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FTSE 100 Live: ‘Markets are now pricing in more than four additional rate rises’, Asda in EG merger
Stock markets are struggling for momentum, despite increased hopes that the US can avoid a disastrous debt default.
Traders are worried about the economic impact of spending restrictions under last weekend’s Biden-McCarthy compromise agreement at a time when the Federal Reserve is still tightening monetary policy.
On the corporate front, the UK operations of EG Group have been sold to Asda in a £2.3 billion deal while Hollywood Bowl has continued its strong run of trading by reporting record half-year profits.
FTSE 100 Live Tuesday
Asda merges with EG Group UK in £2.3bn deal
Shares struggle despite US debt ceiling deal
Hollywood Bowl hits profits record
FTSE 100 closes down 1.4% after Shell losses
17:03 , Simon Hunt
The FTSE 100 closed down 1.4% at the end of the day’s trading session, led by a 3% fall in shares of Shell.
Here’s our closing market snapshot.
Home Reit faces fresh storm after probe findings
16:44 , Simon Hunt
Home REIT, the property business that aims to provide sheltered housing for the homeless, faced fresh turmoil today when it revealed the details of an internal probe.
That report claimed former investment adviser Alvarium passed “inaccurate” data to inspectors and had “undisclosed potential business interests” with third parties.
The company called in forensic accountants from Alvarez & Marsal after facing allegations of wrongdoing in some property deals. It was also under pressure from Viceroy Research, which questioned the ability of some tenants to pay rents.
Home Reit says it was not properly informed by Alvarium about problems with overdue rent.
Nor did it disclose costs on the refurbishment of properties, Home Reit claims. This has “hampered the board’s ability” to assess its financial strength.
A potential bidder, Bluestar, walked away from a deal. The shares were today steady at 38p.There was no comment from Alvarium.
Nvidia hits $1 trillion market cap as stocks open higher in New York
15:15 , Simon Hunt
Nvidia has become the first US chipmaker to reach a market cap of $1 billion after investors were encouraged by signs it was being bolstered by a surge in demand for semiconducters used in artificial intelligence.
The Nasdaq has rocketed 2.6% in the opening minutes of trade on Wall Street, while the S&P 500 is up 1.3%.
Lunchtime FTSE update as US futures rise
13:03 , Simon Hunt
Here’s a look at your key market data mid-way through today’s trading session in London.
Across the pond, US futures are rising, led by a surge in tech and semiconducter stocks as investors welcome a suite of new AI announcements.
Meanwhile in the UK, Vodafone shares have fallen to a fresh 5-year low as turnaround plans announced earlier in the month failed to woo shareholders.
Legal disputes rocket as more firms take insurers to court to pay claims
12:38 , Simon Hunt
The number of legal disputes between companies and their insurers ending up in the High Court has almost trebled since before the pandemic, according to new research.
The findings will intensify accusations that corporate customers are being let down by insurers taking a hard-nosed approach to payouts.
The findings — from Mactavish, a buyer of outsourced insurance and a claims resolution expert — show the rise was led by claims on business interruption policies relating to Covid. The number of such disputes was up by 14% in 2022.
Big-name litigants taking on their insurers include two of London’s biggest Premier League football clubs, Arsenal and Tottenham Hotspur, alongside their Merseyside rival Liverpool, as well as the national restaurant chain Pizza Express.The court clashes come as businesses are struggling to get back on their feet after the twin shocks of the pandemic and the cost-of-living crisis.
Mactavish’s CEO Bruce Hepburn called the findings of the index “really worrying,” adding: “Many of these disputes should simply not be going to court. When you buy an insurance product you expect to be protected from loss, not exposed to further costs and delay.
“Insurers are prioritising their own interests over those of their clients, rebuilding their balance sheets to the detriment of customers who are being forced to seek declarations from court in order to get paid”.
Before 2019, the number of claims ending in the High Court was stable at around 30 a year. Mactavish found it reached 82 in 2022.
Markets are now pricing in more than four rate rises: Ebury
11:18 , Simon Hunt
City analysts are now bracing for the possibility of interest rates topping 6% in signs of further pain to consumers as the Bank of England seeks to curb inflation.
According to a poll by Refinitiv, around one in six are now expecting the Bank’s Monetary Policy Committee to announce a 50 basis point rise when it next meets, with around one in ten expecting the rate to peak at 6% by the end of the year.
