- FTSE 100 closes up
- Oil majors lower as oil price slides
- Life insurers up on Solvency II reform
4.43pm: FTSE closes higher
FTSE 100 closed higher Friday as traders seem determined to send equities higher towards the end of the year, despite headwinds.
The UK's top share index closed up almost 40 points, or 0.53%, at 7,385.
"Stocks have continued to make headway this afternoon, oblivious of the recession fears dogging oil, which is down sharply again today, noted Chris Beauchamp, the chief market analyst at trading firm IG in a note to clients.
"Stocks are once again shrugging off warnings about high interest rates in the US, and it appears the normal seasonal tendency of equities to rally in Q4 has asserted itself once again.
"Indeed, the fact that Fed speakers continue to bang the hawkish drum, but to little apparent effect, might suggest that traders still have their hearts set on a risk-rally into the end of the year, even if that sets everyone up for a fall in January."
3.45pm: Oil majors limit FTSE gains
Heading to the close and London’s blue-chip index is still in positive territory but off earlier highs with gains limited by falls in oil majors, BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL), following a sharp fall in the oil price.
Concerns about weakening demand in China following a spike in Covid-19 cases and expectations of further increases to US interest rates pushed Brent crude down 3.57%, to $86.05 a barrel while US West Texas Intermediate (WTI) crude fell 3.6%, at $78.48.
Life insurers were higher as the market gave the thumbs up Solvency II rules with Legal & General PLC, Aviva PLC (LSE:AV.) and Phoenix all higher.
Retailers took heart from better than expected retail sales and a survey showing consumer confidence improved in November – Frasers Group PLC (LSE:FRAS), JD Sports Fashion PLC (LSE:JD.), Next plc and
Burberry Group PLC (LSE:BRBY) all higher.
FTSE 100 now up 27 points at 7,374 and the FTSE 250 is 165 points to the good at 19,287
2.50pm: US markets open higher
Just after the opening bell, the Dow was up 164 points, 0.5%, to 33,711, the Nasdaq Composite added 71 points, 0.6%, to 11,216 and the S&P 500 improved 23 points, 0.6%, to 3,970.
Despite the gains, the three major indexes are each on pace for losing weeks.
Investors have seemed to weather news that the Federal Reserve is likely to continue with its pattern of interest rate hikes. Boston Fed President Susan Collins echoed the sentiments of her other regional counterparts in a speech this morning.
“Restoring price stability remains the current imperative and it is clear that there is more work to do,” Collins said “I expect this will require additional increases in the federal funds rate, followed by a period of holding rates at a sufficiently restrictive level for some time."
For the moment, though, that hasn't dampened the markets any further.
2.15pm: Jaguar Land Rover offers a home for laid off tech workers
Jaguar Land Rover is eyeing employees laid off by the tech giants, Twitter and Amazon amongst others, as it seeks to fill 800 roles spanning self-driving, electrification, machine learning and data science.
The car maker has launched a jobs portal for displaced tech workers as it seeks to hire hundreds of engineers to help develop electric car technology.
It comes after Elon Musk laid off half of Twitter's workforce after taking over the social network three weeks ago, with hundreds more expected to quit after he issued an ultimatum on Wednesday for staff to decide within a day if they wanted to leave.
On Monday it was claimed Amazon is preparing to lay off some 10,000 staff, while Facebook owner Meta has also announced it is cutting 11,000 jobs.
Jaguar Land Rover said it believed workers leaving big tech groups were most likely to have the required skills to fill new roles in Britain, Ireland, the United States, India, China and Hungary.
"Our digital transformation journey is well underway but being able to recruit highly skilled digital workers is an important next step," said chief information officer Anthony Battle.
1.00pm: Every little helps
Tesco PLC (LSE:TSCO) is offering its staff advances on their pay to helpd deal with the cost of living crisis.
Britain's largest supermarket will offer 280,000 of its workers up to 25% of their contractual pay early if they pay a small fee.
Tesco said that would help staff avoid taking on expensive debt with high interest payments, such as pay day loans.
Tesco, which has hiked hourly pay by nearly 8% this year, said employees would have to pay a £1.49 fee per advance to use its scheme.
"We hope this helps to support colleagues, particularly in the run up to Christmas," Tesco's UK people director James Goodman said.
12.30pm: Early gains expected in the US
US stocks are expected to open higher on Friday as investors take in stride the prospect of more interest rate rises in the world's biggest economy.
Futures for the Dow Jones Industrial Average were up 0.4% in pre-market trading, while those for the S&P 500 were 0.6% higher, and contracts for the Nasdaq-100 rose 0.7%.
