FTSE 100 Live: City expects interest rates to stay higher for longer as gilts surge again; shares fade
Gilt yields rose closer to mini-Budget levels today ami new fears the Bank of England will keep interest rates higher for longer.
The yield on a two-year gilt exceeded 4.6%, just over 10 basis points short of thr 4.734% peak in the immediate aftermath of Kwasi Kwarteng’s “fiscal event” last year.
Blue-chip shares started higher but soon fizzled in a week when the European Central Bank and the US Federal Reserve reveal their latest interest rate decisions.
In Switzerland, banking giant UBS announced that it had completed the acquisition of longtime rival Credit Suisse this morning. UBS agreed to acquire Credit Suisse in March in an emergency deal sparked by the biggest banking panic since the 2008 financial crisis.
FTSE 100 Live Monday
Markets higher amid interest rates focus
UBS completes Credit Suisse deal
Frasers Group buys £75m AO World stake
FTSE closes at 7,570.69
16:40 , Daniel O'Boyle
The FTSE 100 closed at 7,570.69, up 0.1%, as gilt yields surged by 10 basis points.
The index of London blue-chips started the day strongly but quickly faded and was stable through the afternoon.
Ocado was the top riser of the day while miner Fresnillo was the biggest faller.
Gilt yields surge again, getting closer to mini-Budget levels
15:07 , Daniel O'Boyle
Gilt yields rose again today, with two-year yields exceeding 4.6% and getting ever closer to the highs reached amid Kwasi Kwarteng’s mini-Budget last year.
Yields soared as markets expect the Bank of England to keep interest rates higher for longer. Market-implied rates suggest the Bank would keep interest rates above 5.25% until the Autumn of next year.
The yield on two-year gilts hit 4.7341% in September of last year, prompting the Bank of England to interfere by buying bonds to bring the market back under control.
NatWest dramatically upped its buy-to-let mortgage rates as yields soared.
“Something has clearly spooked the money markets around 2pm today,” Lewis Shaw, owner and mortgage broker at Riverside Mortgages, said. “This is extremely worrying and I don't know where it ends.”
US stocks seen slightly higher
14:24 , Daniel O'Boyle
US shares are set to open slightly this morning, ahead of the Federal Reserve’s interest rates decision later this week.
Dow Jones futures are up 0.2% to 34262, while S&P 500 futures are up 0.3% to 4318. Nasdaq futures, including the most rate-sensitive stocks, are up 0.5% to 14813.
Pharmaceuticals firms made up many of the top risers after Novartis agreed to buy Chinook Therapeutics.
More than 2,000 staff redundant as delivery firm Tuffnells collapses
13:35 , Daniel O'Boyle
More than 2,000 staff will be made redundant after Sheffield-based delivery giant Tuffnells Parcels Express fell into administration.
The firm has appointed joint administrators at Interpath Advisory after failing to secure funding in recent weeks.
In today’s Standard...
13:31 , Daniel O'Boyle
...Rishi Sunak says, “You can trust me on tech,” Robbie Williams invests in ticketing platform and Jonathan Prynn says we should enjoy the weather.
Pick up a copy from any of our distribution points
City Comment: Enjoy the weather - we can think about economic forecasts later
13:26 , Daniel O'Boyle
The sun is shining, the rosé is in the fridge and the summer holidays are in view. It is one of most optimistic times of the year — barring the brief annual spurt of hope on 1 January.
So it seems entirely appropriate that the week should start with two relatively upbeat forecasts - from the CBI and KPMG — predicting that Britain will avoid a recession this year.
A flurry of economic events over the next fortnight — labour market figures, April GDP data and the Fed rates decision this week, and inflation and the Bank of England’s next move on borrowing costs later in the month — will go a long way to settling whether they are right or not. Some more gloomy soothsayers still fear that rising mortgage rat
Santander, last major lender to reprice, will withdraw its mortgage deals this evening
12:58 , Jonathan Prynn
Santander today became the last major mortgage lender to withdraw its deals ahead of repricing them with higher interest rates.
The high street lender said it would pull all its “new business residential and buy to let fixed and tracker rates” at 7.30pm this evening. A new range of products will be launched on Wednesday.
