- FTSE 100 closes flat
- New York turns mixed again after data and earnings
- Core US PCE inflation index rose 4.4% in December
4.45pm: FTSE on even footing
At the close, the FTSE 100 was right back where it started, closing slightly higher at 7,765 points for a four-point, 0.1% gain on the day.
The Bank of England's rate decision is on the docket next week, and investors will be keenly anticipating the result as the UK economy continues to struggle with double digit inflation.
"The slide in energy prices in recent months has alleviated some of the pressure on wage packets, when it comes to petrol prices, however with food price inflation still at 16%, they will also be acutely aware that a weak pound will make headline inflation much sticker than it needs to be if they show any indication, they are going soft when it comes to hit its inflation target," according to CMC's Hewson.
3.50pm: Euston is end of the line
HS2 will terminate at London Euston after all, with the UK chancellor Jeremy Hunt scotching reports the high-speed line could stop before reaching the centre of the capital.
Hunt said he did not see "any conceivable circumstance" the original plan would not be followed and that he was "incredibly proud" of the work going ahead.
The endpoint of the line came into question after a report in The Sun claimed the last leg of HS2 could be scrapped and replaced with a new hub at Old Oak Common in the suburbs of northwest London.
The government did not deny the reports or that a two to five-year delay to the entire project - currently due to be completed between 2029 and 2033 - was being considered due to record high inflation impacting costs.
However, when asked if he and the government were committed to the line ending in Euston as planned, Hunt said: "Yes we are ... I don't see any conceivable circumstance in which that would not end up at Euston and indeed I prioritised HS2 in the autumn statement."
"We have not got a good record in this country of delivering complex, expensive infrastructure quickly but I'm incredibly proud that for the first time in this last decade under a Conservative government we have shovels in the ground, we are building HS2 and we are going to make it happen," Hunt added, according to Sky News.
3.30pm: Michigan confidence up
US stocks in New York are holding their gains after the University of Michigan's closely watched consumer confidence index showed a final reading of 64.9 in January, an increase from a preliminary reading of 64.6, and up from a reading of 59.7 for December.
Previously reported changes in inflation expectations, however, were revised lower. The sub-index for price expectations one year ahead fell from 4.4% to 3.9% (Preliminary: 4.0%), while that looking out five to 10 years was steady at 2.9% (Preliminary: 3.0%).
UMich survey director Joanne Hsu commented: "The current conditions index soared 15% above December, with improving assessments of both personal finances and buying conditions for durables, supported by strong incomes and easing price pressures. That said, there are considerable downside risks to sentiment, with two-thirds of consumers expecting an economic downturn during the next year."
With US indices steady, London's FTSE 100 index managed to rally into the close, adding 12 points, or 0.2% to 7,772.
3.15pm: Fed Day approaches
With another batch of data released, Neil Wilson, chief market analyst at Markets.com, notes that it is Fed Day next Wednesday with another US rate hike expected but a lot less certainty around whether the FOMC has any more plans to raise rates.
In a preview of the Federal Reserve committee meeting, Wilson said: "Markets see a roughly 95% chance the Fed goes for another hike and roughly 80% likelihood it follows this with another 25bps hike in March. Beyond that the outlook is much less clear – only a one in three chance of another 25bps in May as markets bet that the Fed is close to the top.
"The meeting and press conference will be crucial as Jay Powell either pushes back against the dovish market pricing or instead leans into the narrative that inflation has peaked and a pause is warranted."
He added: "The Fed raised rates by 425bps last year with an aggressive series of hikes. Now markets think it’s ready to slow right down with a 25bps hike on Wednesday, taking the target range to 4.5-4.75%. Slowing but not stopping seems to be the message – officials have been consistent in saying there is more work to do."
2.50pm: US stocks tentatively gain
The FTSE 100 index moved into positive territory as Wall Street turned modestly higher having edged lower at open following a mixed bag of corporate earnings and data.
