- FTSE 100 closes at 7,564
- United Utilities falls after results
- Intermediate Capital in demand
4.52pm: FTSE 100 closes ahead
FTSE 100 closed ahead on Thursday as equity markets attempted to lift themselves out of the gloom.
Britain's blue-chip benchmark finished up around 42 points, or 0.56%, at 7,564.
"Another attempt at a relief rally is underway across equities, with a fairly substantial bounce across European and US markets coming in the wake of last night’s Fed minutes," said Chris Beauchamp, chief market analyst at online trading platform IG in a note.
"While these minutes didn’t really add much to the outlook for monetary policy, they did at least calm fears that a faster pace of tightening is on the way.
"But beyond bargain hunting there seems little concrete rationale for the bounce, which leaves investors wondering whether next week will see yet another dramatic reversal in stocks," he added.
With Chancellor Rishi Sunak's announcement on measures to help put more money in families' pockets amid the cost of living crisis, big retailers were among the Footsie gainers. Ocado shares added 11% to 861.20p.
3.45pm: Footsie near the day's peak
Markets are in a bright mood heading into the close, with retailers continuing to lead the way on hopes that the UK chancellor's cost of living support package will help boost consumer spending.
With a positive start on Wall Street to help matters, the FTSE 100 is up 46.26 points or 0.61%, close to its high for the day.
Ocado Group PLC (LSE:OCDO) is the biggest riser, up 13.25% after recent losses.
Next PLC (LSE:NXT) has put on 7.12%, B&M European Value Retail SA (LSE:BME) is 7.07% better, Primark owner Associated British Foods PLC (LSE:ABF) has added 4.48% and Burberry Group PLC (LSE:BRBY) has been lifted 3.31%.
JD Sports Fashion PLC (LSE:JD.), which dropped around 6% on Wednesday after the surprise departure of chairman and chief executive Peter Cowgill, has recovered some of that fall, and is up 3.3%.
Oil companies seem to have shrugged off the chancellor's windfall tax, with Shell PLC (LSE:SHEL, NYSE:SHEL) up 1.37% and BP PLC (LSE:BP.) 1.46% better.
Intermediate Capital Group (LSE:ICP) has climbed 5.97% following its figures.
But not so lucky is United Utilities Group PLC (LSE:UU.), down 6.43% after a drop in profits.
Peer Severn Trent PLC (LSE:SVT) was off 3.06%.
Power company SSE PLC (LSE:SSE) fell 4.26% on fears it too could face a windfall tax in due course.
Michael Hewson, chief market analyst at CMC Markets UK, said: "European markets have spent most of the day edging cautiously higher, with the FTSE100 shrugging off the UK government’s decision to impose a 25% windfall tax on the oil and gas sector.
"In yet another government U-turn, chancellor of the exchequer Rishi Sunak announced a £5bn tax raid on the oil and gas sector in the form of an energy profits levy, which is just another name for a windfall tax.
"While it’s not good news for shareholders it’s still removed the uncertainty around whether one would be imposed, with BP, Shell, and Harbour Energy (LSE:HBR) shrugging it off. It’s not such good news for the likes of SSE and Centrica with the chancellor saying that he would be looking to claw back some of their profits, later in the year when more measures could well be needed..
"Also getting a boost from the chancellor's fiscal package UK retail stocks are higher, on the basis that with consumers getting help with their energy costs, they’ll have great disposable income as a result, and more capacity to spend."
Elsewhere, among companies seeing their shares go ex-dividend, Imperial Brands PLC (LSE:IMB) is down 2.99%, DCC PLC (LSE:DCC) has dropped 2.35% and Intertek Group Plc (LSE:ITRK) is 2.33% lower.
BT Group PLC (LSE:BT.A) has fallen 2.61% after the government said it would look at the acquisition of an 18% stake by France's Altice under the National Security and Investment Act 2021.
The telecoms giant also faces the prospect of its first national strike in 35 years over pay.
The Communication Workers Union will be serving an industrial action notice to BT on Wednesday June 8th.
Ballot papers will then be sent to CWU members on Wednesday June 15th, and it is expected that a result will be announced before the month’s end.
2.56pm: US markets cautious on economic worries
US stocks have opened mixed as investors proceded with caution amid ongoing concerns about slowing growth and likely interest rate hikes over the coming months.
