FTSE 100 Live: Interest rates hit 4%, Shell posts record profit

 (Evening Standard)
(Evening Standard)

Interest rates rose another 0.5% to 4% today as the Bank of England continues the fight against inflation with its 10th increase in a row.

Governor Andrew Bailey also said that the UK’s expected recession will be shorter and shallower than forecast in November.

Meanwhile, Shell today reported a bigger-than-expected record profit of $39.9 billion (£32.1 billion) after soaring oil prices boosted its performance in 2022.

FTSE 100 Live Thursday

  • Shell profits hit $39.9 billion in 2022

  • Stocks rally on hopes of US rates pivot

  • BT hails progress on broadband roll-out

New York stocks head higher on relief at smaller Fed rate hike

Thursday 2 February 2023 14:44 , Michael Hunter

Wall Street’s S&P 500 made strong gains in opening New York trade after the Federal Reserve adopted a softer, 0.25% rate hiking strategy overnight, in line with market expectations but soothing outlying fears that it might stick with bigger moves.

There was also support from a surge for Facebook’s parent, Meta, after it beefed up cost cutting plans to around $5 billion this year and announced a $40 billion capital return. Its shares surged by almost 20% .

Overall, the broad New York stock index rose 30 points to 4149.89

European Central Bank lifts eurozone interests rates by 0.50% as expected

Thursday 2 February 2023 13:24 , Michael Hunter

Eurozone interest rates went up by 0.50% today, in a widely expected move at the European Central Bank that takes the rate on its deposit facility to 2.50% and its refinancing rate to 3%.

City experts predict where interest rates will peak after 0.50% hike to 4% from the Bank of England

Thursday 2 February 2023 13:00 , Michael Hunter

After the tenth consecutive hike in a row took interest rates to 4% today for the first time in 14 years, City experts are starting to predict where and when the Bank of England’s Monetary Policy Committee will stop. Here is a round up of some of the reaction in and around the square mile:

Thomas Pugh, economist at audit, tax and consulting firm RSM UK: “We expect the MPC to pause its tightening cycle in March at 4.25%.

“We expect wage growth to come down sharply over the next six months to a year as firms dramatically reduce their hiring in the face of weak demand. What’s more, higher interest rates will force the weakest firms under and cause struggling firms to make redundancies, pushing up the unemployment rate and further weighing on wage growth.”

Sjaene Higgins, mortgage operations manager at the Wesleyan Group: “Markets expect the Bank rate to level off at around 4.5% later this year. This is good news, but it still signals higher costs on the horizon.

“The big thing everyone’s wrestling with is timing. Those with fixed rate deals expiring soon will be wondering whether it will pay to re-mortgage now. Those looking to buy a property will be watching mortgage rates rise, just as house prices are forecast to take a plunge.”

Andrew Aldridge, partner at Deepbridge Capital: “Peak interest rates for the year remain unclear, creating a challenging environment for investors and financial advisors. Today’s decision underscores the importance of alternative investment opportunities available in the private markets and venture capital—sectors providing long-term growth and unparalleled tax reliefs via Government-backed mechanisms like the Enterprise Investment Scheme.”

The pound falls and FTSE 100 rises as the Bank of England softens its language on rate hikes

Thursday 2 February 2023 12:46 , Michael Hunter

Sterling was lower in the wake of the Bank of England’s re-drawn forecasts for the UK economy and a change in tone on its fight against inflation, even after it lifted interests rates for the tenth time in a row, taking them to 4%.

But the BoE also said inflation may have peaked, which traders took as a cue that UK rates could soon do the same as policymakers gain traction in their moves against rising prices.

As the markets absorbed the BoE’s words, the pound was down 0,5% at $1.2317, leaving it down over 8% over the past 12 months. But for 2023 to date, it is up around 2%. It was noted in dealing rooms that policymakers’ previous pledge to respond”forecfully” to further inflationary pressure was not repeated this time around.

And the BoE pointed clearly to the prospect that inflation had already peaked “across many advanced economies, including in the United Kingdom”.