Matthew Ryan, Head of Market Strategy at financial services firm Ebury, said: “It is clear that more interest rate hikes are coming.
“Markets are now pricing in more than four additional interest rate increases, and we do not rule out the possibility that the terminal rate will land above 6%.
“Our bullish view of sterling rests on this prospect, as well as the resiliency of UK domestic demand. Most signs point to only relatively modest growth in the UK this year, though this is far better than previously anticipated, and growth forecasts continue to be revised higher. This includes the IMF, which now no longer expects a UK recession in 2023.”
Brand giants Nestlé and Unilever bring in new chief financial officers
11:12 , Simon Hunt
Two of the world’s biggest consumer goods giants, Nestlé and Unilever, are hiring new chief financial officers.
Nestlé is poaching Anna Manz from the London Stock Exchange, to replace Francois-Xavier Roget who is stepping down after eight years to “pursue new professional challenges”.Unilever said its CFO of eight years Graeme Pitkethly, will leave by the end of May next year. He will “retire from the company” following the appointment of a successor.
Unilever in January appointed Hein Schumacher to replace CEO Alan Jope from July — a move welcomed by activist shareholder Nelson Peltz.Pitkethly’s departure lets Schumacher shape his top team, said analysts.
Both companies, behind many of the world’s best-known brands, are trying to cope with inflation that has put intense pressure on profit margins.
US debt deal fails to lift uncertainty, Hunting shares up 17%
10:15 , Graeme Evans
Fears over the impact of spending limits under a US debt ceiling deal today led to more cautious trading by European markets.
The Biden-McCarthy compromise struck over the weekend suspends the debt ceiling until January 2025, with federal spending capped over the next two years.
The agreement now has to clear Congress before 5 June, which is the latest date that Treasury Secretary Janet Yellen has said that the US can pay its bills.
But traders are worried about more political wrangling and the prospect of spending restrictions at a time when the Federal Reserve is still tightening monetary policy.
The FTSE 100 index slipped 8.38 points to 7618.82, reflecting the earnings exposure of blue-chip companies in the US.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: ‘’A deal may have been struck on the debt ceiling, but it’s not fully calmed nervousness on financial markets.
“Limits on spending are being imposed just as America looks set to head towards recession, which could make it harder for growth to snap back.”
Blue-chip fallers included Entain, whose operations include its US-based BetMGM joint venture as well as Ladbrokes and FoxyBingo in the UK. The shares fell 20p to 1382p, while rival Flutter Entertainment lost 160p to 15,925p.
Outsourcing firm Bunzl also lost 29p to 3165p despite a landmark session in which bolt-on deals in Spain and Brazil took its number of acquisitions since 2004 to 200.
The UK-focused FTSE 250 index outperformed the top flight with a rise of 0.5% or 96.64 points to 18,890.73, led by RHI Magnesita after a subsidiary of private equity firm Rhone Capital announced a move to buy a 20% stake.
Shares in the supplier of highâgrade refractory products jumped 468p to 2518p, with the offer at 2850p being a 39% premium to Friday’s closing price.
Hunting, the oil well services firm, also surged 17% or 33.5p to 235p after lifting full-year earnings guidance on the back of a major contract worth $91 million in India.
Hollywood bowl shares rise on bumper profits
09:12 , Simon Hunt
Hollywood Bowl’s winning streak showed no signs of abating today as the firm rolled into summer with another record half-year of results.
The Hemel-Hempstead based business posted revenues of £110 million, up 20.7% on last year, while pre-tax profits climbed 7.7% to £26.7 million.
Hollywood’s Canadian operations proved to be its star performer, generating EBITDA ahead of expectations at £3.1 million, with a number of new sites in the pipeline, following the acquisition of Toronto-based Splitsville a year ago.
Boss Stephen Burns told the Standard the firm was eyeing further expansion in Canada and wouldn’t rule out building a foothold in other markets worldwide in the future.
“We think there is the potential for up to 40 sites in Canada,” he said, adding: “We’re quite busy with that at the moment before we have time to turn our attention to world domination.”
Burns said there were also “two sites we’d quite like to get our hands on” in the UK but warned that efforts for any major expansion in the UK could be hamstrung by pressure from the competition watchdog, after the firm was forced to divest a number of bowling alleys following a previous acquisition.
