- FTSE 100 closes around four points higher
- Rolls Royce rises as joins fighter jet project
- InterContinental Hotels lifted by Peel Hunt upgrade
4.40pm: FTSE closes ahead - just
FTSE 100 closed a shade higher at the end of the week after US producer inflation last month came in slightly hotter than expected, while attention turns to Central bank action next week.
Britain's blue-chip benchmark finished just around four points up, or 0,06%, at 7,476.
Next week, the Federal Reserve, ECB and Bank of England are all set to raise rates by 50 basis points (bps) amid the economic slowdown and rising prices.
"While US factory-gate inflation points towards the need for still more rate rises, stocks can now scent the potential for a rally into the end of the month," noted IG's chief market analyst Chris Beauchamp.
"Such a bounce would repair more of the damage suffered in 2022, even if the post-Christmas blues do set in.
"The PPI data was unable to have much of a negative impact, although it does set us up for another hot CPI figure and hawkish Fed next week which might be much harder for markets to navigate successfully," the analyst added.
3.40pm: FTSE hovers either side of opening levels
London's blue chip index has moved either side of the line as trading for the week heads to a close.
Currently up 5 points, shares have struggled for direction ahead of a busy week of central bank decisions next week.
InterContinental Hotels Group plc rose after an upgrade to buy from hold by Peel Hunt, while Rolls Royce Holdings Plc advanced 2.75% after it was confirmed they will be involved in developing the next-generation fighter jets with Italy and Japan in a project to produce the successor to the Eurofighter Typhoon.
In the FTSE 250 Man Group PLC (LSE:EMG) was in the winner's enclosure, up 5.5%, after announcing a $125mln share buy-back, while elsewhere Pendragon Group (LSE:PDG) slumped 29% after Hedin Mobility withdrew a bid approach.
Otherwise, the chancellor’s wide ranging reforms to the City were broadly welcomed with the odd caveat here and there.
2.40pm: Footsie the wrong side of the line
FTSE 100 is a touch weaker as US markets moved lower in reaction to the stronger than expected US wholesale inflation numbers which unsettled investors ahead of next week's FOMC meeting.
Just after the market opened, the Dow Jones Industrial Average had shed 60 points or 0.2% at 33,721 points, the S&P 500 slipped 7 points or 0.2% at 3,956 points, and the Nasdaq Composite was down 5 7 or 0.5% at 11,025 points.
Forex.com market analyst Fiona Cincotta said the stronger-than-forecast PPI data raised questions over the extent to which the Fed could ease back from its aggressive monetary policy stance.
“Data across this week has broadly been stronger than expected,” she said. “US nonfarm payrolls showed stronger job creation and higher wages, and the ISM services PMI was also ahead of forecasts, as were factory orders. With PPI also moving southwards at a slower pace than unexpected, the US central bank is likely to be more cautious about adopting a less hawkish stance towards monetary policy.”
Cincotta concluded: “The data suggests that the market has once again gotten ahead of itself and the road to target-level inflation is likely to be a long one."
2.15pm: Undoing ring-fencing a huge mistake - Sir John Vickers
Sir John Vickers, the economist who led a major review of the UK's banking industry after the financial crash, said "unravelling" the ring-fencing regime on Britain's banks would be a "huge mistake".
The former chief economist at the Bank of England told BBC Radio 4's World at One programme: "I'd love to have more clarity from the Government on where they stand on this."
"If they're saying, 'well, it's worked OK for now, but maybe over time we're not going to need it and we can roll it back', then I would get very concerned."
"So, adjustments to a given bit of the architecture: fine. Going down the path to unravelling this regime: huge mistake in my view."
1.35pm: US PPI stronger than expected
US PPI numbers released have come in above expectations in November although the annual figure was lower than October's number.
PPI rose 0.3% in November, ahead of the 0.2% forecast, giving an annual rate of growth of 7.4%, ahead of estimates of 7.2% but down from 8% in October.
Core PPI rose 0.4% in November, against the 0.2% estimate, giving an annual rise of 6.2%, ahead of market expectations for an increase of 5.9%.
