Tech sell-off on Wall Street, retail sales boosted by early Christmas shopping, HSBC fined
Retail sales figures today showed busier high streets and retail parks before the blow to confidence caused by the Omicron variant.
The Office for National Statistics said the proportion of online sales was its lowest level of the pandemic as shoppers got out in November to buy early Christmas presents and snap up Black Friday deals.
The stronger-than-expected retail sales figures for last month came a day after the Bank of England hiked interest rates in response to worries over inflationary pressures.
FTSE 100 Live Friday
Retail sales volumes surprise in November
HSBC fined £64 million for money laundering failings
Tech stocks fall on rates outlook
Halifax forecasts 1% house price growth in 2022
Twas the Friday before Christmas…
16:40 , Oscar Williams-Grut
…and all through the market, not a stock was stirring, not even a mouse. (Yeah, OK, I lost it there at the end).
The FTSE has managed to pull back into the green at the close but not by much. The bluechip index is up 14 points, or 0.2%, at 7278. That’s lower than where it started the week, at 7290.
There’s not much momentum or narrative in the market today but the big stories this week have been the record breaking wave of Omicron currently sweeping the UK, inflation smashing through forecasts to hit 5.1%, the Bank of England responding with its first rate rise in three years and other central banks — the Fed, notably — signalling they are going to be removing pandemic-era support measures as central banks learn to live with Covid. So, a busy week.
That’s all for us on the blog this week, join us again next week.
Amazon and Barclays launch ‘buy now, pay later’ product in the UK
15:01 , Oscar Williams-Grut
Amazon has struck a deal with Barclays to push into the booming “buy now, pay later” market in Britain.
Amazon UK said on Friday it was launching a new product in partnership with the bank called Instalments. The payment method will allow Amazon customers to spread the cost of certain purchases over several instalments between 3 and 48 months after purchase.
Amazon and Barclays first launched the product in Germany last year but today’s deal represents Amazon’s first foray in Britain into the “buy now, pay later” (BNPL) market, which was pioneered by Swedish giant Klarna.
Read the full story.
Wall Street opens lower as tech sell-off continues
14:38 , Oscar Williams-Grut
Stock markets have opened lower on the other side of the Atlantic as a tech-driven sell-off that began yesterday continues.
Tech and growth stocks have suffered after the US Federal Reserve signalled it was preparing to hike interest rates multiple times next year.
Paul Craig, portfolio manager at Quilter Investors, says: “Much has been made of the rise and rise of the tech stocks in recent years and how closely it mirrors the tech bubble of the early 2000s. However, it appears that today’s bubble may finally be bursting, for some at least.
“We are potentially witnessing the end of the valuation bubble in emerging start-ups, hyper-growth and companies wearing tech clothing, and it would not be a shock to see more pain going into 2022. Returns are going to be harder to come by and with support from central banks being scaled back, extreme growth oriented stocks may struggle in an environment we have not operated in for well over a decade.”
The weak open on Wall Street has hit sentiment in Europe. The FTSE is now flat at 7257, having been higher by around 30 points at lunchtime.
Harrods start Boxing Day sale early amid retail Omicron fears
12:45 , Oscar Williams-Grut
Harrods is today kicking off its Boxing Day sale 10 days early as retailers rush to pull in as much cash as possible in the crucial festive period.
The high end department store’s decision to start discounting goods from today comes despite data showing retail sales boomed last month. Experts said momentum had already faded and many businesses now fear Christmas trading could be weaker than expected.
Retail sales grew by 1.4% in November, which was higher than expected thanks to a bumper Black Friday and early Christmas shopping.
That is likely to be the high water mark as Omicron fears keep people indoors, inflation squeezes incomes, and confidence sinks. GfK’s long-running monthly consumer confidence index, also published today, declined by one point to a balance of -15 in December.
The New West End Company said footfall in central London was 32% below pre-pandemic levels yesterday as shoppers stayed home.
Read the full story.
Stocks higher in lunchtime trade
12:27 , Oscar Williams-Grut
The FTSE 100 and 250 are both making gains this lunchtime after a quiet open.
The bluechip index is up 21 points, or 0.3%, while the 250 is 32 points higher, a gain of 0.2%. British Airways owner IAG is at the top of the FTSE, closely followed by commodity stocks like Polymetal International, Fresnillo and miner Anglo American.
The tech stock sell-off that hit the FTSE 100 in early trade has eased somewhat. Baillie Gifford’s Scottish Mortgage Investment Trust, which has 5% of its portfolio invested in Tesla, was down as much as 3% earlier but has now pulled back to trade down 1.7%.
