Sterling stayed positive today, trading over $1.12 as investors kept watch on the UK’s fraught political drama.

City experts said the uncertainty in Westminster was looking priced in, though further turbulence could push the pound toward the bottom of its recent trading range.

Recession fears due to the outlook for much higher US interest rates mean European markets are under pressure today.

Wall Street closed lower last night, having rallied recently on the back of resilient US earnings figures.

FTSE 100 Live Thursday

• Fund firms reveal impact of turbulence

• Rate rises fears hit markets

• Dunelm sticks by sales guidance

FTSE 100 closes up 19 points to 6,944

Thursday 20 October 2022 18:30 , Simon Hunt

The FTSE 100 index closed up 19 points to 6,944 on the day that Liz Truss resigned to become the UK’s shortest serving prime minister.

The pound is trading at $1.1227, up 0.13% paring back gains after peaking at $1.1331 earlier this afternoon. Gilt yields edged higher.

AJ Bell financial analyst Danni Hewson said: “To use a phrase that has no doubt been exhausted in the past few weeks, markets don’t like uncertainty. And losing another prime minister in the midst of a cost-of-living crisis is far from ideal. But Liz Truss’ credibility with markets was shattered when her former chancellor unveiled the mini-budget which effectively lit the touch paper on an explosive period for politics and demonstrated the importance of taking markets with you when it comes to fiscal policy.

“Sterling received a boost against the dollar on the speculation that resignation was imminent and the yield on 30-year gilts was nudged down, but the reality that number 10 is once again in need of a new inhabitant has led to minute by minute fluctuations.

“Volatility which has been a hallmark of global markets this year is most definitely here to stay in UK markets, at least for now. Time is short and credibility is on the line, but it is ordinary people’s finances that should be the priority.”

Tory candidates need support of 100 MPs to have chance of replacing Liz Truss

Thursday 20 October 2022 17:59 , Simon Hunt

Candidates to replace Liz Truss as Tory leader will need at least 100 nominations from Conservative MPs, 1922 Committee chair Sir Graham Brady has said.

The expected candidates:

Boris Johnson - said by allies to be interested in running and returning to power, currently on holiday in the Caribbean

Rishi Sunak - The runner up to Liz Truss is widely expected to go for the top job again

Suella Braverman - Arguably her resignation brought about Liz Truss’s demise and popular in the right wing of the party

Penny Mordaunt - A possible contender as a unity candidate and is seen as a safe pair of hands

Kemi Badenoch - Relatively inexperienced but seen as a rising star in the Conservative Parliamentary Party

City comment: Truss was right to go for growth but went about it all wrong

Thursday 20 October 2022 15:33 , Simon Hunt

A former economic adviser to Liz Truss tells the Standard what went wrong as she becomes the country’s shortest-service prime minister.

Ben Ramanauskas said: “Liz Truss has resigned. She will go down in history for being the Prime Minister who served for the shortest amount of time. However, this need not be her only legacy and her successor should follow her ambition of turning the UK into a high growth nation.

“The tragedy with Truss is that she was absolutely right to not accept the managed decline of the UK and instead go for economic growth. Unfortunately she went about it in completely the wrong way. In an attempt to channel Thatcher she told us that the country was sick, but unlike Thatcher she misdiagnosed the problem and so the medicine didn’t work. Truss and her team focussed on taxation and so her solution was for very expensive tax cuts which plunged the economy into chaos.”

read more here

New York stocks slip in opening trade

Thursday 20 October 2022 14:55 , Michael Hunter

Wall Street stocks slipped in opening trade as momentum from well-received earnings news this week ebbed from the market, while demand for tech stocks helped offset overall losses.

Companies directly exposed to consumer spending were lower, with Home Depot, Coca-Cola and Walt Disney all lower. IBM and Intel were among the biggest gainers.

Overall, the S&P 500 fell 0.2% to 3,687.79, a fall of 7 points.

Liz Truss resigns as prime minister: City experts react

Thursday 20 October 2022 14:40 , Michael Hunter

Here is a round up of some of the reaction from City experts to the resignation of Liz Truss as prime minister after 45 days in office, which were most notable for the run on UK assets caused by the “mini-Budget” in late September.

