A surprise surge in the UK’s inflation rate today heaped pressure on the Bank of England ahead of its interest rates decision tomorrow.
The Office for National Statistics recorded inflation of 10.4% for February, well above City expectations for 9.9% and 10.1% the month before. The largest upward contributions came from restaurants and cafes, food, and clothing.
The evidence of stubborn price pressures will worry Bank of England policymakers as they begin their two-day meeting, with a further quarter point increase in interest rates seen as the likely outcome.
FTSE 100 Live Wednesday
Pound up after shock inflation reading
Federal Reserve set for further rates hike
Superdry signs major Asia licensing deal
Fed raises interest rate 25bps
18:00 , Simon Hunt
The US Federal reserve has raised interest rates by 25 basis points, with the target rate now set to 4.75% - 5%.
The Fed said that US banks were sound and resilient but added: “Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain.”
The move could add further pressure to banks, some of whom had been struggling under the weight of falling bond prices.
The speed at which the hikes have rippled through the financial system has picked up, reducing the number of buyers for the government bonds which banks hold because they can be readily sold. That has made it more difficult to turn bonds into ready cash to meet financial commitments, knocking faith in the system.
Neil Wilson, Chief Market Analyst at Finalto, said: “Markets see this as the Fed threading the needle and saying ‘we think we are almost done but we have no idea really’.
“This could be a mistake but for now this is where we are.
“If the last three weeks has taught us anything it’s just how much things can change, how hard it is to predict and how little the Fed really knows what is going to happen.“
FTSE closes at 7566.84
16:41 , Daniel O'Boyle
The FTSE closed ahead of where it started today, despite an early decline following the latest inflation release.
The index finished the day at 7566.84, capping off a third consecutive day of gains. While it fell early in the morning, it rose as the day went on, reaching as high as 7585.24.
Boss of British Gas owner sees pay increase fivefold to £4.5m
16:24 , PA
The boss of British Gas owner Centrica has been handed a £4.5 million pay package, a five-fold increase, after the business saw its profits soar last year.
Chris O’Shea – who last month had to apologise for the way British Gas had treated some customers – was paid a salary of £790,000 for last year and will be handed around £3.7 million in additional payments.
Of this, £711,000 will be paid in cash straight away, while the rest is tied up in Centrica shares for a few years, the business revealed on Wednesday.
FTSE rebounds, up 0.5% since open
15:22 , Daniel O'Boyle
The FTSE 100 has recovered from its morning fall, and is now up 0.5% for the day
While the index of blue-chip shares dell this morning on the back of worse-than-expected inflation figures, it rose as the day went on and could close above where it started for the third straight day.
However, it still has some way to go to make up all of the previous two weeks’ losses, as the FTSE is still down 4.5% over the last month.
Standard Chartered and HSBC - which fell in prior weeks - have been the biggest risers so far today.
Is there a chance the Bank of England keeps rates at 4%?
14:45 , Daniel O'Boyle
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, is not so certain the Bank of England will raise interest rates tomorrow.
Core inflation came in ahead of expected at 6.1%, while headline inflation was also higher than anticipated at 10.1%, suggesting the Bank would be more likely to hike rates further to bring price growth down to its 2% target.
However, Tombs notes that the core figure is actually below the 6.9% February figure that was forecast by the Monetary Policy Committee when it announced last week’s rise.
US shares steady ahead of key Fed decision
14:05 , Daniel O'Boyle
There has been little movement in US share prices since markets opened today in New York, as investors await the Federal Reserve’s latest interest rate decision.
The S&P 500 is down by two points to 4000, while the Dow Jones is down 15 points to 32545. The Nasdsaq lost eight points, to 11851.
Most regional banks continue to rebound, with Dallas-based Comerica the biggest gainer so far today. However, regional lender First Republic returned once again to the top of the list of biggest fallers, as its shares were down by 5.9%.
Amazon ups UK worker pay after strike action
14:03 , Simon Hunt
Amazon has increased pay for British warehouse workers following strike action in January.
Minimum pay has increased 50p to £11 per hour, according to reports in the Guardian.
The strike action in Coventry was the first ever experienced by the e-commerce giant in the UK.
One Amazon worker told the Guardian: “Nobody believes that the extra 50p an hour we’ve won at Coventry is remotely enough to live on.