After around 20 minutes of trading, the Dow Jones Industrial Average had added 91 points, or 0.3% at 34,040, while the S&P 500 rose 0.1%, and the tech-heavy Nasdaq Composite gained 0.2%.
Looking at the US data, economists at ING said: "Consumer spending slowed sharply through the fourth quarter and we will need to see a rapid turnaround to prevent a contraction in the first quarter of this year. Meanwhile, the Fed's favoured measure of inflation is already undershooting the Fed's forecasts from last month, adding to a sense that the peak is close for interest rates."
Notable stock movers in New York included shares of Intel Corporation, which slid more than 10% after the chipmaker’s latest financial results fell short of expectations and company issued weak guidance released after-hours on Thursday.
In London, the UK blue chip index was up 1.5 points at 7,762.
2.10pm: US consumer spending down, PCE inflation in-line
US households cut spending in December, adding to signs of an economic slowdown, as underlying inflation cooled at its slowest pace since October 2021.
Spending by US households decreased 0.2% in December from the prior month, the US Commerce Department said Friday, compared with a downwardly revised 0.1% decrease in November. Households cut spending on goods last month and increased spending slightly on services.
The personal-consumption expenditures (PCE) price index - the Federal Reserve’s preferred gauge of inflation - rose 5.0% in December from a year earlier, after increasing 5.5% in November.
The core PCE-price index, which removes volatile food and energy prices, rose 4.4% in December from a year earlier—its slowest pace since October 2021 - compared with 4.7% in November.
On a month-to-month basis, the PCE-price index rose 0.1% in December from the prior month, matching November’s increase. Core prices rose 0.3% in December from the prior month, up from November’s 0.2% increase.
The Fed is set to make its first interest rate decision of 2023 at a meeting next week. Officials have signaled that a quarter-point increase is likely which would mark a slower pace of interest-rate increases compared with last year.
US stock futures stayed marginally lower following the as-expected data, while the FTSE remained 4 points, or 0.05% weaker at 7,756.
1.30pm: London's movers
Here’s a look at today’s fallers and risers in London
Fallers
Chesterfield Resources- down 18% to 1.3p
The AIM-listed mineral exploration company saw its shares drop 18% to 1.3p after failing to dispose of its Adeline project. Pacton Gold was interested in the copper project in Labrador, Canada, but has decided not to go ahead with the purchase on the terms announced on 19 October 2022.
Motorpoint- down 3.5% to 140p
The UK’s leading vehicle retailer noted that revenue in the nine months to 31 December grew by 17% to £1.06bn, but shares slipped on the outlook which created consumer uncertainty. As a result, used car demand is expected to suffer.
Superdry- down 18%$ to 122p
Issued a profit warning despite revenues climbing over the Christmas period as the global macroeconomic outlook remains challenging. The clothing retailer said it now expects to break even for the full year, compared to previous estimates of £10mln to £20mln in pre-tax profits.
Risers
Ironveld- up 3% to 0.32p
The iron ore company confirmed its subsidiary entered into a joint venture agreement with Pace SA as equal partners to produce and sell dense media separation grade magnetite from Ironveld’s mine in Limpopo, South Africa.
On The Beach- up 6% to 185p
The online holiday retailer said that at the start of the year from 1 October 2022, sales exceeded that of the same period a year earlier, despite it historically being the quietest quarter. The total transaction value for the year to date is also up 68% compared to a year earlier
Craven House Capital (AIM:CRV)- up 133% to 0.35p
All resolutions at its AGM were passed.
1.00pm: US markets seen lower ahead of PCE figures
Wall Street is expected to open lower, giving back some of Thursday’s strong gains, as the market anticipates inflation data that will help decide the Federal Reserve’s next move when its rate-setting committee meets next week.
Futures for the Dow Jones Industrial Average declined less than 0.1% in Friday pre-market trading, while those for the broader S&P 500 index dropped 0.2% and contracts for the Nasdaq-100 fell 0.5%.
