- FTSE 100 weaker, back below 7,000
- HSBC shares lower as bad debts rise
- Whitbread (LON:WTB) slips as it sees costs rising £60mln
10.50am: Truss on way to Buckingham Palace to tender resignation
Outgoing prime minister Liz Truss said It has been a huge honour to be PM in particular leading the nation in leading the mourning for the Queen.
In her final speech outside No 10 on Tuesday she said the government has acted “urgently and decisively’ on the side of families and businesses.
"In just a short period, this government has acted urgently and decisively on the side of hardworking families and businesses."
"We reversed the national insurance increase. We helped millions of households with their energy bills and help thousands of businesses avoid bankruptcy. We are taking back our energy independence so we are never again beholden to global market fluctuations or malign foreign powers."
She urged her successor, Rishi Sunak, to “be bold” as she laid down the gauntlet by suggesting he should continue cutting taxes and keep the planned rise in defence spending.
Truss showed no sign of contrition for the chaos that engulfed her 50-day premiership, instead quoting the Roman philosopher Seneca, who said: “It is not because things are difficult that we do not dare, it is because we do not dare that they are difficult.”
‘Be bold’: Liz Truss lays down gauntlet to Rishi Sunak in final speech as UK prime minister https://t.co/2UYFHyjmRF— Guardian politics (@GdnPolitics) October 25, 2022
10.40am: German business confidence improves in October
German business confidence improved in October but remained at low levels as Europe's largest economy heads into a tough winter.
A gauge of expectations released by the IFO institute rose to 75.6 from a revised 75.3 in September. Economists had predicted a further drop.
However, an index of current conditions slipped. Clemens Fuest, IFO fo president, said: "Companies were less satisfied with their current business. Their expectations improved, but they are still worried about the coming months. The German economy is facing a difficult winter."
???????? #GERMANY OCT. IFO BUSINESS CONFIDENCE INDEX 84.3; EST. 83.5 - BBG*GERMANY OCT. IFO CURRENT ASSESSMENT INDEX 94.1; EST. 92.5
*GERMANY OCT. IFO EXPECTATIONS INDEX 75.6; EST. 75.0
— Christophe Barraud???????? (@C_Barraud) October 25, 2022
9.53am: Supermarket budget ranges up 17% in last year - ONS
The cost of low-priced items like vegetable oil, pasta and tea have shot up over the past year as value ranges soar as much as their premium equivalents, according to the Office for National Statistics (ONS).
The ONS said the prices of supermarket budget ranges are up 17% in the year to September – slightly more than the 15% rise in the official price of food and a huge jump from 7% in the year to April.
Some budget range prices have risen far faster – with vegetable oil up 65% in a year, pasta up 60% and tea up 46% while prices fell for four of the 30 items – including minced beef (down 7%) and orange juice (down 9%).
Food prices are also affecting people’s #CostOfLiving – some lowest priced food items increased by more than 40% since Sept 2021 ????Our new highly experimental data tracks how the lowest prices of 30 grocery items have changed since April 2021 ????
➡️ https://t.co/PwjTYRcEQR https://t.co/0UMa7c8HnV
— Office for National Statistics (ONS) (@ONS) October 25, 2022
Between April and September, the three biggest rises in monetary terms were vegetable oil (up 80p a litre to £2.58), chips (up 27p to £1.37 for 1.5kg) and milk (up 25p to £1.52 for four pints).
The ONS has issued experimental figures covering inflation among supermarket budget ranges and has collated the prices of 30 low-cost items from supermarket websites.
"Crucially, these large rises in the cheapest available items are broadly in line with the average food price rises reported within the ONS's regular headline inflation measures," the ONS said.
However, Sir Ian Diamond, the National Statistician, said families who bought the lowest priced items were unable to cushion the impact of price rises by trading down.
He told the BBC's Radio 4 Today Programme: "There isn't further to go down, so they can be impacted quite a lot. Very, very few things are going down [in price] at all. The squeeze on people who buy the lowest cost things is pretty hard at the moment."
9.37am: Sterling advances and bond yields fall
The pound has moved higher this morning and UK gilts remained steady as investors wait for more details on economic and fiscal policy from new prime minister Rishi Sunak.
