FTSE 100 Live: Pound nears $1.13 after government tax plan U-turn

The pound headed back toward $1.13 on confirmation that the government will drop plans to abolish the UK’s top tax rate, in a major U-turn from the government on a key part of its Budget proposals.

Chancellor Kwasi Kwarteng called the 45p tax rate “a distraction”.

The FTSE 100 was expected to fall in opening trade according to spread betting group IG, although by a narrower margin by continental European bourses.

No major market moves this time as Kwarteng gives party conference speech

16:37 , Simon Hunt

There were no major market tremors immediately after Kwasi Kwarteng began his speech at the Conservative party conference in Birmingham this afternoon -- though the Chancellor acknowledged the same was not true after he delivered his mini-budget speech a few days ago.

“I know the plan we put forward ten days ago has caused a little turbulence. I get it. We have listened,” he said.

“It has been tough but we need to focus on the job in hand. No more distractions – we have a plan and we need to get on and deliver it.”

Kwarteng reconfirmed the tax cuts he announced at his mini-budget speech last month -- except cutting the top rate of income tax -- including reversing the planned rate of corporation tax and cutting the basic income tax rate.

FTSE 100 turns positive in afternoon trade after Wall Street provides some cheer

16:09 , Michael Hunter

London’s main stock fought back up above the flatline after a positive start to Wall Street trade, helped by a strong reception on the market to news of dealmaking among telecoms stocks and rallying oil majors.

Confirmation from Vodafone that it was considering merging its UK business with Three, a current rival, left investor ringing up gains in the sector. Vodafone itself added over 3p to 105p, a rise of almost 3%. BT, the fixed-line and internet service provider, rose 6p to 128p, a gain of 5.3%. Three is owned by CK Hutchison, the Hong Kong conglomerate.

Oil stocks rose on reports that Opec was considering output cuts ahead of a meeting between the petrochemicals cartel and its allies this week in Vienna. BP was up 11p to 444p and Shell was up 64p to 2310p.

The wider mood improved after confirmation this morning that the government dropped controversial plans to abolish the top rate of tax in the UK. The policy U-turn after Chancellor Kwasi Kwarteng’s mini-Budget on September 23 helped the pound back toward $1.13, the level it held before the measures were announced. Sterling was up over 1% at $1.1279 in afternoon trade, reclaiming over a cent. The price of UK government debt also rose, pushing the benchmark 10-year gilt yield back under 4%.

Overall, the FTSE 100 was up over 18 points to 6911.95, a rise of 0.3%. The FTSE 250 rose 78 points to 17244.20, up 0.5%, with sentiment also boosted by a positive start to trading on Wall Street.

S&P 500 starts with gains as oil makers rally on talk of crude output cuts

14:55 , Michael Hunter

Oil majors helped Wall Street’s main stock index make a positives start to trading in October, after a bleak run lower for the S&P 500 throughout the third quarter of 2022.

Reports that oil exporting countries were considering a significant cut to output sent Marathon Oil sprinting to the top of the leaderboard with a gain of over 8%. Halliburton, the energy sector services provider, was up 7%, as was Devon Energy.

Tesla, the electric car maker, was at the other end of the market after it missed its quarterly delivery targets. The stock dropped 7%.

Overall, the broad New York stock index added almost 40 points to 3625.21, a rise of over 1%.

Wall Street stocks set to rise after dealmaking in defence and drug sectors

14:04 , Michael Hunter

New York’s S&P 500 is expected to make gains in opening trade, with the mood helped by an outbreak of bid activity in the pharmaceutical and defence sectors.

Futures trading suggested the broad Wall Street stock index would rise by around 32 points in opening trade to 3633.25, a gain of 0.9%.

After a run lower last week on worries about the outlook for global growth and the impact expectations of aggressive rate hikes at the Federal Reserve and other global central banks, attention turned to dealmaking.

Drugmaker Myovant Sciences was up over a third in premarket trade after it rejected an offer from its largest existing investor, Sumitovant Biopharma, to buyout the rest of its shares, saying the bid undervalued the company. Viasat was up by over a tenth after reports it was finalising a deal to sell its military communications operations.

