Yahoo Finance FTSE 100 Live: US inflation hits 40-year high of 6.8%, UK GDP disappoints
FTSE 100 Live Friday
UK GDP misses expectations
US inflation hits 40-year high
Steady end to week for FTSE 100
LV scraps Bain deal
FTSE closes lower
17:09 , Oscar Williams-Grut
Despite spending most of the day flat as a pancake, the FTSE 100 has ended the day down 30 points, or 0.4%, at 7291. It’s not altogether clear what prompted the sell-off. It could have been a warning from the UK’s Health Security Agency that Britain could face 1 million Omicron cases by the end of the month. That may have prompted investors to take some risk off the table heading into the weekend, given the fast moving nature of the situation.
Away from the stock market, the big story today was the failure of LV=’s sale to Bain. The mutual couldn’t get enough support for the controversial deal from its members and has now scrapped the deal. It leaves the businesses future in doubt.
That’s all from us on the blog today. Have a good weekend and join us again on Monday.
LV abandons sale to Bain after vote fails
15:57 , Oscar Williams-Grut
Life insurer LV= has abandoned its controversial sale to private equity group Bain Capital after not enough of its members voted in favour of the deal.
69% of members who voted backed the deal, LV said on Friday afternoon. It had said it required 75% to see the deal through. 174,240 people voted, representing 15% of LV’s 1.16 million members
As a result, LV said the sale to Bain for £530 million will “no longer proceed”, LV said. Royal London, which had bid against Bain, quickly said it would come to the table to restart deal talks with LV.
Deutsche Bank: Plan B restrictions will shrink the economy
15:41 , Oscar Williams-Grut
The UK economy is set to shrink in the months ahead as a result of new Plan B restrictions, according to a leading City economist.
Sanjay Raja, chief UK economist at Deutsche Bank, said in a note circulated to the bank’s clients on Friday that restrictions “should see both December and January GDP growth dip modestly into negative territory”. On a quarterly basis, Raja believes restrictions will leave 0.4% lower than initially forecast.
“The new Omicron variant has cast an undeniable shadow on the near-term economic outlook,” he wrote.
Wall Street opens higher
15:03 , Oscar Williams-Grut
Stock markets have opened in the green in New York. The S&P 500 is up 0.4% at typing time and the Nasdaq is up 0.2%.
Over on this side of the pond, the FTSE is still not up to much: it’s down 2 points.
Here’s a sample of how the market is reacting to that huge US inflation print.
Dan Boardman-Weston, CIO at BRI Wealth Management: “This is likely to add further pressure to the Fed to quicken the withdrawal of quantitative easing and raise interest rates sooner than expected. There could be hesitancy from the Fed due to the potential impact that Omicron may have on the economy in the coming months but it’s unlikely this will significantly alter the growth trajectory of the economy.
“The US economy is in rude health and doesn’t require crisis levels of quantitative easing or interest rates and so it remains our view that policy will become tighter. It is important to note that whilst inflation is high and getting higher, the supply chain issues, the high levels of demand and base effects are likely to prove transitory and we continue to believe inflation will move lower over the coming year.”
Caleb Thibodeau, Validus Risk Management: “As CPI continues to see broad-based gains, we might expect the Fed to stay the course on the advanced tapering schedule implicated since retiring the word ‘transitory’. This means winding down net asset purchases to 0 by as early as March 2022 – a move that is already having unintended consequences in Treasury market liquidity, complicating the process.”
Hinesh Patel, portfolio manager at Quilter Investors: “The inflation number in the US is in-line with the consensus and, for markets, thankfully no worse given the elevated levels we are seeing currently. The fact it is still in line with consensus means the belief it is simply transitory is still in play. However, the data is sailing close to the wind and this month’s figure can definitely be put down as “got away with it”.
“We cannot read too much into one data point but the headline figure may begin to roll over from here and it wouldn’t be a surprise to see this being art or near the peak. Should inflation go beyond 7% then the Fed will need to taper sooner, with the balancing act being the communication to markets needed not to upset the precious S&P500 green arrow.”
