- FTSE 100 closes 19 points lower
- US stocks lower after housing data
- British Aerospace up as Paris Airshow starts
4.45pm: Markets lack direction
At the close, the FTSE 100 had slipped 19 points to finish at 7,569 for a 0.3% loss on the day.
European markets have continued to lack direction with a "slight softish bias," despite the decision by the People’s Bank of China to cut 1- and 5-year lending rates by 10bps, CMC's Michael Hewson noted.
"The weakness appears to be being driven by disappointment over the small nature of the move, which has prompted declines in basic resources and the energy sector, with Glencore, Anglo American and Shell acting as the main drags," Hewson wrote.
3.55pm: For the Best
Best of the Best (BOTB) said it has agreed to a takeover offer from Globe Invest Ltd, valuing the operator of weekly online raffle competitions at around £45.3mln.
Globe Invest, a single-family office and investment holding company of Teddy Sagi, holds around a 30% stake in BOTB. Globe Invest is seeking to acquire the remaining stake it does not already own for 535p per share.
The price represents a 34% premium to the price paid by Globe Invest to acquire its initial 30% stake in BOTB back in September and an 8.9% premium to the average BOTB closing price of 491.5p over the past 12 months.
Shares in BOTB fell 7.2% to 515p on Tuesday afternoon in London following the announcement.
Separately on Tuesday, BOTB announced its annual results, reporting a rise in profit but a dip in revenue. In the year ended April 30, 2023, the company posted a pretax profit of £5.4mln, up from £5.1mln the year before, while revenue from continuing operations dropped to £26.2mln from £34.7mln.
It also said that trading in the new financial year has started in line with management expectations.
3.35pm: Creative expansion
WPP has acquired a 30% stake in Atlanta-based diversity-focused creative agency Majority, that combines a multicultural talent model with award-winning general marketing capabilities.
Majority specialises in "disruptive creativity" across advertising, strategic planning, branded entertainment and design services. Its key clients include The Coca-Cola Co, the NBA G League and Match Group. It was founded in 2021 by CEO Omid Farhang and Hall of Fame athlete-turned mogul Shaquille O'Neal, alongside chief strategy officer Asmirh Davis and chief marketing officer Jorge Hernandez
WPP did not provide further financial details regarding the acquisition.
In a statement, WPP chief executive officer Mark Read commented: "We have been really impressed by the vision, market positioning and trajectory of Majority since its launch in 2021 and we are delighted to become strategic partners in the agency."
Shares in WPP were 0.4% lower at 859.40p on Tuesday afternoon.
3.15pm: Renters miserable too
Although the mortgage market is under pressure as interest rates rise, there are also signs that UK housing market strains are spreading to the rental sector with the proportion of household income spent on rent hitting the highest in a decade in May, according to data released by Zoopla on Tuesday.
Asking and agreed rents continued to outpace incomes with tenants spending 28.3% of their pre-tax earnings on rent last month, above the 10-year average of 27%, Zoopla said. May's figures marked the 19th month in a row that rental price growth outstripped incomes.
Renters in London bore the brunt of the affordability squeeze with rent averaging 40% of gross earnings.
Zoopla's report showed a rise in the number of people struggling to pay their rent, with 15% of renters saying they found it very difficult to pay, up from 10% in the six months to November. Just under half said it was easy or very easy.
Zoopla said 53% of renters it surveyed reported a rent rise in the six months to May, up from 35% six months earlier.
Homeowners looking to remortgage and prospective home buyers are facing rising mortgage rates as high inflation and strong wage growth increase the likelihood of further Bank of England interest rate increases. Mortgage lenders including Nationwide, HSBC and Halifax have repriced or pulled home loan offerings in recent weeks.
2.50pm: New York dips
The FTSE 100 index gave up its modest gains and slipped back below the 7,600 level as US stocks started the shortened trading week following yesterday's Juneteenth holiday lower as investors weighed up new economic data from the residential construction sector ahead of Fed chair Jerome Powell’s Congressional testimony on Wednesday.
Around 20 minutes after the New York opening bell, the Dow Jones Industrials Average had lost 170 points or 0.5% at 34,128, while the S&P 500 shed 0.3%, but the Nasdaq Composite edged down just 0.01%.
New housing starts in May surged 21.7% to 1.63 million above the consensus expectation of 1.4 million. Building permits also increased more than expected, up 5.2% at 1.49 million above the expected 1.42 million.
Pantheon Macroeconomics senior US economist Kieran Clancy commented that the rebound in residential construction would soon run out of road.
