- FTSE 100 sheds 114 points
- Fed dashes rate cut hopes
- Water firms to hike bills by 36%
11.00am: Bank of England set to maintain interest rate
The Bank of England meets on Thursday, with markets widely expecting policy makers to hold its key interest rate at 4.75%.
Monetary Policy Committee members reduced the bank rate by 25 basis points in November, marking a second cut after August saw interest drop from a peak of 5.25%.
Though data has painted a picture of stagnating economic growth recently, the central bank is expected to be bound by figures pointing to sticky inflation and wage growth.
Wages, including bonuses, had grown by 5.2% over the year to November, Office for National Statistics figures showed on Wednesday.
Inflation ticked up by 2.6% in the meantime, against 2.3% over the year to October, with the core rate, which excludes energy and food prices, at 3.5%.
Moderating wage growth and stabilising inflation ahead was set to pave the way for further cuts to interest in 2025 though, according to the National Institute of Economic and Social Research.
10.39am: Factory output slumps at fastest pace since pandemic
Output across Britain’s manufacturing sector declined at the fastest pace since mid-2020 over the three months to December, the Confederation of British Industry (CBI) has said.
Its latest Industrial Trends Survey showed output volumes down by a weighted balance of minus 25%, against minus 12% in the quarter to November.
Output was lower across 15 of the 17 sub-sectors across the industry, the CBI noted, with order books dropping “markedly” against November, from -19% to -40%.
“Manufacturers are facing a perfect storm of weakening external demand on the one hand, amid political instability in some key European markets and uncertainty over US trade policy,” CBI economist Ben Jones commented.
“And on the other hand, domestic business confidence has collapsed in the wake of the Budget, which has increased costs and led to widespread reports of project cancellations and falling orders.”
Output was also expected to face another “steep” drop over the coming three months, the CBI added.
10.02am: Pound regains against dollar before BoE rate call
Sterling racked up a gain against the dollar as markets mulled the Federal Reserve’s Wednesday update before the Bank of England’s meeting on Thursday.
The pound was up 0.71% versus the greenback at US$1.2664 on Thursday morning.
It had slumped against the dollar on Wednesday after the Fed pointed to a slower path for rate cuts in 2025.
Though policymakers had opted to cut interest by 25 basis points, expectations were laid out for around two further reductions in 2025, essentially halving previous anticipations.
Attention on Thursday turned to the Bank of England’s latest rate call, which is widely expected to see the bank rate maintained at 4.75%.
“The central bank has been between a rock and a hard place for some time now, given stubborn inflationary pressures and growth which has been lukewarm to non-existent over recent times,” interactive investor analyst Richard Hunter commented.
“Despite any need for stimulus to the economy, inflationary pressures - such as strong wage growth which is likely to be exacerbated by the measures announced in the Budget - are likely to win the day, leading to a widely expected no-change decision as the bank errs on the side of caution for the time being.”
9.44am: MPs to probe water sector as bills hiked
Ministers on Thursday unveiled a new inquiry to the water sector, coinciding with news from Ofwat that firms would be allowed to up bills by 36% over the next five years.
The Environment, Food and Rural Affairs said the probe would “scrutinise the breadth of issues confronting the water sector”.
Water companies have faced strong criticism over “their environmental, financial and customer satisfaction performance,” it said, alongside dividends and bonuses for bosses.
The long-term review would cover the sector’s financial stability, support for customers and the likes of sewage spills, emergency measures and outages, the committee added.
“Over the past few years we have seen a strong backlash to water companies’ failings,” chair Alistair Carmichael commented.
“Companies have breached environmental rules over sewage discharges while paying out huge dividends to shareholders, and big bonuses to executives, even as they have taken on ever more debt.
“In this inquiry our committee will investigate the deep-rooted problems underlying the industry.
“We need a water system that is fit for the future. The government and the regulator Ofwat urgently need to restore public confidence in the sector.”
9.31am: Retail sentiment looking better for Christmas season - Deutsche
Deutsche Bank (ETR:DBKGn) analysts have pointed to improving sentiment across Britain's retail sector in the run-up to the all-important Christmas shopping period.
Commentary from companies had been hampered in October as consumer confidence dropped and the Budget saw employer national insurance hiked, Deutsche said.
“We believe it picked up in November and has likely seen a further improvement in December,” analysts added, however.
“There are some consumer themes that appear to be coming through over the period.”
