- FTSE 100 pushes higher, up 18 points
- US GDP rises 2.6% in the third quarter, above expectations
- ECB lifts interest rates by 75 basis points
3.17pm: Octopus closing in on Bulb takeover - Bloomberg
Octopus is said to be closing in on a takeover of collapsed energy supplier Bulb and a deal could be announced as soon as this week, according to Bloomberg.
The Government is set to help close a transaction for Bulb, according to the report.
Octopus will become one of the UK's largest energy suppliers after adding Bulb's roughly 1.6m household customers.
Bulb collapsed last November when wholesale prices surged above the regulator's price cap, forcing it to sell energy at a loss.
The Government stepped in and appointed Teneo to run the company, with the bailout expected to cost the taxpayer around £4bn.
2.43pm: FTSE 100 little moved by strong start in the US
FTSE 100 remained in positive territory but was little moved by the better than expected US GDP numbers from across the pond or the decision by the ECB to increase interest rates by 75bp.
US markets reacted positively to the GDP data with the Dow Jones Industrial Average pushing ahead by 352 points at the open, or 1.1%.
The S&P 500 added 0.4% while the Nasdaq increased 0.2% despite a batch of disappointing results from a number of tech heavyweights.
US third quarter GDP rose 2.6% ahead of expectations for a 2.4% increase allaying fears of a recession for now.
In London, at 2.40pm the FTSE 100 was up 14 points at 7,070 while the FTSE 250 slipped into negative territory, down 24 points at 18,082.
Shell (LON:RDSa), BP PLC (LON:BP) and Harbour Energy PLC continued to lead the way in the lead index as Shell announced a $4bn buy-back after announcing bumper profits.
1.55pm: Reaction to ECB rate move/US GDP figures
Reaction to both the ECB rate decision and higher than expected US GDP numbers is coming in:
On the US GDP figures Dan Boardman-Weston, CEO and chief investment officer at BRI Wealth Management, said: “The bounce back from the quarter two contraction in the economy could keep inflation and interest rates staying higher for longer.”
“The data continues to point to further rate increases for the coming months and could make the expected slowdown in rate rises by the Fed less likely in the short term.”
On the ECB rate call Neil Wilson at Markets.com said the increase was in line with consensus but pointed to a “less hawkish tone overall, indicative of fewer rate hikes required to tackle inflation.”
He said “Traders have pared bets, with key rate now seen peaking below 2.75% next year from 3% before.”
Anna Stupnytska, Global Economist, Fidelity International, highlighted a change to the tone of the statement with a dropping of the reference to rate hikes happening over the ‘next several meetings’, and declaring that the governing council had made ‘substantial progress’ towards withdrawing policy accommodation.
She thought today's move is likely to be the last 'jumbo' hike in this cycle, followed by smaller rate increases and an earlier pause, or indeed abandonment of tightening, relative to expectations.
1.35pm: US GDP rises 2.6% in quarter three, above forecast
A batch of US economic data has just been released with the headline figure a return to growth in US GDP in quarter three.:
US GDP rose 2.6% in the third quarter against expectations for a 2.4% rise.
The U.S. economy grew at a 2.6% annualized rate in Q3. https://t.co/qHGf5n47pp— BEA News (@BEA_News) October 27, 2022
The increase in the third quarter primarily reflected increases in exports and consumer spending that were partly offset by a decrease in housing investment according to the US. Bureau of Economic Analysis.
US durable goods orders for September were up 0.4% below the 0.6% expected and initial jobless claims were broadly in line with expectations at 217,000 (220,000 estimate).
1.17pm: ECB increases interest rates by 75bp as expected
The European Central Bank has increased interest rates by 75 basis points as expected.
We raised interest rates by 0.75 percentage points.See our latest monetary policy decisions https://t.co/cAhkpSreAB pic.twitter.com/6om7ujR716
— European Central Bank (@ecb) October 27, 2022
In a statement the ECB said "The Governing Council took today’s decision, and expects to raise interest rates further, to ensure the timely return of inflation to its 2% medium-term inflation target."
"The Governing Council will base the future policy rate path on the evolving outlook for inflation and the economy, following its meeting-by-meeting approach."
"Inflation remains far too high and will stay above the target for an extended period."
