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FTSE 100 Live: US interest rates hit 4%, Next posts sales update

Jerome  (Evening Standard)
Jerome (Evening Standard)

US interest rates went up by another 0.75% as the Federal Reserve continues its fight against inflation.

Tonight’s rise to 4% for the top end of the Fed Funds rate range followed three hikes of a similar size over the summer, comes with Wall Street increasingly hopeful that the pace of monetary tightening will slow from December.

In today’s corporate updates, retailer Next said underlying sales growth of 0.4% for the quarter to Saturday was slightly better than it had expected. It continues to forecast annual profits of £840 million, a rise of 2.1% on a year earlier.

Fed hikes US rates by 0.75%, meeting market expectations

Wednesday 2 November 2022 18:04 , Michael Hunter

The US Federal Reserve has increased US interest rates by 0.75%, taking the top end of the Federal Funds target range to 4%, in a move widely expected on across global markets.

City and Wall Street experts moved away from predictions of a full 1% rise in the run-up to the meeting, amid signs that the central bank’s fight against inflation could be starting to appear in economic data. Hopes that household spending may be starting to cool are being seen by some as the first sign that higher borrowing costs are having the desired effect, opening the way for softer rate rises.

It is the fourth consecutive meeting at which the Federal Open Market Committee has opted for a 0.75% rise.

The Bank of England will follow the Fed into the spotlight tomorrow, with its first decision on rates since the short-lived Truss government’s now-demolished mini-Budget.

The BoE is thought likely to lift UK base rates by 0.75% in what would be the biggest rise since 1989 and would take rates to their highest since 2008 and the time of the financial crisis. The propsects of full 1% rise in the UK  have also receded,  since government  spending plans were redrawn in Downing Street rather than due to signs of a more robust economy.

FTSE 100 falls with interest rates in focus on both sides of the Atlantic

Wednesday 2 November 2022 17:51 , Michael Hunter

London’s FTSE 100 ended lower as traders attention turned to interest rates, with monetary policy announcements looming on both sides of the Atlantic.

The Federal Reserve is widely expected to raise rates by 0.75% later this evening, with a rise of the same margin predicted by City and Wall Street experts from the Bank of England on Thursday at midday.

With the fight against inflation at central banks back at the forefront of the agenda, the UK’s main stock market index fell 42 points to 7,144.14, a drop of 0.6%. There were also weak-looking purchasing managers’ index numbers from Germany, Italy and France, adding to the sense of caution. Mining and resource stocks were notable fallers. while dollar earners rose into the Fed rate call.

Federal Reserve back in market spotlight as fourth successive 0.75% rate hike looms

Wednesday 2 November 2022 17:43 , Simon Hunt

The Federal Reserve is moving back into the market spotlight today, on the second day of a two-day rate-setting meeting at which it is expected to stop short of a 1% hike.

City and Wall Street experts are leading toward predictions of a 0.75% rise -- softer than the 1% that some analysts had predicted further away from the meeting--  as the Fed seeks to control inflation. It would be the fourth consecutive meeting at which the Federal Reserve Open Market Committee has lifted rates by 0.75%. As talk of a bigger increase of 1% recedes, speculation has grown about when it might reduce the size of its rises for the first time in the current monetary policy tightening cycle.

Commentators point to December as the month when smaller hikes may kick in, although there will be many economic releases before then that will shape rate expectations and policy makers’ thinking.

read more here

Zilch hits profitability as cash-strapped Brits turn to ‘pay later’ products

Wednesday 2 November 2022 15:42 , Simon Hunt

Buy now, pay later business Zilch hit another milestone on its path to dominate the market today as the firm said it had turned a gross profit and surpassed 3 million users.

The London-based fintech, which offers customers the choice of deferring payment for online purchases, said revenue had tripled in the past six months, while it had now reached profitability across its product suite.

It’s the latest achieve in a period of rapid expansion for the firm as customers with squeezed incomes snub the growing interest rates of credit cards in favour of cheaper alternatives. It comes after the company became Europe’s fastest unicorn with a valuation of $2 billion in November 2021, and announced an expansion to the US in May 2022 with a new office opened in Miami.

read more here

New York stocks slip into Federal Reserve rate decision after more strong jobs data

Wednesday 2 November 2022 13:57 , Michael Hunter

The S&P 500 fell in opening trade ahead of an announcement on US interest rates widely expected to lift them by 0.75% to 4% at the upper end of the Fed Funds target range.

New York’s broad stock index fell 20 points to 3837.0, a decline of 0.5%. It came after more strong weekly jobs data rose unexpectedly into the decision from the Federal Reserve, adding to the sense among traders that the central bank has room for aggressive rate rises to tame inflation as the economy remains resilient.

Wall Street and City experts think the Fed is likely to stick with its established size of rate rise for the fourth consecutive month, with talk of a bigger 1% hike fading in the run up to the meeting. But robust jobs data stoked a sense of caution, especucially with the full employment data for October due out on Friday. The monthly non-farm payrolls report is one of the most closely followed pieces of economic data on the calendar. Rising employment numbers are seen as one of the main factors giving the Fed leeway for big hikes.

