FTSE 100 Live: City sees 6% interest rates as Fed chair speech sparks ‘higher for longer’ fears

 (Evening Standard)
(Evening Standard)

A speech by Federal Reserve boss Jerome Powell erased all of the gains made this morning by London’s top flight.

The FTSE 100 is flat right now, having been up 60 points for the day in the early afternoon, after Powell’s speech was seen as hawkish.

Markets are fearful that borrowing costs will stay high for longer, potentially jeopardising a soft landing for the US economy.

In London, shares in CMC Markets have fallen after it said subdued conditions meant profit could be £30 million less than forecast.

FTSE 100 Live Friday

  • Fed boss updates on US outlook

  • CMC profits hit by subdued conditions

  • Rolex move hits Watches of Switzerland shares

FTSE closes at 7,338.58

Friday 25 August 2023 16:40 , Daniel O'Boyle

The FTSE 100 closed at 7,338.58 today, almost perfectly flat, as its early gains were erased after Jerome Powell’s speech.

The index rose as high as 7388, but fell back to earth in the afternoon.

That leaves the index up 1% for the week.

Top risers included Tesco, Sainsbury’s and Intertek, while Endeavour Mining and Prudential were among the fallers.

Former Co-op Bank boss Paul Flowers to appear in court on fraud charge

Friday 25 August 2023 16:30 , Daniel O'Boyle

Former Co-operative Bank boss Paul Flowers will appear in court next week accused of fraud.

The 73-year-old has been charged with one count of fraud by abuse of position between June 2016 and October 2017.

He will appear at Manchester Magistrates’ Court on Wednesday August 30.

The Crown Prosecution Service did not comment further on the specifics of the charge.

Read more here

Powell: Fed will be “sufficiently restrictive"

Friday 25 August 2023 16:04 , Daniel O'Boyle

Jerome Powell said the US Federal Reserve would take a “sufficiently restrictive” approach to make sure inflation comes down to the 2% target, in a speech that was interpreted by markets as hawkish.

US Federal Reserve boss Jerome Powell (REUTERS)
US Federal Reserve boss Jerome Powell (REUTERS)

“Two percent is and will remain our inflation target,” he also said, defying calls to consider a different target.

FTSE falls as Powell speech reinforces ‘higher for longer’ fears

Friday 25 August 2023 15:51 , Daniel O'Boyle

The FTSE 100 has fallen into negative territory as Jerome Powell’s speech today has led to higher interest rate fears.

The City now sees Bank of England interest rates peaking at 6% again, after a 5.75% peak was seen as more likely than not going into today.

Commenting on today’s speech Salman Ahmed, Global Head of Macro and Strategic Asset Allocation at Fidelity International, said:“Latest remarks from Fed Chair, Jay Powell, continue to highlight the higher for longer mantra and potential for further hikes if needed. Focus remains on inflation as has been the case for much of 2023 despite recent signs of disinflation. The strength of the economy, especially labour market strength, continues to keep the Fed vigilant and away from any significant pivot. Furthermore, Chair Powell defended the two per cent target which helps explain the sustained hawkishness. This communication is in line with our views.

“However, from a business cycle perspective, we remain in the camp that the transmission mechanism is delayed and not broken, implying that cumulative rate hikes done so far will start to negatively affect the economy as temporary factors such as excess savings and delayed maturity walls fall through in coming months. We are already seeing signs of such pressure building in Europe and the UK and we think the US will follow suit by early 2024.”

London luxury gyms in crisis as Equinox plunges to £18 million loss

Friday 25 August 2023 15:22 , Daniel O'Boyle

There are growing signs London’s luxury fitness market is in crisis after high-end gym club Equinox posted an £18 million loss and warned on its future in the UK.

The firm, which has three sites in Kensington, Bishopsgate and St James’s and is popular with celebrities such as Lindsay Lohan, Paris Hilton and Khloe Kardashian, warned that there was ‘material uncertainty’ as to its status as a going concern and it was reliant on funds from its larger US parent to continue trading.

