UK FTSE 100 hits highest level since 2018; cost of living crisis and climate change top global risks – business live | Business
FTSE 100 hits highest since 2018
The UK’s blue-chip share index has hit its highest level in over four years.
The FTSE 100 index has climbed by around 0.7% to hit 7749 points, up 55 points today, the highest level since August 2018.
The Footsie has been lifted today by gains in mining stocks and retailers.
JD Sports are the best performing stock, up 7%, after lifting its profit outlook towards the top end of expectations this morning following strong sales growth in the run-up to Christmas.
Fellow retailers Frasers (+3.6%) and Next (+2.7%) are also among the top risers.
Mining stocks are also rallying, despite the World Bank’s warning yesterday that the world economy risked falling back into recession.
Copper-producer Antofagasta (+2.6%), Anglo American (+1.9%) and Glencore (+2%) are benefitting from China’s move to relax Covid-19 restrictions.
Commodity prices have been rising this year, as Raffi Boyadjian, lead investment analyst at XM, explains:
Copper futures have jumped about 7% so far this year and an increasing number of analysts are predicting that oil prices will top $100 a barrel again in 2023. In the meantime, though, concerns about a recession and some doubts about how quickly Chinese demand will rebound when Covid infections are so high are putting a lid on any upside in oil.
Investors are also relieved that Jerome Powell, the head of America’s Federal Reserve central bank, didn’t push back against expectations of a slowing in US interest rate rises when he spoke yesterday.
The markets are also hoping for a drop in US inflation, when the latest consumer price index figures are released.
Boyadjian points out that a drop in inflation could encourage the Fed to stop hiking interest rates as rapidly.
Sentiment was boosted on Friday from signs that wage pressures in the United States are easing and that the services sector is headed for a sharp slowdown, but the hawkish rhetoric that later followed revived recession worries.
If Thursday’s CPI figures point to further moderation in inflation in December, it’s likely to fuel bets that the Fed’s tightening cycle is nearing the end.
The internationally-focused FTSE 100 outperformed major rivals last year. It gained almost 1% in 2022, while global markets fell 20%.
It is now approaching its record high, of 7903.5 points, set in May 2018.
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The FTSE 100 index is continuing to climb to four-year highs.
It’s now up 69 points or 0.9% at 7763, having hit 7772 a few minutes ago extending its earlier gains to levels not seen since summer 2018.
Craig Erlam, senior market analyst at OANDA, says economic optimism is lifting shares:
Investors remain in an upbeat mood going into tomorrow’s US inflation report, buoyed still by the December jobs report and the prospect of the economy being less squeezed by interest rates.
Fed Chair Jerome Powell may have refrained from commenting on the monetary policy outlook on Tuesday but the chances are, he wouldn’t have said anything investors would have liked even if he had addressed it. It’s been clear from other commentaries that policymakers are sticking to the hawkish script.
Another good inflation number tomorrow could change that as the trend has already been very encouraging and the jobs data that appeared to throw a spanner in the works last month has since been revised out. From an investor perspective, it would take something pretty terrible tomorrow – the inverse of what we were treated to on Friday – to really rock the boat.
Nils Pratley on Britishvolt, and the great electric car battery race
Nils Pratley
In a fantasy world, the would-be rescuer of Britishvolt would be a consortium that included a car manufacturer or two, our finance editor Nils Pratley writes.
The ailing startup would instantly get what it needs most after six months of crisis: endorsement for a battery product that is still in development, plus some future customers.
At that point, the big political claims made about Britishvolt, its planned gigafactory in Northumberland and “the UK’s place at the helm of the global green industrial revolution”, as the former prime minister Boris Johnson put it a year ago, would start to sound more credible.
Sadly, the deal on the table does not resemble a dream version. The prospective buyer is a consortium led by DeaLab Group, a little-known UK-based private equity investor with backing from interests in Indonesia. Details are sketchy until Britishvolt’s board votes on the proposal on Friday but, as far as one can tell, the Indonesian angle seems to be access to metals needed to produce batteries – lithium, nickel, cobalt and so on. All useful, but, if the consortium has expertise in battery chemistry or in supplying the automotive industry with vital kit, it has so far kept quiet.
