Inflation hits 25-year high, respite after Nasdaq sell-off, Darktrace shares surge

The FTSE 100 index was higher today as investors got some respite from the interest rate anxieties that briefly left the Nasdaq in “correction” territory during Wall Street trading yesterday.

The 10% fall since Nasdaq’s November high came amid heightened worries at the start of 2022 about monetary policy tightening by the US Federal Reserve.

A resilient finish to Wall Street trading last night and some positive updates from stocks including Electrocomponents, cyber security firm Darktrace and recruitment business Robert Walters resulted in a more positive session in London today.

FTSE 100 Live Tuesday

• OECD inflation hits 25-year high

• Tech stocks recover after 2022 sell-off

• Darktrace shares surge after update

Virgin Media gets more praise for roaming fees

15:26 , Simon English

Virgin Media got some kind, perhaps too kind, coverage the other day when it said it won’t reintroduce European roaming fees.

EE, Vodafone and Three all say they will do so.

This has been picked up in the US and reported on very positively by CNBC.

“Virgin Media O2 has blown the roaming door wide open,” Kester Mann, director of consumer and connectivity at analyst firm CCS Insight, told the business news network.

“Bucking the market trend to bring back charges, its decision to hold firm will raise eyebrows across the sector and is a blow to rivals.”

He added: “As EE, Vodafone and then Three each confirmed they would reinstate the dreaded fees, it left the door ajar for Virgin Media O2 to break rank and disrupt the market.”

You can see CNBC’s story here: https://www.cnbc.com/2022/01/11/virgin-media-o2-offers-free-european-roaming.html

World Bank: get ready for a global slowdown

15:16 , Simon English

Economic growth is plainly going to have slowed since Omicron arrived, but how much?

UK economists say December and January will be flat at best.

The World Bank today reckons the global economy will grow 4.1% this year, down from 5.5% in 2021.

President David Malpass said inequality is the biggest problem.

Story continues

He told the BBC: “The big drag is the inequality that’s built into the system. The outlook for the weaker countries is still to fall further and further behind. That causes insecurity.”

Inflated: price rises keep on going

14:25 , Simon English

Inflation is at its highest for 25 years, at least in the 38 countries that make up the OECD (the rich ones, basically).

Consumer prices rose 5.8% in the year to November. It was particularly high in the US, at 6.8%.

We get the latest inflation figures from America tomorrow. They will, as they say, be closely watched.

The OECD says inflation is less if you take out food and energy.

So I guess we just have to stop eating and heating.

14:06 , Simon Freeman

Shares in GlaxoSmithKline subsidiary Vir Biotechnology were up 8% before markets opened on Wall Street after the US ordered another 800,000 shots of its Covid-19 treatment sotrivomab.

That will add to the 1.7million doses of the monoclonal antibody secured to date around the world for treatment of mild to moderate COVID-19 symptoms in at-risk adults.

Preclinical data has shown the drug, marketed as Xevudy, retains activity against all known variants of Covid-19, including delta and – uniquely – the omicron strain.

Vir’s parent company GSK also enjoyed a lift on the FTSE 100, up 1%.

The price moves came as CEO Emma Walmsley told JP Morgan’s healthcare conference the company expects to report progress on up to seven new drugs this year.

They include a treatment for hepatitis B, and products targeting myeloma and arthritis.

Walmsley hailed the extra US orders as a vindication of GSK’s “rational” approach to drug design.

She said: “We were not the first to enter this category, but we were thinking about the risk of mutant variants and chose to pursue an approach that targeted a highly conserved part of the spike protein. This appears to have paid off.”

The pharma arm of the FTSE 100 giant is working to boost its portfolio of blockbuster drugs as it prepares for a demerger from GSK’s consumer healthcare division in the middle of the year.

Walmsley said it would be a “momentous” chapter in the company’s history.

More details, including the new company’s new name, will be revealed at a capital markets day to be held “very soon”, she said.

Is Very heading to the stock market?

12:45 , Oscar Williams-Grut

Very Group has fuelled speculation that it is preparing to join the stock market with the appointment of a former senior Walmart executive as its new chair.

Dirk Van den Berghe previously helped run Walmart’s businesses in Canada, China, India and Japan, and oversaw the retail giant’s global sourcing. Van den Berghe said it was “a privilege” to join the Very board as chair.

His appointment will fuel speculation that Very Group, which owns Very.co.uk and Littlewoods, is gearing up for an IPO. Reports over summer suggested the company had sounded out banks to work on a potential listing.

In a statement, CEO Henry Birch said Van den Berghe was “the perfect person to lead our board and assist with strategic options that we are considering” but he downplayed stock market speculation when pressed on the point directly.

Read the full story.

Inflation hits 5.8% across developed nations

12:31 , Simon Freeman

Inflation across the 38 OECD countries hit a 25-year high in November.

Consumer prices rose by an average of 5.8% in the month.