Santander followed in the footsteps of other big players in the sector last week including HSBC, Halifax and Nationwide.
12:10 , Daniel O'Boyle
A slew of data today showed London recovering strongly from the pandemic with diners flooding back to restaurants and Tube ridership rebounding ever closer to pre-pandemic levels.
However, there was also a fresh warning that the capital could do even better if the Government restored tax-free shopping for foreign tourists.
Latest figures from booking portal OpenTable showed how Londoners are finally returning to dining early in the week and to weekday lunching. Mondays in May were particularly busy — although boosted by the extra Bank Holiday for the Coronation — with the 1pm time slot almost 50% busier than in April.
You can trust me on AI, says Sunak
11:16 , Simon Hunt
Rishi Sunak today called on the capital’s tech bosses to put their faith in him as he laid out a fresh vision to make London one of the world’s leading hubs for artificial intelligence.
Speaking at London Tech Week, the Prime Minister said: “I want to make the UK not just the intellectual home but the geographical home of global AI.
“We are not in the business of resting on our laurels and we get that all of this is moving fast. It means government has to move at that same pace.
“The very pioneers of AI are warning us about the ways these technologies can undermine our values and freedoms through to the most extreme risks. And that’s why leading on AI also means leading on AI safety.
“Do you trust the people in charge to really get what you’re trying to do? With this government, and with me as prime minister, you can.”
Robbie Williams heads line-up backing live tickets for NHS and charity workers
10:50 , Daniel O'Boyle
Pop superstar Robbie Williams has become the largest investor in Tickets for Good, a site that offers free and cut-price tickets to live events to NHS and charity staff.
The singer took part in a seed funding round in which Tickets for Good raised £500,000, with other investors including US telecoms giant Comcast’s SportsTech fund.Tickets for Good works with 500 events companies including the National Theatre and Hackney Empire.
More than 200,000 NHS or charity workers have signed up since it launched in 2019, and it has processed more than 300,000 tickets
.Williams said: “Supporting access to the arts is a cause close to my heart. The magic of live entertainment is something everyone should be able to benefit from, so I’m thrilled to be working with Tickets For Good.”
Key market data as FTSE edges up
10:25 , Daniel O'Boyle
Click through the graphs to see all the key market data as the FTSE 100 opened slightly higher this morning
FTSE 100 higher amid US rates focus, travel stocks rally in FTSE 250
10:17 , Graeme Evans
European markets are higher at the start of a big week for economic announcements on both sides of the Atlantic.
The US Federal Reserve is expected to pause its run of rate rises on Wednesday so that it can test the temperature of the slowing US economy. One final hike is still expected in July, although much will depend on the strength of US inflation numbers due to be published tomorrow afternoon.
May’s CPI print is forecast to fall to 4.1% from 4.9% previously, but with the core inflation rate excluding food and energy likely to be more stubborn at 5.3%.
Hopes that the fastest monetary policy tightening in 40 years is nearly over have helped the S&P 500 into bull market territory, driven by a select band of large cap stocks.
European markets have declined to follow Wall Street’s lead, with the FTSE 100 index little changed this year as lower commodity prices weigh on the resources sector.
Rio Tinto, BP and Anglo American were all under pressure today as risk appetite was further curbed by the prospect of Thursday’s European Central Bank interest rates decision and various updates from the UK economy.
Unlike the Fed, the ECB is set to hike rates by another quarter point with a further move on the cards in July.
Despite the latest commodity weakness, London’s top flight crept 0.3% or 24.94 points higher to 7587.30 as buyers focused on stocks with North American exposure.
They included credit checking firm Experian, which rose 68p to 2936p, and FanDuel sports betting business Flutter Entertainment with a gain of 150p to 15,390p.
Buyers returned to grocery warehouse technology firm Ocado, which continued its recovery of the past week by adding another 26.3p to 412.9p. Croda International, the speciality chemicals business, also put back 2% or 150p to 5424p after a profit warning sent shares 16% lower on Friday.
The FTSE 250 index climbed 0.4% or 75.06 points to 19,166.72, led by the travel sector after gains of more than 2% for Wizz Air, Carnival and TUI.
