FTSE 100 Live: Pound slips over recession fears, borrowing surges in December record, Primark sales boost

 (Evening Standard)
(Evening Standard)

Government borrowing today surged by more than expected to post the highest December figure since monthly records began in 1993.

The cost of energy support schemes and a jump in debt interest resulted in public sector borrowing of £27.4 billion, some £16.7 billion higher than the same month in 2021 and above City expectations for a figure of £17.75 billion.

In corporate updates, Associated British Foods said trading at Primark had been better than expected in the 16 weeks to 7 January after sales growth in the UK of 15% on a year earlier.

That’s all folks. Tomorrow: Easyjet

Tuesday 24 January 2023 18:30 , Simon Hunt

That concludes our liveblog coverage today, on the day a sharp rise in spending on energy support schemes and an increase in debt interest led to a bigger-than-expected jump in UK government borrowing.

The Evening Standard City Desk will be back at 7am tomorrow, when a trading update from easyjet will shed light on the performance of the UK’s airlines and travel operators over the festive period.

Amazon closes one London Fresh store, opens another as expansion plans slow

Tuesday 24 January 2023 17:45 , Simon Hunt

Amazon has closed one of its London Fresh stores and opened another elsewhere in a sign the tech giant is cooling its grocery retail expansion plans for the capital.

The Amazon Fresh Dalston site was closed earlier this month, less than 18 months after the store was first opened, with staff being offered jobs at nearby locations.

An Amazon spokesperson could not confirm whether further site closures were being looked at in London. The closure was first reported by the Retail Tech Innovation Hub (RTIH).

The tech giant, which also owns the upmarket supermarket chain Whole Foods, first introduced the high-tech stores in London in March 2021 at a site in Ealing, before expanding at breakneck speed with the opening of a further 18 across the UK in a matter of months.

As many as 100 Amazon Fresh stores had been planned for the UK, according to RTIH – but now the firm has announced just two new sites for London.

FTSE closes down 27 points: Evening wrap

Tuesday 24 January 2023 16:56 , Simon Hunt

The FTSE 100 closed down 27 points to 7,757.36 at the end of the day’s trading session in London. Energy and healthcare stocks were the worst performers, down an average of 0.9% and 2.3% respectively.

It’s also been an unhappy day for sterling, with the pound losing about a cent against the dollar to $1.23.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, said: ’The pound has slipped against the dollar, as worries resurface about the fragility of the UK economy, with recent resilience on the wane, but there is still hope of better times to come.

“Sterling retreated from small early gains to fall 0.5% against the dollar to $1.23, and the gloomy reading from the S&P Global CIPS purchasing managers index  contributed to a stumble for the FTSE 100.”

Gold closes in on sterling high

Tuesday 24 January 2023 15:34 , Simon Hunt

Gold is closing in on a record sterling high, rising to £1,576 an ounce, just shy of its peak level of £1,580, reached in March of 2022, sitting just 6% below its peak in August 2020.

Laith Khalaf, head of investment analysis at AJ Bell, said: “A weakening dollar, the reopening of China, and a slowing global economy have all helped propel the precious metal upwards in recent months.

“It’s likely that gold has received a bit of a nudge from short term traders too, as a ‘golden cross’ has appeared on the technical charts. This happens when a short-term moving average of prices, usually 50 days, rises above a long-term moving average, usually 200 days (see chart below). Gold has just experienced one of these graphical epiphanies, and a golden cross is often used by technical traders as a buying signal.”

Wall Street stocks slip as earnings season kicks in

Tuesday 24 January 2023 14:43 , Michael Hunter

Wall Street’s S&P 500 fell in opening trade as investors took in a series of big-name company reports at the start of quarterly earnings season.

Overall, the broad New York index fell 19 points to 4001.13, a drop of 0.5%. Shares in General Electric fell 2.6% after it predicted a difficult year ahead, in particular for its power business. Shares in 3M were down almost 5% after it missed forecasts for the fourth quarter, hit by the stronger dollar in the period.

FTSE 100 midday movers: Fresnillo shines on upbeat hopes for the precious metals market

Tuesday 24 January 2023 12:36 , Michael Hunter

Mexican silver miner Fresnillo caught investors’ eyes and topped the FTSE 100 today, amid upbeat hopes for growth on the precious metals market after a detailed report into its size predicted it would grow by over a third by 2028.

The forecast, from research firm Proficient Market Insights, came after a recent broker downgrade hit Fresnillo, which look today to give it room to rally.

Associated British Foods was among the biggest fallers, after inflation ate into its profit margins and investors moved out of the stock after a recent run higher into today’s trading update.

