Speculation that incoming prime minister Liz Truss is planning a freeze to energy bills lifted retailers and stocks with exposure to the UK economy today.
Marks & Spencer and Next were among the consumer-focused stocks sharply higher on hopes that households will be able to commit more of their budgets towards discretionary spending rather than bills.
Sterling also firmed today, having stood near its lowest level since 1985 amid fears over the economic impact of the energy crisis.
FTSE 100 slips back as oil stocks cool and financials fade
15:20 , Michael Hunter
London’s FTSE 100 was over 30 points lower at 7258.14 in afternoon trade, with oil majors back under pressure after their strong showing during the previous session, when Liz Truss was confirmed as the UK’s new prime minister.
As the market waits for the detail of her “bold plan” to deal with soaring energy costs, the initial relief rally for the sector after the leadership contest win for an opponent of windfall taxes faded. BP lost 2.2% to 453p, with Shell 1.9% softer at 2304p.
Energy stocks were also notable names on the list of falling stocks ahead of Truss’s response to the cost of living crisis, expected tomorrow. National Grid fell 1.7% to 1072p. SSE was down 1.1% at 1678p.
Financials were also faltering. HSBC shed 0.9% to 532p and London Stock Exchange edged down 0.8% to 7890p.
Support came from house builders after a well-received update from London-focused Berkeley Group started a run of earnings news from the sector. Berkeley gained 3.1% to 3552p. Persimmon was up by the same margin to 1497p.
Wall Street stocks make muted return from long weekend
15:00 , Michael Hunter
New York stocks are looking lethartgic after the long Labor Day weekend, with the S&P 500 up just 4 points in early trade at 3926.83.
The steadier showing comes after a brisk sell-off last week, which came as investors were confronted with a range of darkening economic indicators around the world, while the prospects of rising interest rates at global central banks in the fight against inflation also defined an uneasy tone to trade.
Attention this week will turn to the Federal Reserve’s report into current economic conditions in its so-called Beige Book report, due out on Wednesday and likely to play into the market’s assessment of the pace and extent of US rate rises, The European Central Bank is also centre stage, and is expected to raise eurozone interest rates by at least 0.50% at its meeting on Thursday.
Three UK firms top Europe’s most shorted list in August
14:17 , Michael Hunter
Three major UK firms were among the five most shorted stocks across Europe in August as investors sought to profit from poor share price performance in a range of businesses.
Pest control firm Rentokil Initial, drinks manufacturer C&C Group, and B&Q and Screwfix owner Kingfisher, were the second, third and fourth most shorted stocks across the continent, respectively, according to new research by analytics firm SEI Novus.
SEI’s data covers €30bn (£25.7bn) in short positions -- which allow fund managers to generate a return from falling share prices -- and showed that the UK had the most shorted stocks across Europe in August, accounting for nearly a quarter of short positions in Europe.
Rentokil Initial and C&C Group each represented 2.5% of all the short positions held in European stocks, with Kingfisher representing 1.6%.
C&C has been among the top-5 most shorted stocks since June.
The returns from the short positions will depend on when they were set up. Both Rentokil Initial and C&C Group’s shares are down in the past month. However, a rally in Kingfisher shares today of more than 5% means its shares are broadly flat over the past month.
Looking at the data by industry, industrials were the most shorted stocks at the end of August, accounting for 23% of total short activity in Europe, down slightly from the two-year high of 26.6% reached in the middle of the month.
Consumer discretionary stocks was the second most shorted sector, accounting for 18.8% of short positions, while communication services accounted for 5.4% of short positions.
UK chipmaker IQE urges more government support to build domestic chip production
14:01 , Simon Hunt
The boss of UK chipmaker IQE has urged more government support to build the UK chipmaking industry as he stressed the “importance of compound semiconductors to a series of fundamental mega trends which will shape the global economy.”
IQE CEO Americo Lemos told the Standard: “When you look at our global economy, it’s fuelled by the electronics industry. We can’t see GDP without semiconductor products.
“There is no place [in the world] where the industry has to be investing a lot, we always see public-private partnership in pretty much every country.
“It is not a handout…it is a partnership where businesses invest to make sure they have the capacity they need, and government invests in domestic resilience to build supply chains.”
It comes as the firm posted revenues of £86.2 million for the first six months of 2022, up 8.4%, while pre-tax losses shrunk to £1.9 million, driven by chip sales to the aerospace and security industries.
IQE shares went up 2% this morning to 34.5p.
