FTSE 100 Live: Bank of England raises rates; FTSE closes at 7731
FTSE 100 live business news
Bank of England Interest rates rose to 4.5%, the highest level since 2008 in a move heaping more pressure on homeowners.
As well as hiking rates for the 12th meeting in a row, policymakers said that inflation will remain above 5% until the end of the year and won’t hit 2% until 2025.
In today’s corporate developments, Rolls-Royce has issued an in-line trading statement while Vodafone has announced a partnership with UAE government-owned telecoms company e&.
FTSE 100 Live Thursday
Bank of England rates hike and forecasts due
FirstGroup loses north of England franchise
ITV advertising revenues fall 10% in Q1
Thursday 11 May 2023 16:47 , Daniel O'Boyle
GlaxoSmithKline is to sell up to 240 million shares in Sensodyne owner Haleon, which spun off from the pharmaceuticals giant last year.
After the spin-off, GSK retained a 12.5% stake, but it says it now plans to sell around 240 million shares, roughly a 2.5% stake.
Haleon shares closed at 343.3p today in London, but its New York shares fell by almost 3% on the announcement.
FTSE closes at 7731
Thursday 11 May 2023 16:38 , Daniel O'Boyle
The FTSE closed down 0.1% at 7731 today, after the Bank of England gave little sign it was finished hiking interest rates.
The index of London blue-chips reached 7783 in the morning, but began to slip even before the announcement from Threadneedle Street.
After falling as low as 7683, it rallied slightly in the afternoon.
Smurfit Kappa was the day’s top riser. Rolls Royce and Airtel Africa, which both published trading updates today, were the biggest fallers.
State pension age could rise to 68 by ‘2040 or thereabouts’, says Mel Stride
Thursday 11 May 2023 16:03 , Daniel O'Boyle
The Work and Pensions Secretary said the state pension age is not likely to be raised to 68 until the 2040s — but it is not a decision to be made by the current UK Government.
Mel Stride said there was “no reason why you need to take the decision now” on any change, having pledged to inform voters 10 years ahead of time.
A state pension age increase from 66 to 67 is set to occur between 2026 and 2028, a move which has been legislated for since 2014.
US shares slide
Thursday 11 May 2023 15:30 , Daniel O'Boyle
Shares on Wall Street are down today following new jobs and inflation data.
The S&P 500 has fallen by 0.5% to 4116, while the Dow Jones is down 1% to 33,197 as Disney stocks plunge. The Nasdaq has fared better, but is still down 0.1% to 12293.
The slide comes as US initial jobless claims reached the highest level since October 2021, while producer price inflation came to 0.2% in April, slightly lower than expected.
Revolut CFO quits weeks after auditor BDO warning on accounts
Thursday 11 May 2023 15:09 , Daniel O'Boyle
The CFO of Revolut has quit the firm just weeks after its auditor said it was unable to independently verify three-quarters of the revenue in the company’s 2021 accounts.
Mikko Salovaara, who was first appointed CFO in April 2021, said he was leaving the London fintech for personal reasons.
Heathrow and airlines granted permission to appeal CAA cap
Thursday 11 May 2023 14:37 , Daniel O'Boyle
Heathrow Airport and three major airlines have been granted permission to appeal the Civil Aviation Authority’s cap on the amount the airport may charge airlines that operate flights from there.
The CAA announced the cap, which will last until 2026, in March, but Heathrow bosses quickly slammed the decision and said they would appeal.
However, major airlines British Airways, Delta and Virgin also won permission to appeal.
Pound falls back from highs
Thursday 11 May 2023 14:26 , Daniel O'Boyle
The pound has fallen back against the dollar amid the latest rates outlook, after hitting its highest level in a year.
A pound now buys $1.2544, still well above where it has been for most of the past year but down almost 1.5c from its highs yesterday. Sterling buys €1.1488 and 168.17 yen.
Where will interest rates go next?