US futures headed lower on the numbers while in London the FTSE 100 has moved into negative territory.
US PPI Final Demand (M/M) Nov: 0.3% (est 0.2%; prev 0.2%)
- US PPI Core (M/M) Nov: 0.4% (est 0.2%; prev 0.0%)
- US PPI Final Demand (Y/Y) Nov: 7.4% (est 7.2%; prev 8.0%)
- US PPI Core (Y/Y) Nov: 6.2% (est 5.9%; prev 6.7%)
— LiveSquawk (@LiveSquawk) December 9, 2022
1.05pm: Chancellor urges pay restraint
The chancellor, Jeremy Hunt, has said that he did not wish to see pay rises for public-sector workers that might reduce the pace at which the government expects double-digit inflation to fall.
"We know that the thing that is making them (public-sector workers) most angry is the erosion of their pay through inflation," Hunt told an event hosted by the Financial Times.
"We just have to be really careful not to agree to pay demands that have the opposite of the intended effect, and lock in high inflation," he added.
Hunt said is confident about Britain's long term prospects, adding there is a "robustness" underlying the UK's economy.
He was speaking after announcing his so called "Edinburgh Reforms", aimed at taking advantage of regulatory freedoms after Brexit and securing London's place as Europe's financial capital.
Asked whether the reforms meant he has forgotten the lessons learned following the 2008 financial crash Hunt said: "“Absolutely not. We have to make sure that we do not unlearn the lessons of 2008, but at the same time recognise that banks today have much stronger balance sheets, and we have a much stronger resolution system if things do go wrong."
“In that context, it is perfectly sensible to make pragmatic changes just as the ones we are announcing today."
“But we are doing so very, very carefully to make sure that the UK is competitive, exciting, the place to be and the place to invest, but also that we don’t lose the guardrails that were put in place after 2008.”
12.00pm: US markets seen higher
Wall Street is expected to open higher as the market awaits producer inflation data that may provide more evidence that the US economy is cooling off, allowing the Federal Reserve to ease the pace of interest rate hikes at its last meeting for 2022 next week.
Futures for the Dow Jones Industrial Average rose 0.2% in Friday pre-market trading, while those for the broader S&P 500 index added 0.3% and the Nasdaq gained 0.4%.
Stocks ended higher yesterday, with the S&P breaking its five-day losing streak as an increase in weekly jobless claims numbers to the highest since February was taken as another sign that the Fed may tap the brakes.
Initial jobless claims for the week ended December 3 came in at 230,000, up by 4,000 from the previous week’s revised level and on par with the consensus analyst forecast.
The Dow Jones gained 184 points, or 0.55%, to 33,781, the S&P jumped 30 points, or 0.75%, to 3,964 and the Nasdaq rose 123 points, or 1.1%, to 11,082.
“US PPI figures due today will be closely watched after jobs data yesterday hinted at a loosening in the labour market that may suggest the Fed could be closer to its pause/pivot,” commented Neil Wilson, chief market analyst at Markets.com and Finalto.
“If inflation is easing, that’s one requirement for the Fed to start slowing the pace of hikes. The next would be the labour market – is it starting to cool, too?"
In addition to November’s producer price index, Wilson noted that the University of Michigan consumer sentiment index and inflation expectations data is out later.
"A month ago, the median expected year-ahead inflation rate was 4.9%, down slightly from 5% the prior month," Wilson noted. "Long-run inflation expectations remained steady at 3%. The consumer sentiment data is expected to be barely changed at 56.9 from 56.8 before."
11.24am: City reforms broadly welcomed
Jeremy’s Hunt sweeping financial services reforms have been broadly welcomed although talk of Big Bang 2.0 may be overdone.
Jonathan Herbst, global head of financial services regulation at Norton Rose Fulbright, said: “The direction of travel will definitely be welcome.”
“There is no doubt the measures move the needle in some areas and it will be interesting to see how reforms relating to ring-fencing, the SMCR, PRIIPs, and research play out.”
