FTSE 100 hits record high; UK economy’s recovery from recession gathers pace – business live | Business

FTSE 100 hits record high

Boom! The UK’s blue-chip share index has hit a new alltime high.

The FTSE 100 has jumped at the start of trading to hit 8068 points, up 43 points or 0.55% this morning.

That comfortably clears the previous all-time peak of 8,047 points set in February 2023.

This extends yesterday’s rally, when shares were lifted by rising hopes that the Bank of England will cut interest rates twice this year.

Markets are also more buoyant as fears about an escalating conflict in the Middle East eased.

Jim Reid of Deutsche Bank explains:

Sentiment was bolstered by the lack of any further escalation in the Middle East.

Indeed, yesterday saw Iran’s foreign ministry spokesman say that Israel had received the “necessary response at this stage”. The apparent easing in tensions helped oil prices fall back.


Updated at 

Key events

Although the FTSE 100 is at a new peak, it’s rising slightly slower than other major markets today.

Currently the FTSE 100 is up 0.5% today, or 43 points higher at 8067 (slightly below this morning’s new intraday high of 8076 points).

In contrast, Germany’s DAX has gained 1%, while the pan-European Stoxx 600 is up 0.9%. Both indices have hit their own record highs earlier this year.

The FTSE 100 remains one of the slowest-rising European indices this year (up around 4% this year), having also been one of the laggards in 2023.

Petrol hits 150p a litre, reports AA

Motorists have been hit by a jump in fuel costs, the AA has warned, with petrol across the UK now averages above 150p a litre for the first time since November.

Data collated by website Fuel Prices Online shows typical pump prices reached 150.1p per litre yesterday.

The average price of a litre of diesel is also at the highest level since November 2023, at 158.3p.

Luke Bosdet, the AA’s spokesman on pump prices, says:

“Inflation has been heading downwards at quite some speed but petrol’s rebound to 150p a litre leaves a big boulder in the road. Government data shows that for the fourth week petrol prices have been higher than at the same time a year ago. This last happened in February 2023.

Five days of falling wholesale costs, with the value of oil coming off the boil, offers hope that pump prices may not get much worse in the short-term. However, road fuel priced above 150p a litre grabs the attention of drivers and will lead some to re-tighten their belts on other spending.”

The news is a little less gloomy for UK equities at the moment as London’s blue-chip index hits new records, reports Jason Hollands, managing director of online investment platform Bestinvest, this morning:

And it’s high time, as UK equities have endured a long negative narrative around investor outflows, companies switching their listings overseas, and underperformance compared to the more exciting US market.

“Some of the move in recent days has been down to an improved monetary outlook for the UK. Global investors now anticipate two rate cuts from the Bank of England this year, as the inflationary environment now looks more benign than it does in the US, where a possible reverse-ferret rate hike is back on the cards at the Fed. Renewed strengthening of the US dollar recently will also have played a helping hand for the FTSE 100, as many of the biggest constituents earn the vast majority of their revenues overseas, and often in dollars, a strong US currency can provide a boost to earnings when they are reported in sterling.

Hollands also points out how international investors have fallen out of love with the Footsie over the last two decades:

“Twenty years ago, UK equities made up 10.9% of the MCI All Country World Index: now they comprise just 3.3%, having been muscled out largely by burgeoning US equities which have grown their representation from 52% to 64%.

While the waning relative fortunes of UK equities in recent years have been down to a myriad of factors, including diminishing allocations by domestic pension funds, one of the main drags on the UK market since 2008 has been its large exposure to financials, which represent over a fifth of the FTSE 100 Index today. Banking shares in particular have remained unloved since the global financial crisis. This, combined with negligible exposure to technology companies, are characteristics that have driven divergent returns between the UK and US-dominated global equity indices.

The Bank of England will note that today’s PMI report shows there was “a steep increase” in the costs being incurred by UK companies this month.

Average cost burdens across the private sector rose at the fastest rate since May 2023, the PMI report shows, suggesting inflationary pressures are still strong.

