A levy on oil giants is to remain until 2028, but with the potential for the tax rate to drop to 40% if prices are lower for a sustained period.
Elsewhere, shares in speciality chemicals company Croda International have slumped after it warned on profits while FTSE 250-listed payments business Network International has backed a £2.2 billion takeover.
The FTSE 100 index is down after the S&P 500 entered bull market territory in Thursday’s Wall Street session and China recorded the biggest drop in producer prices since 2016.
FTSE 100 Live Friday
Windfall tax on energy giants to run until 2028
London shares struggle despite US bull market
Payments firm Network International backs £2bn takeover
Key market data as FTSE finishes the week down
Friday 9 June 2023 16:54 , Daniel O'Boyle
Click through the graphs to see our end-of-week market snapshot
Interest rate hikes have barely begun to hit households, economist warns
Friday 9 June 2023 16:44 , Daniel O'Boyle
The Bank of England’s wave of rate hikes have only just begun to hit households, with the vast majority of the shock still to come, a leading economist warned today.
New analysis from Capital Economics has found that the average interest rate that households are paying - including households without mortgages - has barely budged since the Bank’s latest rate-hiking cycle began at the end of 2021.
Even though the Bank Rate has soared from near zero to 4.5 percent, the average household interest rate has increased by only 0.35 percentage points to 2.8 percent.
FTSE ends week at 7,562.36
Friday 9 June 2023 16:40 , Daniel O'Boyle
The FSTE finished the week down at 7,562.36, after a tough Friday of trading.
The US entering a bull market could not lift stocks today, leading the index of London blue-chips to fall 0.5% today. It was down 0.6% for the week.
Ocado, a frequent fixture on the faller’s board this year, was the top riser.
City comment: Workers will return to offices if commute is made a bit less miserable
Friday 9 June 2023 15:58 , Jonathan Prynn
It is encouraging to see demand for office space in London starting to edge up last month, as consultants JLL report today.
I am not surprised, the cranes hanging over the capital appear to have been as numerous as ever. Today we reveal Landsec giving a vote of confidence in the future of offices by putting in plans for a £500 million development near Liverpool Street station.
Predictions that the traditional office would be in terminal decline in the post-pandemic era appear to be wide of the mark, even in the City. But it is certainly true that what employers and staff want is set at a far higher bar than before.
Automation, regulation and immigration: Key themes ahead of London Tech Week
Friday 9 June 2023 15:26 , Daniel O'Boyle
London’s tech scene has gone through a lot of turmoil since the start of the year. Scores of firms, from social media giant Meta to data firm Palantir, have cut or are planning to cut jobs amid a softening in consumer demand and a slowdown in business investment.
Others such as fintech Revolut and meal-kit delivery service Gousto have seen their valuations slashed, while many start-ups say they struggle to access funding.
But these troubles were dwarfed by the collapse of industry linchpin Silicon Valley Bank in March, which put huge numbers of small businesses in danger of going under and risked bringing the entire sector to its knees, before a rescue deal by HSBC.
Wall Street bull run goes on
Friday 9 June 2023 14:51 , Daniel O'Boyle
Wall Sttreet extended its bull run, as shares opened slightly higher today.
Tesla and General Motors led the way after a new deal between the car manufacturers.
Mixed start for US stocks expected
Friday 9 June 2023 14:25 , Daniel O'Boyle
US shares are set for a fixed start when trading opens today after entering a bull market yesterday.
S&P 500 futures are up three points to 4301, while Dow Jones futures are down 0.2% to 34100. Nasdaq futures, though, are up 0.4% to 14730.
Tesla shares are up 6% in premarket trading after a new agreement with General Motors.
Key market data
Friday 9 June 2023 14:22 , Daniel O'Boyle
Take a look at the latest key market data as the FTSE looks set to finsih the week down.
City office space fell by 166,000 square metres in past year
Friday 9 June 2023 13:51 , Daniel O'Boyle
The City of London lost 6% of a square mile in office space in the past year, more than any other local district in the country.
The City lost 166,000 square metres in the year to 31 March, according to data from property data provider Search Acumen.
The rest of London didn’t fare much better, with Westminster losing the second-most space at 124,000 square metres and Hillingdon and Tower Hamlets also in the top five.