Consumers looked to be buying into events to a greater extent, Detusche highlighted, while there appeared more willingness from consumers to pay premium prices.
Retailers were also “maintaining discipline” on markdowns as online channels appeared to increasingly come into favour.
9.05am: Serco surges as trading improves through second half
Serco Group PLC (LSE:LON:SRP) marked a bright spot in London on Thursday as it gained over 6% after unveiling stronger trading momentum for the second half.
Full-year revenue will amount to £4.8 billion, the outsourcing firm said on Thursday, marking a 3% decline for the year.
Underlying operating profit will be up 9% year-on-year to £270 million, supported by a 50-basis-point increase in margins to 5.60%, it added... Read more
Shares jumped 6.1% to 147.10p on Thursday.
8.58am: Sea of red for London stocks
Stocks across the board in London followed Wall Street in taking a beating in the wake of Wednesday’s update from the Federal Reserve.
Interest was indeed cut by 25 basis points, though slashed projections for reductions ahead sent US stocks tumbling.
London markets followed suit in dropping on Thursday morning in response to the announcement.
The FTSE 100 was down almost a full per cent, while the FTSE 250 and FTSE 250 shed 1.2% and 1.0% respectively.
London’s junior market also headed lower, with the AIM 100 off 0.9% and the AIM All-Share index down 0.8%.
“Aside from the decision itself, just about every other aspect leant in a more hawkish direction than expected,” Deutsche Bank analysts noted.
“Our US economists see yesterday’s meeting as reinforcing their baseline view that a skip at the January meeting will likely turn into an extended pause in 2025.”
Severn Trent PLC (LSE:LON:SVT) and United Utilities Group PLC (OTC:UUGRY) (LSE:UU.) remained among just six risers on the FTSE 100 on Thursday.
Both had largely been granted price hikes for the coming five years in line with requests to Ofwat... Read more
8.45am: BA cuts further flights on Rolls-Royce (LON:RR) delays
Delays at Rolls-Royce Holdings PLC (LSE:RR.) have seen British Airways cut flights from Heathrow to Abu Dhabi.
International Consolidated Airlines Group (LON:ICAG) SA (LSE:IAG)-owned BA announced the route from Britain’s busiest airport would be suspended from March to October next year.
Other flights had previously been axed as a result of the delays, which center around Rolls-Royce’s Trent (NS:TREN) 1000 engine for BA’s Boeing (NYSE:BA) 787 Dreamliner aircraft.
“We’re disappointed that we’ve had to make further changes to our schedule as we continue to experience delays to the delivery of engines and parts from Rolls-Royce,” a BA spokesperson said.
“We’ve taken this action because we do not believe the issue will be solved quickly, and we want to offer our customers the certainty they deserve for their travel plans”... Read more
Rolls-Royce shares dropped 1.7% on Thursday, while IAG slipped 0.9%.
8.31am: FTSE 100 drop follows Wall Street hammering
The FTSE 100’s drop on Thursday followed a hammering of US stocks in the wake of Wednesday’s Federal Reserve interest rate cut.
Though policymakers cut interest by 25 basis points, commentary hinting towards fewer reductions due to stubborn inflation next year hampered sentiment.
The Dow Jones shed 2.3%, or 1,123 points, as a result, taking the 40-company strong index to a tenth consecutive daily drop.
The Nasdaq dropped 3.6% in the meantime, as the S&P 500 tumbled by just under 3.0%.
“The verdict was clear: the Fed must slow down,” Swissquote Bank analyst Ipek Ozkardeskaya commented in the wake of the decision.
Just two cuts in 2025 had been hinted at by the Fed, Ozkardeskaya pointed out, effectively halving expectations for reductions ahead.
“Investors were blindsided,” interactive investor Richard Hunter added, “the projections completely wrongfooted the market”.
Back in London, the FTSE 100 was down 87 points at 8,111 on Thursday.
8.19am: Full list of confirmed water bill hikes
8.13am: FTSE 100 sinks early on
London’s blue chips tumbled as trading got underway on Thursday, dropping 99 points to 8,099.
Severn Trent PLC (LSE:SVT) and United Utilities Group PLC (LSE:LON:UU.) were among the early risers, having been granted bill increases largely in line with what they requested for the coming years.
Each will be allowed to hike consumer bills by 47% and 32% respectively over the coming five years, Ofwat’s final determination showed on Thursday.
