- FTSE 100 up 27 points
- Energy prices to be hiked again
- Consumer confidence remains at high
4.01pm: FTSE 100 on course for positive end to the week
The FTSE 100 looked headed to close out the week in positive territory, as signals from across the Atlantic that base rate cuts were soon to come helped buoy stocks on Friday.
By late trading, the index was up 27 points at 8,315.
JD Sports Fashion PLC (LSE:JD.) led the day’s risers, notching up 5.2% and adding to gains seen on Thursday after impressing with quarterly results.
Melrose Industries PLC (LSE:MRO, OTC:MLSPF) remained downtrodden and the FTSE 100’s biggest faller in the meantime though, after a double downgrade by UBS saw the shares drop by 7.1%.
Elsewhere, US markets enjoyed a boost following comments from Federal Reserve chair Jerome Powell at Jackson Hole that it was time to start cutting base interest rates.
Gold rallied on the news too, retaking its spot above the US$2,500 mark at US$2,509 per ounce for a 1.1% gain on Friday.
3.43pm: Scunthorpe steelworks early closure places 2,500 jobs at risk
British Steel has reportedly brought forward plans to close blast furnaces at its Scunthorpe site, placing 2,500 jobs at risk.
According to The Independent, coke and coal will stop being imported to the site in October, meaning the blast furnaces will be permanently shut off earlier than expected.
“That means at least 2,500 jobs lost before the end of the year,” a source said.
Previous proposals had been for the facilities to remain open while the plant transitioned to using electric arc furnaces.
GMB National officer Charlotte Brumpton-Childs commented: “Unions have been assured throughout the process that the blast furnace operations would continue throughout the construction of an Electric Arc Furnace.
“There has been no consultation over an early closure.
“British Steel and the Government must engage with workers immediately to safeguard jobs and livelihoods.”
3.22pm: Fed chair Powell signals time for rate cuts
Federal Reserve chairman Jerome Powell has signalled base rates will be cut in the US during his speech at the Jackson Hole Symposium.
“The time has come for policy to adjust,” he said on Friday.
“The direction of travel is clear and the timing and pace of rate cuts will depend on incoming data.”
Markets had been anticipating the central bank would begin cutting rates from September, though the depth of these remains in the air.
US markets got a boost on the comments, with the Nasdaq jumping 1.4%, the S&P climbing 1% and the Dow Jones adding 0.8%.
In London, the FTSE 100 was up 26 points, or by 0.3% at 8,314.
2.47: Wall Street opens higher
Wall Street enjoyed a positive start on Friday morning as eyes were firmly fixed on Federal Reserve chair Jerome Powell’s speech at Jackson Hole later in the day.
The Nasdaq ticked up 0.9% after the bell, while the S&P 500 and Dow Jones each climbed 0.6% respectively.
This came less than an hour before Powell was set to deliver his speech at Jackson Hole, with investors awaiting any clues on the timing and depth of base interest rate cuts in the US.
“The big question is to what extent Powell validates expectations for a September rate cut, and whether he offers any indication of how big any rate cut might be,” Deutsche Bank analysts said ahead of the speech.
“Our US economists’ view is that it will be difficult for Powell to pre-commit to a particular trajectory at Jackson Hole.
“But they do think his comments will imply that the Fed can begin dialling back the degree of restraint soon, opening the door to a rate cut next month.”
Powell is set to start speaking at 3pm GMT.
1.56pm: Royal Mail falls short on delivery targets
Royal Mail missed regulatory delivery targets over the three months to June, as less than 80% of first-class post was delivered on time.
The International Distributions Services PLC (LSE:IDS)-owned group said on Friday 79.1% of first-class mail arrived within one working day as promised over the three months to June.
This meant the postal service once again missed Ofcom-set targets for 93% of first class post to reach its destination on time.
Second class post targets were also missed, with 94.1% of deliveries being made on time, against Ofcom’s figure of 98.5%.
Royal Mail previously received a £5.6 million fine for missing such targets in 2023, while Ofcom said it was investigating the company over the same issue for the year to March 2024.
1.44pm: Rolls-Royce credit rating boosted by S&P
Rolls-Royce Holdings PLC (LSE:RR.)'s credit rating has been lifted by agency S&P Global after it reported a jump in margins over the first half of the year.
