FTSE 100 Live Thursday
Bank raises rates to 0.25%
Boohoo shares slide after profits downgrade
Federal Reserve clarity on 2022 outlook boosts markets
FTSE 100 ends the day higher as Bank of England hikes interest rates
16:55 , Naomi Ackerman
London’s FTSE 100 index gained 89.86 points on Thursday to close at 7260.61, up 1.25%.
The FTSE 100 was solidly in the green after banks were lifted on the Bank of England's surprise decision to hike interest rates for the first time since the pandemic hit.
City experts had thought rates would be kept on hold despite the leap in November's inflation rate to 5.1%.
When the move was first announced earlier today, Lloyds Bank jumped as much as 6.9%, Barclays rose 5.6%, NatWest was up 4.5% and HSBC rose 3.8%.
What does the rate rise mean for banks? Numis analyst, Jonathan Pierce, said the fact "we have a rate rise in the bag cannot be ignored".
He said: "The risk was we would see delays until at least Spring 2022, unhelpful for a sector where valuations needed rate hikes to progress. Today’s move alleviates that risk. Indeed, cash markets are already pricing in a 60%+ probability of another hike in February (albeit clearly there remains considerable uncertainty around Omicron)."
Unemployment figures have been robust, but new restrictions and a slowdown in economic activity due to the Omicron variant is expected.
The fund management firm created by Hargreaves Lansdown founder, Peter Hargreaves, topped FTSE 100 risers after posting a 560% profit increase for the year to end March.
Over to the FTSE 250, which was up 253.9 points, or 1.1%, at 22,657.79.
Domino's Pizza Group topped the risers, up 24% at 429p after the UK arm of the takeaway giant revealed this morning it had reached a deal with franchisees after a years-long row.
Former chief executive David Wild stepped down amid the dispute which saw franchisees refuse to open new stores unless they received an increased share of the profits.
Current CEO Dominic Paul told, a former Costa Coffee boss, told the Standard that the resolution can "unleash the true potential" of the brand.
He said the impasse had been "holding the business back for about three years", but that the deal is set to deliver an "accelerated growth framework".
That is all from the Evening Standard’s City desk today. More news tomorrow at standard.co.uk/business
Pearson names ex-Twitter chair as new board chief
15:31 , Oscar Williams-Grut
Pearson has called in a Silicon Valley veteran to run its board as the education publisher tries to reinvent itself as a “Netflix for textbooks”.
Omid Kordestani has been named as Pearson’s incoming chair and will join the board in March.
Kordestani has spent three decades working for tech companies in California, including pioneers like Netscape, Google, and Spotify. For the past five years he has been executive chair at Twitter and he sits on the board of “buy now, pay later” giant Klarna.
The Iranian-American said: “I believe Pearson has a tremendous opportunity to help everybody achieve a lifetime of learning.
“I’m excited to combine my background leading tech businesses with Pearson’s strong sense of purpose in my role as the new non-executive chair.”
Pearson is best known as the publisher of university and school textbooks but is trying to reinvent itself as a digital publisher as more learning shifts online. The transformation is being led by former Disney executive Andy Bird, who wants the company to become a subscription business for learning.
Bird said: “Omid has been a driving force behind the growth of a number of world-changing tech companies. I am thrilled that he will now be bringing that expertise to Pearson, enhancing our strategic direction and growth potential.”
In the same update Bird said recent trading has been in line with forecasts.
Shares are trading 2.7% higher on the news.
City Pubs boss: Office worker pubs to shut doors as ‘no one around’
15:30 , Naomi Ackerman
The boss of London‘s City Pub Group has revealed his venues in the City and other office-centred areas will close for Christmas early as the impact of work-from-home guidance and Omicron warnings has meant there is “no one around”.
But today he said: “By this Friday central London is going to be deserted. No one is going to be going to work next week.
“Anything that’s office worker-related in central London will be closed down by the weekend.”
The pubs veteran said his firm is delivering staff full pay while they are off with Covid, but warned that many smaller operators will not be able to do so and that some hospitality staff will “not get paid over Christmas”.