Equinox, which charges as much as £350 per month for a membership, turned over revenues of less than £15 million in 2022 as losses widened and it shed hundreds of members compared to pre-pandemic levels.

Read more here

New Prudential boss set to lay out growth strategy

Friday 25 August 2023 14:36 , Daniel O'Boyle

Prudential is set to unveil its latest trading performance next week as shareholders hope for a revival under its new boss.

The insurance giant has seen its shares drift slightly lower this year as it has been impacted by China’s faltering economy.

Prudential will report its half-year results to investors in an update on Wednesday August 30.

Read more here

Consumer confidence shows ‘renewed optimism’ against falling core inflation

Friday 25 August 2023 13:04 , Daniel O'Boyle

Consumer confidence is showing “renewed optimism” against a backdrop of falling core inflation, figures suggest.

GfK’s long-running Consumer Confidence Index improved five points in August, with all measures reversing the drop seen in July, although it remains firmly in negative territory at minus 25.

Confidence in the general economic situation for the next 12 months increased by three points to minus 30 – 30 points better than last August – against a backdrop of falling core inflation, higher interest rates and rising average weekly earnings, GfK said.

Read more here

John Lewis Partnership recruiting more than 10,000 jobs ahead of Christmas

Friday 25 August 2023 12:14 , Daniel O'Boyle

The John Lewis Partnership (JLP) is recruiting more than 10,000 staff as it starts its preparations for the key Christmas period.

The group, which owns the department store chain and Waitrose supermarket arm, said the vast majority of roles will be temporary, seasonal jobs.

It said it will hire for over 2,900 temporary roles in sales and merchandising positions across its 34 John Lewis stores.

In Waitrose meanwhile, the retailer will recruit more than 2,800 seasonal roles across 329 shops, including supermarket assistants, night shift workers and customer delivery drivers.

Read more here

Ofgem’s energy price cap – what does it mean for household bills?

Friday 25 August 2023 11:27 , Daniel O'Boyle

Despite falling wholesale energy prices making their way through to bills, households are still facing eye-watering costs that remain around 50% higher than two years ago.

What is Ofgem’s price cap and what does it all mean for household bills?

Read more here

City Comment -- Summer is over

Friday 25 August 2023 10:49 , Simon English

Economic signals are always mixed. If everyone is getting a pay rise, inflation will be eating most of them up.

If the stock market is ticking along nicely, then the housing market will be in the doldrums.

The best that can be said for the wider present circumstances is that they are static, a bit stuck in the mud.

There’s plenty of bad news to go around, but so long as people remain mostly employed, they will muddle through.

What then, to make of the holiday market, which seems immune to almost all levels of pessimism.

We just returned from two weeks in Tenerife we couldn’t really afford, indeed we’ll be paying for it for some time to come.

It wasn’t a cheap holiday in the first place yet all around us were people who are either loaded or just playing an extended game of “to hell with it”.

Holiday companies have had a bumper year. What the airlines and travel operators say is that the annual family holiday, post Covid, has become regarded as a necessity.

People will feed their pets and they will go abroad for some sun – everything else, gym membership, Netflix, pints at the pub – are entirely cuttable.

If you are TUI Travel, Jet2 or easyJet that’s a nice spot to be in, but it isn’t entirely reflected in share prices.

Easyjet stock is up 15% in the past year, but is still down 68% on five years ago, before Covid struck.

Global warming fears and this summer’s wildfires that saw thousands evacuated must surely play on the minds of future holiday makers.

No one who holidayed anywhere near those fires wants to risk being caught in it again. Maybe the staycation, or at least much shorter flights to places less at risk of catching fire, will catch on this year. In which case, sell easyJet. Summer’s over.

Rolex move hits Watches of Switzerland shares, Tesco leads FTSE 100

Friday 25 August 2023 10:22 , Graeme Evans

Shares in Watches of Switzerland have fallen 26% after an acquisition by Rolex set alarm bells ringing for investors.

