Inflation figures for September today showed a slight dip in the annual rate to 3.1%, but the performance is unlikely to dampen market expectations that the Bank of England will hike interest rates later this year.
Annual inflation fell back due to the unwinding effect of last year's Eat Out to Help Out scheme, which was a factor in pushing up the rate to 3.2% in August. However, the cost of goods produced by factories rose, with metals and machinery showing a notable rise.
Economists expect a surge in the annual rate for October as the recent increase in the Ofgem energy price cap will be included in the calculations.
FTSE 100 Live Wednesday
Facebook fined £50 million
IAG shares suffer fresh fall
Netflix gets Squid Game boost
Lloyds Banking Group says 48 branches across England and Wales to close
15:35 , Joanna Bourke
The firm’s retail director Vim Maru said the move comes as the use of the group’s physical estate continues to decline.
Maru said: “Our branches remain a fundamental part of how we serve our customers but we need to ensure the size of our branch network reflects the number of customers wanting to use them.”
Read more HERE.
Interest rate speculation mounts
14:47 , Oscar Williams-Grut
The market continues to be fixated on the possibility of an interest rate rise next month, even after this morning’s lower than expected inflation print.
Jane Sydenham, Investment Director at Rathbone Investment Management, says: “The market is certainly telling us we’re going to get an interest rate rise before the end of the year. However, any rises will need to be gradual - not only for households, many of which won’t have seen interest rates beyond 1% for more than 10 years, but for the government too.
“The amount of outstanding government debt means that their bill for interest on that debt also increases significantly as rates rise. Putting rates up too quickly also runs the risk that we kill off the economic recovery just as it gets going. It’s a delicate balance to manage, and the risk of policy error is a real one that governments need to think about.”
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, says: “With prices staying stubbornly high and another surge expected, a gentle rise in interest rates before the end of the year still looks likely if there is any chance of keeping a Goldilocks economy within reach.
“Too much inflation in the mix risks the economy getting too hot, leading prices to spiral upwards. If rates are pushed up rapidly, there’s a risk it gets too cold, freezing off economic growth. A 2% inflation target is considered just right, as long as the economy also keeps growing.”
The FTSE 100 is down 12 points or 0.17% at 7205 in mid-afternoon trade.
Now Nationwide slashes cheap mortgage deals
12:34 , Simon English
NATIONWIDE Building Society today put up the cost of some of its most popular mortgages, the latest sign that home loans are getting more expensive.
With the City betting on a rise in interest rates, perhaps as soon as next month, lenders are already binning their cheapest deals and replacing them with more costly offerings.
While the market remains competitive, financial advisers say now is a good time to lock in the cheapest deal possible, given that bank base rates are likely to rise from today’s low of 0.1% to perhaps 1% by next summer.
Facebook told it’s not ‘above the law'
12:15 , Oscar Williams-Grut
Facebook has been told it is not “above the law” after being hit by a £50.5 million fine from the UK’s competition watchdog.
The Competition & Markets Authority (CMA) today hit Facebook with the bumper fine, which was 150 times bigger than the previous biggest fine for a similar offence.
The punishment was in relation to Facebook’s $400 million acquisition of GIF website Giphy in May 2020. The CMA imposed an initial enforcement order (IEO) at the time, which requires firms to limit integration while the watchdog probes the deal for possible competition concerns.
Facebook was required to provide the CMA with regular updates but the watchdog said the social media group “significantly limited the scope of those updates, despite repeated warnings from the CMA”.
“We warned Facebook that its refusal to provide us with important information was a breach of the order but, even after losing its appeal in two separate courts, Facebook continue to disregard its legal obligations,” said Joel Bamford at the CMA. “This should serve as a warning to any company that thinks it is above the law.”
A spokesman for Facebook said: “We strongly disagree with the CMA’s unfair decision to punish Facebook for a best effort compliance approach, which the CMA itself ultimately approved. We will review the CMA’s decision and consider our options.”
The fine has so far not affected the share price, with Facebook’s stock up half a percent in the pre-market in New York.
Rio’s $7.5bn mission to save planet
12:02 , Simon Freeman
Rio Tinto’s new CEO today set out a $7.5 billion (£5.5 billion) vision to slash its carbon footprint as it seeks to repair its reputation from a run of operational setbacks and the Juukan Gorge scandal.
The FTSE 100 mining giant, whose metals underpin green technologies from wind turbines to electric vehicles, will plough proceeds from powering the global shift toward net-zero into cleaning up its own act.
It intends to drive a 50% reduction in group emissions by 2030 — up from a previous target of 15% — in a dramatic strengthening of commitments ahead of the COP26 summit later this month.
Deliveroo boosted by Amazon tie-up
11:50 , Oscar Williams-Grut
Deliveroo’s partnership with Amazon Prime has already paid off in spades, helping membership of the takeaway app’s subscription service double in just a month.