“The latest man to kill the market joy was St Louis Fed President, Mr. Bullard, who said that the rates should raise at least until the 5-5.25% range, while showing a chart that plotted rates between 5-7%,” noted Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“Maybe that was a mistake, maybe not! Other than him, Neel Kashkari also said that he wants to see inflation stop climbing and that we are not there yet,” she added.
Later today, Boston Fed President Susan Collins has a speaking engagement and her words will be in focus.
Through last week and into the past few days, investors had been hoping that data showing that slowing inflationary pressures would eventually force the US Federal Reserve to scale back on rate hikes. So far this year, the Federal Reserve has delivered four consecutive 75 basis point interest rate hikes as it attempts to cool inflation.
“So, the ambiance in the stock markets is not as cheery as it was at the end of last week. The S&P500 started the day (yesterday) in a bad mood but recovered relatively well to close the session only 0.30% lower. A couple of encouraging earnings from retailers may have helped lift sentiment,” said Ozkardeskaya.
Investors also remain wary about predictions that the world’s biggest economy is heading for a recession. JP Morgan economists have said they expect the US to enter a mild recession next year because of rising interest rates and the tightening monetary conditions.
No surprise then that Ozkardeskaya predicts share price falls ahead.
“Moving forward, we could expect the downside correction at index level to deepen. The first bearish target for the S&P500 stands at the 3,855 level, which is the major 38.2% retracement on the latest rebound,” she said.
12.00pm: Life insurers rise as Solvency II reforms get the thumbs up
Life insurance companies rose today as the market took a positive view on Solvency II reforms proposed in the autumn statement.
Industry body, the ABI, highlighted in particular the proposed reduction to the risk margin by 65% for life insurers and 30% for non-life insurers.
“We agreed with the Prudential Regulation Authority’s view that the risk margin was too large and sensitive to interest rates and consider that the changes proposed address both these issues” it said.
Hannah Gurga, ABI director general, said: “We strongly welcome these changes to the Solvency II regime which will allow the UK insurance and long-term savings sector to play an even greater role in supporting the levelling up agenda and the transition to Net Zero.”
“Meaningful reform of the rules creates the potential for the industry to invest over £100bn in the next ten years in productive finance, such as UK social infrastructure and green energy supply, whilst ensuring very high levels of protection for policyholders remain in place.”
Broker Barclays said most changes to Solvency II were as suggested in the consultation process.
But it viewed the outcome as positive for the UK life insurers for expanding illiquid portfolios although it is unlikely to impact bond investment strategies or dividends.
The broker saw a minimal impact on non-life insurers, but the changes may support dividends in this case.
Legal & General said it was a positive step forward adding the proposals “will allow us greater flexibility to make appropriate investments.
It estimated "the reform to the risk margin would increase the group's solvency ratio by 3-4 percentage points."
Legal & General Group PLC (LSE:LGEN) jumped 4.2% and Phoenix Group Holdings Plc rose 3.2%.
11.20am: "We are in for a long, hard, unpleasant journey" - IFS responds to the Autumn Statement
The Institute for Fiscal Studies has had its say on the autumn statement.
IFS director Paul Johnson said Jeremy Hunt appears to have delayed the “properly tough” decisions needed to balance the public finances.
“Hemmed in by rising interest payments and poor growth prospects, the chancellor decided to allow borrowing to rise, and to put off properly tough decisions for another couple of years”
“He may hope that things will look better by then, or perhaps that it will be somebody else’s problem” Johnson commented.
Johnson suggested that Hunt would be relieved to be working to the OBR’s economic forecasts rather than the much gloomier predictions by the Bank of England
Jeremy Hunt must be mightily relieved that he is working with the OBR's forecasts and not the Bank's.
It is odd that monetary and fiscal policy are being made on the basis of completely different sets of economic forecasts from different official bodies. https://t.co/LNNsRevhBW
— Paul Johnson (@PJTheEconomist) November 18, 2022
Underlying debt is forecast to fall as a share of GDP in five years' time - but barely so, while higher interest rates will push up debt interest to a much higher level than we've enjoyed in recent years..
Debt barely falling in five years time even on assumption of barely credible spending plans for after the next election. Good chance debt is in fact set on a rising path. https://t.co/QkVeIbQgmK
— Paul Johnson (@PJTheEconomist) November 18, 2022
Johnson pointed out that other than a short period in 1980s we'll be spending more of our national income on debt interest than at any time since the 1950s.
The cost of all that borrowing is coming home to roost with a vengeance, he said.
“We'll be spending more on debt interest than on any public service bar the NHS.”