Shortly after the open, the Dow had gained 222 points at 32,343 points and the S&P 500 was up 13 points at 3,992 points.
The Nasdaq, however, had shed 28 points at 11,406 points.
Just after the open, Twitter Inc (NYSE:TWTR) was up about 4% after jumping in pre-market trading following the news thatTesla Inc (NASDAQ:TSLA) chief executive Elon Musk had revised the financing plans for his $44bn purchase of the social media platform.
In a new regulatory filing, Musk said he would seek $13bn in loans for the purchase instead of using twice as much debt as previously indicated.
On the fall in weekly jobless claims to 210,000, Edward Moya at Oanda said: "The latest round of US data delivered a sigh of relief for the labor market as initial jobless claims declined, putting a temporary end to the upward trend. The hot labor market appears to be remaining in place and that is good news for the economy."
2.37pm: Shop shares revived by consumer spending hopes
With more money seemingly going into people's pockets under the chancellor's support plan, retail shares are ringing up the gains.
Ocado Group PLC (LSE:OCDO) has added 9.15%, B&M European Value Retail SA (LSE:BME) is 5.9% better, Next PLC (LSE:NXT) has climbed 5.78% and Primark owner Associated British Foods PLC (LSE:ABF) is up 3.6%.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "Putting hundreds of pounds back in the purses of hard pressed consumers has also helped lift shares in retailers, which have been sliding over the feared repercussions of the cost-of-living crisis.
"Ocado, Next and B&M European Value Retail and Primark owner Associated British Foods climbed sharply amid hopes that shoppers will keep spending briskly, now that household incomes won’t take such a battering."
That has helped lift the FTSE 100 which is now close to its high for the day, up 25.16 or 0.33% at 7547.91.
But the prospect of SSE PLC (LSE:SSE) being hit with a similar windfall tax at some point has seen its shares decline further, down 3.91%.
1.40pm: US GDP falls further, jobless claims improve
Over in the US, and the economy slowed more than expected in the first quarter but weekly jobless claims were better than forecast.
The latest GDP figures show an annualised fall of 1.5%, a rise from the initial 1.4% drop and confounding expectations of an improvement to -1.3%.
US GDP Annualised (Q/Q) Q1 S: -1.5% (est -1.3%; prev -1.4%)
- US Core PCE (Q/Q) Q1 S: 5.1% (est 5.2%; prev 5.2%)
- US Personal Consumption Q1 S: 3.1% (est 2.8%; prev 2.7%)
- US GDP Price Index Q1 S: 8.1% (est 8.0%; prev 8.0%)
— LiveSquawk (@LiveSquawk) May 26, 2022
But the number of Americans seeking unemployment benefit for the first time was 210,000 last week, down 8,000 on the previous week and better than the anticipated fall to 215,000.
1.14pm: Shell and BP rise despite "levy"
The market is fairly unmoved by the chancellor's help for the cost of living crisis.
The FTSE 100 remains marginally higher, up 7.45 points or 0.09% at 7530.2.
The windfall tax (sorry, levy) is on oil and gas companies.
They too seem to be shrugging it off, with Shell PLC (LSE:SHEL, NYSE:SHEL) up 0.9% and BP PLC (LSE:BP.) 0.83% better.
Rishi Sunak also said he was "urgently evaluating" the scale of the extraordinary profits made by electricity generators and the appropriate steps to take.
SSE PLC (LSE:SSE) has slipped a little lower and is now down 2.46% but Drax Group (LSE:DRX) is up 0.21%.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: ‘’As Chancellor Rishi Sunak perfected his U-turn on a windfall tax, the share prices of BP and Shell also looped lower, before climbing back up, as investors shrugged off its impact given that it is expected to be a short lived hit.
"It may mean dividends are pushed lower temporarily, but given that tax will reduce if companies invest more, it’s likely to mean an acceleration of investment by BP and Shell, a strategy which will be welcomed by many investors who see environmental progress and not just shareholder pay-outs as crucial for their long term growth prospects.
"A chunk of profit may still be scooped from the oil and gas majors but the levy will still represent just the cream on the top of fat volumes of cash being generated by energy giants due to the higher price of oil. A barrel of Brent crude, the international benchmark, has edged higher to just shy of $115 dollars. It is up by around 50% since the start of the year pushed higher by the outbreak of war in Ukraine."
