FTSE 100 Live: ‘Heightened recession risk’ with UK private sector in shock decline, but shares climb

 (Evening Standard)
(Evening Standard)

Stock market risk appetite continued to improve today despite more evidence of Europe’s slowing economy.

The FTSE 100 index, which last night ended its longest losing run since 2019, rose even as PMI figures for August showed weaker activity trends in the UK, Germany and France.

The focus for Wall Street is on semiconductor giant Nvidia, which is due to post second quarter figures after the closing bell.

FTSE 100 Live Wednesday

  • UK private sector in surprise decline

  • Rate sensitive stocks rally in FTSE 350

  • Morgan Stanley gets £5m Ofgem fine

Wilko stores could be left empty as estate will be tough to re-let, new data suggests

Wednesday 23 August 2023 21:06 , Daniel O'Boyle

A number of landlords will struggle to quickly re-let the huge Wilko estate following the chain’s collapse, data suggests, as it emerged scores of shops are still sitting empty from two other high-profile retail casualties.

Homeware chain Wilko fell into administration two weeks ago in a move that puts 12,500 jobs at risk. The GMB Union today said that most of its shops are expected to close within weeks.

The 93-year-old business, which has grappled with inflationary pressures and felt the impact of the cost of living crisis on customer spend, was unable to secure a rescue deal. PwC will work on the administration including any search for buyers of the brand name or its around 400 shops.

Read more here

Most Wilko stores to close next week as union warns of ‘significant job losses’

Wednesday 23 August 2023 18:15 , Daniel O'Boyle

Most Wilko stores will close in the next seven days, the union representing around a third of its staff has revealed, after it said an attempt to rescue the beloved high-street retailer out of administration “fell through”.

GMB Union, which represents more than 3,000 of Wilko’s nearly 12,500 employees, said it was told that “there is no longer any prospect that the majority of the business will be saved”.

“This means redundancies for staff in store and at call centres will begin during the coming week,” it said. “Some stores may be bought, either individually or as part of larger packages, but significant job losses are now expected.”

Read more here

Most Wilko stores to close next week as union warns of ‘significant job losses’

Wednesday 23 August 2023 18:10 , Daniel O'Boyle

Most Wilko stores will close in the next seven days, the union representing around a third of its staff has revealed, after it said an attempt to rescue the beloved high-street retailer out of administration “fell through”.

GMB Union, which represents more than 3,000 of Wilko’s nearly 12,500 employees, said it was told that “there is no longer any prospect that the majority of the business will be saved”.

“This means redundancies for staff in store and at call centres will begin during the coming week,” it said. “Some stores may be bought, either individually or as part of larger packages, but significant job losses are now expected.”

Read more here

FTSE closes at 7,320.53

Wednesday 23 August 2023 16:39 , Daniel O'Boyle

The FTSE 100 closed at 7,320.53 today, up 0.7% as traders pared back their bets on higher interest rates amid bleak economic data.

The index of London blue-chips started the day with modest gains but rose more rapidly after August Flash PMI data showed a surprise contraction of the private sector.

That led to hopes that an end to the Bank of England’s interest rate hikes could be in sight, prompting shares to rise again.

Big gainers included miners Endeavour and Fresnillo, as well as student housing provider Unite. JD Sports led the fallers board again today after another set of disappointing results from a US-listed rival.

West End Final: If it’s hurting, it’s working, but it still sucks

Wednesday 23 August 2023 16:21 , Daniel O'Boyle

“At about 10:45 this morning I turned to Jonathan Prynn, the Standard’s business editor, and asked what he made of the latest purchasing managers’ index (PMI) numbers,” Jack Kessler writes. “His answer was unprintable.

“In fairness, at fifteen minutes to deadline, I picked a bad time to bother him. But Jonathan is hardly alone in his view of the UK economy.

“The figures tell the tale of a private sector declining at its fastest rate in two-and-a-half years, when the nation was enduring the second major Covid-19 lockdown. The August flash PMI reading fell unexpectedly to 47.9 (bear in mind a score of over 50 indicates growth, under 50 contraction). All this means the markets now expect interest rates to peak below 6 per cent.