Kim Kardashian slapped with $1 million SEC fine for unlawful crypto ad

12:56 , Simon Hunt

Kim Kardashian has been slapped with a $1 million fine by the US market watchdog for unlawful crypto advertising.

The model and businesswoman was paid $250,000 to publish a post to her Instagram page advertising EthereumMax crypto tokens. The US Securities and Exchange Commission said Kardashian posted a link to the EthereumMax website but failed to disclose the payment she received for the promotion.

SEC chair Gary Gensler said: “This case is a reminder that, when celebrities or influencers endorse investment opportunities, including crypto asset securities, it doesn’t mean that those investment products are right for all investors.”

read more here

Pound and debt markets rally after government U-Turn on Budget plans

12:30 , Michael Hunter

Worries about the UK’s public finances eased after the government changed its mind on abolishing the country’s top tax rate, boosting sterling and the price of sovereign debt, easing gilt yields.

The return investors were demanding to lend to the UK for 10 years dropped under 4% for the first time since the mini-Budget on September 23, which up-ended the international investment case for the country’s assets. Last week, a 10-year gilt yield had jumped to 4.5%, up from 3.5% before the Chancellor’s catastrophic mini-Budget. It was at 3.98% in early afternoon trade.

Sterling’s reaction was immediate to the first reports of the U-turn, as the chart below show. The pound headed back near to the $1.13 it had held before Chancellor Kwasi Kwarteng first unveiled his measures, although it has since drifted back to just under $1.12, leaving it up 0.3% for the day.

Vodafone shares rally on reports of talks with Three to combine UK mobile businesses

11:49 , Simon Hunt

A potential merger in the telecoms sector could ring up some changes for the UK’s mobile phone market, with Vodafone and the company that owns the Three brand in talks about merging their operations in the country.

CK Hutchison, the Hong Kong conglomerate, has been looking for a buyer for Three amid concern that the unit needs significant investment. Vodafone, the Newbury-based FTSE 100 constituent, has been linked with interest in a deal, which is likely to face significant regulatory scrutiny and will create the biggest mobile phone subscriber business in the UK.

Sky News reported on Monday that discussions between the two companies had reached an advanced stage. Vodafone’ shares rose 2.5p to 104p, a rise of 2.4%. BT also moved onto the leaderboard on the prospect of dealmaking and consolidation in the telecoms sector, rising 3.3% to 125p.

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FTSE 100 falls as travel stocks head south: Morning round-up

10:54 , Simon Hunt

There was an eye-catching rally for shares in Telecom Plus today, after it lifted profit forecasts on rising demand from cost-conscious customers using its Utility Warehouse tariff-cutting website.

The stock surged by almost a fifth after it said more than 86,000 people were added to UW’s books in the first half of the year — a record and not far off the 90,000 capacity of Wembley stadium.

Utility Warehouse offers a single monthly bill for a range of services from energy and broadband to insurance. Soaring demand for simpler day-to-day financing amid the UK’s cost-of-living crisis took its customer base to almost 815,000. Shares were up 285p at 2010p, a rise of almost 17%.

Russ Mould, investment director at stockbroker AJ Bell said: “Buying energy in the wholesale market could still be a challenge in the coming months with a cold winter expected but Telecom Plus has demonstrated its ability to survive and thrive so far.”

The FTSE 100 fell overall, by 67 points to 6,826.50, with travel stocks heading south in the wake of a weak update from Carnival, the cruise operator listed in the US and the UK. Its London shares made the biggest fall on the index, down 43p at 539p. Tui, the tour operator, declined 5p to 103p and easyJet lost 14p to 282p.

Housebuilders recovered after the strong sell-off in the sector following the government’s mini-Budget. Persimmon rose 24p to 1262p, Taylor Wimpey gained over 1p to 90p and London-focused developer Berkeley was up 44p to 3341p.

