- FTSE 100 up 147 points at 7,673
- ECB raises interest rates by 25 basis points
- Rio Tinto rises as iron ore prices jump
4:40pm: Rising commodity prices send FTSE soaring
The FTSE 100 enjoyed its best day since mid-July as gains in commodity prices sent oil majors and miners sharply higher.
At the close, London’s lead index was up 147.09 points, 2.0%, at 7,673.08 while the FTSE 250 soared 338.20 points, 1.8%, at 18,899.70.
Chris Beauchamp at online trading platform IG noted: “Commodity prices are surging this afternoon and this has lit a fire under the FTSE 100, prompting a rally that has taken the index to its highest levels in six-weeks.”
“Oil and natural gas prices are enjoying a solid afternoon, with the result that Shell and BP have added over 20 points to the index, with Rio Tinto and Glencore following close behind,” he noted.
Rio was further boosted by JP Morgan taking the stock off its sell list.
Moves by Chinese authorities to support the flagging economy boosted Asia-focused banks HSBC and Standard Chartered, while positive comments from HSBC’s research arm gave Flutter Entertainment a lift.
3:18pm: ECB rate rise a "dovish hike"
Holger Schmieding at Berenberg called the ECB’s rate rise a “dovish hike.”
He noted alongside the rate increase - as part of an apparent compromise between the proverbial hawks and doves - the ECB also signalled that it expects to be on hold from now onwards for a significant period of time.
For markets, this clarity about the outlook may be more important than today’s 25bp increase in the deposit rate to 4%, he believes.
For the economy, however, the extra hike may still matter, he added, “as it adds some downside risk to our call that the economic rebound, which we expect to start early next year and gather pace next spring, could propel growth to a rate modestly above the Eurozone’s c1.5% trend rate in 2025.”
“We maintain our call that the ECB will not steer money market rates down significantly next year.”
“But from the new starting level of 4%, we see some chance that the ECB may lower money market rates to c3.5% in 2025,” Schmieding said.
2:47pm: US markets make a bright start
As expected US stocks have started Thursday on the front foot after retail sales figures came in better than expected and core wholesale prices rose in line with expectations.
Shortly, after the opening bell the Dow Jones Industrial Average was up 162.66 points, 0.5%, at 34,738.19, the S&P 500 was up 22.27 points, 0.5%, at 4,489.71 and the Nasdaq Composite was up 60.70 points, 0.4%, at 13,874.29.
The positive open has pushed the FTSE 100 to its best levels for the day, up 108 points now to 7,634.
2:18pm: US futures extend gains after robust data
The FTSE 100 has brought up its century with plenty going in the market at the moment, with the ECB rate increase, the policy support moves in China plus a raft of US data as well.
Something for everyone in the US figures which show inflationary pressures are not going away anywhere fast but that the economy is holding up despite the interest rate rises.
Starting with wholesale prices figures - and producer prices picked up by more-than-expected in August, according to the latest figures from the US Bureau of Labor Statistics.
The producer price index for final demand rose by 1.6% on an annual basis in August, accelerating from a 0.8% increase in July, above the 1.2% according to FXStreet-cited consensus.
On a monthly basis, producer prices rose by 0.7, picking up from a 0.4% rise in July from June, ahead of expectations for the rate to hold steady at 0.4%.
But the jobs market remains robust. New claims for US employment support rose in the most recent week, but came in lower than expectations.
Data from the US Department of Labor, showed initial jobless claims totalled 220,000 in the week ending September 9, up from the previous week's revised level of 217,000 in the previous week.
Meanwhile, consumer spending held up with retail sales in August up by 0.6% month-on-month, picking up from a 0.5% the month before, and ahead of the 0.2% consensus.
Markets seemed to have liked the robust nature of the data and futures have extended gains across the pond.
2:05pm: Euro tanks after ECB signals pause in rate rises
The euro has taken a tumble after the ECB decision, down 0.5% against the dollat $1.0680.
Capital Economics thinks the ECB’s decision to raise interest rates by a further 25bp today probably brings the current tightening cycle to an end.
"But given the strength of underlying inflation, we expect rates to remain at this level for at least a year even though the economy seems to be heading for a recession," the economics bureau added.
ING's Carsten Brzeski said looking ahead "a further weakening of the economy and more traction in a disinflationary trend will make it very hard to find arguments for yet another rate hike before the end of the year."
