- FTSE 100 heads lower, down 23 points
- BoE prepared to buy more gilts as deadline looms
- Electricity generators fall on revenue cap reports
2.00pm: Bowler appointed as Scholar's successor
Veteran civil servant James Bowler has been appointed as the top official at the Treasury..
Bowler has been named as permanent secretary to the Treasury, succeeding Tom Scholar who was ousted a month ago, shortly after Kwaski Kwarteng was appointed chancellor.
There had been speculation that Antonia Romero, permanent secretary at the justice department, would be appointed but the government has decided to go for someone with experience of financial experience.
Bowler previously workd with Liz Truss at the department for international trade.
Back on the markets the FTSE 100 has nearly clawed back all of this morning's losses, trading just 5 points lower at 6.986.
1.00pm: Cash handled at Post Offices hits record in August
The Post Office handled a record of almost £3.5bn in cash for customers in August, against a backdrop of bank branch closures and the cost of living crisis.
The £3.45bn in cash crossing Post Office counters in August was the highest total since it began recording volumes it handles through its 11,500 local branches five years ago.
“Post Office attributes the continuing high levels of cash withdrawals to the ongoing closure of local bank branches with people turning to the Post Office to support them with their cash needs,” the company said.
12.30pm: Gilt yields rising, market remains nervous on pension funds
Long-term government borrowing costs have risen to their highest levels since the Bank of England launched its £65bn pension bailout, with analysts nervous that further market volatility could be on the cards.
Yields on 30-year gilts rose above 4.5%, their highest since going over 5% just before the Bank’s intervention on 28 September while ten-year gilt yields also increased by 2.5 basis points to 4.25%
The jump in borrowing costs came as the Bank announced it will ramp up its market intervention before it closes on Friday.
It will also launch a scheme to provide liquidity to banks whose clients are struggling with sudden cash calls.
But analysts questioned whether the intervention has adequately addressed the underlying issue.
Antoine Bouvet, senior rates strategist at ING, said: “The suspicion is that risk reduction by pension funds has been too limited so far.”
“The question is do they have enough cash to meet new collateral requirements if the gilt market sells off again, as the gilt purchases by the Bank of England end this week.”
“I think the fear is that the answer's no and that it will trigger the same snowball effect that we had two weeks ago.”
Paul Dales, chief economist at Capital Economics, commented: “If the markets weren't really ready, and there was a greater need for the banks to buy lots of long gilts from pension funds, then presumably pension funds would have sold a lot more long gilts to the Bank last week.”
“I wonder if that means that the markets are getting a bit nervy and are thinking ‘maybe the problem is a little bit bigger than we thought or longer lasting than we thought.”
????UPDATE Mon 10 Oct????- Pound weaker vs US$. Down to $1.10 (was $1.14 few days ago). Partly dollar strength tho.
- 10yr gilt creeping higher. Above 4.3% this am.
- Money markets pricing in 5.75% BoE rates by middle of next yr.
Most of these metrics look worse today than on Friday pic.twitter.com/1ZL1wDb2x9
— Ed Conway (@EdConwaySky) October 10, 2022
12.00pm: FTSE 100 off session lows, weak start expected in the US
In London the lead index pulled away from its earlier worst levels but remains lower with little support expected from across the pond this afternoon.
At 12.00pm the FTSE 100 was down 21 points at 6,970, while the broader FTSE 250 was 149 points lower at 17,203.
In the US stocks are expected to open lower amid concerns that US rate-setters will continue hiking interest rates aggressively, despite the threat to the wider economy, following Friday's strong jobs data.
Futures for the Dow Jones Industrial Average were down 0.1% in pre-market trading, while those for the S&P 500 were 0.2% lower and contracts for the Nasdaq-100 shed 0.3%.
“Friday’s US jobs data wasn’t exactly what investors had wished for. That was the exact opposite of what could’ve been great for the Federal Reserve expectations,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
The jobs data released on Friday showed continued strength in the US labor market with non-farm payrolls increasing by 263,000 in September, falling from 315,000 in the previous month but coming in above the consensus of around 255,000. Wages grew by 0.3% over the month, as expected, but the unemployment rate eased to 3.5%.
“The US unemployment rate printed last Friday was the lowest number since 1969 and came as another proof that whatever the Fed does, the US jobs data remains robust,” noted Ozkardeskaya.