S&P lifted Rolls-Royce’s rating from BBB/A-3 to BBB/A-2, noting better margins had led to improving expectations for profitability over the coming years.
“We continue to see significant deleveraging over the next two years and a strengthening balance sheet,” S&P said in a statement.
“Rolls-Royce's credit metrics have improved materially over the last 24 months, and we expect that trend to continue”... Read more
1.18pm: Pound stretches to 18-month high against dollar
The pound sterling has rallied to an 18-month high against the US dollar ahead of two important speech from Bank of England governor Andrew Bailey and his US Federal Reserve counterpart Jerome Powell.
Powell is set to deliver a speech at the annual Jackson Hole summit, when markets will be looking for clues on monetary policy going forward.
Bailey is set to deliver a speech later in the day.
The Fed kept interest rates at a 23-year high in July, but a cooling US economy has increased the odds of a rate cut in September.
The GBP/USD pair is currently trading at 1.312.
12.33pm: Wall Street eyes bright start ahead of Fed chair speech
Wall Street looked on course for a bright start to the day on Friday, as markets awaited any information on base rate cuts in a speech by Federal Reserve chair Jerome Powell.
Futures had the Nasdaq up 0.8% ahead of the opening bell, while the S&P 500 and Dow Jones looked to add 0.5% and 0.4% respectively.
This comes after declines across the board on Thursday as traders braced for Powell’s key speech at the Jackson Hole Symposium.
Powell will speak at 3pm GMT, with the speech coming as anticipation for a string of base rate cuts by the central bank heats up.
Markets expect around 95 basis points of cuts over the remainder of the year starting in September, leaving the depth of the first reduction in question.
Given more positive economic data since poor job market figures earlier in the month, Powell is expected to allude towards a softer cut initially, though any commentary around this and the bank’s outlook on the US economy will be eagerly awaited.
12.08pm: Oil ticks up on rate cut expectations
Oil gained ground on Friday as anticipation grew that Jerome Powell could allude to Federal Reserve base rate cuts in a speech at Jackson Hole later in the day.
Come midday, Brent Crude was up 1% at US$78.02 a barrel for the day, while West Texas Intermediate had climbed by 1.1% to US$73.87.
This follows declines throughout the week, with expectations over a Federal Reserve rate creeping back into focus on Friday ahead of Powell’s speech.
Markets are pricing in 95 basis points of cuts from the US central bank over the remainder of the year, starting in September.
Powell’s speech is set to be closely watched therefore, as investors await any hints over how steep the first cut could be.
11.53am: Attention turns to Jackson Hole and Fed chair's speech
Federal Reserve chair Jerome Powell was front and centre of attention on Friday as he prepared to deliver a key speech at the Jackson Hole Symposium.
Given widespread anticipation for the US central bank to begin cutting interest rates over the coming months, any clues on the depths of these were awaited.
Swissquote Bank Ipek Ozkardeskaya noted the “absence of a severe economic slowdown” meant Powell would likely hint towards gradual cuts.
“This is at least what the data suggests and what other Fed members nudge toward as well,” she said.
Markets were anticipating 95 basis points worth of cuts over the remainder of 2024 ahead of the speech.
This would include the first at the Fed’s next meeting in September, with a steeper 50 basis point cut expected at least once.
Powell will speak at 10am Eastern Time, or 3pm in the UK... Read more
11.21am: Food shops slashed by 7.5% last year as cost pressures gripped
Official data on Friday showed households slashed spending on food shops by 7.5% over the course of 2023 as cost pressures gripped the nation.
According to the Office for National Statistics, spending rose on a nominal basis but fell in real terms when accounting for inflation.
This meant households made their biggest cutbacks on food shops over the year, the ONS said.
This was through “either consuming less, or where applicable buying lower quality items”.
Overall average weekly spending among households climbed to £567.70, by 7% or £38.90.
However, in real terms this fell by 4%, equating to £21.10 less each week.
This is after consumer price inflation sat as high as 10.4% in February 2023, following a peak of 11.1% in the previous October, before steadily declining.
The ONS added fuel and power remained the highest areas of spending for households.
Proportions of household spending on food and transport returned to pre-pandemic levels, the data also showed, while this remained below 2019 trends for restaurants and hotels.
