LIVE – Updated at 11:42
UK shares have continued their rebound as hopes grow for a u-turn on tax cuts in chancellor Kwasi Kwarteng’s recent mini-Budget.
Stocks including Lloyds Banking Group rose sharply on Thursday as yields on government debt fell back on the speculation.
The FTSE 100 index added more than 1% today, aided by last night’s turnaround on Wall Street after hot inflation figures had earlier boosted interest rate rise expectations.
FTSE 100 Live Friday
- Royal Mail forecasts big loss, major job cuts
- Shares recovery continues on budget u-turn hopes
- Slide in pension fund valuations revealed
Kwarteng sacked as Chancellor: Times
11:42 , Simon Hunt
Kwasi Kwarteng has been sacked as chancellor, the Times is reporting, ahead of a press conference by PM Liz Truss on the UK economy this afternoon.
Chancellor Kwasi Kwarteng arrived in London’s Heathrow airport this morning having cut his trip to Washington short.
Liz Truss to hold press conference on UK economy
11:11 , Simon Hunt
Liz Truss is to hold a press conference on the UK economy shortly, as chancellor Kwasi Kwarteng arrives in London having cut his trip to Washington short.
It comes amid reports the PM plans to reverse a number of mini-Budget policy committments.
Bar and restaurant chain Loungers has insisted it is working hard to maintain “value for money principles” in the face of inflationary “inbound cost pressures” that have hit the business from economic headwinds.
Despite this, the group said it was pleased to “out-perform” the market as over the half year period to the beginning of October, the group delivered like-for-like sales growth of 17% it said in a trading update – measured against a comparable six months in pre-pandemic 2019.
The Bristol-headquartered London-listed business said it had shown “consistent strength of performance against a well-documented challenging macroeconomic backdrop” and that was a testament to the “relevance and resilience” of its brands.
Nick Collins, boss of the group, said: “As our strong sales performance demonstrates, neither uncertainty in respect of the wider UK economy nor consumer attitudes towards discretionary spending have to date impacted our sales. We are continuing to benefit from more people staying local, working from home, and supporting their community and high street, which are trends that we believe are here to stay.”
Ashmore shares fall as assets under management fall by $8 billion
10:19 , Michael Hunter
Investors pulled billions from FTSE 250 fund manager Ashmore as wider market turmoil took a toll in the first quarter of its financial year.
The emerging markets specialist reported net outflows of $5 billion, while a “negative investment performance” further reduced assets under management by $3 billion, making an overall fall of $8 billion.
Ashmore pointed to rising interest rates at global central banks, which put emerging market bond and equity indexes under pressure in the period, just as investors were becoming more cautious. The update from the $64 billion fund manager will be closely read in the City, as the fight against inflation changes the investment dynamics of a range of financial assets.
Mark Coombs, Ashmore’s chief executive and the billionaire founder, said geopolitical risks, rising interest rates and the uncertainty they create “pushed bond yields higher and equity valuations lower,” at a time of “lower market levels and investors continuing to reduce risk”.
He added that valuations across equity and bonds in emerging markets were now “exceptionally attractive.” With investors holding lighter positions, Coombs predicted Ashmore was now “well positioned to deliver outperformance in the years ahead.”
Its shares fell 5p to 186p, a drop of 2.4%.
UK stocks continue to rally, sterling near $1.13
10:15 , Graeme Evans
Signs of an easing in gilt market turmoil helped to lift battered UK stocks today as traders digested a remarkable 24 hours of developments on both sides of the Atlantic.
The yield on 10-year government bonds this morning stood at 4%, down from a 14-year high of 4.6% on Wednesday, after Chancellor Kwasi Kwarteng’s early return from an IMF meeting in Washington fuelled speculation of a u-turn on unfunded tax cuts.
The gilt moves sent banks and housebuilding stocks sharply higher for a second session in a row, with mortgage lender Lloyds up another penny to 42.1p and Barratt Developments 10.7p stronger at 320.5p.
Severn Trent and United Utilities, whose valuations have been hit by fears over rising debt costs, improved 63p to 2316p and 20p to 853.6p respectively.
The wider FTSE 100 index rose 63.42 points to 6913.69 and the FTSE 250 cheered 181.32 points to 17,110.58, with other UK focused stocks on the blue-chip leaderboard including Hargreaves Lansdown after a rise of 23.6p to 821p.
London’s improved sentiment also reflected Wall Street’s dramatic turnaround in fortunes following yesterday’s hotter-than-expected inflation print of 8.2%.
The 5% trading range of the S&P 500 index was the biggest in more than two years as an initial fall of 2% on fears of more hefty interest rate hikes was washed away by an unexpected wave of buying. But with more US rate rises on the cards, sterling surrendered some of yesterday’s gains to stand at below $1.13 this morning.
