Upbeat US jobs numbers, British Airways owner posts loss, Bank of England reaction
The battered fortunes of International Airlines Group are in the spotlight today after the British Airways owner reported another big loss for its most recent quarter.
However, boss Luis Gallego told the City that trends are improving and that Monday’s reopening of the transatlantic travel corridor is a pivotal moment for the industry.
Elsewhere today, markets were digesting the implications of yesterday’s surprise move by the Bank of England to hold rates and also looking ahead to the release of monthly payroll figures in the US. The pound held firm today at 1.35 against the US dollar.
FTSE 100 Live Friday
FTSE closes up, led by airlines
16:53 , Oscar Williams-Grut
The FTSE 100 has closed higher on the day and for the week. The bluechip index is up 25 points today to 7303 and well above the 7263 where it started the week.
British Airways-owner IAG topped the index after a bullish update on transatlantic travel. Engine maker Rolls-Royce wasn’t far behind: the company earns more money the more its engines are in operation to long haul flights are good news.
That’s all from us on the blog today, join us again next week.
Bank under pressure after rates decision
07:40 , Graeme Evans
Markets reacted strongly to yesterday’s surprise decision by the Bank of England to hold interest rates, with the domestic-focused FTSE 250 index up 1.5% by last night’s close and the pound down by around 1.5% against the US dollar.
Sterling was trading just below 1.35 this morning, with the blue-chip FTSE 100 index forecast to open slightly lower ahead of the publication of key monthly jobs figures in the US.
The Bank held interest rates at 0.1%, even though its latest projections showed inflation peaking at around 5% in April. Deutsche Bank’s UK economists now see lift-off for rates in December, with an increase of 0.15% followed by 0.25% hikes in May and February 2023.
Michael Hewson of CMC Markets said: “If you were a student looking to write a paper on the dos and don’ts of monetary policy, then this week’s events will have offered a rich seam of content.
“That’s not to say the bank erred in holding rates as they did, but it was more about the messaging leading up to it.”
Sir Dave Ramsden, the Bank’s deputy governor for markets and banking, voted to raise rates as well as end quantitative easing. He is due to field questions from businesses and community organisations when he appears at a national agency briefing this lunchtime alongside chief economist Huw Pill.
The focus later today will also be on the US non-farm payrolls report amid expectations that around 450,000 jobs will have been added in October. The September payrolls number came in at 194,000, the lowest this year, but there was an upward revision to the August number to 366,000.
Hewson added: “It is hard to escape the feeling that the recovery in the US labour market has been running out of steam in recent months.”
07:56 , Graeme Evans
The latest results from IAG show a smaller operating loss of 452 million euros (£384.8 million) for the third quarter, leading to an overall deficit of 2.5 billion euros (£2.1 billion) across the first nine months of the year.
The British Airways and Iberia owner also generated cash for the first time since the pandemic and improved its liquidity position to its highest ever of 12.1 billion euros (£10.3 billion) by the end of October.
IAG chief executive Luis Gallego said the focus is now on returning the group to profitability next year: “There’s a significant recovery underway and our teams across the group are working hard to capture every opportunity.”
He added: “The full reopening of the transatlantic travel corridor from Monday is a pivotal moment for our industry. British Airways is serving more US destinations than any transatlantic carrier and we’re delighted that we can get our customers flying again.”
House prices rise again
08:13 , Graeme Evans
The average house price is now at a record £270,027, Halifax said today after recording a 0.9% or £2,500 monthly change and a 8.1% rise compared with a year earlier.
One of the key drivers of activity has been the race for space as buyers seek larger properties, often further from urban centres.
But Halifax said first-time buyers, supported by parental deposits, improved mortgage access and low borrowing costs, have also fuelled the growth.
Mortgage rates are set to rise in the coming months, but probably not as quickly as some had feared after the Bank of England opted against a rise in interest rates yesterday.
When the Nationwide published its own figures earlier this week, it said the price of a typical UK home had broken through the £250,000 threshold for the first time.
BT shares continue to rally
08:50 , Graeme Evans
The rebound for BT shares continued today after the telecoms group rose another 4% at the top of the FTSE 100 index.
The latest increase of 6p to 163.8p means the widely-held stock has surged 15% since chief executive Philip Jansen announced in yesterday’s half-year results that he had brought forward the company’s £2 billion cost savings target by a year to 2023.
BT shares have been on a rollercoaster this year, having gone from 100p a year ago to 200p in June after French investor Patrick Drahi built a 12% stake. They fell back to 136p before this latest recovery.