The FTSE 250, home to Telecom Plus, was down 186 points at 16981.88, with mid-cap financial stocks under pressure.

Musk wealth set to tank $8 billion after disappointing delivery numbers

10:04 , Simon Hunt

Elon Musk’s wealth is set to plummet as much as $8 billion when US markets open today after Tesla’s third-quarter delivery numbers sent shares down 6% in pre-market trading.

The share price drop amounts to some $54 billion being wiped off the carmaker’s market cap after its delivery numbers failed to live up to analyst expectations despite reaching a record high.

Tesla said it had produced over 365,000 vehicles in the third quarter of the year, and delivered over 343,000.

In a Tweet Musk said he hoped to “smooth out” a “crazy end of quarter delivery wave” and was aiming for steadier deliveries ahead.

Musk is the world’s richest person with a wealth of $248 billion, according to Forbes.

Pressure for interest rate rises softens as market steadies

09:53 , Simon English

THE pound and the gilts market reacted well to the scrapping of the 45p tax rate, but shares took another hit.

Economists think the stabilisation of sterling and government bonds means there is less pressure on the Bank of England to put rates up.

That is relatively good news for millions of home owners worrying about the soaring costs of mortgages.

Last week the bond market was suggesting that Bank Rate would be at least 6% next year. That price now looks more like 5.5%, still a huge rise on the present 2.25%.

Many thousands of people have fixed rate mortgage deals coming to an end this year and next.

Guy Foster at RBC Brewin Dolphin said: “The derivatives market is now signalling one less rate increase since this U-turn on additional rate tax. The move is symbolic more than fundamental with the tax cut making up around £2bn of about £40bn per year increase in funding requirement announced at the mini-budget.”

Tony Danker, director-general of the CBI welcomed the u-turn. He told Radio 4: “Businesses up and down the country want the markets to stabilise. That is an absolute precondition to investment and growth, and it’s a precondition to getting onto these very good reforms.”

The pound quickly jumped more than 2 cents this morning to $1.26.

The FTSE 100 fell, with the banks that would most obviously benefit from higher rates among those being sold off. HSBC was off 11p at 456p. Barclays fell 3p to 141p.

William Marsters, Senior Sales Trader at Saxo UK, said: “The move to reverse the tax cut decision won’t add much to the government’s balance sheet and so will be seen more as a signal to investors than anything else. As far as government credibility goes, investor concern might be more focused around the government’s disconnect internally with Prime Minister Truss saying the top-tier tax cut decision was made by Chancellor Kwarteng, and other cabinet members were not consulted on the matter.”

Tortilla shares tank after profits warning

09:22 , Simon Hunt

Shares in Tortilla Mexican Grill plummeted 24% to 110p this morning after the fast food firm posted an 88% drop in profits, despite hailing a return to pre-pandemic levels of trade in London.

The London-based business barely broke even in the first six months of the year, posting pre-tax profits of £0.3 million, despite a 30% uptick in sales over the period to £26.8 million.

Tortilla said sales in its Zone 1 London sites – which include Russell Square, Charing Cross and Oxford Circus – were trading at 98% of pre-pandemic levels in the first half of the year. But the company warned a combination of train strikes, heatwaves and overseas holidays meant summer sales were “more challenging than anticipated” and profit margins would continue to be squeezed beyond the end of 2022.

Tortilla CEO Richard Morris said: “Times remain tough across the industry at large reflecting the extent of recent cost pressures [but] we remain cautious over significantly increasing our menu prices and/or resorting to heavy discounting.

The firm acquired Mexican food rival Chilango in May in a £2.75 million deal.

“Uniquely uncertain” outlook hits Peel Hunt

09:22 , Simon English

CITY bank Peel Hunt gave the latest warning about the squeeze on the Square Mile today, as deals dry up and flotations are postponed.

That has been a hit to banks and brokers all year and there are few signs of a return to deal making.

Chief executive Steven Fine, who was “unavailable” to speak to the Standard, said in a statement: “Geopolitical and macro-economic factors have continued to negatively impact markets. More recently, tightening of monetary policy and Government fiscal stimulus have further destabilised markets.”