This increase in input price inflation was overwhelmingly linked to higher staff wages, particularly in the hospitality and leisure sector, after the UK’s minimum wage rose by almost 10% this month.

Some companies reported this had an indirect impact on pay awards to other employees, S&P Global says.

Chris Williamson, their Chief Business Economist, explains:

The upturn encouraged firms to take on workers in increased numbers which, alongside April’s rise in the National Living Wage, drove cost pressures sharply higher.

Although selling price inflation cooled slightly, the upturn in costs alongside solid demand suggests firms may seek to raise prices in the coming months. “While the improving economic recovery picture is welcome news, the upward pressure on inflation will add to concerns that a sustainable path to below target inflation has not yet been achieved.


Updated at 

Bank of England policymaker Jonathan Haskel does not sound like a man itching to cut interest rates.

Speaking at a seminar at City University’s Bayes Business School in London today, Haskel says its important to see more slack in Britain’s labour market to be confident that inflation will stay at 2%.

Asked if he now thought it possible inflation would hold at 2% rather than rise later this year, Haskel explained:

“The labour market is central to the inflation aspect,”

[Reminder, last week BoE deputy governor Dave Ramsden argued that UK inflation could hold around the Bank of England’s 2% target for the next three years, rather than rise back towards 3% as previously expected].

Haskel added that labour market tightness – as measured by the ratio between job vacancies and unemployment – was reducing [data last week showed a drop in job openings, and a rise in the jobless rate].

However, it may not be falling fast enough to keep inflation on target.

In a hint towards the different views around the monetary policy committee (MPC) table, Haskel added:

“Reasonable people might reasonably disagree about the risks.”

Bank of England’s Haskel warns of potential upside risks to inflation remaining at 2%, emphasizing the need for careful consideration. #BOE #inflation

— Markets News (@MarketsDotNews) April 23, 2024

Last month Haskel dropped his vote for further interest rate hikes, having been one of the hawks pushing for higher borrowing costs since last autumn.

The MPC is next due to set interest rates on 9th May; the money markets indicated there’s an 82% likelihood of no change, and just 18% chance of a cut.


Updated at 

UK PMI rises: What the experts say

The monthly purchasing managers index (PMI) is an closely watched barometer of economic prospects; here’s what economists are saying about today’s UK PMI report, showing a pick-up in growth:

Rhys Herbert, senior economist at Lloyds Bank, says:

“Today’s figures suggest that the UK’s economic conditions are continuing to improve.

It’s encouraging to see Service providers recording the fastest growth for nearly a year, and businesses will be hoping that another slight drop in inflation will have a further positive impact on spending power for both households and businesses.

Improving economic activity is telling a relatively optimistic story. While geopolitical tensions may cause some challenges in the months ahead, markets remain optimistic that interest rates have peaked and could begin to fall later this year.”

But…Charles Hepworth, investment director at GAM Investments, points out that factories struggled:

“UK Services PMI data rose more than expected in April to a reading of 54.9, a short term high not seen in almost a year. This reflects the continuing recovery from the slowdown seen in the second half of last year.

However, the strong showing in services was in stark contrast to the contraction still seen in the manufacturing sector which continues to struggle with a contractionary reading of 48.7. Companies surveyed reported that prices they charged went up at the slowest pace in a number of years, less due to declining demand but more through competition.

This may not be seen as good news for the Bank of England who still isn’t comfortable enough that the inflation dynamics are genuinely shifting, and that consumers are reducing demand.”

Overall, the PMIs paint a picture of a recovering economy, says Thomas Pugh, economist at leading audit, tax and consulting firm RSM UK. He adds:

“The robust increase in the flash S&P/CIPS composite PMI in April to 54.0, the highest since May 2023, suggests that the economy continued to pick up steam after last year’s mini-recession.

An acceleration in growth in Q2 would, in theory at least, ease the pressure on the Bank of England (BoE) to cut interest rates. But in reality, with inflation still likely to fall to 2% this month, the labour market rapidly weakening and growth still low, the time for interest rate cuts has come.

A delay in rate cuts beyond the summer would risk harming the economic recovery for no material impact on inflation.