1.04pm: Early thoughts on chancellor's statement
Some reaction to the chancellor's cost of living package.
Portfolio manager Rupert Harrison at BlackRock:
Today's package from @RishiSunak strikes about the right balance - significant support targeted mainly on the most vulnerable.
About 1.5% of GDP total fiscal support. Any more and you'd start to risk making the inflation problem worse https://t.co/dWzwMtBcLm
— Rupert Harrison (@rbrharrison) May 26, 2022
Torsten Bell, chief executive of the Resolution Foundation:
Summary: Chancellor almost doubles the level of energy support to over £30bn (£15bn extra today), and fills the huge gap in previous announcements with large targeted support for those hardest hit. Things to quibble with, but this is big and very welcome indeed
— Torsten Bell (@TorstenBell) May 26, 2022
But:
So, average household is better off the tune of £550 from Chancellor's package of measures. Yet average energy bills, by October, are set to have risen by more than £1,500 in the space of a year. Big gap. Extra help for low income households and pensioners.
— Graham Hiscott (@Grahamhiscott) May 26, 2022
The Chancellor just claimed the reason for today’s new measures is that since the Spring Statement “the outlook for energy prices has changed”.
This is plain wrong.
Look: @OBR_UK itself pointed out we were heading for a £2,800 price cap IN THE SPRING STATEMENT! pic.twitter.com/FyTqtR2o2L
— Ed Conway (@EdConwaySky) May 26, 2022
12.40pm: Sunak's £15bn support package
And how will this not-a-windfall-tax be used to help ease the cost of living crisis?
Sunak says eight million of the lowest income households will get £650, at a cost of £5bn.
We will send a one-off £650 cost of living payment directly to around eight million of the lowest income households.
Worth over £5 billion, there will be no need for people to fill out forms – we will send the payment straight into bank accounts. pic.twitter.com/LwgcVwXoLn
— Rishi Sunak (@RishiSunak) May 26, 2022
On top of that eight million pensioners who get the winter fuel payment will receive payments of £300, while people who get disability benefits will get £150.
Meanwhile the £200 announced in February to help with energy bills will rise to £400.
And it will no longer be a loan paid back later through bills.
The total support package is worth £15bn, he says, with £9bn of it targeted at the poorest households.
Alongside the action we’ve already taken this year today's measures will ensure:
The vast majority of households receive £550.
Pensioners receive £850.
And almost all of the eight million most vulnerable households will receive support of at least £1,200.
Watch ???? pic.twitter.com/fmUVtPswpV
— Rishi Sunak (@RishiSunak) May 26, 2022
12.35pm: Here comes the "temporary targeted energy profits levy”
The UK chancellor has confirmed a windfall tax on energy companies.
He doesn't call it that of course - since it is an opposltion suggestion the government was opposed to for a long time.
It will be a "temporary targeted energy profits levy” which is fooling no one.
He said the oil and gas sector was making extraordinary profits, not because of extra risk taking or efficiency, but because of surging energy prices. So he was sympathatetic to taxing those profits fairly.
But he is sweetening the pill with an incentive for firms to invest.
Alongside this, we’re nearly doubling the overall investment relief for these firms through a new allowance - meaning they will receive tax relief of more than 91p for every £1 they invest.
This will incentivise investment in an important UK industry. (2/2) pic.twitter.com/MYsHJsEwl0
— HM Treasury (@hmtreasury) May 26, 2022
11.52am: Wall Street set for mixed start
US markets are expected to open mixed on Thursday as investors proceed cautiously after the rally yesterday.
While there is lingering positivity from Wednesday’s news that US rate-setters had not considered a 75-basis-point rate increase at their recent meeting, wider concerns over the prospect of slowing growth amid a higher interest rate environment continue to simmer away in the background, keeping market direction uncertain.
Futures for the Dow Jones Industrial Average rose 0.3% in Thursday pre-market trading, while those for the broader S&P 500 index gained 0.2% but the Nasdaq shed 0.04%.
The twin concerns that inflation is still too high and that the US Federal Open Market Committee’s aggressive path for interest rates will take a toll on the economy, and in turn, corporate bottom lines, remain a mainstay.
On the economic data front, US Pending Home Sales will be closely watched given the weakness in recent existing and new home sales data.