"The Governing Council’s monetary policy is aimed at reducing support for demand and guarding against the risk of a persistent upward shift in inflation expectations" it said.
12.45pm: IEA expects global emissions to peak in 2025
The International Energy Agency (IEA) has said global carbon emissions from energy will peak in 2025 thanks to massively increased government spending on clean fuels in response to Russia’s invasion of Ukraine.
In its annual report on global energy, the IEA said that government spending on clean energy in response to the crisis would mark a “historic turning point” in the transition away from fossil fuels.
World Energy Outlook 2022 is out now! ????#WEO22 shows that the global energy crisis can be a historic turning point towards a cleaner & more secure future.Explore the key findings ⬇️
— International Energy Agency (@IEA) October 27, 2022
The invasion of Ukraine has prompted an energy crisis around the world, with global gas prices initially surging.
But Fatih Birol, the IEA’s executive director said the energy crisis caused by Russia’s invasion “is in fact going to accelerate the clean energy transition”.
The IEA said planned investments in green energy in response to the crisis meant that – for the first time – government policies would lead to demand for polluting fossil fuels peaking this decade.
The agency cited notable contributions from the US Inflation Reduction Act, the EU’s emissions reduction package, and actions by Japan, South Korea, China and India.
12.15pm: EY predicts slump in mortgage lending
UK mortgage lending is headed for its biggest fall in more than a decade next year as the sharp increases in interest rates and the cost-of-living squeeze takes household budgets to breaking point.
According to a report by EY, total loans for house purchases may total just £11bn next year, a fraction of the £63bn expected for 2022.
That would mark 0.7% growth in lending – the lowest since 2011 and down from a healthy 4% increase expected this year.
Anna Anthony at EY said: “While interest rates are still fairly low by historic standards, they are the highest they’ve been in a decade and are set to rise further.”
“This will put further pressure on already-strained finances and will have a knock-on effect on demand for most forms of bank lending.”
11.40am: FTSE 100 holds small gains, mixed restart seen in the US
FTSE 100 held onto its small gains approaching midday boosted by rising oil stocks following Shell’s third quarter results which included plans for a $4bn share buy-back and a 15% hike to the fourth quarter dividend.
At 11.40am the lead index was up 15 points at 7,071 while the FTSE 250 rose 39 points to 18,145.
Looking across the pond and US stocks were expected to open mixed on Thursday, with wider gains dented by falls in tech stocks as the unfolding earnings season reveals an uncertain outlook for big tech companies.
Futures for the Dow Jones Industrial Average were 0.3% higher in pre-market trading, while those for the S&P 500 were flat, and contracts for the Nasdaq-100 shed 0.5%.
Apple and Amazon are due to release quarterly results today and investors are worried that they might mirror some of the concerns, including dwindling advertising revenue, flagged in recent earnings from Facebook's owner Meta and Alphabet which owns YouTube and the popular search engine Google.
“Earnings news proved to be something of a drag in market sentiment yesterday, with major Wall Street indices losing pace. The Dow finished barely ahead, whilst some big misses amongst tech stocks left the NASDAQ more than 200 points lower at the close,” noted James Hughes chief market analyst at scopemarkets.com.
“Arguably the slightly better than expected home sales data (on Wednesday) also gives the Fed a little more headroom, but attention now will be on the Q3 GDP data," he added.
The GDP data is expected to show a rebound into positive territory after two successive quarters of contraction and would be seen as positive for the policy hawks on the Federal Reserve and potentially pour more cold water on stocks, Hughes noted.
11.08am: ECB expected to increase rates by 75bp
Away from equities and markets are looking ahead to The European Central Bank’s (ECB) interest rate decision due later today.
Analysts at Radobank expect the deposit rate to be increased by 75bp in line with market expectations and forecasts further hikes of 75bp in December, 50bp in February and 25bp in March taking the deposit rate to 3.0%.
Radobank also noted the market is expecting an alteration will be announced to TLTRO terms/ reserve remuneration and whilst the investment bank expects some changes it expects the ECB to do so in such a way that minimises market impact.
Analyst at the bank do not expect any tangible plan to be announced with regard to quantatative tightening.
10.32am: Shell (LON:RDSa) boss backs windfall tax
Ben van Beurden, chief executive of Shell, has once again thrown his weight behind the need for windfall taxes against energy firms.