Therein lies one reason to be underwhelmed. Another is the fact that Britishvolt is being valued at only £32m, or 90%-plus less than a year ago. Good luck to DealLab but the outline proposal reinforces the fact that the fast action in the global gigafactory race is happening outside the UK…
More here:
Cost of living dominates global risks in the next two years
The cost of living crisis is the most severe global risk to the world economy over the next two years.
It’s followed by natural disasters and extreme weather events, and the risk of geoeconomic confrontation, on the threats facing us over the next two years.
That’s the conclusion from the World Economic Forum’s latest Global Risks Report, released today ahead of next week’s Annual Meeting in Davos.
The report warns that the economic aftereffects of COVID-19 and the war in Ukraine have led to skyrocketing inflation, a rapid normalization of monetary policies and started a low-growth, low-investment era, adding:
Governments and central banks could face stubborn inflationary pressures over the next two years, not least given the potential for a prolonged war in Ukraine, continued bottlenecks from a lingering pandemic, and economic warfare spurring supply chain decoupling.
It also warns of the downside risks to the economic outlook also loom large, as “a mismatch” between monetary and fiscal policies could lead to liquidity shocks, causing a longer economic downturn and debt distress “on a global scale”.
Saadia Zahidi, managing director at WEF, says:
As the conflict between Russia and Ukraine approaches one year, economies and societies will not easily rebound from continued shocks.
In this year’s Global Risks Perception Survey, more than four in five respondents anticipated consistent volatility over the next two years. The persistence of these crises is already reshaping the world that we live in, ushering in economic and technological fragmentation.
A continued push for national resilience in strategic sectors will come at a cost – one that only a few economies can bear. Geopolitical dynamics are also creating significant headwinds for global cooperation, which often acts as a guardrail to these global risks.
Looking further ahead, the climate emergency dominates the top long-term risks. That list of topped by “Failure to mitigate climate change”, followed by “Failure of climate-change adaption”, “Natural disasters and extreme weather events” and “Biodiversity loss and ecosystem collapse”.
More here:
Mirror and Express publisher Reach to axe 200 roles in £30m cost-cutting drive
Mark Sweney
The publisher of the Mirror and the Express is to cut 200 roles in a £30m cost-cutting drive, after advertisers failed to spend heavily through the World Cup, Black Friday and Christmas season.
Reach, which also owns hundreds of regional titles including the Manchester Evening News, Birmingham Mail and Liverpool Echo, reported a slump of 20.2% in print advertising and 5.9% in digital ads in the traditionally strong fourth quarter.
The company said this was largely due to a significantly lower than anticipated benefit from traditionally stronger ad spending around Black Friday and Christmas, which has affected the whole sector.
It added:
“More broadly, we have also seen the continued impact of macroeconomic and consumer uncertainty, reflected in slowing market demand for advertising.”
S&P Global Ratings has forecast that European housing prices are set to decline – but not crash – in most countries in the region over 2023 and through 2024.
A new report predicts that rising mortgage costs will hit house prices, with UK house prices forecast to fall 3.5% in 2023.
The report also forecasts that a strong rebound over the next three years remains unlikely, as the downward adjustment in housing prices to higher interest rates will take time.
S&P Global Ratings says:
We forecast a decline–but no crash–in house prices in most European countries over 2023 and through 2024 for others, with few if any prospects of a strong rebound through 2025. That’s because housing prices as well as investment are likely to suffer from rapidly rising mortgage rates.
It will take time for market prices and investment to adjust fully to those higher interest rates, with some countries taking longer than others. We have found that such an adjustment could last up to 10 quarters and is typically twice as pronounced as after a low-rate regime.
That said, the past has shown that housing prices in Europe are quite inelastic to decline. And today’s drivers (such as limited supply, a strong labor market, high household wealth, and what appear to be shifts in preferences) may lessen the effect of rising interest rates.
Parcel firm Evri has apologised to customers across the UK who are continuing to wait for delayed Christmas deliveries.
The firm said that staff shortages, Royal Mail strikes and bad weather had contributed to the problems and it was working to sort them out.
An Evri spokeswoman said (via PA Media):
“We are sorry that some customers are experiencing short, localised delays in receiving their parcels.
“We continue to be impacted by high demand, staff shortages and bad weather conditions but due to the hard work of our local teams, we successfully delivered over three million parcels each day over recent weeks.
“Despite incredible efforts from all of our people, our service has not been as good as we would have liked in some areas, and we are committed to redoubling our efforts this year including a focus on recruitment.