"The remark in the official communication that “based on its current assessment, the Governing Council considers that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target” shows that today’s rate hike looks like the last," he said.
"Today’s hike isn't only a credibility booster, it will also be the last in the current cycle," he reckons.
1:51pm: ECB lifts interest rates to all-time high
The European Central Bank has increased interest rates by 25 basis points to an all-time high in a bid to tame inflation but hinted the monetary policy tightening cycle was close to an end.
Deutsche Bank chief european economist, Mark Wall said: "In the end, the ECB decided to hike again. A lingering pause is being signalled, but it’s a low conviction pause. The ECB has retained the option to hike further if necessary. There is no declaration of victory on inflation.”
"The rate increase today reflects the Governing Council's assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission," the ECB said in its policy statement.
It added that, based on its current assessment, it believes interest rates have reached levels that, when maintained for a "sufficiently long duration", will make a "substantial contribution to the timely return of inflation to the target."
Thursday's decision by the ECB Governing Council took the interest rate on the main refinancing operations, the marginal lending facility, and the deposit facility to 4.50%, 4.75% and 4.00%, respectively.
It means the Frankfurt-based central bank has hiked its policy rates by a cumulative 450 basis points during the current tightening cycle.
The September ECB staff macroeconomic projections for the euro area now see average inflation at 5.6% in 2023, 3.2% in 2024 and 2.1% in 2025.
This represents an upward revision for 2023 and 2024 and a downward revision for 2025 which had predicated average inflation at 5.4%, 3.0%, and 2.2%, respectively.
1:00pm: Rics survey bad, but not horrific says Berenberg
Berenberg economist Kallum Pickering thinks although today’s figures from Rics are bad, they are not horrific, and do not indicate that the peak-to-trough decline will be greater than previously feared.
“We expect house prices to bottom early next year before momentum gradually improves in 2024 and 2025 on the back of a broader economic recovery, further falls in mortgage rates and rising real incomes,” Pickering said.
“However, the recovery in demand and transactions may be more restrained than in previous housing market cycles,” he added.
“The situation is bad now and will likely get worse. But a full-blown housing crisis remains a far-off prospect, in our view,” he said.
Unlike in 2008, the UK banking sector is well capitalised and properly regulated, and household debt levels are manageable.
Any suggestions that the housing market or economy face a genuine crisis are thus far overblown, in Pickering’s opinion.
12:35pm: CBI could face fresh exodus if goes ahead with Made deal - Sky
Sky News is reporting there could be fresh trouble brewing at the CBI.
It said some of the CBI's remaining members are warning that they will terminate their association with the crisis-hit lobbying group if it goes ahead with a full merger with Make UK, the manufacturers' trade body.
Revealed: CBI members are warning of a fresh exodus if the once-influential business group cements a merger with Make UK, the manufacturers' body, amid talks about a tie-up which are largely being driven by the CBI's growing cash crisis. https://t.co/EeK1stImLR
— Mark Kleinman (@MarkKleinmanSky) September 14, 2023
Sky said it has learnt that a number of individual company members and trade associations are discussing ending their memberships if the tie-up goes ahead as they have no interest in participating in an organisation dominated by Make UK's leadership.
Sky revealed last week that rhe financially troubled CBI is in discussions about collaborating with Make UK in a move largely designed to avert a growing cash crisis.
12:05pm: US expected to open higher, ARM starts trading
The brighter mood in Europe looks set to filter across the pond where US markets are expected to open higher.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.3% higher, while those for the S&P 500 rose 0.4%, and contracts for the Nasdaq 100 futures were up 0.4%.
Investors will have a further batch of economic to digest following the strong consumer price index data on Wednesday.
Retail sales are forecast to have increased by 0.2% in August, moderating from the 0.7% jump in July while the US producer price index, a leading indicator of wholesale inflation, is forecast to have increased 0.4% month-on-month in August after a 0.3% rise in July.
Elsewhere, trading in Arm Holdings is expected to start in New York at $51 per share while US auto workers are headed towards a strike unless the United Auto Workers union and Ford, General Motors and Stellantis agree on a new contract by the end of the day.