The Telegraph quoted him as saying: "The reality is, what we are seeing today, is that many many people in society, particularly of course the most vulnerable, are suffering very badly as a result of it [high prices]."
"I think it is only sensible, it’s a societal reality, that of course governments intervene and alleviate the pressure on those who need that alleviation most."
"And I think therefore [it’s] also a societal point we have to accept that governments will raise taxes for that."
"Therefore I think we should be prepared and accept that our industry will be looked at for raising taxes in order to fund the transfers to those who need it most in these very difficult times."
10.00am: Credit Suisse (SIX:CSGN) sells stake to Saudi National Bank as part SF4bn fund raising
Over in Europe and Credit Suisse has raised SF1.5bn (£1.3bn) from the Saudi National Bank through shares sales, as it seeks to restructure its ailing business by hiving off its investment bank and refocusing its efforts on wealth management.
The ailing Swiss lender announced the sale today as it said it was seeking to raise SF4bn of capital as part of “a radical strategy” to create “a stronger, more resilient and more efficient bank” focused on client needs.
Credit Suisse also revealed it would sell its securitised products unit to US investment groups Pimco and Apollo, and outlined plans to spin off its capital markets and advisory business over the next three years under a rejuvenated CS First Boston brand.
The Zurich-based bank will cut SF2.5bn of costs, representing 15pc of its total cost base, by 2025.
Ulrich Körner, chief executive officer of Credit Suisse, said: “We are radically restructuring the investment bank to help create a new bank that is simpler, more stable and with a more focused business model built around client needs.”
9.30am: Shell's bumper profits prompt renewed calls for a windfall tax
Shell PLC’s bumper profits and plans for a $4bn share buy-back has prompted mixed responses including renewed calls for a windfall tax.
Michael Hewson, chief market analyst at CMC Markets UK said: “While this move is likely to please shareholders it is likely to bring down the red mist elsewhere when it comes to what Shell is doing with its excess cash."
"$18.5bn in share buybacks so far year to date and a 15% rise in dividends indicates where management priorities lie, however as an exercise in PR is likely to invite a firestorm of criticism from the usual suspects, even as Shell’s effective tax rate on UK profits sits at 65%.”
As Hewson suggested criticism was not slow in coming. The Labour Party renewed its calls for a “proper windfall tax” on energy companies.
Ed Miliband, Labour’s shadow climate change and net zero secretary, said: “As millions of families struggle with their energy bills, the fact that Shell recorded the second highest quarterly profits in the company’s history is further proof that we need a proper windfall tax to make the energy companies pay their fair share.”
Greenpeace also called on the government to impose a “proper tax” on energy firms’ profits and to use the money to help struggling households, for example by insulating homes.
But the City was unfazed and shares in the oil giant remain at the top of the FTSE 100 risers, up 3.74%.
9.00am: FTSE 100 opens higher boosted by oil majors
FTSE 100 made a strong start, on a busy day of corporate results, boosted by gains in oil major Shell PLC (LSE:SHEL, NYSE:SHEL) which promised an increase to its fourth quarter dividend as it unveiled third quarter figures this morning.
The oil giant also announced a further $4bn share buy back programme which helped push the company to the top of the FTSE 100 risers and pulled BP PLC (LSE:LON:BP.) higher as well, up 2.2%.
By 8.50am London’s blue-chip index had advanced by 15 points to 7,071 while the FTSE 250 slipped 48 points to 18,058.
Aside from the weighty number of company results, investors will have one eye on the ECB’s interest rate decision later today and US GDP figures due for release this afternoon.
Victoria Scholar, Head of Investment, interactive investor said: “Focus turns to the European Central Bank’s rate decision at lunchtime which is expected to announce the second 75 basis point hike in a row as it looks to get to grips with inflation in the euro zone.”
“In the US, investors will be looking for further signs of an economic slowdown stateside with the release of its latest GDP growth figures.”
Lloyds Banking Group PLC (LON:LLOY) remained a weak feature, down 1.8%, as it reported a sharp increase in bad debt provisions which knocked its profits with pre-tax profits down 26% to £1.5bn.
But John Moore, senior investment manager at RBC Brewin Dolphin, said: “Lloyds may be putting aside more money for potential bad loans against the current economic backdrop, but that overshadows a strong set of results from the bank.”