In the previous November 2020, the figure was 1.2%.

The data shows prices are rising in developed nations at the highest rate since May 1996.

The surge was driven by rampaging energy costs, up 28% – the highest pace since 1980.

Food was also up by 5.5%.

Latest ONS figures suggested inflation hit 4.6% in the UK in the same month, slightly below the average.

The Bank of England raised the base interest rate from 0.1% to 0.25% the following month.

Uber rival Bolt raises half a billion

12:23 , Oscar Williams-Grut

Some news from the private markets that could give Uber investors pause for thought: ride hailing company Bolt has raised a €628 million (£524 million) war chest to take on rivals in markets ranging from scooter rentals to 10-minute grocery deliveries.

Bolt, a major rival to Uber in Europe, said it had raised the fresh funds from Silicon Valley VC giant Sequoia Capital and retirement investor Fidelity. Others including Whale Rock, Blue Owl, D1 and G Squared also put money in as part of the round.

The company claims to be valued at €7.4 billion (£6 billion) in the latest funding round, which is its biggest to date. Estonia-based Bolt was founded in 2013 and has now raised over $2 billion.

Read the full story.

Supermarket price war looms

12:00 , Oscar Williams-Grut

Lidl has fuelled what looks to be a looming price war in the grocery market after its CEO pledged to keep prices low as inflation squeezes household budgets.

Christian Härtnagel, Lidl GB CEO, said in a statement: “As inflation continues to rise, I want to reassure each and every one of our customers that we remain resolute in our promise of being the destination for the lowest grocery prices in the market.”

The comments comes a day after rival Aldi made a similar pledge. UK CEO Gile Hurley said his business “will always offer the lowest prices for groceries, no matter what.”

German discounters are touting their bargain basement prices as inflation soars. Prices are rising at over 5% across the economy and running at around 3.5% in the supermarket sector. Think tank the Resolution Foundation has said 2022 will be the “year of the squeeze” as households face a £1,200 jump in annual costs from April.

Lidl and Aldi’s statements put pressure on “Big Four” rivals to make similar price promises. Sainsbury’s and Tesco kick off the Christmas reporting later this week.

Read the full story, including an update on how Lidl fared over Christmas.

11:26 , Oscar Williams-Grut

Recruiter Robert Walters today hailed a record December and said profits were ahead of forecasts as a shortage of qualified job candidates around the world sparks a boom for headhunters.

Robert Walters said gross profits were up by 39% on a constant currency basis in the final few months of 2021, hitting £95.1 million. Growth was strongest in Asia, where income jumped 48%, followed by Europe.

In the UK, the company is benefiting from a shortage of lawyers in London.

“London legal was up by 89.7%,” CFO Alan Bannatyne said. “There is just clearly not enough legal capacity.

“It takes three years to train a lawyer, potentially hiring volumes were reduced during Covid and actually maybe we have had some people during the ‘Great Resignation’ who have decided they are going to change career progression.”

Shares rose 3.3p, or 1.6%, to 823.32p.

Rival Hays jumped 7.3p, or 5%, to 155.5p, helped higher by a broker upgrade from Credit Suisse.

Read the full story.

Epic quest for Games Workshop

10:30 , Simon English

PROFITS are sliding at Games Workshop but the enthusiasm among devotees for its main product – Warhammer figurines – remains heroic.

The miniature army action men who do battle with aliens and orcs in the future are in their 35th-year, about the same age as many of the fans.

The shares have been on their own epic quest, up ten-fold in five years, a victory mission of which a Space Marine would be proud.

read more here

Darktrace returns to form, tech stocks higher

10:23 , Graeme Evans

A fightback for tech stocks was led by newcomer Darktrace today after the cyber security firm’s better-than-expected update sent shares surging by as much as a fifth.

The return to form for Cambridge-based Darktrace also reflected an easing of market jitters after high growth stocks were the subject of heavy selling at the start of 2022.

A 10% fall since November meant the tech-focused Nasdaq briefly touched correction territory yesterday as Wall Street investors increasingly factor in the US Federal Reserve hiking interest rates as many as four times this year, starting from March.

Today’s buy-on-the-dip trade meant the FTSE 100 index added 44.36 points to 7489.61, with Amazon and Tesla investor Scottish Mortgage Investment Trust recovering by 4% and online gambling company Flutter Entertainment up 4% or 435p to 11,575p.

Darktrace, which spent three months in the FTSE 100 after an initial 300% surge for its shares in the wake of its April flotation, rose 18% or 70.4p to 465.2p.

The stock had been as high as 495.2p at one point after it raised guidance for 2022 results, with annual recurring revenues growth now expected to be between 37% and 38.5% compared with 34%-36% previously forecast.

City firm Peel Hunt, whose bearish note spooked market sentiment just as the fast-growing company made its entry into the FTSE 100 index in September, removed its “sell” recommendation but still has a target price of 473p.