He added: “It would be massively helpful if the Government could reintroduce some form of furlough scheme.”
Read the full piece here
15:05 , Simon Freeman
Alan Monks, analyst at JP Morgan, says the “hesitation and unclear communications” from the MPC surrounding last month’s eventual interest rate hold left the Wall Street giant surprised by today’s move.
He summarises: “Right decision, wrong month.”
JPM forecasts another 25bp hike in February, possibly March, followed by two more doses of the same in August and November.
Hospitality trade body warns businesses have already lost £2bn in sales this month
14:58 , Naomi Ackerman
UK Hospitality boss Kate Nicholls has made a plea for business rates relief and VAT discounts to be extended, warning that the sector has been knocked harder than expected by the Plan B restrictions.
She said hospitality sales have already plunged by more than a third over the last 10 days with £2 billion of trade already lost in December.
Prior to the emergence of Omicron and Plan B restrictions, figures suggest the sector was on track to reach 95% of pre-pandemic trade levels. Consumer confidence has plummeted and businesses are facing devastating levels of cancellations, however.
The trade body said its members are expecting a further 22% drop in bookings in the coming weeks.
Nicholls said: “Christmas trade is always crucial for the hospitality industry, making up as much as a quarter of the year’s profit for many businesses.
“Last year Christmas was cancelled and so much rested on this December period for businesses already staggering under a burden of debt incurred from the pandemic and facing rising costs across the board.
“If operators are unable to trade profitably over the next month, many will simply not survive.”
FTSE up as rate increase lifts banks, Wall Street opens higher
14:45 , Naomi Ackerman
The FTSE 100 is solidly in the green after the Bank of England's surprise decision to hike interest rates for the first time since the pandemic hit lifted banks and pushed the index up nearly 1% to 7236.41.
Lloyds Bank jumped as much as 6.9%, Barclays rose 5.6%, NatWest was up 4.5% and HSBC rose 3.8% when the move was first announced earlier today.
In New York, the S&P 500 has opened slightly up at 4713.54, the Dow is 0.29% higher and the Nasdaq has sunk 0.24% at the open.
ECB holds rates but cuts back on bond buying
13:40 , Oscar Williams-Grut
The Bank of England isn’t the only central bank meeting today: the European Central Bank has just announced it is keeping its rates on hold.
However, the ECB said it will start to wind down the pace of bond buying under its Pandemic Emergency Purchase Programme (PEPP), which is due to end next March. At the same time, its ramping up bond buying through its Asset Purchase Facility, which is used during normal times.
Paul Craig, portfolio manager at Quilter Investors, said: “The European Central Bank (ECB) is keeping their distance from the Federal Reserve and Bank of England, who are moving to a tighter monetary policy stance. Although inflation is at record-levels for the bloc, ECB board members will be most concerned with the virus outbreak and economic deterioration, in Germany notably.
“Rate increases were clearly never on the table but the wind-down of asset purchases had to be confirmed from the current position which, in our view, is distorting financial markets. Should virus fears recede, 2022 looks set to be a decent year for the bloc economically speaking and as such it is in a good position to begin to scale back the extraordinary support.”
Reaction to first rate hike in three years
13:18 , Oscar Williams-Grut
As you’d expect, there’s a lot of chatter about today after the Bank of England moved to put up interest rates for the first time in three years.
Here’s a selection of what people are saying:
Federation of Small Businesses National Chair (FSB) Mike Cherry, said: “This move will increase pressure on small firms with debt – four in ten of which describe their level of borrowing as ‘unmanageable’.
“More than a million small businesses took out loans during the pandemic, with a significant proportion of them first-time borrowers. Many took on debt more than a year ago, on the basis that Covid would be under control by now.
“While Bounce Back Loans thankfully have a fixed interest rate, a lot of facilities held by firms – including Interruption Loans and debt that predates lockdowns – will be affected by the uplift, alongside personal borrowing. Any increase could push those just managing to make ends meet to the brink.”