“The ongoing bounce in housing starts and new home sales, and the surge in homebuilders’ stock prices, is fuelling the emerging narrative in parts of the commentariat that housing is now recovering, but the new home market is not the whole housing market,” Clancy pointed out.
“Total mortgage applications are bouncing along the floor, at best, and affordability remains extremely stretched, fundamentally limiting the scope for further increases in housing starts and new home sales.
“A sustained recovery in housing requires a meaningful improvement in affordability, via lower mortgage rates, falling home prices, or both. Neither will happen overnight," he concluded.
2.25pm: Inflation crucial
All eyes will be on the May UK consumer prices index reading for inflation tomorrow morning, which in turn could have a crucial bearing on the Bank of England’s key interest rate decision on Thursday.
David Goebel, associate director of Investment Strategy at leading UK wealth manager Evelyn Partners noted: “The expectation among economists is that the annual CPI rate will come down to 8.4% from the unexpectedly high April reading of 8,7% that kicked off the recent rise in bond yields. The closely watched core inflation figure, however, is expected to remain at 6.8%, and it’s fair to expect that any overshoot of either reading will further stoke bond yields. The two-year gilt yield continued its persistent surge this week, reaching 5.08% on Tuesday morning – higher than at any time since the midst of the financial crisis in 2008.”
He said: “The Bank of England’s policymakers are between a rock and a hard place, although some would argue they have had a hand in wedging themselves there. On the one hand the monetary policy committee must retain the credibility of its inflation-controlling mandate and its willingness to do whatever is necessary to bring inflation back down to target. On the other, with 12 successive rate rises the MPC is being criticised for risking an overshoot in its attempt to cool economic activity, while pouring fuel on the mortgage crisis fire.
“There is little doubt that the MPC will hike rates by 0.25% at the end of its meeting on Thursday, but if the ONS reports a higher-than-expected rate of inflation for May on Wednesday morning then the odds will shorten on a controversial 0.5% increase.”
Goebel added: “BoE Governor Andrew Bailey sounded a warning shot on the need to get inflation down, the Chancellor weighed in by backing the Bank to ‘do what it takes’, and markets are now pricing in the UK Bank Rate to rise to an eye-watering 5.8% - a 1.3% advance on the current 4.5%. It was only a few weeks ago that rate watchers were calling an imminent peak for the Bank rate.
“That has caused serious ructions in the mortgage market, with lenders withdrawing products and falling over each other to reprice.”
He concluded: “If BoE estimates that only a third of the rate increases since the end of 2021 have fed through to consumers and businesses are near the mark, then many more households and businesses are in for a rates shock as reality feeds through this year and next.”
2.10pm: Electric Rolls
Rolls-Royce is set to test a new line of hybrid-electric turbogenerators at its European sites rather than in the UK, the company said on Monday.
Showcasing the new system at the Paris Air Show, Rolls-Royce confirmed the engine would be tested using sustainable aviation fuels in the coming months in Dahlewitz, near Berlin.
The German economic affairs ministry is also partially funding the project, Rolls-Royce said, which will see the engine eventually run on hydrogen as the fuel becomes more widely available.
Rolls-Royce also laid out plans to become “the leading provider of all-electric and hybrid-electric power and propulsion systems” for aviation, with Monday’s move indicating the wider plans could also take place in Europe rather than in the UK.
Rolls-Royce shares were 2.3% higher at 157.30p on Tuesday afternoon.
1.30pm: A look at some risers and fallers on the junior market
Saga Communications (NYSE:SGA) shares rose 7.5% to 139.8p after it said underlying profit is expected to be well ahead of the prior year. Sentiment was further buoyed by news that river cruises and travel businesses were set to return to the black. Shares have since retracted to 132.5p
Lookers PLC (LSE:LOOK), the UK car chain, jumped 34% to 118.62p after it agreed to be taken over in a deal valuing the business at £465.4mln.
Capital Metals PLC (AIM:CMET) fell by 47% to 1.18p after the mineral sands company confirmed a placement to raise £500,000.
Somero Enterprises, Inc. (AIM:SOM) shed 8% to 303p after the concrete laser screed company announced in a trading update it expects full-year revenues to fall and underlying earnings (EBITDA) to come in below consensus.
1.00pm: US stocks to open lower
US stocks are expected to drift lower as traders return from the extended weekend break and look to Federal Reserve chair Jerome Powell’s semi-annual report to Congress on the state of US monetary policy on Wednesday for more direction.