FTSE 100 reverses away from record high….

The FTSE 100 has slipped back from its early morning record high, as the news that Britain’s economy is recovering from recession weighs on shares.

While a recovering economy is obviously good for companies, this month’s stronger-than-expected PMI report could make the Bank of England cautious about cutting interest rates quite as quickly as hoped.

Joshua Mahony, chief market analyst at Scope Markets, explains:

The FTSE 100 has started to reverse back from record highs, after a fresh PMI survey that saw the services sector reading jump into the highest level since May 2023.

Crucially, traders are showing signs of concern that this rebound in UK growth could come at a cost, with economy-wide input price inflation rising at the highest level in 11-months. Between strong services sector wage growth, and rising material and transportation costs in the manufacturing sector, we are seeing fears grow over the potential for a more cautious approach from the Bank of England.

With markets essentially viewing the June rate decision as a coin-toss, today’s data raises fears that the BoE will instead hold off until August.

Farage: Boycott NatWest share sale until debanking report released

Kalyeena Makortoff

Kalyeena Makortoff

Nigel Farage is urging the public to boycott the government’s planned sale of NatWest shares until the group released a full report regarding the decision to close his account with its private bank, Coutts, last year.

The message came just hours before NatWest is due to hold its AGM at its Gogarburn headquarters in Edinburgh, from 11am today.

In a video release on social media platform X on Thursday, Farage said:

“No member of the British public should put their money and invest in shares in Natwest while they continue to hide the facts, hide the information, to hide the truth about me.

This debanking row is far from over and I still reserve the right to take legal action”

Today is @NatWestGroup AGM.

They still refuse to give a full report into what was said in their “independent investigation”.

Worse still, the SAR I submitted to @TraversSmith doesn’t include all of the information said about me.

What are they hiding? I will find out the truth. pic.twitter.com/zsTcWX56yw

— Nigel Farage (@Nigel_Farage) April 23, 2024

Farage said he had put in a fresh subject access request to NatWest, asking for all the information that related to him, from the independent investigation surrounding last summer’s debanking row. They came back with “over 100 pages of documents” that he says were simply copies of a variety of press articles and not the information he was hoping for.

The debanking controversy started when Coutts – the NatWest-owned private bank for the ultra-wealthy – planned to shut Farage’s bank accounts, and snowballed after Farage obtained internal documents that showed the bank had concerns over his political views. The scandal escalated when it emerged that CEO Alison Rose had discussed Farage’s case with a BBC journalist.

Rose resigned, and was forced to forgo £7.6m in pay from NatWest, although independent lawyers hired by the bank concluded she had made an “an honest mistake” in speaking with the BBC and that concerns over Farage’s political views were not the driving factor in the decision to shut his accounts.

The government’s stake in NatWest dates back to the bailout of Royal Bank of Scotland after the 2008 financial crisis. Jeremy Hunt confirmed in March’s budget that the government plans to sell a chunk of shares in NatWest in the summer.

FTSE record high will help “repair the reputation of the UK stock market’

The sight of the UK’s FTSE 100 index climbing to a new record high this morning could help to buff up the reputation of the UK stock market.

The London stock exchange has taken a battering recently as some major companies have chosen to float on Wall Street instead, such as chip maker ARM.

Others, such as building materials group CRH, have chosen to move their listing from London to New York.

The FTSE 100 has been tarred as a “Jurassic Park” of an index, due to its lack of fast-growing technology companies.

But even if the Footsie is something of a lumbering Brontosaurus, it has still scaled new heights today.

Russ Mould, investment director at AJ Bell, says that Brexit, and political ructions, have also weighed on UK share prices.

Today’s positive showing is “exactly what’s needed to help repair the reputation of the UK stock market”.

He adds:

It’s going to be a slow process but every little helps

“The UK has lived in the shadows of the US stock market for the past decade or more, delivering inferior returns on a relative basis as it has lacked the go-go growth stocks highly desired by investors. The FTSE’s low exposure to the technology sector has diminished the index’s appeal and seen investors look elsewhere for ways to turbocharge their portfolio.