10.50am: Melrose plummets on UBS downgrade
Melrose Industries PLC (LSE:MRO, OTC:MLSPF) fell over 6% on Friday to top the FTSE 100's fallers after facing a double downgrade from UBS analysts.
The defence firm’s rating was slashed from a ‘buy’ to a ‘sell’ by UBS, while Melrose’s share price target was wound down from 770p to 400p.
UBS said this was due to the company’s revenue and risk-sharing partnership (RRSP) portfolio being significantly overvalued.
This sees the company share in aftermarket profits with the likes of airlines and other companies following engine sales.
According the UBS, the portfolio is worth £2.8 billion and less than half the £5.7 billion value cited by the company’s management.
Melrose fell 6.1% to 479.97p on the downgrade, dragging defence peers BAE Systems PLC (LSE:BA.) and Rolls-Royce Holdings PLC (LSE:RR.) down 0.7% and 0.2% respectively.
9.56am: Direct Line slips on solvency ‘miscalculation’
Direct Line fell over 2% on Friday morning after admitting to an error in its solvency calculation.
The FTSE 250-listed insurer said on Friday that a “miscalculation” had been identified “within the group's audited solvency II own funds for the year ended 2023”.
“Correcting for the miscalculation, the solvency capital ratio (post-dividend) at year-end 2023 was 188%, which was above the group's risk appetite range of 140% to 180%.”
Direct line had reported the figure at 197% for 2023 initially, meaning it was more solvent than previously stated.
It added the correction did not affect its International Financial Reporting Standards figures.
Shares fell 2.1% to 185.10p.
9.25am: Four in 10 still face non-essential spending cuts - KPMG
Some four in 10 consumers are still being forced to cut back on non-essential spending due to inflated living costs, according to KPMG.
The accountant noted many were still struggling despite inflation having subsided recently, ahead of a confirmed increase in energy prices by 10% from October.
“Rising energy prices will be a huge concern for the many households who are not on fixed deals just as we enter the winter months,” KPMG energy vice chair Simon Virley commented.
“Average dual fuel bills remain well above the levels prior to Russia’s invasion of Ukraine and the fact that prices remain slightly below the levels of last winter will be of little comfort.”
Cornwall Insight analyst Craig Lowrey noted the October rise was likely to only be the first as the consultancy forecasts another increase in January.
“Unfortunately, a volatile wholesale market, and a country heavily reliant on imported energy has created a perfect storm for fluctuating household bills.”
Charity National Energy Action warned separately that October’s increase in bills would force an additional 400,000 homes into fuel poverty this winter, taking the total to over 6 million as the rise coincides with a government cut to winter fuel support.
9.06am: Consumer confidence sticks at near three-year high
Consumer confidence remained unchanged this month at its highest level in almost two years, GfK said on Friday.
At -13, GfK’s consumer confidence index stuck at the same level seen in July and at its highest since September 2021.
This was as a rise in consumer expectations for personal finances climbed but sentiment towards the economy deteriorated.
This could be thanks to “a mortgage-friendly interest rate cut at the beginning of August,” GfK client strategy director Joe Staton commented, “and hopes of more to come”.
Though economic sentiment on the index fell for the first time since February, GfK pointed out the specific reading of -15 was better than the -30 seen a year ago.
GfK also noted the major purchase index, indicating spending on big-ticket items, also ticked up in “great news” for retailers.
“All the key numbers this month are significantly more encouraging than 12 and 24 months ago,” Staton said.
8.55am: FTSE 100 gains early on
The FTSE 100 started off in positive territory on Friday, adding 16 points to reach 8,304.
In a quiet day on the company front, Melrose Industries PLC (LSE:MRO, OTC:MLSPF) was the only real mover on the index, falling 4.3% early on, while Pershing Square Holdings (LSE:PSH) Ltd led risers.
Among headlines was news energy prices would increase by 10% from October, after regulator Ofgem confirmed a hike to its price cap on Friday morning.
Consumer confidence was also confirmed to have remained at a near three-year high this month, following an unchanged reading from July.
8.20am: Thames Water monitor set to stay
Thames Water has been ordered to appoint independent monitors and will only be allowed to remove these once its credit rating improves, regulator Ofwat confirmed Friday.