Stocks rallied in the previous session as investors responded to news that the US economy grew by a bigger-than-expected 2.9% in the fourth quarter of 2022, and continued to digest corporate earnings reports.
The DJIA added 0.6% to finish at 33,949, while the S&P 500 gained 1.1% to 4,060 and the Nasdaq jumped 1.8% to 11,512.
“Renewed hopes for a soft economic landing cheered investors, as economic growth continued amid the tightening interest rate environment,” commented Richard Hunter, head of markets at interactive investor. “Next week will provide further colour, with a Fed policy meeting which is expected to result in a further 0.25% rate hike, and with a non-farm payroll release which could well confirm that the labour market remains tight.
"In the meantime, today will also see the release of the Personal Consumption Expenditure (PCE) price index, the Fed’s preferred inflation measure, which will give further indications on whether its policy is having the desired effect," he said.
The PCE index, due for release before the market opens, is expected to show a 0.3% month-over-month rise in core inflation - which excludes volatile food and energy prices - for December, with the annual rate declining to 4.4% from 4.7% in November, according to Reuters consensus estimates.
“Meanwhile the current earnings season is in full flow, with mixed messages remaining the order of the day,” Hunter continued. “Although around two-thirds of the companies which have reported so far have beaten estimates, expectations are that earnings will nonetheless have fallen on the whole.
“The latest updates included a strong reaction to numbers from Tesla and American Airlines, the former of which added to tech gains alongside the likes of Microsoft, Amazon and Alphabet. Less positively, stocks dropping after their latest updates included IBM and Southwest Airlines (NYSE:LUV) (Southwest Airlines (NYSE:LUV)),” he added.
Chevron Corporation (NYSE:CVX) (Chevron Corporation (NYSE:CVX)), American Express and Colgate-Palmolive are among the companies scheduled to report their quarterly earnings today.
12.35pm: Store vacancies fall - BRC
Some news from the retail world and the number of store vacancies has declined for the fifth consecutive quarter.
Data from the BRC-LDC Vacancy Monitor showed that the overall rate of store vacancies across the UK improved to 13.8% in the fourth quarter of 2022, which is 0.1% better than quarter three and 0.6% better than the same time last year.
????️ Helen Dickinson: "Retail occupancy was boosted by the return of international tourists visiting UK towns and cities, and more frequent visits to offices."
"The first half of 2023 will likely be yet another challenging time for retailers and consumers”https://t.co/w5ymIYgVn5
— The British Retail Consortium (@the_brc) January 27, 2023
Shopping centre vacancies improved to 18.2% in the fourth quarter compared with 18.8% in the third, while high street vacancies improved slightly to 13.8% in the final quarter compared with 13.9% in the third quarter.
Meanwhile, retail parks continued to show the lowest vacancy rate at 9% in quarter four – a 0.7% reduction from Q3 2022.But British Retail Consortium chief executive Helen Dickinson said: “While the number of empty stores reduced in the final quarter of 2022, vacancy rates have not recovered to pre-pandemic levels.”
12.23pm: Chancellor should add a fifth E - empty - says IOD
A slightly scathing put down from The Institute of Director’s chief economist Kitty Ussher responding to the chancellor’s speech today.
She suggested he should add a fifth “E” to his four pillars for growth which all began with that very letter - enterprise, education, employment and everywhere.
But is wasn’t a word Jeremy Hunt was looking for with Usher choosing “empty” in her reaction to the speech.
“While he referenced the current Prime Minister's Mais lecture of a year ago, that opened the door to using the tax system to encourage investment in people, capital and ideas, we heard nothing about how it would be done” she said.
“We would therefore add a fifth E for 'Empty' to his four E's economic framework” she added.
“Business needs government action to counteract the negative mood, for example through a continuation of the capital investment super-deduction, through tax credits for employers who invest in skill shortage areas and a plan to incentivise the net-zero transition for the SME sector.”