11:54am: China cuts banks’ reserve ratio for second time this year
Giving a further boost top equities in London is news that China’s central bank has cut the amount of cash that banks must hold as reserves for the second time this year to help keep liquidity ample and support a nascent economic recovery.
The People’s Bank of China said it would cut the reserve requirement ratio for all banks, except those that have implemented a 5% reserve ratio, by 25 basis points from September 15.
China cuts RRR rate - another fundamental negative for the Yuan! pic.twitter.com/rckWtrQAcO
— AndreasStenoLarsen (@AndreasSteno) September 14, 2023
The move came after the world’s second-biggest economy has struggled after its post-pandemic recovery faltered.
“The economy continues to recover and its internal driver keeps strengthening,” the central bank said.
11:44am: UK-focused equity funds record largest weekly inflow in a year
Last week, UK-focused equity funds recorded the largest weekly inflow in a year of US260 million, according to research from Bank of America.
Though driven by passive funds, this was spread across funds benchmarked to the FTSE100 and FTSE250/AIM/All Share/Small caps., it said.
Sentiment among investors is mixed: global investors deeply dislike the UK (a net 22% are underweight the region and a net 9% would underweight it) but their European counterparts are the most optimistic they have been in a year (a net 37% would overweight the country).
The inflow was the only the second this year and the highest since June 2022 and was fully supported by passive funds which saw $455 million of inflows (the largest since June 2022), while active funds saw $195 million of outflows (the smallest outflow since April 2023).
When split by the funds' benchmarks, those benchmarked to the FTSE100 saw $120 million inflows (the highest in 3 months), while those benchmarked to the FTSE250/AIM/All Share/Small caps recorded $324million of inflows (the highest since June 2022).
BofA said Tate & Lyle and HSBC saw the largest inflows last week while ITC and Persimmon saw the largest outflows.
11:10am: IAG shares hit on fears rising fuel costs will eat profits
Stocks keep pushing higher, perhaps on hopes the ECB will leave interest rates unchanged today. We shall see.
But shares in British Airways owner, International Consolidated Airlines Group SA (LSE:IAG) fell 1.9% leaving it top of the FTSE 100 fallers as rising fuel costs prompt worries over earnings.
US peer American Airlines fell 5.7% on Wall Street on Wednesday after it lowered its third-quarter profit forecasts due to fuel prices that have "increased considerably" since July, becoming the latest US airline to do.
SouthWest Airlines and Alaska made similar statements regarding fuel prices last week.
AA anticipates adjusted earnings per share of 20 to 30 US cents for its fiscal third quarter, compared with previous guidance of 85 to 95 cents a share.
It expects to pay an average of US$2.90 to US$3.00 per gallon of jet fuel in the three months to September, compared to its prior estimate of US$2.55 to US$2.65 per gallon.
10:41am: Flutter's valuation doesn't reflect pace of growth
Flutter Entertainment’s valuation doesn’t reflect the underlying pace of growth, according to analysts at HSBC.
The broker has reiterated its buy rating and increased its price target to 18,100p from 17,900p.
Shares were around 2% mid-morning in London at 14,250.00p.
HSBC noted while there may not have been an earnings upgrade in the recent results, but the performance is on track.
“We are reassured by the underlying growth at H1, and think that this suggests our forecasts for this year and next are well underpinned,” the bank said.
“This growth is not reflected in the valuation of the group, as we see it,” it added.
“The greater granularity on the US is reassuring,” it said.
As these results showed, Flutter is comfortably delivering, even after this year’s tax pressures, HSBC commented.
The broker is also positive on Entain, rated buy, but it has cut its price target to 1,540p from 1,830p.
“Performance was more anaemic than we anticipated, though a wide range of interpretations are possible,” it said.
“We believe shares offer value, but delivery is important,” in the broker’s view.
10:14am: Trainline firmly on track with buyback a sign of confidence
Trainline is sending all the right signals to the market with shares up 12% at 277.56p.
The online booking site launched a £50 million share buyback and said sales grew 23% year-on-year to £2.65 billion between March and April, faster than expected, while revenue was up 19% to £197million.
Peel Hunt thinks the market should view the buyback as a sign of confidence in the long run performance of this business model, where any surplus capital may be returned to shareholders.
Neil Shah, head of research at Edison Group described the performance as “robust” and noted the firm’s outlook was “bullish.”