“However, it is important for people not to overplay this - there is no sense of any move back to a pre-financial crisis world.”
“Most of the UK regulatory regime reflects either international commitments or policy developed over many years to reflect the lessons of experience. So, the talk of a Big Bang 2 may well be overdone” he felt.
“There are some interesting proposals but, in terms of the bigger picture, there is no talk here of fundamentally changing the MiFID settlement or the rest of the post financial crisis package of measures.”
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown said “It’s clear the government is going for growth, but it must strike the right balance between stoking the engines of growth in what has become a tepid environment, and not slashing standards too far.”
“London’s financial reputation has been severely held back since Brexit, right at a time when the ‘powers that be’ have tried to encourage investment and growth in a big way” she pointed out.
Victoria Scholar, head of investment, interactive investor said: “Hunt is trying to prove to the financial sector that he is very much pro-business and in favour of the City of London as a key growth engine to the economy.”
“However there is a risk that the Treasury is acting myopically, quickly forgetting the pre-2008 excessive risk taking that ultimately led to the global financial crisis and the introduction of new regulation to prevent another similar catastrophe.”
While the policy chairman at the City of London Corporation Chris Hayward explained “This is not about deregulation, this is about growth.”
He told BBC Radio 4’s Today programme: ““We need the help of good growth and good regulation at the same time, they are two sides of the same coin.”
“It’s not a race to the bottom, in my view, it’s a chance to actually grow our economy and I think we should be very excited about it. It’s positive news for financial services.”
Alasdair Haynes, chief executive of Aquis Exchange, said the announcement "promotes competitiveness and growth".
He said: “It gives more power to the regulators to make faster and appropriate rule changes. This will bring equal opportunities allowing for competition, that in turn promotes innovation.”
“The City does not want to see deregulation, it wants good regulation that means consumers are protected.”
“Today's announcements are an indication of an evolution – rather than revolution” he concluded.
10.41am: Rolls-Royce rises as UK confirms Tempest jet fighter project
Shares in Rolls-Royce have advanced 1.4% following confirmation that Britain will work to develop next-generation fighter jets with Italy and Japan.
Prime minister Rishi Sunak said the defence partnership will ensure the UK and allies are “outpacing and outmanoeuvring those who seek to do us harm”.
Downing Street aims for the jets, called Tempest in the UK, to take to the skies by 2035 and serve as a successor to the Typhoon.
Sunak will launch the first major phase of the programme during a visit to RAF Coningsby in Lincolnshire on Friday.
Before the visit, he said: “The security of the United Kingdom, both today and for future generations, will always be of paramount importance to this government. That’s why we need to stay at the cutting edge of advancements in defence technology – outpacing and outmanoeuvring those who seek to do us harm.
“The international partnership we have announced today with Italy and Japan aims to do just that, underlining that the security of the Euro-Atlantic and Indo-Pacific regions are indivisible.
The Unite union welcomed the partnership.
The national officer Rhys McCarthy said: “The Tempest fighter aircraft will not only play a key role in defending our nation but also will boost the UK economy by supporting tens of thousands of aerospace jobs across the UK at BAE Systems, Rolls-Royce, Leonardo, MBDA and throughout these companies supply chains.”
"Our ability to develop cutting-edge technologies to meet global power needs, teamed with our advanced power and propulsion systems means we will play a major part in the next-generation fighter jet strategy to ensure Team Tempest leads the world in the combat air sector." Rolls-Royce says on its website
9.52am: Pendragon tumbles as Hedin Mobility pulls bid
Pendragon Group (LSE:PDG) shares tumbled 26% on news that Scandinavian car dealer Hedin Mobility has withdrawn its takeover approach for its UK peer blaming challenging market conditions and an uncertain economic outlook for the decision.
Hedin made a tentative offer of around 29p per share in September, which Pendragon said it was considering while also carrying out a strategic review of the whole business.
Russ Mould, investment director at AJ Bell said: “Car retailers were in strong demand during the pandemic as a shortage of new vehicles and a sudden jump in demand for used cars made the market red hot.”