Vimto sales sweeten Nichols
09:05 , Graeme Evans
Vimto maker Nichols sent its shares more than 8% higher today after revealing that profits for the year to the end of September will be stronger than City expectations.
Revenues for the period rose 17% year-on-year to £107 million, bigger than the Merseyside-based company had been expecting after industry figures from Nielsen showed UK year-to-date growth in the Vimto brand of 4.5%.
Profits for 2021 will be in the range of £21 million and £22 million, although next year’s guidance has been left unchanged due to ongoing uncertainty about the impact of inflationary pressures including logistics, labour and materials.
The AIM-listed shares rose 95p to 1216.5p but are still 9% lower in the year to date.
‘Red flags’ at Sanjeev Gupta’s steel empire
09:31 , Oscar Williams-Grut
MPs have heavily criticised steel tycoon Sanjeev Gupta for the way he runs his business.
The Business, Energy, and Industrial Strategy select committee said today there were multiple “red flags” at Gupta’s Liberty Steel business.
Darren Jones MP, who chairs the committee, said there were “systematic issues” and “serious problems with high-risk financial practices, weaknesses in audit, and about inadequate accountability and corporate governance arrangements within GFG Alliance,” Liberty’s parent company.
A GFG spokesperson said it “takes note of the findings” and “will review and reflect upon its conclusions.”
GFG was heavily linked to collapsed financing company Greensill. Greensill, which collapsed amid controversy at the start of the year, provided billions in funding for GFG’s empire. Greensill’s collapse has put major stress on the business.
Snap and TikTok told to provide details of scam protections
09:55 , Oscar Williams-Grut
MPs are worried about scammers running riot on platforms like Snapchat and TikTok.
The Treasury Select Committee today wrote to the bosses of Microsoft, Twitter, Snap, and TikTok asking the companies to provide more details of what they are doing to monitor and stamp out fraud on their platforms.
Mel Stride MP, chair of the committee, said: “It’s clear that fraud is rapidly rising and ruining people’s lives. Scammers seem to act with impunity online and their actions can have devastating consequences.”
Today’s letter extends the committee’s scrutiny of tech giants. MPs have already got details from Google, Facebook, Amazon, and eBay about what they are doing to tackle fraud on their platforms.
The Treasury Committee wants the government to extend the Online Safety Bill to cover online advertising, forcing platforms to take more responsibility for the ads they run on their platforms.
Stride said: “Without coordinated action, I fear many more people will sadly fall victim to these scammers.”
Rates decision continues to drive London market
10:29 , Graeme Evans
Sterling came under more pressure and the FTSE 100 index reached a 21-month high today as wrong-footed markets continue to react to the Bank of England’s rates surprise.
The pound was down another half a percent to $1.343 against the US dollar, having been near to $1.38 a week ago when the City was fully pricing in the Bank to become the first of the major central banks to hike interest rates.
The Bank held at 0.1%, even though projections showed inflation peaking at around 5% in April. Deutsche Bank’s economists now see lift-off in December, with a 0.15% rise followed by 0.25% hikes in May and February 2023.
The rate rise delay and boost of a weaker pound for overseas earning stocks helped the FTSE 100 index, which lifted another 31.98 points to 7311.89.
BT added 4%, meaning it has surged 15% since CEO Philip Jansen used yesterday’s half-year results to accelerate the group’s £2 billion cost savings target by a year to 2023.
The shares were 5.8p higher at 163.6p, extending the rollercoaster ride since French investor Patrick Drahi built a 12% stake in the summer.
Disappointment for lenders following the rates decision also eased as Lloyds Banking Group and NatWest recovered 0.7p to 48.9p and 3.2p to 215.5p respectively.
The domestic-focused FTSE 250 index added 1.5% yesterday and was up another 74.30 points to 23,545.41, with specialist insurer Beazley 4% higher after forecasting stronger-than-expected rate rises and premium growth.
Beazley, which revealed catastrophe losses of $85 million from Hurricane Ida and $40 million for European floods, said its exposure to cyber security coverage left it well placed.
Shares in battered e-commerce group THG were 6% higher at 210p after backing from non-executive director Zillah Byng-Thorne. The chief executive of publisher Future was yesterday involved in THG share purchases worth more than £110,000 at prices close to 200p, having seen the stock slide from 600p in just two months.
British Airways owner predicts return to profit
11:16 , Oscar Williams-Grut
IAG chief executive Luis Gallego has said he expects the group to be able to operate at up to 90% of 2019 capacity by next summer – and that if that happens “we will come back to profitability”.
