FTSE 100 Live: Bank of England interest rate rise, FTSE closes down 0.9%, US shares up
The Bank of England today hiked interest rates to 4.25% as it continues efforts to bring inflation back under control.
The expected quarter point increase matches last night’s move by the Federal Reserve after it lifted US rates to 4.75%-5%.
Investec economist Elllie Henderson noted that the rate hikes may not be finished.
“The door was also left firmly open to further hikes, with the guidance in the minutes remaining the same as that in February,” she said.
Alongside the rise, the Bank also said it not longer expects a recession this year.
European markets are under pressure after the central bank dashed Wall Street hopes for a rates cut later this year and Treasury Secretary Janet Yellen warned there was no blanket insurance for US deposits.
FTSE 100 Live Thursday
Markets under pressure as rates rise
Lloyd’s of London reveals £800m loss
Amigo Loans to be wound down
Playtech boss cools on takeover support
17:20 , Daniel O'Boyle
Playtech CEO Mor Weizer said he couldn’t be sure if he would back another takeover attempt after supporting one last year, as the gambling technology business reported a profit increase despite UK revenue slowing.
The gambling tech provider seemed on course to be sold last year when Weizer threw his weight behind a proposal from Asian investment group TTB.
“I was always focused on Playtech and its growth,” he said. “At a certain point in time I did support a bid because I felt it was what shareholders wanted. But I am fully committed to the strategy of the business.
FTSE closes at 7499.6
16:41 , Daniel O'Boyle
The FTSE 100 closed just below 7500 today, down 0.9% from opening.
The index fell this morning, before the Bank of England’s decision to raise interest rates to 4.25%. With the rate hike being widely expected, it had little impact on markets, which did not move significantly after the rise was announced.
The dip follows three consecutive days in which the FTSE closed higher than where it started.
How many more lenders will go the way of SVB?
16:20 , Simon English
A somewhat alarming statistic from Martin Wolf in the FT.
According to the Federal Reserve, US commercial banks are holding equity of $2.14 trillion. This is to back loans (the banks would call them assets) of $22.8 trillion.
To put it another way, for every £1 banks have on hand, they have lent £10.
US shares up
14:18 , Daniel O'Boyle
Shares in US companies have risen today following decline’s yesterday, after markets opened on Wall Street.
The S&P 500 is up 1.2% to 3985 and the Dow Jones is up 0.9% to 32325. The Nasdaq rose by 1.8% to 11883.
Streaming giant Netflix was the top riser, with shares up 9%.
FTSE steady following expected rates decision
13:00 , Daniel O'Boyle
The FTSE 100 has risen slightly following today’s interest rate decision.
The index of blue-chip companies is at 7518, 15 points away from its level just before the decision.
With a rise of 25 basis points widely expected, must of its impact was already prices in by investors.
The pound rose immediately after the annnouncement, but then fell back down to $1.2275, again close to its level just before noon today.
Bank may raise rates further
12:48 , Daniel O'Boyle
Today’s rate rise was of little surprise, but there may be signs that the bank of England is not yet finished, and may raise interest rates again.
Capital Economics deputy chief UK economist Ruth Gregory noted that today’s 7-2 vote was a stronger consensus than expected.
In addition, the Bank’s Monetary Policy Committee pointed to the “primacy” of price stability as its top objective, and said its “remit is clear that the inflation target applies at all times”.
Gregory said she still expacts another rate raise. However, she also said she expected a quick decline in interest rates to 3% in 2024.
No 2023 recession, Bank says
12:16 , Daniel O'Boyle
The Bank of England no longer expects the UK to enter a recession next year.
The economy is now expected to grow “slightly” in the second quarter of this year, meaning the technical definition of a recession - which is two consecutive quarters of decline - will not be met.
In its projections last month, the Bank said the UK’s GDP would decline by 0.1 per cent in Q1 and a further 0.4 per cent in Q2.
However, it now expects the economy to grow marginally in the second quarter.
