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Key data as FTSE opens lower
The FTSE 100 fell sharply this morning as today’s slower-than-expected decline in inflation – and a shock rise in core inflation to the highest level in 30 years – means the Bank of England is now expected to raise interest rates at least twice more.
Click through the graphs to see how markets have reacted this morning.
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FTSE 100-listed builders under pressure, M&S shares jump 8%
Shares in housebuilders have fallen sharply after today’s stubbornly high inflation print raised expectations of more demand-sapping interest rate hikes.
Taylor Wimpey and Persimmon shares fell by 4%, with wider stock market sentiment not helped by the impact of last night’s weak session on Wall Street.
The FTSE 100 index snapped its recent run of calm trading by falling 1.2% or 94.30 points to 7668.65, with the FTSE 250 index 223.95 points lower at 18,984.36.
Other blue-chip fallers included insurer Aviva, which lost 3% or 14.3p to 409.5p on the back of its first quarter trading update, and Burberry with a fall of 69p to 2189p.
On a brighter note, shares in renewable energy giant SSE rose 30p to 1899.5p after its annual results. And the return of the Marks & Spencer dividend helped the retailer’s shares jump 8% or 12.85p to 176.45p in the FTSE 250 index.
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Food inflation gets even worse
Food inflation has climbed even fast in a number of areas, ONS data shows.
The rate of inflation across fruit, vegetables, soft drinks, beer, wine and spirits has all gone up.
Scroll through the chart below to view food inflation data.
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Openreach pricing plan cleared by Ofcom
New pricing arrangements proposed by BT’s regulated Openreach arm for its full-fibre services have been given the all-clear by Ofcom.
The Equinox 2 offer involved giving lower prices to retail providers – such as BT, Sky, TalkTalk and Vodafone – if they agree to use mainly Openreach’s full-fibre products for new orders instead of its legacy copper products.
The proposals mean alternative network operators are now likely to face stronger competition from Openreach. However, the regulator concluded that the conditional terms of the offer did not create a barrier to the use of altnets.
Ofcom said: “Our overriding objective is to bring better broadband to people across the UK, by promoting competitive investment in high-speed networks and making sure there’s a level playing field for all companies.
“With this in mind, and based on the evidence available to us, we don’t consider Openreach’s new pricing discounts to be anti-competitive.”
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Severn Trent ups dividend and pledges to invest up to £1 billion in current financial year
Severn Trent, the water utility, has pledged to increase its capital investment in the current financial year to as much as £1 billion as it sticks with plans to increase its payout to shareholders.
It said its final dividend for last year would go up by 9.4% to 116.84p, meaning investors will get around £293 million in total.
With water companies at the centre of a public outcry over the amount of sewage being discharged into rivers and the amount of leakage from the system, Severn Trent said it invested £737 million last year, up by “over £100 million”. It increased its guidance on next year’s spending to a range between £850 million and £1 billion.
Profit before tax for the financial year to the end of March reached £508.8 million, up from £506.2 million.
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Bad weather means like-for-like sales dip at B&Q owner Kingfisher
“Unusually poor spring weather” hit sales at B&Q owner Kingfisher, as like-for-like sales fell by 3.3%.
The group, which also owns Screwfix, made sales of £3.27 billion in the three months to the end of March, including £1.59 billion from the UK and Ireland.
But both those figures were down on a like-for-like basis, which Kingfisher CEO Thierry Garnier blamed on the weather.
“The unusually poor spring weather in the UK and France affected our seasonal sales in the quarter, impacting demand for items such as garden and outdoor products,” he said.
Garnier expects to see better sales as weather improves, which allowed Kingfisher – among London’s most shorted stocks – to maintain its guidance of £634 million in profit for the year.
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SSE lifts net zero spending target
SSE’s plan for spending on net zero projects is to increase by over 40% after the renewable energy giant today revealed annual results showing “profits with a purpose”.
It now intends to set aside £18 billion for its five-year investment strategy up to 2027, with spending across regulated electricity networks, renewable electricity generation and low-carbon thermal generation.
Higher energy prices helped annual profits to rise 89% to £2.18 billion in the year to 31 March, but chief executive Alistair Phillips-Davies said this was below the record £2.8 billion of capital expenditure and investment.
He added: “The results that we have reported today are profits with a purpose. We are creating value for all of our stakeholders and our investments exceed our earnings.”
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Could rates hit 5.5%?
George Lagarias, chief economist at Mazars, warns that there could be more than two more rate rises on the cards. Three hikes would take interest rates to 5.5%.
“Overall, headline inflation remains uncomfortably high and, what’s worse, increasingly dynamic,” he said. “This could lead to more than the two rate hikes the market, perhaps optimistically, expects.
“Until the Bank of England sees evidence of the vicious price-wage cycle breaking and demand conditions sufficiently tame, we should expect increasingly tighter credit conditions and pressures on consumers and businesses.”
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Watchdog finds 5 major banks colluded in Bloomberg chatrooms over government bonds
The Competition and Markets Authority has found that five major banks in London “unlawfully” exchanged information over UK government debt sales in Bloomberg chatrooms.
The banks –Citi, Deutsche Bank, HSBC, Morgan Stanley and Royal Bank of Canada – shared “competitively sensitive information” according to the watchdog.
It said this morning:
“The information exchanges took place in one-to-one Bloomberg chatrooms between a small number of traders who worked at the banks and related to the buying and selling of UK government bonds – specifically, gilts and gilt asset swaps. This included details on pricing and other aspects of their trading strategies.”
The CMA’s said its findings are “provisional”, adding: “Deutsche Bank and Citi have admitted to participating in the alleged one-to-one conversations that apply to them. HSBC, Morgan Stanley and Royal Bank of Canada have not admitted any wrongdoing. At this stage, no assumption should be made that any of the banks have broken the law.”
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Marks & Spencer to resume dividend as sales beat expectations
Marks & Spencer has revealed bumper consumer demand even as customer finances are squeezed and outlined plans to resume dividend payments, in the first set of annual results delivered by new chief executive Stuart Machin.
For the 12 months to April 1 sales were ahead of the 7.7% and 10.5% growth analysts had pencilled in for food and clothing and home respectively. They came in at £3.7 billion, 11.5% higher, and £7.2 billion, up 8.7%.
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