“In some local areas, there are still some delayed parcels that should be cleared over the next few days and we apologise for any inconvenience and disappointment.
“However, in the unlikely event that a parcel hasn’t been delivered within 10 days, we would advise customers to contact their retailer/seller who will in turn contact us if necessary.”
While stocks are rallying, the pound is having a more mixed day.
Sterling has dipped by a third of a cent against the US dollar, to $1.212. Against the euro, it’s lost 0.3 of a eurocent to €1.129.
Concerns over the UK’s economy prospects have been weighing on the pound recently.
Georgette Boele, senior FX strategist at ABN Amro, explained:
“The economic outlook for the UK has already deteriorated substantially and is worse than that for the U.S. and the eurozone.”
With the UK expected to fall into recession, the Bank of England may raise interest rates more slowly than forecast, which would also weaken sterling.
The UK was the only G7 country to suffer a drop in productivity in 2021, new figures from the Office for National Statistics show.
Output per hour worked in current prices was £46.92 in the UK in 2021, 10% lower than the other G7 nations’ average, the ONS says, and down from £47.58 in 2020.
All other G7 countries saw a rise in output per hour worked, apart from Japan where there was a lack of data for the ONS to work with.
In 2021, the UK’s output per hour worked was lower than France, Germany and the United States, but higher than Canada and Italy, the report shows.
In 2021, the UK’s output per hour worked was lower than:
▪️ France
▪️ Germany
▪️ the USABut higher than:
▪️ Canada
▪️ Italy— Office for National Statistics (ONS) (@ONS) January 11, 2023
The UK’s average output per hour grew third fastest (5.1%) over 2020 and 2021 out of the G6 countries (the G7 without Japan). This was behind Canada (6.1%) and Italy (5.9%). pic.twitter.com/MkpckRYb91
— Office for National Statistics (ONS) (@ONS) January 11, 2023
Longer NHS waiting lists and rising inactivity due to ill health are hitting productivity in the UK, says Paul McGuckin, head of employee benefits distribution at consultancy Broadstone:
“The UK’s productivity continues to lie substantially behind many of its major international peers including the USA, France and Germany.
“Of more immediate concern will be the direction of travel with the UK the only G7 nation to see its productivity go into reverse in 2021 following the pandemic. With the economy set to enter recession, the nation’s productivity puzzle will be a key challenge for the Prime Minister and businesses to overcome in the year ahead.
“Productivity has a huge impact on the economy and people’s standard of living. But growing NHS waiting lists, diminishing access to treatment and surging economic inactivity due to ill-health are all weighing on productivity in the UK.
“Businesses that proactively implement effective incentivisation and employee benefits programmes throughout their entire workforce will be best placed to retain staff, drive better performance and grow in a post-Covid landscape.”
NatWest extends debt repayments in cost of living support
UK bank NatWest has announced a new package of Cost of Living support measures, including £5.7m of funding for charities and partners.
NatWest is giving £1m to the Trussell Trust, the food bank charity, to support the Help through Hardship scheme, plus over £1.6m to the debt advice sector; £900k for Responsible Finance to support provision of accessible credit to people; and a £1m partnership with Federation of Small Businesses (FSB) to provide cost of living support.
NatWest is also giving struggling customers more time to repay debts, it says:
From early February this year, where customers have missed several payments on an unsecured debt such as a loan or overdraft, the bank will extend the time for them to repay their debt from 18 to 24 months, giving them more time and flexibility.
European financial markets are relatively upbeat after a good showing on Wall Street last night, ahead of the next US inflation numbers on Thursday, says AJ Bell investment director Russ Mould.
“It helped that a speech by Federal Reserve chair Jerome Powell yesterday didn’t contain any shocks which would cause investors to worry about markets even more.
JD Sports’ upbeat trading statement helped to drive renewed interest in the retail sector and extended a trend that gathered pace last week when Next said it had experienced a good Christmas.
JD Sports: young shoppers had more cash to spend at Christmas
Sarah Butler
JD Sports said more work available for its young shoppers and better availability of key brands helped spur a surge in sales over Christmas, my colleague Sarah Butler reports.
The retailer, which operates in Europe and the US as well as the UK, said sales surged more than 10% in six months to New Year’s Eve, compared to 5% growth in the first half of the year.
Growth was strongest in the US and in stores – but it also saw growth online as shoppers could pick up orders from stores, staving off concerns about deliveries.
