FTSE live Thursday
Bank of England holds rates at 0.1%
Keeps QE at £895billion
BA scraps Gatwick budget flights plan
French Connection in takeover talks
Nationwide loses chair and CEO
How Covid saved Royal Mail
FTSE flounders on rates rise signal
17:48 , Simon Freeman
Bank of England’s latest interest rate decision failed to excite investors, with the leading index closing the day with little to shout about.
Its decision to hold rates was expected but the suggestion from its Monetary Policy Committee that tightening could happen next year bolstered the pound and restrained London markets.
The FTSE 100 closed 5.02p, or 0.07%, lower at 7,078.35p at the end of trading on Thursday.
Craig Erlam, Oanda’s senior market analyst for UK and Europe, said: “The Bank of England is clearly of a similar mindset to its counterpart across the pond, with the central bank today appearing to give the impression that the first hike next year may come sooner than expected.
“The pound is rallying strongly on the back of the announcement, which is weighing on the FTSE, the only major European index in the red.”
A pound was worth 1.374 against the dollar and 1.170 against the euro.
Meanwhile, in Europe the German Dax rose by 0.88% and French Cac closed 0.98% higher as they continued recent rebounds.
In company news, it was a big day for pubs groups, with Fuller’s, City Pub Group and Mitchells & Butlers all reporting results to the stock market.
All three said they are seeing signs of recovery, particularly as workers return to offices, but caution remains over job vacancies.
Shares at Fullers fell by 14p to 716p and City Pub Group dropped by 4p to 116p. Meanwhile, Mitchells & Butlers increased by 5p to 267.8p.
Royal Mail said it expects a strong jump in first-half profits but cautioned over labour shortages and rising costs ahead of the peak festive season.
The company said interim group underlying earnings are set to jump to between £395 million and £400 million – up from £37 million a year ago.
Shares in French Connection surged 3.7p to 26.8p as the struggling retailer revealed it is in takeover talks after receiving an approach worth £29 million from a consortium including its second largest shareholder, Apinder Singh Ghura, as well as Amarjit Singh Grewal and KJR Brothers.
Cinema chain Everyman said it hoped the new James Bond movie would help boost revenues, with admissions at 80% of pre-Covid levels since full reopening of its screens on July 21.
The company remained deep in the red with pre-tax losses of £9.2 million for the six months to July 1, with venues closed for 20 weeks of the half-year. Shares closed 6p higher at 125p.
And sofa business DFS said it could have grown revenue even more than the 47% it reported for the 12 months to the end of June if it were not for the ship that blocked the Suez Canal and shortages of raw materials.
The furniture giant’s shares fell by 6.5p to 261p.
The price of oil continued to climb as the oil majors dropped, amid concerns that continued high demand could pose a problem if production cannot be ramped up.
Brent crude increased by 1.17% to 77.08 dollars per barrel.
The biggest risers on the FTSE 100 were Rolls-Royce, up 4.76p at 126.94p, Lloyds, up 1.08p at 45.06p, Scottish Mortgage Investment Trust, up 25.5p at 1,451p, and Natwest Group, up 3.7p at 217.3p.
The biggest fallers were Entain, down 115p at 2,262p, Polymetal, down 44p at 1,302p, Hargreaves Lansdown, down 35p at 1,404.5p, and Intertek, down 122p at 5,304p.
13:08 , Simon Freeman
Bloomberg has got hold of the letters sent between Andrew Bailey and Rishi Sunak as inflation missed ats 2% target by more than 1 percentage point.
Bailey says in his letter to Sunak that inflation was partly driven by base effects: “Recent consumer price data have measured the change in prices relative to spring and summer 2020, when prices were particularly low, reflecting the impact of Covid.”
Sunak to Bailey: “I agree with your assessment that the recent period of above target inflation is driven partially from base effects, rising commodity prices, global supply bottlenecks and shortages (particularly of semiconductors) and the increase in energy prices.”