Pound slips as recession fears undercut new year rally into Bank of England interest rate call

Tuesday 24 January 2023 11:11 , Michael Hunter

Sterling slipped further today as forward-looking data pointed to recession and served as a reminder of the difficulties faced by the UK’s economy, which the Bank of England forecasts will be in recession throughout 2023.

The pound fell 0.5% to $1.2317, leaving it on course for a second successive session in retreat. It followed a spike in public sector borrowing, as figures included the cost of the government’s intervention in the energy market.

Also. Purchasing Managers’ Index data for the services sector pointed to decline for the biggest part of the economy, coming it at 48, well below the 50-mark that separates expansion from contraction. It also missed forecasts of 49.7, and was down from the previous reading of 49.9. The showing was also notably worse than equivalent numbers for European countries.

Sterling’s drop interrupted a wider rally for the currency during January, after a run of encouraging numbers on the economy and a series of bright spots for high street trading over Christmas, even as overall retail sales failed to impress. There has also been some support with the BoE expected to increase interest rates by another 0.50% next week, although weaker data may unnerve policy makers.

Rolls rallies but BP and Astra shares lead FTSE 100 lower

Tuesday 24 January 2023 10:24 , Graeme Evans

Rolls-Royce shares rose another 2% today as investors welcomed more signs of improving conditions in the engine giant’s aerospace markets. The gain of 2.2p to 110.4p took Rolls to the top of the FTSE 100 index and left the stock at its highest level since last February.

The Rolls valuation has taken its time to rebuild since the pandemic, although with airline customers reporting stronger-than-expected demand there’s increased hope that all-important engine flying hours can finally make up lost ground.

The positive mood was given a further lift by today’s update from FTSE 250-listed Senior as the Airbus and Boeing parts supplier forecast 2022 profits at the top end of City hopes.

Senior, whose components are used in everything from air duct systems to precision sheet metal fabrications, said aerospace activity had been in line with hopes and that demand in the heavy duty truck and power and energy markets was particularly strong.

Shares raced ahead 11% or 15.6p to 152p, leaving Senior at its highest level since early last year. Analysts at Jefferies have a price target of 190p, believing the Hertfordshire-based company has significant recovery potential.

The enthusiasm towards aerospace also helped British Airways owner IAG to lift another 2.7p to 165.1p as it continued a recovery from 100p seen in late October.

Its progress failed to prevent the FTSE 100 index from easing 33.10 points to 7751.57 as heavyweight stocks came under pressure. Fallers included AstraZeneca, which dropped 230p to 10,808p, and BP after a decline of 5.7p to 475.1p.

The FTSE 250 index clung to positive territory by adding 28.29 points to 19,829.98, helped by a 7% or 15.6p rise to 243.6p for private equity firm Bridgepoint.

One of the best performers of the session was AIM-listed corporate energy supplier Yu after it said it was in the “fast lane of growth” following its fifth upgrade to forecasts for 2022 results. Shares jumped 62p to 700p, having been just above 200p in October.

City Pub Group takes 3.5% knock from strikes

Tuesday 24 January 2023 09:41 , Simon Hunt

Further signs of the damage of rail strikes to the hospitality sector emerged today after London-based chain City Pub Group said it had recorded a £750k hit from industrial action.

The firm, whose sites include Three Crowns on Old Street, Temple Brew House on The Strand and The Cock & Bottle in Notting Hill, said the strikes wiped out around 3.5% of its revenues in the fourth quarter.

City Pub Group boss Clive Watson said: “We would have had a record week had it not been for the strikes – which also had an effect on staff bonuses and tips.”

Watson urged union bosses and government ministers to come to an agreement to end industrial action, adding: “Given all we’ve faced over the last three years we’ve got to pull together.”

Despite the knock from strikes, the firm said sales were up 7.8% on pre-pandemic levels in the run up to Christmas, after getting a boost from the unusually-timed winter World Cup. Shares climbed 1.7% to 76p.

Budget setback as public borrowing surges

Tuesday 24 January 2023 09:08 , Graeme Evans

The chances of Budget giveaways on 15 March have been further reduced by today’s worse-than-expected public finances figures.

The total of £27.4 billion for December was the third month in a row that borrowing has exceeded the same month a year earlier.

Total expenditure came in at £91.2 billion, which was £16.4 billion higher than last December. However, total tax receipts of £74.6 billion were higher than last year’s £70.6 billion.

There’s also some encouragement for Chancellor Jeremy Hunt through the recent fall in wholesale gas prices, which Capital Economics thinks will mean the government’s energy price subsidies could cost at least £10 billion less than projected in 2023/24.

The consultancy believes that borrowing will be lower than projected by March 2024 and that the Chancellor may still be in a position to cut taxes or raise spending ahead of the next general election.