The slump came even though luxury watches firm Rolex said the purchase of Swiss retailer Bucherer would have no bearing on its current distribution arrangements.

It made the move because the 86-year-old grandson of founder Carl Bucherer has no direct descendants and it wanted to preserve the ties that have existed since 1924.

However, the purchase of a business with 100 sales outlets worldwide unnerved investors as Watches of Switzerland suffered its worst session on record, down 185.75p to 508p.

Broker Peel Hunt said the Rolex concerns would be a cloud over shares in the retail chain for the foreseeable future as it ditched its “buy” recommendation and cut its target price from 900p to 600p.

At the other end of the FTSE 250, Aston Martin Lagonda accelerated 5% or 16.4p to 337.2p after analysts at Jefferies lifted their estimate on shares by 26% to 420p.

They said the operating outlook was “more encouraging than ever” amid a renewed focus on the core strength of front engine vehicles and a rise in average selling price.

The FTSE 250 stood 15.16 points lower at 18,179.41, while the FTSE 100 index edged 18.27 points higher at 7351.90 in a lacklustre session prior to a speech by Federal Reserve chair Jerome Powell at the Jackson Hole symposium.

Tesco led the top flight with a rise of 4.7p to 259.9p, while among the minnows DFS Furniture cheered 4.1p to 114.1p after GfK reported that consumers are showing improved appetite for major purchases.

Heineken sells Russian business at loss of £256m

Friday 25 August 2023 10:05 , Daniel O'Boyle

Brewing giant Heineken has completed its exit from Russia, around 18 months after the invasion of Ukraine.

The Dutch firm, which also makes Amstel and Birra Moretti beers, said it has now secured the sale of the business, which includes seven breweries, to Russian company Arnest Group for 1 euro.

It said it expects to incur a total loss of 300 million euro (£256 million) as a result.

Bosses at the brewer admitted it “took much longer than we had hoped”, after it faced criticism for the slow pace of its exit in the wake of the outbreak of war.

Read more here

Profit falls at law firm DWF ahead of private equity takeover

Friday 25 August 2023 09:24 , Daniel O'Boyle

The boss of listed law firm DWF today warned of “turbulent times” for the sector as profits fell ahead of the company’s takeover by private equity firm Inflexion.

Profit dropped by 23.2% to £17.2 million, amid higher salary costs.

Marylebone-based Inflexion is set to take DWF private in a deal agreed last month. CEO Sir Nigel Knowles told shareholders today that without the offer, dividends may have been at risk.

Shares were steady at 97p, close to the offer price.

Market snapshot with FTSE flat ahead of Powell speech.

Friday 25 August 2023 08:35 , Daniel O'Boyle

London’s top flight is close to unchanged so far today, ahead of Federal Reserve chair Jerome Powell’s Jackson Hole speech this afternoon.

Take a look at our full market snapshot.

Oil giants boost FTSE 100, Aston Martin leads FTSE 250

Friday 25 August 2023 08:25 , Graeme Evans

The FTSE 100 index is 18.90 points higher at 7352.53, although most investors appear content to sit on the sidelines until Federal Reserve chair Jerome Powell’s speech at 3pm.

A rise in the Brent Crude price to $83.86 a barrel meant BP and Shell shares were about 0.5% higher, while there was also support from Tesco after its shares rose 3.7p to 258.9p.

Shares in JD Sports Fashion were back under pressure with a decline of 1.1p to 138.75p and B&M European Value Retail dipped 1.2p to 568.4p.

The FTSE 250 index dipped 11.47 points to 18,183.10, but Aston Martin Lagonda made strong progress after analysts at Jefferies lifted their price target to 420p. The shares were 12.8p higher at 333.6p.

CMC Markets warns of slow trading in August

Friday 25 August 2023 07:49 , Daniel O'Boyle

City trading house CMC Markets warned today that profit could be £30m less than previously thought, amid sharp drop in retail trading.