Analysts at Berenberg, however, said today’s update justified a return to the 1,000p briefly seen in the autumn, while counterparts at Jefferies have a 800p target after naming Darktrace as the best play on the growth opportunity in cybersecurity.

The FTSE 250 index lifted 188.68 points to 23,190.49, with Darktrace joined on the risers board by Micro Focus International after the enterprise software company jumped 11% or 45.5p to 462.4p.

Electrocomponents, which replaced Darktrace in the top flight in December, initially rose 5% after it raised profits guidance for the full year. Shares in the UK-based distributor of more than 500,000 industrial and electronics products were later 1% or 17p higher at 1192p.

Vets business Dechra Pharmaceutcials, which is another recent newcomer to the FTSE 100, lifted 78p to 4378p as it announced it had bought the worldwide rights to verdinexor, a treatment of all forms and stages of canine lymphoma in dogs.

FTSE 100 higher, Darktrace up 19% in FTSE 250

08:32 , Graeme Evans

The FTSE 100 index has risen 0.6% or 41.7 points to 7486.92, with Electrcomponents the best performing top fight stock.

Shares in the UK-based distributor of more than 500,000 industrial and electronics products jumped 5% or 63p to 1238p after a better-than-expected third quarter performance prompted it to raise profits guidance for the full year.

Electrocomponents was one of two companies promoted to the FTSE 100 index in December, with the other also on the risers board today.

Vets business Dechra Pharmaceuticals lifted 78p to 4378p as it announced it had bought the worldwide rights to verdinexor, a treatment for canine lymphoma in dogs.

Other stocks on the FTSE 100 risers board included Scottish Mortgage Investment Trust, which recovered 27p to 1166p after the heavy selling yesterday.

Flutter Entertainment, Next and plant hire business Ashtead were also up by more than 2%.

The FTSE 250 index, which rose 0.8% or 188.64 points 23,190, was powered by a spectacular return to form for AI-focused cyber security business Darktrace. The former FTSE 100 company surged 19% or 69.4p to 464.2p as it raised guidance for the 2022 financial year.

Why Matt Moulding is wrong about the short sellers

08:18 , Simon English

City Comment: There is a long, ignoble and quite funny history to big company bosses moaning about short-selling.

Back in 2006 Enron chairman Ken Lay blamed the collapse of the now notorious energy trader on those evil investors who dared to bet his shares would drop.

In 2008 HBOS said the shorts were undermining the bank by claiming it was going bust. It was and it did. The City watchdog, then the FSA, abandoned a brief inquiry into claims traders had profited illegally from shorting the stock, owing to lack of evidence.

read more here

Stock market optimism despite higher rates

07:54 , Graeme Evans

UBS Global Wealth Management expects three rate hikes from the US Federal Reserve this year, starting as soon as March.

Additional hikes in the following two years should take the rate to between 1.75% and 2% by the end of 2024.

However, UBS’s chief investment officer Mark Haefele believes there’s no reason to think the equity rally is about to end.

He said today: “Historically, stocks perform well in the months leading up to the first rate hike of a cycle. Since 1983, the S&P 500 has risen 5.3% on average in the three months before the first Fed rate hike.

“In addition, the normalisation of Fed policy shouldn’t dent the outlook for corporate profit growth, which is being supported by above-trend growth buoyed by strong consumer spending and still-easy access to capital.”

UBS expects only a gradual rise in rates and for the 10-year US Treasury yield to rise from 1.75% currently to 2% by June.

Markets steady ahead of Powell testimony

07:41 , Graeme Evans

Investors will be hoping for a calmer session after heightened interest rate tensions yesterday sent the tech-heavy Nasdaq down by as much as 3% in New York.

The sell-off came amid speculation that the US Federal Reserve might hike rates four times in 2022 starting from March, compared with previous hopes for two rises.

The rates outlook put pressure on the valuation of high growth stocks as the Nasdaq briefly entered correction territory with a 10% fall from its November high.

Shares later steadied after the US 10 year bond yield declined slightly to end a run of seven straight increases, having been above the 1.8% level for the first time since January 2020.

This meant the Nasdaq finished last night’s session marginally in positive territory while futures trading on Wall Street is pointing towards a more resilient start later.

The FTSE 100 index is also forecast to open 35 points higher at 7480.

Michael Hewson, analyst at CMC Markets, said attention will now focus on testimony from Federal Reserve chairman Jerome Powell at his re-nomination hearing with the Senate Banking Committee.

Hewson said: “There is a sense that markets might be getting slightly carried away when it comes to how aggressive the Fed might be in the coming months.

“We could get a better sense of where we are later today when Powell testifies to US politicians, when he is likely to face a lot of questions on the timeline and number of possible rates rises, as the US economy continues its recovery process.”

The prospect of tighter monetary policy has impacted the cryptocurrency market in recent days, with bitcoin at one point trading below $40,000 for the first time since September.