“It was also interesting to see real average hourly earnings fall nearly 2%. This will likely to hit consumer confidence going forward, but whether or not this is too late to stop inflation breaching 7% remains to be seen.”
US inflation soars to 6.8%
13:48 , Oscar Williams-Grut
Official data just out in the US shows inflation keeps climbing higher.
Prices rose by 6.8% on an annual basis in November, up from 6.2% the month prior. That was the largest monthly increase since 1982.
Month-to-month growth eased slightly to 0.8%.
The US Bureau of Labor Statistics said the rise was driven by “broad increases in most component indexes, similar to last month.”
“The indexes for gasoline, shelter, food, used cars and trucks, and new vehicles were among the larger contributors,” the agency said.
Earlier in the day we heard from Deutsche Bank that inflation is currently the biggest concern for investors around the world. Many fear spiralling prices could stick around in 2022, rather than subside as many central bankers argue.
The FTSE 100 hasn’t budged much on the data. It’s down 7 points at the moment, roughly the same as it was prior to the data.
Wall Street looks set to open higher despite the sky-high inflation. Futures are spiking on the data, which was broadly in-line with forecasts. Trading starts in New York in about 45 minutes.
FTSE flat at lunchtime
12:41 , Oscar Williams-Grut
The FTSE 100 is more or less flat this lunchtime: the top flight index is down four points at 7317.
Darktrace is at the foot of the index, down 2.3%. Boss Poppy Gustafsson has been lamenting that the market has “misunderstood” her business. It seems they still do.
At the other end of the index is British American Tobacco, up 2.3%, closely followed by Berkeley, up 1.5% as it continues to benefit from a positive update earlier in the week.
Bank of America sees Bank of England keeping rates on hold
11:54 , Oscar Williams-Grut
Bank of America thinks Threadneedle Street will leave interest rates at 0.1% next week.
Economists at the bank say in a note out today: “It’s a close call but we expect the BoE to leave interest rates unchanged next week, due to Omicron effects/uncertainty. We look for the BoE to hike 15bp in February and 25bp in May. Beyond that we see the BoE hiking slower than the market does.”
Our city comment piece today looks at the tough decision faving the Monetary Policy Committee next week:
Who’d be a rate setter in this economy?
Data out today underlines the almost impossible decision facing the Monetary Policy Committee next week. Members must decide what they are worried about more: growth or inflation? Both are in bad shape.
Britain’s Covid recovery has hit the buffers and is at risk of going into reverse as Omicron restrictions bite and cloud the outlook. That would usually prompt the Bank to keep rates low to stimulate the economy with cheap cash.
But at the same time, prices are spiralling. Deputy government Ben Broadbent said this week that inflation would be “comfortably” above 5% by next Spring. That would usually prompt higher rates to take some of the fuel out of and cool price rises.
You can read the full article here.
Investors’ biggest fear for 2022 is inflation
11:27 , Oscar Williams-Grut
Deutsche Bank has just released a survey of 750 finance professionals from around the world asking them what 2022 might hold.
Here’s a snippet: “The biggest risk remains higher than expected inflation. Commensurate with that, an aggressive Fed tightening cycle came in at number two. Vaccine-escaping variants were close behind, bringing Covid risks back into the top three after a one-survey absence.”
The latest US inflation data is out at 1.30pm today and will underline why people are so worried: the data is expected to show prices rising at an annual rate of 6.8% in November, up from 6.2%. That would be the highest reading in 40 years.
Elsewhere, Deutsche Bank’s survey turns up an interesting generational divide when it comes to crypto: “Bitcoin is more likely to halve than double, unless you are under 35 where the opposite is true.”
Tougher year for Baillie Gifford fund
10:29 , Graeme Evans
High-profile stakes in Tesla, Upwork and Oxford Nanopore today failed to prevent one of Baillie Gifford's flagship funds from reporting its first year of underperformance since 2016.