The announcement came as the bank announced it would raise interest rates to 4.25%.
Last week, the Office of Budget Responsibility also said it did not expect a recession this year.
Bank of England raises rates to 4.25%
12:00 , Simon Hunt
The Bank of England has hiked interest rates to 4.25%, as it prioritises the fight against inflation over signs of stress in parts of the world financial system.
Its vote for the rise of a quarter of a percentage point follows a shock rise in the consumer price index earlier this week, leaving inflation stuck in double digits at 10.4%, much higher than had been expected.
The cost of thousands of variable rate mortgages will go up as a result of the rate hike, adding to the pressure on household budgets. Londoners are likely to be particularly hit, due to the higher property costs across much of the capital.
But the hike came with growing talk in the City that rates could now be nearer their peak than previously thought, after the hikes at a range of major central banks has led to stress in the financial sector, where big-name banks have failed or needed rescuing in the US and Europe.
Bank of England widely expected to raise rates
11:43 , Daniel O'Boyle
The City strongly expects the Bank of England to raise interest rates at noon today.
According to a Refinitiv poll of economists, the probability of a 0.25 percentage point rate hike today is 95.6%.
Last week, economists had been divided on whether interest rates were set to rise due to turmoil in the banking sector. However, higher-than-expected inflation figures mean an increase is once again seen as close to certain.
Gambling Commission fines 32Red and Unibet for performing “superficial” checks
10:44 , Daniel O'Boyle
The Gambling Commission today fined sister companies 32Red and Unibet, who in 2021 pledged to make no money from problem gambling, for performing only “superficial” checks on at-risk customers.
The pair, both owned by Swedish company Kindred, received a combined £7.1 million worth of fines, which come as the Government prepares to publish long-delayed plans to reform gambling.
Kindred CEO Henrik Tjärnström said appreciated that the regulator decided it was still fit to keep its licence.
“While we accept the outcome, and the acknowledgment that we have already taken significant steps to strengthen our processes, we also recognise that we need to work even harder,” he added.
He added that the failings were “unlikely to happen today” due to changes it had made.
The Government gambling review is likely to consider “affordability checks” on big-spending customers.
In a letter to the DCMS Committee published on Tuesday, Kindred said these checks were “overly bureaucratic, unprecedented and disproportionate”.
Blue-chip stocks under pressure, HSBC down 3%
10:16 , Graeme Evans
This week’s improved market mood was tested today as safe haven gold returned to near $2000 an ounce and blue-chip shares fell back.
The jitters followed heavy selling on Wall Street after US Treasury Secretary Janet Yellen told the Senate there would be no “blanket insurance” for bank deposits without congressional approval.
Her comments reignited concerns for the US financial sector, particularly given that Federal Reserve projections yesterday ruled out a fall in interest rates until next year.
The risk averse mood meant the FTSE 100 index dropped 0.8% or 62.12 points to 7504.72 as dollar weakness particularly dented overseas-earning stocks.
International-focused banks were at the forefront of the selling pressure as Standard Chartered and HSBC both dropped 3%, off 19.2p to 632.8p and 16.3p to 548.3p. NatWest was more resilient, with its shares up by almost a penny to 270p.
Gold resumed its rally to stand at $1975 an ounce, having briefly broken through the $2000 threshold at the height of the banking crisis last week.
The yellow metal’s performance pushed Africa-focused Endeavour Mining to the top of the FTSE 100 risers board, lifting 2% or 36p to 1827p. Other defensive stocks in demand included BAE Systems, which improved 7.4p to 965.4p.
The FTSE 250 index got some protection from a stronger pound but still traded 0.5% or 89.42 points lower at 18,668.37.
Big fallers included car distribution and retail group Inchcape, which fell 10% or 87.5p to 779.5p despite reporting a 50% rise in annual profits to £373 million. It said recent trading had been in line with its expectations, adding that the improvement in supply of new vehicles is expected to continue this year.