Jesús Cabra Guisasola, associate at Validus Risk Management, said: “The BoE surprised the market for the second time after hiking interest rates by 15bps in a split vote of 8-1. Most market participants were pricing for the first hike in the February 2022 meeting, after the BoE decided to leave interest rates unchanged at 0.1% in the November meeting.
“News around the new variant of Covid which has been spreading rapidly in the UK during the last weeks has not been concerned for policymakers on their decision. Hence, the latest inflation and unemployment figures have weighted the balance for the BoE to hike interest rates to mitigate the risk of greater prices pressures in the coming months.”
Mike Owens, Global Sales Trader at Saxo Markets, said: “Looking ahead, we think this is likely to be a two and done kind of a scenario, and then the central bank is likely to go into a long wait-and-see mode. The Bank of England rate hike puts more pressure on the imminent ECB meeting too, especially if we factor in the fact that the Norges Bank also hiked rates this morning.”
Hannah Audino, economist at PwC, said: “Given it takes around 12-18 months for the full impact of an increase in rates to be realised in the economy, the Bank judged it necessary to raise rates today in order to maintain price stability in the medium-term.“But with cases at record levels and expected to continue rising, the risk of further social distancing measures, and signs that business confidence is already weakening, it is likely this modest rate rise could be the first and only one for some time.”
Jack Leslie, Senior Economist at the Resolution Foundation, said: “While the timing of the Bank’s decision to raise interest rates is odd given the economic damage currently being caused by Omicron, the fact is that it is unlikely to make much difference to either inflation or household budgets. The real action is with the Treasury – both in terms of needing to act to support businesses during Omicron, and in shaping the macroeconomic debates.
“With inflation being driven by global pressures, domestic rate rises won’t affect the underlying drivers of those pressures. And with fewer than one-in-ten home-owners on a variable rate mortgage, very few people will see a rise in their mortgage payments.
“Instead, today’s rate rise reflects the rude health of the jobs market, and the need to start normalising rates given the labour market recovery of the past year.”
FCA fines asset manager and former fund chief
13:14 , Oscar Williams-Grut
The Financial Conduct Authority (FCA) has fined the UK arm of Switzerland’s GAM £9.1 million and Tim Haywood £230,037. Fines would have totalled much more but both parties qualified for 30% discounts due to cooperation resolving the investigation.
GAM was fined for “failing to manage conflicts of interest” related to three investments made by the company’s Absolute Return and Long Only funds between 2016 and 2018.
Haywood, who worked at GAM between 2009 and 2019, was fined for failing to manage conflicts of interest and for breaking GAM’s gifts and entertainment policies.
Specific details weren’t given as the FCA said it needed to give an unnamed third party included in the report a chance to respond.
McBride shares lower as it warns of deeper losses
12:52 , Joanna Bourke
Cleaning products firm McBride has cautioned on higher costs it is facing.
The company said: “Raw material and packaging costs have continued to experience very significant inflationary pressures with availability continuing to impact our supply chain efficiency.”
It expects to report a first half loss of between £14 million and £17 million.
McBride said: “The increase in this loss compared to our previous update in October is a consequence of the ongoing rapidly rising input costs and the timing of pricing agreements.”
The shares declined 2.4p, or 4%, to 56.8p.
Bank shares leap on shock rate rise
12:35 , Simon Freeman
The Bank’s surprise decision to hike interest rates has lifted banks and pushed the FTSE 100 up another 1% to 7241.76.
Lloyds Bank jumped as much as 6.9%, Barclays rose 5.6%, NatWest was up 4.5% and HSBC rose 3.8%.
The pound rallied by as much as 0.8% against the dollar, while UK 10 year rate yields jumped 5 basis points.
Bank shocks with rate hike to 0.25%
12:14 , Simon Freeman
The Bank of England has surprised the City by raising interest rates for the first time since the pandemic struck.
The 15 basis point rise takes the benchmark rate from 0.1% to 0.25%.
Officials led by governor Andrew Bailey voted 8-1 in favour of lifting borrowing costs, with only one dissenter.