Inside the (very) secret world of the Barclays and an oh-so tangled web
Friday 9 June 2023 13:13 , Daniel O'Boyle
“A few years ago, I was at a fashion retailer’s collection launch in London,” Chris Blackhurt writes. “The crowd was packed, full of media types. In the corner, a DJ pumped out the music. The canapes were going round.
“Suddenly, the throng had to part. This short figure, with what appeared to be minders either side of him, had come into the room. He was wearing a chalk pinstripe suit with slicked hair. He looked important — or rather he wanted us to think he was important. It was Howard Barclay, joint owner of the Telegraph newspaper group.
“What was striking was just how much like his father and uncle he was. Sir David and Sir Frederick Barclay, on their rare appearances in public, would make similar entrances. Always dressed in pinstripes, their hair neatly parted, shoes highly polished, ties knotted just so, they were identical twins. They conveyed superiority, detachment and yes, a certain disdain.”
‘We now expect the first rate cut to be delayed until early-2025'
Friday 9 June 2023 12:01 , Daniel O'Boyle
Andrew Goodwin, chief UK economist at Oxford Economics, forecasts that the Bank of England will not begin to cut interest rates until 2025.
Markets expect the Bank to raise interest rates as high as 5.5% this year, and while Goodwin expects the peak to be lower at 5%, he thinks rates will remain at that level for around a year and a half.
“We think the MPC will want to reassert its inflation-fighting credibility and will hike again in August, taking Bank Rate to 5%,” he said.
“Previously we had expected the BoE to begin cutting interest rates from May 2024, a little behind the Fed and ECB. But we now expect the first rate cut to be delayed until early-2025. The MPC has a relatively pessimistic view of potential supply and is particularly wary of the inflationary implications of a tight labour market. Though we forecast a modest rise in unemployment over the next year, it's unlikely that we will see much spare capacity emerge.
“The stickiness of core pressures means we see headline inflation remaining above the 2% target until early-2025. And the persistent inflation overshoots of the past couple of years will still be fresh in the memory, not only for policymakers but also financial markets. Against this backdrop, we think the MPC will err on the side of caution, waiting until it has strong evidence that price pressures are back under control before it considers loosening policy.”
Key market data as FTSE slides
Friday 9 June 2023 11:52 , Daniel O'Boyle
The FTSE 100 sank just before lunchtime as US stock futures fell.
Crode is the day’s biggest faller after this morning’s profit warning, while builders make up many of the other spots on the fallers board.
Mortgage rate panic causes home purchases to fall through
Friday 9 June 2023 11:37 , Jonathan Prynn
Home purchases are starting to fall through as a direct result of the extraordinary spate of turmoil in the mortgage market, brokers warned today.
Major lenders have withdrawn hundreds of deals over the past fortnight, often at short notice, as a result of soaring bond yields on expectations that interest rates will have to go higher to rein in inflation.
Yesterday afternoon HSBC became the latest top player to pull its loans, telling brokers at lunchtime that it would remove all its mortgage deals by 5pm.
Wall Street bull market fails to lift FTSE 100, Shoe Zone up 9%
Friday 9 June 2023 10:27 , Graeme Evans
Bull market headlines in the US jarred with the experience of London traders today as the FTSE 100 index completed the week barely changed.
The S&P 500 index last night broke into what many regard as bull market territory by closing 20% higher than its October low, with tech stocks driving the outperformance.
There’s unease that Wall Street’s rally is concentrated in just a handful of stocks, with New York’s FANG index of mega caps up 65% in the same period and the S&P 500’s top 10 companies now accounting for 30% of the overall index.
Saxo Bank strategists said this looked to be a bad sign: “It shows that competition is going down in the US economy. Second, it shows that the US equity market offers less and less diversification thus inherent risks to a smaller set of risk factors.”
Tuesday’s US inflation print and the Federal Reserve rates decision the following day will provide the next tests for the S&P 500, which is still short of its January 2022 record high.
Analysts at UBS said: “Until markets reach a new all-time high, it's impossible to know whether we are experiencing a new bull market or merely a bear market rally.”
The FTSE 100 index, meanwhile, stood 2.77 points higher at 7602.51 for a decline of five points in the week. The FTSE 250 fell 12.38 points to 19,095.17.
