FTSE 100 Live: Fed hikes rates by 0.50%, easing the size of its increases; UK inflation at 10.7%

US rates went up by another 0.5% tonight, with the country’s inflation rate dropping but still high at 7.1%.

The UK’s inflation rate dipped by more than expected to 10.7% in November, figures from the Office for National Statistics revealed today.

Despite the fall from 11.1%, the rate remains near a 40-year high and the Bank of England is still expected to hike interest rates by another 0.5% tomorrow.

Compulsory liquidations in November 2022 rocketed to more than five times as many as last year and 7% were higher than in November 2019, new figures released today show, as small and medium-sized businesses feel the pressure of rising prices, higher interest rates and dwindling consumer demand.

FTSE 100 Live Wednesday

• Inflation dip eases pressure on BoE

• HSBC to stop funding new oil and gas fields

• TUI shares fall after annual results

Bank of England moves into the rates spotlight after Fed’s softer rate hike

Wednesday 14 December 2022 19:05 , Michael Hunter

Next up in the global fight against inflation is the Bank of England.

It is due to announce the size of its rate hike on Thursday at high noon. Predictions on the size of the move are finely balanced between 0.50% and 0.75%, with a better-than-expected run of data in a blockbuster week for the UK economy looking to make the smaller rise more likely in the run up to the announcement.

Read more on the options facing the BoE and the inflation, jobs, pay and economic growth data here.

Fed hikes US interest rates by 0.50% as its fight against inflation get less aggressive

Wednesday 14 December 2022 19:01 , Michael Hunter

The Federal Reserve has lifted its benchmark interest rates by 0.50%, a smaller rise than the 0.75% increases it has used in its fight against inflation at its last four meetings.

Markets were expecting the softer increase after signs in a range of economic data that the central bank’s aggressive fight against inflation was starting to kick in properly.

A surprise fall in consumer price inflation this week added to expectations that the Fed would soften the pace of its rises, which take upper end of its Fed Funds target rates range to 4.50%.

Attention now shifts to clues on where rates will peak in the current hiking cycle, from policymakers’ own predictions listed in the so-called ‘dot plot’ released alongside the decision. Fed chairman, Jerome Powell, will give a press conference on the decision later today.

Wall Street stocks warm up early in a session where Fed rate call will set the weather

Wednesday 14 December 2022 15:02 , Michael Hunter

With the last Federal Reserve rate call of the year due later in the day, New York’s S&P 500 has been able to rise in early trade.

The broad stock gauge rose over 17 points to 4037.06 in morning trade, helped by gains in the communication, energy and transport sectors.

But the fate of the session is likely to depend on the Federal Reserve’s announcement, due at 7p.m. London time, 2p.m. in the east of the US.

The central bank is expected to ease back on the extent of its rate hikes, adopting an increase of 0.50% from the 0.75% jumps it has been using in an aggressive fight against inflation. Signs that it has started to take effect mean investors are looking for the softer move.

New York stocks set to slip before last Fed rate call of 2022

Wednesday 14 December 2022 13:49 , Michael Hunter

Wall Street stocks indices were expected to fall in opening exchanges according to futures trade into the start of a session likely to be defined by the Federal Reserve’s last rate hike of the year.

Signs that the central bank’s agressive fight against inflation is kicking into economic data mean that investors are expecting it to adopt a smaller increase of 0.50%, less than the 0.75% increments it has been using to tame rising prices.

In the run up to the announcement, due at 7p.m. London time and 2 p.m. in Washington and New York, the S&P 500 was prediced to fall by around 4 points at the start of full trade, taking it to 4051.0.

Shoppers stick with fast-fashion house Zara after selective price rises and higher profits at Inditex, its owner

Wednesday 14 December 2022 12:47 , Michael Hunter

The company behind the fast fashion chain Zara reported a rise in sales and profits for much of 2023 after price rises made in the autumn did not seem to deter shoppers.

Inditex, the world’s largest clothing retailer, said sales in the nine months to the end of October rose almost a fifth to just over €23 billion (£20 billion) with profits also up by a fifth to €6.5 billion.

And the higher prices don’t seem to be hurting sales in the peak festive shopping season. Between the start of November and over the first week in December, they are up 12% year-on-year. That came after an average price rise of around 5%.

The Spanish company said its operating expenses in the nine-month period rose 17%, below sales growth.

Wednesday 14 December 2022 12:12 , Michael Hunter

BT Group topped the FTSE 100 leaderboard in midday trade after news on its broadband strategy was well-received by investors. The fixed-line telecoms operator filed details of its so-called Equinox 2 offering to regulators. There was also news of a renewed deal with Nokia covering analytics software.

Ocado was once again the biggest faller, as the tussle of opinion over the online retailer and e-commerce tech provider prospects continued to play out on the London market.