“We know we’re worth more – that’s why we will be stepping up the action and appealing to workers in other Amazon sites to join us in the strikes.”
Amazon, which earlier in the year shut three warehouses in the UK, said: “We regularly review our pay to ensure we offer competitive wages, and we’re pleased to be announcing another increase for our UK operations teams.”
‘Meme stock’ GameStop up 33% after 2022 results
13:51 , Daniel O'Boyle
Shares in video gaming retailer and so-called ‘meme stock’ GameStop rocketed more than 50% today off the back of its results announcement, before falling back down to $23.84, a 33% rise.
Around $1.8 billion has been added to the business’ market cap today, after it beat earnings expectations.
Retail trading frenzies have meant GameStop’s share price has been subject to an unusual amount of volatility, rising above $500 per share at one point in pre-market trading in January 2021.
Attention turns to Fed as market opens on Wall Street
13:39 , Simon Hunt
Jerome Powell, the Fed’s chairman, has spoken of the importance of fighting inflation with rate hikes, but the fast pace of increases has been firmly linked with the outbreak of chaos in the banking sector.
The latest poll undertaken by financial data provider Refinitiv shows that 15% of economists expect no change, with 85% predicting a 0.25% rise, the same action taken in February.
Wednesday’s announcement on US interest rates marks the anniversary of the first hike of the current cycle. It has lifted its Fed Funds target rates eight times since to its current range of 4.5% and 4.75%. It was at 0.25% to 0.50% a year ago.
Highbury & Islington most resilient retail area in Greater London list
12:58 , Daniel O'Boyle
Highbury & Islington has been crowned the most resilient area in the capital outside of zone one for retail and dining businesses, according to new research.
The list looking at the retail and food and beverage sectors, has Kilburn and Holloway Road come in at second and third.
It was compiled using a number of metrics including store vacancy rates, footfall, new openings, population growth and household incomes to identify the top 40 markets in London from zones two – six.
Openreach full-fibre broadband reaches 10 million UK homes — but London areas left behind
12:54 , Daniel O'Boyle
Openreach has announced that 10 million UK homes and businesses are now within reach of ultrafast full-fibre broadband — but it has transpired that parts of London are being left behind.
While parts of the country — including Kingston upon Hull, Coventry and Milton Keynes — have almost universal full-fibre coverage, fewer than one in 10 homes and businesses in London have access to full-fibre broadband. Enfield (5.2%), Kingston Upon Thames (6.5%) and Haringey (6.7%) are London areas with some of the worst full-fibre coverage in the country, according to Ofcom’s most recent Connected Nations report.
Although London’s median broadband speed is on average higher than the country as a whole, it lags behind other major cities such as Birmingham, according to the Fair Internet Report.
Economists’ star falls further as prices jump
11:47 , Simon English
An old joke that never really ages: What’s the point of economists? To make astrologers looks good.
This gag surfaced again today when inflation came in at 10.4% for the year to February.
That isn’t just a bit higher than City economists were expecting, it’s miles higher. Some had guessed it at 9.6%, which in terms of how these things are measured is embarrassingly far off.
Pressure on BoE governor over rate hike
11:39 , Simon Hunt
Consumer Price Inflation rose to 10.4% in February, up from 10.1% in January, and far higher than City economists had been forecasting.
That makes it likely that the Bank will put rates up from 4% to 4.25% when its Monetary Policy Committee, chaired by Governor Andrew Bailey, votes at 12pm on Thursday.
Following recent banking collapses and the forced sale of Credit Suisse to UBS, some had begun calling for rates to fall, or at least hold steady.
WANdisco hires rubbish boss to run fraud investigation
10:44 , Simon Hunt
Beleaguered software businessWANdisco has appointed the boss of a rubbish firm to its board amid an investigation into potential fraud.
Ken Lever, who previously chaired waste management business Biffa, has been drafted in as interim chair and will also chair the fraud investigation alongside non-exec director Peter Lees and audit committee chair Karl Monaghan.
The Sheffield-based business, which only weeks ago was eyeing a US listing for its shares, earlier this month asked for them to be suspended in London as it discovered a major fraud that could threaten it as a going concern.