Elsewhere, Scottish Mortgage (LON:SMT) Investment Trust headed the early fallers, down 3.2%, followed by the likes of Barclays PLC (NYSE:BCS) (LSE:BARC) and DS Smith PLC (LSE:LON:SMDS).
8.04am: FCA extends motor finance complaint response deadline
Britain’s Financial Conduct Authority has increased the time companies have to address complaints over historic motor finance deals which did not involve non-discretionary commission payments.
Firmed had until 4 December 2025 to respond to such complaints, which the FCA noted was in line with a deadline for those involving non-discretionary commission agreements.
An October ruling saw the Court of Appeal decide such hidden payments between lenders and car finance sellers were illegal.
This had opened the door for motor finance firms to be ordered to pay billions extra in compensation, with an FCA investigation having solely focussed on non-discretionary arrangements.
“Firms who provide motor finance are likely to receive a high volume of complaints in response to the judgment,” the financial watchdog said in a statement.
Britain’s Supreme Court has since agreed to hear appeals against the October ruling, put forward by the likes of Close Brothers (F:CBRO) Group PLC (LSE:CBG), but having a knock on effect for lenders such as Lloyds Banking Group PLC (LSE:LON:LLOY).
“We have extended the time firms have to handle complaints to help prevent disorderly, inconsistent and inefficient outcomes for consumers and firms,” the FCA added.
7.41am: Thames Water bills to go up by 35%
Thames Water customers will face a 35% increase in bills over the next five years, Ofwat’s final determination showed on Thursday.
The crisis-struck water supplier had lobbied Ofwat for a 53% increase in bills as it looked to stave off renationalisation due to hefty debt levels.
Ofwat’s confirmed increase will see bills average £588 annually, against £436 previously.
Among listed companies, Severn Trent PLC (LSE:SVT) was granted a 47% increase to £583 annually, against the 46% rise it had asked for.
Pennon Group PLC (LSE:LON:PNN, OTC:PEGRY)’s South West water will be allowed to hike bills by 23% to £610, in line with the rise requested by the supplier.
United Utilities Group PLC (LSE:UU.) was also granted the 32% rise it had asked for, which will take bills for the firm’s customers to £588.
7.22am: Water bills to be hiked by 36% a year
Regulator Ofwat has announced that water bills will rise by an average of 36% annually over the coming five years.
In its final determination for the sector, the regulator confirmed on Thursday that prices would be hiked by the equivalent of £31 a year.
Water firms had lobbied for an average 40% increase to bills, with the increase above the 21% average hike initially proposed by Ofwat earlier this year.
“We recognise it is a difficult time for many, and we are acutely aware of the impact that bill increases will have for some customers,” Ofwat chief executive David Black said.
“That is why it is vital that companies are stepping up their support for customers who struggle to pay.”
“We have robustly examined all funding requests to make sure they provide value for money and deliver real improvements while ensuring the sector can attract the levels of investment it needs to meet environmental requirements.”
7.09am: Stocks set to drop
Futures had the FTSE 100 falling by eight points to 8,414 ahead of Thursday’s trading, following a slight three-point gain seen throughout Wednesday.
Overnight, Asian markets largely fell, with China’s Shenzhen down almost 2% and leading the drop, after steep declines on Wall Street in the wake of the Fed’s latest move on interest rates.
Though policymakers had opted to cut interest by a further 25 basis points, markets were spooked by commentary around a slower pace of reductions over the coming months.
Back in London, attention early on was set to be on Ofwat and its price control decision for the water sector for the coming five years.
5.00am: Thursday's schedule
Serco is among those set to update on Thursday before the Bank of England's latest decision on interest rates, while water firms will be braced for a key update from Ofwat.
Water companies will be in focus as Ofwat reveals price controls for the coming years... Read more
Serco will still be reeling from its recent contract loss and October's Budget hit... Read more
Announcements due:
Finals: Serco Group PLC (LSE:SRP)
Trading update: Time Finance PLC
Interims: FIH Group Plc
US earnings: Accenture (NYSE:ACN) PLC, FedEx Corporation (NYSE:FDX), Nike Inc (NYSE:NKE)
Economic news: BoE Interest Rate Decision (UK), GDP (US), Current Account (EU), Continuing Claims (US), Initial Jobless Claims (US), Personal Consumption Expenditures (US), Existing Home Sales (US)