FTSE 100 disappoints, AB Foods shares lower after update

Tuesday 24 January 2023 08:57 , Graeme Evans

The FTSE 100 index has fallen 33.90 points to 7750.77, with GSK and AstraZeneca 1% lower during a worse-than-expected performance for the London market.

Associated British Foods fell 18p to 1851.5p as investors used today’s update as an opportunity to lock in profits after a recent strong run for shares. They also sold Diageo and Unilever as the consumer-focused pair retreated 34p to 3671.5p and 32p to 4073.5p respectively.

Rolls-Royce was the leading riser, up 1.8p to 110p in the wake of a strong update from aerospace components supplier Senior. Its shares jumped 10% or 13.2p to 149.6p in the FTSE 250 index as the UK-focused benchmark moved 28.67 points higher at 19,830.36.

M&C Saatchi chairman to step down after ‘record' year

Tuesday 24 January 2023 08:09 , Michael Hunter

M&C Saatchi, the advertising and branding agency, said today that its chairman, Gareth Davis, is stepping down after what it called a “record year”.

The London-based company said profit before tax for 2022 would reach at least £31 million, the largest in its history and in line with guidance, up 14% year. Revenue was expected to reach £271 million, up from £249 million.

Davis will stay on until a successor is found, with the search already underway. He said: It has been a privilege to chair M&C Saatchi through a three-year turnaround.”

Employing almost 3,000 staff in over 30 cities, the company founded by brothers Maurice and Charles Saatchi remains famous for its ads for the Conservative Party in the 1980s, and a series of creative campaigns that transformed London’s reputation as a centre for the global advertising industry.

FTSE 100 higher following Wall Street boost

Tuesday 24 January 2023 07:57 , Graeme Evans

Technology-focused companies last night helped US markets to post a second session in a row of gains, with the Nasdaq Composite up 2% and the S&P 500 1.2% higher.

The improvement followed the latest batch of fourth quarter earnings and amid hopes that the Federal Reserve will moderate its approach to interest rate hikes.

Wall Street’s performance has set the tone for a positive session in Europe after CMC Markets forecast that the FTSE 100 index will open 20 points higher at 7804.

The FTSE 100 index yesterday rose 0.2% and the FTSE 250 index lifted 0.5% amid stronger trading by cyclical stocks.

Saga cruises toward 50% revenue rise as the over 50s return to the seas

Tuesday 24 January 2023 07:47 , Michael Hunter

Saga. the holidays. media and insurance group focused on the over 50s, said revenue is set to rise by between 40% and 50%, helped by demand for cruises after the end of Covid restrictions.

The company said it expected its cruises to be by 84% full in the second half of the 2022/23 financial year, taking its full-year load factor to 75%, up from 68% and in line with guidance.

Travel insurance revenue was expected to rise 200%, with policy sales up 95%. But it described the market for car insurance as “challenging”, with overall total policies in force across its insurance business 3% behind the previous year. It also said there was “some pressure” on its underwriting business, but it expected its retail broking unit to meet forecasts.

Borrowing surges on cost of energy support

Tuesday 24 January 2023 07:45 , Graeme Evans

A sharp rise in spending on energy support schemes and an increase in debt interest today led to a bigger-than-expected jump in UK government borrowing.

The figure of £27.4 billion was the highest for December since monthly records began in 1993 and compared with City forecasts of £17.7 billion.

Debt interest payable was £17.3 billion last month, largely due to the effect of soaring inflation on index-linked gilts.

The period also included the ongoing impact of the government’s energy price guarantees and the third round of energy bills support scheme payments costing £1.9 billion.

Today’s figure means the public sector borrowed £128.1 billion in the financial year to December, £5.1 billion more than the same period last year.

Record Christmas for Primark, ABF says

Tuesday 24 January 2023 07:31 , Simon Hunt

Primark owner ABF hailed a record Christmas as cash-strapped shoppers flocked to the budget fashion retailer to escape cost-of-living pressures.

Sales at Primark climbed 15% in the 16 weeks to the beginning of January, reaching a record high in the week running up to Christmas day. The firm has plans to open a further 17 new stores in the course of the year, the first store in Slovakia and the first in Hungary.

Overall group revenue at ABF was up 20% to £6.7 billion, but the firm warned inflation, labour costs and a strong dollar meant profits were squeezed compared to last year.

ABF said in a statement: “We believe our proposition of great quality at affordable prices and attractive store experience is proving increasingly appealing to both existing and new customers.

“Early trading in this new calendar year has been encouraging but macro-economic headwinds remain and may weigh on consumer spending in the months ahead.”