Thursday 11 May 2023 14:19 , Daniel O'Boyle
Paul Dales, chief UK economist at Capital Economics, still believes that today’s rate hike will be the last of the current cycle. However, he then expects rates to be held at 4.5% for a long period, before a fairly aggressive period of cutting.
“Today’s 25 basis point rise in interest rates from 4.25% to 4.50% takes rates to our long-held forecast and may be the last hike, although one or two more hikes are possible,” he says. “We suspect the subsequent holding phase will be fairly long, lasting until the first half of next year. But we think the future cutting phase will be more aggressive than market pricing with rates falling to 3.00% by end-2024 rather than to 4.00%.”
US shares in for mixed start
Thursday 11 May 2023 14:11 , Daniel O'Boyle
Shares in US-listed companies are in for a mixed start today, after higher-than-expected jobless claims.
Dow Jones futures are down 0.4% to 33459, while S&P 500 futures are close to level at 4147. However, Nasdaq futures are up by 0.2%, to 13433.
Among the biggest premarket risers is 1-800-FLOWERS, while regional lender PacWest is among the biggest losers.
Highest US jobless claims since 2021
Thursday 11 May 2023 13:58 , Daniel O'Boyle
US weekly jobless claims rose to 264,000 in the past week,, ehad of expectations that claims would remain flat.
“Initial jobless claims figures came in much higher than expected, at 264k versus 245k expected – the highest print since 2021,” Ryan Brandham, Head of Global Capital Markets, North America at Validus Risk Management, said. “The impact from the 2022-23 rate hiking cycle in the US might finally be impacting what has been a surprisingly tight labour market, and also reinforces the Fed’s plans to pause further rate hikes.”
FTSE down on rate rise expectations
Thursday 11 May 2023 13:40 , Daniel O'Boyle
The FTSE 100 has fallen after today’s Bank of England interest rate decision, mostly due to increased expectation that the Bank will raise rates further.
The index of London blue-chips is down 0.4% to 7708, despite going into today’s meeting close to flat.
More London workers eye job change as cost-of-living crisis makes them restless
Thursday 11 May 2023 13:20 , Daniel O'Boyle
Millions of Britons and around one-in-six Londoners are looking to change jobs in the next six months according to new research, in a sign that the UK’s labour market could get even more competitive.
Around one in seven workers questioned by Barnett Waddingham, the professional services consultant, predicted they would have different work in six months time. That’s around 14%, and would add up to about 4.2 million people nationally, in a jobs market with just over 1 million live vacancies.
‘Inflation is becoming entrenched’
Thursday 11 May 2023 13:03 , Daniel O'Boyle
George Lagarias, chief economist at Mazars, says the Bank has little alternative but to keep raising rates to avoid inflation becoming entrenched.
“The hike was hardly news,” he says/ “The UK boasts the fastest wage growth and one of the tightest labour markets within developed markets. This means that inflation is becoming entrenched. The Bank of England has little alternative other than tightening the money supply, in order to curb consumer demand.
“Homeowners who were eagerly waiting for their refinancing rates to drop may be in for a disappointment. Unless we see a financial accident that could affect the banking sector, or some sort of other systemic event, we expect the central bank to continue to tighten rates, despite the economic slowdown.”
‘We are now in an economic danger zone'
Thursday 11 May 2023 12:03 , Daniel O'Boyle
Commenting on rising interest rates and how managing inflation is like breaking a nut with a sledgehammer, Charles White Thomson, CEO at Saxo UK, said:“Managing inflation with the blunt weapon that are interest rates has always faced choreography issues, similar to breaking a nut with a sledgehammer. We are now in an economic danger zone, pincered between public enemy number one/ inflation, a 19% increase in food and non-alcoholic beverages which reaffirms the cost of living crisis, and a consumer saddled with outsized debt that was once cheap. The risk for further policy failure is real and the stakes are getting increasingly high.
