Wise shares drop on cofounder sale, Bank of England stokes rate hike talk, Evergrande payment
Speculation that debt-laden property firm Evergrande has made a key interest payment ahead of a weekend deadline shored up market confidence today after London-listed miners fell sharply on Thursday.
The FTSE 100 index is moderately higher, although the underlying picture for the UK economy continues to cause concern after this morning’s disappointing retail sales figures and the Gfk’s consumer confidence index that shows “all vital signs weakening”.
The uncertain picture adds to the pressure on Bank of England policymakers as they consider whether to hike interest rates next month amid a warning from its chief economist last night that inflation could get close to 5% early next year.
FTSE 100 Live Friday
Markets boosted by Evergrande debt hopes
07:34 , Graeme Evans
European markets should open higher amid reports in China that indebted property firm Evergrande will pay the $83 million interest due on its US dollar bond tomorrow.
It comes a day after Evergrande’s shares fell 13% on their resumption of trading in Hong Kong, having failed to complete deal that would have raised $2.6 billion from the sale of a controlling stake in a property services business.
Oanda senior market analyst Jeffrey Halley thinks the payment should give a temporary reprieve to the China financial system contagion fears, although he adds that another grace period payment worth $45.2 million is due next Friday.
“Still, if they’ve managed to scrape together the funds for this one, it is reasonable to surmise that next weeks will also be met,” he said.
US equities continue to show strength on the back of the strong earnings season, leading to the S&P 500 posting a seventh consecutive advance and another all-time high. Consumer and retail stocks drove the performance.
The tech-laden Nasdaq also moved towards a record high, but that was before Snap shares sank 24% in aftermarket trading following the release of disappointing earnings figures.
The Snapchat owner blamed Apple‘s new privacy rules for impacting the ability of advertisers to reach iPhone users with targeted adverts.
CMC Markets predicts that the FTSE 100 index will open 23 points higher at 7213, continuing an up and down period of trading for London’s top flight.
Snap hit by Apple changes
07:58 , Graeme Evans
It’s been a decent few days for Wall Street earnings, but social media firm Snap bucked the trend overnight with its warning over how privacy changes on Apple‘s iOS operating system have impacted the way advertising is “targeted, measured and optimised”.
Shares in the Snapchat owner were more than 20% lower in after-hours trading, with other leading tech stocks including Facebook and Twitter also under pressure.
Snap’s third quarter figures also came in short of expectations despite revenues growth of 57% to just above $1 billion and adjusted earnings up 209% to $174 million.
Founder and chief executive Evan Spiegel also highlighted the impact of supply chain issues and labour shortages on its partners, but after 10 years of trading he said Snap was now “operating at the scale necessary to navigate significant headwinds”.
Bank’s inflation warning
08:15 , Graeme Evans
This week’s lower inflation figure of 3.1% is looking like the calm before the storm after the Bank of England’s chief economist said he would not be shocked to see a rate close to or above 5% in the months ahead.
Huw Pill told the FT that this was “an uncomfortable place” for a central bank with an inflation target of 2%, although he declined to say how he would vote in next month’s policy meeting. Many economists expect the base rate to rise from 0.1% to 0.25%.
Rising energy prices and the impact of labour shortages and supply chain issues are also putting pressure on consumer confidence after GfK’s benchmark tracking the financial pulse of the nation dropped for a third month in a row in October.
GFk’s client strategy direcetor Joe Staton said: “After six-months of robust recovery in the first half of 2021, UK consumer confidence has taken a turn for the worse with all vital signs weakening.”
UK retail sales suffer surprise September drop, despite petrol panic buying
08:19 , Joanna Bourke
UK retail sales have registered the longest period of consecutive monthly falls since records began around 25 years ago, with soaring petrol demand not enough to boost total September figures.
New data from the Office for National Statistics shows total retail sales volumes were 0.2% lower as more shoppers embraced online purchases, and non-food stores, such as lighting and furniture, were less in demand.
Read the full story HERE.
Rio revival keeps FTSE 100 in positive territory
08:37 , Graeme Evans
The FTSE 100 index is trading slightly higher at 7195.84, led by JD Sports Fashion after the retailer stepped up its global expansion with a deal to buy 80% of Greek leisurewear chain Cosmos Sport. Shares were 2% higher at 1065p.
Rio Tinto was yesterday’s biggest faller but rallied more than 1% today on hopes that the plight of Evergrande won’t derail China’s economy, particularly if the property firm makes an overdue interest payment this weekend.
Barclays shares were more than 1% higher, up 2.5p to 199.38p after Deutsche Bank raised its price target by 10p to 250p in the wake of this week’s record third quarter results.
London Stock Exchange was the session’s biggest blue-chip faller, despite revealing a 7% rise in profits after a boom in dealmaking helped boost capital markets’ revenues by 17% in the third quarter. Shares fell 216p to 7868p.
Evergrande makes interest payment
09:31 , Graeme Evans
Indebted property firm Evergrande appears to have staved off a default after the state-owned Securities Times newspaper reported that the developer made an overdue payment of $83.5 million to international bondholders.
Evergrande was close to the end of a 30-day grace period before bondholders could send a notice of default to the company, an event that markets feared would trigger contagion across China’s financial system. Another payment is due next Friday.