“That bubble now seems to have burst as people watch their pennies and find ways to keep their existing motor running for longer rather than seeking an upgrade or changeover.”
9.44am: InterContinental Hotels benefits from Peel Hunt upgrade
Shares in InterContinental Hotels Group plc are having a good morning, up 2.5% and topping the FTSE 100 risers, as Peel Hunt upgraded the stock to buy from hold.
“We believe that IHG’s share price has been left behind in an undervalued UK market and domestically-focused subsector” the broker said.
“Given its primary exposure to a US economy in relatively good shape and a mid-market hotel subsector that has proven to be resilient, we believe its valuation will look increasingly compelling as 2023 goes on.”
Alongside the rating upgrade the broker upped its price target from 4,600p to 5,750p based on a fiscal year 2023 PE multiple of 19x.
9.36am: FCA fines Santander
The Financial Conduct Authority has fined Santander £107.7mln for "serious and persistent" gaps in the Spanish bank's anti-money laundering controls for more than 560,000 business customers.
The FCA said that between 31 December 2012 and 18 October 2017, Santander's UK arm failed to properly oversee and manage its anti-money laundering systems.
The failings created a risk of ‘prolonged and severe’ money laundering, said Mark Steward, executive director of enforcement and market oversight at the FCA.
‘Santander’s poor management of their anti-money laundering systems and their inadequate attempts to address the problems created a prolonged and severe risk of money laundering and financial crime.
‘As part of our commitment to prevent and reduce financial crime, we continue to take action against firms which fail to operate proper anti-money laundering controls.’
9.14am: Footsie little changed as City digests financial services reforms
The FTSE 100 is hovering around its opening levels, with falls in oil majors weighing on London’s blue chip index and as the City digested the sweeping reforms to the financial sector announced by chancellor, Jeremy Hunt today.
Victoria Scholar, head of investment, interactive investor said: “Hunt is trying to prove to the financial sector that he is very much pro-business and in favour of the City of London as a key growth engine to the economy.”
“However there is a risk that the Treasury is acting myopically, quickly forgetting the pre-2008 excessive risk taking that ultimately led to the global financial crisis and the introduction of new regulation to prevent another similar catastrophe.”
In the equity markets and InterContinental Hotels Group plc jumped 1.9% as Peel Hunt upgraded to buy from hold raising its price target to 5,750p from 4,600p.
Investment manager Man Group PLC surged 6.2% as it announced a share buyback programme of up to $125m and housebuilder Berkeley Group PLC rose 0.5% after it backed its full-year profit outlook despite reporting a drop in first-half profits.
"Berkeley is battening down the hatches in view of a tightening economic environment, but remains supported by its exposure to London and the South East," said interactive investor's Richard Hunter.
Among the small caps and ProCook plunged 19%. after the kitchenware retailer said sales in recent weeks have been weaker than anticipated, as consumer demand softened due to the cost-of-living crisis in the UK.
It now expects revenue for its full year to be between £60mln to £65mln, and underlying profit before tax to be approximately breakeven.
8.22am: FTSE 100 higher, UK unveils "Big Bang 2.0"
London’s blue-chip index has opened higher with the FTSE 100 up around 11 points at 7,483 following the US higher.
The Treasury has announced its reforms to the financial services industry, dubbed Big Bang 2.0, which it said will taking forward its ambition for the UK to be “the world’s most innovative and competitive global financial centre.”
Billed as the biggest shake-up since Margaret Thatcher's wave of deregulation in the 1980s, the Chancellor's proposals - published online this morning - include a relaxation of rules on what banks can do with their money; a new requirement for regulators to make London more competitive internationally; and scrapping red tape that holds back the stock market.
Hunt will set out more details later today.
Banking shares were higher with Lloyds Banking Group PLC (LSE:LLOY) up 0.9% and Barclays PLC (LSE:BARC) up 0.5%.
Associated British Foods PLC (LSE:ABF) was a touch lower, down 0.6%, as it reiterated ull-year guidance but Anglo American advanced 1% as it forecast production increases in 2023 and 2024.