“In some ways, this represents a victory for the Bank of England. Its mandate is to maintain price stability and hit the target of 2 per cent inflation, something eagle-eyed readers will know it has not been wholly successful at achieving in recent times.”

Read the full West End Final newsletter from Jack Kessler here

Water companies almost breached licences to keep supply flowing, documents show

Wednesday 23 August 2023 13:51 , Daniel O'Boyle

Several water companies came close to breaching their licences in order to maintain public water supply after the intense heat and dry weather last summer, Environment Agency (EA) documents show.

Obtained through a freedom of information request by Unearthed, Greenpeace’s investigative journalism unit, the documents show how the EA was worried about companies not having enough clean water with which to supply their customers.

The majority of reservoirs were “exceptionally low” by September, with some near to the point of being classed as “dead storage”, where the quality of the remaining water is so poor that treating it may not be possible.

Read more here

Alison Rose to still make £2.4 million salary after resigning amid Farage controversy

Wednesday 23 August 2023 13:43 , Daniel O'Boyle

Former NatWest boss Dame Alison Rose will still be paid her £2.3 million compensation package while under investigation for leaking information about Nigel Farage’s bank account, the partially Government-owned bank revealed today.

However, this salary could still be clawed back by NatWest, depending on the outcome of an investigation into her revealing ofcertain information regarding Mr Farag’es account. In addition, possibility of a larger buyout is in doubt, as NatWest said decisions about other payments “will be made taking into account the findings of the Investigations, as appropriate”.

Rose will receive her £1.16 million fixed pay and her a fixed-share allowance of the same value, which is released over five years, while she is on 12-month gardening leave. She stepped down as head of the banking giant after revealing that she had provided information to a BBC reporter that led to an inaccurate report regarding the closure of Nigel Farage’s account with Coutts.

Read more here

Key market data as FTSE climbs higher

Wednesday 23 August 2023 13:11 , Daniel O'Boyle

Tkae a look at today’s market snapshot as the FTSE 100 climbed higher on the back of lower expected interest rates.

City Comment: Relax, lawyers and accountants. AI isn’t going to take your jobs

Wednesday 23 August 2023 13:01 , Daniel O'Boyle

A nice respectable career as a lawyer or an accountant has been the ambition of generations of young people.

But with professional services firms investing billions in AI technology will the jobs still be there for them in years to come?

Today “big four” accountancy firm PwC revealed that it spent £100 million on “emerging technologies” last year including on AI and “digital collaborations with Harvey, Microsoft and Icertis, and ContractPodAI”.

But did that result in swathes of eager young auditors and consultants being laid off and replaced by robots and algorithms? Apparently not.

Read more here

JD Sports shares sink after Footlocker cuts guidance

Wednesday 23 August 2023 12:37 , Simon Hunt

Shares in JD Sports fell as much as 5% this afternoon after its US rival Footlocker cut back its guidance.

Sales at Footlocker fell to $1.9 billion in the second quarter while it swung to a $5 million loss from a $94 million profit the previous year.

That promted the firm to cut its guidance and suspend its quarterly cash dividend. Its shares fell 265 in pre-market trading on Wall Street.

(Yui Mok/PA) (PA Archive)
(Yui Mok/PA) (PA Archive)

New NatWest boss Thwaite to make seven figures, but less than Alison Rose

Wednesday 23 August 2023 12:28 , Daniel O'Boyle

New NatWest interim boss Paul Thwaite will be paid a seven-figure salary, partially funded by the taxpayer, but his pay will be slightly less than predecessor Dame Alison Rose who quit last month amid controversy over Nigel Farage’s bank account.

But there is still uncertainty over Rose’s final payout, as NatWest said decisions about her compensation “will be made taking into account the findings of the Investigations, as appropriate”.