F1 Arcade raises £30 million in latest sign of ‘competitive socialising’ boom
10:13 , Daniel O'Boyle
The trend of “competitive socialising” continues to accelerate, as Formula One simulator bar F1 Arcade has raised £30 million in a round that included investment from McLaren driver Lando Norris.
F1 Arcade opened in St Paul’s in November, and new locations are set to open in Birmingham and the US in the next year. It plans to use the funds to expand further, especially in the US. The business hopes to have 30 global locations by the end of 2027.
The round was led by Liberty Media and Formula One, while McLaren Racing CEO Zak Brown and British Formula One star Norris also took part.
Jollyes sales rise to record £115.5 million
09:39 , Daniel O'Boyle
Sales at pet store Jollyes eclipsed £100 million for the first time, as it plans to open its 100th store this year.
In the year to the end of May, sales were up by a third to £115.5 million, as there continues to be little sign of customers cutting back spend on their pets amid the cost-of-living crisis. Jollyes said the majority of the growth came from more transactions rather than price increases.
Jollyes currently has 90 stores, including shops in Enfield and Romford. Having secured £3 million in funding from HSBC, it plans to open at least 10 more before the end of 2023.
Jollyes chief executive officer Joe Wykes said: “Fundamental to our continued outperformance of the market has been the deep pet expertise of our own people.”
Two more forecasts expect UK to avoid recession
08:51 , Daniel O'Boyle
The UK economy received a major boost this morning as both the Confederation fo British Industry (CBI) and KPMG forecast that the country will avoid recession this year.
The CBI upgraded its forecast from a 0.4% decline to 0.4% growth in 2023. KPMG, meanwhile, expects growth of 0.3%.
Victoria Scholar, head of investment at interactive investor, said: “The UK economy is not out of the woods yet, but the direst forecasts continue to be wound back. This included one particularly pessimistic projection from the Bank of England which said last year that the UK would face the longest recession since records began.
“This year, however, the central bank sharply upgraded its gloomy predictions.”
“The British economy is still struggling with above-target inflation, rising interest rates, negative real wages, and sluggish growth domestically and among its key trading partners. However, with inflation finally dropping back into single digits, China’s anti-covid lockdown restrictions being removed, energy prices cooling, and some light emerging at the end of the monetary policy tightening tunnel, there are reasons to be cautiously optimistic.”
Ocado leads FTSE 100 higher, AO World up 8%
08:42 , Graeme Evans
The FTSE 100 index has opened the week 0.3% or 21.75 points higher at 7584.11, with Frasers Group on the blue-chip risers board after announcing it has built a 19% stake in online electricals retailer AO World.
The Sports Direct owner lifted 8.1p to 692.63p, with All-Share company AO World up 8% or 5.4p to 74.95p.
Other stocks doing well included the grocery warehouse technology business Ocado, which rallied 5% or 19.5p to 406.1p, and car insurer Admiral after a rise of 46p to 2340p.
Croda International also put back 2% or 94p to 5368p, having fallen sharply in Friday’s session due to a profits warning.
The FTSE 250 index is 46.78 higher at 19,138.44, led by travel stocks Wizz Air and Carnival after their shares rose by more than 2%.
Heathrow traffic surges in May
08:28 , Daniel O'Boyle
Traffic at Heathrow surged in May, with 6.7 million passengers during the month.
That included 1.6 million transatlantic flights, as heathrow made up one in four flights between Europe and the US.
Heathrow CEO John Holland-Kaye added that the airport does not expect summer strikes to cause cancellations.
He said: “The unrivalled choice of destinations and high frequency to cities like New York make flights from Heathrow vital trade routes with the USA, Britain’s most important export market.
“We have delivered excellent service to passengers, with no cancellations, over eight days of strikes on the busiest days in May, and do not anticipate cancellations as a result of strikes during the summer holiday getaway.”
No bid battle for Network International as rival consortium drops offer
07:43 , Michael Hunter
There won’t be a bid battle for FTSE 250 payments firm Network International, after the rival consortium to the agreed deal from Brookfield Asset Management said today it will not make an offer.