The FTSE 250-listed Edinburgh Worldwide Investment Trust grew net asset value by 18.3%, against 35.9% for the comparative S&P Global Small Cap Index in the year to October 31.
Despite the recent performance in today’s annual results, the £1.4 billion fund remains way ahead of the market since focusing in 2014 on smaller, entrepreneurial and unlisted growth opportunities.
With electric car maker Tesla and recruitment services platform Upwork still a big part of the portfolio, Edinburgh Worldwide has grown its net asset value by 280% over the past seven years to make it a popular pick among retail investors.
Other long-term holdings include grocery warehouse technology business Ocado, while more recently the fund has added clean fuel business ITM Power to its portfolio.
It said one factor behind the recent performance has been the indirect impact of China's regulatory crackdown on sectors such as lending, education and gaming.
Edinburgh Worldwide shares today fell 2% or 6.5p to 306.5p in a difficult session for Baillie Gifford after its tech-focused Scottish Mortgage Investment Trust declined 22.5p to 1400p in the FTSE 100 index.
Other fallers in London's top flight included heavyweight stock AstraZeneca after a decline of 2% or 144p to 8218p. Overall, the FTSE 100 stood 9.16 points lower at 7312.04, leaving it broadly where it was prior to the Omicron-led sell-off two Fridays ago.
Stronger mining stocks propped up the index, while housebuilder Berkeley rose another 91p to 4829p after its better-than-expected update earlier in the week.
The FTSE 250 index declined 74.68 points to 23,073.36, despite a recovery of 3% for bootmaker Dr Martens following its interim results yesterday.
On AIM, Nexus Infrastructure attracted interest after its electric vehicle charging business saw “exceptional growth, profitability for the first time and a burgeoning order book”.
Nexus, which also owns civil engineer Tamdown, is now looking at the possibility of a separate listing or outside investment to optimise the growth of eSmart Networks.
Shares rose half a penny to 232.5p after today's full-year results.
Dunelm secures new sustainability-linked bank facility
10:15 , Joanna Bourke
Dunelm has secured a £185 million sustainability-linked loan facility, an agreement that could help the homewares retailer slash how much plastic packaging it uses.
The FTSE 250 firm’s unsecured revolving credit facility is from Barclays, Lloyds, National Westminster Bank, Banco Santander, and Credit Industriel et Commercial.
The agreement comes at a time when many businesses and investors are increasingly looking at their environmental, social and governance (ESG) credentials.
Read more HERE.
Octopus Energy raises another $300 million
10:11 , Oscar Williams-Grut
Octopus Energy continues to defy the energy crisis that has seen many rivals collapse, raising $300 million (£227 million) just months after another major investment.
Octopus, which supplies 3.1 million customers in the UK, has raised funds from Canada Pension Plan Investments (CPPI), one of the largest pension funds in the world. Five-year-old Octopus was valued at around $5 billion (£3.7 billion) in the deal.
The fundraising comes just months after Octopus raised $600 million (£437 million) from Al Gore’s climate fund Generation Investment Management. The energy business was valued at $4.6 billion (£3.3 billion) in the September deal, which made it worth as much as British Gas owner Centrica at the time. (Changes in Centrica’s share price since then mean the company is now worth around £200 million more than Octopus at current levels.)
Hilton Food Group buying spree continues with smoked salmon producer
10:03 , Naomi Ackerman
Meat packer Hilton Food Group today revealed it is to snap up smoked salmon giant Dutch Seafood Company (Foppen) for for €90 million (£76.9 million) in a move that will see the FTSE 250 firm enter the US for the first time.
Hilton, which processes and packages meat for supermarkets including Tesco, said it plans to raise £75 million via equity placing to part-fund the acquisition.
It is the latest in a string of buy-ups for Hilton, which reported £2.8 billion in revenues and £67 million in adjusted profits last year.
Shares fell 0.1%, or 1.4p, to 1195p, this morning.
