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FTSE 100 Live: Sterling under pressure as stagflation fears stalk UK market

·16-min read
 (ESI)
(ESI)

Sterling remained under pressure today as stagflation fears, the ongoing fuel crisis and possibility of earlier-than-expected hikes in US interest rates are blamed for the currency falling to its lowest level since January.

The FTSE 100 index rallied, however, with Next's latest upgrade to profit guidance after a stronger-than-expected summer helping its shares to rise by 2% to near a record high.

FTSE 100 Live Wednesday

  • Stagflation risks pressure sterling

  • Stephen Hester has a new gig

  • Morrisons auction date set

Revealed: How firms are luring staff as the ‘war for talent’ intensifies

18:09 , Naomi Ackerman

There are over 1 million job vacancies in the UK right now.

Bosses of companies across sectors are desperate to find stand-out ways to attract and retain staff amid an acute hiring crisis.

In addition to raising pay, companies have been offering packages including flexible working and increased autonomy to lure in staff in recent months.

Now new data from workplace benefits marketplace Juno has revealed firms are resorting to offering more unusual benefits, including free video game vouchers, plants, regular meal kit deliveries and at-home cleaning services for WFH offices.

Read more here

Enstroga, Igloo Energy and Symbio Energy are ceasing to trade

16:07 , Joanna Bourke

Energy suppliers Enstroga, Igloo Energy and Symbio Energy have announced they are ceasing to trade, Ofgem announced on Wednesday.

Together the suppliers represent less than one per cent of domestic customers in the market. Igloo Energy supplies gas and electricity to around 179,000 domestic customers, Symbio Energy to around 48,000, and Enstroga to about 6,000.

You can read more HERE.

Foxtons reviews bonuses after backlash

15:05 , Simon Freeman

Estate agent Foxtons has agreed to review its bonuses policy in the wake of an investor backlash and a 50% cut in payouts to senior execs.

Investors bared their teeth at the company’s annual meeting in April, with just under 40% voting against an almost £1 million cash-and-shares bonus for CEO Nic Budden.

Around 17% voted against his re-election to the board and 33% voted against non-executive Alan Giles, who chairs the remuneration committee.

Foxtons said: “The committee has consulted with its larger shareholders to understand their views.

“The performance of the business in 2020 met the conditions set out in the remuneration framework for the payment of bonuses but, considering the circumstances, the Committee exercised its discretion by reducing this award by 50%.

“Despite the discretion, it was clear that a significant proportion of shareholders did not agree with the decision to pay bonuses to executive directors under the Bonus Banking Plan, because the company had benefited from Government support.”

Foxtons enjoyed £6.9 million in Government support during the pandemic, including business rates relief and £4.4 million in furlough for staff.

The property sector recorded a strong year during the pandemic, as the Government also introduced a stamp duty holiday.

Pay policies at Foxtons will be reviewed, the company added, although it did not say that any of the Government support would be repaid.

It recently appointed a new chairman Nigel Rich to oversee changes.

A closer look at Next: How the retailer is defying high street gloom

14:53 , Joanna Bourke

Next has upped profit forecasts (PA Wire)
Next has upped profit forecasts (PA Wire)

High street giant Next today upped profit forecasts for the fourth time this year, and the sixth in two years.

Here we look at what the retailer is doing to achieve such results, despite a number of headwinds the sector is facing.

Read more on how Next became king of the high street HERE.

Sterling has dropped below $1.35

13:47 , Joanna Bourke

The stagflation worries blamed by some investors for sterling’s worst performance of the year continued today.

The pound has now fallen 0.5% to $1.3476, a 10 month low.

The Evening Standard’s market report earlier said that fears over the toxic combination of inflation, and a stagnating growth outlook, have been fuelled recently by rising oil and gas prices and the possibility the Bank of England may be forced into an earlier than expected rise in interest rates.

More about the pound latest here.

Lunch time update: FTSE 100 higher, with AstraZeneca and Next in demand

13:28 , Joanna Bourke

London’s blue chip index was up 67.47 points, or 0.96% higher, at 7095.57 shortly after 1pm.

Top risers include AstraZeneca, up 288p to 8762p after it revealed the buy-up of life sciences pioneer Caelum Biosciences in a deal worth up to $500 million.