Ahead of that US housing data for May will also be scrutinized.
Futures for the Dow Jones Industrial Average (DJIA) fell 0.3% in pre-market trading, while those for the broader S&P 500 index and contracts for the Nasdaq-100 were also 0.3% lower.
The main US indexes closed weaker on Friday as stocks took a breather from the rally that followed the Fed’s decision to pause on interest rate hikes at last week's Federal Open Market Committee meeting.
The DJIA fell 0.3% to 34,300, the Nasdaq Composite slid 0.7% to 13,690 and the S&P 500 declined 0.4% to 4,410. The small-cap Russell 2000 index ended 0.9% lower at 1,872.
“Investor attention will be drawn to housing data today, specifically housing starts and building permits, ahead of Fed Chair Powell's semi-annual testimony to Congress Wednesday,” commented TickMill Group market analyst Patrick Munnelly.
“His comments will provide additional insights into the Fed's decision to skip a rate hike last week and offer further discussions on the prospects of Fed policy, including the conditions necessary to support or dismiss the policymakers' 'dot plot' projections, which currently indicate expectations of 50bps of additional hikes in the second half of the year," he added.
12.58pm: Rightmove knocked lower by mortgage misery
Rightmove PLC (LSE:RMV) is among the worst performers in the blue-chip index today as investors respond to the crisis emerging in the UK mortgage market.
Rightmove, which generates revenues from estate agents advertising their properties online, was trading 1.8% lower at 519p as of 1pm.
Only Ocado, which copped a downgrade from JPMorgan this morning, is performing worse.
On the upside is Britain’s aerospace industry, with Rolls-Royce and BAE Systems keeping the FTSE 100 above ground.
The index was trading 0.12% higher at 7,597 in early-afternoon orders.
12.40pm: UK aerospace blue chips get Paris airshow bump
Britain’s two largest aerospace groups Rolls-Royce Group plc and BAE Systems PLC (LSE:BA.) have shot to the top of the FTSE 100 list as the Paris airshow enters day two.
Yesterday’s news of a record-breaking order for 470 Airbus A320neo jets by Air India has galvanised the sector, with BAE shares shooting 1.3% higher to 963p at the time of writing.
Rolls-Royce also appears to be riding the slipstream, with shares jumping over 2% to 157p after announcing a new line of hybrid-electric turbogenerators.
Rolls-Royce and BAE’s solid performance has helped Footsie shoot back into positive territory at 7,596p, marking a 0.11% daily gain.
12.20pm: No mortgage relief, Hunt reiterates
As expected in a free market economy, UK Chancellor Jeremy Hunt has ruled out any government assistance to help fend off the mortgage ticking time bomb.
With prices on two-year buy-to-let homes surging above 6.4% today, Tory MP Sir Jake Berry pitched “a bold Conservative idea of mortgage interest relief at source” in today’s Treasury Questions.
But inflation concerns made short work of that proposal, with Hunt replying: “Much as we sympathise with the difficulties and will do everything we can to help people who are seeing their mortgages costs going up, we won’t do anything that would mean we prolong inflation.”
Hunt also ruled out a food price cap when replying to an earlier question fielded by Labour MP Ian Byrne.
Back in the City, the FTSE 100 blue-chip index was last seen at a flat day-on-day price of 7,593.
12,00pm: Frasers snaps up boohoo stake
It seems like Mike Ashley’s Frasers Group’s appetite for investing shows no signs of abating this week.
Following this morning’s news of an 8.9% stake in electronics retailer Currys, the Sports Direct owner has now disclosed a 5% stake acquisition in online fashion retailer boohoo.
“Boohoo is an attractive proposition to us with its laser focus on young female consumers. We see potential synergies and an opportunity to strengthen our own brand proposition in collaboration with Boohoo, most obviously with Frasers Group brands I Saw It First and Missguided,” the group said in a statement.
Fraser Group’s share price is currently at 714p, having fallen from an intraday high of 738p.
The wider FTSE 100 index was last seen at 7,589, roughly equivalent to Monday’s closing price.
11.35am: Mortgage market in meltdown, warns Lewis
Martin Lewis has succinctly summed up the state of the UK mortgage sector, telling Good Morning Britain that the previously cited “mortgage ticking time bomb” is now “exploding”.
Mortgages geared toward first-time buyers have disappeared from the market, as lenders squabble to change deals ahead of a further interest rate hike.
Interest on two-year fixed rates has recently shot above 6%, with the average two-year buy-to-let residential mortgage rate today at 6.4%, up from an average rate of 6.3% on the previous working day.