Under-pressure Vodafone shares put on 0.85p to 75p, with UK lenders NatWest and Lloyds up 3p and 0.2p to 264p and 45.55p respectively.
The purple patch for B&M shares also continued, with the discounter up another 4.4p to 536p as Stifel analysts revealed a 600p target price.
Another beneficiary as shoppers trade down during the cost-of-living crisis has been Shoe Zone, which today delivered the latest in a string of profit upgrades.
The AIM stock jumped 9% or 18.55p to 228.55p, which compares with 36p in November 2020, as it forecast a surplus of at least £10.5 million for the October financial year.
The footwear retailer, which trades from 380 stores, reported strong demand for summer ranges as well as a margin boost from lower shipping container rates.
Mothercare boss out after just five months
Friday 9 June 2023 09:43 , Daniel O'Boyle
Mothercare boss Daniel Le Vesconte is out after a five-month spell in the role in which shares fell by 40%.
Le Vesconte started in January, as Mothercare’s first chief executive in two years. But shares quickly slid and the decline became more drastic when the firm revealed it may have to issue more stock to help pay its debts last month.
Mothercare’s UK arm collapsed in 2019 and plans to focus operations abroad were impacted by the war in Ukraine, which prompted the company to suspend the Russian business that brought in almost a quarter of its profits.
Chairman Clive Whiley and finance boss Andrew Cook will again take over CEO duties, as they did before Le Vesconte’s arrival, until a new boss is found.
Whiley said: “The Board believes that a change in CEO is in the best interests of the company and its shareholders.
“The Board is fully committed to the group's successful long-term strategy and, further to last month’s pre-close trading update, the company continues to perform in line with expectations. In addition we are progressing a number of options to refinance the group’s debt facilities. Working together with Mothercare’s senior management team I am confident that the group's successful, consistent strategy and culture will continue the group’s profitable growth."
Shares were up 5.8% to 6.0p today.
Today’s market snapshot as FTSE starts flat
Friday 9 June 2023 09:19 , Daniel O'Boyle
Take a look at the key market data as the FTSE 100 held steady upon opening today.
Croda shares slide, Vodafone leads unchanged FTSE 100
Friday 9 June 2023 08:24 , Graeme Evans
Croda International shares are down 12% after the FTSE 100-listed manufacturer of speciality chemicals found in beauty and home care products warned on profits.
The East Yorkshire-based company, which last year generated sales of £2 billion, fell 702p to its lowest level in three years at 5322p.
The FTSE 100 index initially rose before later settling unchanged at 7599.
Under-pressure Vodafone shares rose 0.9p to 75p, while it was also a stronger session for UK lenders NatWest and Lloyds Banking Group.
The FTSE 250 index fell 41.89 points to 19,065.66, with Harbour Energy up 2% or 5.2p to 251.3p on the back of today’s windfall tax announcement.
Elsewhere, shares in discount chain Shoe Zone jumped 7% or 13.75p to 223.75p after another upgrade to profit forecasts.
Shoe Zone raises guidance after strong summer trading
Friday 9 June 2023 08:17 , Daniel O'Boyle
Shoe Zone has upped its profit guidance for the year after strong demand for its summer line helped trading beat expectations in May and June.
The retailer now expects profit to come to £10.5 million for the year to 2 October.
“This is a combination of strong early demand for summer products and lower container rates contributing to improved margins,” its board said.
However that would still be down on last year’s £11.2 million.
Croda warns on profits
Friday 9 June 2023 07:59 , Michael Hunter
FTSE 100 chemicals company Croda issued a profit warning this morning, due to “customer restocking” which continued into the second quarter of its financial year.
It said it now expects annual profit of £370 million to £400 million, lower than City forecasts of £454 million.
Windfall tax on energy giants given longer to run but will fall if prices drop
Friday 9 June 2023 07:52 , Michael Hunter
The government has announced that the windfall tax on oil and gas companies will last for longer, but will fall if commodity market prices drop.
The Energy Profits Levy will now run until March 2028, keeping the 75% levy on North sea oil and gas production “while oil and gas prices remain higher than historic norms”. But it will fall to 40% “when prices consistently return to normal levels for a sustained period,” set at $71.40 per barrel for oil and £0.54 per therm for gas, for two consecutive quarters.