Rivals such as Numis have said the same recently. Banker bonuses are likely to be down this year, even as the cap on them gets dropped.

Peel Hunt shares fell 6p to 82p today. They are down 65% over a year.

KBW said in a note: “Peel Hunt has had a demanding time since coming to the market…(with) activity levels slowing markedly across all areas of the business.”

The outlook is “uniquely uncertain”, the analysts warn.

Shares in the owner of Utility Warehouse surge as customers rush in for deals on bills

08:56 , Michael Hunter

London’s FTSE 250 had a clear leader today, with shares in Telecom Plus surging by almost fifth after it lifted profit forecasts after a surge in demand from cost-conscious customers using its Utility Warehouse website.

Just over 86,000 people were added to UW’s books in the first half of the year -- a record -- and not far off the 90,000 capacity of Wembley stadium, taking its total customer base to almost 815,000 an annualised growth rate of 24%.

Utility Warehouse matches customers with to the providers of a range of tariffs covering energy, insurance and communications and issues a single monthly bill. The soaring demand for a simplified approach to financing day-to-day essentials has tracked the UK’s cost of living crisis sparked by soaring energy bills after Russia’s invasion of Ukraine.

The company’s co-chief executives, Andrew Lindsay & Stuart Burnett, said: “At a time when cost of living pressures continue to rise, we are uniquely positioned to offer households what they need now more than ever: savings on their essential bills and an extra income from recommending these savings to their friends and family.”

Shares in the company were up 285p at 2010p, a rise of almost 17%.

Overall, the FTSE 250 was down 186 points at 16981.88, with mid-cap financial stocks standing out at the bottom of the market.

Flooring firm warning over inability to manufacture amid soaring costs

08:51 , Simon Hunt

Flooring firm James Halstead today sounded the alarm on its soaring costs and supply chain woes, warning it had ramped up its stockholdings to prepare for the “potential inability to manufacture.”

The Bury-based firm, which also has factories in Teesside, said it would suspend some production at its sites if the situation improved to bring stock levels back down. The company said it had been forced to pass on some of the “flood of cost increases” it faced to customers.

James Halstead chairman Anthony Wild said: “The optimism at the start of the year on the decline of Covid-19, related supply problems and greater availability of labour was offset by a myriad of shortages/cost increases following the invasion of the Ukraine…we have been mindful that the autumn/winter period may bring deeper problems.”

FTSE 100 falls but stocks exposed to mini-Budget sell-off bounce higher

08:22 , Michael Hunter

Housebuilders and UK-focused mortgage banks rose on an otherwise lacklustre FTSE 100 on Monday after the government confirmed it was dropping plans to abolish the UK’s top tax rate.

The proposal was part of the September 23 mini-Budget that stoked fears about the country’s public finances and a plunge in the pound and the value of UK government debt. News of its demise sent the pound back up toward $1.13.

On the stock market, residental developer Persimmon rose 13p to 1250p, a rise of almost 2%. . Taylor Wimpey was up 1p to 90p, also a gain of 2%. . Lloyds Banking Group was up 1p, or 1.3% to 42p.

Overall, the FTSE 100 fell by over 82 points to 6811.60, a drop of 1.2% .

The FTSE 250, seen as more representative of the domestic economy, lost 173 points to 16,995.38, with fund management stocks under pressure, but high street retailers rising.

FTSE 100 expected to fall but by less than European stock markets after tax U-turn

07:49 , Michael Hunter

London’s main stock market index was expected to fall at the start of trade, with opening calls from IG pointing to a decline of 0.8% to 6839 points.

But there were bigger losses expected for continental European stock markets, of over 1% acrosss the rest of the region.

Traders were measuring news that the government will drop plans to abolish the top rate of tax in the UK, after the wave of market turmoil and political criticism that surrounded the plans. The pound rose after the news, heading back to the $1.13 level it held before the tax measures were outlined on September 23.