“Without action, these foundational businesses may not take kindly to being told by the chancellor to take on more risk, when the environment they operate in feels problematic due to factors outside their control” she stated.
11.59am: James carries the can at Direct Line
“You can’t walk away from the kind of stock market disaster served up by Direct Line this month without a senior executive carrying the can.”
That was the view of AJ Bell’s investment director, Russ Mould, who suggested “shareholders will have been looking for someone to take a bit of responsibility and chief executive Penny James has agreed with the board she will step down – the statement open to interpretation on whether she jumped or was pushed.”
“It was not so much the decision to scrap the dividend in and of itself which did for James, it was more what lay behind it” he explained.
“Direct Line had been happily buying back its own shares less than a year ago and left its capital buffers too bare to cope with a period of extreme weather events in 2022, which while unusual shouldn’t have been enough to put Direct Line in such a perilous position.”
“Where James probably warrants more sympathy is on the inflationary pressures which are continuing to bite across the whole industry. However, none of its major peers have found themselves in Direct Line’s predicament yet,” Mould pointed out.
“What happens next with dividends will also be in focus for investors – there has to be a risk of no dividend for 2023 either as the company looks to rebuild its capital position.”
“Which would be truly lean times for a shareholder base who had got used to a generous stream of income” Mould concluded.
11.40am: ING sees 50bp rate rise by Bank of England
As is the way with financial markets and the focus is already switching to the next big news with the Bank of England’s (BoE) rate call next week prompting much discussion.
ING Economics said it expects the BoE to follow the European Central Bank than the Federal Reserve, with a 50 basis point rate hike for the second consecutive meeting.
“While the minutes of the December meeting appeared to open the door to a potential downshift to a 25bp move in February – and this meeting looks like a closer call than markets are pricing – the reality is that the recent data has looked relatively hawkish” economists at ING noted.
Wage growth is persistently high, looking both at the official numbers and the BoE’s own business surveys and while headline inflation came in a little lower than the Bank projected back in November, services CPI (seen as a better gauge of domestically-driven inflation) has come in above expectations.
But ING predicted if we get a 50bp hike then it’s likely to be the last of that magnitude.
It noted BoE officials have hinted previously that much of the impact of last year’s rate hikes is yet to hit, and cracks are forming in interest-rate-sensitive parts of the economy.
Headline inflation should begin to come down more rapidly from March too, as the impact of last year's energy bill surges drop out, and core goods/food pressure begins to ease more noticeably.
“We expect one final 25bp hike in March, taking the Bank Rate to a peak of 4.25%. The key question for Thursday is whether the Bank itself acknowledges its work is nearly complete. We suspect it’s more likely to keep its options open.”
11.16am: Oil price moves higher
Oil prices jumped on Friday after yesterday’s better than expected US GDP numbers raised hopes of a soft landing in the world’s largest economy.
Together with continued expectations of a demand recovery from top crude importer China this helped propel oil prices higher.
By late morning Brent crude was trading 1.54% higher at US$88.81/barrel.
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The rise also underpinned share prices in BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL) which currently sit in 2nd and 3rd place in the FTSE 100 risers, up 1.8% and 1.9% respectively, with only J Sainsbury PLC (LSE:SBRY) above them.
This has helped keep London’s lead index the right side of the line, currently 12 points to the good.
10.43am: Wise falls as report suggests it could face competition probe
Shares in Wise PLC (LSE:WISE) fell 2.2% after a report suggested it could face a regulatory investigation after a rival start-up accused the money transfer firm of stifling competition.
The Guardian said that Atlantic Money has written to the Competition and Markets Authority (CMA) to raise concerns over potential conflicts of interest and anti-competitive behaviour after Wise blocked the firm from a swathe of its own price comparison sites.
Atlantic’s complaint relates to Wise’s price comparison sites, which Atlantic said appear to be independent.