The current price of Brent crude is $75.59, down from peaks of over $123 in March 2022 after the Russia’s invasion of Ukraine. Soaring energy prices powered record profits for oil and gas companies, along with a wave of public outrage and political controversy as sky-high bills became the main cause of the cost-of-living crisis.
The levy has raised around £2.8 billion and is expected to raise almost £26 billion by March 2028. It has helped fund support measures for homes and businesses, including the Energy Price Guarantee that capped the annual household bills for typical amounts of energy consumption.
The extension means the total tax take on oil and gas companies over the next five years will reach £50 billion according to government estimates.
Amigo in last-ditch rescue talks, but with “very low likelihood” of success
Friday 9 June 2023 07:46 , Daniel O'Boyle
Amigo Loans is in talks with a shareholder for a last-ditch rescue deal, but it admits there is a “very low likelihood” that it will come to anything.
The board of the lender, which announced in March that it was going to be liquidated, said it was approached by shareholder Michael Fleming about a possible debt investment deal.
They said the talks were unlikely to result in a successful rescue of the business, but that they would pursue them in order to see if there is an alternative to a shareholder wipeout.
“Shareholders should note that there remain significant impediments to any new capital being made available to the business,” the board said. “In addition, establishing a new business and potentially creating value for shareholders in the longer term, has significant execution risks and will require regulatory approval.
“The board recognises the very low likelihood of a successful conclusion to any discussions arising because of this agreement but is pursuing the agreement in line with its duties under the Companies Act to consider the interests of all stakeholders, including creditors, shareholders and employees.
Network International recommends £2 billion bid from Canada’s Brookfield
Friday 9 June 2023 07:37 , Michael Hunter
Canadian asset manager Brookfield moved ahead in the takeover battle for Network International today, when the FTSE 250 company’s board recommended its £2.2 billion bid for the payment services firm.
The offer is priced at 400p per share. It was first offered in April after a rival bid from a consortium of CVC Capital Partners and Francisco Partners Funds priced at 387p. Network and Brookfield were given extra time to discuss the offer. Network said today the offer was “fair and reasonable”.
The stock closed at 363p yesterday, meaning the offer represents a 10% premium to Thursday’s final price. Brookfield said the price was 64% higher than the price before the offer was first made and 49% higher than Network’s volume-weighted average price before the offer.
Network is based in Dubai in the United Arab Emirates and is focused on markets in the Middle East and Africa. Brookfield has over $825 billion (£656 billion) in assets under management.
Wall Street in bull market, China producer prices dip to 2016 low
Friday 9 June 2023 07:31 , Graeme Evans
US stocks firmed yesterday after Wall Street’s hopes for a pause in interest rate hikes were boosted by signs of a softening labour market..
The big jump in US jobless claims to 261,000 for the week to 3 June was much bigger than forecast and represented the largest figure since the end of 2021.
The Nasdaq Composite rose 1% and the S&P 500 index lifted 0.6% to its highest level of the year, marking an entry into bull market territory based on a 20% rise from October’s low.
The performance reversed earlier nervousness that the Federal Reserve might go for another rate rise next week rather than wait until July as previously thought.
There was a further boost this morning when China revealed producer deflation continued in May for the eighth consecutive month. The producer price index declined 4.6% year-on-year in May, the biggest fall since 2016 amid weakening global demand.
The country’s headline inflation rate was also subdued, with a smaller-than-expected annual figure of 0.2% reflecting the ongoing slowdown in the Chinese economy.
The FTSE 100 index fell 0.3% by last night’s close but is forecast by CMC Markets to open 12 points higher at 7612 this morning.
WANdisco to raise $30 million and re-join AIM with new name
Friday 9 June 2023 07:26 , Simon Hunt
Beleaguered tech firm WANdisco has laid out fresh plans for its transformation as it battles for survival.
The company plans to raise $30 million in shares and re-join the AIM market with a new name.
The changes were approved overwhelmingly at a general meeting held earlier this week.
“The change to the company name is part of a broader update to the Company’s overall brand to best reflect the values and vision embodied in the turnaround plan, including but not limited to improvements in disclosure, governance, and the board’s future ambitions for the company,” WANdisco said.