The FTSE 100 was up 45 points at 7084.62, a rise for the day of 0.5%.

BoE says recession now expected to be shorter and shallower with peak inflation reached

Thursday 2 February 2023 12:24 , Michael Hunter

The Bank of England is still expecting the size of the UK economy to shrink this year, but its official forecasts now point to a shorter and shallower recession.

Overhauling its outlook in an update after November’s dire prediction of a recession that would outlast 2023, the BoE said today that the economy would “fall slightly” over the year as energy costs and wider inflation rates ease. That means the eventual peak to interest rates, the main tool to fight inflation, could come sooner and be lower than previously thought.

The BoE also said today that inflation may have already peaked, after it was sent soaring via higher energy costs after Russia’s invasion of Ukraine.

While consumer price inflation “remains high”, the BoE also said “it is likely to have peaked across many advanced economies, including in the United Kingdom”. The BoE’s target for inflation is 2%. The Consumer Prices Index for December reached 10.5% when it was published last month. January’s reading is due on February 15.

Bank of England hikes interest rates to 4% with 0.50% rise

Thursday 2 February 2023 12:02 , Michael Hunter

UK interest rates have hit 4% after the Bank of England’s Monetary Policy Committee voted 7-to-2 for a hike of 0.50%, taking the baseline cost of borrowing to its highest in 14 years.

It was the 10th consecutive meeting at which there was a rise and the move will add to the pressure on thousands of struggling London homeowners, who are caught up in crossfire of the BoE’s fight against inflation.

The move will have an immediate impact on the mortgage bills of the estimated 200,000 homeowners in London who are on tracker or variable rates that move in line with the base rate. It is also expected to accelerate the fall in house prices.

JD Sports sets £1 billion long-term profit goal

Thursday 2 February 2023 10:23 , Daniel O'Boyle

JD Sports has set a goal of £1 billion in annual operating profits within the next five years, as it prepares to lay out international expansion plans today.

Ahead of a capital markets day today, the retailer revealed that it intends to open 250 to 300 new stores per year, as part of a strategy of “store expansion in underpenetrated markets”.

CEO Régis Schultz said the group planned to expand internationally to hit these targets.

“Today marks a new, distinct chapter in the growth story of JD as we set our plans to become the leading global sports-fashion powerhouse,” he said. “Building on our strong existing position and attractive long-term market dynamics, we see significant growth opportunities ahead by expanding JD internationally, notably in North America and Europe.”

“We will also be enhancing our omnichannel retail offering, investing in technology and analytics, and leveraging our long-term strategic brand partnerships, to better serve more customers.”

JD Sports shares are up 3% so far today to £1.68.

WPP and Ocado shares rally, FTSE 250 above 20,000

Thursday 2 February 2023 10:23 , Graeme Evans

A buoyant session for growth and technology stocks today pushed the FTSE 100 index back near a record high.

The upbeat mood in London reflected Wall Street’s optimism that interest rate hikes by the Federal Reserve are nearly over after last night’s smaller increase of 0.25% to a range of 4.5% to 4.75%.

The hopes of an imminent pivot in approach by US policymakers meant the S&P 500 rose 1% and New York’s index of mega-cap tech stocks by 4%, even though Fed chair Jerome Powell insisted the fight against inflation is far from over.

The Wall Street gains were before Facebook and Instagram business Meta Platforms delivered better-than-expected guidance on 2023 sales and announced plans for share buybacks of up to $40 billion (£32.4 billion).

The bullish fourth quarter results statement helped Meta’s shares to jump by a fifth in after-hours trading and contributed to a strong session for several London-listed stocks.

Beneficiaries in the FTSE 100 included the media and advertising agency WPP, which put on 4% or 36p to 994.6p, and Scottish Mortgage Investment Trust as the tech industry backer rallied 4% or 32.2p to 779.4p.

The confidence boost also helped grocery technology business Ocado to improve 6% or 36.8p to 697p and North America-focused JD Sports Fashion up by 5.4p to 168.7p.