The tax burden as a share of GDP is now forecast to increase above 37% – the highest level since the late 1940s.
Tax as a share of GDP is now forecast to increase above 37% – the highest level since the late 1940s. pic.twitter.com/pgekju6qRc
— Institute for Fiscal Studies (@TheIFS) November 18, 2022
He continued “After years of stagnation household incomes are set to fall and then recover only gradually, while taxes rise and public services continue to struggle.”
“The truth is we just got a lot poorer. We are in for a long, hard, unpleasant journey; a journey that has been made more arduous that it might have been by a series of economic own goals. Mr Hunt appears to have recognised this.”
10.45am: Hunt says no decision made on fuel duty
Jeremy Hunt has insisted that he hasn’t decided to raise fuel duty by 12p per litre next year.
Yesterday’s report from the Office for Budget Responsiblity anticipated that Hunt would raise the tax on petrol and diesel by 23% in March.
That would more than reverse the 5p/litre temporary cut made by Rishi Sunak earlier this year, and bring in £5.7bn in extra tax receipts next year,
But Hunt told broadcasters this morning that a decision hasn’t been made, saying:
"Let me clear that up, that is not government policy."
"We will make a decision on that at the next budget in the Spring."
"That was just an assumption that the OBR made – they’re an independent organisation, they make assumptions."
"We have made no decision on that at all."
10.10am: Pound rises back above $1.19
The pound has enjoyed a good start to the day recovering some of the small losses of yesterday despite the gloomy economic forecasts.
The pound has risen 0.5% against the US dollar to $1.192 and is also up against the euro to €1.15.
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Bu Ipek Ozkardeskaya, senior analyst at Swissquote Bank, warns that the outlook for the pound remains bearish: “From the economic lenses, both the U-turn on spending cuts, and higher energy bills will boost inflation, and that could be negative for the pound, if the Bank of England doesn’t compensate with higher interest rate hikes.”
9.20am: Consumer confidence improves in November - GfK
GfK’s long-running consumer confidence Index increased three points to stand at -14 in November with a seven point jump in the major purchase index potentially good news for retailers in the run-up to Black Friday and Christmas.
Four measures were up, and one was down in comparison to October, GfK said.
Joe Staton, client strategy director at GfK, said: “Headline consumer sentiment has ticked upwards this month despite decade-high inflation, fears of higher prices and worries over rising interest rates, and as the deepening cost-of-living squeeze leaves UK household finances worse off this winter.”
"The view on the general economic situation over the past year and year to come is better this month (up six points and three points respectively) but consumers are slightly less buoyant on their personal finances.”
"However, one highlight for both physical and virtual retail is the seven-point jump in major purchase intentions in the run-up to Black Friday and Christmas.”
“Is this a sign that shoppers are ready to bounce back, after last year’s cancelled family gatherings, with a Christmas splurge in coming weeks? That’s how it looks - but consumers also know that when the festivities are over it’s going to be a tough year in 2022.”
9.00am: JP Morgan positive on Centrica, SSE and Drax, Citi ups Centrica price target
FTSE 100 has pushed higher now, up 36 points, led by rises in Centrica PLC (LSE:CNA), SSE PLC (LSE:SSE) and Drax Group (LSE:DRX) PLC despite the rise in the tax on energy profits unveiled in yesterday’s autumn statement..
Centrica was top of the FSE 100 risers, up 3%, while SSE rose 1.8% and Drax 1%.
JP Morgan said it believes the news materially “derisked the outlook for UK Power Generation.”
While accepting there remain some questions to be answered, JPM reiterated its positive view on the three companies as it believes investors have enough visibility on earnings to turn more positive.
“We appreciate that some were hoping for a better outcome, whether via generous investment allowances or a higher threshold for excess profits.”
But the broker said the market should not forget that these companies still have significant leverage to higher power prices, and “we anticipate earnings upgrades to come.”
“We remain positive on SSE, Centrica, and Drax - we think these companies offer positive earnings momentum at attractive valuations, with opportunities for value creation in a volatile energy environment (gas storage, flexible generation, trading).”
Centrica received a further boost from Citi which raised its price target to 110p aand lifted EPS forecasts by between 25% to £0% for 2022 to 2024.
"With increased clarity following UK Government budget and its intentions around windfall taxes, we reiterate our Buy on Centrica and continue to flag the shares as our preferred UK utility" it said.
" A combination of strong profits and cash generation in the near term from commodity exposed businesses, EM&T teach-in potentially providing further visibility that demonstrate the sustainability of profits and the ongoing share buyback, should all help to re-rate the Centrica shares, in our view" analysts wrote.