Prime Minister Rishi Sunak has ruled out any government intervention to help out homeowners, leaving their hopes resting on a significant reduction in UK inflation numbers to stave off further interest rate hikes.
This makes tomorrow’s inflation read among the most pivotal – and closely watched – of the year before Thursday’s call from the Bank of England.
Martin Lewis gives us the latest on the mortgage crisis and offers advice to people who are struggling. pic.twitter.com/uyd0rPWGqb
— Good Morning Britain (@GMB) June 20, 2023
Back to footsie, the blue-chip index was last trading sideways at 7,589, down from an intraday high of 7,600.
11.14am: Gilt yields cool off (slightly)
Some slight relief on the UK bond market today as yields on short-term (two-year) gilts fall back to 5.045% from Monday’s peak of 5.07%.
10-year gilts have fallen from 4.5% to 4.43%.
Lower grocery price inflation as announced by Kantar this morning is likely to blame for the slight cooling off, as traders weigh up a lighter touch on interest rate hikes from the Bank of England.
Tomorrow’s full-scope inflation readout will be the biggest test for the market, with beleaguered mortgage holders hoping for a substantial dip in core prices.
On the London stock market, the FTSE 100 was last seen at 7,592, largely flat against Monday’s closing price.
10.40am: FTSE 100 dips, but still beating European markets
London is edging out the European markets today.
In Frankfurt, DAX opened 0.75% lower while Paris opened 0.4% lower.
“A more hawkish outlook from the ECB next week has turned sentiment bearish with traders eyeing further rate hikes near-term,” noted James Harte at Tickmill.
He continued: “The DAX has also come under pressure after shares in German chemical maker Lanxess tanked following the lowering of the group’s profit outlook for the second quarter.
“However, there is some good news today with German PPI seen falling to its lowest level since early 2021, in a sign that inflation is moderating further.
On the macroeconomic front, construction output in the Euro Area rose by 0.2% in April compared to the same period last year, following a downwardly revised 0.7% contraction in March.
After a bullish morning, the FTSE 100 has dipped into the red at 7,586.
10.25am: Heathrow hullabaloo
A bit of thunder and lightning has sent Heathrow into a state of havoc, with thousands of would-be passengers facing delays and cancellations.
Air traffic controllers have cut down flights by 40%, according to The Telegraph, which reported that passengers on short-haul flights have been stranded on the tarmac as they await news.
Back to City news, FTSE 100 has retraced from morning highs of 7,600 back close to Monday’s closing price of 7,592.
Ont the forex market, Cable is around 10 pips lower at 1.278, while the EUR/GBP pair jumped 0.14% to 85.49p.
10.08am: Ocado sent lower on JPMorgan downgrade
Grocery-cum-technology company Ocado is the worst performer in the FTSE 100 this Tuesday morning after JPMorgan Chase & Co (NYSE:JPM) pared back its price target to 400p from 450p.
The stock was last seen 5.1% lower at 412.3p.
Ocado is contending with inflation-driven price increases and subsequently smaller basket sizes.
Furthermore, rising costs, such as wages and utilities, are having a detrimental impact on the profitability of Ocado's UK Retail arm.
The wider FTSE 100 remains ever so slightly in the green at 7,593 as of 10.08am.
9.27am: Lookers revs up, Revolution collapses
Looking away from London's blue chips, shares in car dealer Lookers jumped after a £465mn swoop by Canada's Alpha Auto.
An offer of 120p a share, a premium of around 42% on the average share price over the past month, has been agreed by the UK company's board, but still requires shareholder approval.
Shares in Saga also jumped earlier as the over-50s insurance and holiday group said full-year profit is likely to be well ahead of last year’s showing.
Revolution Beauty anked 56% after saying it is considering legal action against its founder and former CEO Adam Minto.
And elsewhere among the small caps, Atlantic Lithium (AIM:ALL) shares were boosted by news that the latest results from the Ewoyaa mine in Ghana indicate more significant lithium grades.
Looking further afield, battery maker Northvolt has secured a US$400mln injection from Canadian investors, which will help the Swedish firm boost production and prepare for a potential IPO that was being reportedly planned earlier this year.
The FTSE 100 is maintaining its slight gain, up 12 points, while the FTSE 250 is down 0.4% at 18,772.23.
9.05am: Footsie tiptoes higher
London’s blue-chip index bucked pre-market expectations by flipping into the green this Tuesday morning, adding 0.17% to knock above 7,600 at the time of writing.
