- FTSE 100 closes 39 points higher
- Nasdaq, S&P 500 turn higher, but Dow Jones stays weak
- Thames Water's financing talks with investors continue
4.42pm: FTSE closes in the green
At the close of trading, the UK's blue chip index had added 39 points to reach the 7,500 level for a 0.5% gain on the day.
The Dow’s position as one of the poor performers this year was restated this afternoon, as Fed chairman Powell reaffirmed his commitment to more rate hikes, IG's Chris Beauchamp noted.
"The Fed chairman seems determined to restate the Fed’s hawkish attitude at every opportunity, but other central bankers today have been more circumspect, giving room for European indices to rally," Beauchamp said.
3.50pm: Powell repeats
The FTSE 100 index remained firmer as US stocks turned mixed as investors assessed Federal Reserve chairman Jerome Powell's latest remarks.
In comments to a policy panel at the European Central Bank Forum on Central Banking in Sintra, Portugal, the Fed boss said he would not take two straight interest-rate increases off the table — a sign that the central bank could hike when they meet in July and September.
He also said that while there’s a significant probability of a downturn, that’s not likely the case as the economy remains quite resilient.
Powell reiterated that policymakers expect to raise interest rates further this year to curb persistent price pressures and cool a surprisingly resilient US labor market.
Edward Moya, senior market analyst at Oanda commented: “The economy is clearly feeling the effects of the Fed’s tightening cycle and the consumer is weakening but has no trouble getting a job, so it will be interesting how the stock market’s back gets broken.”
3.35pm: Forza to space
Virgin Galactic is to make its first commercial flight to the edge of space tomorrow, it confirmed this afternoon, with a three-man crew from Italy set to board a passenger rocket plane operated by the firm, founded by billionaire Richard Branson in 2004.
The two Italian air force officers and an aerospace engineer from the National Research Council of Italy were to join their Virgin Galactic instructor and the spaceplane's two pilots on a suborbital ride taking them about 50 miles above the New Mexico desert.
The flight, dubbed Galactic 01, comes two years after Branson himself rode along with five other Virgin Galactic personnel for the company's first fully crewed test spaceflight of its rocket plane, VSS Unity.
The Italian team's mission is described as a scientific one, with the three men planning to collect biometric data, measure cognitive performance and record how certain liquids and solids mix in microgravity conditions.
3.25pm: Crude dull
Oil prices retreated on Wednesday as worries about slowing demand over further global interest rate hikes offset support from a report showing a larger-than-expected drop in US crude inventories.
UK Brent crude was up just 0.01%, to $72.48 a barrel, while US West Texas Intermediate (WTI) crude fell 0.1% to $67.64.
Oil was up earlier in the session, finding support from American Petroleum Institute (API) data showing US crude inventories fell by about 2.4 million barrels.
But worries over higher interest rates weighing on economic activity and oil demand pulled crude prices back.
European Central Bank President Christine Lagarde said on Tuesday that stubbornly high inflation will require the bank to avoid declaring an end to rate hikes.
Some analysts, however, still expect the market to tighten in the second half of 2023 partly due to ongoing OPEC+ supply cuts and Saudi Arabia's voluntary reduction for July.
3.00pm: Coal on dole
Drax Group has confirmed that the decommissioning of its two remaining coal units at its Drax Power Station will continue and that they will not be available to generate power this winter.
The confirmation follows a recent request by National Grid ESO to explore the possibility of extending coal generation at Drax Power Station but concluded that due to a combination of technical, maintenance and staffing reasons, the extension of coal over this winter was not possible.
The company first announced in April this year that after almost 50 years of coal power generation at Drax Power Station, its coal units would close.
The renewable energy business revealed the news in a statement that welcomed the Climate Change Committee’s (CCC) report, ‘Progress in Reducing UK Emissions – 2023’, and its recommendation that if the UK government wants to deliver on its climate targets it must deliver specific policy which supports the development of carbon removals projects in this country.
In 2022, Drax provided around 11% of the UK’s renewable energy and it plays a vital role in maintaining the country’s energy security.