Bank of England raises interest rates to 4.5%
Thursday 11 May 2023 12:01 , Daniel O'Boyle
As expected, the Bank has raised interest rates to 4.5%.
Rates decision imminent
Thursday 11 May 2023 11:51 , Daniel O'Boyle
The Bank of England will announce its latest interest rates decision in 10 minutes, with markets believing a quarter-point rate hike is all but certain..
The comments and projections accompanying the announcement may be watched more closely, as some economists believe the Bank will pause its hikes after today’s rise, while markets are still pricing in a further increase to 4.75% in June.
Investors should check company culture before they buy the shares
Thursday 11 May 2023 11:08 , Daniel O'Boyle
Costco’s co-founder, Jim Sinegal, once said that in business: “Culture is not the most important thing, it’s the only thing.”
Warren Buffett, arguably the world’s greatest investor, agrees. At Berkshire Hathaway’s 2022 Annual Meeting, he said: “Our culture is 99.9% of running the business.”
Next’s long-running CEO, Simon Wolfson, dedicated a whole page of his recent results to discussing Next’s ‘Culture and Expectations’, instructing staff to “Keep it simple and speak in plain English; you will achieve so much more”.
Consumer spending soars ahead of BoE decision
Thursday 11 May 2023 10:42 , Daniel O'Boyle
Consumer spending on credit and debit cards increased by 11 percentage points in the last week, according to the ONS.
The rise suggests consumers are not cutting back as prices rise, which may be a signal that the Bank of England will have more work to do to tackle inflation.
‘’Ahead of the crunch interest rate decision, shoppers have been splashing the cash keeping spending in the economy buoyant,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, said. “This increases the chances that the Bank of England policymakers won’t just hike borrowing costs today, but will be mulling another rise down the road.”
Citizens Advice reports ‘bleakest-ever’ start to year
Thursday 11 May 2023 10:31 , Daniel O'Boyle
Citizens Advice has helped a record 9,600 people a day on average between January and April as the cost-of-living crisis led to its “bleakest-ever” start to year.
The charity said it helped 94,000 people with food bank referrals and access to emergency charitable grants – a 178% increase on the same period in 2020.
FTSE 100 higher, FirstGroup and ASOS down in FTSE 250
Thursday 11 May 2023 10:21 , Graeme Evans
Rolls-Royce slipped 2% today after new boss Tufan Erginbilgic reported “good progress” in the company’s turnaround plan.
The blue-chip stock has rebounded more than 50% this year as the engine giant is backed by investors to benefit from the airline industry recovery and self-help efforts.
At his first Rolls AGM since taking the helm, Erginbilgic told investors that engine flying hours were 83% of pre-Covid levels and on track for the targeted 80%-90% in 2023.
Other guidance on key metrics such as operating profit and cash flow were left unchanged, with supply chain issues still a key operational challenge.
The lack of upgrades meant shares cooled 3.6p to 152.7p but they are still significantly higher than the 107p prior to results in February.
AJ Bell investment director Russ Mould said: “Erginbilgic has made a good start in his transformation of Rolls but he still has plenty to do and he will need to demonstrate progress in first-half results in August.”
Another stock with momentum has been 3i Group as the private equity firm benefits from its investment in strongly-performing European discount chain Action.
Results today showed 3i’s net asset value at 1745p, well ahead of City estimates and up 32% on a year ago. The shares rose 16p to 1762p, having surged by a third in 2023.
The FTSE 100 index cheered 25.55 points to 7766.88, with caterer Compass up another 16p to 2107p as the City bumped up estimates after yesterday’s strong update and £750 million buyback plan. Analysts at Barclays moved their target price to 2300p.
Blue-chip fallers included Tesco, which dropped 7.1p to 270.8p because shares no longer trade with the latest dividend.
The FTSE 250 index edged up 8.96 points at 19,282.25, led by a 5% rise for controls business Diploma after a “buy” recommendation from Jefferies.