“Although it is the most exposed of the major UK banks to the domestic economy, Lloyds is benefitting from an improving net interest margin, which is driving income growth.”
Foxtons (LON:FOXT) Group PLC pleased the market today reporting strong third-quarter results and forecasting that full year numbers will top expectations.
The estate agent said third quarter revenue increased by 25% compared to the same period in 2021, up to £43.8mln from £35.1mln.
Across the group’s different sectors, lettings revenue rose 18% compared to the third quarter last year, with sale and financial services revenue jumping 44% and 37% respectively, Foxtons (LSE:FOXT) added.
Peel Hunt suggested that profits could be ahead of forecasts by as much as £2mln.
The broker reiterated its buy rating and 55p price target.
Shares jumped 14.4% to 33p on the news.
8.18am: FTSE 100 little changed as investors digest earnings
FTSE 100 made a subdued start to the day as investors digested a hefty batch of earnings and awaited the latest interest rate decision from the ECB with a rate hike of 75 basis points expected.
At 8.15am was up 2 points at 7,058 while the broader FTSE 250 was down 32 points at 18,074.
In London, Lloyds Banking Group PLC (LSE:LLOY) fell after reporting below forecast Q3 pre-tax profits of £1.5bn and increased its bad debt provisions to £668mln for the quarter taking them above £1bn for the year to date.
On the bright side the high street lender raised its net interest margin guidance to 2.9% from 2.84% for the year to date.
Shares fell 3.4% on the profit shortfall.
Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown (LON:HRGV) said: “Lloyds has seen its profits wiped out as it puts almost £700mln aside in readiness for a weak economy.”
Shell PLC (LSE:SHEL, NYSE:SHEL) was another firm feature in the market with shares rising 2.33% after the oil major announced plans to increase the dividend in the fourth quarter to 15% as its third quarter results saw it continue to reap the rewards of higher global energy prices.
Shell reported third-quarter underlying earnings (EBITDA) of US$21.5bn, down 7% on the second quarter but up 59% on a year ago, with cash flow from operating activities of US$15.5bn and a US$5bn cash outflow from investing activities.
Unilever PLC (LON:ULVR) rose after it raised guidance for full-year sales after reporting a better-than-expected increase in third-quarter sales as it continued to hike prices to counter soaring costs.
The group announced underlying sales growth of 10.6% ahead of City expectations for growth of 8%.
Unilever said it now expects underlying sales growth for the full year 2022 to be above 8%.
In July, the company said it now expected to beat its previous forecast for full-year underlying sales growth of 4.5% to 6.5%.
Freetrade's senior analyst, Dan Lane said: “A much brighter picture from Unilever today but there’s still a while to go before inflationary pressures stop hitting the bottom line.”
But he added: “Even with a hike in sales growth It still looks like the firm will miss Jope’s 20% margin goal for the year, and will have to strap in for higher material costs in 2023.”
7.53am: Shell plans to raise dividend in quarter four
Shell PLC has kicked off a new US$4bn share buyback, announced a US$0.25 interim dividend, and said it intends to increase the dividend for the fourth quarter by 15%, as its third quarter results saw it continue to reap the rewards of higher global energy prices.
The buyback follows US$6bn of shareholder distributions in the third quarter, a period where the oil supermajor saw income attributable to shareholders fall by 63% from the previous quarter to US$6.7bn.
Shell reported third-quarter underlying earnings (EBITDA) of US$21.5bn, down 7% on the second quarter but up 59% on a year ago, with cash flow from operating activities of US$15.5bn and a US$5bn cash outflow from investing activities.
READ: Shell announces another US$4bn buyback and plans Q4 dividend increase
7.45am: Sterling tops out at six-week high against US dollar, euro reclaims parity
Cable topped out at a six-week high of US$1.163 this morning before plateauing throughout the Asia trading session.
The pair remains on a decent footing though, having benefitted from a softer US dollar over the past two days.
“Corrective forces are at work” as investors seek out riskier assets on the equities markets, reckons Chris Turner, head of FX strategy at ING.
The GBP/USD pair rises on soft US dollar
Sterling has stabilised against the euro in the lead up to today’s interest rate decision from the European Central Bank, with the EUR/GBP pair changing hands at 86.7p.