The data will play into the hands of the hawks on the Federal Reserve Open Market Committee (FOMC), which sets interest rates. Activity on Fed funds futures indicates about a 77% chance for a 75-basis point hike when rate-setters meet in November, said Ozkardeskaya.
The Federal Reserve has delivered three 75 basis point interest rate hikes this year and is expected to keep on raising interest rates as it attempts to tackle runaway inflation, but its moves are also expected to dampen growth.
Looking ahead, this week brings more key data on price pressures. Producer price data for September are due on Wednesday and consumer price inflation data, also for September, are due on Thursday.
The focus will also be on quarterly earnings figures from key banks later this week. Blackrock (NYSE:BLK) reports on Thursday while JP Morgan Chase (NYSE:JPM) and Morgan Stanley (NYSE:MS) report on Friday.
The escalation in Russia’s bombing of Ukraine is also ratcheting up market nervousness. Russia has begun a new wave of bombing, targeting key Ukrainian cities, including the capital, Kyiv, as it blames Ukraine for an attack over the weekend which damaged a bridge linking Russia and occupied Crimea.
11.40am: Government changes mind on new Treasury permanent secretary
The Financial Times has reported another u-turn by the government, this time on who will be the new permanent secretary at the Treasury.
Having jettisoned experienced and respected campaigner Tom Scholar the government had planned on installing Antonio Romero to head up the finance ministry.
But the FT reported that Liz Truss has decided to appoint someone with more financial experience, as part of moves to reassure the financial markets.
New - U-turn as Truss decides to appoint Treasury old hand NOT Antonia Romeo to run the finance ministry. Part of wider operation to calm markets. Identity of new perm sec coming laterhttps://t.co/LHazHmdsqQ— George Parker (@GeorgeWParker) October 10, 2022
Government decides having worked on economic policy is a good criteria for running @hmtreasury https://t.co/ET1M111pzd— Torsten Bell (@TorstenBell) October 10, 2022
11.23am: Shares in electricity generators fall on a reports of a revenue cap
Shares in Centrica (LON:CNA), Drax and SSE (LON:SSE) fell sharply today following reports that ministers are considering a "revenue cap" for renewable power generators which has been likened to a windfall tax.
The Financial Times claimed legislation to impose a revenue cap could be laid as soon as this week with a starting point for the cap of around £50-60/MWh.
In a separate article, the BBC reported that industry and government officials would meet today with potential for the cap to be introduced as early this week.
The BBC said the plans could hit the profits of energy companies including SSE, Scottish Power, RWE and EDF (EPA:EDF) Energy.
Shares in Centrica PLC fell 2.73% to 69p, Drax Group (LON:DRX) PLC fell 4.55% to 535p and SSE PLC fell 0.4% to 1494p.
10.54am: Moneysupermarket.com gains after RBC upgrade
Moneysupermarket.com powered 6.70% higher today to 193.20p as broker RBC Capital Market said it thinks the 20% de-rating since August represents a good entry point.
Upgrading the stock to outperform from sector perform the broker said the stock is now trading attractively at a free cash flow yield of 10%.
RBC forecast that the group’s core business should benefit from consumers increasingly looking to save on their monthly bills, making it a resilient play during the economic downturn.
RBS (LON:NWG) said it expects the company to deliver on expectations, which amid market downgrades, should drive relative stock outperformance.
The broker also upped its price target to 250p from 230p.
But on the downside a downgrade by JPMorgan (NYSE:JPM) Cazenove hit shares in RS Group PLC.
The broker cut its rating to neutral from outperform with a price target of 1050p saying the risk to reward was now more evenly balanced after its quarter two trading update.
Shares fell 3.3% to 948p.
Meanwhile the FTSE 100 has settled off earlier lows but still down 36 points at 6,955.
10.12am: Government to publish fiscal plan and OBR forecast on October 31
The chancellor, Kwasi Kwarteng has brought forward the date of his medium-term fiscal plan, to 31st October.
The chancellor announced the change in a letter to parliament’s Treasury Select committee.
Chancellor @KwasiKwarteng has announced that the Medium-Term Fiscal Plan will be published on 31 October & an @OBR_UK forecast has been commissioned for that date. pic.twitter.com/RoiNyhLmQA— HM Treasury (@hmtreasury) October 10, 2022
The Office for Budget Responsibility’s independent economic forecasts will also be published that day.