Quixant confident of continued growth despite recession fears
13:48 , Simon Hunt
Fears of a looming recession are doing nothing to quell the optimism of the boss gaming technology firm Quixant after the company posted a big hike in sales.
The firm boasted of strong customer demand with a robust order book and double digit profits.
Jon Jayal, CEO of Quixant told the Standard: Gaming’s been a remarkably resilient market in economic downturns. In the last recession We traded through that and increased our revenues as we converted new customers.”
“I think it’s an area that provides a lot of entertainment -- there’s a chance of winning and getting out of the challenges of the cost of living.”
The firm posted revenues of $53 million (£46 million) for the first six months of 2022 while gross profit grew 52% to £16.8 million.
Quixant shares went up 1.6% in early trading.
VW moves up a gear in Porsche shares sale plan
13:19 , Simon Hunt
Volkswagen is poised to give investors the chance to buy Porsche shares in one of the biggest stock market flotations for decades.
The company behind the Tiguan SUV is moving ahead with the process of selling the world-famous maker of luxury sportscars, from the 911 to the Macan, by the end of 2022.
The sale is expected to value Porsche at up to €85 billion (£73 billion). The iconic status of Porsche — who have tennis star Emma Raducanu as an ambassador — means a shortage of buyers is unlikely.
Alongside the main listing in Frankfurt, VW may sell to retail investors in Spain, Italy, Austria, Switzerland and France. The market backdrop is less favourable. Global stock indices are struggling and VW says the plan also depends on conditions in the capital market.
Qatar has already signalled it will take a stake of around 5%. Goldman Sachs and Bank of America are reported to be working on the sale, as are JP Morgan Chase and Citigroup.
Berkeley Group plans to pick land ‘very selectively’ in tougher market
12:31 , Simon Hunt
London-focused developer Berkeley Group said today it will be choosier about the sites it takes on in the latest sign of a pullback in the market for home builders.
The sector faces a range of increased costs — from raw materials and energy to the price of labour —while rising interest rates make mortgages more expensive, potentially limiting the number of customers for its homes.
Berkeley said today it would only add new land to its holdings “very selectively” and that the “operating environment remains volatile”, although overall cost inflation remained between 5% and 10% per year across its portfolio, in line with levels outlined in its previous trading update in June.
The Weybridge-based FTSE 100 company kept its existing profit guidance for the full-year on hold, despite stronger than forecast prices for its homes and more forward sales, which helped it cover rising costs. For the current financial year, it expects pre-tax profit of £600 million.
The builder tends to earn more profit in the second half of the year, in line with the seasonal peak in home-buying patterns. It has completed over 18,000 homes in the past five years. Its shares were up 5% at 3618p early today.
Cyber attack forces bus group Go-Ahead to call in forensics
11:21 , Simon Hunt
Go-Ahead, London’s largest bus company, has called in forensic digital experts after suffering a cyber attack.
The firm, which runs roughly a quarter of the capital’s buses, said it had detected a fault on a server late on Sunday evening, and realised yesterday that the problem was more widespread and the result of a cyber attack.
The attackers are understood to have compromised back office systems as well as systems related to bus scheduling and the roster of drivers.
No services have been impacted as yet, although it’s understood that the firm cannot rule out some disruption.
However, back-up systems are being used to mitigate any interruption to services and no problems had been reported up until this morning.
A spokesman for First Group said it was working with its IT partner IBM to establish the scope of the incident and to restore its systems.
“Contingency plans have been activated to ensure that front-line services keep running and we have informed the relevant authorities, including the Information Commissioner,” he said.
Go-Ahead also runs Govia Thameslink but the spokesman said its train services relied on a different system that was unaffected by the cyber attack.
City Comment: Football should help fans to eat, heat and keep their seat
10:53 , Simon English
A SPORTS entrepreneur pal of mine has been bending Liz Truss’s ear (gently).
If we assume that the next few months are going to be dark, in some cases literally, for a large number of people, sport has a large role to play in keeping our spirits up, keeping consumers spending whatever little they have spare to help pubs, restaurants and gyms stay alive.
The big solution, or at least plaster-cast, for the broken energy market has to come from the government.
But businesses including our now enriched football clubs are surely part of how we all get through.
Jon Smith, the football agent who set up First Artist in 1986 and went on to have Gary Lineker and Diego Maradona as clients, agrees.
