nterest rates rose another 0. 5% to 4% today as the Bank of England continues the fight against inflation with its 10th increase in a row. Governor Andrew Bailey also said that the UK’s expected recession will be shorter and shallower than forecast in November.
Meanwhile, Shell today reported a bigger-than-expected record profit of $39. 9 billion (£32. 1 billion) after soaring oil prices boosted its performance in 2022.
Wall Street’s S&P 500 made strong gains in opening New York trade after the Federal Reserve adopted a softer, 0. 25% rate hiking strategy overnight, in line with market expectations but soothing outlying fears that it might stick with bigger moves. There was also support from a surge for Facebook’s parent, Meta, after it beefed up cost cutting plans to around $5 billion this year and announced a $40 billion capital return.
Its shares surged by almost 20% . Overall, the broad New York stock index rose 30 points to 4149. 89 Eurozone interest rates went up by 0.
50% today, in a widely expected move at the European Central Bank that takes the rate on its deposit facility to 2. 50% and its refinancing rate to 3%. After the tenth consecutive hike in a row took interest rates to 4% today for the first time in 14 years, City experts are starting to predict where and when the Bank of England’s Monetary Policy Committee will stop.
Here is a round up of some of the reaction in and around the square mile: , economist at audit, tax and consulting firm We expect the MPC to pause its tightening cycle in March at 4. 25%. “We expect wage growth to come down sharply over the next six months to a year as firms dramatically reduce their hiring in the face of weak demand.
What’s more, higher interest rates will force the weakest firms under and cause struggling firms to make redundancies, pushing up the unemployment rate and further weighing on wage growth. ” , mortgage operations manager at the “Markets expect the Bank rate to level off at around 4. 5% later this year.
This is good news, but it still signals higher costs on the horizon. “The big thing everyone’s wrestling with is timing. Those with fixed rate deals expiring soon will be wondering whether it will pay to re-mortgage now.
Those looking to buy a property will be watching mortgage rates rise, just as house prices are forecast to take a plunge. ” , partner at “Peak interest rates for the year remain unclear, creating a challenging environment for investors and financial advisors. Today’s decision underscores the importance of alternative investment opportunities available in the private markets and venture capital—sectors providing long-term growth and unparalleled tax reliefs via Government-backed mechanisms like the Enterprise Investment Scheme Sterling was lower in the wake of the Bank of England’s re-drawn forecasts for the UK economy and a change in tone on its fight against inflation, even after it lifted interests rates for the tenth time in a row, taking them to 4%.
But the BoE also said inflation may have peaked, which traders took as a cue that UK rates could soon do the same as policymakers gain traction in their moves against rising prices. As the markets absorbed the BoE’s words, the pound was down 0,5% at $1. 2317, leaving it down over 8% over the past 12 months.
But for 2023 to date, it is up around 2%. It was noted in dealing rooms that policymakers’ previous pledge to respond”forecfully” to further inflationary pressure was not repeated this time around. And the BoE pointed clearly to the prospect that inflation had already peaked “across many advanced economies, including in the United Kingdom”.
The FTSE 100 was up 45 points at 7084. 62, a rise for the day of 0. 5%.
The Bank of England is still expecting the size of the UK economy to shrink this year, but its official forecasts now point to a shorter and shallower recession. Overhauling its outlook in an update after November’s dire prediction of a recession that would outlast 2023, the BoE said today that the economy would “fall slightly” over the year as energy costs and wider inflation rates ease. That means the eventual peak to interest rates, the main tool to fight inflation, could come sooner and be lower than previously thought.
The BoE also said today that inflation may have already peaked, after it was sent soaring via higher energy costs after Russia’s invasion of Ukraine. While consumer price inflation “remains high”, the BoE also said “it is likely to have peaked across many advanced economies, including in the United Kingdom”. The BoE’s target for inflation is 2%.
The Consumer Prices Index for December reached 10. 5% when it was published last month. January’s reading is due on February 15.
UK interest rates have hit 4% after the Bank of England’s Monetary Policy Committee voted 7-to-2 for a hike of 0. 50%, taking the baseline cost of borrowing to its highest in 14 years. It was the 10th consecutive meeting at which there was a rise and the move will add to the pressure on thousands of struggling , who are caught up in crossfire of the BoE’s fight against inflation.