8.12am: FTSE 100 opens slightly higher
FTSE 100 opened higher on Friday helped by a rebound in retail sales figures in October which followed a fall in September, which was distorted by the state funeral.
At 8.15am the FTSE 100 was up 12 points at 7,359 while the FTSE 250 rose 24 points to 19,146.
Retail sales rose 0.6% in October, above expectations, but Martin Beck, chief economic advisor to the EY ITEM Club, said: “October's rebound seemed to be entirely due to September's outturn being decreased by the extra bank holiday.”
“Many retailers – including large supermarkets – closed for the day of the Queen’s funeral, creating a favourable base effect for October.”
“This pattern is likely to have been replicated across the services sector, so the EY ITEM Club expects there was a decent month-on-month rebound in GDP in October too.”
Legal & General Group PLC (LSE:LGEN) rose despite taking a £10mln charge from chaos in the pensions market in September.
It maintained guidance for the year as a whole and gave the thumbs up to the chancellor’s references yesterday to solvency II reform, which it believes represents a positive step forward.
The proposals “will allow us greater flexibility to make appropriate investments", it said, and estimated "the reform to the risk margin would increase the group's solvency ratio by 3-4 percentage points" the company said.
Bodycote PLC was also marked slightly higher after holding full-year guidance.
It said revenues in the four months to October 30 rose by a third due to price increases and energy cost surcharges.
7.50am: L&G takes £10mln from pensions market chaos
Legal & General Group PLC (LSE:LGEN) forecast a £10mln hit to full-year revenues and profits as a result of the chaos in the pension market in September but maintained operating profit guidance overall.
The FTSE 100 listed insurer said it expected resilient full year 2022 operating profit growth in line with the 8% delivered in the first half £1.16bn vs £1.08bn) and full year 2022 capital generation of £1.8bn in line with the guidance given at the half-year stage.
But in a trading update L&G said the turmoil in liability-driven investment (LDI) strategies after the infamous mini-budget led to clients selling higher fee products to meet collateral requests.
The insurer said that as a result it expected annual revenue and profits in its direct benefit pension scheme business to reduce by about £10mln in 2022.
7.15am: Retail sales rise 0.6% in October, above expectations
Retail sales volumes rose 0.6% in October, above expectations for an increase of 0.3%, following a fall of 1.5% in September (revised from a fall of 1.4%) which was affected by the additional bank holiday for the State Funeral, according to the Office for National Statistics (ONS).
Retail sales values, unadjusted for price changes, rose by 1.8% in October, following a fall of 1.4% in September. When compared with the pre-coronavirus (COVID-19) level in February 2020, total retail sales were 14.2% higher in value terms, but volumes were 0.6% lower.
Sales volumes fell by 2.4% in the three months to October 2022 when compared with the previous three months; this continues the downward trend seen since summer 2021, the ONS said.
Retail sales volumes rose by 0.6% in October 2022 following a fall of 1.5% in September.
Retail remains 0.6% below its pre #COVID19 level.
— Office for National Statistics (ONS) (@ONS) November 18, 2022
Increases over the month were seen in all of the main sectors apart from food stores, where sales volumes fell by 1.0% in October, 4.1% below their pre-coronavirus (COVID-19) levels in February 2020.
Non-food stores sales volumes rose by 1.1% in October and were 1.7% below February 2020 levels.
Automotive fuel sales volumes rose by 3.3% in October, following a fall of 1.2% in September; these were 6.9% below their February 2020 levels.
Non-store retailing (predominantly online retailers) sales volumes rose by 1.8% in October following a fall of 2.5% in September; sales volumes were 21.2% above their February 2020 levels.
The proportion of retail sales taking place online was 26.1% in October; this has remained at a broadly consistent level since May 2022.
7.00am: FTSE 100 expected to open slightly higher
FTSE 100 expected to open slightly as investors digest yesterday’s autumn statement and ahead of retail sales numbers which will give another indication as to fortunes on the UK’s high streets.
Spread betting companies are calling the lead index are calling the lead index up by around 11 points.
"The recovery off the lows of the day in the US looks set to see markets here in Europe open modestly higher with the focus today remaining on the UK economy, with the latest October retail sales numbers," said CMC Market's Michael Hewson.
In the US the Dow, S&P and Nasdaq all ended slightly lower in a subdued session as hawkish comments from a US Federal Reserve official and conflicting data as to the strength of the US economy saw investors pause for breath.
At the close the DJIA was down 6 points, to 33,547, the S&P 500 fell 12 points, or 0.3%, to 3,947 and the Nasdaq Composite dipped 39 points, or 0.35%, to 11,145.
Retail sales figures are due today in the UK.