Frasers Group is helping lead the charge, on the back of Mike Ashley’s company announcing an 8.9% stake acquisition into electronics chain Currys and launching a new share buyback.
All eyes are on the bond market today, with two-year and 10-year yields showing few signs of budging from their 15-year highs.
On the economic calendar today, grocery price inflation hit the lowest level in 2023, Kantar revealed, which at 16.5% means little to beleaguered consumers.
The real news will come tomorrow when UK consumer price inflation and core prices are released.
“If inflation surprises on the downside, we might see rate hikes bets retracing, weighing on yields. Yet, we do not expect two-year yields to fall significantly below 5%, as they remain rich compared to their swap,” noted Althea Spinozzi, senior fixed income strategist at Saxo.
On the crypto market, bitcoin is changing hands at just below US$26,800, a 0.3% improvement against yesterday’s spot prices.
8.40am: FTSE 100 goes green
The blue-chip index flipped into positive territory in Tuesday’s opening hour, helped along by Frasers Group’s bullish performance following news of its Currys stake acquisition.
Large-cap insurance firm Beazley tops the FTSE 100 list, with drinks giant Diageo also making gains.
Footsie was last seen at 7,599, 0.15% higher against the Monday close.
Looking at the bond market, the 10-year yield fell back incrementally to 4.476% while two-year gilts remain close to 15-year highs, proving little relief for anxious mortgage holders.
8.30am: Grocery price inflation slows
Grocery price inflation eased to 16.5% for the four weeks to June 11, according to Kantar data released this morning.
This marks the lowest level for 2023, albeit the sixth-highest monthly figure since 2008.
According to a Kantar poll, nearly 70% of households are either “extremely” or “very” worried about the cost of food and drink.
As for sales trends, sunny weather has sent ice cream sales volumes up by 25% and bottled mineral water by 8%, for which shoppers are paying 20% and 17% more respectively.
8.18am: Frasers Group buys Currys stake
The FTSE 100 has opened slightly in the red, down 10 points to 7580, with Ocado the leading faller.
Near the top of the early leaderboard is Mike Ashley’s Frasers Group after launching a share buyback and taking an 8.9% stake in electricals retailer Currys, a week after buying a 21.3% holding in white goods specialist AO World.
Ashley revealed the stake after the market closed on Monday without giving any further details.
A spokesperson for Currys declined to comment.
Frasers’ share price added 1.5% to 722.5p in this morning’s opening trades.
8.10am: Bitcoin heads above 27k… and falls again
Benchmark cryptocurrency bitcoin headed above US$27,000 this morning before swiftly knocking back below US$26,800 as traders cashed out.
Bitcoin is around 2.5% higher week on week, but the real eye-catching stat is its market dominance, which just hit 50% of the global cryptocurrency market.
This is a clear sign that bitcoin’s ‘altcoin’ alternatives, the likes of Cardano, Solana and Polygon, are strongly out of favour with crypto investors.
In wider crypto news, South Korean former crypto fugitive Do Kwon, who oversaw the collapse of Terraform Labs which was a catalyst of the two-trillion-dollar crypto market rout in 2022, has been sentenced to four months in prison in Montenegro.
Kwon was found guilty of forging official documents. He faces a litany of charges relating to the collapse of the TerraUSD stablecoin in his native country.
7.42am: UBS to stump up hundreds of millions in Credit Suisse legal penalties
Regulators across Switzerland, the UK and US have completed their investigation into Credit Suisse’s handling of the Archeogos Capital affair, with new owner UBS potentially up for hundreds of millions of dollars in fines.
The FT notes that Britain’s Prudential Regulation Authority could impose a £100mln fine, while the US Federal Reserve could slap the bank with up to US$300mln (£235mln) in fines.
UBS is said to have set aside US$4bn from its war chest to deal with litigation against Credit Suisse.
7.12am: FTSE to open lower, gilts higher in Tuesday session
FTSE 100 is set to knock a few points lower when trading opens this drizzly Tuesday, with estimates pointing to 7,577 against Monday’s closing price of 7,588.
Sterling has similarly dropped back slightly, with the GBP/USD pair losing a dozen or so pips in this morning’s Asia trading hours (though still hanging around the 14-month highs recently achieved).
Gilt yields will be in focus for the day ahead; having recently shot up to year-to-date highs of 4.49% on the 10-year market and short-term yields pushing 15-year highs, they are feeding into anxieties around the UK’s crisis-ridden mortgage market.
Stay with Proactive for all the latest market news in the day ahead.