One of the best performances in the FTSE 250 came from biotech PureTech Health, which jumped 12% or 25p to 228p after it announced a deal with Royalty Pharma that monetises its royalties in potential schizophrenia drug KarXT.
Wickes profits slip as DIY pandemic boom softens
09:10 , Simon Hunt
Profits slipped at Wickes amid signs the pandemic DIY boom was coming to an end.
Core revenue at the home improvement business, which includes DIY and local trade sales, fell 3.8% to £1.2 billion in 2022, while pre-tax profits dropped 38% to £40.3 million.
Wickes said DIY sales “softened from June onwards as a result of the cost of living crisis,” partially offset by a boom in demand for insulation as Brits scrambled to swerve soaring heating bills.
CEO David Wood said the firm was still seeing strong DIY demand from younger generations.
“Typically homeowners would invest in their home, but younger people in rented accommodation are spending more time at home and want that environment to be more about them [by doing] simple stuff like painting a room, hanging shelves and pictures,” he said.
Shares fell 2% to 141p.
Magners owner expects profit hit as transformation project takes longer than expected
08:56 , Daniel O'Boyle
Magners and Tennent’s owner C&C Group said it expects a hit to profits as a major project that formed part of the “digital transformation” of its business is taking longer than expected.
The Irish business, which also makes soft drinks, wines and spirits, brought in profit of €84 million in the year to 28 February, up 75% year-on-year.
However, it warned that delays to a tech project for its British operations would impact its earnings this year.
“The implementation phase of the project is taking longer than originally envisaged, with some consequent impact on service and profitability,” it said.
FTSE 100 lower, Inchcape down 9%
08:32 , Graeme Evans
European markets have followed Wall Street’s lead, with the FTSE 100 index down 0.4% or 31.25 points to 7535.59.
Oanda senior market analyst Craig Erlam said: “While investors have been relieved that this week has brought no new instability in the banking sector (yet), they are a little concerned by what they heard from the Fed and Treasury Secretary Janet Yellen yesterday.”
Big fallers in London included Schroders and Pearson, but their declines of 17.8p to 445.6p and 13.4p to 811.2p respectively also reflected their shares trading without the right to the latest dividend awards.
West Africa-focused Endeavour Mining led the blue-chip risers board, lifting 2% or 39p to 1830p after a rise in the gold price to around $1,975 an ounce.
The FTSE 250 index fell 22.90 points to 18,734.89, with Inchcape down 9% or 77p to 790p after the car retail business published annual results.
Yellen comments hit US markets, FTSE 100 seen lower
07:39 , Graeme Evans
US shares closed lower yesterday after the Federal Reserve hiked interest rates by 0.25% and chair Jerome Powell ruled out the chance of rate cuts later this year.
Comments by Treasury secretary Janet Yellen added to the selling pressure after she told lawmakers there was no commitment to extend banking deposit insurance beyond the current $250,000 cap.
The S&P 500 index finished 1.6% lower, unwinding gains earlier in the week.
Deutsche Bank strategist Jim Reid said: “In an FOMC meeting that went to script but perhaps leaned dovish, Mr Powell’s press conference was overshadowed by his predecessor’s (Yellen) simultaneous comments that a blanket guarantee of deposits had not been discussed or considered.
“It seems highly unlikely the US would let depositors take losses but maybe such a move won't be done preemptively and would require future stress first. The reaction to her comments also highlighted the nervousness and fragility underpinning a big two-day rally.”
The dollar weakened following last night’s developments to leave the pound above $1.23 ahead of today’s Bank of England interest rates meeting. CMC Markets expects the FTSE 100 index to open 25 points lower at 7542.
