FTSE 100 Live: Bank of England intervention to reach £65 billion, stocks slip

The Bank of England’s intervention in the UK government debt market was expected to cost £65 billion, with £5 billion in bond buying every day for a further 13 days.

Initial details of the size of the operation provided the main talking point in dealing rooms across London and beyond, while the former governor of the Bank of England, Mark Carney, said the government’s tax cuts were “working at some cross purposes” with the monetary policy being run out of Threadneedle Street.

London’s FTSE 100 fell further and a global wave of selling reached Wall Street markets, where big-name tech stocks were among the fallers. The pound found support -- rising 0.9% to $1.0979 -- and the yield on benchmark 10-year UK government debt stayed nearer 4% than 5% after the BoE’s dramatic action stopped the slide in the price of the debt.

FTSE 100 closes below 6,900 while FTSE 250 hits fresh two-year low

17:14 , Simon Hunt

The FTSE 100 closed at 6,86, down 124 points after a wave of selling swept across UK asset markets was concentrated on stocks today, taking the FTSE 100 to its March lows in a broad decline that reached all but a handful of its most defensive companies. The FTSE 250 performed even worse, dropping 3.6% to hit a fresh two-year low.

Retailers were among the hardest-hit today, with Next down 12.2% and Ocado down 10.2%. Next Chief executive Simon Wolfson offered some support for the Government’s tax cutting policies, but told the Standard he was concerned about the borrowing costs they will incur. Aerospace companies were the biggest winners today, with Rolls Royce up 2.3% and BAE Systems up 2%.

Wes Wilkes, chief executive at wealth manager Iron Market said: “This volatility will continue unless the policy error is reversed or abated. But the prime minister is instead acting like a bull in a china shop, whilst the Bank of England follows her picking up the broken bits to try and sal-vage some credibility in UK assets and our economy.”

Made.com shares leap 24% after revenue growth

17:05 , Simon Hunt

Shares in Made.com soared 24% on Thursday after the furniture retailer posted a surprise uptick in revenue for the first half of the year despite warning of dwindling demand amid a severe downturn in the home furnishings market.

The firm reported revenues of £178 million in the first six months of 2022, up 4.2% on the previous year. The value of orders shrunk 18.8%, while pre-tax losses swelled £35 million.

It comes after the firm slashed jobs and announced it was putting itself up for sale as part of a strategy to keep the business afloat and protect shareholder value.

Nicola Thompson, Chief Executive Officer, said: "The first half of the year was a challenging time for the global economy and particularly for the retail sector. The Group has faced a significant reduction in demand which has been difficult for the business and its stakeholders.

“MADE is not alone in being hit by supply chain problems and the cost of living squeeze, but we are confident that MADE has a strong brand, an excellent product range and a large and loyal customer base across the UK and Europe."

What next for the pound as it recovers to $1.10

16:27 , Simon Hunt

The pound recovered to $1.10 this afternoon after a difficult week for the currency which saw it fall to 37-year lows against the dollar to below $1.04. So what’s next for Sterling after it’s wild ride?

David Morrison, Senior Market Analyst at Trade Nation, said: “Investors prefer a Goldilocks environment where revaluations between currencies are gradual. This gives businesses time to adjust, plan and thereby run effectively. Unfortunately, that doesn’t always happen.

“In the current case, the GBPUSD is like a piece of overstretched elastic. Could it be stretched further? Sure. But when currency pairs get seriously out of whack, you often get a strong counter-move. The ‘long $’ trade has been all one way for a long time now, and maybe a reversal is on the cards.

“If so, that should take some pressure off sterling, even if unwarranted by the UK’s economic and political situation.”

Yield on 10-year UK government bonds stays nearer 4% than 5%

15:20 , Simon Hunt

The Bank of England’s dramatic £5 billion-a-day intervention in the debt market looks like it is working.

It has kept the returns investors demand to buy benchmark government bonds nearer 4% than 5%, but as this chart shows, yields have been moving as pension funds and other money managers sell their gilts to meet wider financial obligations.

Fears that it would be hard for institutions to find buyers prompted the BoE’s move to act as a backstop in the market and head off what it called a “material risk to UK financial stability.”

Global wave of selling reaches Wall Street and big-name tech stocks fall

14:46 , Michael Hunter

New York’s S&P 500 fell in opening trade, after economic data showed a decline of 0.6% in the size of the US economy in the second quarter, in line with expectations but a reminder of the clouded outlook for global growth.

Better-than-forecast jobless data helped offset the worries somewhat, but the main US stock index fell 60 points to 3657.0, a loss of 1.%.

Shares in some of the biggest names in the tech sector fell. Amazon lost 2% after news of a settlement with its US drivers and warehouse staff lifted its wage bill by $1 billion. Apple fell 3.2% after a broker downgrade for the stock, which expressed concern about the impact on the company of expected constraints on consumer spending around the world.