In a statement, Drax Group CEO, Will Gardiner, said: “The CCC’s report is welcome as it is a holistic view of the scale of the challenge facing us all in reaching Net Zero, as well as acknowledging the vital role that carbon removals technologies like BECCS will play in getting us there. We support its recommendation that faster progress is needed to reach the UK’s ambitious carbon removals targets.
“With the right support from the UK Government, we plan to invest billions into delivering BECCS at our power station in Yorkshire. Our formal discussions with the UK Government on BECCS deployment and parallel discussions about a ‘bridging mechanism’ to support the transition to BECCS have been productive and we are looking forward to continuing these in the coming months.”
2.40pm: Wall Street chipped away
The FTSE 100 index held firm but off the day’s highs midafternoon as US stocks started lower after big gains in the previous session following strong data, with all eyes on a speech in Portugal by the Federal Reserve chair, Jerome Powell.
Around 10 minutes after the New York open, the Dow Jones Industrial Average was down 101 points, or 0.3% at 33,824, while the S&P 500 index fell 0.4%, and the Nasdaq Composite shed 0.3% as chips stocks suffered on concerns about more curbs on China exports.
The day’s only US data saw the May advance goods trade deficit fall to $91.1 billion from $97.1 billion, below the consensus forecast of $93.7 billion.
Kieran Clancy, senior US economist at Pantheon Macroeconomics commented: “The May decline in the goods trade deficit only partially reverses the April surge, and leaves it slightly above its Q1 average, $88.3B. Net foreign trade will subtract around 1.0 percentage points from annualized GDP growth in the second quarter, if the deficit is unchanged in June. That said, the advance trade numbers for June are—unusually—due on the same day as the first estimate of Q2 GDP, 27 July, rather than a day or two earlier, so the margins of error in all GDP forecasts will be wider than usual.”
He added: “The drop in the May goods trade deficit mostly reflects a 2.7% fall in imports, offsetting a 0.6% decline in exports. All of the drop in exports is the industrial supplies and food components, which are very noisy month-to-month but are trending lower in tandem with falling prices.”
2.30pm: JD Sports kicking looks “overdone”
JD Sports shares bobbed higher in afternoon trading as analysts at Berenberg sounded a positive note on the stock following recent falls after the company’s AGM trading update, highlighting the retailer's fundamentals, valuation and share buyback potential.
The analysts said: "This weakness looks overdone, pricing in significant downgrades that, we believe, will not materialise.”
"JD is too cheap for the quality and double-digit compounding growth on offer, with a huge global growth opportunity not fairly reflected in valuation,” they added.
The analysts noted that trading by its US peers had already flagged weakness in that country, as reflected in a 15% drop in JD shares going into the AGM news, and the fact that management remained very comfortable with guidance and the consensus forecasts was proof of its "conservatism".
The Berenberg analysts repeated a 'buy' rating and 210p target price for JD shares, which were up 0.8% to 143.80p
2.10pm: Emergency response
BT Group PLC is being investigated by the UK's telecom regulator following widespread distortion to emergency call services on Sunday.
Ofcom said this morning that its investigation will “seek to establish the facts surrounding the incident and examine whether there are reasonable grounds to believe that BT has failed to comply with its regulatory obligations.”
Supposed “technical faults” caused people not to call the police, ambulances, and fire services for more than an hour on Sunday morning.
The issue was spotted shortly after 8.30am on Sunday morning, but at 9.52am, BT announced that its backup platform was “now working” and confirmed people should call 999 “as usual”.
Ofcom said its rules require BT and other network providers to take all necessary measures to ensure there is no uninterrupted access to emergency services.
1.35pm: Some of the top risers and fallers on the junior market
Tern PLC (AIM:TERN) shares flew 23% higher after its 54%-owned subsidiary Device Authority won an award with Microsoft for its cloud-based security product.
Sound Energy PLC (AIM:SOU) shot up 5% in early trading after saying it has received a conditioned financing offer from its Moroccan lender of 2.365bn dirham (US$237mln) for the next phase of development for its Tendrara production concession.