A belting exchange.
Interest rates fireworks in November?
13:02 , Simon Freeman
Laith Khalaf, head of investment analysis at AJ Bell, said:
“A record jump in inflation has not stirred policy makers at the Bank of England, who are steadfastly maintaining the mantra that price rises are transitory. That doesn’t mean they will be short-lived however.
“The Bank expects inflation to hit 4% this winter and still to be above 3% this time next year, so consumer pockets and cash savings are still going to take a big hit. The Bank has also conceded that the gas price crunch has elevated inflationary risks heading into 2022.
“While savers will continue to grimace as their cash loses its buying power, the continuation of the low interest rate environment is a blessing for borrowers and a key driver of the boom in UK house prices.
“Markets are now pricing in an interest rate hike in the spring, but even if that transpires, it will still only leave base rate at 0.25%.
“The QE programme will still loom large over proceedings too, as the Bank has said it won’t start reducing the bonds on its balance sheet until base rate reaches at least 0.5%.
“The direction of travel for interest rates is inevitably upwards, but the pace of change will be glacial, unless inflation really takes off and puts central banks under serious pressure.
“Markets generally remain fairly sanguine about the prospect for slowly tightening monetary policy, both here and in the US.
“The ten-year gilt yield currently stands at 0.8% and the ten year US Treasury a little higher at 1.3%.
“Meanwhile equity markets are still buoyant, despite a recent wobble precipitated by the Evergrande crisis. Market participants can be astonishingly short term in their thinking however, and we could still see some shakeout when policy tightening is actually announced.
“The beginning of November now looks like the next tipping point which will cause markets to pause for breath, as both the US Fed and the Bank of England could set out their tightening plans.
“ Fed Chairman Jay Powell has indicated that QE tapering could easily begin at the November meeting, and the Bank of England will finally have employment data to look at that isn’t distorted by the furlough scheme, which is still propping up the jobs of 1.7 million workers.
“Until then, central banks are still playing the same tune, and investors are happy to keep on dancing, with little regard to what happens when the music stops. But if central banks do signal tighter policy at the beginning of November, we can expect some fireworks.”
The art of doing nothing: Central banks sit tight
12:35 , Simon English
Yesterday the European Central Bank sent out a picture of its executive board with president Christine Lagarde front and centre. Behind them were some plants.
A City commentator tweeted: “The plants in the background would make better policy decisions than the people at the front.”
BA’s budget airline plan grounded
12:23 , Simon Freeman
British Airways’ plans to launch a low-cost short-haul subsidiary at Gatwick Airport have been scrapped.
The carrier’s owner IAG cited lack of support from pilots union BALPA.
The company will suspend almost all short-haul operations from Gatwick, bar a few domestic UK flights connecting to long-haul services, at the outset of the pandemic.
Last month it unveiled plans for a new unit for budget short hops if it could obtain union backing: the new unit would offer less expensive contracts than the main IAG division.
It said it would seek alternative uses for Gatwick slots, adding: “After many years of losing money on European flights from the airport, we were clear that coming out of the pandemic, we needed a plan to make Gatwick profitable and competitive.”
IAG is still struggling to recover from the pandemic’s body-blow to international travel: its share price has yo-yoed on reopening rumours.
Today it was up at 174.50p after a week-long rally. That is still less than half the pre-pandemic price.
Bank holds rates at 0.1% as inflation fears grow
12:17 , Simon English
Economists now increasingly expect the Bank to move rates up early next year, sooner than previously thought.
That is far above the Bank’s 2% target rate.
Shares in French Connection leap as takeover talks revealed
12:03 , Joanna Bourke
High street fashion chain French Connection said it has received an approach from a consortium of bidders.
The retailer, which is conducting a formal sales process, as announced in March, said the consortium comprises the firm’s second largest shareholder Apinder Singh Ghura, Amarjit Singh Grewal and KJR Brothers.