Deliveroo said today the number of people signed up to Plus had doubled since it began offering a year’s free trial to customers through Amazon Prime in mid-September. Specific numbers weren’t given.
Plus subscribers get free deliver on orders for £3.49-a-month. Deliveroo said last month it would offer Amazon Prime customers a year’s free trial of the service under a partnership deal. Amazon Prime customers still have to opt in. Amazon is a significant investor in Deliveroo.
Momentum in Plus and Hop helped deliver a surge in orders for Deliveroo over the last few months. The company said gross transaction value was up 58% to £1.6 billion in the third quarter.
Deliveroo upgraded forecasts for growth in order value across the year, saying it now expects gross transaction value to jump by 60% to 70%. The company had previously guided growth of 50% to 60%.
Shares rose 7.6p or 2.6% to 298p. The company still remains well below its 390p IPO price.
THG continues to mend relations with the City
11:35 , Oscar Williams-Grut
Matthew Moulding, the boss of under-pressure e-commerce group THG, has made changes to a personal loan with Barclays that had raised eyebrows in some parts of the City as the company continues to try and repair relations with investors.
THG said Moulding and his wife Jodie were no longer using THG shares as collateral for a £100 million loan from Barclays. The loan was taken through a shell company, FIC Shareco, and partly used to buy more shares in THG.
THG said the Mouldings did not sell any shares as part of the changes. The loan is still understood to be active. No details were given about any alternative collateral now backing the loan.
The arrangement, which pre-dated the company’s IPO last year, had drawn the attention of some critical analysts, with complaints about a lack of transparency.
Shares in THG rose 6.2p or 1.9% to 331.6p. Read the full story.
Retail worries continue
10:25 , Graeme Evans
Buy recommendations for Pets at Home and WH Smith failed to ignite their shares today as investors focused on the prospect of another torrid winter for the retail sector.
The recent spike in Covid-19 cases has added to selling pressure, with sentiment already weakened by the perfect storm of rising labour, freight and raw material costs.
For Deutsche Bank, this means companies that have performed well during the pandemic, such as B&Q owner Kingfisher and B&M European Value Retail, will have to surrender some of their hard-won margin gains.
The City bank placed a “sell“ recommendation on B&M and instead favours Pets at Home for its exposure to pet ownership trends and WH Smith as the travel sector rebuilds.
Shares in both stocks were lower today despite the “buy” recommendations, with WH Smith caught in a wider sell-off in the airline sector as Covid cases in the UK continue to rise.
British Airways owner IAG fell 6% yesterday and was off by another 7.6p to 158p, not helped by analysts at Peel Hunt jettisoning their buy rating and reducing the broker's target price from 215p to 178p on the back of surging jet fuel costs.
IAG was joined on the blue-chip fallers board by Antofagasta after its latest production report highlighted ongoing disruption from the 12-year drought in Chile. Antofagasta's overall copper production and cost performance during the third quarter was in line with expectations but shares still fell 4% or 65.5p to 1410.5p.
The FTSE 100 index was 15.5 points lower at 7202.03, with defensive stocks including safety products conglomerate Halma and wind farms giant SSE the biggest risers.
Sentiment was also favourable towards British Gas owner Centrica, which resumed its upward momentum with a gain of 4% or 2.1p to 60.6p. It led the FTSE 250 index, which fell 36.62 points to 23,017.47 amid the weakness in consumer-focused stocks.
IAG under more pressure
10:21 , Graeme Evans
Shares in British Airways owner IAG came under more selling pressure today, falling another 6p to 159.6p on top of the 6% decline seen yesterday.
Rising costs, including the recent surge in jet fuel prices, have combined with a spike in Covid-19 cases to stall the airline sector's recovery.
Berenberg dumped its “buy” recommendation on IAG yesterday, with Peel Hunt following suit today. The broker now has a price target of 178p, compared with 215p previously.
Analyst Alex Paterson said: “We cut our forecasts by a significant amount as we do not expect yields to rise sufficiently quickly to mitigate the fuel cost pressure, which may worsen and be exacerbated by higher airport charges.”
Shopping centres firm Hammerson cheers improvement in rent collection rates
10:20 , Joanna Bourke
Hammerson has said it does not expect to provide further rent support for tenants, with trading recently picking up after the tough pandemic year.
During the Covid-19 crisis the FTSE 250 retail landlord agreed rent holidays and deferrals for some tenants. The government also introduced a moratorium on business evictions to help occupiers that were struggling amid lockdowns.
Hammerson, a joint owner of the Brent Cross mall and behind Birmingham’s Bullring centre, today said: “We remain focused on collecting arrears. We do not anticipate granting future concessions and all avenues to collect rents due are being pursued.”
The update came as the property firm said footfall in all territories now stands at around 15-20% below 2019 levels, although some centres in the UK exceeded what was seen two years ago around the August bank holiday weekend, and have continued to perform strongly since.
Read more HERE.
