-growth stocks like tech but good for banks. And unlike US markets, which have a large number of tech businesses, London’s stock market relies much more on lenders than it does tech.
Asian-focused bank Standard Chartered is currently at the top of the FTSE leader board with a gain of 3.6%. Lloyds, HSBC, Natwest and Barclays are all not far behind. In ad land, WPP is up just over 1% after an upgrade to ‘Buy’ from Shore Capital.
Elsewhere, the top stories this lunchtime are:
- A profit upgrade and special dividend from Next have spurred hopes that retailers avoided the worst of the Omicron downturn to enjoy a bumper Christmas
- M&C Saatchi, Margaret Thatcher’s favourite advertising agency, is facing a surprise takeover bid from its own deputy chair
Sell off puts boot into Dr Martens
12:57 , Simon Freeman
Dr Martens’ share price has suffered its biggest one-day fall after former owner Permira, which took the boot-maker public 12 months ago, offloaded a 6.5% stake at a discount.
The UK-based private equity group sold 65 million shares at 395p, below yesterday’s 421p closing price, sending the stock down by as much as 13% to 366p.
Permira raised £257 million from the sell-off, which was offered via its Luxembourg-based IngreLux fund, in a placing to institutional investors overseen by Goldman Sachs.
That is not far short of the £300 million it paid to take control of the company in 2013.
It still retains 36% of Dr Marten’s issued share capital.
The iconic boot-maker enjoyed a bumper IPO last January with shares leaping 16% on its market debut.
It posted a 46% jump in pre-tax profits to £61 million in the six months to September 30 but wa r n e d s h i p p i n g d e l ays a n d snagged supply chains could weigh on sales into the next financial year
Bumper year for bitcoin
11:19 , Oscar Williams-Grut
Crypto trading volumes surged last year to rival some major currencies, a new report shows.
Chainalysis, a US crypto data company, said cryptocurrency transactions rose 550% last year to reach $15.8 trillion, equivalent to daily volumes of around $43 billion. That would put daily crypto turnover on a par with foreign exchange dealings for the Danish krone and more than the Polish zloty, according to data from the Bank for International Settlements.
The surge in trading came in a year when Tesla founder Elon Musk helped drive a rally in dogecoin by Tweeting memes, crypto-enabled NFTs grew from almost nothing to a $41 billion market, and bitcoin reached a new all-time high. 2021 was a banner year for the emerging sector.
While last year was a breakout for crypto, 2022 has had a rougher start. Bitcoin is in a bear market and fell another 6.8% overnight to reach $46,163, its lowest level since September.
Womenswear firm Sosandar toasts sales jump
10:23 , Joanna Bourke
The AIM-listed firm added that trading into early January has also been strong, with an increase in demand for active and casual clothing since December 25.
Total revenue in the three months to December 31 was £8.9 million, up from £4 million and representing a record quarter.
Read more HERE.
M&C Saatchi faces £250m bid from its own deputy chairman
09:25 , Simon English
M&C Saatchi, the storied Soho advertising firm with close links to the Conservative Party, faces a £250 million takeover bid from its own deputy chairman.
Vin Murria, a software entrepreneur with a near 10% stake in the business, is poised to make an offer that would take the business off the stock market.
A story in the Daily Telegraph this morning flagged her intentions. Today M&C was forced to tell investors that it has received “a preliminary approach from AdvancedAdvT Limited, a vehicle connected with Vin Murria, a director of the Company”.
Investors wrong-footed by Fed minutes
09:25 , Graeme Evans
Rising US rate expectations weighed on currency markets, with the pound reversing some of its recent recovery to stand 0.4% lower at just above 1.35 versus the US dollar.
Pressure extended to Asia markets, where Tokyo's Nikkei 225 finished almost 3% lower.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said the minutes had taken investors by surprise but that the dip in stocks seemed overdone.
He told clients: “The normalisation of Fed policy shouldn’t dent the outlook for corporate profit growth, which remains on solid footing due to strong consumer spending, rising wages, and still easy access to capital.
“Bear in mind that the Fed has become incrementally more hawkish since last summer and equity markets have performed quite well.”
Growth companies have been the main beneficiaries of low real and nominal interest rates, pushing valuations to elevated levels.
Haefele added: “As the Fed begins to normalise policy, it’s logical that these stocks will face the strongest headwinds. Within the US equity market, we continue to have a preference for value stocks over growth stocks.”
Company behind UK gas project puts itself up for sale
09:02 , Oscar Williams-Grut
Buyers are circling UK gas assets after surging global prices prompted a renewed focus on domestic supply.