FirstGroup shares skidded 5% or 6.7p to 116.6p as the government said the company’s Transpennine Express franchise would not be renewed following “months of significant disruption and regular cancellations”.
Meanwhile, fast fashion chain ASOS followed yesterday’s 23% results-day slump by losing another 3% or 15.4p to 472p.
Rishi Sunak ‘may fall short on pledge to halve inflation in 2023’,
Thursday 11 May 2023 09:44 , Daniel O'Boyle
Prime Minister Rishi Sunak is at risk of failing in his pledge to halve inflation this year, according to an economic think tank.
The National Institute of Economic and Social Research (Niesr) forecast that inflation will remain persistently higher than expected over the rest of 2023, in a worrying prediction for under-pressure households.
In its latest set of projections, the forecaster said inflation is expected to drop from its current level to 5.4% by the end of 2023.
New CEO in at Man Group
Thursday 11 May 2023 08:52 , Simon English
One of the leading members of the LGBTQ+ community has just landed the top job at giant hedge fund Man Group.
Robyn Grew, 54, will take over as chief executive of the $150 billion business, replacing the retiring Luke Ellis in September.
Man Group earlier said that the next chair will be Anne Wade, who will succeed City grandee John Cryan later this year. That means the firm will be led by two women for the first time in its history.
Ellis, 60, is a highly regarded City player closely associated with the growth of Man. He is one of the best paid fund managers, getting $11.3 million (£9.1 million) last year.
Grew’s salary will be closely watched for evidence that it is comparable. She joined Man Group in 2010 as chief compliance officer, then chief operating officer as previous roles at LIFFE and Barclays Capital.
She will relocate to London from the US in time.
Ellis, CEO since September 2016, said: "It has been a privilege to be CEO of Man Group and it is easy to want to stay on forever when you are leading such a great team of people. However, I feel that now is the right time to pass the reins to the next custodian of this firm and having worked with Robyn for well over a decade I could not be more thrilled at her appointment.”
Grew said the job is an “honour”. She has been outspoken on the need for financial services to recruit from a wider pool of talent.
She told Financial News in January: “When I made that move into finance in 1994, hedge funds in London seemed to have this ‘masters of Mayfair’ reputation, a rather caricatured image of a group of men in a room shouting on the phone (and at each other), and making big, risky bets. It didn’t put me off at the time — I was used to working in environments largely populated by men, especially at a senior level — nor did it turn out to be the reality.”
Credit Suisse said in a note: “Mr Ellis is well regarded and his retirement may be seen as a blow by many investors. But Ms Grew is a continuity candidate with experience including solutions, trading, execution and as group COO.”
Ellis warned last month that the banking crisis sparked by the collapse of Silicon Valley Bank is far from over. He said: “I think we will have significantly more banks that don’t exist in 12-24 months.”
Man Group shares rose 1p to 209p.
Rolls-Royce shares down 3%, FTSE 100 in positive territory
Thursday 11 May 2023 08:23 , Graeme Evans
Rolls-Royce shares have surrendered some of their recent gains, falling 3% or 4p to 152.3p on the back of the company’s unchanged guidance in today’s AGM trading update.
Vodafone shares are flat at 92.8p following its strategic tie-up with an Emirates telecoms group, while private equity firm 3i Group has continued its recent progress as annual results sent shares 16p higher at 1762p.
The FTSE 100 index stands 32.36 points higher at 7773.86, while the FTSE 250 index is up 34.64 points at 19,307.93.
ITV shares are 2.1p lower at 75p after it forecast a challenging market for advertising revenues in the current quarter. Meanwhile, FirstGroup shares have fallen 3% or 3.7p to 119.6p after the loss of its Transpennine Express rail franchise.
UK’s top listed landlord Grainger says it is a ‘beneficiary’ of rising wages
Thursday 11 May 2023 08:16 , Daniel O'Boyle
The UK’s biggest listed landlord Grainger is set to reap the reward of wage inflation, according to its boss.
