FTSE 100 Live: UK growth weaker than expected in July, markets higher
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GDP rose by 0.2% in July, marking a return to growth for the UK economy after a 0.6% decline the previous month.
However, today’s headline figure from the Office for National Statistics was weaker than expected following declines in construction and industrial production output.
The services sector propped up the performance with growth of 0.4%, meaning that the economy overall was flat in the quarter to July.
FTSE 100 Live Monday
July’s GDP figure adds to recession fears
FTSE 100 rallies, Ferrexpo shares higher
Serco shares fall on CEO departure
FTSE 100 lifted by retailers and housebuilders on hopes for the economy
15:12 , Michael Hunter
Confirmation that the UK economy avoided two consecutive months of contraction with news of 0.2% growth in July helped improve sentiment in London, helping retailers and housebuilders onto the FTSE 100 leaderboard.
As buyers came in for the sectors after a torrid run lower last week, Tesco took top spot with a rise of 5.3% to 253p. Kingfisher, the owner of B&Q, gained 5.2% to 255p. Berkeley Group, the London-focused developer, was up 5% at 3707p.
The UK’s main stock index rose 122 points overall to 7471.80, a rise of 1.8%. It was a broad advance, with only a handful of its constituents posting falls, led by investment manager M&G and industrial group Melrose, down 1.5% at 201p and 1% at 126p respectively.
S&P 500 rises as cooler dollar and well-received corporate news provide support
15:00 , Michael Hunter
Wall Street’s S&P 500 was up 35 points at 4101.13 in early trade, a gain of 0.8%, helped by a cooler dollar in the run-up to the main US inflation reading for August, due out tomorrow as one of the last main data points before the Federal Reserve’s September rate call next week.
Corporate news flow was also largely supportive, including news of regulatory approval for a new psoriasis drug at Bristol-Myers Squibb and a broker upgrade for web-based used car dealer Carvana. The stocks were up around 8% apiece.
The dollar index was down 0.6%, trimming its rally for the year to just under 18%.
New York stocks set to rally ahead of inflation numbers as dollar cools
14:00 , Michael Hunter
A cooling US dollar helped improve the mood on the New York stock market as investors were also looking out for inflation numbers due later in the week that will shed light on the impact of the Federal Reserve’s fight against rising prices.
According to futures trade, the S&P 500 will open up by 115 points or 1.5%. After its long rally for much of the year, the dollar index was down 0.8%. The Consumer Price Index for August is expected to hold steady at 0.3%. It will be one of the final numbers out that are expected to hold significant sway over the Fed’s September rate-setting meeting due on September 20 and 21.
Soames steps down after eight years running Serco
12:47 , Simon Hunt
One of the most colourful characters in the City, Rupert Soames, is stepping down from his job as chief executive of Serco, the support services company which he is widely credited with rescuing from scandal.
Soames who will be 64 when he retires this month, said: “It is now time for me to outsource myself. My respect and admiration for the wonderful team of people at Serco, who work so hard to deliver superb public services and value for money for taxpayers, is unbounded.”
He took the top job when he joined the company in 2014 after its previous CEO, Christopher Hyman, left suddenly after a 20-year career there, amid a series of high-profile problems. They included an overcharging scandal when the company billed the Government for tags on offenders who had not been released from prison and even some who had even died.
Soames, the grandson of Winston Churchill, was brought in to steady the ship and then turn it around. His reputation with the City and that of the FTSE 250 company has been burnished during his time in charge, which included its management of about 20% of the NHS’s mobile Covid testing sites.
Serco employs more than 50,000 people supporting government services in transport, justice, immigration, defence and healthcare. Its chair, John Rishton, said of Soames: “Serco is unrecognisable from the business that he joined. Under his leadership, the business was stabilised, a clear strategy developed and executed, which has resulted in the strong and successful business it is today.”
Soames will receive pay covering his 12 months notice period and will remain as a strategic adviser to the group and sit on the board of Serco North America. He was paid £850,000 a year and will be replaced by a company insider, Mark Irwin, who runs its UK and Europe division. Irwin will be on a basic annual salary of £800,000.
Ladbrokes owner faces probe into money-laundering
12:18 , Simon Hunt
The Australian financial crimes regulator has opened an investigation into Ladbrokes owner Entain for possible breaches of anti-money laundering and counter-terrorism financing rules.
The Australian Transaction Reports and Analysis Centre (Austrac) said it began its investigation after an extensive supervisory campaign covering the whole corporate bookmaking sector.
Entain has come under increasing criticism for the way it deals with its social responsibility and anti-money laundering obligations, and last month was fined £17 million by the Gambling Commission for violations.
Today Austrac chief executive Nicole Rose said: “Reporting entities have a responsibility to ensure they identify, assess and manage risks of money laundering and terrorism financing, develop adequate processes and devote the necessary resources to comply with their obligations.”
11:49 , Simon Hunt
Banking giant JP Morgan has agreed to acquire payments firm Renovite as it jostles with the likes of challengers Stripe and Adyen for the top spot in payment processing.
The firm says it hopes to integrate Renovite’s technology to bolster its digital offering as part of a strategy to modernise its payments systems. The terms of the deal were not disclosed.
JP Morgan holds the title of biggest payment processor in the US with almost $1.9 trillion in volume in 2021, but challengers Adyen and Stripe, both founded in the past 16 years, are rapidly catching up, ranked 6th and 12th biggest processors respectively.
City Comment: Slash VAT for pubs until Christmas
11:21 , Simon English
To small businesses, news that the economy grew in July might feel like they are being trolled.