The FTSE 100 index reached 7813 at one stage, some 90 points off its May 2018 record, before settling 22.28 points higher at 7783.39.

Resurgent growth stocks helped the FTSE 250 index to return above the 20,000 threshold as fast fashion chain ASOS jumped 7% or 66p to 891.6p and Trustpilot investor Molten Ventures lifted 24.8p to 376.6p.

Magazine publisher and online platform Future also rebounded 99p to 1622p to help the FTSE 250 stand 1.3% or 266.42 points higher at 20,164.96.

Cyber security firm NCC bucked the trend, however, falling 10% or 18.2p to 166.2p after half-year results highlighted that customers are taking longer to reach buying decisions.

Zopa bank defies tech gloom with £75 million funding round

Thursday 2 February 2023 10:07 , Simon Hunt

Further signs of the resilience of London’s fintech sector amid a wider global tech rout emerged today, after digital bank Zopa said it had raised a further £75 million in its latest funding round to turbo-charge its expansion plans.

The deal, which adds to the $300 million the firm raised in 2021, will be used to fuel its M&A dealmaking and help it meet the bank’s capital requirements for its growing balance sheet.

Zopa CEO Jaidev Janardana said: “Today’s equity round reaffirms the support of our investors despite the challenging economic environment.

“Zopa takes an agile and dynamic approach to credit risk which means it has continued to lend responsibly in a changing environment. As a result, our business remains resilient with record loan origination volumes, stable credit performance comparable to pre-pandemic levels, and continued innovation.”

In December, the firm vowed to continue hiring and raise minimum salaries more than 20% to £27,000 to attract and retain talent. Its employee headcount has climbed 19% to top 600 in the past year, according to LinkedIn data.

Zopa didn’t disclose a company valuation following the funding round but said the deal “markedly enhances” its ‘unicorn’ status.

Southend Airport owner’s shares dip after profit warning

Thursday 2 February 2023 09:02 , Daniel O'Boyle

Southend Airport owner Esken’s shares dipped by 3% as it issued a profit warning for its renewable energy division after “unplanned outages” at biomass energy plants.

Esken Renewables, which supplies waste wood to biomass power plants, previously expected an operating profit of £22 million for the year ended 28 February. However, it now expects this figure to come to £20 million, as it supplied less wood than expected during the winter due to “continued and further unforeseen outages” as a cold snap hit the UK in December.

Esken said it would normally expect to make up these losses over time, but because the outages occurred close to the end of its financial year, there would not be time to do so in 2022-23.

Tech stocks bounce after Meta update, Shell up 2%

Thursday 2 February 2023 08:50 , Graeme Evans

Ad agency WPP and Scottish Mortgage Investment Trust were today sharply higher following last night’s strong session on Wall Street.

Both benefited from the read-across from the better-than-expected update from Meta Platforms, as well as optimism that the US Federal Reserve might be close to the peak for interest rates.

WPP jumped 5% or 45.4p to 1004p and tech investor Scottish Mortgage lifted 4% or 26.8p to 774p. JD Sports Fashion, which has significant operations in North America, rose 4.4 to 167.7p and grocery technology stock Ocado bounced 6% or 37p to 697.2p.

The FTSE 100 index rose 0.35% or 26.75p to 7787.86, with Shell up 2% or 41p to 2407p after its record annual profit was accompanied by a 15% hike in its fourth quarter dividend.

The FTSE 250 index returned above 20,000 after adding 1% or 192.24 points to 20,090.78, led by ASOS with a rise of 56.5p to 948.

Cyber security firm NCC bucked the positive tech trend, falling 14% or 25.8p to 158.6p after its interim results highlighted that customers were taking longer to reach buying decisions.

Superdry boss insists: no plans to go private

Thursday 2 February 2023 08:11 , Simon English

SUPERDRY founder Julian Dunkerton today denied he is looking at taking the business off the stock market.