Golden Rock Global PLC (LSE:GCG) shares jumped 22% after it confirmed that talks are underway with "a number of parties" regarding a potential reverse takeover acquisition.
Prospex Energy PLC (AIM:PXEN) shares moved on the front foot in Wednesday’s early deals, as it secured approval in Italy to take the Podere Maiar – 1 well, at the Selva gas field, into production.
Revolution Beauty Group PLC (AIM:REVB) shares surged 43% as its share suspension was removed following a dramatic shareholder meeting which saw three senior board members removed before subsequently being reappointed.
Various Eateries PLC (AIM:VARE) shares were about as appetising as last night’s cold pizza as the shares dropped 12.5% on the back of a downbeat trading update.
Aferian PLC (AIM:AFRN) shares tumbled 16.5% in early trade after the video streaming company’s trading statement failed to pass muster. While software-as-a-service revenues are growing, income from devices fell 71% in the six months ended May 31.
BlueJay Mining PLC (AIM:JAY, OTCQB:BLLYF) was off the pace this morning as market makers knocked the price down by 14.5% after a placing overnight at 1.75p.
1.00pm: Mixed start seen in the US
US stocks are expected to start mixed again on Wednesday following strong gains in the previous session driven by a batch of stronger-than-expected data, with all eyes on a speech by the Federal Reserve chair, Jerome Powell.
In pre-market trading, futures for the Dow Jones Industrial Average (DJIA) were around 0.1% higher, but those for the S&P 500 fell 0.1%. and contracts for the Nasdaq 100 lost 0.4% as techs came under pressure from concerns about more curbs on AI chip exports.
On Tuesday, the DJIA posted its first positive session in seven, with the index closing 0.6% higher. Meanwhile, the S&P 500 and the Nasdaq Composite jumped 1.2% and 1.7%, respectively, buoyed by a resurgence in tech stocks after last week’s sell-off.
With the six-month-end coming on Friday, investors are preparing to close out the best first-half performance by the Nasdaq in 40 years, with the composite index up 29%.
Joshua Mahony, chief market analyst at Scope Markets commented: "Despite a buoyant session across Asian markets, Wall Street futures are looking at a somewhat subdued start to Wednesday’s session.
The fact that yesterday yielded some significantly better than expected US economic data - including bumper consumer confidence readings – whilst indices still managed to advance may be taking a toll here.
"However, calls over likely direction of monetary policy will have to wait until the Fed chief, along with heads from the BoJ, ECB and BoE, have spoken at the Sintra conference which concludes today."
Fed chair Powell speaks Wednesday before a policy panel at the European Central Bank Forum on Central Banking in Sintra, Portugal, which begins at 9.30am ET.
Powell will be joined on the panel by Bank of England governor Andrew Bailey, European Central Bank president Christine Lagarde and Bank of Japan governor Kazuo Ueda.
Markets will be looking for more clues from Powell about the future of US economic policy. Recently, the Fed chair said he expects additional interest rate increases on the way to battle inflation, though he thinks the central bank can do so at “a more moderate pace.”
Scope's Mahoney added. "Economic data for the day is relatively limited but this evening the Fed will also release results of its annual stress tests on US banks. Bigger lenders are expected to fare well, although any surprises here could obviously inject a degree of volatility as we move towards the closing bell."
12.35pm: Ofwat says Thames Water needs a robust and credible plan
Water regulator Ofwat said it has been holding discussions with Thames Water, and says the firm needs a “robust and credible” turnaround plan.
A spokesperson for Ofwat said: "We monitor the financial position of all the key water and wastewater companies.
“We have been in ongoing discussions with Thames Water on the need for a robust and credible plan to turn the business around and transform its performance for customers and the environment.
“We will continue to focus on protecting customers’ interests.”
12.15pm: FTSE 100 at session highs
Equities remain in an upbeat mood, up 45 points at 7,516, close to the best levels for the day.
The pound gave back some of yesterday's gains after the hawkish rhetoric from the ECB President Christine Lagardere with sterling down 0.4% at USD1.2692.