Helical lines up new London office project, shares edge up
12:24 , Joanna Bourke
Landlord and property developer Helical has agreed a £160 million deal, giving it a substantial office refurbishment project to work on in London.
The firm said it has exchanged contracts to acquire the single asset company that owns 100 New Bridge Street, a office block mid-way between Farringdon and Blackfriars stations that is used by law firm Baker McKenzie.
The tenant’s lease at the 167,026 square feet building ends in December 2023 and the law firm will relocate to a new HQ.
Confidence to invest comes despite some employers looking to reduce office space post-pandemic, or spend fewer days in offices as more flexible working is embraced.
Shares in Helical rose 7.49p to 435.49p.
Read more HERE.
UK SPAC’s cannabis deal delayed
12:06 , Oscar Williams-Grut
A former construction business trying to tap the global stock market boom in SPACs is facing delays in its efforts to bring a cannabis business to market.
UK SPAC, a cash shell listed on AIM, said its deal with medical cannabis company Hellenic Dynamics was taking longer than expected due to scrutiny from the regulator and complex due diligence.
Hellenic’s operations in Germany and Greece are taking longer to check than anticipated due to the fact they are overseas.
UK SPAC executive chair Peter Jay said: “In addition, as Hellenic will be one of the first medicinal cannabis cultivators to undertake a London listing, the FCA, understandably and appropriately, requires an extended period to consider and review such an application due to the nature of Hellenic’s product and to review the Company’s systems, procedures and controls and licenses.”
UK SPAC struck a deal with Hellenic in summer and had hoped to complete a reverse takeover by October. Last month it pushed the timeline back to the end of January. Jay said both companies want to complete the deal “at the earliest possible date.”
JM’s slimdown continues
11:48 , Simon Freeman
CHEMICALS specialist Johnson Matthey has blamed a “challenging” market for pharmaceuticals as it offloaded its health business to a US private equity firm for £325 million.
The sale comes hot on the heels after the FTSE 100 group dumped its battery division, a surprise move which sent its share price spinning to a 12-month low.
The company expects to receive £150 million in cash on completion of the complex deal with New York healthcare investor Altaris.
FULL STORY HERE
Live from the floor of the City’s top trading house…
10:53 , Simon English
I’m standing in the centre of the biggest trading floor in the City listening to the sound of a billion dollars flash past.
At TP ICAP in the heart of the City, just near Liverpool Street station, they execute 24 million trades a year with a value of £350 trillion.
That’s nearly £1 trillion a day including weekends and holidays. That’s £41 billion an hour. Or £11 million a second.
There are 650 brokers trading interest rates, credit, foreign, money markets and boring old shares, a bit. (In this bit of town, equities, like Gordon Gekko’s lunch, are for wimps).
read more here
HSBC gets another fine for money laundering
10:30 , Simon English
HSBC was today hit with a £64 million fine for “serious weaknesses” on money laundering, the latest blow to the global bank’s reputation.
City watchdog the Financial Conduct Authority said the bank had “unacceptable failings” between 2010 and 2018, including “inadequate monitoring” and poor assessment of risk.
The fine comes just days after rival NatWest was fined £265 million for money laundering. Gangs of criminals deposited hundreds of millions of pounds in cash at more than 50 NatWest branches, the investigation found.
read more here
Tech stocks under pressure
10:07 , Graeme Evans
Richly-valued sectors bore the brunt of market jitters today as the dust finally settled on a significant week in the battle to contain inflation.
The pressure on London-listed technology stocks came after Wall Street’s Apple, Tesla and Microsoft skidded 3% and more as investors reacted to this week’s Federal Reserve guidance for three hikes in interest rates in 2022.
Higher rates tend to diminish the appeal of tech-focused stocks, whose lofty valuations are built around strong future cash flows.
AI cyber security firm Darktrace also fell 10.2p to 400.8p, marking a lacklustre final session before its relegation to the FTSE 250 index on Monday.
Lloyds Banking Group continued to improve on hopes that yesterday’s margin-enhancing hike in UK interest rates will be followed by another in February or March.
The shares added half a penny to 47p, compared with 44.5p on Wednesday afternoon.
Strong clothing sales in November’s official figures boosted Next shares 114p to 7872p, but there was no respite for AIM-listed Boohoo after yesterday’s profits warning.
Shares fell another 3.95p to 102.1p as City analysts reviewed their price targets. Andrew Ross at Barclays cut to 135p from 395p, adding that while some of the pressures are transitory it will be difficult for Boohoo to build confidence in the near term.