The indicated offer price is 30p per share in cash.
French Connection, which is among retailers to have suffered from temporary store closures during lockdowns, said: “Discussions with the consortium remain ongoing.”
It added: “Accordingly, there can be no certainty that an offer will be made, nor as to the terms on which any offer might be made (although any offer is likely to be in cash). Further announcements will be made as appropriate in due course.”
The shares jumped more than 11%, or 2.7p, to 25.8p.
Pet boom in the pandemic lifts sales at CVS Group
11:20 , Joanna Bourke
The AIM-listed firm, which has 506 veterinary practices, said revenue in the year to June climbed 19.2% to £510.1 million, with comparable sales up 17.4%. Pre-tax profit more than trebled to £33.1 million.
Chairman Richard Connell pointed to structural growth in the industry, helped by trends “including the humanisation of pets”, with people willing to spend more on their animals.
Read the full story HERE.
Nationwide boss to quit -- internal names in frame
10:50 , Simon English
While the departure of Roberts had been rumoured, the loss of 52-year old Garner is a serious blow to the mutual, which has had a strong period of performance over his six year tenure.
Garner told the Standard: “As the saying goes, move on when people are asking why, not when.” He said running Nationwide is a “unique privilege”.
FTSE 100 rebound continues
09:56 , Graeme Evans
The prospect of the US Federal Reserve reining in support for the American economy provided few worries for investors today as the FTSE 100 index posted further gains.
The Fed said last night that if progress continues broadly as expected “a moderation in the pace of asset purchases may soon be warranted”. This is likely to mean tapering will start in November with the potential for the process to be completed by the middle of 2022.
The Dow Jones Industrial Average closed 1% higher and the FTSE 100 index lifted 0.5% or 38.27 points to 7,121,64 as sentiment continues to improve after Monday's pummelling.
Fears over Chinese property firm Evergrande sparked contagion fears at the start of the week, but these worries have faded after the company signalled its readiness to meet debt payment obligations.
London's top flight is now above where it started the week, having risen by more than 1% in its previous two sessions. Comments from Fed failed to upset the apple cart, although there now appears to be more chance of interest rates rising in 2022.
There's unlikely to be anything dramatic from the Bank of England later today, despite inflationary pressures creeping up. AJ Mould investment director Russ Mould said: “Both central banks need to ward off the nightmare scenario of stagflation and for both this involves walking a bit of a tightrope at present.”
Copper miner Antofagasta was the biggest beneficiary of the improved sentiment as shares rose 38.5p to 1,459p, just ahead of Glencore at 5.5p higher at 329.7p.
Rolls-Royce led the risers board, with the engines giant now up 20% in the past week after sentiment towards the aerospace industry was given a significant boost by the relaxation of Covid travel restrictions in the UK and United States.
Shares rose 4p to 126.2p, while GKN owner Melrose Industries improved 2.9p to 186.4p.
Takeover target Entain was the biggest faller in the FTSE 100, with shares in the Ladbrokes and Coral owner falling further away from the £28 offer price tabled by US firm DraftKings earlier this week. Shares were down 3% or 68p at 2,309p.
Royal Mail upbeat
09:29 , Graeme Evans
Royal Mail shares were 3.2p lower at 479.2p, having initially risen on the back of its latest trading update. That's still double their level of a year ago, but down from June's peak of above 600p when investors piled into the stock on the back of the boom in parcel volumes.
Those favourable trends created by the pandemic appear to be continuing after chairman Keith Williams reported that domestic parcel volumes in the five months to August were up 44% on the same period of 2019.
Overall group revenues rose by 8.2% year-on-year and by 17.7% on 2019.
Williams said: “We are increasingly confident that domestic parcels are re-basing at a significantly higher level than pre-Covid and believe we are maintaining our share of the market.”