9.55am: Government to ban solar farms on England's farmland - Guardian
Ministers are planning to ban solar farms from most of England’s farmland, according to a report in the Guardian.
The new environment secretary, Ranil Jayawardena, is understood to oppose solar panels being placed on agricultural land, arguing that it impedes his programme of growth and boosting food production.
Government sources said he has asked his officials to redefine “best and most versatile” land (BMV), which is earmarked for farming, to include the middling-to-low category 3b.
Land is graded from 1 to 5, and currently BMV includes grades 1 to 3a. Planning guidance has said that development on BMV land should be avoided, although planning authorities may take other considerations into account.
9.40am: Retail sales growth slowed in September - BDO
Britain’s retailers in September saw their sales grow by the slowest rate since shops reopened after the end of Covid-19 lockdowns, as consumers cut spending in the face of rising energy costs and inflation.
Retail sales last month increased by 2.8% year-on-year, compared with a 3.6% rise in August, according to BDO's High Street Sales Tracker.
"The actual performance for retailers may be even worse than these results suggest. With rising inflation, data suggests that the actual volume of sales is down significantly while it is higher prices that is driving the growth," said Sophie Michael, BDO's head of retail and wholesale.
Sales peaked at 4.9% in the second week of September and then fell to 1.3% in the third and fourth weeks.
Fashion sales rose 6.7%, while lifestyle sales increased by just 1.2%.
The homewares sector had a disappointing month with sales declining by 6.3%, reflecting belt-tightening by consumers after they spent significant sums improving their homes during the pandemic.
9.12am: Bonds open lower
Despite the Bank’s announcement, long-dated UK bond prices have opened a little lower.
The yield on 30-year UK government bonds have inched up to 4.45%, from 4.38% on Friday night.
Before the mini-budget, the 30-year gilt yield was around 3.8%, but it surged over 5% in the days after Kwasi Kwarteng’s statement, forcing the Bank to act.
9.00am: FTSE falls further
The FTSE 100 index extended its falls with reports of explosions in Ukraine adding to the nervous mood in London already dented by falls on Wall Street on Friday following the strong US jobs report, and in Asia overnight as chip stocks fell on news of new US export control measures aimed at slowing Beijing’s technological and military advances.
At 9.00am the lead index was down 47 points at 6,944 with the broader FTSE 250 down 164 points at 17,189.
In London, the Bank of England announced further liquidity measures as it seeks to ensure stability in the financial markets, doubling the size of its daily auctions ahead of the end of its emergency programme on Friday.
The Bank’s move today is telling the markets not to test its pledge to restore stability in the long-dated government bond market, according to Torsten Bell of the Resolution Foundation.
Bank of England sets out its plan to reduce the chance of pension fund driven instability after gilt sales finish on Friday - summary is supporting banks to provide liquidity as @bankofengland itself tries to step back from providing it https://t.co/ooypoxcx40— Torsten Bell (@TorstenBell) October 10, 2022
Former pensions minister, Steve Webb, said today’s move should reduce the risk of a “cliff edge” when the Bank’s bond-buying programme ends on Friday.
Neil Wilson at markets.com noted: "The Bank made it clear it will be the market maker of last resort, but we are not home and dry just yet.”
In reaction the pound was slightly lower, down 0.22%, against the US dollar at US$1.1070.
8.10am: FTSE 100 opens lower
FTSE 100 made a subdued start to the week reflecting heavy losses in the US on Friday and in Asia overnight.
At 8.10am London’s blue chip index was down 28 points at 6,962 while the broader FTSE 250 fell 115 points to 17,238.
Asian markets were hit by falls in semi-conductor stocks dented by new US export control measures aimed at slowing Beijing’s technological and military advances.
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown (LON:HRGV) said: "The US administration has ramped up its new strict rules on exports, which include a measure to prevent China using certain semi-conductor chips made anywhere in the world with US equipment."
"This development is likely to put a further brake on the Chinese tech sector given the difficulties China has faced in attempting to develop its domestic semiconductor industry. It’s also likely to continue to weigh on chip makers Nvidia and AMD which were sideswiped on Friday by the ramp up in restrictions.," she added.
In London, the Bank of England announced further liquidity measures as it seeks to ensure stability in the financial markets, doubling the size of its daily auctions ahead of the end of its emergency programme on Friday.