In a shock announcement to the stock exchange, it tore up its guidance for 2022 and said an investigation was under way to identify its “true financial position” after sales booked by an employee appeared to have been inflated.
London house prices up 3.2% year-on-year to £534,000
10:24 , Daniel O'Boyle
The average house price in the UK grew by 6.3% year-on-year in January, but price rises in London were the lowest in the country at 3.2%.
Average London prices reached £534,000, up from £517,000 a year earlier and still almost 50% more than the next-most-expensive region.
Most of the increase, though, was due to sharper rises earlier in the year. Since peaking at £544,000 just before the mini-budget, prices have declined.
M&S and banking shares higher, property stocks slide
10:19 , Graeme Evans
Broker upgrades today reignited Marks & Spencer shares as investors also continued their return to heavily-sold banking stocks.
Improved positions by three City firms as M&S bids to reverse long-term market share declines in clothing helped get investors back on side after a pause in the stock’s recent rally.
The widely-held investment, which stood at 93p in October, surged 4% or 5.75p to 153.8p in the FTSE 250 index following new price targets that included Goldman Sachs at 180p.
The mood elsewhere was more cautious after the rally of the past two sessions petered out to leave the FTSE 100 index down 0.2% or 14.89 points to 7521.33.
The top flight finished 1.8% higher yesterday as contagion fears eased in the banking sector and energy stocks rebounded after an earlier slide in Brent crude futures.
BP eased 3.9p to just below 500p and mining giant Rio Tinto dipped 76p to 5264p in today’s session, but the recovery for banks continued as stocks from the sector occupied the first four places on the FTSE 100 risers board.
They were led by Barclays, which backed up yesterday’s 5% improvement by adding another 3% or 2.9p to 147p. NatWest and HSBC were 2% higher, while Lloyds Banking Group rose 1% or 0.6p to 48.8p.
The fallers board was dominated by stocks from the property sector after Goldman Sachs hit Broadgate and Paddington Central owner British Land with a “sell” recommendation.
The shares fell 4% or 17.3p to 381.6p, while rival Land Securities dropped 16.4p to 597p and warehousing and logistics firm Segro lost 26.6p to 717.4p as high interest rates continue to diminish the appeal of the sector.
Other blue-chip fallers came from the telecoms industry as Vodafone dropped 1.6p to 91p and BT Group surrendered 1.9p to 139.45p.
As well as M&S, mid-cap investors liked Bytes Technology Group after shares in the Microsoft reseller rallied 5% or 17.4p to 393p following a trading update showing annual operating profits will be up by around 20%.
The FTSE 250 index fell 58.41 points to 18,270.69, with shopping centre owner Hammerson among the leading fallers with a drop of 0.8p to 23.2p.
WPP buys influencer agency whose co-founder questioned its digital ambitions
10:05 , Daniel O'Boyle
Old-school advertising agency WPP has today moved to bolster its status in the social media space by acquiring an influencer marketing agency whose co-founder last year criticised the conglomerate’s digital strategy.
The marketing behemoth founded by Sir Martin Sorrell acquired Millbank Tower-based Goat for an undisclosed fee. Goat has organised campaigns for social media influencers to promote brands like Meta, Tesco and Uber.
“Influencer marketing is a key growth priority for the industry and for WPP,” chief executive of WPP Mark Read said.
On a podcast last year, Goat co-founder Arron Shepherd said WPP “haven’t quite worked out digital yet”, citing it as an example of an ad holding groups “not doing that well”.
“The size of WPP, there might be 30-40% of their business that is literally not fit for purpose in the next three or four years,” he said.
Profits soar at Ten Entertainment
09:35 , Simon Hunt
Bowling group Ten Entertainment has hailed the success of its affordable prices as it rolled into 2023 with a tripling of profits.
The Bedford-based business posted a 51% surge in sales in 2022 compared to its pre-pandemic performance, while profits jumped 194% to £26.6 million and footfall climbed over 40%. Over £2 million in bonuses was shared between staff.
Ten Entertainment boss Graham Blackwell said efforts to keep costs down, including swapping out food menu options, had allowed the average bowling trip price at its alleys to fall from £5.21 to £5.13 despite rocketing inflation.
“We’ve been clever around the mechanics of our food offering,” he said.