Investors will be keen to hear what leading central bankers have to say when take part in the annual ECB Forum in Sintra, Portugal.
Today sees a panel featuring US Federal Reserve Chair Jerome Powell, European Central Bank President Christine Lagarde, Bank of Japan Governor Kazuo Ueda and Bank of England Governor Andrew Bailey.
11.39am: Thames Water says financing talks continue
Thames Water has spoken after the press speculation about its future.
It said talks continue with regard to the further equity funding expected to be required to support Thames Water's turnaround and investment plans.
"Ofwat is being kept fully informed on progress of the company's turnaround and engagement with shareholders," it added in a statement.
The firm said it continues to maintain a strong liquidity position, including £4.4bn of cash and committed funding, as at 31 March 2023.
11.10am: Water privatisation has "totally failed"
The potential collapse of Thames Water has sparked debate about whether water companies should be nationalised.
Cat Hobbs, Director of public ownership campaign group We Own It, said: "Water privatisation has totally failed and Thames Water being on the point of collapse makes this painfully clear."
"England has chosen to hand over its essential water infrastructure wholesale to privatised monopolies, owned by a handful of shareholders around the world."
"They’ve extracted £72bn in dividends while letting pipes leak and pouring sewage into our rivers and seas. And they’ve collectively built up a debt mountain of £53bn, although they started out in 1989 with zero debt."
10.30am: Banks have 'questions to answer' over speed of passing on rate rises
The Work and Pensions Secretary has said there is a “question to be asked” about how quickly banks are passing interest rate rises to savers.
Lenders have faced criticism for raising mortgage rates as the Bank of England increases interest rates to fight inflation but not raising savings rates at the same speed.
Speaking to LBC, Mel Stride said: "There’s certainly a question to be asked about the speed at which banks pass on the benefits of these interest rates. That’s a way of saying it’s definitely something to be looking at."
"The Chancellor has had the banks in for some very serious conversations about this. The Financial Conduct Authority... also oversees that sector and is looking at exactly those kinds of issues."
"So it is something that’s right up there on the Treasury’s agenda at the moment."
"I think the general feeling is that there is a question mark hanging over whether they are passing on these benefits to savers quickly enough."
"And what I’m reassuring your listeners of is that we are absolutely looking at that."
10.07am: Utilities steady despite Thames Water reports
The reports that the government has begun drawing up contingency plans for the collapse of Thames Water have not hit listed water companies, so far at least.
Neil Wilson at Markets.com said investors appeared to have shrugged off the drama.
"While it is not a listed business, such news would normally cause investors to speculate what might happen to other companies in the sector."
“Shares in United Utilities, Severn Trent and Pennon barely moved, suggesting that investors see Thames Water as a company-specific problem (drowning in debt) rather than the start of broader trouble,” he commented.
Shares in all three were little changed while the FTSE 100 is 30 points to the good at 7,492.
9.51am: Sage boosted by JP Morgan upgrade
Sage, the online accounting software provider, sits top of the FTSE 100 risers as JP Morgan took a more positive view of the stock.
The US investment bank has upgraded Sage to overweight from neutral and increased its price target to 1,110p from 860p.
The broker has also placed Sage on its 'analyst focus list'. The news helped push the shares 4.1% higher to 909.20p.
But JP Morgan was less bullish on online insurers, Direct Line and Admiral.
It has placed both stocks on 'negative catalyst watch.'
Shares in Admiral fell 3.6% - the biggest faller in the FTSE 100 - and Direct Line by 1.4%.
9.36am: Defra in emergency talks with Ofwat over Thames Water - FT
A bit more on the situation at Thames Water. The Financial Times reports officials have confirmed that Defra, the environment ministry, is holding emergency talks with industry regulator Ofwat to consider contingency plans in case the company is unable to raise private finance in the coming weeks.
As previously reported one leading option is placing Thames - the UK’s biggest water company - into a special administration regime that would effectively mean public ownership.