9:45am: THG faces uphill battle to be seen as credible, says AJ Bell
THG is now down 18% after its results today and AJ Bell's Russ Mould thinks it continues to face an uphill battle "to be seen as a credible business with the market."
He noted another period of operating losses and with "more moving parts than a Swiss watch, it’s no wonder that investors struggle to get their head around exactly what this company is trying to do."
He pointed out the word ‘adjusted’ is used 118 times in the half-year results, which says it all.
“The nutrition business looks to be improving, helped by inflationary pressures easing," he noted, with THG wanting to build sports nutrition brand Myprotein into a global lifestyle brand.
Mould explains this part of its business has been the focus of activist investor Kelso which has called it one of THG’s undervalued assets.
While THG has sold off loss-making businesses, Mould thinks the "reinvention journey needs to speed up if it wants the share price to move higher."
"As it stands, the latest results went down like a lead balloon with the market, the shares falling nearly 18% in the first hour of trading.”
9:15am: Lidl swings into the red but pledges to retain price gap
The competitive food retal landscape is reflected in results from discount retailer Lidl which has plunged to an annual loss in the UK after pressing ahead with an aggressive expansion and cut prices.
Revenue rose 18.8% to £9.3 billion in the 52 weeks ending to February 28 from £7.8 billion the year before but the supermarket group reported a loss of £75.9 million compared to a pre-tax profit of £41.1 million in the prior year.
Ryan McDonnell, Lidl GB CEO said: "The entire retail market has seen inflation, and we are no exception."
"However, for us, what is important is that our price gap to the traditional supermarkets is as strong as it has ever been."
The grocer opened 50 more UK stores during the year, taking the total to over 960.
It also cut prices and added £50 million to its staff bill by pushing up wages.
The German group, controls 7.6% of the grocery market making it the UK’s sixth largest supermarket chain.
8:45am: Miners advance; JP Morgan upgrades Rio Tinto
The FTSE 100 continues to make headway with miners, Anglo American and Rio Tinto, leading the way.
JP Morgan has increased price targets for a number of mining stocks after raising forecasts for iron ore price forecasts through 2023-25.
The investment bank took a cautious view to iron ore exposure with its 2023 sector outlook on waning China steel demand and improving supply.
But, it pointed out China steel demand has proven more resilient as infrastructure demand has offset poor property sector demand while excess output is finding its way to the export market.
“With the iron ore market relatively more balanced medium term, we raise our 2023-25 iron ore price forecasts +6%/+13%/17%,” JPM said.
The bank sees iron ore miners offering moderately more attractive valuations, with Rio Tinto now offering 2024/25 estimated spot free cash flow yield of 9%/10%.
Rio has been upgraded to neutral from sell with an increased December 2024 price target of 6,000p (up from 5,440p).
Targets for BHP (rated neutral) increase to 2,550p from 2,320p while Anglo American – JP Morgan’s favoured pick, rated overweight – lifted to 2,900p from 2,650p.
8:15am: FTSE climbs ahead of ECB rate call
The FTSE 100 has opened higher as investors look ahead to the interest rate call by the European Central Bank with the decision whether to raise or pause seen as being finely balanced.
At 8:15am, London’s lead index was up 33.39 points, 0.4%, at 7,559.38 while the FTSE 250 advanced 14.90 points, 0.1%, to 18,576.40.
Matt Britzman, equity analyst at Hargreaves Lansdown said expectations on the ECB decision have “been all over the place, with hopes that a pause might be on the cards reversing in recent days – markets are now pricing in a 63% chance of a 25-point hike.”
Goldman Sachs (NYSE:GS) expects the ECB to deliver a final 25 basis point hike for a terminal rate of 4.00% given sticky core inflation “though we view this as a close call.”
The investment bank expects the ECB to remain on hold until the fourth quarter of 2024.
Back in London and a batch of FTSE 250 earnings are keeping investors and analysts busy.
Trainline PLC (LSE:TRN) appears firmly on track with shares up 8.6% at 268.60p after a strong trading update plus news of a £50 million buyback.
Shore Capital called the update “positive” and retained a buy recommendation and fair value of 320p.
But THG PLC (LSE:THG) dropped 6% after it reported increased operating losses and a rise in revenue although it said adjusted Ebitda were above expectations.
M&C Saatchi is another share in the red, down 7.7%, after its results.