Régis Schultz, the chief executive of JD, said young shoppers had more cash in their pockets than a year ago thanks to the reopening of retail and hospitality which had provided jobs, while inflation had prompted people to go out and buy instead of waiting for bargains.
He added that competition from online pure plays was waning as the costs of delivery racked up.
“Investors are now saying to online players you have got to make money.
The era of the free lunch for online pure plays is a little bit over.”
FTSE 100 hits highest since 2018
The UK’s blue-chip share index has hit its highest level in over four years.
The FTSE 100 index has climbed by around 0.7% to hit 7749 points, up 55 points today, the highest level since August 2018.
The Footsie has been lifted today by gains in mining stocks and retailers.
JD Sports are the best performing stock, up 7%, after lifting its profit outlook towards the top end of expectations this morning following strong sales growth in the run-up to Christmas.
Fellow retailers Frasers (+3.6%) and Next (+2.7%) are also among the top risers.
Mining stocks are also rallying, despite the World Bank’s warning yesterday that the world economy risked falling back into recession.
Copper-producer Antofagasta (+2.6%), Anglo American (+1.9%) and Glencore (+2%) are benefitting from China’s move to relax Covid-19 restrictions.
Commodity prices have been rising this year, as Raffi Boyadjian, lead investment analyst at XM, explains:
Copper futures have jumped about 7% so far this year and an increasing number of analysts are predicting that oil prices will top $100 a barrel again in 2023. In the meantime, though, concerns about a recession and some doubts about how quickly Chinese demand will rebound when Covid infections are so high are putting a lid on any upside in oil.
Investors are also relieved that Jerome Powell, the head of America’s Federal Reserve central bank, didn’t push back against expectations of a slowing in US interest rate rises when he spoke yesterday.
The markets are also hoping for a drop in US inflation, when the latest consumer price index figures are released.
Boyadjian points out that a drop in inflation could encourage the Fed to stop hiking interest rates as rapidly.
Sentiment was boosted on Friday from signs that wage pressures in the United States are easing and that the services sector is headed for a sharp slowdown, but the hawkish rhetoric that later followed revived recession worries.
If Thursday’s CPI figures point to further moderation in inflation in December, it’s likely to fuel bets that the Fed’s tightening cycle is nearing the end.
The internationally-focused FTSE 100 outperformed major rivals last year. It gained almost 1% in 2022, while global markets fell 20%.
It is now approaching its record high, of 7903.5 points, set in May 2018.
Bernard Arnault, world’s richest man, appoints daughter to run Dior
Rupert Neate
Bernard Arnault, the world’s richest person, has appointed his daughter Delphine to run Christian Dior, the second-biggest brand in his LVMH luxury goods empire.
Arnault, 73, is the chief executive, chair and majority shareholder of the group, which owns a swathe of high-end businesses including Louis Vuitton, Tiffany, Givenchy, Kering and Moet Hennessy.
He announced on Wednesday that his eldest daughter would become Dior’s Cchief executive and chair as part of a shake-up of the €382bn (£337bn) conglomerate.
Delphine Arnault, who is the executive vice-president of Louis Vuitton and in charge of its product product-related activities, will take up the new position from 1 February.
The 47-year-old joined the family business in 2000 after two years at the management consultancy firm McKinsey and studying at the London School of Economics. She joined the LVMH board in 2003 – becoming the first woman and youngest person to serve on it.
Her father said:
“Under Delphine’s leadership, the desirability of Louis Vuitton products advanced significantly, enabling the brand to regularly set new sales records. Her keen insights and incomparable experience will be decisive assets in driving the ongoing development of Christian Dior.”
More here.
Full story: Barratt brings in hiring freeze as UK housing market slows
Kalyeena Makortoff
Britain’s largest housebuilder, Barratt Developments, has introduced a hiring freeze and is “significantly” cutting back on buying land as it steels itself for a further slump in the UK housing market, my colleague Kalyeena Makortoff reports.
Barratt said it was responding to a “marked slowdown” in the UK housing market after a rise in interest rates that had made mortgages more expensive for prospective homebuyers.
The company said the average weekly net number of private reservations of properties fell in the second half of last year, down from 259 to 155.
It was also forced to scrap building plans for 3,293 land plots, cancelling out the 3,003 plots that proceeded with construction. The net cancellation of 290 plots compares with the net addition of 8,869 a year earlier.
More here.