9.25am: Revolution Beauty and boohoo need to work together and put spat behind them
The spat between boohoo and Revolution Beauty continues to attract attention although Russ Mould at AJ Bell thinks both sides "could do with putting the war of words behind them and working together ," for the sake of other shareholders.
"A fashion for retail businesses to take stakes in their peers was always a recipe for friction and Boohoo has certainly been throwing its weight around after taking a hefty stake in the cosmetics business," he pointed out.
He described the scenes at yesterday's AGM as "unedifying" and "somewhat farcical" where Boohoo was successful in ousting the senior management only for the sole remaining director to bring in two non-executive directors who then reappointed the executives who had been forced out.
“Revolution Beauty’s contention that Boohoo is aiming to take the company over by stealth through a boardroom coup without making an offer for the business may find some sympathy with minority shareholders," Mould explained.
Shares in Revolution Beauty surged 57% higher compared to their suspension price but face "a long road back" said Mould to the issue price of 160p from the 2021 IPO.
Meanwhile, the FTSE 100 is up 38 points at 7,500.
8.47am: FTSE 100 holds gains despite more signs of housing market stress
The FTSE 100 remains firmly in the green despite further signs of easing house prices in the UK and an escalation in the chip war between the US and China.
At 8.50am, London's lead index was up 30 points at 7,492.
Susannah Streeter at Hargreaves Lansdown noted the "upbeat sentiment about signs of resilience for the mighty American economy is over-riding worries about China’s flagging recovery and fresh signals that another twist in the chip wars is set to emerge."
"Reports that President Biden is considering slapping further export bans on AI chips headed for China dented the share price of Nvidia and AMD in after-hours trading," she pointed out.
"The chip makers which have been enjoying a boom amid expectations of soaring demand for artificial intelligence largely erased gains made over the session," she added.
In the UK, more than four in 10 UK house sellers are having to shave more than 5% off the original asking price to achieve a sale, according to Zoopla, in signs that rising mortgage rates are dampening the market.
The property website said this proportion, seen in June, is the highest it has recorded since 2018. Around one in six, 15% of, sellers are having to shave more than 10% off the initial asking price to get a sale over the line, Zoopla said.
"Our view remains that 5% mortgage rates represent a tipping point, beyond which house prices will post annual price falls with lower sales volumes," Zoopla said
8.15am: FTSE on the front foot after strong US data
London’s blue-chips have made a bright start to trading after a batch of surprisingly robust US data raised hopes the world’s largest economy may avoid a recession.
Deutsche Bank’s Jim Reid noted: “Risk appetite has returned to markets over the last 24 hours, aided by a strong set of US data releases that dampened fears about an imminent recession after weaker data over the last week.”
At 8.15am, the FTSE 100 was up 19.89 points at 7,481.35 while the FTSE 250 jumped 60.64 points to 18,115.48.
Mulberry jumped 4% despite a drop in annual profit and a reduced dividend.
The luxury goods maker said revenue for the first 12 weeks of the new financial year is 6% ahead of last year with retail revenue up 15%, with the newly acquired Sweden and Australia stores continuing to perform well.
Revolution Beauty shares surged as they resumed trading after its lengthy suspension as the war of words with major shareholder boohoo.com continued.
The two sides have been swapping barbs after a dramatic AGM yesterday which saw three senior board members removed, after a shareholder vote, only to be reappointed soon after.
Boohoo said it had “serious concerns” over the conduct at the AGM while Revolution Beauty described boohoo’s approach as “nothing short of value-destructive, opportunistic and self-serving.”
Away from corporate news and the other focus today will the ECB’s Sintra conference, that will feature all of Fed Chair Powell, ECB President Lagarde, BoJ Governor Ueda and BoE Governor Bailey later today.
7.56am: Mulberry slashes dividend as profit falls
Mulberry slashed the final dividend after reporting a sharp drop in annual profit after a “challenging” first half of the year, although revenue edged higher.
The luxury goods company, famous for its handbags, said revenue in the 52 weeks to April 1 rose 4% to £159.1mln from £152.4mln the year prior, “despite macro-economic uncertainty.”