The move makes the BoE the first of the Group of Seven central banks to up rates since the start of the crisis.
Although only a marginal increase, banks will waste little time in removing the cheapest mortgage deals from the market.
THG shares lifted as work with Matalan announced
11:36 , Joanna Bourke
Shares in under-pressure THG made gains today as a new partnership between the tech firm and retailer Matalan was announced.
Matalan said it will migrate its digital platform in 2022 to THG Ingenuity “to support and accelerate extensive online growth”.
Shares in THG rose more than 7%. The firm this year spooked investors with plans for THG Beauty to be separated and listed on a public share-trading exchange in 2022.
The company would focus on its ‘Ingenuity’ division which provides a direct to consumer digital service for brands, including hosting websites and creating content.
Daily Mail take private bid wins approval
11:35 , Oscar Williams-Grut
The owner of the Daily Mail has succeeded in its efforts to take the paper’s parent company private.
Lord Rothermere, the great grandson of the paper’s founder, has secured enough shareholder support for his takeover bid for DMGT Media, which owns the Daily Mail and other assets such as the Metro and businesses in events and insurance.
A vehicle controlled by Lord Rothermere said it had received support from 56.7% of DMGT Media for its offer to buy the company, clearing the 50% level required to push the deal through.
The level was cleared after influential fund manager and major investor Nick Train yesterday backed the bid. Nick Train’s company Lindsell Train holds 13.7% of DMGT’s stock, making it the second biggest investor after the Rothermere family, with a 13.7% stake.
Shares rose 12p, or 1.1%, to 1044p.
Buyback boosts Aviva shares, Dunelm gets upgrade
10:37 , Graeme Evans
An extra £250 million from Aviva boss Amanda Blanc fired up the insurer's shares today as she kept alive hopes that investor returns will be well above £4 billion by next year.
Blanc's increase in the ongoing buyback programme from £750 million to £1 billion comes amid pressure from activist investor Cevian Capital for Aviva to eventually return as much as £5 billion from a recent flurry of business disposals.
Aviva is sticking by its commitment to hand back at least £4 billion, with a further update on its capital return and dividend plans due with annual results in March.
But shares rose 5p to 401p as investors took today's increase as a sign of potential further upside from one of the London market's highest-yielding stocks.
Elsewhere on a packed blue-chip risers board, technology stocks rallied after US bond yields held firm in response to the Federal Reserve's decisive approach on tackling inflation.
The guidance included three hikes in interest rates in 2022, but investors liked the clarity as markets enjoyed a risk-on session in the wake of the central bank meeting.
The FTSE 100 index rallied 61.98 points to 7232.73, with Alibaba and Tesla investor Scottish Mortgage Investment Trust up 3% and cyber security firm Darktrace 4% higher.
IG analyst Chris Beauchamp said: “The overwhelming feeling appears to be that of relief that the Fed’s plan for the year is now in the public sphere, giving investors something to work with as they look ahead to the next 12 months.
“After all, you only raise rates when the economy is improving, so there is still a case to be made for being long equities.”
The FTSE 250 index rose 243.04 points to 22,676.92, aided by recoveries for Cineworld and Restaurant Group of 13% and 6% respectively.
Shares in retailer Dunelm bucked the gloom elsewhere in the sector this week by rising 68p to 1380p, aided by a “buy” recommendation from analysts at UBS.
They raised their price target from 1300p to 1750p amid expectations that the homewares business will continue to perform ahead of rivals, driven by trends such as hybrid working, greater interest in home improvement and strong online growth.
Recruitment firm Robert Walters is another stock enjoying favourable trends after it revealed that profits are "comfortably" ahead of forecasts amid a tight labour market. The All-Share stock rose 17p to 775p and is up by two-thirds in the year to date.
Domino’s Pizza Group shares surge after UK arm of takeaway giant ends years-long dispute with franchisees
10:26 , Naomi Ackerman
Domino's Pizza Group shares surged this morning as the UK arm of the takeaway giant revealed it has reached a deal with franchisees after a years-long row.
