US factory prices soar, Drahi ups BT stake, Ocado victory, National Express-Stagecoach deal
Telecoms billionaire Patrick Drahi today insisted he has no plans to make an offer for BT, despite increasing his stake in the former monopoly from 12.1% to 18%.
The purchase comes just days after Drahi was freed from City takeover rules preventing him from buying more BT shares.
In other developments, the Office for National Statistics said there were no signs in today’s unemployment figures for November to suggest the end of the furlough scheme is being felt in the UK jobs market.
FTSE 100 Live Tuesday
Patrick Drahi lifts BT stake to 18%
Unemployment rate at 4.2%
National Express and Stagecoach agree merger deal
US factory gate prices soar
16:48 , Simon English
The Dow Jones is drifting as London closes for business. The US index is down 97 points at 35,538 just now.
It is up around 6000 points on this time a year ago, it is worth remembering.
The FTSE is down 12 at 7218. The biggest fallers being Rentokil, off 83p at 542p, and BT, down 8 at 167p.
I guess the market is disappointed that French billionaire Patrick Drahi isn’t launching a takeover bid, at least not yet.
He took his stake in BT from 12% to 18% today, but now has to wait six months before a bid.
I don’t think he will do that anyway. I think he just likes the business….
16:42 , Simon English
How bad are new Covid curbs going to be for pubs? Tim Martin at Wetherspoon has already complained of “lockdown by stealth”.
Just now the Bar 44 chain tells the BBC that 3200 people have scrapped bookings for December.
Operations director Natalie Isaac says: “This should be our bumper two weeks before Christmas, but the diary is worryingly empty. We’re significantly impacted and without furlough, we won’t be able to protect our staff.”
No word from the government on this, yet…
UK should be ready to reintroduce furlough – IMF
15:54 , Simon English
Should we reintroduce furlough?
The IMF says the UK better be “ready to redeploy” some form of the scheme if we end with up lockdowns.
Furlough is regarded as one of the most successful, if dramatic and expensive, interventions in the market ever.
The IMF said today that fresh waves of Covid are the “major risk” to the UK’s economic outlook.
It has guessed UK economic growth at 6.8% this year, followed by 5% in 2022.
The Bank of England makes its latest interest rate decision on Thursday.
Property giant Landsec completes deal for developer U+I
15:39 , Joanna Bourke
Property developer and landlord Land Securities has today completed the purchase of regeneration specialist U+I.
The company announced the £190 million deal in November, and it is a move that will give Landsec more major post-Covid building opportunities in London.
Today Landsec’s chief executive Mark Allan said: “Through acquiring U+I, we extend our development pipeline meaningfully, and welcome colleagues who strengthen the skills and expertise in our business. I truly believe that the combination of Landsec and U+I is compelling.”
The return of rent gazumping
15:06 , Simon Freeman
The home rental market in London’s most sought-after districts in the weeks before omicron took hold, LonRes data shows.
Rents were higher in November than they were before the pandemic, as a drop in available stock resulted in a 20% increase in typical rents.
In prime central districts, tenants were paying more than the asking price for the first time since 2005.
“In the short-term chronic lack of supply means that rental increases could be here to stay and we expect further rental rises into early 2022,” the report said.
But another round of lockdown will send the market back into tailspin: prime London’s market depends on an end to the ‘race for space’ dash to the suburbs, and staff returning to the office.
FTSE flat as Scotland introduces restrictions, Wall Street opens lower
14:39 , Oscar Williams-Grut
Stock market momentum in London is fading after a weak open on Wall Street and amid some tough headlines on Omicron.
Scotland’s first minister Nicola Sturgeon has just announced she is increasing restrictions in a bid to curb the spread of the new strain. In England, health secretary Sajid Javid has warned that Omicron cases could “overwhelm” the NHS.
The FTSE 100 was solidly in the green earlier but is now flat at 7229.
In New York, the S&P 500 has opened down half a percent, the Dow is 0.1% lower and the Nasdaq has sunk 1% at the open.
US factory prices soar
14:16 , Oscar Williams-Grut
Producer price inflation, a measure of prices at factory gates, continue to soar at record rates, suggestion inflation isn’t going anywhere soon.
Data from the US Bureau of Labor Services shows annual inflation running at 9.6% in November, the largest increase since annual changes began being recorded in 2010. It rose from 8.8% in October.
Here’s a flavour of which prices are rising: “The indexes for guestroom rental; securities brokerage, dealing, investment advice, and related services; fuels and lubricants retailing; airline passenger services; and transportation of freight and mail moved higher.
