The highest inflation rate in three decades today raised the chances of a February interest rate hike.
The consumer prices index rose by a bigger-than-expected 5.4% year-on-year, while the retail prices index measure still used in setting some bills reached 7.5%.
The Bank of England hiked rates in December and will be under pressure to do so again when policymakers meet next month.
FTSE 100 Live Wednesday
Inflation higher than expected at 5.4%
Oil above $88 after pipeline outage
WH Smith shares surge after update
Pearson’s first profit upgrade in five years
FTSE closes higher after strong corporate updates
17:10 , Oscar Williams-Grut
The FTSE 100 has ended the day up 26 points, or 0.3%, at 7589.
The index was buoyed by a solid update from Burberry and Pearson’s first profit upgrade since 2017 (both mentioned earlier on the blog). Unilever also put 4.5% back on its share price after vowing not to increase its offer for GSK’s consumer healthcare business. Investors had been concerned the company would overpay and destroy value.
Elsewhere, the big story today is inflation rising to a 30-year high at 5.4%. It makes another interest rate rise at next month’s MPC meeting surely almost certain.
That’s all from us on the blog today, join us again tomorrow.
Unilever says it won’t up GSK bid
17:06 , Oscar Williams-Grut
A late breaker: Unilever has ruled out raising its bid for GSK’s consumer healthcare business.
In a statement at market close on Wednesday, Unilever said: “We note the recently shared financial assumptions from the current owners of GSK Consumer Healthcare and have determined that it does not change our view on fundamental value. Accordingly, we will not increase our offer above £50bn.”
The statement means the company has effectively ruled out a possible fourth approach. The deal now looks if not dead, then at least on life support. That’s perhaps unsurprising given the stinking reaction it got from the City.
Crackdown on crypto ads
16:27 , Oscar Williams-Grut
The City’s top watchdog is tightening its grip on crypto and other high-risk investments as politicians and regulators fret that too many Brits are getting into investments they don’t understand.
The Financial Conduct Authority today launched a crackdown on financial advertising amid concerns about “the ease and speed with which people can make high-risk investments”.
The regulator wants to ban incentives to invest such as refer-a-friend bonuses or new joiner giveaways. Rules around financial marketing and risk warnings would also be toughened up under the proposed reforms, which will now go to consultation.
M&C Saatchi loses its CFO
16:15 , Oscar Williams-Grut
The finance director who helped rescue M&C Saatchi from a near disastrous accounting scandal is jumping ship – in the midst of a takeover tussle for the famed advertising house.
Mickey Kalifa is on the verge of joining digital agency Dept, Sky News reports, a blow to CEO Moray MacLennan. M&C said he was leaving for “personal reasons”.
A search for his replacement is underway and Kalifa will remain in post to ensure an orderly transition. It comes as M&C’s own deputy chair tries to mount a takeover bid.
Crest Nicholson returns to profit and reinstates divi
15:58 , Oscar Williams-Grut
Crest Nicholson has rebounded to a profit of £70.9 million following a loss of £10.7 million the year prior. Revenue rose 16% to £786.6 million last year as forward sales and completions both rose. The company reinstated its final dividend at 9.5p per share, taking total dividends this year to 13.6p per share.
CEO Peter Truscott, who took over in 2019, said the results showed his three year turnaround was complete.
“It was a clear objective of the new leadership team to restore Crest Nicholson to being one of the UK’s leading housebuilders,” he said. “That challenge was undoubtedly heightened by the arrival of the pandemic. However, we can say with confidence that we have delivered the turnaround that we wanted.
“We were delighted to increase profit expectations twice in the year and we have started 2022 with a strong forward order book and everyone in Crest Nicholson is excited about our plans for expansion.”
Shares rose 3.6p, or 1%, to 343.2p.
Mode Global parts ways with CEO
14:51 , Oscar Williams-Grut
Mode Global said CEO Ryan Moore left on Wednesday. He was in charge for just nine months, according to his LinkedIn profile.
Jonathan Rowland, Mode’s executive chair, said: “I would like to thank Ryan for his contribution to Mode over his time as CEO. I wish him well in all his future endeavours.”
Rowland, Mode’s founder, struck a different tone on Twitter, saying he had “cleared the decks to take control of the business.” He will now take over day-to-day running of the company.
The shake-up follows an embarrassing and damaging saga last November surrounding the roll-out of Mode’s product.
Last year the company said its bitcoin cash back scheme was set to launch in partnership with 40 retailers in 2022, including Boots, Homebase and Ocado. However, Mode was quickly forced to “clarify” the claims after all three retailers denied they were involved.
Unilever finds a floor
14:09 , Oscar Williams-Grut
After two days of heavy selling, Unilever stock has finally stopped taking on water.
The consumer goods giant is up 2.1% at writing time to trade at 3590p. That’s still about 330p below where it was trading last Friday, before news broke of its £50 billion bid for GlaxoSmithKline’s consumer healthcare arm. Investors and analysts are not keen on the idea, which they see as high risk.