The landlord said its rental income had grown by 12% in the six months to the end of March, while its profits were up by 2%.
CEO Helen Gordon said her business was well-placed for an era of economic uncertainty, thanks in part to the fact it was a ‘beneficiary’ of rising prices and wages.
“Our net rental income is strongly linked to wage inflation, and therefore benefits from a high inflationary environment,” she said.
However, she dismissed claims the business was gouging tenants, pointing out that the rises in line with inflation have come at a time of limited supply and soaring demand.
“There are some landlords trying to take advantage of that disconnect between supply and demand but I think our properties remain affordable,” she said.
First Group’s north of England train operator Transpennine Express loses franchise
Thursday 11 May 2023 07:54 , Michael Hunter
Controversial north of England train operator Transpennine Express is losing its franchise at the end of the month after a run of cancellations and delays that has made it infamous.
It had the highest cancellation rates of any operator, in part due to an industrial dispute, with around one in six services cancelled in March.
Transpennine is owned by First Group, a FTSE 250 company.
The Transport Secretary, Mark Harper, said today that the company’s contract would not be renewed or extended from May 28, citing “months of significant disruption and regular cancellations across Transpennine Express’s network”.
Services will be run by the government’s operator of last resort scheme managed by the Department of Transport.
He added: After months of commuters and Northern businesses bearing the brunt of continuous cancellations, I’ve made the decision to bring Transpennine Express into operator of last resort.
“This is not a silver bullet and will not instantaneously fix a number of challenges being faced.”
Rail services will continue to run with no planned changes to tickets or timetables.
Transpennine issued a brief statement acknowledging the move, adding: “All tickets remain valid and customers should continue to use and purchase tickets in the normal manner.”
S4 remains optimistic despite tech clients’ caution
Thursday 11 May 2023 07:39 , Daniel O'Boyle
Sir Martin Sorrell’s advertising conglomerate S4 Capital expects slower growth in its major markets, but remains optimistic of hitting its targets as tech firms remain cautious about spend but have not yet cut back.
Billings rose to £455.9 million in the three months to the end of March, but looking ahead Sorrell said the firm now expects growth rates in EMEA and the Americas of between 7-10%, less than previous projections.However, S4 still expects to hit its targets of 8-12% growth.
Sorrel said the rise of AI could be a huge opportunity for his business.
“There has been considerable speculation about the potential impact of AI and AGI on our industry with various commentators making early decisions on potential winners and losers,” he said. “It is very early days, and the world is not even in the foothills of exploration and development, but this new Industrial Revolution is already set to have a major impact on productivity and the patterns of employment. We believe it will make our disruptive model even more inevitable for clients and are determined to establish the leadership position and leverage it.”
Rolls-Royce says supply chain remains ‘key operational challenge'
Thursday 11 May 2023 07:35 , Michael Hunter
Rolls-Royce, the FTSE 100 engineer, said today that managing its supply chain remains a “key operational challenge” as it continued to scale back up after the impact of Covid, particularly in its Civil Aerospace division.
The Derby-based company, which is in the process of a “transformation programme” to simplify the business under new chief executive Tufan Erginbilgic said it was making good progress and its financial performance was in line with expectations. He said the “strategic review is on track” after an overhaul of the senior leadership team earlier this year. Its findings and refreshed medium-term targets will follow in the second half of this year.
“We are already benefitting from the actions we are taking as well as recovery and growth in our end markets,” Erginbilgic said.
Supply chains were disrupted by Covid lockdowns around the world, with a shortage of computer chips particularly actue.
Vodafone partners with UAE government-backed telco
Thursday 11 May 2023 07:22 , Simon Hunt
Vodafone has announced a partnership with United Arab Emirate government-owned telecoms company e&.