“That will overshadow second estimate of Q1 GDP and Initial jobless Claims. Another ugly number will put the recession word back on Wall Streets' lips and we could see another rush for the exit. Soft results from Gap and Dollar tree could reinforce that sentiment,” said Jeffrey Halley, senior market analyst at OANDA.
The initial estimate for US first-quarter GDP was a 1.4% contraction. If the headline figure is adjusted to show a wider contraction, equity markets could be in for a rough ride.
“Overall, though, it looks as if today will be a day of consolidation for financial markets as they await fresh inputs, and ahead of personal income and expenditure data out of the US tomorrow evening,” he added.
Elsewhere, earnings from Chinese tech giants Alibaba and Baidu, due today, will be closely watched.
In the energy markets, the WTI crude oil futures rose 0.96% to $111.39 a barrel and the Brent crude futures added 0.72% to $114.85.
11.35am: Serco and FirstGroup (LSE:FGP) help support mid-cap index
As we wait for news of chancellor Rishi Sunak's cost of living package, here's a look at the current state of the markets.
The FTSE 100 is up 0.13% at 7532.71, but the mid-cap FTSE 250 index is outperforming, 0.6% better at 20,053.5.
It has been helped by an unexpected but positive update from outsourcer Serco Group (LSE:SRP), up 9.36%.
Transport firm FirstGroup (LSE:FGP) has accelerated 7.79% to 128.7p after it received an unsolicited takeover approach.
Analysts at Berenberg began coverage with a buy recommendation and 150p price target.
10.30am: Car production goes into reverse
UK car production fell in April, hit by the continuing global shortage of semiconductors and the impact of the war on Ukraine on supply chains.
The number of cars produced last month fell by 11.3% to 60,554 compared to a year ago.
Output for overseas markets dropped by 20.8%, driven by a 68% decline in shipments to the US.
Global pressures hold back April car productionhttps://t.co/A2Q0Gde1Di pic.twitter.com/waTHQyVLWJ
— SMMT (@SMMT) May 25, 2022
But UK car makers continue to shift focus towards the latest battery electric, plug-in hybrid and hybrid vehicles, with more than one-in-four (26.4%) cars made in April being electrified. This is equivalent to 16,010 units, up 2.1% on the same month a year ago, boosted by battery electric vehicle output up 38.2% (to 9.9% share).
Mike Hawes, SMMT chief executive, said: "The UK car industry is exposed to a host of issues that are undermining output and competitiveness. Global chip shortages and supply chain disruption are exacerbated by spiralling energy costs, additional trading costs and slowing global markets. The foundations of the sector are strong and the transition to zero and ultra-low emission vehicles continues apace but we need more policies and measures that support manufacturing and encourage investment into the UK at this most challenging of times."
9.15am: Mixed reaction to the day's big results
A couple of well received updates have helped lift the leading index out of the red.
The FTSE 100 is now up 9.75 points at 7532.5, helped by a positive reaction to results from Intermediate Capital Group (LSE:ICP), up 5.45%, and Auto Trader Group PLC (LSE:AUTO), which has added 2.44%.
Heading the other way is United Utilities Group PLC (LSE:UU.), down 5.39% after underlying pretax profits fell by £158mln to £301.9mln after a jump in finance expenses.
A number of companies are lower after their shares went ex-dividend, including DCC PLC (LSE:DCC), down 2.42%, Intertek Group Plc (LSE:ITRK), off 1.6% and The Sage Group PLC (LSE:SGE), which slipped 1.2%.
9.04am: China downbeat about economy
Market sentiment has not been helped by a downbeat assessment of China's economy by the country's premier.
According to the official Xinhua news agency, premier Li Keqiang told a State Council meeting on Wednesday that in some ways the challenges now were "greater than when the pandemic hit hard in 2020."
The agency quoted him as saying: "We are currently at a critical juncture in determining the economic trend of the whole year. We must seize the time window and strive to bring the economy back onto a normal track."
The country has seen recent lockdowns to try and cope with the continuing spread of COVID-19.
8.20am: Footsie dips into the red at the open
Leading shares have made an uncertain start ahead of an expected announcement from the UK government on a cost of living package to help ease soaring energy prices.
The FTSE 100 is hovering between positive and negative in early dealings, and has currently dipped 2.2 points to 7520.55.
Chancellor Rishi Sunak's emergency measures to help the most vulnerable households are expected sometime between 11am and 11.30am.