Wise runs a price comparison page on its own website that lists the transfer fees and exchange rates of rivals, including major high street banks, as well as Western Union, Starling Bank and MoneyGram.
It also owns least six external currency conversion and money transfer comparison sites including Exiap, Geldtransfer and Currencyshop.
Wise originally listed Atlantic Money on its Wise.com price comparisons page in October 2022, but removed the firm last week.
Wise told the Guardian that it “decided to remove Atlantic Money for the time being for a number of operational reasons, including queries received from customers about their business. We take compliance with all applicable laws very seriously.”
Atlantic was also refused entry on to the Exiap and Geldtransfers comparison sites, which Wise owns, with the representative claiming in November: “Atlantic Money is still in the early stages of establishing its brand and building a public footprint.”
Atlantic has rebuffed concerns over its business.
“Wise is effectively acting as gatekeeper to the market and creating a substantial barrier to entry for cheaper and more innovative providers to establish themselves,” Atlantic said in its letter to the CMA.
“This conduct is harmful to competition across the UK and EU and, we would submit, ultimately results in higher fees for end consumers.”
The report said Wise had not been contacted by the CMA while the CMA said it was unable to comment on specific cases outside a formal investigation.
10.00am: Chancellor hits out as "declinism"
The chancellor, Jeremy Hunt has delivered his speech to business leaders at the Bloomberg UK headquarters in London.
Outlining his hopes for growth Hunt declared he wants to make Britain the "next Silicon Valley".
His plan would be based on what he called his “"four pillars" as a "framework" against to assess individual policies.
He said they were "essential for any modern, innovation-led economy".
The four pillars, all beginning with the letter "E" are: enterprise, education, employment and everywhere, he said.
Hunt insisted the "best tax cut right now is a cut in inflation", arguing that reducing inflation was the "only sustainable way to restore industrial harmony" in Britain.
“High taxes directly affect the incentives which determine decisions by entrepreneurs, investors or larger companies, about whether to pursue their ambitions in Britain.”
He added that the public sector has rebounded more slowly from the pandemic than he wanted, but hit out at "declinism".
“I say simply this declinism about Britain is just wrong. It’s always been wrong in the past and it’s wrong today.”
He also argued that Brexit makes his plan for growth possible and argued that "we need lower taxes" in the UK.
Hunt said the government’s plan for growth is “necessitated, energised and made possible” by Brexit, and that the UK needs to “make Brexit a catalyst for bold choices”.
Brexit allows us to “take advantage of the nimbleness and flexibility it makes possible”, he declared.
On employment, the UK will “never harness the full potential of our country unless we unlock it for each and every one of our citizens” Hunt stated.
“Nor will we fix our productivity puzzle unless everyone who can participate does. So to those who retired early after the pandemic, or haven’t found the right role after furlough, I say – Britain needs you.”
He concluded by saying: "We must never forget the ingenuity and optimism that is our hallmark."
"Being a technology entrepreneur changed my life. Being a technology superpower can change our country’s destiny."
9.26am: Bestway swoop shows UK's shares "are cheap"
Bestway’s swoop for a 3.45% stake in Sainsbury’s “is another indicator that UK shares are cheap.”
That’s the view of John Moore, senior investment manager at RBC Brewin Dolphin who added this was especially so in the “retail sector, which has somewhat of a dark cloud hanging over it.”
He suggested the deal would put “a cat among the pigeons and remind stock market-focused investors that trade values for assets may be much higher.”
He noted Sainsbury’s is one of the least favoured FTSE 100 stocks among analysts and the fact that it has been the target of investment from another sector player could spark a flurry of activity around the company and more widely.
9.16am: Off the rails - HS2 might not make it to central London
The UK’s flagship high speed rail project linking the capital to the Midlands and the North may never reach central London, according to a report in The Sun.
Blighted by soaring inflation, HS2 bosses are weighing up a scaling back of the project — including delaying its Euston terminus to 2038 or scrapping it altogether, the paper said.