Briitish Airways owner IAG is banking on Monday’s “pivotal” US border reopening to turbocharge its recovery and help fuel a return to profitability after reporting further heavy losses.
The US has banned UK and EU travellers for more than 18 months, with companies having to secure complicated visas to allow employees to enter the country. (BA) traditionally relies heavily on the profitable North Atlantic market and its frequent business travel, and its long suspension has helped lead to IAG’s huge losses.
Criminals defraud taxman of £5bn over Covid
11:40 , Simon English
COVID support schemes offered by the government have been defrauded to the tune of £5 billion, official figures show.
HMRC says it in its annual report that it estimates that 6.4% of the billions of pounds paid to companies to support furlough employees actually went to fraudsters.
The tax authority believes that close to £350 million has fallen into the hands of organised crime gangs, while another £4.6 billion was claimed by so-called “opportunistic fraudsters”.
The figures include claims made under the Furlough, Self-Employment Income Support Scheme and Eat Out To Help Out.
read more here
Bank of England 1: City 0
11:41 , Simon English
Economics is called the dismal science for good reason – there aren’t too many laughs.
There was one yesterday when the Bank of England surprised half of the market by keeping interest rates on hold rather than putting them up, as some economists and a whole load of other City commentators, had expected.
How dare the Bank make them look so foolish?
Moans today that the Bank somehow misled the market are hilarious. They complainers look like men standing outside a Ladbrokes after a failed bet on a football match ranting about the referee.
Read more here
Co-op Bank still eyeing deals after TSB snub
11:45 , Oscar Williams-Grut
Co-op Bank today signalled it is still on the hunt for merger deals, a week after it was snubbed by the Spanish owners of TSB.
Chief executive Nick Slape concedes the bank needs scale to compete with the high street giants and the new breed of fintech bank apps.
“We have an organic plan that works,” he told the Standard. “But we are looking at opportunities. We are looking at things on paper, but they have got to be doable. The more we can do ourselves, the more we can be prepared to take opportunities when they arrive.”
TSB owners Banco de Sabadell turned the Co-op down flat saying it was “not a transaction we wish to explore at this moment”.
Big beat for US jobs
12:46 , Oscar Williams-Grut
Fresh US jobs data just published has been a blow out. Non-farm payrolls show 531,000 new jobs were added in October, against forecasts of 425,000. Not only is it a beat, it’s a big jump from September’s figure of 312,000, which itself was revised up today from an initial estimate of just 194,000.
Richard Flynn, Managing Director at Charles Schwab UK, said: “The upbeat U.S. job numbers will be welcomed by investors, given the string of disappointing employment figures in recent months. It offers a sign of optimism that job growth is headed in the right direction, with financial markets confirming that the economic cycle has shifted from recovery to expansion.
“Employers had been struggling to fill open positions, with a large swath of individuals not yet returning to the labour force following the pandemic. However, today’s figures are a step forward, as more people than expected have returned to work.”
The FTSE 100 has ticked slightly higher on the data. It’s currently trading up 25 points at 7304.
‘The FTSE 100 has got that Friday feeling’
13:34 , Oscar Williams-Grut
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, says: ‘’The FTSE 100 has got that Friday feeling, soaring to a 21 month high late morning as the repercussions from the surprise Bank of England decision to leave interest rates unchanged reverberated on financial markets. The continued sell off of sterling which hit its lowest level against the dollar in more than a month, is partly behind the rise in the blue chip index.
“Multinationals listed earn big chunks of revenues overseas, so benefit from the pound’s lower value. But the financial markets are also hooked on the drug of cheap money, so the news that the drip won’t be immediately withdrawn in the form of higher interest rates, led to a fresh burst of euphoria, before seeping away a little.
The US jobs report got the party started again, coming in much more upbeat than expected. Employers added 531,000 new jobs to payrolls in October, higher than the 450,000 forecast. Although this bodes well for the recovery in the US, the rise in earnings year on year of 4.9% does highlight worries about wage inflation.”
FTSE on track to close higher
15:04 , Oscar Williams-Grut
The FTSE 100 looks set to close higher today. It is up 26 points, or 0.36%, at 7306 with a little under an hour and a half left of trading.
Engine maker Rolls-Royce is top of the index, up 5.4%. The company has been boosted by a bullish update from customer IAG, the owner of British Airways. IAG said it was seeing strong demand for transatlantic flights ahead of the lifting of the US travel ban on Monday. That’s good news for Rolls-Royce, which earns money the more its engines are in operation.
IAG isn’t far behind Rolls-Royce on the FTSE leader board, up 4.1%.