With the shares down 35% in the last year there has been gossip he could take the company private and seek to rebuild it away from the glare of the market.

Today he issued a statement insisting there are “no plans to do this at the moment”, which means he now can’t do so for the next six months under City takeover rules.

Dunkerton, who owns 20% of the stock, came back to the business he set up in anger at how the business was being run. He claimed the board did not understand fashion.

BT to build internet “like fury"

Thursday 2 February 2023 08:03 , Simon English

BT today claimed it is winning the broadband race, building “like fury” to give Britain an ultra high-speed internet network that should rival any in the world. It is doing 62k premises a week and is 38% into its 25 million target for the fastest internet connections.

The company was hit by eight days of strikes recently, but has reached a settlement with unions that ought to hold firm for the near future at least.

Various so-called “altnets” – small telecom players – are competing with BT in some areas, though it is far from clear they will have enough scale to truly make a difference.

CEO Philip Jansen welcomes the competition, especially in hard to reach parts of the country. But said: “We are really ramping it up now, despite the economic challenges. We are going to put our foot down.”

In the nine months to December 31, revenue slipped 1% to £13.6 billion. Profits fell 15% to £1.3 billion.

The City is likely to be pleased with progress. BT shares open today at 124p

Rates set to rise, FTSE 100 higher after US rally

Thursday 2 February 2023 07:50 , Graeme Evans

Updated economic forecasts by the Bank of England will today help the City understand if interest rates are near their peak.

Today’s expected 0.5% increase by the Bank will take the base rate to a fresh 14-year high of 4%, but with economists looking for the Bank to pause monetary tightening at 4.25% or 4.5%.

Last night’s 0.25% hike in the Federal Reserve was the smallest in almost a year and took US interest rates to a range of 4.5% and 4.75%.

Policymakers said further increases would be necessary to ensure monetary policy is “sufficiently restrictive” to return inflation to 2%.

Despite this message, the S&P 500 closed 1% higher and the Nasdaq surged 2% after sentiment towards the tech sector was also boosted by a better-than-expected earnings report from Facebook owner Meta Platforms.

The pound has strengthened to near $1.24 following the US rates meeting, while CMC Markets expects the FTSE 100 to open 30 points higher at 7791.

Shell reports record-breaking annual profits fuelled by high gas prices

Thursday 2 February 2023 07:41 , Michael Hunter

Energy giant Shell has posted annual profit of almost $40 billion (£32 billion) for 2022, its biggest ever and one of the highest figures ever made by a UK company.

It is double what Shell made last year, sent higher by soaring gas prices after Russia’s invasion of Ukraine. Earnings in the fourth quarter alone came in at almost $10 billion, with the biggest contribution coming from its gas business.

The scale of the earnings will energise calls for windfall taxes on resource companies at a time when the government is subsidising bills for hard-pressed households during the cost-of-living crisis.

The profits beat City expert’s forecasts and Shell pledged to return $4 billion to investors via a share buyback. The 115-year old company also lifted its dividend payout by 15%.

Wael Sawan, who took up his appointment as CEO at the start of 2023, said the results “demonstrate the strength of Shell’s differentiated portfolio, as well as our capacity to deliver vital energy to our customers in a volatile world.”

Stuart Lamont, investment manager at RBC Brewin Dolphin, said: “Shell’s record profit for the year will only intensify calls for more to be done to claw back profits from energy companies in the current environment. Looking ahead, investors will want a sense of what the future strategic direction of the company will be under the new CEO.”

Sales slump at ScS

Thursday 2 February 2023 07:35 , Simon Hunt

Sofa business ScS has become the latest company to feel the effects of a downturn in the furniture market, which has already claimed a string of bankruptcies in the past few months, including Made, Eve Sleep and Snug, the latter of which the company recently acquired.

ScS reported like-for-like order intake down 9.2% in the 16 weeks to 19 November.

But recent trade has been more rosy, with orders up 2.6% in the 10 weeks to the end of January, with the firm vowing to continue with expansion plans following the opening of two now sites in Swindon and York.