Michael Hewson, chief market analyst at CMC Markets UK, said: "The package, which it is said is expected to be in the region of £10bn, is also likely to be a welcome distraction for the government in the wake of the furore over the Sue Gray report over gatherings and parties at Number 10 and the Cabinet Office.
"The big question is how it will be paid for, with speculation that we could see the announcement of a windfall tax of some description, in a move that while politically popular, could have wider unexpected and negative consequences further down the line, when it comes to encouraging business to invest in the UK.
"It would also be seen as a political win for the opposition parties who have been campaigning for such a move for weeks now."
Shares in power group SSE PLC (LSE:SSE), which could be hit by any windfall tax, are down 1.69%.
Elsewhere BT Group PLC (LSE:BT.A) has fallen 4.9% after the government said it was reviewing the increase by France's Altice of its stake in the UK business from 12.1% to 18% under the National Security and Investment Act 2021. BT said it would fully cooperate with this review.
After a 6% drop yesterday after JD Sports Fashion PLC (LSE:JD.) announced the surprise departure of chairman and chief executive Peter Cowgill shortly before the market closed, shares in the retailer are off 1.47%.
Analyst Nick Bubb said: "It was obviously known that the company had decided to separate the roles of chairman and chief executive, but it is not clear why Peter felt unable to step back into one of those two roles or why an internal candidate could not come forward as chief executive
"It is hard to avoid the view, however, that the controlling shareholder Pentland put its foot down on the need for a shake-up of corporate governance."
Meanwhile in the mid-cap index, Serco Group (LSE:SRP) has soared 8.25%.
In an unscheduled statement the company said trading in the first four months of the year had been stronger than expected.
It now expects underlying trading profit for the year to be around £215mln, an increase of some £20mln on previous guidance. Favourable currency movements should add another £10mln, making a total profit of £225mln which is near the 2021 level.
6.50am: Markets cautious ahead of cost of living package
FTSE 100 was set to open lower on a day likely to be dominated by politics and the cost of living.
Financial spreadbetters were pencilling in a drop of at least 20 points for Footsie when trading gets underway, even though US markets closed higher after the minutes from the latest meeting of the Fed.
In the UK, the BBC was reporting that the Chancellor will unveil a £10bn package to help those struggling with soaring energy bills.
Rishi Sunak is set to scrap his previous energy loans scheme and give people a one-off grant of up to £400 instead, with the more vulnerable also receiving a VAT cut and additional help.
It will be paid for by a windfall tax on oil, gas and power firms to raise £7bn.
This package comes just hours after the publishing of the Sue Gray report into the 'partygate' scandal.
PM Boris Johnson again seems to have survived with yet another warning as most Tory MPS seemingly have no stomach for a leadership change given everything else that is going on at present.
Markets so far have been largely ambivalent to whether the PM stays or goes and focused on bigger issues such as the Ukraine war, global inflation and recession.
On that theme, the US Fed minutes overnight confirmed a unanimous decision for May’s 50 basis point ( 0.5%) interest rate hike.
Another couple of 50bps rate hikes in June and July before a pause in September were also signalled, said Jeffrey Halley, senior market analyst, Asia Pacific, at OANDA
“The dreaded 75bps hike threat was off the agenda and with some slowdowns in recent US data, notably in the housing market, it was enough to spur a relief rally of sorts in US equities and the US Dollar,” he added.
Back in the UK, scheduled company news is thin (read more) though if the windfall tax is confirmed it will affect the oil and gas sector.
Expect also some more movement in JD Sports, which announced yesterday that Peter Cowgill, the group’s executive chairman and driving force for the past twenty years was stepping down immediately.
That announcement came just minutes before the close on Wednesday with reports later suggesting shareholders were concerned Cowgill had too much control over the trainers and leisurewear retailer.
6.50am: Early Markets - Asia / Australia
Asian shares were mostly lower on Thursday after the Bank of Korea announced a 25 basis points hike in its base rate to 1.75%, the central bank’s second straight rate increase.
Japan's Nikkei 225 slipped 0.17% and South Korea’s Kospi dipped 0.27%.
The Shanghai Composite in China traded 0.72% higher while Hong Kong’s Hang Seng index fell 0.62%.
Australia’s S&P/ASX200 dropped 0.45% as private sector capital expenditure contracted 0.3% in the March quarter, well shy of the 1.5% growth consensus estimate.