Read the full story here
FTSE and sterling under pressure
08:35 , Graeme Evans
The FTSE 100 index has fallen 14.4 points to 7306.86, with tech-focused Scottish Mortgage Investment Trust and Auto Trader among stocks in retreat.
Primark-to-Twinings owner Associated British Foods rose 6.5p to 1940.5p after its AGM trading update pointed to operating profit progress in the year ahead.
Sterling remained at 1.32 versus the US dollar after the GDP figure for October came in lower than expected. The domestic-focused FTSE 250 index fell 82.86 points to 23,065.18.
Patrick Drahi’s ‘no bid’ period at BT ends
08:03 , Oscar Williams-Grut
French telecom billionaire Patrick Drahi’s lock-up period at BT comes to an end today.
Drahi, the creator of Altice, bought a 12.5% stake in the UK business in June, triggering a six month ‘no bid’ clause. That ends today and he is free to do what he pleases. What exactly will he do?
A full-on swoop at BT would be difficult to get past regulators, though, especially amid current strong opposition to foreign takeovers. The National Security and Investment Act, meant to protect British infrastructure, comes into force next year. Still, the telecom firm’s shares have more than halved since 2016 and BT is on high alert. It has hired Robey Warshaw - the firm George Osborne joined earlier this year - to help defend itself from any approaches.
Read our full profile of Drahi, which explores in detail what he might get up to at BT.
UK GDP slows sharply
07:59 , Graeme Evans
The steam appears to be coming out of the UK’s economic recovery after figures showed the country expanded by just 0.1% in October.
That compares with 0.4% expected in the City and the 0.6% growth recorded by the Office for National Statistics a month earlier.
Supply chain issues, worker shortages and surging inflation are likely to have put the dampeners on growth in October.
Unusual times for investors
07:52 , Graeme Evans
Deutsche Bank is looking for today's headline CPI figure to reach 6.9%, with core inflation at 5.1% for its highest reading since 1990.
Its markets commentator Jim Reid said that inflation near to 7% would normally have led to sleepless nights for investors about how to position their portfolios. Instead, guidance from the Federal Reserve about the pressures being transitory has soothed their nerves.
Reid said: “The reality is that as inflation has risen, the market has managed to go through denial, transitory, elongated transitory, and now the retirement of transitory, all without much fuss.
“I’ve said this before but I doubt there is anyone in the world that predicted we’d end the year at near 7% whilst at the same time having 10yr US Treasury yields still at around 1.5%.”
Inflation jitters set to slow FTSE 100
07:36 , Graeme Evans
Inflation jitters will mean a risk-averse session for markets today amid expectations that the latest reading of the US consumer prices index (CPI) will be near to 7% later today.
October's figure came in at a 31-year record of 6.2%, with November's likely to be even higher at 6.9% for the highest level since 1982.
Some economists have suggested that CPI could hit 7%, which would add to pressure on the US Federal Reserve to accelerate the tapering of their bond-buying stimulus programme.
The Fed meets next week, but chairman Jerome Powell has already indicated that inflation concerns may push policymakers to go harder than the current reduction of $10 billion in treasuries and $5 bilion a month in mortgage-backed securities.
Michael Hewson, chief markets analyst at CMC Markets, said “Currently markets are pricing in the prospect of a doubling of the taper next week, and any number that hints at a bigger amount next week could prompt some choppiness for markets.”
A faster pace of tapering will fuel expectations for interest rates to rise sooner than expected, adding to upward pressure on the US dollar.
Sterling, in contrast, has been depressed by the tightening of Covid-19 restrictions and the possibility that their impact will delay a rise in UK interest rates until February.
The pound hit a low for the year on Wednesday and was only marginally better off this morning after trading at 1.321 versus the dollar.
The inflation fears and continued Omicron uncertainty led to a weak session for Wall Street and Asian markets, with Europe set to follow suit. CMC is forecasting that the FTSE 100 index will open 30 points lower at 7291.