Another 75 bps hike from the ECB is generally expected, though a softer 50 bps hike wouldn’t be too shocking.
The big test for the euro is if it can maintain parity with the US dollar, having broken through the barrier during yesterday’s session.
At US$1.065, there is at least a bit of headroom to sustain the EUR/USD pair above parity should a lighter rate hike be announced, but one wonders if the psychological barrier will drive hawkish sentiment in today’s meeting.
The Bank of Canada turned a few heads after proving more dovish than expected- its 50 bps rate hike came below 75 bps expectations.
Despite a brief kneejerk reaction that saw the USD/CAD pair jump as high as US$1.365, the Loonie actually responded well to the surprise, and the pair drew back to US$1.355.
Kneejerk spike aside, the Canadian dollar reacted well to the BoC’s softer approach to rates
The BoC’s dovish action could be a sign of a global policy pivot.
7.40am: Unilever raises full year sales estimates
Unilever PLC (LSE:ULVR) increased its full-year sales estimates and reported a better-than-expected increase in third-quarter sales as it continued to hike prices to counter soaring costs.
The group, which sells Ben & Jerry's, Dove soap and Hellmann's, announced underlying sales growth of 10.6% ahead of City expectations for growth of 8%.
Unilever said it now expects underlying sales growth for the full year 2022 to be above 8%.
In July, the company said it now expected to beat its previous forecast for full-year underlying sales growth of 4.5% to 6.5%.
Chie executive, Alan Jope, said “We have delivered growth in each of our five business groups, led by a strong performance from our billion+ Euro brands, growing 14% in the quarter. Strong pricing allows us to continue to drive increased investment behind our brands.”
7.22am: Lloyds posts 13% jump in net income, lifts net interest margin guidance
Lloyds Banking Group PLC (LSE:LLOY) has reported third quarter net income of £4.59bn, up 13% and in line with market forecasts, but announced a jump in bad debt charges to £668mln taking the total for the nine months to date this financial year to £1.045bn.
Underlying profits before the impairment charges were £2.4bn, a 22% increase on the same period last year, while underlying profits were down 17% to £1.73bn.
The high street lender said its CET1 ratio of 15.0% remained well ahead of the ongoing target of c.12.5% and it remained committed to looking at returning excess capital returns as usual at year-end.
Looking ahead, the bank updated its 2022 guidance and said banking net interest margin are now expected to be greater than 290 basis points,compared to 284 basis points for the year so far, operating costs are expected to be c.£8.8 billion, the asset quality ratio is now expected to be c.30 basis points and return on tangible equity expected to be c.13%.
Charlie Nunn, group chief executive: “Our income growth, balance sheet momentum and resilient customer franchise have enabled the Group to deliver a robust financial performance and strong capital generation, alongside updated guidance for 2022.”
7.00am: FTSE seen lower, earnings and ECB rate move in focus
FTSE 100 set to open lower on Thursday after US markets lost their earlier gains and as Facebook owner Meta saw its shares tumble after the bell following weaker than expected third quarter earnings.
Spread betting companies are calling London’s blue chip index down by around 20 points.
US markets ended a volatile session in subdued fashion with the Dow Jones posting its fourth consecutive day of gains (just) but with tech stocks under pressure following disappointing results from Alphabet and Microsoft (NASDAQ:MSFT).
At the close the DJIA was up 3 points at 31,840, the S&P 500 was down 28 points, or 0.74%, at 3,831 and the Nasdaq Composite slipped 228 points, or 2.04%, to 10,971.
Back in Europe and attention will focus on the ECB’s interest rate decision with a 75bps increase expected.
The Bank of Canada surprised the market yesterday by hiking rates by a less than expected 50bps, with Bank of Canada governor Tiff Macklem going on to admit that the central bank was placing a lot more emphasis on the effects of the slowdown when crafting rate strategy going forward.
Michael Hewson chief market analyst at CMC Markets UK said: “This could have implications if the Federal Reserve were to start thinking the same way next week, hence the selloff in the US dollar.”
In London, a bumper corporate calendar sees results from Lloyds Banking Group PLC (LSE:LLOY), Shell PLC (LSE:SHEL, NYSE:SHEL) and Unilever PLC (LSE:ULVR) amongst others.