Meanwhile shares in Next made gains of 218p to 8298p after it made another profits upgrade.

Other news to read over your lunch break:

-A date for the Morrisons auction has been set for this weekend.

-Energy giants SSE and Total have both announced plans to push further into wind power.

-Building materials retailer CMO Group discusses the HGV driver shortage.

-Uber says its service is not suffering as a result of the ongoing petrol crisis in the UK.

-Dishoom reports how lockdowns have eaten into sales.

Lockdowns eat into sales at Dishoom

12:54 , Joanna Bourke

Dishoom saw sales plunge by almost 45% last year as lockdowns forced the popular Indian restaurant chain to shutter doors for long periods, latest filings show.

The family-run business was founded in London in 2010 and has pursued expansion in recent years.

Restaurant chain Dishoom has shown how lockdowns hit sales (Dishoom)
Restaurant chain Dishoom has shown how lockdowns hit sales (Dishoom)

Its latest filings, for the year ended December 27, show turnover fell to £29.2 million from £59.9 million a year earlier. It swung to a pre-tax loss of £3.77 million, from a pre-tax profit of £4.71 million in 2019.

Dishoom put the falls down to Covid-related closures and restrictions in 2020, saying the situation had a “profound impact on the company”.

Read the full story HERE.

Yu Group bucks downturn in the energy market

12:19 , Oscar Williams-Grut

Small energy firms are going bust at a rate of knots due to soaring natural gas prices that are making electricity prohibitively expensive.

But Yu Group, an AIM-listed minnow worth just £40 million, is bucking the trend. The company today said it turned a profit of £920,000 over the last six months as revenue soared 44% to £65 million.

“I sleep well at night,” founder and CEO Bobby Kalar told the Standard today. “I’ve got a solid hedging book up to 2023.”

Read the full story.

Shares in Morrisons make gains ahead of auction this weekend

11:44 , Joanna Bourke

Shares in Morrisons made further gains today, as investors prepared for a £10 billion takeover battle for the supermarket giant heading to a quick-fire auction this weekend.

Rival suitors Clayton, Dubilier & Rice, the US private equity firm, and a consortium led by investment group Fortress, have been locked in a more than three month bidding war to take control of the UK’s fourth largest grocer.

Various proposals have been made, with the most recent offers being 285p per share from the former, which Morrisons’ board has backed.

The takeover panel today said an auction procedure will take place on Saturday, for bidders to make their final offers.

Shares in Morrisons rose 3.5p to 295.5p.

Read more HERE.

Stephen Hester’s new gig

11:37 , Oscar Williams-Grut

Former Royal Bank of Scotland boss Stephen Hester is adding to his already busy portfolio of boardroom roles by taking up a post at IBM spin-off Kyndryl Holding.

New York-based Kyndryl said Hester would serve as the company’s lead independent director.

IBM announced earlier this year that it would spin-out its managed infrastructure business as Kyndryl by the end of the year.

“A 90,000-person ‘start-up’ doesn’t come along very often,” Hester said.

Hester, 60, was famously brought in to lead the turnaround of RBS after the financial crisis but left in 2013 after pressure from the government. Until June this year Hester ran insurer RSA and he is set to become chairman of easyJet in December. In addition, he is an independent director at British Gas-owner Centrica.

Hester said he was “proud” to join Kyndryl to help it “reach its potential”. Terms weren’t disclosed.

Bank of America not buying sterling’s petrol story

10:36 , Oscar Williams-Grut

Kamal Sharma, an analyst at Bank of America, isn’t buying the argument that sterling is suffering due to concerns about the ongoing petrol crisis in the UK.

He writes in a note sent to clients today: “Whilst we concede that rising domestic fuel prices are a headwind to the UK consumer, we do not think that recent developments are existential enough to weigh on GBP as it has done. Indeed, through both the NY and Asia session, we observe that GBP was relatively stable - we would have expected a continuation of selling pressure if the narrative was one of fundamental deterioration in the UK economy. More likely, we think that GBP has succumbed to month/quarter end rebalancing pressures as it has done in Q1 and Q2.”