The move will have an immediate impact on the mortgage bills of the estimated 200,000 homeowners in London who are on tracker or variable rates that move in line with the base rate. It is also expected to accelerate the fall in house prices. JD Sports has set a goal of £1 billion in annual operating profits within the next five years, as it prepares to lay out international expansion plans today.
Ahead of a capital markets day today, the retailer revealed that it intends to open 250 to 300 new stores per year, as part of a strategy of “store expansion in underpenetrated markets”. CEO Régis Schultz said the group planned to expand internationally to hit these targets. “Today marks a new, distinct chapter in the growth story of JD as we set our plans to become the leading global sports-fashion powerhouse,” he said.
“Building on our strong existing position and attractive long-term market dynamics, we see significant growth opportunities ahead by expanding JD internationally, notably in North America and Europe. ” “We will also be enhancing our omnichannel retail offering, investing in technology and analytics, and leveraging our long-term strategic brand partnerships, to better serve more customers. ” JD Sports shares are up 3% so far today to £1.
68. A buoyant session for growth and technology stocks today pushed the FTSE 100 index back near a record high. The upbeat mood in London reflected Wall Street’s optimism that interest rate hikes by the Federal Reserve are nearly over after last night’s smaller increase of 0.
25% to a range of 4. 5% to 4. 75%.
The hopes of an imminent pivot in approach by US policymakers meant the S&P 500 rose 1% and New York’s index of mega-cap tech stocks by 4%, even though Fed chair Jerome Powell insisted the fight against inflation is far from over. The Wall Street gains were before Facebook and Instagram business Meta Platforms delivered better-than-expected guidance on 2023 sales and announced plans for share buybacks of up to $40 billion (£32. 4 billion).
The bullish fourth quarter results statement helped Meta’s shares to jump by a fifth in after-hours trading and contributed to a strong session for several London-listed stocks. Beneficiaries in the FTSE 100 included the media and advertising agency WPP, which put on 4% or 36p to 994. 6p, and Scottish Mortgage Investment Trust as the tech industry backer rallied 4% or 32.
2p to 779. 4p. The confidence boost also helped grocery technology business Ocado to improve 6% or 36.
8p to 697p and North America-focused JD Sports Fashion up by 5. 4p to 168. 7p.
The FTSE 100 index reached 7813 at one stage, some 90 points off its May 2018 record, before settling 22. 28 points higher at 7783. 39.
Resurgent growth stocks helped the FTSE 250 index to return above the 20,000 threshold as fast fashion chain ASOS jumped 7% or 66p to 891. 6p and Trustpilot investor Molten Ventures lifted 24. 8p to 376.
6p. Magazine publisher and online platform Future also rebounded 99p to 1622p to help the FTSE 250 stand 1. 3% or 266.
42 points higher at 20,164. 96. Cyber security firm NCC bucked the trend, however, falling 10% or 18.
2p to 166. 2p after half-year results highlighted that customers are taking longer to reach buying decisions. Further signs of the resilience of London’s fintech sector amid a wider global tech rout emerged today, after digital bank Zopa said it had raised a further £75 million in its latest funding round to turbo-charge its expansion plans.
The deal, which adds to the $300 million the firm raised in 2021, will be used to fuel its M&A dealmaking and help it meet the bank’s capital requirements for its growing balance sheet. Zopa CEO Jaidev Janardana said: “Today’s equity round reaffirms the support of our investors despite the challenging economic environment. “Zopa takes an agile and dynamic approach to credit risk which means it has continued to lend responsibly in a changing environment.
As a result, our business remains resilient with record loan origination volumes, stable credit performance comparable to pre-pandemic levels, and continued innovation. ” In December, the firm vowed to continue hiring and raise minimum salaries more than 20% to £27,000 to attract and retain talent. Its employee headcount has climbed 19% to top 600 in the past year, according to LinkedIn data.
Zopa didn’t disclose a company valuation following the funding round but said the deal “markedly enhances” its ‘unicorn’ status. Southend Airport owner Esken’s shares dipped by 3% as it issued a profit warning for its renewable energy division after “unplanned outages” at biomass energy plants. Esken Renewables, which supplies waste wood to biomass power plants, previously expected an operating profit of £22 million for the year ended 28 February.
However, it now expects this figure to come to £20 million, as it supplied less wood than expected during the winter due to “continued and further unforeseen outages” as a cold snap hit the UK in December. Esken said it would normally expect to make up these losses over time, but because the outages occurred close to the end of its financial year, there would not be time to do so in 2022-23. .