The pound rose 0.45% to $1.132 against the dollar holding most of its gains made since late last week when Liz Truss announced her resignation. Against the euro it was up 0.3pc at 87.30p.
Meanwhile, the yield on 10-year government bonds dipped 3 basis points to 3.7pc.
Mr Sunak will be sworn in as prime minister later today and is expected to keep Jeremy Hunt as chancellor.
9.03am: FTSE weaker as Sunak prepares to become PM
FTSE 100 made a weak start on Tuesday as investors digested a batch of corporate earnings and with Rishi Sunak set to meet King Charles III as he officially becomes UK prime minister.
At 9.00am London’s blue-chip index was down 30 points at 6,984 while the FTSE 250 rose 18 points to 17,355.
The incumbent PM, Liz Truss, will hold her last cabinet at 9.00am before officially tendering her resignation to the King.
Sunak will then take the reins and is set to appoint his cabinet today with Jeremy Hunt expected to retain his position as chancellor.
Results from HSBC Holdings PLC (LSE:LON:HSBA) and Whitbread PLC (LSE:WTB) failed to lift the mood despite both companies reporting better-than-expected profits.
HSBC slipped as increases in bad debt provisions and continued worries over the state of the Chinese property market overshadowed the above forecast profits.
The banking giant also named Georges Elhedery, a former head of its investment bank, as its new chief financial officer in a surprise move that leaves him in pole position to eventually succeed chief executive Noel Quinn.
Whitbread PLC (LSE:WTB), the owner of Premier Inn, also fell as it warned that inflationary pressures would result in costs rising £60mln in the rest of the year eating into margins.
Genuit Group PLC (LSE:GEN) was another weak feature, down 5.4%, after it warned that profit for the year would be at the lower end of analyst expectations as market turmoil hit trading at the end of the third quarter.
8.38am: Whitbread lower as sees costs rising £60mln
Shares in Whitbread PLC (LSE:WTB) slipped 2% after the owner of Premier Inn warned of a £60mln increase in costs this year fuelled by soaring inflation.
The company said that a combination of rising labour costs, utility bills such as energy and food and beverage costs – as well as increased investment in IT and marketing – will see total costs increase £60mln for the year to March.
The news came as the group posted better than expected pre-tax profits of £307.4mln for the six months to 1 September compared to a loss of £19mln in the same period last year and 40% ahead of the same period in 2019 (pre-pandemic).
Whitbread, which runs 800 Premier Inn hotels, also said that it was increasing its target of number of rooms from 110,000 to 125,000 to take advantage of independent accommodation operators going bust in the UK and Ireland.
Total revenues of £1.35bn were 25% ahead of pre-pandemic levels.
8.15am: FTSE makes a subdued start
FTSE 100 made a subdued start to trading on Tuesday despite strong gains in the US overnight although Rishi Sunak’s appointment as prime minister gave some stability to the bond markets, for now at least.
At 8.15am the lead index was down 17 points at 6,997.
CMC Markets analyst Michael Hewson said: "Markets are hoping that the coronation of Rishi Sunak as the next UK prime minister will help draw a line under the events of recent days, as the new PM elect warned his party that they needed to unite or die.”
“This may prove to be a tall order, given the Tories propensity for fratricide over the years.”
Sunak will unveil his new cabinet today and financial markets will be hoping that the chancellor Jeremy Hunt retains his position so that the fiscal statement panned for 31 October will go ahead.
Markets remained calm at the prospect of the new PM with the pound up 0.14% against the US dollar at $1.129.
Shares in HSBC PLC fell 4.8% despite better-than-expected profits as it set aside a further $1.1 billion for bad debts and with nervousness in the region following the recent political developments in China.
Richard Hunter, Head of Markets at interactive investor said: “The figures are markedly skewed by two large provisions which entirely change the quarterly result.”
“Pending the sale of its French banking operations, HSBC has set aside a provision of $2.4 billion, while due to wider economic uncertainty there is a further $1.1 billion set aside for potential bad debts, bringing the cumulative figure this year to $2.2 billion.”
7.48am: FCA to probe tech companies over moves into financial services
The Financial Conduct Authority is to probe how to regulate big tech companies such as Apple (NASDAQ:AAPL), Google and Amazon (NASDAQ:AMZN) over fears they could harm competition in Britain’s financial services sector.
