- FTSE 100 closes up 31 points at 7,619
- Entain sets aside £585 million for Turksih bribery probe
- US markets soar after soft inflation report
5.40pm: FTSE closes near session highs
The FTSE 100 closed near session highs on Thursday perking up in afternoon trade following the US inflation figures.
London's lead index closed up 31.30 points at 7,618.60 while the FTSE 250 rose 56.61 points to 18,993.81.
3.52pm: Drax welcomes government support for biomass with carbon capture
Drax Group (LSE:DRX) PLC has welcomed a government report backing the use of bioenergy with carbon capture and storage (BECCS) in hard-to-decarbonise sectors.
The inclusion of BECCS in the report “is a clear signal that the UK wants to be a leader in carbon removals”, Drax said in a statement, adding it is “ready to deliver on this ambition”.
Drax reiterated that it is “in formal discussions with the government” over plans to retrofit the north Yorkshire biomass power station with carbon capture technology.
3.15pm: Fed will continue to make hawkish noises but hikes are done
The FTSE has finally perked up following US markets higher after the inflation report.
Ryan Sweet, Chief US Economist at Oxford Economics reckons the data will not change the Fed’s immediate plan or its communication strategy as it will continue to signal that it has not won the inflation battle yet.
"The Fed will continue to strike a hawkish tone because it wants to prevent financial market conditions from easing."
But he expects the Fed to skip rate hikes in September and November when inflation should decelerate.
"Therefore, we believe the Fed is done hiking rates in this tightening cycle but will not cut them until early next year as it will want to err on the side of keeping rates higher for longer to ensure it wins the inflation battle," he added.
Kieran Clancy at Pantheon Macroeconomics expects another good print in August following on from June's good number.
"Three decent core CPI prints is not definitive, but we think it will be enough to dissuade the Fed from another hike, unless the August payroll report, due on September 1, is really ugly," he said.
2.45pm: Sterling rises after US inflation figures
US markets opended sharply higher after figures showed inflation rose by less than expected in July, boosting hopes that interest rates may have peaked.
Shortly after the opening bell, the Dow Jones Industrial Average was up 313.60 points, 0.9%, at 35,436.96, the S&P 500 was up 41.92 points, 0.8%, at 4,509.63 and the Nasdaq Composite was up 142.45 points, 1.0%, at 13.858.84.
But the bright start in New York hasn't sparked much of a rally in London where the FTSE 100 sits 10 points higher at 7,598.
The pound did push higher, up 0.4% against the dollar to $1.2678 as traders against further US rates rises.
1.54pm: FTSE little moved by softer US inflation print
US headline inflation in July ticked up slightly from June, but by less than expected, boosting the case for the Federal Reserve to hold interest rates steady at its next meeting in September.
The Bureau of Labor Statistics reported that the consumer price index (CPI) rose 0.2% from June to July, giving annual growth of 3.2%, up from the annual rate of 3% in June. The figure was below expectations for annual growth of 3.3%.
Core inflation, which strips out the volatile food and energy components, rose 0.2% in July, the same rate as the previous month, taking the annual rate of growth to 4.7%, down from 4.8% in June, and in line with forecasts.
Futures retained higher after the report indicating a positive when trading kicks off in the next hour.
Alex Livingstone at Titan Asset Management said the number were "below expectations" but he sees some challenges ahead.
"Looking ahead the persistent headline disinflation narrative may face some challenges from rising oil prices but will largely look to be kept on track by the wider deteriorating economic landscape."
1.35pm: Here’s a quick recap of some of the risers and fallers in London today
Shares in Silver Bullet Data Services Group PLC (AIM:SBDS) shot up 32% after the company announced strong revenue growth and a reduction in losses for the first half, leading it to forecast a swing to profit next year.
In a trading update, the digital marketing services company said revenue grew by 76% to £4.1 million in the six months to 30 June 2023, with losses for the period narrowing “significantly”, in line with expectations.
Galileo Resources PLC (AIM:GLR) jumped 11% too, after announcing a new lithium discovery during initial drilling at the company’s Kamativi Project in Zimbabwe.