Despite some upward pressure on costs, he said the Royal Mail division's adjusted operating profit and margin are expected to be higher in the second half compared to the first half.
Shipping delays impact trading at maternity wear brand Seraphine
09:15 , Joanna Bourke
Seraphine, the upmarket maternity wear brand, today said shipping delays in a “challenging” second quarter have weighed on its profits.
The company, which floated at 295p per share earlier this year, said that sales in the first quarter to July 4 surged. But it added that it “experienced supply chain issues from China due to the heavily delayed arrival of sea freight from late July”.
Stock issues have now been resolved but underlying first half profits are expected to come some 15% below a year earlier.
Read the full story HERE.
Rolls leads FTSE 100 higher
08:33 , Graeme Evans
The recovery for the FTSE 100 index after Monday's China-led wobble has continued, with the top flight up another 0.5% after gains of more than 1% in the previous two sessions.
Oanda's senior market Jeffrey Halley said the momentum for global markets highlighted the TINA effect — There Is No Alternative — where shares remain attractive due to poor returns on cash and government bonds.
He said: “With interest rates at rock bottom globally and zero in much of it, even a 2% yield on a half-decent stock look attractive.”
The FTSE 100 was 29.68 points higher at 7,113.05, led by gains of 2% for Rolls-Royce and GKN owner Melrose Industries as sentiment towards the aerospace industry continues to improve. Royal Mail also cheered 1.5% after overall revenues in the five months to August increased by 8.2% year-on-year and by 17.7% versus 2019.
Roofing specialist Marley confirms London float plan
08:18 , Joanna Bourke
One of the UK’s biggest manufacturers of roofing tiles has confirmed plans to float in London, at a time when new housing is in high demand.
Marley, which was founded in the 1920s in Kent and makes products from five factories, expects to start trading on the main market next month. Market sources estimate the move could value the business at around £600 million.
The company is working with Jefferies, Peel Hunt and Panmure Gordon on the float.
Read the full story HERE.
Bank to continue waiting game
08:13 , Graeme Evans
The Bank of England monetary policy committee is expected to vote 9-0 in favour of leaving interest rates unchanged, with the City more interested in how many members want to unwind the quantitative easing programme.
At the previous meeting, there was only once voice calling for a pull back on the mass purchase of government bonds.
The language used by the Bank will be closely watched, particularly whether the committee still thinks that the uplift in inflation is “transitory” after August's figures showed the biggest spike on record and as energy prices have continued to rise ahead of the winter.
Hargreaves Lansdown analyst Susannah Streeter said the Bank of England is likely to continue to play a waiting game.
She said: “Members know full well that the economy needs to be weaned off the drug of cheap money, not least to give them options to treat any future crises and to keep a lid on inflation.
“But an interest rate rise any time soon, could tip many borrowers over the edge and into more debt, and put a further break on recovery. Already consumers were faced with rising prices in the shops, but now energy hikes are on the cards as soaring gas prices lead to the collapse of smaller cheaper providers.”
FTSE 100 steady after Fed meeting
07:53 , Graeme Evans
Investors appear to be taking last night's US Federal Reserve meeting in their stride, with the FTSE 100 index tipped to open slightly higher after the Dow Jones Industrial Average finished up by 1% last night.
CMC Markets is calling the FTSE 100 to start 20 points higher at 7,103, having jumped 1.5% yesterday to above where it was prior to Monday's, when contagion fears linked to the debt crisis at property firm Evergrande led to a sharp sell-off.
Few were surprised by last night's statgement from the Fed that if progress continues broadly as expected “a moderation in the pace of asset purchases may soon be warranted”.
Unless next month's payrolls report is particularly bad, economists expect tapering will be announced in November with the potential for the process to be completed by the middle of 2022.
The number of Federal Reserve members who saw the potential for a rate rise in 2022 has gone from seven in June to nine yesterday, meaning the committee is evenly split in a big shift from the pro-2023 stance earlier this year.