Thwaite - who will be in charge of NatWest for the next 12 months - will make a £1.05 million base salary, less than the £1.16 million that Rose was on. He could make another £2.6 million in bonuses, but this is also below the maximum that Rose was eligible for. His salary will be pro-rated for this year based on the amount of time he’s been on the job.

Read more here

Recession fears grow and interest rate expectations decline after surprise slump in output

Wednesday 23 August 2023 12:19 , Daniel O'Boyle

Recession fears stalked the City again today as a key business survey painted a grim picture of the strains in the economy this month.

The preliminary or “flash” version of the closely watched S&P Global/CIPSprivate sector output index fell far more steeply than expected by forecasters from 50.8 In July to 47.9 this month.

It was the first reading under 50 — which indicates contracting output — since January ending a six-month period of expansion as the economy shrugged off slump fears earlier in the year.

Read more here

150 jobs saved as private equity firm buys wine bar Vinoteca out of administration

Wednesday 23 August 2023 11:32 , Daniel O'Boyle

A City private equity firm has bought upmarket wine bar chain Vinoteca out of administration, saving 150 jobs after train strikes and high energy costs put the operation on the brink of collapse.

Administrators at Interpath sold Vinoteca, which has five locations all in London, to Cannon Street-based Breal Capital.

Last week, the chain warned it was close to collapse, blaming “inflation, spiralling energy charges and regular train strikes”. It closed a Birmingham wine bar, the largest in the UK’s second city, in May, less than a year after it opened.

The wine bar was founded by Elena Ares, Brett Woonton and Charlie Young in 2005. They remained as directors and major shareholders until administrators took over.

Read more here

FTSE 250 surges as traders revise rate hike bets, Ithaca falls on 2024 production guidance

Wednesday 23 August 2023 10:36 , Graeme Evans

Rate sensitive stocks are dominating the FTSE 350 risers board after today’s shock decline in UK private sector activity.

With the City scaling back its rate hike bets, shares in the likes of Severn Trent, Taylor Wimpey and Land Securities are all up 2% or more.

London’s top flight rallied 48.71 points to 7319.47 and the FTSE 250 index improved 157.45 points to 18,181.71, with second tier risers including shopping centre owner Hammerson after a gain of 3% or 0.8p to 25.1p.

Elsewhere in the FTSE 250, shares in North Sea firm Ithaca Energy weakened 2.8p at 161p after it warned that production is likely to fall next year due to the impact of the Energy Profits Levy.

The company, which has stakes in six of the ten largest fields in the UK North Sea and two of the largest three prospective developments, has fallen in value since joining the stock market last November in a £2.5 billion flotation.

Ithaca today hailed its robust operating performance but also revealed Energy Profits Levy charges of $223 million (£176 million) in the first half of its financial year. Net income of $159.6 million (£126 million) also included a $73.7 million (£58.2 million) writedown due to a reduction in planned activity in its Greater Stella Area.

Ithaca said it continued to press the UK government to review the current fiscal regime, including an appropriate price floor for the tax.

On AIM, Angling Direct shares rose 1.5p to 40p after the fishing tackle retailer reported a 10.1% rise in first-half sales to £40.9 million.

UK private sector in surprise decline

Wednesday 23 August 2023 09:36 , Daniel O'Boyle

The UK private sector is declining at the fastest rate in two-and-a-half years, according to the latest PMI figures, in a surprise underperformance that suggests interest rate hikes may now be having a serious impact on the economy.

The August flash PMI reading came to just 47.9, significantly below the 50 mark that seperates growth from decline. That comes despite expectations of modest growth, with economists projecting a reading of 51.

Services fell back into decline, having grown last month, while manufacturing fell further, with a 39-month-low reading of just 42.5.

Dr John Glen, CIPS Chief Economist said: “High interest rates continue to cast a shadow over the UK economy, creating a lull in new orders, stunting output, and ensuring prospects for the private sector remain uncertain.