Investors swarmed on the report of the “significant find,” as described by the company in an update.
The economic headwinds caused by inflation and rising interest rates were only too real for Savills PLC (LSE:SVS) though, which saw its profits collapse by 72% in the first half.
This caused shares to spiral downwards 9% on Thursday, as the company’s reassurances of strong balance sheets and increased market share failed to woo investors.
Shares in Jarvis Securities Plc (AIM:JIM) also tumbled by almost 17% after the company confirmed it is now trading below current market expectations.
The issue for the stockbroker would appear to be Jarvis Investment Management, where it has been told by the watchdog to appoint what’s called a skilled person to review the regulatory controls there.
1.02pm: UK to host flagship energy summit in 2024
Energy is a constant hot topic and the government has announced the UK will host an international energy security summit next year, inviting big oil-producing nations and companies but focusing also on net zero.
The London Energy Security Conference, set for early 2024, will concentrate on shoring up supplies and making the system "more resilient to shocks", the Department for Energy Security and Net Zero said.
Excl - UK to host global energy security summit next spring. Story by @CharlieCooper8https://t.co/iWdtdfyIcn
— Russell Hargrave (@Hargraver) August 10, 2023
The gathering will come two years after Russia's invasion of Ukraine upended gas supplies and sent wholesale prices spiralling, and as countries grapple with the transition away from fossil fuels.
"Energy security does not stop at our borders," Energy Secretary Grant Shapps said in a statement.
12.38pm: Wilko had plenty of interest but couldn't seal the deal
Wilko had received “a significant level of interest, including indicative offers that we believe would meet all our financial criteria to recapitalise the business”, the firm’s chief executive Mark Jackson said, but it had not been able to finalise these in time to save the business.
Jackson said talks had failed despite Wilko making a number of cost-cutting measures, which he claimed would have resulted in “the most profitable Wilko ever recorded within 24 months”.
Administrators from PricewaterhouseCoopers, who are set to be formally appointed on Thursday afternoon, are expected to continue to seek a buyer for at least part of the business after their appointment.
It is understood that managers were told the news on Thursday morning just before 9am and went on to brief staff in stores.
12.06pm: US futures rise but inflation figures will set the tone
US futures are pointing to a strong start in New York although much will depend on consumer price inflation figures due at 0830 EST.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.5% higher, while those for the S&P 500 rose 0.5%, and contracts for the Nasdaq 100 futures climbed 0.6%.
Thursday’s US CPI report is expected to show that inflation increased at a 3.3% annual pace in July, up from 3.0% in June, marking the first acceleration since June 2022, while the core measure, which strips out volatile food and energy prices, is expected to ease slightly to 4.7% from 4.8%.
Joshua Mahony at Scope Markets thinks “some form of rise is largely a foregone conclusion, with base effects meaning that the July 2022 monthly reading of 0% is replaced with today's July 2023.”
“With only one other reading at zero or below in the past year it is highly likely that inflation turns higher in the US,” he explained.
“The big question mark is how markets will react to what is essentially a known entity, with a new upward trajectory signalling that there is still some way to go for the Federal Reserve despite having made such progress on driving CPI down towards their 2% target.”
Ipek Ozkardeskaya at Swissquote Bank reckons while any bad surprise on the inflation front could revive the Federal Reserve hawks, “we are far from pricing another hike in September just yet.”
Markets currently see a 87% chance of the Fed holding interest rates steady at its September meeting, according to the CME FedWatch tool.
In company news, Alibaba reported a rise in quarterly revenue to RMB234.16 billion from RMB205.56 billion a year ago, better than the RMB 223.75 billion forecast.
Net income of RMB34.3 billion also topped estimates.
Shares rose 2.8% in pre-market trading.
Disney will be in focus with shares up 1.4% ahead of the open as plans to increase streaming prices and possibly clampdown on password sharing took the heat of news of a fall in subscriber numbers.
After Wednesday’s market close Disney delivered somewhat tepid results with revenue of $22.33 billion slightly behind Street expectations of $22.5 billion, along with earnings of $1.03 per share, compared to projections of $0.95.