Chris Beauchamp, Chief Market Analyst at IG Group: “An initial bounce in the pound has begun to fade, as the implications of yet another period of uncertainty sink in. But given how quick the change is expected, and with the chancellor likely to stay in place, we should expect market tensions to calm. In all likelihood Rishi is ready to step in, and with Hunt in alignment with him we can expect a very different approach, but one more likely to please markets.”

Richard Burge, chief executive of the London Chamber of Commerce and Industry (LCCI): “it is shocking that the Government has allowed chaos to have free reign in recent weeks, damaging our economy and jeopardising our standing on the world stage. Ms Truss’ resignation will not bring instant relief and it will not magically inspire confidence amongst the many businesses that are trading in the worst economic climate in decades. We should not have been in a situation so drastic in the first place and yet businesses find themselves on the brink, unable to plan for the future and secure growth.”

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown: “The great political gamble of Liz Truss has spectacularly backfired but not before wreaking significant damage to the UK economy. It will take considerable time before the risk premium attached to UK assets fades away, following the financial nervous breakdown which followed the mini-budget ... With the third Prime Minister in just a year expected to be announced by the end of the month, the UK will still be viewed in financial markets as politically unstable.”

William Marsters, senior UK sales trader at Saxo: ““Sterling’s game of snakes and ladders is far from over, yet it’s unlikely the pound will show many signs of long-term recovery. The economy is likely to continue to suffer at the hands of rising inflation, which has led to crippling everyday costs affecting households and businesses up and down the UK.”

James Hughes, analyst at Scope Markets: “Something had to change and looking at the market response - the pound is down a quarter of a cent against the dollar, the FTSE 25, a better measure of UK plc than the FTSE 100, is off session highs but trading unchanged on the day and those gilt yields have ticked a little higher – it’s difficult not to conclude that this news had already been factored in.”

Here is what renown bond market expert Mohamed El-Erian said on Twitter:

Jeremy Hunt rules himself out for PM; 31 October fiscal event to go ahead

Thursday 20 October 2022 14:11 , Simon Hunt

Jeremy Hunt has ruled himself out of next week’s Conservative leadership election and has instead said he will remain as chancellor while a new leader is chosen.

Markets have been reassured that the fiscal event and OBR forecast scheduled for Monday 31 October will be going ahead as planned.

Pound up slightly as Liz Truss resigns after just 44 days

Thursday 20 October 2022 13:58 , Michael Hunter

The pound was higher overall for the day after the Downing Street announcement -- up 0.5% at $1.1269 — although it did not hit the top of the session’s trading range at $1.1305.

The FTSE 250, home to a range of companies which earn revenue within the domestic UK economy, was up almost 1% in afternoon trade at 17,398.77. It outperformed the more international FTSE 100, which was down 0.1% at 6,918.0.

Gilt yields remain under 4% amid political turmoil

Thursday 20 October 2022 13:46 , Simon Hunt

The yields on most durations of UK government debt stayed under 4%, as investors did not demand significantly higher returns to lend to the country amid the political uncertainty.

The benchmark 10-year gilt yield ticked up to 3.819% after Truss confirmed her departure, having been at 3.769% beforehand.

Pound nudges higher after Liz Truss resignation

Thursday 20 October 2022 13:39 , Simon Hunt

The pound was higher after the Downing Street announcement -- up 0.5% at $1.1269 — although it did not hit the top of its trading range for the day, at $1.1305.

Truss resigns

Thursday 20 October 2022 13:37 , Simon Hunt

Liz Truss has resigned as prime minister.

Speaking outside Downing Street she said: “I came into office at a time of great economic international instability.

“We delivered on energy bills and on cutting national insurance.

“I recognise though, given the situation, I cannot deliver the mandate on which I was elected.

“I will remain as prime minister until a successor has been chosen.

“A leadership election will be held within the next week.”

Sterling trades at $1.12 as Liz Truss meets with Graham Brady in Downing Street

Thursday 20 October 2022 13:20 , Simon Hunt

Sterling stayed positive today, trading over $1.12 as investors kept watch on the UK’s fraught political drama.

City experts said the uncertainty in Westminster was looking priced in, though further turbulence could push the pound toward the bottom of its recent trading range.