There are lingering concerns that Unilever will come back with an even higher bid. Boss Alan Jope has insisted he won’t overpay but the City clearly has concerns.
GSK’s science chief goes West
12:07 , Simon Freeman
GlaxoSmithKline’s busy week continues with the departure of revered chief scientist Hal Barron to a $3billion US start-up backed by Jeff Bezos.
Barron will be replaced by Tony Wood, hired in from Pfizer in 2017, who will step up from his role as GSK’s science and technology VP in August to oversee its global research and development pipeline.
Wood has been involved in launching a series of Glaxo’s most important drugs including HIV treatment Cabenuva and most recently its Covid-19 treatment Xevudy.
He also heads up AI and machine-learning projects to discover new drugs.
But the change at the top comes at a critical time for the FTSE 100 drugmaker, which is preparing to spin off its over-the-counter healthcare division and focus solely on new medicines.
It emerged this week that Unilever has bid £50 billion, so far unsuccessfully, for the consumer unit.
Barron will remain on GSK’s board as a non-exec director, paid £295,000, when he moves to San Francisco to head up Altos Labs.
The high-paying biotech is working to rejuvenate cells and reverse ageing, a goal close to the hearts of Bezos, Facebook investor Yuri Milner and other billionaire backers among Silicon Valley’s elder statesman.
Emma Walmsley, who intends to lead the new pharma division, said: “Tony is perfectly placed to build on Hal’s outstanding progress and to deliver value from our pipeline.
“Hal’s appointment to Altos Labs is a unique opportunity for him and we are pleased that GSK will continue to benefit from his expertise at the Board .”
KPMG hit with £3 million fine over Conviviality work
12:06 , Oscar Williams-Grut
The Financial Reporting Council (FRC) today fined KPMG for poor quality audits of Conviviality in 2017 and 2018. Nicola Quayle, the former KPMG partner who led the work, was personally fined £80,850.
“Big Four” accountant KPMG is reeling from a string of recent fines and scandals linked to poor quality audits carried out in the past. In December, KPMG ruled itself out of bidding on new government contracts after the Cabinet Office threatened a ban due to historic misconduct.
Burberry checks out
11:52 , Simon Freeman
Burberry’s future looked a little brighter today as moves to attract younger, richer customers begin to pay off.
The British luxury fashion brand now expects annual profits to grow by 35% this year.
It put a 7% rise in third-quarter sales down to ditching discounts, a sharper digital operation and “stand-out” growth in the US market.
Coats, totes and Lola shoulder bags are selling well.
Chairman Gerry Murphy said the performance is an “excellent platform on which to build” when Jonathan Akeroyd, of Versace, takes over from Marco Gobbetti as CEO in April.
Shares, down by a third since August, rose 6% to 668p to top the FTSE 100 in early trading.
Pearson surprises the City
11:40 , Oscar Williams-Grut
Pearson has delighted the City with its first profit upgrade since 2017.
The textbook maker said full-year operating profit was on track to be around £385 million for the current financial year, up 33% on the prior 12-months and ahead of forecasts.
Outperformance was driven by booming demand for professional training as workers look to learn new tech skills. Sales grew by 18% last year, helping group sales climb 8%.
CEO Andy Bird, a former Disney exec, is trying to turn Pearson into a “Netflix for textbooks”. He said today that his new subscription platform Pearson+ now had 2.7 million registered users who had taken 36 million sessions.
“What’s really interesting is the amount of data we’re getting,” he said. “The insight we’re getting is really, really invaluable to the company.”
Shares shot to the top of the FTSE, up 42.6p, or 6.7%, to 675p.
WH Smith boosts recovery hopes
10:41 , Graeme Evans
The prospect of a summer without Covid restrictions fired up interest in WH Smith and easyJet today as City analysts picked their winners for a travel re-opening.
WH Smith helped its cause with a resilient trading update showing an improved sales trend for its UK airport and rail sites in the month prior to the emergence of Omicron. Its high street stores also got back to 90% of 2019 revenue levels last month.
With travel restrictions being withdrawn, the retailer is hopeful that investments made during the pandemic in the UK and its rapidly growing US estate will pay off this summer.
Shares jumped 5% or 82.5p to 1635p, meaning the FTSE 250 stock is now well ahead of where it was before Omicron hit but still short of the 2000p seen last spring.
Analysts at Peel Hunt believe there's the potential to reach 2300p. The broker said today: “WH Smith will come out of the Covid-19 crisis in better shape than it went in. Profit recovery won’t come overnight but investor faith will return quickly.”
There was also optimism towards easyJet after Liberum analyst Gerald Khoo raised his price target to 800p as one of his three favoured picks in the European airline sector.
Fuel prices have more than doubled in the past year, creating near-term pressure on earnings estimates, but Khoo believes easyJet's short-haul focus will be an advantage.
Barring further restrictions, he says the industry is in recovery mode as he also backed shares in British Airways owner IAG to reach 200p. Khoo said: “The strong get stronger in crises and are better able to handle higher fuel costs.”