11.41am: Subdued Chinese property market to hurt Savills
Over to the FTSE 250 now which like its blue-chip peer is little changed.
One share on move and not in a good way is Savills PLC (LSE:SVS), down 8.8% at 904.50p.
The international real estate adviser said half-year revenues were down 4% as a sharp rise in borrowing costs slowed transactions.
But it warned that China’s property market will remain subdued for the rest of the year.
Chief executive Mark Ridley said: "We are seeing some positive signs in markets such as the UK and continued strength in certain Asia Pacific markets including Japan; in Continental Europe and mainland China we now expect reduced market volumes to continue through much of the year."
11.15am: Deliveroo serves up tasty buy-back
Back to today’s earnings updates and Deliveroo PLC (LSE:ROO) shares are in favour, up 3.7% at 128.10p.
The food delivery firm unveiled plans to return a further £250 million to shareholders in a sign of confidence that it can soon start generating positive free cash flow, after losses halved in the first half of the year.
Pre-tax losses at the London-based outfit narrowed from £127.1 million in the first half of last year to £57.6 million in the first six months of 2023, as revenue grew 5% to £1 billion.
It did cut its annual forecast for gross transaction value, a measure of customers’ total spending on its app as well as other fees, to “lower single digits” percentage growth, but raised its guidance for adjusted earnings from a £20-£50 million range to £60-£80 million.
10.40am: Wilko calls in administrators
As flagged earlier, Wilko has called in administrators, putting more than 12,000 jobs at risk after it failed to agree a rescue deal.
The family-owned household and garden products retailer, which has about 400 stores, is expected to have to close dozens of outlets, leaving big gaps on high streets after weeks of talks with potentially interested parties.
UK homeware retailer Wilko has collapsed into administration, putting 12,000 jobs at risk.
— BBC Breaking News (@BBCBreaking) August 10, 2023
Mark Jackson, chief executive, said: “We left no stone unturned when it came to preserving this incredible business but must concede that with regret, we’ve no choice but to take the difficult decision to enter into administration."
10:23am: Markets look to US inflation to boost flagging fortunes
Mid-morning and blue-chips are flagging, with the FTSE 100 back to opening levels.
Traders will be hoping that US inflation figures deliver the same kind of boost they did in June.
AJ Bell's Russ Mould says it "could be an important day for markets as the US readies its latest inflation numbers."
“The last reading provided a positive surprise as it undershot expectations for the first time in a long time."
"A repeat could revive a flagging equity rally, but a negative shock could accelerate recent selling."
The figures are expected to show a rise in the headline figure to 3.3% from 3% although the core figure is forecast to edge down to 4.7% from 4.8%.
The figures are due at 1.30pm UK time.
9:56am: Wilko on the brink - reports
Hopes that Wilko could be saved have been dashed, according to reports.
Thousands of staff at the low-cost retailer are set to be told this morning that the chain has collapsed, Bloomberg and Sky are reporting.
The UK company, which is privately owned and has about 400 stores, is due to enter insolvency proceedings as soon as Thursday morning unless an unexpected last-minute buyer emerges, according to people familiar with the situation, Bloomberg said.
Wilko previously appointed advisers at PricewaterhouseCoopers LLP to find new funding but potential buyers withdrew their interest in recent days. It has roughly 12,000 staff.
It secured a £40 million lifeline from Hilco UK, the owner of Homebase, at the beginning of this year, citing supply chain disruptions and a sharp drop in footfall.
9:31am: House prices could drop around 8% this year
Economists have been running the numbers after the release of the RICS survey which pointed to a further fall in the property market this year.
Gabriella Dickens at Pantheon Macroeconomics expects a peak-to-trough fall in house prices of around 8%, with prices bottoming out early next year.
She pointed out the net balance of surveyors reporting that prices have risen over the past three months fell to its lowest level since early 2009 while in addition, new buyer enquiries balance was pretty much unchanged.
The weakness “makes sense” she felt given the jump in mortgage rates, adding this has lifted the proportion of disposable incomes soaked up by mortgage repayments for the average two-earner household to 29%, from a stable 20% in the 2010s.