Elsewhere on AIM, Tekmar rose 2.5p to 50.5p after it secured a contract to supply cable protection systems for the giant Dogger Bank wind farm off the North East coast.
Halifax forecasts UK house price growth to be around 1% next year
08:57 , Joanna Bourke
UK house price growth next year may be in the range of flat to 2%, and not match bumper rises seen during the pandemic, mortgage lender Halifax has forecast.
While Halifax predicts growth of around 1%, its new outlook report cautioned “forecast uncertainty remains very high”.
The market has been boosted during the coronavirus crisis by many people during lockdowns reassessing how much space they want and where they want to live, and attractive mortgage deals. There was also a stamp duty holiday which finished at the end of September.
Read more HERE.
Small consolation for retailers
08:52 , Graeme Evans
Capital Economics said the strong retail sales in November will feel like “a consolation prize” for retailers as they come to terms with a difficult Christmas period due to Omicron.
The 1.4% month-on-month rise in retail sales volumes in November compared with City forecasts for 0.8%.
Its UK economist Bethany Beckett said: “Some of that strength was related to a recovery in fuel sales after September’s panic buying dampened sales volumes in October.
“But it was mostly due to a stronger-than-usual boost from Black Friday and people starting their Christmas shopping early in light of worries about shortages and shipping delays.”
08:34 , Graeme Evans
Boohoo shares came under further pressure today, falling another 3% before settling 0.5% or 0.4p lower at 105.65p. They had been 373p as recently as February.
Today’s sell-off wasn’t helped by general weakness in the tech sector as rising bond yields erode the appeal of high growth stocks.
The FTSE 100 index rose by a better-than-expected 7.73 points to 7268.34, aided by a resilient showing from mining stocks including BHP.
A 4% rise for MoD supplier Qinetiq led the FTSE 250 index, which was 4.35 points lower at 22,643 amid weaker trading for greetings card firm Moonpig and IT supplier Kainos.
Black Friday boost for high streets helps UK retail sales to rise 1.4%
08:27 , Joanna Bourke
UK retail sales improved 1.4% in November, with Black Friday deals and Christmas shopping helping the high street.
The monthly gain was led by growth in clothing stores, up 2.9% and surpassing their pre-Covid level for the first time, data from the Office for National Statistics shows.
Other non-food shops also recorded higher sales volumes, up 2.8%, covering firms that sell goods such as toys, jewellery and computers.
Read more HERE.
Red pen for Boohoo shares
08:11 , Graeme Evans
Today’s official figures suggested online shopping fatigue in November as consumers took the chance to visit high street and retail parks for Black Friday and pre-Christmas deals.
The trend added to the headwinds facing fashion firm Boohoo as it reduced sales guidance yesterday, sending shares down 23% to 106p. The chain highlighted factors ranging from higher freight costs to a spike in the level of customer returns.
City analysts have published significantly lower price targets on the back of the warning, with Andrew Ross at Barclays cutting to 135p from 395p. He said some of the issues are transitory, but adds that it will be difficult to build confidence in the near term.
Adam Cochrane at Deutsche Bank is more optimistic at 230p, but is cutting his earnings forecasts by 35% for 2022 and 2023.
Tech stocks lower in Nasdaq sell-off
07:40 , Graeme Evans
Last night’s big Wall Street sell-off has set a downbeat tone for the London market at the end of a week in which investors got a clearer view of monetary policy in 2022.
The tech-heavy Nasdaq slid 2.5% on Thursday, wiping out gains in the previous session after the Federal Reserve on Wednesday signalled the likelihood of three interest rate rises next year.
The prospect of higher rates chipping away at the attractiveness of some of the more richly valued sectors meant shares in Apple, Tesla and Microsoft fell 3% or more. In contrast, US banks were higher to limit the decline for the Dow Jones Industrial Average to 0.1%.
Asia markets followed the US lead while the FTSE 100 index is due to slip 25 points to 7235 after its 1.25% rally yesterday, when the mood was helped by relief that the Bank of England’s had hiked interest rates in response to spiralling inflation.
Investors now expect the Bank to make a full quarter point hike by the time of the March meeting and possibly as soon as the next gathering of the monetary policy commitee in February.
Sterling, which rose to a three-week high after the Bank’s surprise move to 0.25%, remained at just above 1.33 versus the US dollar.
The uncertain demand outlook put pressure on the oil price, with Brent crude futures continuing to trade below $75 a barrel.