EXC: Inflation blighted HS2 in chaos with delay or scrap of it arriving at Euston.
Construction costs pain means scaling back of the project under live discussion in Whitehall.
Spent last few weeks under bonnet and it's not looking good https://t.co/5PrlFNp0Nt
— Harry Cole (@MrHarryCole) January 26, 2023
A two to five-year delay to the entire project is being considered, with fresh fears the Birmingham to Crewe and Manchester legs will also be scrapped.
High speed trains would instead run from a new hub at Old Oak Common in West London’s suburbs rather than HS2 going all the way into the city centre with a new tunnel.
HS2 bosses have privately admitted soaring construction costs mean they will miss their £44bn phase one budget by “many billions” — with a quarter of the contingency funds already spent.
9.00am: FTSE little changed, Sainsbury's leads the way
London’s blue chips have moved either side of the opening line in early exchanges but appear to have settled on the upside for now with the FTSE 100 up 5 points.
Sainsbury’s is top of the risers, up 5.5%, while Tesco was also slightly higher after the Bestway news with the family-owned business swooping for a 3.45% stake in the grocer.
“The news comes as a surprise to us and may spark some chatter around both Sainsbury and the wider sector with respect to corporate activity and equity values, noting that current metrics are undemanding” Sainsbury’s house broker, Shore Capital commented.
Michael Hewson at CMC Markets noted the bid talk but pointed out that “one only has to look across the High Street at what’s happened with Morrisons and Asda to realise how any bid if it were to happen might end up becoming a very expensive proposition, in what is an incredibly competitive marketplace.”
“Bestway would also have the considerable task of convincing Sainsbury’s two largest shareholders, the Qataris and Vesa that they have a credible plan to take the business forward” he stated.
But Bestway’s position as a wholesaler could offer synergies for Sainsbury in any future relationship given that Tesco already owns Booker, he suggested.
Oil stocks have also provided support with both BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL) prominent on the upside.
Not such a super day for branded retailer, Superdry PLC (LSE:SDRY), which plunged 15% after it issued a profit warning due to increasing uncertainty and an underperformance in its wholesale business.
The clothing retailer said it now expects to break even for the full-year, compared to previous estimates of £10mln to £20mln in pre-tax profits.
Elsewhere, Amigo Holdings tumbled nearly 10% after the sub prime lender said that the expressions of interest it had received so far for a planned capital raise were below its target of £45mln.
Amigo reiterated that if it cannot raise the extra funds by May 26, 2023, it would start an orderly wind-down of the business.
8.36am: Hunt to lay out growth plans
The chancellor, Jeremy Hunt, will use a speech today to pledge to transform ‘British genius and hard work’ into long-term prosperity.
The Daily Mail reported that Hunt will unveil a plan for growth, the hitting out at the ‘declinism’ peddled by Labour and say this country is well placed to exploit ‘the growth sectors which will define this century’.
He will insist that downbeat projections from gloomy forecasters ‘do not reflect the whole picture’ and argue that the economy is standing up well against global rivals.
Making ‘the case for optimism’, he will claim EU red tape has held back investment and productivity but future growth can be ‘built on the freedoms which Brexit provides’.
Hunt was reported to have told a Cabinet ‘awayday’ at Chequers yesterday that the government could meet Rishi Sunak’s pledges to halve inflation, kick start growth and rein in debt.
But he warned it would require tight control over spending, including resisting union calls for pay rises that could fuel price rises.
Tory MPs pushing for tax cuts in the March Budget are also set to be disappointed, with the chancellor expected to warn today that the battle against inflation comes first.
Mr Hunt will pledge a relentless focus on key industries of the future in which the UK has a ‘competitive advantage’, such as digital technology, green industries, the life sciences, advanced manufacturing and the creative sector.
‘Our plan for the years that follow is long-term prosperity based on British genius and British hard work ... and world-beating enterprises to make Britain the world’s next Silicon Valley,’ he will say.