Under the terms of the deal, Vodafone and e& will explore jointly offering digital services to multi-national customers and public sector organisations, while e%, which controls a 14% stake in Vodafone, will get a seat on its board. E& has also agreed not to build up a stake in the company greater than 25%.
Vodafone boss Margherita Della Valle said: "We know e& well and I'm delighted we have strengthened our existing relationship through this strategic partnership. This closer alignment allows us to capture opportunities in our respective markets and brings additional telecoms experience to our Board."
Ad slump hits ITV
Thursday 11 May 2023 07:22 , Simon English
Advertising slumped 10% in the first quarter of the year, ITV revealed today, though it thinks the Rugby World Cup and Love Island will boost returns in the near future.
The broadcaster saw overall revenue down 7% to £776 million in the three months to March, largely in line with City expectations.
Chief executive Carolyn McCall said: “Total advertising revenue in Q1 was down 10% - as expected and better than the wider TV advertising market. We are looking forward to Q3 with Love Island and the Rugby World Cup set to draw large broadcast and streaming audiences.”
Last night Disney revealed that its flagship streaming service lost 4 million subscribers this year so far. There is growing scepticism that the streaming model will prove truly profitable for media giants such as Disney and Netflix.
Disney’s streaming business made a loss of $659 million, better than the £1.1 billion lost in the previous quarter.
McCall said: “"ITVX has sustained its strong launch, with a 49% increase in streaming hours and a 29% growth in digital revenue in the quarter. Exclusives, such as Nolly and The Twelve attracted new viewers, 80% of whom went on to explore other content on ITVX. In addition, live simulcast viewing of our biggest shows and sports events, including Love Island and the FA Cup attracted large streaming audiences.”
BoE rates set to rise again, markets steady
Thursday 11 May 2023 07:17 , Graeme Evans
The Bank of England’s monetary policy committee is today expected to increase interest rates for the 12th consecutive meeting, hiking by a quarter point to a 14-year high of 4.5%.
The Bank will also update its projections for inflation and the wider outlook for the UK economy, with GDP forecasts for this year likely to be revised higher.
Sterling has strengthened in the run-up to the meeting, reaching a one-year high of $1.26 as traders speculate that the Federal Reserve is at the top of its rate hiking cycle.
Deutsche Bank expects one further rate hike by the Bank of England in June, although it admits the risks are tilted to the upside with UK inflation still at 10.1% compared with 6.9% for the euro area.
Yesterday, US inflation dipped below 5% for the first time in two years but the slight decline in the annual rate failed to do much for shares as the S&P 500 index posted a modest gain of 0.5% and the Dow Jones Industrial Average finished near its opening mark.
The FTSE 100 index closed 0.3% lower and is forecast by CMC Markets to open four points higher at 7745 this morning.
Disney shares slide after it sheds 4 million subscribers
Thursday 11 May 2023 06:57 , Simon Hunt
Shares in Disney dropped 5% in after-market trading in New York overnight after the streaming giant said it had shed four million subscribers compared to the previous quarter, its second consecutive quarter of subscriber losses.
It follows the company’s decision to lay off around 7,000 jobs after a downturn in demand.
But the firm narrowed losses from $1.1 billion to $659 million, which boss Bob Iger said was a result of "the strategic changes we've been making throughout the company to realign Disney for sustained growth and success."
Recap: Yesterday’s top stories
Thursday 11 May 2023 06:49 , Simon Hunt
Good morning. Here’s a summary of our top stories from yesterday:
ASOS plunges to a £300 million loss as sales fall 10%.
John Lewis staff have backed boss Sharon White after she vowed to prevent the firm’s de-mutualisation.
The bosses of the world’s largest crypto exchange Binance have mounted a charm offensive to restore relations with the FCA.
The boss of Wetherspoons has slammed MPs for their “lack of understanding” on inflation.
Today we’re expecting trading updates from Rolls-Royce and Balfour Beatty.
Later in the day we’ll cover the Bank of England’s interest rate decision.