Taylor Wimpey shares fall after downgrade, FTSE 100 lower

Wednesday 14 December 2022 10:18 , Graeme Evans

Housebuilding stocks remained under pressure today as more City downgrades offset encouragement from a weaker UK inflation rate.

JP Morgan’s lower price targets for Taylor Wimpey and Redrow sent the pair’s shares down by 2% and 5% respectively and kept the rest of the sector under a cloud.

The selling pressure came despite today’s inflation reading of 10.7% lowering City predictions on the eventual peak for Bank of England interest rates in 2023.

Taylor Wimpey, which dropped 1.7p to 102.5p following JP Morgan’s 60p cut in price target to 110p, was one of the biggest fallers in a lacklustre session for the London market.

The FTSE 100 index weakened 29.13 points to 7473.76 as traders awaited direction from tonight’s Federal Reserve interest rates decision, with other stocks more than 2% lower including Flutter Entertainment and British Airways owner IAG.

The best performance came from BT Group, which had traded at its lowest point since November 2020 earlier this week. Its shares rallied 3% or 3.5p to 117.4p as its Openreach arm submitted new proposals to Ofcom for wholesale pricing of full fibre broadband.

BT was joined on the risers board by North Sea explorer Harbour Energy, which rose 2% or 7.5p to 318.7p in its last week as a FTSE 100-listed stock.

The FTSE 250 index fell 73.63 points to 19,012.66, but ventilation products business Volution added 11p to 361.5p. It revealed revenues 7% higher as interest around energy efficiency and indoor air quality continues to drive demand in its new financial year.

Insolvencies jump 21% in November to top 2,000

Wednesday 14 December 2022 10:12 , Simon Hunt

The number of registered company insolvencies in November 2022 was 2,029, 21% higher than in the same month in the previous year, and 35% higher than 2019, according to data released by the insolvency service this morning.

There were 290 compulsory liquidations in November 2022, more than 5 times as many as in November 2021 and 7% higher than in November 2019. Numbers of compulsory liquidations have increased from historical lows seen during the coronavirus pandemic.

Inga West, Counsel at law firm Ashurst, said: “The real number to watch here is the comparison with the pre-pandemic period in 2019 rather than last year because the 2021 figures are still somewhat affected by the government’s Covid support measures.

“The bulk of corporate insolvencies in November 2022 are still creditor voluntary liquidations (1,595) – which show a staggering 50% increase from November 2019. Compulsory liquidations (290) are still on the rise, with HMRC increasing their winding-up petition activity, in common with a single bank, which has issued 95 petitions in the last two months. This is a relatively new development. CVA and administration activity remains lower than 2019.

“This is a very similar pattern to last month. It shows that the insolvency ‘heat’ is still very much on SME’s who typically have a smaller economic shock-absorbing capacity than their larger corporate counterparts. But this may change.”

Downgrades hit housebuilding stocks, BT shares rally 2%

Wednesday 14 December 2022 08:40 , Graeme Evans

London’s FTSE 100 index has fallen 21.36 points to 7481.53, with traders on the sidelines ahead of tonight’s interest rates update from the US Federal Reserve.

Housebuilders featured heavily on the fallers board after JP Morgan’s cautious note on the sector included lower price targets for Taylor Wimpey and FTSE 250-listed Redrow.

Taylor Wimpey’s shares fell 2.35p to 101.85p at the top of the FTSE 100 fallers board, with others on the back foot including Barratt Developments with a drop of 7.1p to 401.9p.

BT Group shares attracted buying interest after they hit their lowest point since November 2020 earlier in the week. The stock lifted 2% or 2.35p to 116.25p at the top of the FTSE 100 risers board.

The FTSE 250 index weakened 0.5% or 91.16 points to 18,995.13, with shares in TUI and Watches of Switzerland down 5% and 4% after their respective updates. Redrow dropped 4% or 20.8p to 451.6p following the reduction in JP Morgan’s target price to 390p.

HSBC to stop funding new oil and gas fields in refreshed green policy

Wednesday 14 December 2022 08:30 , Simon Hunt

HSBC has committed to stop funding new oil and gas fields as part of a refreshed environmental policy aimed at driving down global levels of greenhouse gas emissions.

Finance for new oil and gas will be suspended, HSBC said, but it will continue to work with energy companies where they share the same net-zero commitments.

In a statement HSBC said: “We will no longer provide new lending or capital markets finance for the specific purpose of projects pertaining to new oil and gas fields and related infrastructure when the primary use is in conjunction with new fields.

“We will therefore continue to provide finance to maintain supplies of oil and gas in line with current and future declining global oil and gas demand, whilst accelerating our activities to support clean energy deployment.”

HSBC shares stayed flat on the news.

Tui shares sink as recovery lags behind pre-pandemic levels

Wednesday 14 December 2022 08:18 , Simon Hunt

Shares in travel business Tui have sunk 5.3% in opening trade as a recovery in sales continued to fall short of pre-pandemic levels.