The City watchdog suggested that big tech companies could provide innovations in financial services and drive down costs, but also expressed concerns that they could build dominant positions leading to the “potential exploitation of market power”, according to analysis published on Tuesday.
US technology companies are increasingly considering global financial services as they look for ways to use their huge profits, market power and troves of data to disrupt another industry.
Alphabet (NASDAQ:GOOGL) (the owner of Google), the retailer Amazon, Meta (the owner of Facebook (NASDAQ:META)) and the iPhone-maker Apple all already offer some financial services in the UK, the FCA said.
Only last week Amazon launched an online insurance store in the UK.
The FCA analysis said: “Big tech firms’ entry in financial services could benefit many consumers.”
However, it added that those benefits “could be eroded if these firms can create and exploit entrenched market power to harm healthy competition and worsen consumer outcomes.”
7.44am: Sterling falls again, but signs of stability emerge
There is a glimmer of hope on the horizon that the UK markets might stabilise themselves now that Rishi Sunak has taken the mantle as the next UK Prime Minister.
Following his ascension, 10-year gilt yields fell sharply to 3.74%, though the pound also fell in tandem, albeit only slightly.
Gilts’ wild ride: Volatility rarely seen on the bond market – Source: Financial Times
The GBP/USD pair is changing hands at US$1.128 after having 25 pips knocked off it in this morning’s Asia trading session, while EUR/GBP remains more or less flat at 87.5p.
Sunak faces a steep hill: The pound against the US dollar – Source: capital.com
The EUR/USD pair is changing hands at US$0.987, and the moving averages point to some potential further upside, though the latest economic data shows contracting economic activity across the continent.
Parity between the euro and US dollar is likely to face still bearish resistance.
The Japanese yen edged higher against the US dollar, with USD/JPY falling below 150, though the pair remains at a precarious 148.8.
The Japanese government refuses to comment, but a suspected US$36bn intervention was likely responsible for the yen’s incremental recovery… but there’s doubt as to whether it’s enough to resuscitate the struggling yen to any significant degree.
The Australian dollar is currently buying US$0.63.
7.16am: HSBC lower in Hong Kong as profits fall
HSBC PLC shares fell 2.6% in Hong Kong, after reporting a decline in profit and revenue in the third quarter.
In the three months to September 30, HSBC reported pre-tax profit of $3.15 billion, down 42% from $5.40 billion a year before.
Chief Executive Noel Quinn said "We maintained our strong momentum in the third quarter and delivered a good set of results.”
“Our strategy produced good organic growth in all three global businesses, and net interest income increased on the back of rising interest rates.”
“We retained a tight grip on costs, despite inflationary pressures, and remain on track to achieve our cost targets for 2022 and 2023."
Net interest income improved to $8.58 billion from $6.61 billion, but net fee income fell to $2.78 billion from $3.32 billion.
Net insurance premium income slipped to $2.66 billion from $2.72 billion and revenue decreased by 3.2% to $11.62 billion from $12.01 billion.
The banking giant also named Georges Elhedery, a former head of its investment bank, as its new chief financial officer in a surprise move that leaves him in pole position to eventually succeed chief executive Noel Quinn.
7.00am: FTSE 100 seen slightly higher
The FTSE 100 is set to open slightly higher on Tuesday following further strong gains in the US and as Rishi Sunak prepares to be officially appointed as prime minister.
Spread betting companies are calling London’s blue chip index up by around 11 points.
US markets made further strong advances on Monday, extending last week’s gains, shrugging aside weak economic data which suggested that the Fed’s aggressive rate raising strategy aimed at tackling soaring inflation may be slowing the economy too.
At the close the DJIA was up 418 points, or 1.34%, to 31,501, the S&P 500 rose 45 points, or 1.2%, to 3,798 and the Nasdaq Composite jumped 93 points, or 0.86%, to 10,953.
HSBC Holdings PLC (LSE:HSBA) was 2.6% lower in Hong Kong, after the China-focused bank reported a decline in profit and revenue in the third quarter.
In the three months to September 30, HSBC reported pre-tax profit of $3.15 billion, down 42% from $5.40 billion a year before.
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