Former chief executive David Wild stepped down amid the dispute which saw franchisees refuse to open new stores unless they received an increased share of the profits.
The new deal will see Domino's invest £20 million over the next three years into improving its e-commerce offering, into marketing and store opening incentives - in return for pledge from franchisees to deliver 45 new branch openings per year. Franchisees will also take part in national promotion deals, and test new tech, store formats and recipes.
Domino's stock was up as much as 23.4%, or 81p, at 427p, in early trading on the news.
Read our chat with current CEO Dominic Paul on the deal and what it means for Domino’s here
Boohoo lowers full-year sales guidance, sending shares lower
08:56 , Joanna Bourke
Fashion firm Boohoo has warned pandemic-related disruption is hitting the business, prompting it to reduce full-year sales guidance.
The shares fell 11%, or 15.25p, to 122.6p in early trading after the AIM-listed retailer pointed to a number of headwinds it has been grappling with.
There have been higher freight costs as industry-wide supply chain disruption bites, and continued extended delivery times have impacted international demand.
Read more HERE.
Tech stocks boost FTSE 100, Boohoo down 16%
08:42 , Graeme Evans
The FTSE 100 index is up by more than 1% as financial markets continue to welcome the Federal Reserve's decisive stance on inflation.
The top flight added 80.14 points to 7252,32, led by technology-focused stocks on relief that US bond yields have held firm despite the prospect of US interest rates rising three times next year.
Alibaba and Tesla investor Scottish Mortgage Investment Trust added 3% and AI cyber security firm Darktrace rallied 4% at the top of the FTSE 100 index. The domestic-focused FTSE 250 index also climbed 1%, led by Domino’s Pizza after its shares jumped 20% on the back of a long-awaited agreement with its franchisees regarding future growth plans.
The main interest outside the FTSE 350 index was on Boohoo shares after its profits warning.
The fast-fashion retailer fell 16% on AIM after warning that sales growth will be between 12% and 14% rather than the 20% to 25% in its previous guidance. Shares in rival ASOS also fell 5%.
Fed progress seen as positive for stocks
08:01 , Graeme Evans
Last night's calm reaction of financial markets represents success for the Federal Reserve in managing expectations for a potential three rate rises in 2022.
This doesn't mean investors should expect a smooth ride, however, as policymakers go about their plans for tightening monetary policy.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said: “While volatility is to be expected, we believe a still-accommodative policy backdrop, along with solid economic and corporate fundamentals, should support further upside for equities.
“We favour the likely winners from global growth, including energy and financials, balanced with exposure to more defensive sectors like healthcare.”
Haefele also believes that inflation will slow by more than the Fed anticipates in 2022 and that this should the ease pressure on policymakers to act.
Markets rise despite hawkish Fed tone
07:39 , Graeme Evans
Global markets are on the front foot today, despite US Federal Reserve policymakers signalling three interest rate rises in 2022.
The more hawkish tone in response to the threat of rising inflation failed to spook Wall Street as the Dow Jones Industrial Average closed more than 1% higher. Japanese stocks tracked the rally by adding 2% and the FTSE 100 index is due to rise 80 points to 7250.
Attention now turns to meetings by the European Central Bank and Bank of England, with the latter expected to keep rates on hold despite the leap in November's inflation rate to 5.1%.
Michael Hewson, chief markets analyst at CMC Markets, said: “The US is facing similar Omicron challenges to the UK, yet the Fed was able to deliver a message that was clear and concise, something the Bank of England has consistently struggled with.”
He said the Bank's monetary policy committee had “bottled” the decision to raise rates in November by 0.15%, a move which would have been easy for the market to absorb and would have allowed policymakers to take no action today.
Since then, unemployment figures have been robust and inflation is now close to its highest level since 1992. However, new restrictions and a slowdown in economic activity due to the Omicron variant mean most economists think the Bank will continue its wait-and-see approach.
Hewson added: “If today’s decision was based on the data alone, which ultimately it should be, a rate rise wouldn’t even be open to debate.”