The business has benefitted from a nadir in overseas travel over the past three years, which Burns said had rekindled Brits’ love of bowling.
“A lot of people hadn’t been bowling in a long time and their last experience was of their feet sticking to the carpet in a dark dingy environment.
“We’ve improved that experience and we have universal appeal.”
Shares rose 1.1% to 263p.
Key market data as session begins in London
08:29 , Simon Hunt
A few minutes into the start of the trading session in London, here’s a look at the key market indicators.
FTSE 100 opens lower, quarterly reshuffle in focus
08:25 , Graeme Evans
London’s blue-chip shares have made a disappointing start to the week, with the FTSE 100 index down 0.2% or 16.89 points to 7610.31.
Fallers include Lloyds Banking Group, which is down a penny at 45p, and Rolls-Royce with a decline of 2.45p to 147p.
Stronger performances have come from media and advertising group WPP, which is up 20.2p to 894.6p, and by British Gas owner Centrica after a rise of 2.6p to 120.5p.
Ocado shares are broadly unchanged at 412p as attention turns to whether the grocery technology business can avoid relegation from the FTSE 100 index when the next quarterly reshuffle is calculated based on tonight’s closing prices.
A recent rally for Ocado means that British Land and Frasers are likely to face relegation following dips of 20% and 16% respectively over the last three months. They are likely to be replaced by IMI and Hikma Pharmaceuticals.
Richard Hunter, head of markets at Interactive Investor, said: “IMI is well-known to seasoned investors, previously having been a FTSE 100 stalwart in its days as Imperial Metal Industries and having been previously relegated in December 2014.
“Hikma, meanwhile, has had a recent chequered past which has seen the company in and out of the premier index on more than one occasion.”
Spending limits fuel US recession outlook
08:08 , Graeme Evans
The spending limits agreed under the Biden-McCarthy debt ceiling compromise deal mean the US economy is facing even greater growth headwinds at a time when the Federal Reserve is still tightening monetary policy.
UBS Global Wealth Management said this morning: “According to minutes from its latest policy meeting, the Fed has already had a recession in its baseline projection, with real GDP contracting in the final quarter of this year and the first quarter of next year.
“We reiterate our view that the US growth is set to slow as the lagged effect of the Fed tightening feeds through the economy amid stricter lending standards from banks.”
Billionaire Issa brothers merge Asda with EG Group UK in £2.3 billion deal
07:21 , Simon Hunt
The billionaire Issa brothers are to merge the UK operations of EG Group with Asda in a £2.3 billion deal.
EG Group said its UK and Ireland fuel, foodservice, grocery and merchandise business would be sold off to Asda as part of the deal. The Issa brothers completed their £6.8 billion acquisition of Asda from Walmart in February 2021.
EG Group said the proceeds from the deal would be used to repay its debts as it wrestles with soaring interest rates on its billions of pounds of loans. The firm said it “will look to address upcoming maturities” on its existing portfolio of loans.
The group will continue to operate in the USA and several European countries whilst retaining arount 30 UK sites and the Cooplands bakery brand.
Zuber Issa CBE, co-founder and co-CEO of EG Group, said: “This transaction with Asda represents an important strategic step for EG Group. Following this sale, EG Group will benefit from a significantly strengthened balance sheet, supporting the continued roll out of its successful convenience retail, fuel and foodservice strategy and drive innovation to transform the consumer experience.
“This includes the ongoing investment and expansion of our EV charging business, evpoint, as well as hydrogen and other sustainable fuel retail infrastructure, which we continue to see as a significant future opportunity.“
Debt ceiling agreement calms US markets, FTSE 100 steady
07:20 , Graeme Evans
A debt ceiling deal between President Biden and House Speaker Kevin McCarthy appears to have calmed markets at the start of the new trading week.
The agreement struck over the weekend suspends the debt ceiling until January 2025, with federal spending capped over the next two years.
The deal has to clear Congress before 5 June, which is the latest date that Treasury Secretary Janet Yellen has said the US can pay its bills.
US stock futures are broadly positive with the S&P 500 seen rising 0.2% and the Nasdaq 100 by 0.4% from Friday's close.
The response has been more subdued in Europe, with CMC Markets expecting the FTSE 100 index to open unchanged at 7627.