Hunt was reported to have told ministers yesterday that he believes the economy will be out of recession and growing again by autumn – and inflation will be significantly lower.
In his speech today, he will argue that, although UK growth has slowed since the financial crash, it has remained ahead of France, Japan and Italy – and point out that the economy has kept pace with Germany’s since the EU referendum.
‘Declinism about Britain was wrong in the past – and it is wrong today,’ he will say.
He will also highlight reforms to City regulation and plans to review more than 4,000 EU laws still on the statute book.
Hunt will set out the need to get four million people of working age back into employment to help tackle labour shortages that are fuelling inflation and hampering the economy.
8.18am: FTSE dips at the open
FTSE 100 opened slightly lower despite a rally in the US overnight as investors looked ahead to a speech from chancellor Jeremy Hunt later today, while one of the UK’s best known names, J Sainsbury PLC (LSE:SBRY), was in the spotlight after Bestway took a 3.45% stake.
At 8.15am the FTSE 100 was down 6 points at 7,755 while the FTSE 250 was 4 points lower at 19,911.
The news that Bestway, a family-owned company which runs the UK’s largest independent cash and carry business, has taken a stake in Sainsbury’s pushed shares in the grocer over 6% higher.
Bestway said it has no plans to bid for the FTSE 100-listed company, but may buy more shares from “time to time” and Sainsbury said it would liaise with Bestway as it would with any shareholder.
Rival Tesco PLC (LSE:TSCO) was also a firm feature, up 1%.
News of strong demand and bookings growth pushed On the Beach Group (LSE:OTB) PLC 6.6% higher. The online beach holiday retailer said bookings since the Christmas period have materially increased and whilst it is still very early in the year, group total transaction value since the start of the financial year to date is up 68% vs the equivalent period in the prior year.
But Rolls-Royce Holdings PLC (LSE:RR.)’s new CEO’s call to arms failed to impress the market with shares 2.3% lower after Tufan Erginbilgic was reported by the FT to have told employees it must transform the way it operates or it will not survive.
The FT reported that in a global address to staff, parts of which were shared with the paper, Erginbilgic had warned that investors were losing patience with the FTSE 100 group.
Meanwhile Direct Line Insurance Group PLC (LSE:DLG) was little moved by news that CEO, Penny James, has agreed to step down with immediate effect.
The online insurer warned on profits earlier in the month.
8.13am: Forex daily: USD sees some short-term upside against GBP and EUR, but analysts split over Fed direction
Most of the attention is in the equities market today, at least for US investors encouraged by Thursday's surprisingly strong 2.9% gross domestic product growth for the final quarter of 2022, beating forecasts by 0.3 percentage points.
Healthcare services, housing and utilities, and personal care services led the growth, while spending on automobiles and parts proved a tailwind.
Core personal consumption expenditures (a measure of the spending on goods and services) fell from 4.3% to 3.2% in the last quarter, which according to Bloomberg analysts “will probably offer more evidence supporting a slower pace of Fed hikes”.
Analysts added that “the core inflation gauge probably slid to 4.4% last month, and falling energy prices and discounts to clear excess inventory may stay disinflationary through the first half”.
Yet, as ING pointed out, “the Federal Open Market Committee appears to have more room to surprise on the hawkish side compared to the European Central Bank”, and the forex markets seem to be in agreement (as does the bond market, given the overnight yield hike on 10-year treasury bonds).
While GBP/USD closed slightly higher yesterday, the pair dipped 40 pips to 1.237 in this morning’s Asia trading window.
Cable pulls back from mid-December highs – Source: capital.com
EUR/USD closed 0.25% lower and shed another 0.17% to 1.087 this morning, while the greenback also saw gains against the Japanese yen and Swiss franc, and the rest of the G10 bucket for that matter.
For some perspective, the US Dollar Index (DXY) is still down 2.7% year to date, and the trendline certainly points in the same direction, so the prospect of some short-term upside should take this into consideration.