DS Smith PLC (LSE:SMDS) pleased the market as it raised its profit guidance for the year.
Shares rose 10% as the packaging company said it expects adjusted operating profit of £400mln in the six months to October 31, 2022, up 45% from £276mln a year earlier.
For the full year, its performance is "expected to be ahead of our previous expectations" the company said.
"I am very pleased with the performance in the year to date and the momentum in our business. We remain focussed on delivering for our customers and managing our costs in an inflationary environment," DS Smith chief executive Miles Roberts said.
Shares in Unite Group PLC (LON:UTG) also bucked the market trend and rose 1.5% after it said it has sold more beds than expected for the current academic year, with 99% of beds sold for the current academic year, up from 94.1% in 2020-21, and above its forecast for 97%.
Unite noted that: "In addition, the group has significant waiting lists in many of its largest markets, where there remains a shortage of high-quality, purpose-built student accommodation close to university campuses."
The group said it had seen rental growth of 3.5% for the academic year and expects further rental growth for 2023-24, targeting a climb in the range of 4.5% to 5.0%.
For 2022, Unite said it now expects adjusted earnings per share at the top end of 40p to 41p guidance.
7.38am: Bank of England ready to buy more gilts
The Bank of England (BoE) said today it was ready to increase the size of its daily purchases of government bonds to ensure sufficient capacity ahead of the end of its emergency programme to calm recent turmoil in the gilt market which is due to end on Friday.
It said the maximum size of each operation would be confirmed each morning and was set at up to £10 billion for Monday.
The Bank has today announced additional measures to support market functioning. Full details: https://t.co/buydxIu9KH— Bank of England (@bankofengland) October 10, 2022
NEW:@bankofengland is doubling the size of its daily emergency auctions to buy long-dated govt bonds from £5bn to £10bn.Also announces a new temporary special repo facility for banks affected by what's happening in this corner of the pensions market pic.twitter.com/dJE7t97iq7
— Ed Conway (@EdConwaySky) October 10, 2022
The central bank said last month that it would temporarily buy up to £5 billion a day of gilts in a bid to calm surging yields following a government mini-budget that spooked the markets.
So far, the BoE has bought far less than the minimum daily limit.
"To date, the bank has carried out 8 daily auctions, offering to buy up to 40 billion pounds, and has made around 5 billion pounds of bond purchases, As set out previously, all purchases will be unwound in a smooth and orderly fashion once risks to market functioning are judged to have subsided," it said on Monday.
The BoE also said it would launch a temporary expanded collateral repo facility to help banks ease liquidity pressures facing their client funds caught up in the turmoil which threatened pension funds.
7.18am: Octopus Energy set to buy Bulb - Sky
Octopus Energy is close to clinching a takeover of rival Bulb in a deal that will crystallise up to £4bn of losses for British taxpayers, according to Sky News.
Sky said it has learnt that ministers at the Treasury and the Department for Business, Energy and Industrial Strategy (BEIS) have been told that a sale of Bulb's 1.6m-strong customer base is now the optimal outcome.
Industry sources said this weekend that the government and Bulb's special administrator, Teneo Financial Advisory, were preparing to sign a binding agreement to sell the company to Octopus Energy by the end of this month.
The transaction, which is said to have the backing of industry regulator Ofgem, would be targeted for completion in December, according to one of those insiders.
If completed, it would end nearly a year of uncertainty over the fate of Bulb, Britain's seventh-largest residential power supplier at the point of its collapse.
7.00am: FTSE 100 seen lower
The FTSE 100 is expected to make a weak start to the week following heavy losses on Wall Street on Friday and in Asia overnight.
Spread betting companies are calling the lead index down by around 50 points.
On Friday, US indices were deep in the red after the latest jobs report highlighted tight labour conditions despite a slowdown in hiring, which could indicate the Fed will proceed with aggressive interest rate hikes.
At the close, the Dow Jones fell by 2.1% at 29,297 points, while S&P 500 had fallen by 2.8% at 3,640 points, and the Nasdaq Composite lost 3.8% at 10,652.
Meanwhile in Asia on Monday, stocks tumbled with Hong Kong’s Hang Seng leading the way as Chinese chip stocks listed in the City plunged following new export rules from the US.
In London, trading updates are expected from Unite Group PLC while the latest BRC retail sales data will give a further indication as to health of Britain’s high streets.