Chris Turner, global head of markets at ING, said: “Political infighting and the uncertainty of policy continue to demand a risk premium for sterling, where GBP/USD could easily slip back to the bottom end of its wide $1.10 to $1.15 range.

The returns demanded to loan to the country for 10 years stayed under 4%, after the demolition of the government’s mini-Budget helped restore calm to the government debt market.Sterling was up 0.3% on the day at $1.1248

National Express boosted as passengers shun trains

Thursday 20 October 2022 13:07 , Simon Hunt

Transport giant National Express said today that passenger traffic on increasing numbers of its inter-city coach routes are now “well in excess” of pre-pandemic levels as frustrated passengers switch from the strike-ravaged railways.

There was also a rise in demand for travel around the time of the Queen’s funeral, when the FTSE 250 company increased capacity across its network as mourners headed to London. With Victoria coach station closed on the day of the service in nearby Westminster Abbey, it ran a pop-up coach station at Wembley, with more than 500 coaches terminating at the temporary facility in under 24 hours.Its private hire business provided transport for the Metropolitan Police during the period of national mourning, getting around 1000 officers into and around the capital each day.

The company said: “Our ability to react quickly to events means we were able to provide more services during rail strikes, and we were proud to play a part in supporting the Metropolitan Police during the Queen’s funeral.”

National Express pointed to a wider “ongoing recovery in passenger journeys” across its markets as it reported a rise of a third in revenue for the third quarter, leaving it on course to for annual results “broadly in line with expectations”.

The Birmingham-based company runs school bus routes in America and runs coach lines in Spain and Germany as well as North Africa and the Middle East. Long-term supply contracts, fuel hedging and “a proven ability to pass through price increases” meant it was well-positioned to deal with inflation, it said, with fuel hedges in place to cover 100% of 2023 volumes and 50% of 2024 volumes. Talks with its staff on wages were “progressing in line with our expectations.”National Express’s shares slipped 2p to 165p, a decline of 1%.

Bank of England fines MS Amlin Underwriting almost £10 million for risk management failings

Thursday 20 October 2022 12:07 , Simon Hunt

The Prudential Regulation Authority has fined MS Amlin Underwriting, a Lloyds of London insurer, almost £10 million for a series of regulatory failings, including risk management.

The watchdog, which is part of the Bank of England, said MS Amlin did not have adequate governance, oversight and risk management in place after restructuring its business into three divisions.

The changes were made in September 2014 and the failings continued until the end of 2019. The PRA said the issues raised in its concerns -- which included the company’s systems, controls and processes, were not addressed “in an effective and timely manner.”

read more here

Gold miner raises £30m in London for Greenland move

Thursday 20 October 2022 11:18 , Simon Hunt

Greenland gold miner Amaroq Minerals has raised £30 million in London after investors backed a share placing to help it move nearer extracting the precious metal and minerals from the Arctic Sea island.

The AIM-listed, Toronto-based company owns seven licences in Greenland including the Nalunaq gold mine, which produced around 350 thousand ounces of gold between 2004 and 2009. The mine closed in 2013 due to falling global gold prices, financial difficulties and a lack of exploration. Amaroq aims to reopen it.

The plans come at a time when soaring global inflation highlights gold’s traditional role among investors as a hedge against wider price rises on asset markets and in the wider economy.

The company placed around 86 million new shares with new and existing backers, about a third of its enlarged share capital.CEO Eldur Olafsson said the fundraising “will prove transformational for Amaroq as we bring our cornerstone Nalunaq project towards production.”Panmure Gordon acted as manager and broker on the placing and Stifel Nicolaus Europe was sole book runner.

FTSE 100 holds firm as Burberry shares rise

Thursday 20 October 2022 10:30 , Graeme Evans

Burberry shares were higher today amid more signs that spending by wealthy customers is yet to feel the pinch.

The luxury goods group added 20p to 1880p and is marginally higher across 2022 after third quarter figures from Birkin bag company Hermes showed no fall off in demand.

As well as sales being well ahead of expectations at 3.1 billion euros (£2.7 billion), Paris-based Hermes said it would raise prices by between 5% and 10% in January.