Simon French at Panmure Gordon also sees a 8% fall by early 2024.
Latest @RICSnews data for UK housing market shows price expectations in line with a ~8% YoY nominal (15% real) price decline by early 2024. There have been misleading indicators before (2016 & 2020) but given the squeeze from the mortgage refi cycle this looks more set in pic.twitter.com/bcIf2jck2p
— Simon French (@shjfrench) August 10, 2023
Victoria Scholar, head of investment at interactive investor pointed out the data echoes recent reports from Nationwide and Halifax suggesting that the Bank of England’s aggressive stream of 14 consecutive rate hikes and the consequent surge in mortgage costs are sharply weighing on the housing market.
"The reduction in affordability of borrowing is prompting more and more would be buyers to turn to the rental market instead with increased demand leading to a jump in rents," she added.
9:11am: Entain's Turkish charge worse than City feared
Entain’s provision for the Turkish bribery probe is hanging over the stock offsetting some pretty decent numbers.
The £585 million charge is higher than City analysts were expecting and has pushed the shares down 2.3% so far.
Shore Capital’s Greg Johnson said: “This is materially higher than the c£200m we were anticipating, equivalent to c90p per share, although would be paid over a four-year period.”
Matt Britzman at Hargreaves Lansdown described it as the “elephant in the room” pointing out the event highlights why “governance is so important.”
Back to the results, and Britzman highlighted a “record numbers of active customers” and a “strong showing” by retail business.
But it is BetMGM, the joint venture in the US, “which continues to be a beacon of light and a hugely important asset for future growth.”
ShoreCap’s Johnson doesn’t expect forecasts to move much on the numbers which he said were in line.
8:52am: Spirax-Sarco on the wane after margin warning
The FTSE is holding its modest gains so far, up 7 points now.
Looking at the fallers and top of the pile is Spirax-Sarco Engineering (LSE:SPX) which disappointed the City after warning a "short-term headwind from Biopharm destocking is now expected to continue into 2024."
The thermal energy management and fluid technology solutions outfit said first-half pre-tax profit fell 18% and operating margins by 340 basis points.
Broker Peel Hunt thinks the "short term looks undoubtedly tough" for the firm although the "medium-term demand outlook remains strong."
"The new news in the statement is perhaps that the recovery in Biopharm, which was expected in 2H, is now likely to happen in 2024, and that the WFE semicon sector is likely to remain tough for the rest of the year," it said.
Spirax now expects 0-4% revenue growth in 2023, and operating margin 100-200bps lower.
Peel Hunt estimated this means an Ebitda range of £360-400 million against its £432.3 million and a Refinitiv consensus of £419.1 million.
8:38am: RICS survey points to further falls in property market
The gloomy state of the UK's property market was underlined in a new report today.
The Royal Institution of Chartered Surveyors (RICS) said the market slowed in July after a jump in mortgage costs reduced both buyer demand and the volume of sales, according to new figures.
RICS said its measure of sales agreed fell to minus 44% in July, the weakest since the start of the pandemic and down from minus 36% in June.
The survey of estate agents and property appraisers showed price declines were the widest-spread since 2009, just after the financial crisis.
“The recent uptick in mortgage activity looks likely to be reversed over the coming months,” Simon Rubinsohn, chief economist at RICS, said in a report. He noted growing “economic uncertainty, rising interest rates and a tougher credit environment” were weighing on the market.
Despite the downbeat assessment, housebuilders are broadly higher taking heart from the more encouraging forward looking comments from Persmmon.
8:15am: Steady progress in London as trading starts
The FTSE 100 has pushed higher in early trading, ahead of the US inflation figures later today, but Entain has slipped after setting aside a hefty chunk of cash to cover a bribery probe.
At 8.15am, London's lead index was up 10.35 points, 0.1%, at 7,597.65 while the FTSE 250 rose 49.52 points, 0.3%, to 18,986.72.
The top story in London was news that Entain, the owner of Coral and Ladbrokes, has put aside £585 million to cover the expected costs of an investigation into its former Turkish business by HMRC.
Shore Capital’s Greg Johnson said: “This is materially higher than the c£200m we were anticipating, equivalent to c90p per share, although would be paid over a four-year period.”