“This reduction in activity has provided UK supply chains with much-needed respite after the instability of the last two years. High interest rates are starting to have their intended effect of dampening demand and reducing inflationary pressures, leading to moderated input costs and reduced raw material prices for manufacturers. Businesses who had built up stock as a safety net against disruption have now reduced their inventories and created more balanced and efficient supply chains as a result.

“The hope is that more predictable supply chains will help to stabilise the economy and support an eventual rebound in new orders. However, the question remains as to how long elevated borrowing costs will limit demand.”

The stats suggest GDP will decline by 0.2% over the third quarter so far.

Chris Williamson, chief business economist at S&P Global Market Intelligence said: “The early PMI survey for August suggests that inflation should moderate further in the months ahead, but also indicates that the fight against inflation is carrying a heavy cost in terms of heightened recession risks.”

The pound fell below $1.27 on the news.

Costain shares gain 3% as dividend return teased

Wednesday 23 August 2023 08:54 , Joanna Bourke

Contractor Costain has signalled dividend payments could be resumed for the first time since 2019, with the construction and consulting firm’s turnaround plan gaining momentum.

The company, which is working on upgrades to the signalling infrastructure on the Piccadilly line and the HS2 project, said a interim payout for the six months to June 30 is “under consideration” by the board with an “announcement expected to be made shortly”.

Shares in the firm rose 3%, or 1,44p, to 49.34p following the update.

Read more HERE.

FTSE 100 higher as JD Sports rebounds, AJ Bell surges 5%

Wednesday 23 August 2023 08:41 , Graeme Evans

Shares in mining companies Glencore, Fresnillo and Anglo American have risen 1% to leave London’s FTSE 100 index 27.55 points higher at 7,298.31.

The best performing top flight stock is JD Sports Fashion, which rallied 2.8p to 143.55p after falling sharply yesterday in response to a profit warning by US retailer Dick’s Sporting Goods.

The improvement in risk appetite was seen in a shortened fallers board, with BP among the handful of stocks in negative territory.

The FTSE 250 index rose 67.23 points to 18,091.49, led by investment platform AJ Bell with a gain of 5% or 13.6p to 293p.

PMI suggests bleak outlook for Germany and France

Wednesday 23 August 2023 08:40 , Daniel O'Boyle

The German economy is declining at the sharpest rate since the heights of the Covid-19 pandemic this month, while France “remains mired in a downturn”, according to a closely watched indicator.

The latest flash PMI figures from S&P Global found that both the EU’s top two economies are in decline. Germany’s PMI reading fell to 44.7, a 39-month low, while France’s remained at 46.6, both readings being well below the 50 mark that separates growth from decline.

Commenting on the German statistics,Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said the figures suggest a 1% decline in GDP.

“Any hope that the service sector might rescue the German economy has evaporated,” he said.

“Instead, the service sector is about to join the recession in manufacturing, which looks to have started in the second quarter. Our GDP nowcast model, which incorporates the PMI flash estimate, now indicates a deeper fall of the whole economy than it did before, at almost -1%.”

On the French data, Norman Liebke, economist at Hamburg Commercial Bank, said: “The French economy is stuck in a rut, showing signs of struggle once again. For the third month straight, we’ve seen Europe’s second-largest economy shrinking, as indicated by the HCOB PMIs.

“Despite hopes of a positive economic outlook, the latest PMI data is throwing a curveball, hinting that we might be headed for a contraction in the third quarter.”

UK PMI figures will be published at 9:30.

Market snapshot: FTSE rises modestly again

Wednesday 23 August 2023 08:24 , Daniel O'Boyle

The FTSE 100 has continued its modest gains after ending its losing streak yesterday.

Big risers include JD Sports, rebounding from a sharp fall yesterday, and miners Fresnillo, Glencore and Anglo American.

Taske a look at all our key market data.

Morgan Stanley fined £5 million after energy market traders use WhatsApp to discuss deals

Wednesday 23 August 2023 07:57 , Michael Hunter

Morgan Stanley has been hit by a multi-million pound fine by regulators for failing to follow rules covering the way in which traders in wholesale energy markets discuss deal making.