“We’re not a high-end restaurant. We don’t deal with couscous and caviar, we’re about burgers and buns so it’s easy to substitute items to keep prices down.”
The firm, which has alleys in Acton, Kingston and Croydon, has plans for further expansion, targeting between four and six new openings this year, with another six existing sites set to undergo a major refurbishment. Blackwell said the company was targeting opening smaller high street venues with fewer lanes, which had become more attractive over larger out-of-town sites.
Last year, Ten Entertainment became the first bowling company worldwide to launch its own app, offering augmented reality gaming, allowing users to keep track of their bowling scores and handing out discounts to regular customers, in a move which helped the company expand its customer database to over one million.
Ten Entertainment shares rose 2.2% to 291p.
“There really isn’t anything positive we can take away from this”
08:51 , Daniel O'Boyle
Craig Erlam, senior market analyst for the UK & EMEA at OANDA, noted that there was no good news in the ONS’ latest inflation release.
“Considering both were expected to decline, a large increase has come as a nasty shock,” he said.
“And while it could prove to be a blip, there really isn’t anything positive we can take away from this release.”
Vistry profits dip as it sets aside cash for post-Grenfell safety upgrades
08:50 , Daniel O'Boyle
Housebuilder Vistry said profit dropped by more than a fifth last year as it set aside cash to make buildings fire safe in the wake of the 2017 Grenfell fire.
The builder said it had set aside £97 million during the year, helping to push down pre-tax profit by 22.5% to £247.5 million.
Taking out these one-off costs, adjusted pre-tax profit hit £418.4 million, up 20.9% on the year before. Vistry said it expects adjusted pre-tax profit to rise to around £440 million this year.
Mpac CEO packs it in after profits fall in 2022
08:29 , Daniel O'Boyle
Packaging business MPac announced its CEO would exit the business, after profits fell to £3.5 million in 2022.
Steels, who has been CEO since 2016, will be replaced by Adam Holland, who is currently chief operating officer.
“We would like to thank Tony for his very significant contribution to the Group since becoming CEO in 2016,” chair Andrew Kitchingman said. “Tony has transformed the Mpac business and leaves the Group in very strong position with substantial growth opportunities.
“I would also like to thank Tony for his involvement in his succession planning to ensure a smooth handover to Adam as his successor.”
The company’s full-year revenue was up by 4% to £97.7 million, but its profit fell by more than 50% to £3.5 million.
Mpac shares were down 9.5% this morning to 253.3p.
Will UK inflation mirror the US?
08:18 , Daniel O'Boyle
Alongside the rise in the headline CPI figure, Core inflation - which removes the more volatile food and energy prices - also increased, to 6.2%, a rise that Capital Economics chief UK economist Paul Dales called “more worrying”.
He said that inflation in the UK may follow a similar pattern to the US, where there were early successes in bringing down prices, only for inflation to prove stickier than expected.
“These inflation figures smell a little like the recent US experience, where it appeared that core inflation was easing rapidly a few months ago only for it to accelerate again as economic activity proved resilient,” Dales said.
Pound up and shares lower after hot inflation print
08:13 , Graeme Evans
The pound is up by 0.45% to $1.226 after today’s hot inflation print strengthened expectations that the Bank of England will hike interest rates by at least 0.25% tomorrow.
AJ Bell’s head of financial analysis Danni Hewson said: “After two weeks of instability on financial markets there had been growing expectation that the Bank of England may take a pause in its rate hike journey, and that can’t be ruled out, but today’s upward shift will be akin to popping a rooster into the henhouse.”
The FTSE 100 index has also been unsettled by the evidence of persistent price pressures, meaning the top flight is down 20.44 points to 7515.78 compared with earlier expectations for a moderately positive session.
The UK-focused FTSE 250 index lost 73.33 points to 18,705.77 in the opening minutes of trading, although housebuilder Vistry rose 3% or 20p to 752p on the back of its annual results.
Inflation: What has increased the most?
07:55 , Simon Hunt
Food price increases continue to lead the increased CPI figures today, rising to a staggering 18.2% according to the ONS.
Superdry signs $50 million licensing deal to sell its brand into Asian markets
07:54 , Michael Hunter
Superdry, the fashion brand, is joining forces with a South Korean retailer to take its range of leisurewear into the Asia Pacific region in a deal worth $50 million (£40 million) upfront and which will take it back into China.