For some the brutal choice might be between heating and eating. For others, already stretched football fans, it might be more like: can I eat, heat and keep my seat?
The new PM is already going to have to intervene in more industries than her Conservative philosophy is comfortable with.
So she shouldn’t order football to do the right thing by its customers.
But the Premier League clubs should do whatever they can to keep stadiums full. Cheap or free tickets for school-children. A warm training hall and hot soup for those really on the breadline on non-match days.
Smith makes the point that sport and football in particular “will be the repository of our emotional outlet this winter” and moreover two or three hours that fans won’t need heating. He has been saying so to the new PM.
As an industry, football likes to think it has grown up. That it is responsible and properly business-like in its dealings.
Now would be a good time to show it.
M&S and Next rise 5% on energy bill hopes
10:32 , Graeme Evans
Potential help in the cost-of-living crisis ensured stocks including M&S and Domino’s Pizza were sharply higher today.
The rally for the battered retail and hospitality sectors came on speculation that incoming prome minister Liz Truss will later this week announce an energy bill freeze, giving some protection to spending power at a fragile time for the UK economy.
Shares in M&S and Next jumped by 5% - up 5.9p to 129.55p and 286p to 6,322p respectively - while homewares chain Dunelm surged 7% in the FTSE 250 index. B&Q owner Kingfisher, which is one the most shorted stocks on the London market as hedge funds bet on a further downturn in fortunes, gained 4% or 9.5p to 249.1p.
In the food and hospitality sectors, Greggs and Domino’s Pizza shares improved 6% and JD Wetherspoon unwound some of its recent losses by adding 28.4p to 517p.
The momentum for stocks with exposure to the UK economy, including Lloyds and NatWest, ensured the FTSE 100 index continued its resilient performance by adding another 18.62 points to 7306.05.
Other risers included Centrica, even as the Financial Times said the British Gas owner was in talks with its banks over securing additional short-term financing.
The “pre-emptive” move comes as power generators across Europe have to post higher sums as collateral due to the surge in wholesale prices. Centrica shares rose 4% or 3.18p to 81.84p, putting back losses seen yesterday.
The domestic-focused FTSE 250 index was up more than 1.3% or 234.99 points to 18,864.67. Aston Martin Lagonda lifted 26.8p to 431.8p as it recouped some of the losses after yesterday’s £575 million rights issue announcement.
Retailers rally on energy bill hopes, M&S shares up 7%
08:45 , Graeme Evans
Shares in Next and B&Q owner Kingfisher are 4% higher today as traders focus on the prospect of an energy bill freeze by new prime minister Liz Truss.
Other stocks with exposure to the UK economy are also higher, with Lloyds Banking Group and NatWest up 2% on the potential boost for household finances.
The FTSE 100 index lifted 11.76 points to 7299.19, having closed marginally higher yesterday during a resilient performance aided by energy and commodity stocks.
Housebuilders also rallied today, with FTSE 100-listed Berkeley up 6% after posting a resilient trading update.
The UK-focused FTSE 250 reversed yesterday’s weakness by adding 1.3% or 251.58 points to 18,881.26, with Marks & Spencer, Dunelm and ASOS shares all 7% higher.
Markets steady, oil up after Opec output cut
07:59 , Graeme Evans
The FTSE 100 index finished marginally higher last night as stronger energy and commodity stocks helped protect London’s top flight from volatility elsewhere.
In contrast, the UK-exposed FTSE 250 index and Stoxx Europe fell by 1.2% after Monday’s jump in gas prices caused by the suspension of the Nord Stream pipeline spooked traders.
CMC Markets expects European indices to open broadly unchanged and the FTSE 100 index to slip 10 points at 7277, aided by stronger trading in Asia this morning. US markets were closed for a public holiday yesterday, having fallen sharply on Friday.
Sterling spent most of yesterday’s session close to its lowest level in over 30 years before recovering off its intraday lows.
Deutsche Bank pointed out today that sterling has been the worst performer among the G10 currencies since Boris Johnson’s resignation on 7 July, having fallen by 4.2% against the US dollar.
CMC’s chief market analyst Michael Hewson said opinion is divided on whether there’s more to come in terms of pound weakness.
He added: “While some short-term borrowing is unavoidable given the current challenges, the main focus will be on what steps the government intends to take to keep energy prices down and deal with the UK’s longer term energy security.”
Brent crude futures, meanwhile, remained edged up to $95 a barrel after Opec and its allies agreed a small cut to output to reflect growing economic headwinds.