Sterling stuck at January low

10:08 , Graeme Evans

The stagflation worries blamed by some investors for sterling's worst performance of the year continued today as another surge in natural gas prices added to the jitters.

Fears over the toxic combination of inflation and a stagnating growth outlook have been fuelled by rising oil and gas prices and the possibility the Bank of England may be forced into an earlier than expected rise in interest rates.

Sterling remained at its lowest level since January today, having dropped from around $1.37 on Tuesday morning to $1.35, a level not seen since January 11.

End-of-quarter rebalancing is likely to be part of the reason for the weakness, but the situation comes with natural gas futures up another 5.5% at 218p a therm today and Brent crude close to the $80 a barrel threshold.

A sharp rise in US borrowing costs on expectations for tighter monetary policy also put upward pressure on the US dollar. Wall Street's S&P 500 was down 2% last night on big losses for stocks in high-growth sectors such as semiconductors, media and software.

There was a similar story in Europe, but the FTSE 100 index largely bucked the trend thanks to support from its dollar-earning stocks. The blue-chip index fell 0.5% last night but was up 63.63 points to 7,091.73 after Next's bullish interim results helped sentiment.

US-focused building supplies firm Ferguson posted the biggest rise, up 295p to 10,530p, while there was buying in mining after Anglo American and Glencore added more than 2%.

Royal Mail was the biggest faller after analysts at UBS scrapped their “buy” recommendation and downgraded their price target from 590p to 440p.

Their caution reflects the impact of increasing cost pressures at a time when the pricing power in the industry is likely to decline as more parcel sortation capacity is added in 2022.

Shares were above 600p in June but fell 5% or 26.4p to 452.8p after the downgrade.

SSE and Total strike wind power deals

10:08 , Oscar Williams-Grut

Energy giants SSE and Total have both announced plans to push further into wind power, shrugging off an unusually poor year for the renewable energy source.

SSE said it had signed a $208 million (£153 million) deal to enter the Japanese offshore wind market through a joint venture with local operator Pacifico Energy.

Elsewhere, French oil giant TotalEnergies submitted a bid to build a new offshore wind project in Scotland that could one day power 2 million homes.

Total has partnered with Macquarie’s Green Investment Group and Scottish developer RIDG on a proposal to build the West of Orkney Windfarm, which aims to supply two-gigawatts of power by 2029. Total has been working on the bid for 5 years.

The two turbine projects come despite an unusually bad year for wind. Low winds have contributed to the ongoing energy crunch around the world and SSE said “unfavourable weather conditions” meant its energy generation was down 32% over the last 6 months.

SSE is predicting an 11% output shortfall across the year. The company, which has also been hit by high hedging costs as energy prices soar, guided earnings for the full-year of between 7.5p and 10p per share. That was about half of what the market expected.

SSE shares fell 0.3%, or 5.5p, to 1598p. Total was half a percent lower in Paris.

Read more here.

CMO Group hopes to benefit from government actions to tackle HGV driver shortage

08:47 , Joanna Bourke

Online building materials retailer CMO Group expects government moves to address the current shortage of lorry drivers will help the business in the medium term.

The firm has not been immune to supply chain challenges the wider construction products sector is facing.

CMO has taken undertaken ‘self help’ initiatives to help tackle problems, such as expanding warehouse space for storage and increasing the amount of couriers it uses.

It added that recent Government actions, which have included making up to 50,000 more HGV driving tests available each year, “will enable improvements in the medium term, over and above the self-help actions which we are already undertaking”.

CMO said as a result, the board remains confident that trading remains in line with expectations.

Read the full story HERE.

Next powers FTSE 100

08:38 , Graeme Evans

The FTSE 100 index has recovered yesterday's losses to open 45 points higher at 7,073.1, aided by the confidence boost from Next's bullish set of interim results.

Next shares were 3% higher at 8,302p, which is close to the record levels seen earlier in the summer. JD Sports Fashion also benefited with a gain of 22p to 1,072.5p.

AstraZeneca joined the risers board with a gain of 2% after announcing deal to bring rare diseases specialist Caelum Biosciences into its recently-acquierd Alexion business.

Royal Mail was the biggest faller, off 6% or 27.2p to 452p in the continuation of a recent downward trend.