Cowell Fashion Company will own and use the Superdry brand in the region, starting in South Korea and then expanding, including into China. Superdry will work in partnership with the firm for the first two years of the plan.
Julian Dunkerton, Superdry’s billionaire founder and CEO, said: “This agreement offers the Superdry brand a fantastic opportunity to expand its global reach, whilst providing additional funding to help deliver our turnaround programme in the face of the challenging consumer landscape.”
Superdry has struggled in Asia. It left the Chinese market in 2020 after “material losses” following an expansion there, and it said today success in the region was “more likely” via “ third-party partner.”
FTSE 100 seen higher as focus turns to Fed decision
07:36 , Graeme Evans
An improvement in risk appetite as contagion fears eased in the banking sector helped the FTSE 100 index to rise 1.8% yesterday, with the S&P 500 index up 1.3% on Wall Street.
As well as the recovery for financial stocks, energy companies rebounded on improved hopes for the global economy.
The VIX index of volatility also fell to its lowest level since the current turmoil was triggered by worries over the health of Silicon Valley Bank just under a fortnight ago.
The improved market conditions are likely to mean the US Federal Reserve goes for a quarter point hike in interest rates today.
Traders will also be looking out for the Fed’s dot plot guidance on the path of rates for the rest of the year, as well as comments from chair Jerome Powell.
Michael Hewson, chief market analyst at CMC Markets, said: “How Powell manages market expectations at his press conference, especially with respect to how events have affected today’s decision, will be as equally important as the decision itself.”
CMC expects the FTSE 100 index to open 11 points higher at 7547 this morning.
Fevertree profits slide as sales dip in the UK
07:24 , Simon Hunt
Profits at Fevertree slipped 44% to £24.9 million last year as the mixer and soft drinks maker wrestled with soaring cost inflation.
Sales in the UK fell 2% to £116.2 million in 2022, but climbed more than 10% in Europe and more than 20% in the US, in part thanks to the launch of new ‘adult soft drinks’ including Ginger Beer and Sicilian Lemonade.
The firm said “industry-wide inflationary pressures impacted the Group’s gross margin, most notably in glass costs and trans-Atlantic freight costs.
“These were partially mitigated by positive pricing actions and improvements in sales mix.”
Fevertree confirmed its previous earnings guidance and said it expected the UK to return to growth this year and was taking action to mitigate cost pressures including raising prices and taking cost-saving steps.
Jeremy Hunt responds to unexpected inflation rise
07:11 , Simon Hunt
Chancellor Jeremy Hunt has responded to the unexpected rise in February inflation numbers.
Hunt said: “Falling inflation isn’t inevitable, so we need to stick to our plan to halve it this year.
"We recognise just how tough things are for families across the country, so as we work towards getting inflation under control we will help families with cost of living support worth £3,300 on average per household this year."
Inflation rises to 10.4%
07:06 , Daniel O'Boyle
The Bank of England may be forced to raise interest rates higher to slow price growth, as the ONS revealed inflation rose to 10.4% in February.
Itr is the first rise in inflation since October 2022, and leaves price rises a long way from the Bank of England’s goal of 2%.
The price of a basket of commonly bought goods was 10.4% higher in February than it was a year earlier, well ahead of City expectations 9.9%. Prices were up by 1.0% on a month-on-month basis, also ahead of expectations of 0.6%.
The higher-than-expected figure - combined with fears around the banking sector easing in the last two days - could encourage the Bank of England to be more hawkish in raising interest rates.
The Bank will announce whether it will raise rates again tomorrow, with expert opinions on whether it should do so divided earlier this week as its two core objectives came into conflict.
Recap: Yesterday’s top stories
06:46 , Simon Hunt
Good morning. Here’s a summar of our top stories from yesterday:
European financial markets kept their nerve after shockwaves from the latest troubles in the banking sector eased.
Just Eat Takeaway is to let go of 1,700 staff as it wrestles with a slowdown in customer demand.
A biotech firm has become the first UK listing on the Nasdaq this year, using a SPAC.
B&Q owner Kingfisher is hoping for a revivial of the high street as it plans to open a number of smaller local stores.
Today we’re expecting:
UK inflation numbers
Ten Entertainment results
LSL property results