The strong update follows a similar one from Louis Vuitton owner LVMH as the deteriorating economic outlook fails to sap the industry’s post-pandemic recovery, particularly among customers in China.

Burberry, which is due to post figures on 17 November, was joined on the FTSE 100 risers board by commodity stocks as Harbour Energy, BP and Shell all rose by 1.5% or more.

Their support limited the impact of yesterday’s Wall Street weakness as the FTSE 100 index stood just 10.16 points lower at 6914.83. The FTSE 250 fell 27.87 points to 17,219.68.

Some of the weakest stocks were in housebuilding after Deutsche Bank cut its estimates based on expectations for lower house prices, reduced volumes and stubborn build cost inflation. Persimmon fell 32p to 1201p and Taylor Wimpey by 2.3p to 86.5p.

Shares across the sector are down by over 50% this year, leaving valuations at levels seen in the financial crisis. Deutsche Bank added: “After a brutal sell off, we believe much is now in the price and a relief rally lies ahead.”

Among the top flight companies posting updates today, Dechra Pharmaceuticals dropped 4% or 116p to 2492p and distribution business Bunzl lost 74p to 2704p despite no changes to their full-year guidance.

AIM-listed GB Group, which provides digital location and identity verification tools, slumped 19% or 82.8p to 348p after its update. Its full-year expectations are unchanged after interim sales growth of 22.5% to £133.8 million, but net debt increased to £132.6 million due to the impact of the weak pound.

Bitcoin considered a “safe haven” compared to Sterling after mini-Budget market turmoil

Thursday 20 October 2022 10:04 , Simon Hunt

The scale of the turmoil in the City’s foreign exchange market caused by the September mini-Budget was laid bare today after new data found Sterling’s volatility sparked a ten-fold increase in the volume of pound to Bitcoin traffic on spot exchanges.

A staggering £6 billion worth of Bitcoin-pound trading took place in the days following the Budget, according to cryptocurrency hedge fund Tyr Capital, as investors retreated from the plunging pound to the relative stability of the digital coin, which for the first time was considered a “safe haven” compared to Sterling.

Ed Hindi, Chief Investment Officer at Tyr Capital, told the Standard: “These numbers are significant and they are something we haven’t seen in developed countries in the past.

“We have only seen it in developing countries’ currencies like with the Turkish Lira. It gives you an idea of how much distrust there has been in the fiscal policies of the new government.”

Schroders funds down £21 billion in just three months

Thursday 20 October 2022 09:35 , Simon English

THE impact on the City from the chaos in central government was laid bare today when Schroders revealed that its funds plunged by an extraordinary £21 billion in the last three months.

That is a direct result of the crisis in pension funds that followed the now ditched mini-budget that saw investors panic sell British bonds due to concern about the state of the nation’s long term finances.

Schroders, one of the grandest names in the Square Mile, has been around since 1804 and is generally regarded as one of the most stable and best run City institutions.

Its assets tumbled from £773 billion to £752 billion between July and September, largely due to the LDI (liability driven investment) strategies that pension funds use to match up assets and liabilities.

When the gilt market crashed and the Bank of England was forced to intervene, some pensions were close to collapse.

Schroders did not comment beyond its statement to the stock market today, and chief executive Peter Harrison declined to speak to the Standard as he tried to calm nervous investors. Schroders shares have halved in the past year to 375p today.

Schroders is far from the only City firm affected by market turmoil, but it seems to be one of the worst hit.

Its rival Jupiter Fund Management today reported that clients pulled £600 million from the company in the last quarter. The state of the industry is such that Jupiter regarded this as a sign that the business is improving.

Jupiter’s assets are down by £11 billion this year to £49 billion.

New chief executive Matthew Beesley told the Standard that while global issues are at play, “there are very clearly some additional challenges to the UK market…due to the fiscal approach from the government”.

He cited “a worsening macroeconomic backdrop, continued geopolitical challenges and inflationary concerns, particularly in the UK”. Jupiter shares are down 63% this year.

Christmas comes early for IG Design as shares jump 12%

Thursday 20 October 2022 08:57 , Simon Hunt

Christmas has come early for gift-wrapping company IG design after it said its sales and profits had been given an unexpected boost by consumers starting their festive shopping sooner.