New York markets eye opening decline on uneasy outlook for global economy and tech stock pressure

13:59 , Michael Hunter

The S&P 500 is expected to fall in opening trade, amid stubborn uncertainty over the outlook for the world economy and as global names from the technology sector decline in pre-market trade.

Ripples of unease over the plight of UK assets are still reaching global trading centres beyond London. Analysts far and wide were looking past the Bank of England’s current support measures for its home debt market and ponder what might lie ahead as the government defends its controversial economic plans, adding to a feeling of unease.

A broker downgrade for Apple, on worries about constraints to consumer spending, and news that Amazon’s wage bill was going up next year by almost $1 billion for US drivers and warehouse workers, left both tech stocks set for opening losses, of about 2% and 1% respectively.

Overall, the main Wall Street index was on course to fall by just over 1% to 3,683.50 points.

US jobless claims fall 8% to 193,000

13:48 , Simon Hunt

Jobless claims in the US fell 8% week-on-week to 193,000, data from the US Labor Department show, bucking analyst expectations of a 3% rise to 215,000.

It comes as revisions to the US’s GDP growth by the Commerce Department showed the economy recovered from the Covid pandemic quicker than expected, with GDP increasing 5.9% in 2021 compared with previous estimates of 5.7%.

The US economy also contracted less than originally thought in 2020, down 2.8% instead of previous estimates of 3.4%.

German government to shield citizens from energy price hikes with 200 billion euro package

13:35 , Simon Hunt

The German government plans to shield citizensfrom energy price hikes after laying out plans for a 200 billion euro package of support.

The plan, which will direct the support via a “stabilisation fund” includes an emergency price brake on gas and electricity prices.

Finance minister Christian Lindner said Germany can no longer expect to receive gas from Russia.

Market action in UK assets: ‘Bank England puts out one fire’; too much self-interest at the top table’ -- experts react

12:20 , Michael Hunter

Reaction to the dramatic action on UK asset markets since the government redrew its tax and spending plans continues to flood in. The Bank of England’s intervention in the debt market to ease concern about the potential impact on pension funds of the turmoil in gilts has worked, but also continues to provide the main talking points on a day when stocks and the pound have fallen.

Here is a round up of some expert reaction from the City and beyond.

Gordon Shannon, portfolio manager at TwentyFour Asset Management: “The Bank of England put out one fire sparked by the mini-budget but monetary and fiscal policy need to start acting in unison. A run on pension schemes is only one symptom of this policy failure. The government cannot hold back the tide.”

James Hughes, analyst at Scope Markets: “It’s crystal clear that markets are far from convinced about the government, its credibility over tax plans and how the market fall out has been mis-managed. With the risk of further Bank of England intervention looming large, volatility is likely to remain turbulent for some time yet, paving the way for the UK economy to stumble into something of a doom loop.”

Richard Hunter, head of markets at Interactive Investor: “The government’s potential conflict of interest with the Bank of England has already forced emergency remedial action from Threadneedle Street. The pressure will remain on sterling and wider markets in general, as recessionary fears linger in a period of high inflation and aggressive interest rate hiking policies.”

Wes Wilkes, CEO at wealth management firm Iron Market: “The Chancellor and PM are exacerbating a self-inflicted problem and are displaying breathtaking arrogance and intransigence in front of extreme market turmoil. This volatility will continue unless the momentous policy error that was the mini-Budget is reversed or watered down.”

Adrian Kidd, chartered wealth manager at EQ Financial Planning: “The only way for this to be resolved is for a U-turn or postponement of the policies introduced in the mini-Budget. With too much self-interest at the top table, that seems unlikely but it would show true leadership and is what markets really need to regain lost faith in the UK.”

James Thompson, director at the financial advisor Becketts FS:”It is important to note that the Bond Purchase exercise is an asset swap, as opposed to pure fiscal spending. It’s not directly comparable with other forms of stimulus, In a fragile market environmentit is not taking much thought or analysis to generate high levels of volatility.”

City Comment: Wolfson’s worrying warning

11:48 , Simon English

IF he weren’t busy running perhaps the best retailer in Britain, Simon Wolfson would make an expert internet troll.

The Next boss can turn a phrase. His results statements are more than just dull descriptions of his results, they are events.

In today’s half-year results presentation he starts negative and then pivots to this: “Before this document sinks to levels of depression only usually seen in newspapers, it is worth pointing out that there are some features of our economy, such as employment opportunities and accumulated savings that bring some comfort.”

Ouch.

Of course it would be nice to be optimistic, if only for variety’s sake, but there isn’t much cause for it.

Wolfson quotes famed economist John Kenneth Galbraith’s saying: “There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.”