This comes after ratings agencies S&P and Moody’s downgraded the UK largest water supplier to ‘junk’ status in July.
It means Thames is in breach of licence conditions, according to Ofwat, with the supplier having appeared on the brink of renationalisation recently after racking up a £15.2 billion debt pile.
Ofwat also said on Friday that Thames had committed to “taking the steps required to deliver an equity raise” and “delivering a suitable operational business plan to achieve turnaround”.
Thames previously said it has enough cash to last until May next year, with failure to secure more placing the supplier under threat of government-handled administration.
8.03am: Reform urged as energy prices to rise again
Confirmation energy prices will rise again from October has sparked further calls for reform in the sector.
“The root cause of spiking energy prices is our reliance on volatile fossil gas,” UK head of thinktank E3G, Juliet Phillips, said.
“The government has an opportunity at the forthcoming autumn budget to start to fix our broken energy system.”
This comes after Ofgem announced a 10% increase to the energy price cap from October, meaning 28 million householders will pay more per unit as the UK approaches the winter months.
Trade body Energy UK echoed the calls, adding suppliers were “keen to work with Ofgem” on reforming daily standing charges.
These are paid regardless of usage and have spiked in recent years despite energy prices actually having fallen. From October they will rise again for both electricity and gas.
“It’s right that Ofgem is looking at how to address these growing concerns,” Energy UK added, claiming “the price cap gives suppliers limited scope to reduce standing charges”.
7.48am: Chief executive change at Nestle
Nestle has announced chief executive Mark Schneider will be replaced by company veteran Laurent Freixe after eight years at the helm of the consumer goods giant.
This comes as the KitKat maker struggles to grow sales, with shares in the company having been on a downward trajectory since May 2023.
Deutsche Bank analysts said “we expect an initial negative market reaction to the announcement”.
“We expect the skill set of the incoming chief executive to be more suited to the needs of Nestle at this time and at the moment we don't see a big one off margin reset
However, noting the company also had a new chief financial officer, Deutsche added: “This is a time where any higher investment or change in accounting practices may be viewed by the market as resetting margin expectations.”
7.38am: What the energy price cap rise means
Ofgem confirmed on Friday that its energy price cap would climb from £1,568 to £1,717 in October.
This reflects what households would pay on an annualised basis and means 28 million households across England, Wales and Scotland will be charged more from October to December per unit of energy they use.
Electricity will rise from 22.36p to 24.50p per kilowatt from October, while gas will increase from 5.48p to 6.24p.
Daily standing charges, paid regardless of usage, will rise too, from 60.12p to 60.99p for electricity and 31.41p to 31.66p for gas.
This follows an increase in wholesale energy prices for suppliers, with gas having climbed recently as Ukrainian forces launched an incursion into Russia.
Higher network and operating costs for suppliers have also been reflected in the new cap, according to Ofgem, alongside earnings and headroom allowances.
7.22am: Energy prices to rise 10% from October
Energy prices will be hiked by 10% from October ahead of the colder winter months, Ofgem confirmed on Friday.
At £1,717, Ofgem’s energy price cap will be increased by £149 on its current level, meaning households across England, Wales and Scotland will be charged more per unit of energy.
7.15am: FTSE 100 seen higher
Futures had the FTSE 100 enjoying a bright start on Friday, with London’s blue chips on course to add 35 points as trading gets underway.
Though consumer confidence data is due from the UK on Friday, attention will be fixed on the Jackson Hole Symposium and Federal Reserve chair Jerome Powell’s speech.
This follows a negative session in the US as investors awaited clues from the speech on the central bank’s outlook for the economy and interest rate cuts most importantly.
Swissquote Bank analyst Ipek Ozkardeskaya commented: “He is expected to douse the jumbo rate cut expectations because there is no reason for the Fed to start cutting the interest rates by big chunks in the absence of a severe economic slowdown, market stress, or a crisis.
“This is at least what the data suggests and what other Fed members nudge toward as well.”
Overnight, Asian markets had a mixed performance, with Japan’s Nikkei 225 and India’s Nifty Fifty among those rising.
Back in the UK, eyes were on Ofgem this morning and news energy prices would rise once again from October.