The Bedfordshire-based business said customers were likely trying to pre-empt some of the supply chain disruption that had caused delays to the delivery of Christmas presents last year. But the firm warned there remained a continued downturn in consumer sentiment.

IG Design shares jumped 12% to 91p. The company’s stock tanked 60% earlier in the year after it said a flurry of supply chain issues had forced it to cancel paying a dividend.

Housebuilders lower after downgrades, Burberry shares rise

Thursday 20 October 2022 08:29 , Graeme Evans

The FTSE 100 index is 20.22 points lower at 6904.77 and the FTSE 250 index off 48.99 points at 17,199.39 as investors take their lead from last night’s Wall Street close.

Oil companies BP, Shell and Harbour Energy bucked the gloom by lifting by more than 1%, while Burberry also improved 2% as investors drew encouragement from an upbeat earnings update by rival Hermes.

The biggest fallers came from the housebuilding sector after analysts at Deutsche Bank made major cuts to their estimates based on expectations for lower house prices, reduced volumes and stubborn build cost inflation.

Persimmon shares fell 32p to 1201p and Taylor Wimpey by 2.3p to 86.5p.

In the FTSE 250 index, the shares of Travis Perkins, National Express and Dunelm were all lower despite reassuring trading updates.

Sales down at Dunelm but sales guidance stays in place

Thursday 20 October 2022 07:54 , Michael Hunter

Dunelm, the FTSE 250 homewares retailer, has reported a drop in sales but stood by its guidance for the full-year, and strong demand for seasonal products including its “Winter Warm” range.

Revenue in the first quarter of its financial year fell 8% to £357 million, with the proportion of digital sales steady at at third. The chain, which has almost 200 outlets, also pointed to “external headwinds” including “particularly volatile” exchange rate movements in recent weeks, but said it was “very well hedged” for the remainder of its financial year.

Nick Wilkinson, chief executive. said: “As we enter what will clearly be a challenging winter for consumers, our absolute focus remains on making every pound count for everyone, through a tight grip on operations.”

Rising yields hit Wall Street shares, Tesla falls

Thursday 20 October 2022 07:33 , Graeme Evans

The US 10-year Treasury yield last night topped 4.1% for the first time since October 2008, reflecting expectations for another big hike in interest rates of 0.75% when the Federal Reserve announces its next policy decision on 2 November.

The surge followed comments from a number of Fed policymakers, with one highlighting that rates may need to go above 4.75% in the fight against inflation. The Fed fund rates is currently in the region of 3.25% after a series of 0.75% increases.

Stock markets were impacted by the spike in the 10-year yield as the S&P 500 lost 0.7% during its first downbeat session of the week.

The Nasdaq fell by almost 1% and futures markets are pointing to a further decline today after Tesla’s update last night disappointed, despite third quarter revenues jumping 56% to a record $21.45 billion.

The company, which is run by Elon Musk, highlighted supply chain issues and inflationary pressures as factors impacting its performance in the period. Shares fell 5% in after-hours trading.

Hargreaves Lansdown analyst Sophie Lund-Yates said: “Decades-high inflation, rising energy bills in Europe and signs of a weakening China market were all blinking alarms heading into Tesla’s quarterly results. We’re seeing that the strength of the group’s brand is holding it steady in times of deep economic uncertainty.

“With all that said, there are challenges just up the road. We’re yet to understand how deep an oncoming recession will be, and it has the potential to shake Tesla’s chassis. There is a limit to how far prices can go without volumes falling.”

In London trading, CMC Markets expects the FTSE 100 to open 18 points lower at 6,907.

Naked Wines chairman quits as firm promises “pivot to profit"

Thursday 20 October 2022 07:29 , Simon Hunt

The Chair of Naked Wines is stepping down with immediate effect, the firm said, as it warned revenue was set to fall in the months ahead while it promised a “pivot to profit.”

Nick Devlin, CEO, said: "We recognise that in pursuit of rapid growth we have made mistakes.

“Whilst the business today remains materially bigger than pre-pandemic, in 2021 we bought inventory and added to our cost base in anticipation of sustained faster growth which has not been delivered; today we are taking steps to reset our cost base and unwind inventory levels.

The stock is the 9th most shorted in the UK, according to ResearchTree.