“Prices for iron and steel scrap rose 10.7 percent. The indexes for gasoline, fresh fruits and melons, fresh and dry vegetables, industrial chemicals, and jet fuel also moved higher.”
‘Menacing storm clouds’ facing the world in 2022
14:14 , Oscar Williams-Grut
The narrative of 2021 was one of optimistic recover: at the start of the year it looked like we would manage to put Covid behind us thanks to effective vaccines.
Things didn’t quite play out that way. Inflation emerged as a major spanner in the economic works and Covid proved more persistent and adaptable than we’d hoped.
As a result, the outlook for 2022 isn’t looking as rosy as 2021 did this time last year.
Here’s Deutsche Bank:
Menacing storm clouds have gathered around our outlook for the next two years. Inflation is pushing 6% or more in Europe and the US while central banks continue quantitative easing. A new and more infectious strain of Covid is spreading rapidly as vaccination rates lag. Supply chains remain clogged with delivery times and transport costs near all-time highs. Potential populist-driven political turmoil, climactic tempests, and geopolitical storms loom.
The odds of a shipwreck have risen dramatically as we chart a course through perilous waters. But timing recessions is very difficult until they are fast upon us. For now, a way can still be seen to the safe harbor of a relatively soft landing, albeit with some favorable assumptions and a modicum of good luck.
The bank is forecasting growth of 4.6% in the US next year, 3.8% in the EU, and 3.5% in the UK. Global growth is pegged at 4.4%. All of those forecasts are downgrades from estimates made in March.
Strong jobs market ups pressure on the Bank
14:00 , Oscar Williams-Grut
Jobs numbers out this morning were a blowout, with economist George Buckley at Nomura summarizing it thusly: “Rising payrolls, fresh highs in vacancies, another fall in the unemployment rate and pay growth picking up.”
The data puts pressure on the Bank of England to raise rates on Thursday, for fear that inaction will send inflation soaring even higher as companies throw cheap money at staff.
Buckley says: “The message remains the same – that the labour market is tight and is supportive of some degree of monetary accommodation being withdrawn. Whether that happens at this week’s MPC meeting remains to be seen, but at the very least today’s labour market report keeps our view of a 15bp hike on Thursday alive.”
Jesús Cabra Guisasola, associate at Validus Risk Management, says: “These numbers will put further pressure on the BoE with the unemployment rate continue falling despite the end of the furlough program and with inflation jumping to record levels.
“Nevertheless, most investors bet that policymakers are unlikely to hike interest rates this week after disappointing the market during the last interest rate decision in November. Moreover, the new variant of Covid-19 is threatening the recovery in the short term as the government continue imposing further restrictions to contain the spread. February is looking as the most likely meeting for the BoE to become the first major central bank to increase its benchmark rate.”
Richard Flax, CIO at digital wealth manager Moneyfarm, says: “The consensus view now seems to be that we won’t see a rate hike in December – although the consensus has been wrong before – and this data release gives the Bank of England a further reason to wait. The next important data release will be the November CPI report on December 20th. The Bank of England will be hoping for some respite on the inflation front since a slowing economy and stubborn inflation is not where they’d like to be as we head into 2022.”
Dogecoin jumps on Elon Musk tweet
13:13 , Oscar Williams-Grut
Joke cryptocurrency dogecoin has jumped after Elon Musk tweeted that Tesla would accept it as payment for some merchandise.
Dogecoin was trading up 24% against the dollar at $0.20 in the wake of the tweet.
It’s not the first time Musk has tweeted about doge: he tweeted multiple memes about the crypto token at the start of the year, fuelling a rallying that peaked in April. The coin has more than halved since then.
In February, Musk spiked the price of bitcoin after saying Tesla would accept it as payment. It subsequently crashed after Musk reversed that decision in May. Dogecoin speculators will be hoping it’s a different story this time…
FTSE 100 lunch latest news and prices
13:09 , Simon Freeman
The FTSE 100 held onto initial gains to stay up 31.73 points at 7263.12 at 1pm today.
The solid, if unspectacular performance, was led by Ocado whose win in a patent battle paves the way for it to march its warehouse robots into the US market.
That, accompanied by upbeat results forecasting a belter of a Christmas followed by growth in its Zoom speedy delivery service, pushed shares up 9% to 1738.5p.
The robot war has left arch-rival AutoStore bruised: the Softbank-backed Nordic tech firm’s share are down 13%, wiping $2bn from its market cap.
Rentokil’s £5bn purchase of US peer Terminix has gone down like a cup of rat poison with investors.