But reported pre-tax profit for the period fell to £13.2mln from £21.3mln while the final dividend was lowered to 1p per share from 3p.
“We are confident in our strategy and continue to invest, including in further store openings across the network planned later this year,” said Chief Executive Thierry Andretta.
7.35am: Revolution Beauty and boohoo war of words continues
The war of words between Revolution Beauty and Boohoo, one of its major shareholders, continued after a dramatic AGM yesterday which saw three senior Board members removed, and subsequently, reappointed.
Boohoo, which holds a 26.6% stake in Revolution Beauty opposed the reelection of chief executive Bob Holt, chief financial officer Elizabeth Lake and chair Derek Zissman, and all three were initially ousted from the board.
It meant non-executive director Jeremy Schwartz, was briefly the beauty products seller's sole board member.
With three board members required to meet the group’s Articles of Association, Schwartz appointed two non-executive directors, and those three then re-appointed the ‘ousted three’.
Revolution Beauty described the approach taken by boohoo as “nothing short of value-destructive, opportunistic and self-serving.”
Amongst all the drama, shares in Revolution Beauty are set to resume trading today after a long suspension.
7.07am: Government monitoring Thames Water as debt concerns mount
The government has begun drawing up contingency plans for the collapse of Thames Water amid growing doubts in Whitehall about the ability of Britain’s biggest water company to service its £14bn debt-pile, according to Sky News.
Sky has learnt that ministers and Ofwat, the industry regulator, have started to hold discussions about the possibility of placing Thames Water into a special administration regime that would effectively take the company into temporary public ownership.
Such a process was used when the energy supplier Bulb collapsed in 2021.
On Tuesday, Sarah Bentley, its chief executive for the last three years, resigned with immediate effect, saying: "The foundations of the turnaround that we have laid position the company for future success to improve service for customers and environmental performance."
The Daily Telegraph reported on Tuesday night that Thames Water was still trying to raise £1bn from shareholders and that AlixPartners had been drafted in to advise on the company's operational turnaround plans.
Thames Water is owned by a consortium of pension funds and sovereign wealth funds, many of which are understood to be sceptical about delivering additional funding.
Its largest shareholder is Ontario Municipal Employees Retirement System which holds a stake of nearly 32%, according to Thames Water's website.
Others include China Investment Corporation, the Universities Superannuation Scheme and Infinity Investments.
Thames Water serves 15mln customers across London and the south-east of England, and has come under intense pressure in recent years because of its poor record on leaks, sewage contamination, executive pay and shareholder dividends.
7.00am: FTSE 100 expected to push higher on brighter global economic picture
The FTSE 100 is expected to open higher on Wednesday after gains in the US after a batch of surprisingly robust economic data.
Spread betting companies are calling London’s lead index up 25 points from Tuesday’s close of 7,461.46.
Consumer confidence, housing sales and durable goods orders all surprised on the upside boosting hopes that the world’s largest economy may yet swerve a recession.
There was also better news on global inflation with weaker-than-expected figures in Australia and Canada.
The Australian Bureau of Statistics said that inflation eased to 5.6% from 6.8%, with petrol prices dropping by 8%.
In the US, the Dow Jones Industrial Average rose 212.03 points, or 0.6%, at 33,926.74. The S&P 500 gained 49.59 points, or 1.2%, at 4,378.41, and the Nasdaq Composite jumped 219.89 points, or 1.7%, at 13,555.67.
In Asia, the Nikkei in Tokyo rose strongly while the Shanghai Composite in Beijing and Hang Seng in Hong Kong edged lower.
Back in London, and utilities will be in focus on reports the government has started drawing up contingency plans for the collapse of Thames Water amid growing doubts in Whitehall about the ability of Britain’s biggest water company to service its £14bn debt-pile.
Sky reported the news which comes after Thames Water CEO, Sarah Bentley, resigned.
The Telegraph reported on Tuesday night that the firm was still trying to raise £1bn from shareholders and that AlixPartners had been drafted in to advise on the company's operational turnaround plans.