Entain said it was making “good progress” towards a settlement.
The news saw shares fall 2.8% and took the shine off in line results.
Better news for housebuilder Persimmon with shares up 2.0%.
Rising mortgage rates hit revenue, profit and house sales in the first half but chief executive Dean Finchsaid he expected the firm to hit profit expectations for the year.
“We are on track to deliver profit expectations for the year and are building a platform for future growth.”
But not such good news for Persimmon and other builders came from a survey from the Royal Institution of Chartered Surveyors which slowed the property market slowed in July with further falls expected.
“The recent uptick in mortgage activity looks likely to be reversed over the coming months,” Simon Rubinsohn, chief economist at RICS, said in a report.
7:55am: Persimmon backs guidance despite brutal first half
Persimmon PLC (LSE:PSN) remains on course to hit current profit expectations despite a brutal first half which saw revenue, profit and completions tumble as rising interest rates took their toll.
Chief executive Dean Finch said: “Against a backdrop of higher mortgage rates, the removal of Help to Buy and significant market uncertainty, Persimmon has delivered a robust sales rate excluding bulk sales whilst growing the private average selling price in our forward order book and also securing cost savings.”
“We are on track to deliver profit expectations for the year and are building a platform for future growth.”
New home completions in the six months to June 30 slid to 4,249 down from 6,652 the year before while revenue of £1.19 billion was down from £1.69 billion.
Pre-tax profit more than halved to £151.0 million down from £439.7 million before with EPS of 34.4p down from 106.5p.
But the housebuilder did reinstate the interim dividend at 20p per share.
7:35am: Entain takes £585 million hit for bribery probe
Kicking off Thursday with news that Entain PLC (LSE:ENT), the betting operator, is seting aside a whopping £585 million provision as it closes in on an agreement into an HMRC probe into potential bribery offenses at the group’s former Turkish subsidiary.
The betting firm said the sum would be paid over a four-year period.
“We are pleased to be making good progress towards drawing a line under this historical issue, which relates to a business that was sold by a former management team of the group nearly six years ago,” Chairman Barry Gibson said in a statement.
In June, investment bank Citi estimated a fine could be between £200-£300 million.
The news came as the owner of Coral and Ladbrokes reported a 13% increase in revenue to £2.38 billion from £2.09 billion the year including a record number of online customers.
Total net gaming revenue (NGR) rose 19%, with online NGR up 15% while the retail arm performed ahead of expectations, with NGR up 12%.
Bet MGM performed strongly with NGR up 55% to $944 million.
Entain said the 50/50 joint venture with MGM was on track to deliver the upper end of 2023 NGR guidance of $1.8-$2.0 billion and be Ebitda positive in the second half of the financial year.
Underlying pre-tax profit jumped 89% to £287.6 million from £152.4 million but on a statutory basis the firm swung to a pre-tax loss of £502.5 million from a profit of £28.1 million.
The dividend was lifted 5% to 8.9p.
7:02am: Steady progress seen in London, US CPI lies ahead
Good morning. A bright start is expected in London ahead of US inflation figures which will take centre stage on Thursday.
In London, spread betting firms are calling the FTSE 100 up by around 12 points after closing up 59.88 points at 7,587.30 on Wednesday.
Thursday’s US CPI report is expected to show that inflation increased at a 3.3% annual pace in July, up from 3.0% in June, marking the first acceleration since June 2022, while the core measure, which strips out volatile food and energy prices, is expected to ease slightly to 4.7% from 4.8%.
Ipek Ozkardeskaya at Swissquote Bank said: “Any bad surprise on the inflation front could revive the Federal Reserve hawks, but we are far from pricing another hike in September just yet.”
Markets currently see a 87% chance of the Fed holding interest rates steady at its September meeting, according to the CME FedWatch tool.
US markets closed down ahead of the inflation print while Asian markets were mixed.
Updates from Antofagasta, Entain, Persimmon, Spirax-Sarco will grab early attention in London as will the ongoing spat between the US and China after the White House unveiled a ban on US investment in Chinese tech sectors.