CVC Advisers Limited and Francisco Partners Management said today that they would not bid again, on their own or jointly, for the Dubai-based financial services firm, having previously offered 387p a share.
The statement leaves the way open for Brookfield’s £2.2 billion offer, priced at 400p per share.
Andreessen Horowitz sets up crypto outpost in London
07:41 , Simon Hunt
Andreessen Horowitz, one of the biggest venture capital firms in the world, has said it will open its first crypto hub outside the US in London.
The company, controlled by billionaire Marc Andreessen said it planned to make a number of investments in UK-based crypto companies, and today announced its latest one, machine learning business Gensen. Andreesen Horowitz said its next annual crypto startup school would be hosted in London next year.
Managing partner Chris Dixson said: “We have been working with policymakers and regulators across the globe, and during our discussions it has become clear that the UK government sees the promise of web3, with Prime Minister Rishi Sunak suggesting the UK can become a hub of web3 innovation.
“UK authorities are also willing to work with the industry to create policies that incentivize startups to pursue decentralization.
“While there is still work to be done, we believe that the UK is on the right path to becoming a leader in crypto regulation. The UK also has deep pools of talent, world-leading academic institutions, and a strong entrepreneurial culture.”
UBS completes Credit Suisse deal
07:26 , Daniel O'Boyle
Swiss Banking giant UBS has completed the acquisition of longtime rival Credit Suisse, it announced this morning.
UBS agreed the emergency deal in March, after a collapse of confidence in Credit Suisse amid the biggest banking crisis in more than a decade.
In an open letter published in Swiss newspaper NZZ, UBS CEO Colm Kelleher said: “This is the start of a new chapter - for UBS, Switzerland as a financial centre and the global financial industry.”
The merger sparked fears of job cuts in London, Credit Suisse where employs 5,000 and UBS 6,000.
Mike Ashley’s Frasers’ Group buys £75 million stake in AO World
07:26 , Michael Hunter
Frasers Group, the owner of Sports Direct, has bought a 19% stake in AO World, the online appliances retailer, for £75 million.
The retail group, majority-owned by entrepreneur Mike Ashley, also owns the Frasers department stores it is named after and the Jack Wills fashion chain. It said today it had been in talks with AO over “a strategic partnership” for the last two years.
CEO, Michael Murray, said:
“Frasers has long admired what John and the AO team have built, and we are delighted to have the opportunity to form a supportive, strategic partnership. AO is a fantastic business with a clear strategy which is leading the market in online-only electricals. Through this investment, Frasers will benefit from AO’s valuable know-how in electricals and two-man delivery, helping us to drive growth in our bulk equipment and homeware ranges. In turn, AO will have the opportunity to benefit from Frasers’ expertise and ecosystem.”
US inflation and rates decisions in focus, FTSE 100 seen higher
07:23 , Graeme Evans
Wall Street believes the US Federal Reserve will pause interest rate hikes on Wednesday, although with inflation numbers due tomorrow the meeting’s outcome is far from certain.
May’s CPI print is forecast to fall to 4.1% from 4.9% previously, with core inflation excluding items such as food and energy down to 5.3% from 5.5%.
Hopes that the US is near the peak for interest rates helped the S&P 500 move into bull market territory last week following a rise of 20% since October’s low.
A select band of mega cap stocks is behind the S&P 500 improvement, while the tech-focused Nasdaq also finished higher for seven weeks in a row after Friday’s positive session.
European markets have been far more cautious, with the FTSE 100 broadly flat last week but forecast by CMC Markets to open 30 points higher at 7592 today.
Unlike the Federal Reserve, the European Central Bank is set to hike rates by another quarter point on Thursday with a further move expected in July. The Bank of England’s next interest rates decision is on 22 June.
Friday’s top stories
06:57 , Daniel O'Boyle
Good morning, here are a selection of Friday’s top stories:
Home purchases are starting to fall through as a direct result of the extraordinary spate of turmoil in the mortgage market, brokers warned.
Demand for central London offices has edged up, as property giant Landsec became the latest firm to make a fresh bet on employers upgrading to more ‘green’ workspaces.
The Bank of England’s wave of rate hikes have only just begun to hit households, with the vast majority of the shock still to come, a leading economist warned today.