AIM-listed Angus Energy said it had recently received a “series of approaches” from buyers interested in its 51% stake in the Saltfleetby Gas Field in Lincolnshire and one offer to buy the entire business. Angus has kicked off a formal sale process as a result, with CEO George Lucan saying it’s in the “best interests” of investors as public markets are “attributing little value to hydrocarbon reserves in general.”
In the meantime, Angus said it was continuing plans to restart gas production at the Saltfleetby site, which was first discovered in the 1990s.
Shares jumped 14.5% to 0.88p.
Next “jewel in high street’s crown”
08:55 , Graeme Evans
Next shares have failed to kick on, despite the retailer's fifth profits upgrade of the past year.
Analysts were full of praise, however, as sales for the eight weeks to Christmas Day came in £70 mllion ahead of management expectations and full year pre-tax profit guidance was raised by £22 million to £822 million.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “For all the tales of woe on the high street, there is one shining jewel to be found in the form of Next.
“There aren’t many bricks-and-mortar retailers dishing out special dividends or upgrading guidance multiple times over.”
The latest upgrade means Next is able to pay another special dividend of 160p a share, in addition to the 110p which has already been paid.
RIchard Hunter, head of markets at Interactive Investor, said: “This implies a dividend yield of over 3% which is notable in the current interest rate environment, and which also leaves the potential for more gas in the tank as the company returns to the pre-pandemic ordinary dividend cycle, including the possibility of share buybacks if certain hurdles are met.”
FTSE 100 falls 1%, Next shares lower
08:26 , Graeme Evans
The FTSE 100 index is down 1% or 74 points to 7440, although still above the 7384 level at which London's top flight started the year.
British Airways owner IAG gave up recent gains by falling 3% and tech-focused Scottish Mortgage Investment Trust declined 2% as the latest rise in US bond yields put pressure on the value of holdings including Tesla and Amazon.
Transatlantic retailer JD Sports Fashion also fell 2% on fears of a consumer squeeze caused by an imminent hike in US interest rates.
Discount chain B&M European Value Retail rose 2% after it upgraded full-year forecasts on the back of a “very strong Golden Quarter”, but there was no rally for Next shares. The FTSE 100-listed stock was 52p lower at 7986p, despite another profits upgrade.
Greggs boss Roger Whiteside to retire, Roisin Currie to become CEO
08:00 , Joanna Bourke
Roger Whiteside, the chief executive of high street bakery chain Greggs, will retire from the company he has led since 2013 this year.
The boss, who is 63, will step down from the post after Greggs’ annual meeting in May. He will be succeeded by Roisin Currie, the FTSE 250 firm’s retail and property director.
During his time leading Greggs, the firm’s estate has grown from around 1600 shops to 2181, and more openings are planned.
Whiteside said: “Greggs is a fantastic organisation with a very strong team. Roisin is a great leader and has played a key role in the development of the business over many years, most recently in shaping our ambitious plans for further growth.”
Read more HERE.
Next shows other retailers how it is done (again)
07:50 , Simon English
Next is on the up. Not for the first time. Today it posts another profit upgrade and another special dividend to shareholders.
You can read more here.
US rates fear triggers FTSE 100 fall
07:37 , Graeme Evans
The FTSE 100 index is to open sharply lower after the latest US Federal Reserve minutes triggered a big sell-off on Wall Street last night.
The comments from the Fed's most recent meeting in December suggested a rate rise could come “relatively soon“, prompting bets among traders for a hike in March. Some Fed members also considered when would be the right time to reduce the size of the central bank's balance sheet as part of the normalisation of monetary policy.
US inflation is currently well above 6% while the central bank also noted America's “very tight” labour market as reasons for accelerating their policy response.
The prospects of a spring interest rates rise put upward pressure on US bond yields for the third session in a row, diminishing the appeal of high growth companies valued on future cash flows.
The tech-focused Nasdaq closed down 3.3% and the S&P 500 lost almost 2% of its value, although US futures markets are pointing to a steadier session today.
London's FTSE 100 index is expected to open more than 100 points lower, having gained ground in the first two sessions of 2022 after closing last night at its highest level since February 2020.
Michael Hewson of CMC Markets said: “What appears to have spooked markets is talk about balance sheet reduction.
“This has prompted a quite a bit of anxiety with some on the Fed talking about the probability of when it might be appropriate to reduce the size of the balance sheet, thus pulling liquidity out of the market.
“While this might be a valid concern, speculation that the Fed might start doing this seems a little premature given that it hasn’t stopped adding to its balance sheet yet, let alone reducing it.”