Its shares have slumped 80% in Hong Kong this year, including a big fall yesterday after the company failed to raise $2.6 billion from a planned deal to sell a majority stake in its property services arm.
IHG registers staycation summer boost
09:48 , Naomi Ackerman
InterContinental Hotel Group, owner of Holiday Inn and Crowne Plaza, is back to pre-pandemic levels in some parts of the US – but still has a way to go in Britain.
IHG today revealed a significant boost from 2021’s “staycation summer”.
The FTSE 100 firm, one of the world’s largest hotel operators, said revenue per available room (RevPar) – a key industry metric – was up 66% in the three months to end September.
Group RevPar was still 21% down on pre-Covid levels, however, with the UK down 22%.
Read more here
Shares in JD Sports climb on latest acquisition update
10:26 , Joanna Bourke
Deal-hungry JD Sports has boosted its presence in Europe by buying a majority stake in a Crete-based firm behind 60 shops.
The FTSE 100 trainers and clothing retailer said it has purchased 80% of Cosmos Sport which has most of its stores in Greece, a handful in Cyprus, and also sells goods online.
JD Sports rose 23.5p, or more than 2%, to 1063p, making it one of the top risers on London’s blue chip index.
Read more HERE.
Strong UK PMIs, but experts say it will increase rate hike talk
11:12 , Oscar Williams-Grut
The latest PMI figures increased the chances that the Bank of England will put up interest rates sooner rather than later.
The IHS Markit/CIPS measure of economic activity rose to a three-month high of 56.8 in October – any number above 50 shows growth.
Chris Williamson, Chief Business Economist at IHS Markit, said: “The UK economy picked up speed again in October, but the expansion is looking increasingly dependent on the service sector, which in turn looks prone to a slowdown amid the recent rise in COVID-19 cases. Growth is also being accompanied by an unprecedented rise in inflationary pressures, which will inevitably feed through into higher consumer prices in coming months.”
That comes hours after the Bank of England’s new chief economist said inflation will hit 5% by early next year. Huw Pill told the FT: ““That’s a very uncomfortable place for a central bank with an inflation target of 2% to be.”
Capital Economics said: “The PMI survey suggests our expectation of GDP stagnating in October may be a bit too pessimistic and increases risk that the Bank of England will hike interest rates in the coming months.”
London Stock Exchange leaves investors disappointed
12:10 , Oscar Williams-Grut
London Stock Exchange Group (LSEG) reported third quarter figures below City forecasts. Revenue rose 7.6% in the quarter, with profit up 7.3%.
The performance was driven by a 17.2% surge in sales at its capital markets division thanks to bumper trading activity on its fixed income and derivatives trading platform Tradeweb and good volumes on its platform FXall. However, a weaker performance in the company’s data and analytics division and its post-trade division saw earnings undershoot in those parts of the business.
“LSEG’s group revenue growth was better than expected on a constant currency basis, but it was largely driven by the strength in Tradeweb, where we expect decelerating growth in 2022,” said Michael Werner, an analyst at UBS.
Analysts at Citi called the revenue mix “marginally disappointing”.
LSEG left forecasts for the full year unchanging, saying growth would not be as fast in the final quarter of 2021 as it had been in the third quarter.
Shares dipped 302p or 3.7% to 7782p.
Activist vs. Activist: Third Point takes on AVI
12:32 , Oscar Williams-Grut
Activist investors agitate for change at companies they believe are underperforming — but it appears they don’t like having their own tactics used against them.
Third Point, the New York activist hedge fund run by billionaire Dan Loeb, today hit out at the activist targeting its UK-listed vehicle.
Third Point said Asset Value Investors (AVI) was trying to “commandeer the apparatus of the Company in pursuit of its own agenda, at the expense of all shareholders” and accused AVI of simply trying to promote itself.
The statement is part of a months-long battle between Third Point and AVI over the share price of Third Point’s vehicle. Shares are below the net asset value of the fund and AVI wants Third Point to do more to address that imbalance.
Read the full story.
Wise shares sink as co-founder sells shares
13:35 , Oscar Williams-Grut
Share in digital payments business Wise slid as much as 5% today after its co-founder sold a stake worth £81.5 million in order to invest in early-stage businesses.
Taavet Hinrikus, executive chairman of the Shoreditch-based fintech, sold 10 million shares at a price of 815p each, which is a 4% discount to Thursday’s closing price.
The Estonian’s move, which was managed by Goldman Sachs, led to shares falling 43.2p to 806.6p and means Wise is now back close to the 800p it started life at in a blockbuster listing worth almost £8 billion in July. The shares peaked at 1150p in September.
FTSE ends higher on the day but down for the week
16:58 , Oscar Williams-Grut
The FTSE 100 has closed up 14 points or 0.2% at 7204. However, the bluechip index is below where it started the week, having been at 7230 first thing on Monday.
Here are the main stories of the day:
– UK retail sales have recorded their longest losing streak on record
– The London Stock Exchange Group has seen its share price sink after posting worse than expected numbers
– JD Sports has struck another takeover deal, this time in Greece
– Third Point, the activist investment fund run by New York billionaire Dan Loeb, has hit out at another activist fund targeting its UK vehicle
– IHG has scored a boost from a summer of staycations, which boosted bookings in the UK and US
That’s all from us today and this week. Join us again on the blog next week and have a good weekend.