7.54am: Pound gains on greenback following softening jobs US data, euro runs hot
The US Dollar Index (DXY) continues to weaken on the back of consistent signs of a cooling US economy.
Initial jobless claims have been edging higher since late August (albeit at a fairly slow pace) while forecasts for today’s producer price index expect a reading of 7.3% compared to last month’s 8%.
DXY ended Thursday’s session 0.4% lower and has so far dipped another 0.15% to 104.29 in today’s Asia trading window.
Cable jumped as a result, adding 0.2% on Thursday and another 0.2% this morning to change hands at 1.226.
The pound maintains the upper hand against the greenback – Source: tradingview.com
Sterling has the upper hand in the EUR/GBP pair this morning, though the pair has primarily range traded on 86p for the past four sessions- the current market price of 86.22p is equal to Tuesday’s closing price.
Currently buying 1.057 US dollars, the euro continues to gain against the greenback, having added 0.4% yesterday and sustaining the upper hand in the EUR/USD pair this morning.
While the UK and US seem to be weighing up the chances of peak inflation, energy costs in the euro area are a going concern, while unemployment remains at record lows and wage growth is accelerating, hence the persistently hot euro on the forex market.
"The core inflation rate is unlikely to peak until mid-2023 and will only fall slowly thereafter," Commerzbank economist Christoph Weil recently said. "Against this backdrop, the ECB's goal of pushing the inflation rate back to just under 2% on a sustainable basis seems a long way off."
7.39am: AB Foods holds guidance, Aggreko (LSE:AGK) buys Cresthic for £122mln
In corporate news, Associated British Foods PLC has maintained full-year guidance in a trading update.
“Our outlook for the full year is unchanged. We continue to expect further significant input cost inflation, but the volatility of our input costs has diminished” chairman, Michael McLintock said.
"We continue to expect the aggregate profit of our food businesses to be ahead of our last financial year," he added.
"At this early stage, Primark trading in this financial year has been encouraging.“
While Aggreko (LSE:AGK), the former FTSE-100 temporary power supplier, has swooped to buy Crestchic PLC in a deal that values the specialist equipment provider at £122mln.
The deal values each share in the AIM-listed group at 401p cash, a 13% premium to Thursday’s closing price of 356p and represents an implied enterprise value multiple of approximately 13.7x Crestchic's EBITDA from continuing operations.
Aggreko (LSE:AGK) said Crestchic's business is well-aligned with its objective of supporting its customers through the energy sector's transition to more renewable sources of energy and will accelerate plans to target high-growth attractive end-markets such as renewable energy and data-centres.
7.00am: Footsie set for a bright start
FTSE 100 seen opening higher on Friday as US markets pushed higher following recent losses and as investors look ahead to next week’s central bank meetings.
Spread betting companies are calling the lead index up by around 20 points.
“The main focus of attention continues to be on next week’s central bank meetings of the Federal Reserve, ECB and Bank of England, and guidance on the likely glide path for rates heading into 2023, as well as two important CPI reports, one from the UK, and more importantly the November CPI report from the US” said Michael Hewson, chief market analyst at CMC Markets UK.
The S&P 500 broke its five-day losing streak and other US markets moved higher as an increase in weekly jobless claims numbers was taken as a sign that the pace of interest rate hikes could soon slow.
At the close the Dow Jones Industrial Average was up 184 points, or 0.55%, to 33,781, the S&P 500 jumped 30 points, or 0.75%, to 3,964 and the Nasdaq Composite rose 123 points, or 1.1%, to 11,082.
“We had a strong selloff over the last few days and it doesn’t take much to create even the underpinnings for a modest rally,” Quincy Krosby, LPL Financial’s chief global strategist told CNBC.
In London, a trading update is expected from Diploma PLC (LSE:DPLM) while first-half numbers are due from Berkeley Group Holdings PLC (LSE:BKG). Across the pond US PPI figures are due for November along with a reading from the Michigan consumer sentiment index.