“Brexit and political uncertainty have also weighed on the index, even though approximately three quarters of its constituents earn money overseas. That’s led to cheap valuations and a mountain of unloved stocks. Investors are finally getting the message that a good chunk of these businesses still have a lot to offer, delivering slow but steady profit growth, and they’re available for a fraction of the price of some of their overseas peers.

“The conveyor belt of takeovers continues to trundle along and that has put the spotlight on the market. At the same time, many UK-listed companies are simply getting on with the job at hand, delivering earnings and dividend growth. Investors who take a long-term view are still able to find plenty of opportunities.

UK’s recovery from recession continues as PMI rises

Newsflash: the UK economy continues to pull away from last year’s recession.

The UK’s private sector is expanding at its fastest rate since May 2023, according to a new survey of purchasing managers at UK businesses.

Data firm S&P Global’s Flash UK PMI has risen to 54.0 this month, up from March’s 52.8. That’s the highest level since last May, showing a pick-up in growth.

The services sector, which makes up about three-quarters of the economy, is driving the growth, while the manufacturing sector is shrinking slightly this month.

📢 Even more evidence of return to growth… 👍

Flash #UK #PMI Composite Output Index rose to 54.0 in April (March 52.8), an 11-month high.

Still led by services – #manufacturing output index actually dipped to 49.1 (March 50.9) – but also still outperforming the #euro area. pic.twitter.com/Yssr9cQUNI

— Julian Jessop 🏴󠁧󠁢󠁥󠁮󠁧󠁿 (@julianHjessop) April 23, 2024

Services companies reported that output is growing this month, helped by a rise in new orders, leading to a small increase in hiring.

The PMI report suggests the economic picture is improving, reports Chris Williamson, chief business economist at S&P Global Market Intelligence. He explains:

“Early PMI survey data for April indicate that the UK economy’s recovery from recession last year continued to gain momentum.

Improved growth in the service sector offset a renewed downturn in manufacturing to propel overall business growth to the fastest for nearly a year, indicating that GDP is rising at a quarterly rate of 0.4% after a 0.3% gain in the first quarter.

We will find out next month whether the UK has officially escaped recession, when the GDP figures for January-March are released. The economy shrank slightly in the third and fourth quarters of 2023, which triggered a shallow technical recession.


Updated at 

There are encouraging economic signals from the eurozone this morning, where business activity in the euro area is growing at the fastest rate for nearly a year.

The latest survey of eurozone purchasing managers from S&P Global shows that Europe is pulling out of its recent downturn.

Germany returned to growth in April and France came close to stabilising, while growth was especially solid outside of the eurozone’s two largest members.

This pulled the HCOB Flash Eurozone Composite PMI Output Index up to an 11-month high of 51.4, up from March’s 50.3, a level that shows faster growth.

IFS: whoever is Chancellor after the election faces ‘difficult inheritance’

Today’s UK public finance figures (see opening post) shows the “difficult inheritance” that will face the Chancellor after the election, explains the Institute for Fiscal Studies:

New figures show the first estimate of government borrowing for the past financial year was £121 billion, £7 billion more than the official forecast.

But the forecast fall in borrowing over the next five years is predicated on tight spending plans and large tax rises.

[1/3] pic.twitter.com/ma5fbBUN9H

— Institute for Fiscal Studies (@TheIFS) April 23, 2024

Initial borrowing estimates are subsequently revised as better data becomes available.

Last year’s initial estimate was revised by £11bn and over the last eight years, the median revision to the borrowing outturn within a year was nearly one-tenth of the total amount.

[2/3] pic.twitter.com/OzswTmW1EB

— Institute for Fiscal Studies (@TheIFS) April 23, 2024

Even if borrowing falls substantially over the coming years as under official forecasts, this will barely be enough to stabilise debt as a share of national income, leaving a difficult inheritance for whoever is Chancellor after the election.

[3/3] pic.twitter.com/RfoU4qvkZb

— Institute for Fiscal Studies (@TheIFS) April 23, 2024

Source link

Leave a Reply

Back To Top