Broker Peel Hunt said: “On initial estimates, we look to reduce our FY23E revenues by c.4% and EPS by c.10%.”
“The trading environment continues to be challenging for M&C,” it added.
7:58am: UK estate agents gloomiest in 14 years
More downbeat news on the housing market which slowed further in August in the face of high mortgage rates, with sales falling to levels not seen since the early stage of the pandemic.
The Royal Institution of Chartered Surveyors also said almost every region is now experiencing “relatively steep” falls in house prices, with a key index deeper in negative territory than at any time since 2009 and agents predicting the downturn will worsen in the coming months.
“Prices are continuing to slip, albeit that the relatively modest fall to date needs to be seen in the context of the substantial rise recorded during the pandemic period,” said Simon Rubinsohn, chief economist at RICS.
“Critically, affordability metrics still remain stretched in many parts of the country.”
Buyer demand and agreed sales continued to fall sharply against a backdrop of “economic uncertainty and the high cost of mortgage finance.”
The index of house prices slumped by 13 percentage points to minus 68.
The West Midlands, East Midlands, East Anglia and the South East of England all exhibited “particularly negative feedback.” Northern Ireland was the only region still in positive territory, Rics said.
Going forward, near-term price expectations are signalling further falls to come over the next few months, with the net balance slipping a little deeper into negative territory at -67% compared to 60% last time around.
7:48am: Trainline on track after strong first half
Let the train take the strain used to be the marketing headline and it seems as though consumers are just doing that.
Trainline PLC (LSE:TRN) has reported a strong first half as well as launching a £50 million share buyback.
The online ticketing platform said in the six months to August 31, ticket sales rose 23% to £2.65 billion from £2.16 billion the year before while revenue jumped 19% to £197 million from £165 million.
Trainline expects full-year net ticket sales growth of between 13% and 22%, revenue growth of 13% and 22% and adjusted Ebitda of between 2.15% and 2.25% of net ticket sales.
Announcing the buyback, the firm said any surplus capital may be returned to shareholders, including through the repurchase of Trainline's shares.
7:28am: THG earnings beat expectations
Quite a lot of earnings from the FTSE 250 and we'll start with a look at THG, run by Matthew Moulding, no fan of the City, it is fair to say judging from his previous comments.
The Manchester-based e-commerce firm reported earnings ahead of expectations despite a drop in revenue which was held back by a short-term volume reductions in its Beauty division plus the strategic exit from non-core operations.
In the six months to June 30, revenue fell 9.3% to £969.3 million from £1.07 billion the year before.
This included record Nutrition revenue of £340.7 million, up 2.6%, although Beauty revenue fell 10.4% to £538.7 million and Ingenuity revenue slipped 14.9% to 320.0 million.
Continuing adjusted Ebitda of £50.1 million jumped 22.9% from £40.8 million last year, above the top end of guidance which THG put at £47 million to £50 million, at a margin of 5.3%, up from 4.0%.
The FTSE 250-listed firm left adjusted Ebitda guidance unchanged for the full-year unchanged.
But operating losses increased to £99.5 million from £89.2 million reflecting the exit of loss-making discontinued categories and non-core assets which saw the group take a £26.2 million charge.
Adjusted Ebitda leapt 72% in its Nutrition arm to £47.1 million but fell back in Beauty to £10.6 million from £17.7 million, impacted by one-off industry de-stocking in manufacturing.
But encouragingly, since the start of August, the Beauty division has returned to growth, the firm said.
7:00am: Bright expected but housebuilding plans voted down
Good morning, and it is expected to be a positive start for blue chips in London ahead of interest rate decision by the European Central Bank.
Spread betting companies are calling London’s lead index up by around 17 points after closing down 1.54 points at 7,536.27 on Wednesday.
Housebuilders will once more be in the spotlight as house prices declined at their fastest rate since 2009 in August, according to surveyors.
The Royal Institution of Chartered Surveyors said a net balance of 68% of property professionals reported house prices falling rather than rising, marking the most negative reading since 2009.
In addition, controversial moves to relax environmental rules to boost housebuilding have been scuppered by the House of Lords which voted by 192 to 161, against scrapping EU-era rules that force developers to mitigate the impact new homes have on river health.
Otherwise, the main early focus will be updates from Renishaw, Trainline, Spire Healthcare, IG and THG.