Without any major catalysts on the UK and Eurozone economic calendars, investors should expect too much action on the EUR/GBP pair. For the moment, the pair is changing hands at 87.86p after closing 0.3% lower on Thursday.
7.49am: Strong bookings at On The Beach
Positive news from On the Beach Group (LSE:OTB) plc which reported bookings in the first quarter of the fiscal year were higher than last year leaving the group with a healthier forward order book.
The online beach holiday retailer was updating investors ahead of its AGM later today.
“Although the first quarter (calendar Q4) is historically the quietest trading period, group total transaction value (TTV) for October, November and December 2022 exceeded the comparative months in fiscal year 2022” the company said.
Bookings since the Christmas period have also materially increased and whilst it is still very early in the year, group TTV since the start of the financial year to date is up 68% vs the equivalent period in the prior year.
The company reported growth across premium, long-haul and B2B expansion areas.
The balance sheet remains strong and investment has been ramped up to support the strong sales growth.
7.32am: Bestway swoops for stake in Sainsbury
Could we see a bid for one of the UK@s best known names?
J Sainsbury PLC (LSE:SBRY) said it will engage with Bestway Group in line with other shareholders after it was revealed that the family owned multi-national had taken a 3.45% stake in the grocer.
Bestway, which runs the UK’s largest independent cash and carry business, said it paid around £193.mln for the 80.8mln shares at a price of 239.4p each.
The company said it intends to hold the shares for investment purpose and isn’t considering an offer for the company.
“Bestway Group intends to hold its shares in Sainsbury's for investment purposes and looks forward to supporting the executive management team” it said in a statement, although it added it may make further purchases from “time to time.”
In response Sainsbury’s said: “We note the announcement made this morning by Bestway Group stating that it is not considering an offer for the company.”
“We will engage with Bestway Group in line with our normal interactions with shareholders.”
7.10am: New Rolls-Royce boss calls for transformation - FT
The new CEO of Rolls-Royce PLC has given a brutal assessment of Britain’s flagship engineering group telling employees it must transform the way it operates or it will not survive, according to the Financial Times.
The FT reported that in a global address to staff, parts of which were shared with the paper, Tufan Erginbilgic, warned that investors were losing patience with the FTSE 100 group.
“Every investment we make, we destroy value” he told employees, adding that financially “we undperform every key competitor out there.”
Rolls-Royce’s new CEO has warned the engineering group must transform the way it operates or it will not survivehttps://t.co/MdMKI2XMJw
— Financial Times (@FinancialTimes) January 26, 2023
The stark appraisal was designed to pave the way for a shake-up at the group.
Speaking at the company’s Derby manufacturing site Erginbilgic who took over as CEO this month described the company as a “burning platform.”
He said the business needed to change fundamentally and that no business generating low returns should be in its portfolio.
"Rolls-Royce has not been performing for a long, long time, it has nothing to do with Covid, let’s be very clear. Covid created a crisis, but the issue in hand has nothing to do with it" he stated.
"Given everything I know talking to investors, this is our last chance" he said
7.00am: FTSE seen edging higher
FTSE 100 expected to open slightly higher on Friday after gains in the US following better than expected GDP figures.
Spread betting companies are calling the lead index up by around 7 points.
Wall Street rallied in afternoon trading as investors digested the release of gross domestic product data and another round of corporate earnings.
At the close, all three major indices were in the green, with the Dow pulling ahead 206 points at 33,949, a 0.6% gain; the S&P 500 up 1.1% or 44 points at 4,060 and the Nasdaq rocketing 1.8% to 11,512, up 199 points.
The focus in the US today another gauge of inflation, the PCE data, that is closely watched by the Federal Reserve.
Back in London and after yesterday’s bumper day of trading updates and results the company diary is looking quieter with a trading update from Paragon Banking Group PLC (LSE:PAG) the only major scheduled announcement.