It certainly didn’t seem like that to them, nor to most of us.
Wandering past pubs and restaurants lately makes for grim viewing. There is no doubt that consumers are spending less.
Small businesses might normally respond to this with special offers, price cuts, two-for-one deals.
The cost of ingredients, materials, energy and staff has jumped so far that for many this is impossible. It is going to be a long, cold winter.
Bigger companies, which can better absorb inflation, could perhaps step in. They could offer the deals that would keep the High Street busy.
Leading the way is JD Wetherspoon, the favourite pub chain of everyone who isn’t a snob.
Today it says it will cut the price of all food and drinks in its pubs this Thursday by 7.5%. With a London pint of lager often not shy of £8 — not in ’Spoons of course — and talk of landlords only being able to break even if they charged £20, that has to be welcomed.
This being Wetherspoons, there’s a political point to the price cut. Chairman Tim Martin has been cross for years that the supermarkets he sees as competition don’t pay VAT on food.
He says today: “Taxes should be fair and equitable. It doesn’t make sense for the hospitality industry to subsidise supermarkets. It is unfair that supermarkets pay zero VAT on food, but pubs and restaurants pay 20%.”
Whether he is right in the longer term we’ll leave for today. The Government could axe VAT in pubs until Christmas though, and it should.
FTSE 100 up 1.2%, Ferrexpo shares rally
10:23 , Graeme Evans
Shares in the Ukraine-based iron ore pellets firm Ferrexpo today surged 12% to their highest level since June.
FTSE 250-listed Ferrexpo, which in 2021 had a 9% market share as the world’s third largest exporter of pellets to the steel industry, jumped 18.3p to 174.4p.
The movement followed weekend reports of a rapid advance by Ukrainian forces into Russian-held territory in the east of the country.
Despite the war, the company’s operations in central Ukraine still managed to produce 4.8 million tonnes of iron ore pellets in the first half of the year. Revenues declined by 31%, with sales impacted by access to export routes.
The momentum for Ferrexpo came in a positive session for the mining sector as London’s FTSE 100 index built on Friday’s progress by adding 1.2% or 85.5 points to 7436.62.
Glencore and Anglo American lifted 2%, while there was progress for stocks focused on the UK consumer as supermarket Tesco rallied 8p to 247.9p at the top of the blue-chip risers board and B&Q owner Kingfisher added 7.7p to 249.8p.
Berkeley Group rose 102p to 3644p after analysts at Berenberg raised their price target on the housebuilder to 4500p, at the same time as removing “buy” recommendations on rivals Persimmon and Taylor Wimpey.
The FTSE 250 index lifted 1% or 181.52 points to 19,369.55, with cyber security firms NCC and Darktrace among those doing well. Marks & Spencer also rallied 5.15p to 122.8p.
On AIM, gaming technology firm Frontier Developments added 10p to 1330p after Liberum highlighted encouraging initial sales of F1 Manager 2022. The broker, which has a 2110p target, believes the title can generate £40 million sales in the 2023 financial year.
July GDP figure adds to recession fears
09:03 , Graeme Evans
The 0.2% month-on-month rise in GDP for July was smaller than the forecast 0.4%, adding to the City’s recession fears as activity levels continue to be impacted by high inflation.
Capital Economics thinks GDP will fall by at least 0.2% quarter-on-quarter in the three months to the end of September.
Its chief UK economist, Paul Dales, said: “The disappointingly small rebound in real GDP in July suggests that the economy has little momentum and is probably already in recession. The government’s utility price freeze is unlikely to change that.”
With underlying inflationary pressures still growing, the consultancy expects the Bank of England will raise interest rates by at least 0.5% at the meeting rearranged from this Thursday to 22 September.
FTSE 100 higher, Serco shares fall on CEO departure
08:45 , Graeme Evans
Support from the mining sector means the FTSE 100 is 49.03 points higher at 7400.17, with the best performing stocks including Glencore and Anglo American following gains of 2%.
The fallers board included housebuilders Persimmon and Barratt Developments after analysts at Berenberg downgraded their recommendations on the pair to “hold”.
The FTSE 250 index rose 56.62 points to 19,244.65, led by Ukraine-based iron ore company Ferrexpo. Investors were encouraged by weekend reports of a counter-offensive in the east of the country, leading shares 11% or 17.1p higher at 173.2p.
Serco shares were 5.1p lower at 175.1p after the outsourcing giant announced that Rupert Soames is to step down as chief executive at the end of the year. He will be succeeded by Mark Irwin, who is currently the CEO of Serco's UK & Europe Division.
On the contribution of Soames, chairman John Rishton said: “Serco is unrecognisable from the business that he joined in 2014.”
FTSE 100 seen higher, oil below $92 a barrel
07:55 , Graeme Evans
The FTSE 100 index is expected to open higher after Wall Street’s S&P 500 and Nasdaq finished Friday’s session up by around 2%.
CMC Markets sees the FTSE 100 trading 29 points higher at 7380, building on the 1.2% improvement posted at the end of last week.
Inflation figures in the US on Tuesday will be a big factor in the direction of markets later this week, particularly with the next Federal Reserve decision on interest rates due on 21 September.
Economists are forecasting a fall in the annual rate of CPI to around 8.1% from 8.5% the previous month. This week also sees the release of the UK’s latest inflation number, which is forecast to show another reading above 10%.
Recent developments in the oil market have offered some encouragement on the inflation front, however, with the price of Brent crude below $92 a barrel this morning.