After an initial bounce, it is trading down 7.6% at 576.8p.
The prospect of its issuing 643 million new shares and the 47% premium paid above its target’s previous closing price outweighed excitement at owning the world’s biggest bug, rat and scorpion catcher, initially at least.
Elsewhere, it was a familiar picture in the top-flight with miners BHP, Evraz, Antofagasta, Rio Tinto and Anglo American all among the top ten.
A note from AJ Bell points to continued growth in the sector next year despite a levelling off of this year’s commodity price spiral.
In the US, futures fell from their recent record highs with Fed-watchers waiting for any clues on tapering stimulus and raising interest rates at its policy meeting tomorrow.
There was good news for Goldman and JP Morgan bankers: the Wall Street giants are upping their bonus pools by between 40% and 50% after the year’s frenzy of deal-making.
Back on earth, the UK’s mid-cap FTSE 250 was u pa similarly solid 62 points at 22708, with CMC Markets leading the way up 4% to 238.5p.
Ocado shares jump on US robot battle latest
12:04 , Joanna Bourke
Shares in Ocado have jumped after the online supermarket won a key victory in a patent battle with a rival over the technology that powers its robot warehouses.
The update came as the firm also released fourth quarter sales figures, and pointed to a good Christmas ahead for Ocado Retail.
Read more HERE.
Insolvencies = good news for Begbies Traynor
11:55 , Oscar Williams-Grut
An economic slowdown and the end of furlough is good news at least for insolvency specialist Begbies Traynor.
In the half-year it saw revenue jump from £37 million to £52 million. Profits rose from £500,000 to £2.7 million.
Ric Traynor, executive chairman of Begbies Traynor Group, said: “This strong performance, and an anticipated increase in national insolvency numbers following the removal of the Government’s pandemic support measures, leaves us confident of delivering market expectations for the full year.”
The City expects Begbies to make profits for the year of up to £18.5 million.
The shares were steady today at 133p, which values the firm at £202 million.
National Express and Stagecoach seal merger
11:21 , Oscar Williams-Grut
National Express and Stagecoach have agreed their long awaited merger.
The two coach companies have officially agreed terms to combine. Deal talks were first announced in September but the deadline was subsequently extended.
National Express shareholders will control 75% of the group under the terms of the all-share merger.
Stagecoach shares rose 4.9p, or 6.6%, to 79.95p. National Express was 2.3p, or 1%, higher at 237.4p.
Lenders show resilience in Bank stress test
10:40 , Graeme Evans
Shares in UK lenders were in the spotlight today after the Bank of England announced last night that all eight banks passed its stress test.
The Bank factored in £70 billion of impairments on top of the £20 billion already booked in 2020, based on the unemployment rate jumping to 12% and GDP falling by 9%.
Capital ratios for the eight lenders all stayed above minimum requirements, boosting sentiment across the sector today. The mood was further helped by November’s resilient jobs market figures, which kept alive the chances of a hike in interest rates on Thursday.
Lloyds shares rallied 2% or 0.7p to 45.1p and Barclays added 2.1p to 180.2p.
Other risers in the top flight included BHP and Aviva as the FTSE 100 index climbed 18.85 points to 7249.95, reversing some of yesterday’s Omicron-led 0.8% decline.
The FTSE 250 index rose 48.84 points to 22,695.88, despite further pressure on MoD supplier Qinetiq after a ratings downgrade by JP Morgan. Shares fell 5.4p to 244.6p.
Elsewhere in the defence sector, shares in Chemring held firm as the countermeasures and energetics specialist reported a 2021 performance in line with expectations after profits rose 8% to £55.9 million.
Boodles jewellery sales pick up after lockdowns hit trade last year
10:34 , Joanna Bourke
Luxury jewellery retailer Boodles has said it hopes Plan B restrictions won’t disrupt Christmas trade, after it managed to bounce back from the pandemic taking the shine off sales.
The family-owned business, which was founded in 1798 and advertised by models Amber and Yasmin Le Bon, has filed accounts that show turnover declined to £49.5 million in the year to February, from £74 million in the prior 12 months.
Managing director Michael Wainwright said business has been encouraging since restrictions were eased in April, helped by pent-up demand and travel restrictions resulting in more UK shopping for some domestic customers.
Read more HERE.
Staff shortages as Omicron bites
09:49 , Simon English
JOB vacancies hit another record high last month as employers struggled to find staff, leading to fears that the economy is slowing as Omicron runs rampant.
There were 1.22 million openings in the three months to November even after the furlough job protection scheme came to an end.