Luton-based easyJet rose 1.5% to 644p in the FTSE 250, but IAG failed to benefit as higher oil prices left shares 3p cheaper at 162.7p.
Support from BP and Royal Dutch Shell pushed the FTSE 100 up 8.13 points to 7572.79, offsetting weakness elsewhere after Japan's Nikkei 225 index fell 2.8% to a five-month low in the wake of Tuesday's sell-off for Wall Street tech stocks.
Baillie Gifford Japan Trust and JPMorgan Japanese Investment Trust were 3% lower in the FTSE 250 index, but the second tier rose 32.39 points to 22,686.97.
Burberry and Pearson set pace, Japan stocks lower
08:54 , Graeme Evans
Coursework publisher Pearson and luxury goods business Burberry set a strong pace in the FTSE 100 index after their shares rose 4% on the back of trading updates.
Support from BP and Royal Dutch Shell following the latest rise in oil prices also helped the FTSE 100 to a better-than-expected performance, albeit still 5.96 points lower at 7557.59.
The resilience came amid weakness elsewhere, with Japan's Nikkei 225 index down 2.8% at a five-month low following last night's latest sell-off for Wall Street tech stocks.
Baillie Gifford Japan Trust and JPMorgan Japanese Investment Trust were down by more than 3% in the FTSE 250 index, leaving the second tier 49.20 points lower at 22,603.
WH Smith rose 4% as it said its travel-based stores were well placed ahead of this summer's anticipated recovery in peak trading. The chain also reported that high street stores generated 90% of 2019 revenue levels in December.
Bank under pressure as inflation surges
08:30 , Graeme Evans
The Bank of England's monetary policy committee next meets to discuss interest rates on 3 February, when it will have updated economic projections to hand.
It hasn’t been this far off its inflation target of 2% since it first set it.
The City expects the consumer prices index to spike at 7% in April, higher than the peak of 6% forecast by the Bank when it increased interest rates to 0.25% in December.
Hargreaves Lansdown's personal finance analyst Sarah Coles notes that falling unemployment and record low redundancies make the argument for raising rates far stronger.
She added: “It won’t want to panic borrowers, businesses or investors by raising rates too far or too fast, but it can’t afford for inflation to get out of control either.”
Boris “should have gone to the pub” -- ‘Spoons boss Tim Martin
08:22 , Simon English
JD WETHERSPOON weighed in to the Number 10 “partygate” scandal today, saying it would not have been a problem if the government had the sense to have kept the pubs open.
Outspoken founder and chairman Tim Martin, a Tory donor and sometime Boris Johnson backer, noted in an update to the City today that:
1) Central London pubs employ experienced staff, including highly trained managers, who would have easily dealt with the “high jinks” alleged to have occurred at No. 10.
2) CCTV is in operation in Central London pubs, so subsequent enquiries as to events are facilitated by the ready availability of evidence.
3) In 2020, before vaccinations were available, Covid controls in pubs were superior to private parties, with screens, sanitisers, optimal seating layouts and so on.
Fuel costs add to pressure on airlines
07:59 , Graeme Evans
Rising oil prices pose a fresh headache for airlines just as travel restrictions begin to ease.
Liberum's transport analyst Gerald Khoo notes that fuel prices have more than doubled in the past year, creating short-term pressure on earnings estimates at a time of limited pricing power.
His recommended stocks include easyJet and British Airways owner IAG, based on new price targets of 800p and 200p respectively. Europe-listed Ryanair is also backed, but Khoo has “sell“ recommendations on Air France-KLM and Lufthansa.
He said: “The strong get stronger in crises and are better able to handle higher fuel costs.”
Khoo added: “Injections of private and government capital have kept much of the industry alive. While good for the wider economy and society, the support of excess and economically unviable capacity means the industry faces a protracted recovery.
“However, assuming international travel restrictions continue to ease, with Omicron appearing to be a brief but painful blip, we believe the industry is now on the path to recovery.”
Oil rises after pipeline outage
07:28 , Graeme Evans
Oil supply concerns following an outage on a pipeline between Iraq andTurkey sent Brent crude futures up for a fourth successive session to more than $88 a barrel today.
The price of Brent was already at its highest level in seven years following an attack earlier in the week by Yemen's Houthi group in the United Arab Emirates.
As the global economic recovery picks up speed and some OPEC+ members struggle to meet their supply targets, there are fears that the price could soon be in three figures.
The cost pressures do little to quell fears over higher interest rates after a downbeat sessions for markets in Europe and the US yesterday.
The S&P 500 fell 1.8%, with a results-day drop of 7% for shares in Goldman Sachs offsetting M&A optimism after Microsoft's deal to buy Activision Blizzard for $68.7 billion.
Wall Street futures point to another decline later today, while CMC Markets expects the FTSE 100 index to open 40 points lower at 7523.
CMC's Michael Hewson said: “There is little doubt that bond markets have driven this move, with tech stocks and other highly valued areas of the market getting sold off heavily.
“The US 2-year yield which is probably most correlated with where market rates are heading moved back above 1% and has risen more than 30 basis points this year alone.”