The bank will pay £5.4 million after staff used WhatsApp messages on private phones to discuss transactions. That breached requirements to “record and retain” communications over the market, which were uncovered by the energy market regulator Ofgem. The rule-breaking took place between January 2018 and March 2020.

Ofgem said it was the first ever fine issued in Britain over the so-called “REMIT Enforcement Regulations” which cover record-keeping in the wholesale energy markets, and are designed to prevent market manipulation and insider trading.

Ofgem’s regulatory director of enforcement, Cathryn Scott, said the breaches risked “a significant compromise of the integrity and transparency of wholesale energy markets,” adding: “This fine sends a strong message to market participants that they must comply with all REMIT rules or face enforcement action.”

While Morgan Stanley prohibited traders from using WhatsApp, Ofgem said the bank “did not take sufficient reasonable steps to ensure compliance with its own policies.”

Morgan Stanley “fully co-operated with Ofgem’s investigation”, the regulator said, and agreed to settle the case.

The bank declined to comment when contacted this morning by The Standard.

M&S set for FTSE 100, four stocks in relegation danger

Wednesday 23 August 2023 07:37 , Graeme Evans

Marks & Spencer is on course to end its four-year exile from the FTSE 100 index, with housebuilder Persimmon poised to make way.

The retail giant starts today’s session with a market value of £4.3 billion, putting it in the running for promotion when the September quarterly reshuffle of London’s top flight is calculated using next Tuesday’s closing prices.

FTSE Russell, the global index provider, said last night that seals and controls business Diploma and Hikma Pharmaceuticals are also on track to secure blue-chip status. And Dechra Pharmaceuticals is set for a brief stay ahead of its private equity takeover.

Persimmon, Johnson Matthey, the asset manager Abrdn and former Electrocomponents business RS Group are the stocks currently in danger of losing their places in the FTSE 100.

Klarna booms in Europe as shoppers on squeezed incomes turn to Buy Now, Pay Later

Wednesday 23 August 2023 07:25 , Simon Hunt

Swedish fintech Klarna is booming in Europe as shoppers turn to Buy Now, Pay Later products amid inflationary pressure and high interest rates.

The firm today said GMV (the value of goods sold through Klarna) had grown 26% in the UK and 14% across Europe in the second quarter of the year, having amassed 100 million European consumers and striking deals with over 470,000 merchants.

But Klarna did not say whether the increased demand was profitable or whether it would increase the company’s losses. The firm continues to offer interest-free instalments on products bought using credit, despite the fact that central bank interest rates have tripled over the past year. In 2022, Klarna posted a loss of $1 billion.

Klarna CEO Sebastian Siemiatkowski said: “While other, smaller players dial back their commitment or leave the region altogether, we’re doubling down, further strengthening our position in Europe, as well as the US.”

Klarna’s new payment cards (Klarna)
Klarna’s new payment cards (Klarna)

FTSE 100 seen higher as Hang Seng rallies 1%, US banks hit by downgrades

Wednesday 23 August 2023 07:23 , Graeme Evans

The FTSE 100 index is set to remain in positive territory after last night ending its longest losing run since 2019 with a gain of 13 points to 7270.76.

The predicted improvement of 10 points comes ahead of flash PMI figures that should provide insight into the pace of Europe’s economic activity during August.

US markets finished broadly unchanged last night after an initially strong start, with the banking sector particularly under pressure after S&P downgraded the credit ratings of several firms.

Nvidia shares traded at a record before closing in the red ahead of the semiconductor giant’s second quarter results after tonight’s Wall Street closing bell.

In Asia, the Hang Seng index is 1% higher and the Nikkei 225 up by 0.5% after Japan posted a robust set of PMI figures for services and manufacturing. However, the Shanghai Composite is 0.6% lower.

Recap: Yesterday’s top stories

Wednesday 23 August 2023 06:50 , Simon Hunt

Good morning. Here’s a summary of our top headlines from yesterday: