FTSE and Europe rise after UK’s autumn statement and ECB minutes

• Markets close and recap

  Well that’s all from us today, thanks for following along. Be sure to join us again tomorrow.

  Here’s a quick recap of some of the top stories from today:

  Ofgem lifts energy price cap

  NatWest to close 19 more branches

  UK private sector grows at fastest in four months

  Pound rises after PMI survey

  Virgin Money down 4% after setting aside £309m for bad loans

  Jet2 profits rise despite £14m hit from summer chaos

  Have a good evening!

• Turkey hikes interest rates to 40%

  Turkey’s central bank has increased its key interest rate to 40% in a bid to battle inflation.

  This is a rise of five percentage points from 35%. Economists had expected a smaller rise to 35.7%.

  It came after inflation came in at 61% in the year to October, little changed on September’s figures

  Timothy Ash, emerging markets strategist at BlueBay Asset Management, said.

  Really impressive move by the CBRT [Central Bank of the Republic of Turkey] – probing their orthodoxy and getting well ahead of expectations.

  These guys and girls are serious about fighting inflation. We need to give them credit for that.

• Traders dampen expectations for UK interest rate cut next year

  

  Money markets have suggested that the first Bank of England rate cut may not come until August, rather than in May/June as recently expected.

  Bloomberg said:

  Traders are betting the central bank will reduce rates by around 60 basis points in 2024, according to swaps tied to monetary-policy meeting dates. That means two quarter-point reductions are fully priced in — with the first cut in September. The chance of a third is about 40%.

• UK faces two decades of lost pay growth

  UK wages are now set to remain below their 2008 level until 2028.

  That’s a totally unprecedented two lost decades of pay growth, according to the Resolution Foundation.

• Financial stability outlook remains fragile, ECB finds

  The ECB has said that financial markets remain exposed to adverse macro-financial and geopolitical developments, potentially amplified by vulnerabilities in some non-bank financial institutions.

  According to the November 2023 Financial Stability Review, the full impact of tighter financial conditions on the real economy is yet to be felt.

  Higher borrowing and debt service costs will increasingly test the resilience of euro area households, firms and governments.

  It added that Euro area banks see profitability benefit from rising interest rates but face headwinds from higher funding costs, worsening asset quality and lower lending volumes.

  The weak economic outlook along with the consequences of high inflation are straining the ability of people, firms and governments to service their debt,” said ECB Vice-President Luis de Guindos.

  It is critical that we remain vigilant as the economy transitions to an environment of higher interest rates coupled with growing uncertainties and geopolitical tensions.

• Commodity update: Gold

  Gold (GC=F) prices are hovering just below the $2,000 mark, at 1,994.20.

  The bullion price found strong support earlier in the week, as expectations that the Fed’s rate hiking cycle had ended consolidated amongst investors.

  Ricardo Evangelista, senior analyst at ActivTrades, said:

  The resulting mood led to a two-and-a-half-month low for the greenback and saw treasury yields drop, in a dynamic that benefited the non-yielding precious metal.”

  However, the subsequent publication of hawkish Fed minutes cooled this enthusiasm, and the release of strong labour data on Wednesday compounded the sentiment of uncertainty as investors hesitated to call the next Fed monetary policy move.”

  With the ‘higher-for-longer’ view lingering and receding expectations of a rate cut in the first half of 2024, the upside for gold prices may be limited.

• Arm rises 5%

  

  Shares of the central processing unit (CPU) architecture licensing company Arm Holdings (ARM) were on the rise in extended trading after Wells Fargo (WFC) initiated coverage the stock.

  Wells Fargo is giving the company an ‘overweight’ rating with a $70 (£55.78) per share price target. Analysts at Wells Fargo pointed out the company’s chip designs and expanding markets in China among other reasons for the rating.

  The stock has also been uplifted after reports that Nvidia (NVDA) will use technology from Arm Holdings to design central processing units that will run the Microsoft MSFT operating system.

  Nvidia was one of Arm’s biggest financial supporters heading into the September IPO and actually tried unsuccessfully to acquire the company.

  See what other tickers are trending here

• Pound rises after PMI survey

  

  Sterling rose on Thursday to its highest against the dollar since early September after the PMI data.

  Simon Harvey, head of FX analysis at Monex Europe, said:

  November’s flash PMIs once again support our view that the UK economy is merely in a state of stagnation as opposed to outright contraction, like that seen in the eurozone.

  In conjunction with structural supply issues which should keep short-term UK rates higher for longer relative to the eurozone, we expect the UK’s better relative growth prospects to support renewed upside in GBPEUR.

  This has broadly been on display this morning, with the cross rallying two tenths of a percent as the PMI reports show diverging economic momentum and more credible inflation pressures in the UK, leading UK-eurozone rate spreads to widen.

• UK private sector grows at fastest in four months

  Britain’s private sector grew at its fastest pace in four months.

  According to the latest S&P Global/CIPS Flash UK purchasing managers’ index (PMI), the UK’s services sector unexpectedly returned to growth in November, with a reading of 50.5.

  This was thanks to the Bank of England (BoE) holding interest rates steady at 5.25% for a second meeting in a row, as well as improving business conditions.

  The reading was up from 49.5 the previous month and ahead of analyst predictions of 49.5. Any figure above 50 indicates an expansion, whilst a reading below it means contraction.

  Overall the private sector reading came in at 50.1.

• NatWest to close 19 more branches

  NatWest (NWG.L) is planning to close another 19 branches, mostly in the early part of next year.

  The lender said it will shut 18 NatWest branches and one Royal Bank of Scotland site. These are mainly spread across England, apart from one in Pontypridd in Wales.

  All the NatWest sites will close in either the latter part of February or early March, the bank said.

  Three of the sites are in London, with others in Redcar, Bradford, Birmingham, Maldon and Dudley, among others.

  The largest number of closures announced this year have been Barclays branches. The bank has said 185 of its sites are set to shut.

  NatWest is second with 116 branches, followed by Lloyds (112), Halifax (72), Virgin Money (40), Bank of Scotland (28), Ulster Bank (10), TSB (nine), RBS (five), and Nationwide (one).

  NatWest said:

  As with many industries, most of our customers are shifting to mobile and online banking, because it’s faster and easier for people to manage their financial lives.

  We understand and recognise that digital solutions aren’t right for everyone or every situation, and that when we close branches we have to make sure that no-one is left behind.

  We take our responsibility seriously to support the people who face challenges in moving online, so we are investing to provide them with support and alternatives that work for them.

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