I know I don’t know. But in anything approaching normal times, Simon Wolfson does know. His style is to downplay expectations then beat them.

Anything could happen, he might say, while plainly having the clearest idea of what is most likely to occur.

At this point he says that his own “informed best guesses” are less informed than usual. “More than ever, it is not possible to predict the future on the basis of the past,” he says.

The past has never been a certain predictor of the future, but it is supposed to be a reasonable guide, a clue to direction of travel.

That even Wolfson says he can’t be sure of anything should worry us all.

10:58 , Simon Hunt

Barratt is biggest single faller amid wave of UK selling: morning round-up

10:57 , Simon Hunt

The wave of selling sweeping across UK asset markets was concentrated on stocks today, taking the FTSE 100 to its March lows in a broad decline that reached all but a handful of its most defensive companies.A slump of 111 points took London’s main share index to 6893.60, levels not touched in seven months. It took the fall in percentage terms since Friday’s overhaul of government tax and spending plans near to 4%.As confidence continued to drain away, companies exposed to the UK mortgage market once again made some of the biggest losses.Barratt Developments tumbled 42p to 328p and was the biggest single faller in percentage terms, down by over 11%. The company built over 17,000 homes last year and its shares were worth over 750p in January. Property website Rightmove fell 23p to 483p, a fall of almost 5%. It started the year at almost 770p.Shares in pension fund providers fell for a second session, even as conditions in the UK debt market stayed calm with the Bank of England acting as a £5 billion-a-day backstop buyer of gilts. Worries that low prices for the debt were making it hard for the sector to use sales of it to meet its financial obligations prompted the BoE’s dramatic intervention yesterday, which it expects to reach £65 billion. Legal & General, which runs pension schemes for almost four million people, fell 6p to 214p. Aviva, the operator of over 26,000 company pension policies was down 10p to 379p.There were just a handful of gainers. Among them, BAE Systems, the defence contractor, was up 9p to 818p.The FTSE 250 fell 382 points to 16,938.40, a loss of 2.2%.

Wes Wilkes, chief executive at wealth manager Iron Market said: “This volatility will continue unless the policy error is reversed or abated. But the prime minister is instead acting like a bull in a china shop, whilst the Bank of England follows her picking up the broken bits to try and sal-vage some credibility in UK assets and our economy.”

Profits plunge at the Co-Op as it promises to narrow product ranges

10:41 , Simon Hunt

Profits at the Co-Operative group plunged over 80% as the supermarket pledged to ditch branded products in favour of own-brand ranges as it slashes costs to tackle soaring energy and food prices.

The Manchester-based firm posted revenue of £5.6 billion for the first six months of 2022, which were flat on the previous year, while pre-tax profits dropped to £7 million from £44 million. The firm said it would prioritise reducing product ranges at stores.

Co-Op CEO Shirine Khoury-Haq said: “While 2021 provided us with some unexpected headwinds, the first six months of this year have proven to be even more challenging. We have had to make difficult decisions in managing our Co-op, including reducing our cost base and some planned investment. At pace, we must do fewer things, and do them better.”

She told the Standard: “We certainly want to promote our own brand – our honest value range…they’re in a lower price range, you may not need quite as many varieties of a specific product.”

Last month, the firm sold off 129 petrol forecourts to rival Asda in a £600 million deal.

Losses widened at Shire Foods and Indulgence Patisserie owner Volvere

10:23 , Simon Hunt

Losses widened at Shire Foods and Indulgence Patisserie owner Volvere, as the company abandoned part of its turnaround plan after it was hit by a lack of fixed energy costs.

The firm posted revenue of £17.87 million in the first 6 months of 2022, up 13.7% on the previous year, while losses widened to £1.1 million over the period.

The firm scrapped its turnaround plan to manufacture retail products as it was unable to mitigate sharp raw materials price increases, and said it would exit retail manufacture entirely. Shares fell 18% to 760p.

Volvere boss Jonathan Lander said: “The first half trading performance of 2022 was disappointing. The tragic war in Ukraine and the related rise and volatility in raw material, energy, and labour costs has made it very difficult to price products for customers with reasonable certainty of acceptable profit.”

“Shire Foods and Indulgence Patisserie have both been affected by cost inflation, but Shire entered the period from a much stronger position, with its energy costs fixed for the longer term, and as an established market player. Indulgence on the other hand faced the same environment without energy price certainty and with the added challenges of a turnaround.”

Liz Truss defends mini-Budget as the ‘right plan’ despite market turmoil

09:00 , Simon Hunt

Liz Truss has defended her mini-Budget as the ‘right plan’ despite the turmoil it caused in the markets, forcing the Bank of England to make an intervention.