Power struggle

08:25 , Graeme Evans

Britain's bid to reduce reliance on high cost gas markets hasn't been helped by the recent weather, with SSE reporting today that its output from renewables assets has been about a third below plan since April.

SSE said it had been one of the least windy summers across most of the UK and Ireland and also one of the driest in its hydro catchment areas in the last 70 years.

Its operational performance has also been affected by the requirement to buy back hedges in volatile markets. Overall, it expects to deliver a solid performance for the financial year to March and to still pay shareholders a full-year dividend of 80p a share plus inflation.

The company has also announced it is to enter into Jpana's offshore wind market through a joint venture agreement with Pacifico Energy.

Morrisons auction set for 2 October

08:19 , Oscar Williams-Grut

The Takeover Panel has confirmed the timeline for the auction for Morrisons. Private equity firm CD&R is squaring off against a consortium led by Fortress Investment to buy the supermarket chain. Morrisons is currently backing a £7 billion bid from CD&R but neither side has admitted defeated, forcing the pursuit into an auction.

The auction will take place on Saturday 2 October and run for up to 5 rounds of bidding, the Takeover Panel confirmed today. The winners will be announced as soon “as practicable” and the successful bidder must make a stock market announcement by4 October. Morrisons must respond by 5 October.

You can find the full Takeover Panel announcement here.

Deutsche Bank tells clients to sell sterling

08:01 , Oscar Williams-Grut

More here from Deutsche Bank on the big sterling sell-off over the last 24 hours.

“Sentiment has increasingly been knocked by the optics of the fuel crisis here,” Deutsche Bank strategist Jim Reid said on Wednesday. “Given this and the hawkish BoE last week many are now talking up the stagflation risk.”

“The fuel shortage is to some extent simply the vehicle through which the wider labour shortages are biting the most at the moment,” Deutsche Bank analysts Shreyas Gopal and Rohini Grover wrote in a bearish note on sterling sent to clients on Tuesday. “The risk is that this situation repeats itself with different products in the future.”

The bank this week advised its clients to sell sterling, saying: “We see the underlying backdrop as very negative for the pound.”

Read more here.

08:00 , Simon English

NEXT today offered further evidence that it is the best run retailer in Britain, upgrading profit forecasts for the fourth time this year as it shrugged off the struggles faced by rivals.

Sales in the first half of the year were up 8.4% and profits up 5.9% to £347 million compared to two years ago, pre-pandemic.

Next today told the City that full year profits should hit £800 million, far ahead of previous guidance of £764 million.

Chief executive Simon Wolfson said: “We have been surprised how strong sales have been in August and September.”

Read more here.

Brent price cools

07:58 , Graeme Evans

Some of the renewed concerns about inflation have come from a fresh spike in energy prices, with Brent crude yesterday above $80 a barrel for the first time in three years on the back of energy shortages in several Chinese provinces.

Brent fell back during yesterday afternoon's wider market sell-off and was trading at just below $77 a barrel this morning.

Oanda analyst Jeffrey Halley said: “It’s not just China with energy issues, the entire Northern hemisphere is now sweating (or is that chilling), on whether the forthcoming winter is mild or cold.”

Sterling in focus

07:44 , Graeme Evans

Sterling held firm this morning at 1.35 against the US dollar, having fallen 1% to the lowest point since January during yesterday's worst session of the year.

The pound's weakness was blamed on stagflation fears triggered by the fuel crisis and as rising US borrowing costs put upward pressure on the greenback.

The 10 year Treasury yield rose to 1.537% on expectations for an earlier-than-expected rise in interest rates, leading to sharp sell-off in tech shares whose valuations are built on future strong cash flows.

Wall Street's tech-focused Nasdaq closed 2.8% lower, while the S&P 500 was down more than 2% after big losses for stocks in high-growth sectors such as semiconductors, media and software.

There was a similar story in Europe, where major indices on the continent fell more than 2%. The FTSE 100 index bucked the trend and was only 0.5% lower due to support from dollar-earning stocks.

Michael Hewson, CMC Markets analyst, expects European markets to show a modest rebound and for the FTSE 100 index to open four points higher at 7,032.

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