The business founded by Tory peer Lord Cruddas said it had seen “subdued market conditions” this month, with revenue set to be down 20% on last year. Retail trading in particular has fallen off, leading to a greater reliance on lower-margin institutional investors.

Lord Cruddas, leader of the Conservative Democratic Organisation (PA)
Lord Cruddas, leader of the Conservative Democratic Organisation (PA)

“Whilst underlying market activity has the potential to recover, should year-to-date market conditions continue for the remainder of FY24 then it is expected that net operating income will be between £250 and £280 million,” CMC said.

Shares were already down almost 50% this year even before today’s profit warning.

Consumer confidence picks up in August - GfK

Friday 25 August 2023 07:47 , Graeme Evans

Consumer confidence looks to have improved during August after GfK recorded a five point uptick in its monthly barometer.

Although the headline score is still strongly negative at minus 25, hopes for people’s financial situation in the coming year are close to positive territory.

There was also an eight-point advance in major purchase intentions, signalling better news for retailers ahead of the autumn period.

Today’s improvement in the overall headline score follows strong wage growth and July’s fall in the annual inflation rate to 6.8%. The index stood at minus 44 in August last year.

GfK client strategy director Joe Staton said; “While the financial pulse of the nation is still weak, these signs of optimism are welcome during this challenging time for consumers across the UK.”

LendInvest warns on data breach

Friday 25 August 2023 07:25 , Simon Hunt

London fintech LendInvest has warned it has suffered a data breach in which customer personal data had been accessible to third parties.

Investigations into the incident are ongoing and the precise number of individuals affected and the length of time that the information was compromised is to be determined, the firm said, adding it had alerted regulators.

The company said: “LendInvest takes the issue of data security extremely seriously, and any affected individuals will be notified as appropriate and in accordance with applicable regulations.”

Powell speech in focus after US sell-off, FTSE 100 seen flat

Friday 25 August 2023 07:20 , Graeme Evans

US markets finished sharply lower last night after an initial boost from Nvidia’s strong results faded on concerns over the higher-for-longer interest rate outlook.

The S&P 500 fell 1.35%, the tech-focused Nasdaq Composite by 1.9% and the Dow Jones Industrial Average by 1% as traders focused on the likely comments of Federal Reserve chair Jerome Powell at the Jackson Hole symposium in Wyoming.

Even Nvidia failed to survive the sell-off as its shares retreated from a record level above $500 to finish the session broadly unchanged at $471.6.

The jitters were not helped by more signs of a tight US jobs market after weekly figures showed an unexpected fall in the number of people claiming unemployment.

Powell, who is due to speak at 3.05pm, is likely to reinforce the message that the fight against inflation is not over and that the next move by Fed policymakers is data dependent.

However, traders will be looking for guidance over whether Powell believes getting inflation back to target will require a period of weakness for the US economy.

Asia markets tracked Wall Street lower, with Japan’s Nikkei 225 the hardest hit after falling 2%. The FTSE 100 index, which clung to positive territory in yesterday’s session, is forecast by CMC Markets to open five points lower at 7328.

Energy price cap cut to £1,923

Friday 25 August 2023 07:03 , Daniel O'Boyle

Regulator Ofgem has cut the energy price cap for the last three months of the year by £150, but the end to support schemes means many households are still set to pay more for energy than in 2022.

The new cap of £1923 per year will apply from October to December, when households are likely to turn their heating back on. It is almost £600 lower than the £2500 Energy Price Guarantee that superseded the cap last winter.

However, the energy support scheme that provided customers with an extra £66 a month last winter will no longer apply. With the new cap being around £50 a month lower than last year, this means the amount a typical customer will pay over the next cap period is actually set to be around £15 a month higher in 2023.

Read more here

Recap: Yesterday’s top stories

Friday 25 August 2023 06:52 , Simon Hunt

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