While a 0.75% move is still strongly forecast later today, a run of strong hiring into next month’s Fed meeting could undermine hopes among stock traders for softer rate rise of 0.50% in December.

Political chaos curbs marketing spend

Wednesday 2 November 2022 11:46 , Simon Hunt

The political and economic turmoil unleashed by the botched mini-Budget in September has had a major knock on effect on businesses willingness to spend on marketing, B2B media company Bonhill warned today.

The Clerkenwell based firm said it had seen a “further softening in its markets” since Kwasi Kwarteng’s statement.

There is also a reluctance to spend during the COP27 climate change summit starting on Sunday. However the company said its InvestmentNews US subsidiary had performed better with “a stabilisation in both forward bookings and general trading.”

Bonhill, which put itself up for sale last month, said it expects revenues of about £14.5 million and a loss of £0.6 million this year. It said it is “pleased by the strong level of interest received.” Shares fell 16% to 3.16p

Metro Bank shares jump on profit landmark, FTSE 100 steady

Wednesday 2 November 2022 10:20 , Graeme Evans

A surprise September profit by Metro Bank today helped shares to jump 14% or 10.2p to 83p.

Chief executive Daniel Frumkin said tight cost control and the support of rising interest rates led to last month’s turnaround landmark.

As well as the earlier-than-expected profit, investors were relieved that Metro has seen no signs of stress or increased delinquency rates in its customer base.

Metro soared in value after its 2016 listing, hitting 4000p at one point in 2018 as its branch-led model and focus on customer service shook up the banking sector.

But the challenger bank’s shares crashed back to earth in 2019 after an accounting issue saw it wrongly class certain loans. A turnaround under Frumkin has so far taken more than two years, with Metro focused on being the UK's best community bank.

Analysts at Jefferies have a price target of 148p, but even after today’s improvement the former FTSE 250 index company is where it was earlier in the autumn. AJ Bell investment director Russ Mould added: “It still needs to convince the market it is now on a sustainable path.”

Elsewhere, blue-chip investors were content to sit on the sidelines ahead of this week’s monetary policy decisions in the UK and US.

The FTSE 100 index, which rose 1.3% yesterday, was 6.83 points lower 7179.33 and the UK-focused FTSE 250 index retreated 73.69 points to 18,122.21.

One of the biggest top flight fallers was the packaging firm Smurfit Kappa, which dropped 5% or 156p to 2743p despite continued progress in the recovery of significant cost inflation. It reported a 77% rise in profits for the first nine months of the year.

In the FTSE 250, tech investor Molten Ventures rose 5.6p to 352.6p after its half-year update revealed an anticipated net asset value of at least 830p a share.

Sales up at Next as shoppers buy coats for winter

Wednesday 2 November 2022 09:37 , Simon English

NEXT offered a ray of hope for the high street today when it said sales are up on a year ago as shoppers stocked up on warm clothes in readiness for winter.

City analysts still warn that there is trouble to come even for Next, generally regarded as the best run business in UK retail.

Sales in the thirteen weeks to October 29 were up 0.4% on a year ago and the company held its full year profit forecast at £840 million. There was one very strong week of sales in September when the weather was bad.

The shares rose 97p, 2%, to 5060p.

Rosalind Hunter at global consultancy Simon-Kucher & Partners said: “The stabilising sterling should help deal with costs, and a combination of physical and online stores could place the retailer in a better position than some of its solely online competitors to face the challenges ahead.”

Richard Hunter, Head of Markets at interactive investor, said: “The wider concerns of a cost of living crisis, an inflationary environment which is being tackled by rising interest rates and a more cost-conscious consumer, are all headwinds to be faced.”

Recent surveys have showed that consumer confidence is near record lows as households responded to high inflation and concern over chaos in government

GSK and Next shares rise after updates, FTSE 100 flat

Wednesday 2 November 2022 09:10 , Graeme Evans

Uncertainty ahead of tonight's US interest rates decision means the FTSE 100 index is close to its opening mark, up 7.30 points at 7193.46.

Retailer Next’s shares lifted 3% or 163p to 5126p after its reassuring trading update, while GSK’s improved full-year guidance sent its shares up 18.1p to 1464.07p. Packaging firm Smurfit Kappa dropped 77p to 2822p after its trading update.

The FTSE 250 index was 15.29 points lower at 18,180.61, with the tech investor Molten Ventures up 20.6p to 367.60 after it forecast a net asset value of at least 830p a share for half-year results to 30 September.

Shares in Aston Martin Lagonda and Wizz Air were down 11% and 9% after their respective trading updates.

Maersk: “Plenty of dark clouds on the horizon”

Wednesday 2 November 2022 09:02 , Graeme Evans

Shipping company Maersk today added to global recession fears after it sounded the alarm on dwindling demand for its containers amid a European energy crisis and sky-high inflation.

The Oslo-based firm, which is often considered a bellwether for international trade, warned of “plenty of dark clouds on the horizon” as it cut its forecast for demand, predicting a fall of 2-4%. Maersk shares fell 5%.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, said: ‘’Despite high hopes of an easing of supply snarl ups would be fair winds for a smoother passage ahead, Maersk instead is spotting fresh dark clouds on the horizon, as consumer confidence is sideswiped by looming recessions around the world.

“The company has been riding a wave of surging demand and has been buoyed by a rise in freight rates but it sees that tide receding as demand for goods subsides amid cost-of-living headwinds. It sees the ongoing energy crisis, fuelled by the ongoing war in Ukraine, as a particularly bleak spot which is exacerbating the pain of inflation for consumers and companies around the world.’’

Wizz upbeat despite wider loss, shares fall

Wednesday 2 November 2022 08:20 , Graeme Evans

Operating losses at Wizz Air have risen 23% to 64 million euros (£55 million) in the six months to 30 September, with a strong summer recovery unable to offset severe travel disruption earlier in the year.

Revenues of 2.2 billion euros (£1.9 billion) were more than double the previous year’s Covid-hit performance, but the bottom-line loss still surged to 384.3 million euros (£330.5 million).

The eastern Europe-focused carrier sounded a note of optimism, however, as it revealed demand for flights remained strong. It also confirmed plans to expand its fleet by upping capacity 35% compared with 2019 levels.

Wizz Air shares were 5.7% lower following the update.

Chief executive Jozsef Varadi said: “Whilst there remains some uncertainty during the winter period in relation to macroeconomic and input costs…the continued diversification and growth of our network supported by fleet expansion plans leaves the company well positioned to drive profitable growth in the future.”

Praise for Next after resilient trading

Wednesday 2 November 2022 08:12 , Graeme Evans

Next’s sales rise of 0.4% for the quarter to 29 October and unchanged profits guidance helped lift its shares more than 2%, while also providing a wider boost for high street confidence.

The shares are 109p higher at 5072p but broker Liberum has a “buy” recommendation and 7500p price target, regarding the FTSE 100-listed company as one of its favoured consumer-focused stocks for 2023.

Liberum said: “We already knew much of Q3 when the group announced its interims, but the last five weeks saw a 1.4% increase in full-price sales.

“The performance of the group is admirable and unchanged guidance for pre-tax profits of £840 million and a very strong balance sheet provides comfort in making Next one of our top picks for the next 12 months.”

GSK ups full-year sales and profit forecasts after vaccine boost

Wednesday 2 November 2022 07:58 , Michael Hunter

GlaxoSmithKline has increased its sales forecast for the full-year, helped by demand for its vaccine against shingles.

The company said it now expected to report revenue growth of between 8% and 10% at constant exchange rates , with operating profit to rise by between 15% and 17% for 2022. The guidance excludes any contribution from its Covid vaccine.

Sales of ts Shingrix vaccine rose 51% to £760 million, a record. Overall quarterly sales rose 9% to almost £8 billion.

Aston Martin Lagonda reports record average selling price

Wednesday 2 November 2022 07:47 , Michael Hunter

The average price of an Aston Martin Lagonda sports car hit a record £173,000 in the third quarter, helping the newly-recapitalised company report a rise in revenue despite delivering fewer vehicles due to difficulties in its supply chain.

James Bond’s favourite carmaker said “strong pricing dynamics” took its average selling price to its highest ever level, up from £150,000 a year ago, helping revenue in the year to date rise 16% to £857 million.

It reported an operating loss of £148 million for the year to date, and £58.5 million in the third quarter. The FTSE 250 company, which recently completed a major capital raising, said “supply chain problems continued to moderate potential growth.”

But demand remained strong, with GT/Sports cars now sold out into Q2 2023 and DBX orders up by more than 40% year-on-year. It delivered 44 Valkyrie cars so far in 2022, the model it says comes closest to being a Formula One car without being restricted to the track.

US markets fall ahead of rates decision, FTSE 100 seen higher

Wednesday 2 November 2022 07:33 , Graeme Evans

Further evidence of a robust US jobs market meant Wall Street indices surrendered initial gains to finish in negative territory last night.

The unexpected rise in jobs vacancies in September fuelled doubts over whether the Federal Reserve will be in a position to slow the pace of interest rate rises once the expected fourth consecutive 0.75% increase is out the way tonight.

Markets rose sharply in October, with the Dow Jones Industrial Average up 14% in the month, on hopes that Federal Reserve chair Jerome Powell may signal a pivot in the central bank’s approach to fighting inflation.

Michael Hewson, chief market analyst at CMC Markets, points out there are two sets of inflation and jobs reports before December’s meeting.

He added: “Powell will have to keep the prospect of a 0.75% rate rise on the table if he is serious as he said back in September that the Fed is “strongly committed” to driving inflation lower.”

The FTSE 100 added 1.3% yesterday amid speculation that China is preparing a gradual exit from its zero Covid policy. Hewson expects the top flight to open 15 points higher at 7201 in today’s session.