The firm posted sales of 16.5 billion euros (£14.2 billion) for the year to September 2022, more than triple last year’s sales, but short of 2019’s 18.9 billion, while it posted a loss of 213 million euros.

Richard Hunter, Head of Markets at interactive investor, commented “TUI has seen improvements across the board as it continues its recovery following the ravages of the pandemic, but this recovery is something of a marathon and not a sprint.

“Even so, one swallow does not a summer make and investors will need to see evidence of an established trend before warming to the prospects of the company. In the meantime, inflation, disruptions, labour shortages and competition from lower-cost operators which could well capture the imagination of cash-starved consumers could all provide headwinds.”

Inflation dip won’t stop BoE raising rates 0.5%

Wednesday 14 December 2022 08:12 , Graeme Evans

The Bank of England is tomorrow set to increase interest rates by 0.5% to 3.5%, but today’s inflation reading of 11.7% means a back-to-back rise of 0.75% is now seen as less likely.

Capital Economics said inflation eased in six of the 12 main categories covered by the Office for National Statistics, providing encouragement that the decline in the annual rate is not a one-off.

Chief UK economist Paul Dales said: “Overall, inflation has passed its peak and will continue to fall from here. That will prompt a sigh of relief in Threadneedle Street.

“But with the economy still proving resilient and wage growth still strong, the Bank of England won’t be complacent.

“So interest rates are still going to be raised further, but the Bank will probably raise them at a slower rate and the risk is that they peak at a lower level than the 4.5% we are forecasting.”

US rate rise expectations soften, FTSE 100 seen flat

Wednesday 14 December 2022 07:45 , Graeme Evans

The S&P 500 finished yesterday’s session 0.7% higher, but had been as much as 2.7% stronger after US inflation came in lower than expected at 7.1%.

That was the lowest reading of 2022 so far and also the fifth consecutive decline since inflation hit its peak of 9.1% back in June.

With inflation surprising on the downside, investors moved to price in a much more dovish path for the Federal Reserve over the coming months.

Deutsche Bank strategist Jim Reid said: “There’s little doubt that they’ll be moving by 0.5% at today’s meeting, but futures moved to price in a significantly higher chance that they’ll downshift further to 0.25% at the February meeting.

“Indeed, the odds of a 0.5% hike in February fell from 54.9% to 34.2% after the CPI print. Beyond that, the terminal rate expected in May came down on the day and is now seen at 4.86%.”

The FTSE 100 index added 0.8% following yesterday’s US inflation cheer and is forecast to hold these gains this morning, with CMC Markets expecting a broadly unchanged performance at 7500.

Inflation: which prices have risen the most?

Wednesday 14 December 2022 07:34 , Simon Hunt

The Office for National Statistics (ONS) said the slight slowing in the rate of inflation was largely due to lower fuel prices after the cost of filling up the car fell sharply.

However, there was no let up in the soaring price of food and drink which went up 16.5 per cent, the highest rate since September 1977. The rate of food inflation has risen for 16 consecutive months, from -0.6 per cent in July 2021.

Here’s a look at which prices have risen the most.

Food inflation surges 16.5% in a year

Wednesday 14 December 2022 07:34 , Graeme Evans

The largest upward contributions in today inflation’s reading of 10.7% came from household energy costs and food and drink. However, tobacco, motoring fuel and clothing rose by less than in 2021.

On a monthly basis, the Office for National Statistics said the consumer prices index rose by 0.4% in November, compared with an increase of 0.7% in November 2021.

The annual rate of 10.7% compares with City forecasts of 10.9% and the 11.1% recorded in October, which was the highest figure since 1981. Food inflation of 16.5% in today’s release was the highest since 1977.

Inflation eases slightly to 10.7% as price rises slow

Wednesday 14 December 2022 07:25 , Simon Hunt

The rate of inflation fell to 10.7 per cent last month raising hopes that the worst of the cost of living crisis may soon be over.

The bigger than expected fall in November’s Consumer Prices Index - the headline measure of inflation - from a 42 year high of 11.1 per cent in October will come as a huge relief to Chancellor Jeremy Hunt and the Bank of England.

It is likely to be enough to allow the Bank’s Monetary Policy Committee (MPC) to slow the pace of interest rate hikes from 0.75 per cent to 0.5 per cent when it publishes its decision on Thursday.

The Office for National Statistics (ONS) said the slight slowing in the rate of inflation was largely due to lower fuel prices after the cost of filling up the car fell sharply.

Chancellor Jeremy Hunt said: “The aftershocks of Covid-19 and Putin’s weaponisation of gas mean high inflation is plaguing economies across Europe, and I know families and businesses are struggling here in the UK.

“Getting inflation down so people’s wages go further is my top priority, which is why are holding down energy bills this winter through our Energy Price Guarantee Scheme and implementing a plan to help halve inflation next year.