On the corporate front, paper and packaging firm Mondi rallied 11p to 1385p in the FTSE 100 after it said volume and price growth had more than offset inflation pressures.
Investors also backed Ocado for a second day in a row after it emerged that its biggest partner in the US grocery market is in merger talks with a smaller rival. The potential consolidation involving retail giant Kroger helped Ocado shares to add another 8.2p to 444p, having rallied by 10% from a multi-year low last night.
Top pension funds crash
10:04 , Simon English
SOME of the biggest pension funds in the City have crashed 50% in value this year, putting the retirement dreams of tens of thousands of people in possible jeopardy.
Today the Bank of England’s support for pension funds via a £65 billion bond buying spree comes to an end. Bank Governor Andrew Bailey said on Wednesday, in a controversial comment, that pension funds had “three days to get this done”, by which he meant stabilise the funds before the support ends.
Analysis for the Evening Standard by SCM Direct shows that scores of funds had plunged in value even before the gilt crisis that began after Chancellor Kwasi Kwarteng’s mini budget three weeks ago.
Alan Miller of SCM said: “When the Evening Standard asked us to analyse the performance of pension funds, we did not know where the analysis would lead us, but even as professional investors we were shocked by what we discovered.”
Inmarsat takeover suffers setback as CMA launches investigation
09:41 , Simon Hunt
A planned $7.3 billion (£6.5 billion) takeover of satellite firm Inmarsat by American rival Viasat suffered a setback today as the UK’s competition watchdog said it was referring the case for an in-depth investigation.
The Competition and Markets authority said it feared the deal would result in a “substantial lessening of competition” in the UK, which could see airlines facing high prices to use satellite services, passing the cost on to consumers.
CMA senior director Colin Raftery said: “This is an evolving market, but the merging companies are currently two of the key players – and it remains uncertain whether the next generation of satellite operators will be able to compete against them effectively.
“Ultimately, airlines could be faced with a worse deal because of this merger, which could have knock-on effects for UK consumers as in-flight connectivity becomes more widespread.”
The two businesses agreed to merge in a deal announced in November 2021.
Lenders lead FTSE 100 higher, Royal Mail shares slide
08:31 , Graeme Evans
An unexpected turnaround in Wall Street fortunes has set the tone for an improved session for European markets.
The FTSE 100 index rose 1.4% or 93.3p to 6942.57, with lenders Lloyds and Barclays at the top of the leaderboard after adding to yesterday’s strong session with gains of more than 3%.
Legal & General also improved 3% or 6.7p to 224p as investors cheered an easing in bond yields on speculation of a u-turn over the chancellor’s mini-Budget tax cutting plans.
Barratt Developments and Persimmon lifted 10.4p to 352.2p and 35p to 1231.5p respectively in a session when UK stocks dominated the FTSE 100 index.
Other risers included paper and packaging firm Mondi, which lifted 40p to 1416p after it said volume and price growth had more than offset inflation pressures.
The FTSE 250 index rose 1.7% or 294.32 points to 17,223.58, but Royal Mail business International Distributions Services dropped another 6% or 12.75p to 196.95p after its warning of a £350 million operating loss for the financial year.
Royal Mail to cut thousands of jobs
07:36 , Graeme Evans
Royal Mail is set to cut as many as 5,000 jobs over the next year, according to its parent company International Distributions Services.
In a statement the firm said: “We will be starting the process of consulting on rightsizing the business in response to the impact of industrial action, delays in delivering agreed productivity improvements and lower parcel volumes,.
It comes as the firm reported an operating loss of £219 million for the first half of the year, with a full-year loss of £350 million expected.
FTSE 100 seen higher, US bank earnings due
07:30 , Graeme Evans
US shares had a remarkable ride yesterday after a third consecutive decline in US inflation to 8.2% came in above the 8.1% forecast, fuelled by a rise in core inflation to 6.6% in September.
The S&P 500 index initially fell 2%, reflecting expectations for further 0.75% rises in US interest rates next month and in December.
But a two-year low prompted a surprise turnaround for the US benchmark as it ended a run of six consecutive days in the red to close 2.65% higher.
The dollar weakened despite the US rate rise speculation, with sterling at $1.13 this morning amid the budget u-turn speculation.
CMC Markets expects the FTSE 100 index to open 70 points higher at 6920, having finished in positive territory during yesterday’s rollercoaster session.
Michael Hewson, CMC’s chief market analyst, said: “While Downing Street has denied such a u-turn will happen, markets seem to think that the Chancellor won’t have a choice, and his early departure from IMF meetings in Washington appears to suggest that something is afoot.
“There is also an expectation that whatever the Bank of England and Governor Bailey says about ending the support for the gilt market today, if we get further turbulence next week they will have little choice but to step in and provide liquidity to the market.”
Today’s session will also see the first batch of third quarter earnings from the US banking sector, with figures due from heavyweights JP Morgan, Morgan Stanley and Citigroup.