Truss said she was prepared to take “controversial and difficult decisions” to get the economy moving and was “prepared to do what it takes to make that happen”.

Speaking to BBC Radio Nottingham, the prime minister said the UK was already facing high inflation and a slowing economy before the measures were introduced.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, said: “As pulses are continuously checked across asset classes, for fresh signs of panic, the clock is ticking for the Truss administration to come up with full costings of it plans which has caused such uproar in the financial markets.

“The return of the Office of Budget Responsibility which provides independent forecasts, to a seat at the table in the review of the plan, will provide more reassurance, but there is clamour for a lot more detail before the planned November 23 fiscal plan.

“There are now signs of a fresh return to austerity with government departments reportedly told to make sweeping cuts to expenditure, despite a vow from Theresa May when she was Prime Minister that the page had been turned on that era.”

Bank of England intervention: Gilt markets steady after first details of buying programme emerge

08:47 , Michael Hunter

UK government debt markets were calm in early trade with the Bank of England providing a £5-billion-a-day backstop as the first details of the size of its intervention emerged.

The BoE expects to spend up to £65 billion in its market operation which will run to October 14 and should limit the rise in yields while boosting the price of the debt, which fund managers are selling to meet their financial obligations.

Yields on gilts across a range of maturities either side of the benchmark 10-year bonds moved nearer 4% that 5% after news of the intervention was announced yesterday at 11am. They rose marginally today, but remained at the bottom end of that range, easing fears about stress in the market and potential systemic problems as a result.

The yield on 10-year gilts ticked up to 4.187%. Five-year debt was yielding 4.464% and two-year gilts were at 4.428%.

Porsche worth 75 billion euros on stock market debut

08:47 , Simon Hunt

Shares in luxury carmaker Porsche made their stock market debut on the Frankfurt stock exchange to hit a valuation of 75 billion euros (£67 billion) despite turbulent market conditions.

The firm was spun-off by owners Volkswagen and priced and the top end of the range in one of Europe’s largest IPOs and the biggest in Germany for 25 years.

Shares opened at 84.00 euros each but traded down 5.7% in the opening minutes. The Porsche and Piech families will continue to own a 25% stake in the business.

Declines on the FTSE 100 gather pace with shares in fund managers under pressure

08:21 , Michael Hunter

London’s main stock index fell further in opening trade, with declines gathering pace as investors looked through the first detail on the size of the Bank of England’s intervention to calm the conditions on UK debt markets.

The action -- expected to amount to £65 billion with £5 billion in daily spending until October 14 -- was started to support the price of UK government bonds and keep their yields from spiking as pension funds sell their holdings of the debt to meet wider financial obligations.

The FTSE 100 fell by over 70 points in initial trade to 6933.69, a loss of 1%. Fund managers started a second consecutive session under pressure. Legal & General fell 6p to 214p, a decline of almost 3%. Aviva was down 7p to 382p, falling almost 2%.

Housebuilders stayed at the bottom of the market as the prospect of more aggressive rate rises from the Bank of England knocked sentiment toward the sector on concern at the outlook for the mortgage market. Barratt Developments fell 34p, losing a further 9%. Persimmon was down 32p, or 2.4% to 1219p.

Pound back under pressure as details of the scale of the Bank of England’s debt market intervention emerge

07:52 , Michael Hunter

The pound was back under pressure as the detail of the size of the Bank of England’s intervention in the UK government debt market emerged.

Sterling traded just under $1.08, down 0.8% at $1.0797, amid a wider trend for a stronger dollar, while against the euro it weakened by 0.2% with a unit of the shared currency costing £0.8954.

The BoE expects to spend £65 billion overall, with £5 billion of buying every day until October 14 in order to keep gilt yields down and to support the price of UK government bonds as pension funds sell them in order to meet their financial obligations.

Mark Carney, the former governor of the Bank of England, said the UK financial system took “a big knock” and that the government’s “partial Budget” was responsible for “undercutting” the country’s economic and financial institutions. Speaking to BBC Radio Four’s Today programme, he also said the measures, announced by Chancellor Kwasi Kwarteng were “working at some cross-purposes with the Bank in terms of short-term support for the economy”.

Opening calls point to further falls for FTSE 100 as investors consider scale of Bank of England intervention

07:35 , Michael Hunter

London’s FTSE 100 was expected to decline in opening trade as investors considered the details of the Bank of England’s intervention in the UK government bond markets.

The BoE will spend £65 billion overall, with £5 billion of spending every day until October 14. That will support the gilt market, keeping yields down and lift the price of the debt, which many pension funds are having to sell in order to meet their financial obligations after the market turmoil that followed the government’s mini-Budget on Friday.

According to opening calls from IG, the FTSE 100 will slip 0.4% to 6979 points, in line with falls on continental European stock indexes.