Lloyd’s of London loses £800 million for 2022 due to drop in value of government bonds
07:28 , Michael Hunter
A sharp drop in the value of the stockpile of government bonds held by Lloyd’s of London has pushed the insurance syndicate to an overall loss of £800 million for 2022, down from a profit of £2.3 billion a year earlier
Unrealised losses on its investment portfolio, of assets it holds so it can sell them when it needs to make payouts and mainly made up of bonds, hit £3.1 billion, from a profit of £0.9 billion. The decline in the value of bonds has rippled through the financial world and came about as rising interest rates at central banks has cut demand. While the paper losses look steep, companies like insurers able to hold on to the bonds to maturity expect them to improve as market conditions normalise.
Lloyd’s made a profit of £2.6 billion from its underwriting business, up from £1.7 billion and its core market continued to grow, with gross written premiums up by almost a fifth to £46.7 billion, with volumes up 4%.
The Lloyd’s insurance marketplace, in Lime Street at the heart of the City, is the hub of the world’s face-to-face insurance broking trade.
John Neal, CEO of Lloyd’s said: “This is an outstanding underwriting result that follows several years of performance improvement, a comprehensive plan to digitalise our market, steady and sustained progress on our culture and purposeful action to help our industry and society manage the biggest challenges of our time.”
Playtech profit up despite UK slowdown
07:25 , Daniel O'Boyle
Profit at gambling technology provider Playtech rose to €405.6 million in 2022, but UK revenue fell due to “pre-emptive measures” its customers took ahead of the Government’s long-delayed reforms to the gambling sector.
Playtech’s UK operations brought in €126.7 million, which was down 4% from last year, while revenue in every other region was up by at least 30%.
The company - which provides much of the behind-the-scenes technology for well-known betting brands - said this was mostly due to steps taken to implement the reforms.
“The UK Government is currently undertaking a review into existing gambling laws in the UK,” it said. “In response, several operators are taking pre-emptive measures such as stake limits and affordability checks in an attempt to show regulators that the industry is able to self-regulate.”
Profit was up by 28%, as the company continued to expand in the Americas. Last week, it took an €85 million stake in Hard Rock Digital, the online arm of casino group Hard Rock International.
The company had appeared set to be sold last year, with CEO Mor Weizer backing an approach from an Asian investment group, but a bid never materialised.
End of the road for Amigo as it enters liquidation
07:23 , Simon Hunt
Amigo Loans is set to be liquidated after the lender was unable to raise enough capital to continue trading.
The firm said it would stop lending with immediate effect and before being placed into an orderly wind-down, with surplus assets being transferred to the creditors of its compensation scheme.
Danny Malone, Chief Executive Officer, said: “This is a very sad day for all our employees who have worked extremely hard to address historic lending issues and rebuild a new Amigo, and for our shareholders and wider stakeholders who have supported us.
“It’s also a sad day for creditors due redress who will now receive a lower level of cash compensation than they would”
City firms reveal merger deal
07:18 , Graeme Evans
City firms finnCap and Cenkos Securities are to merge, the two companies confirmed today.
The combination creates a business with more than 210 listed or quoted clients and employing more than 230 staff across equity capital markets, M&A advisory, debt advisory and private growth capital fundraising.
It will have in excess of £50 million of revenues and be led by the existing CEOs of Cenkos and finnCap as co-CEOs.
Cenkos boss Julian Morse called the merger “a true meeting of minds”, presenting the opportunity to create a full-service advisory house supporting growth and investment companies.
Recap: Yesterday’s top stories
06:57 , Simon Hunt
Good morning. Here’s a summary of our top stories from yesterday.
The US Federal reserve has raised interest rates by 25 basis points, with the target rate now set to 4.75% - 5%.
Beleaguered software businessWANdisco has appointed the boss of a rubbish firm to its board amid an investigation into potential fraud.
Profits at Fevertree slipped 44% to £24.9 million last year as the mixer and soft drinks maker wrestled with soaring cost inflation.
A new Guinness brewery in London’s Covent Garden has come a step closer to fruition after Westminster councillors approved a planning application by owner Diageo.
Today we’re expecting:
Lloyd’s of London results
Bank of England interest rate decision