Lower migration, people retiring or looking after ill relatives has cut the number of people in the labour market by a million, the Institute for Employment Studies estimates.
That is making life hard for employers.
read more here
Rentokil Initial in £5 billion rat catching deal
09:28 , Graeme Evans
Rentokil Initial is to chase more of America’s rats, cockroaches and bed bugs after unveiling a deal worth £5 billion to buy US firm Terminix.
The proposed transaction cements Rentokil’s position as the global leader in pest control and hygiene services and comes as population growth, urbanisation and climate change increase demand for its services.
The combined business, which will employ about 56,000 staff and serve 4.9 million customers, provides Rentokil with a major platform for growth in North America.
Following the deal’s completion, Rentokil plans to open its first innovation centre in the US focused on termite and residential pest control.
Shares fell 5% in the FTSE 100 index as it emerged that Rentokil will issue 643 million new shares as part of the deal, which has been priced at a 47% premium to the Terminix share price last night. The US firm’s shareholders will own about 26% of the enlarged company.
Dividend growth set to slow
08:31 , Graeme Evans
The post-pandemic recovery in dividends is set to slow in 2022, with AJ Bell’s latest Dividend Dashboard report today forecasting total payments of £83.7 billion from FTSE 100-listed companies.
That’s an increase of £1.9 billion or 2%, representing a slowdown from the 32% rise expected for this year.
Weaker iron ore and copper prices are likely to weigh on payments from the mining sector, although AJ Bell still expects Rio Tinto to be the index’s biggest dividend payer in 2022.
It said the FTSE 100 index should yield 4.1% in 2022, with 12 top flight firms forecast to offer more than 7% next year.
Ocado Retail sales growth knocked by driver shortages, but still above pre-Covid levels
08:19 , Joanna Bourke
Tim Steiner, the chairman of Ocado Retail, has said thousands of consumers will stick with online grocery shopping rather than return to physical stores, but fourth quarter sales at the business have declined.
The joint venture between Ocado Group and Marks & Spencer posted sales of £547.8 million for the 13 weeks to November 28.
That was 3.9% lower than a year earlier when demand was still very high during the pandemic. However, the performance was 31.6% above the fourth quarter in 2019.
Read more HERE.
Jobs market fuels rates hike speculation
08:14 , Graeme Evans
The unemployment rate in today’s figures dropped to 4.2%, which is just above the pre-pandemic level but still low by historical standards.
The number of payrolled employees rose to 29.4 million, almost half a million higher than the February 2020 level.
Laith Khalaf, head of investment analysis at AJ Bell, said the strength of the jobs market made the case for a rise in interest rates from historic lows.
He said: “The Bank of England has been quite sensibly waiting for data which is not heavily distorted by the furlough scheme, and that is now beginning to emerge.
“The Bank will likely want to see a bit more sustained stability in the labour market post furlough, and to assess the damage wrought by the Omicron variant.
“That makes a Christmas rate hike unlikely, but barring severe social restrictions pegging the economy back, the Bank will probably begin to tighten policy in February.”
Drahi ups BT stake in £1bn move
08:05 , Graeme Evans
Today’s disclosure by Patrick Drahi that his Altice UK business had bought another 585 million shares in BT represents a £1 billion investment, based on Monday’s closing price.
Drahi surprised the City in June when he spent £2.2 billion on BT shares, building a 12.1% stake and fuelling speculation that he could be eyeing change at BT.
The publicity shy billionaire made his name with cable TV in Europe and is known for his deal making.
Read more on today’s developments
FTSE 100 steadies despite Omicron worries
07:33 , Graeme Evans
Stock market anxiety over Covid-19 increased yesterday after Boris Johnson reported the first death from the Omicron variant and more countries moved to tighten pandemic restrictions.
The FTSE 100 index closed 0.8% lower, with travel and leisure stocks including British Airways owner IAG and Premier Inn business Whitbread down 5% and 3.5% respectively.
The Dow Jones Industrial Average and S&P 500 finished down by almost 1% on Wall Street last night and Asia markets have also had a difficult session overnight.
Several big central bank meetings taking place later this week, including the US Federal Reserve and Bank of England, have also fuelled the jitters.
Trading in Europe looks set to continue this cautious tone, although CMC Markets is looking for the FTSE 100 index to recover by 24 points at 7255.
Demand concerns triggered by the spread of the Omicron variant have also weighed on the Brent crude price, which was little changed at just below $75 a barrel this morning.
This came despite oil cartel Opec raising its demand forecast for the first quarter of 2022, amid hopes that the impact of Omicron will be “mild and short-lived”.