Arena backs takeover
09:29 , Graeme Evans
Arena Events, which builds temporary grandstands and structures for sporting events including the Ryder Cup and Cheltenham races, today backed a £71 million takeover proposal involving its 24% shareholder, the Saudi Arabian investment firm Tasheel.
The consortium also features UAE-based conglomerate IHC, which has worked with Arena previously. The 21p a share bid, which is subject to shareholder approval, represents a 48% premium on last night's AIM-listed price.
Chairman Ken Hanna said new ownership ensures the funding and support to become a leader in the event rental market.
Hanna added: “Over the last 15 years, under the leadership of Greg Lawless and his management team, Arena has grown from a small, UK based furniture rental business to a leading event rental business.
“Having spent most of the last two decades chasing around the world building the group, and subject to the successful conclusion of this transaction, Greg intends to step down as group CEO.
Drought impacts Antofagasta
08:31 , Graeme Evans
The FTSE 100 index is down 5.74 points at 7211.79, driven lower by mining stocks following price weakness for several commodities including coal and aluminium.
Glencore and BHP dipped 1%, but the biggest decline came from Antofagasta after its latest production report highlighted ongoing disruption from the 12-year drought in Chile.
The traditional rainy season ended in September, putting pressure on operations at the company's Los Pelambres mine until a new desalination plants comes into service next year.
Antofagasta's overall copper production and cost performance during the third quarter was in line with expectations but shares still fell 5% or 73p to 1403p.
Burberry shares were among the biggest risers in the FTSE 100 index after the luxury goods business appointed Versace boss Jonathan Akeroyd as its next chief executive. Shares lifted 28p to 1858p.
Burberry names Jonathan Akeroyd as CEO
08:13 , Joanna Bourke
The 54-year-old will replace Marco Gobbetti, who announced in June he was stepping down at the end of the year. The latter is leaving to head up luxury goods group Salvatore Ferragamo, an opportunity that will enable him to return to Italy and be closer to his family.
Akeroyd has been boss of Milan-based Gianni Versace since 2016. The label was sold to US group Capri, behind Michael Kors, in 2018. Prior to that Akeroyd led Alexander McQueen for more than a decade, overseeing a turnaround there.
Read more HERE.
08:07 , Graeme Evans
Buy shares in Pets at Home and WH Smith, sell B&M European Value Retail are some of the recommendations to come out of Deutsche Bank's sweep of European speciality retail.
The analysis covers retailers in sub-sectors including travel retail, DIY, discount and pet care.
Deutsche Bank analyst Matt Garland said: “These segments have generally shown long-term structural growth with the winning formats delivering a differentiated and profitable offer. Covid has seen a dramatic divergence in performance and we believe this will reverse in 2022.”
Pets at Home has a price target of 555p compared with 474.8p last night, while WH Smith is seen as reaching 1840p, up from 1605p. B&M shares have been a pandemic winner, but Deutsche Bank thinks they are worth 500p compared with 609p today.
Sunak to cut bank surcharge
07:52 , Graeme Evans
Bank shares including Lloyds Banking Group and Barclays have moved steadily higher in recent weeks on speculation that UK interest rates may see a rise before Christmas.
Alongside this potential boost to net interest income, the sector is now also poised to get a lift from the Chancellor after the Financial Times reported that Rishi Sunak is planning to slash a tax surcharge on profits from 8% to 3% from April 2023.
His move is designed to keep the City competitive, particularly in light of the scheduled increase in corporation tax from 19% to 25% by 2023. Sunak is expected to unveil the plan in his budget statement next Wednesday.
07:26 , Graeme Evans
European markets are taking their lead from Wall Street after more strong earnings figures helped the S&P500 and Nasdaq to climb about 0.7% last night.
There have been very few negative downgrades of 2022 guidance in results posted so far, despite the margin pressure created by rising costs and supply chain disruption.
Netflix last night reported a 9.4% year-on-year increase in global paid memberships in the third quarter, driven by the popularity of shows such as Squid Game and Lupin.
The overall figure of 213.6 million subscribers was slightly better than management had expected, driven by strong growth in Asia Pacific as quarterly operating profits rose by a third to $1.8 billion.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “Given the group is lapping incredibly strong growth delivered during the pandemic, this is no mean feat.
“The fact growth is now being driven by progress outside the core North American and European markets is testament to the global appeal of Netflix content – something some commentators have been sceptical of in the past.”
In commodities, the coal price fell sharply today after China's threat to intervene in onshore markets in order to cap prices.
There were also jitters around this weekend's the first 30-day grace period on unpaid offshore bonds held by debt laden property firm Evergrande.
Oanda's senior market analyst Jeffrey Halley said: “The silence from Evergrande and the government is deafening, and as other developers default or struggle to pay offshore debts, this story may make its way back to the front pages.”
The FTSE 100 index is forecast by CMC Markets to open 10 points higher at 7227.