- FTSE 100 falls, sterling advances further
- Fiscal statement delayed until November 17th
- US markets expected to open lower
1.55pm: Fracking ban is back
New Prime Minister Rishi Sunak said the ban on fracking for shale gas in England is back, sending the shares in UK oil and gas plays IGas Energy PLC (AIM:IGAS, OTC:IGESF) (IGas Energy PLC (AIM:IGAS, OTC:IGESF), IGas Energy PLC (AIM:IGAS, OTC:IGESF)) and Egdon Resources PLC (AIM:EDR) (Egdon Resources PLC (AIM:EDR)) shooting lower.
At Prime Minister's Questions in the House of Commons on Wednesday, Sunak said he “stands by” the party’s manifesto commitment for a moratorium on new fracking.
A government spokesperson confirmed the moveon fracking at the lobby press briefing and said cuts in national insurance will stah but gave no commitment on the pensions triple lock or whether benefits would rise in line with inflation.
The spokesperson also gave no commitment that defence spending would rise by 3%.
????New lines coming out of lobby briefing- Spox refuses to say if advice given against Braverman appointment, but says not true Case was "livid"
- Confirms fracking ban is here to stay, as per 2019 manifesto
- Nics cut will stay
- Triple lock/Benefits no commitment given
— Jessica Elgot (@jessicaelgot) October 26, 2022
12.58pm: Fiscal shortfall put at £35bn - Bloomberg
The shortfall in the UK’s finances has been put at £35bn, Bloomberg has reported, citing officials familiar with current Treasury and OBR data.
The report said the Treasury has drawn up a menu of 104 options to cut spending, details of which will be unveiled at the Autumn Statement which is now set to be delivered on November 17th.
The delay to the fiscal statement from October 31 was announced earlier today.
** EXCLUSIVE: The UK is seeking to fill a fiscal shortfall of £35 billion on Nov 17, according to officials familiar with current Treasury and OBR data **** The Treasury has drawn up a menu of 104 options to cut spending **https://t.co/SeJTiygkEO
— Alex Wickham (@alexwickham) October 26, 2022
12.40pm: UK wages fall at fastest rate since 2010 - ONS
UK wages have fallen at the fastest pace since the global financial crisis in 2010, according to data from the Office for National Statistics (ONS).
Real wages adjusted for inflation fell 2.6pc in the year to April, the ONS said, the sharpest drop since a 3.3% decline in 2010/2011, which coincided with a recession.
The ONS's survey of earnings put the median UK wage at £640 in April, up from £610 the previous year.
This was driven by the post-pandemic rebound of hospitality industries.
The survey also showed that 509,000 people were paid below the National Minimum Wage in 2022, compared with 409,000 in 2019.
UK earnings fell on the year to April 2022 in real terms, our new annual data shows ????Median pay for full-time workers was £640 a week – a fall of 2.6% after adjusting for inflation ????
Without adjusting for inflation, pay increased by 5.0%.
➡️ https://t.co/JSsWZhBGe0 pic.twitter.com/HcGHINNPuW
— Office for National Statistics (ONS) (@ONS) October 26, 2022
11.57am: FTSE 100 remains weak, US set to open lower
FTSE 100 remained lower around midday with US markets unlikely to lift the mood this afternoon following disappointing earnings from the likes of computer giant Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL), which owns YouTube and the popular search engine Google.
At 11.55 London’s blue chip index was down 29 points at 6,985 although the FTSE 250 continued to buck the weaker trend, rising 122 points to 17,954.
Futures for the Dow Jones Industrial Average were 0.2% lower in pre-market trading, while those for the S&P 500 were down 0.8%, and contracts for the Nasdaq-100 shed 1.6%.
Investors are continuing to take direction from the performance of big technology companies. Alphabet said, after hours on Tuesday, that its sales slowed as firms cut their advertising budgets while Microsoft noted that demand for its computers and other technology had weakened.
While Wall Street closed Tuesday’s regular session higher, the disappointing numbers from Alphabet after the closing bell may be acting as something of a catalyst to rein in the recent spate of buying, said James Hughes chief market analyst at scopemarkets.com.
“Much of this is stemming from optimism that the Federal Reserve will now ease off its monetary policy tightening agenda, something that yesterday’s disappointing consumer confidence figures and that earnings miss from UPS both lend credibility to,” he said.
On the data front today, the focus will be on US new home sales figures for September due out at 10.00am ET which are expected to show a softening.
“Yet more dovish tones from Fed board members would be no surprise, although radio silence here could serve to erode the confidence we’ve seen building in recent days,” added Hughes.
11.44am: Sterling falls from highs and yields rise on delay to fiscal statement
Sterling fell back from its highs and gilt yields rose slightly following news that the government’s fiscal statement would be delayed.
The pound was up 0.8% against the US dollar at $1.156, after briefly topping $1.16 earlier, hitting a six week high, while yields on 30-year bonds rose as much as 14 basis points to 3.81pc after the announcement.
But there was no sense of panic and the markets broadly took the news in their stride.
The delay means that the Bank of England will have to make its next call on interest rates without knowing the full extent of the UK’s financial position.
Ben Zanako, economist at the IFS, said he thinks a delay is sensible.
A delay is sensible. There's a lot riding on this, so important to get the details right. But the challenge remains the same: find a way to somehow reconcile 2019 manifesto public service objectives (which Sunak has recommitted to) with likely cuts to public spending. https://t.co/yyYoJ0qgwE— Ben Zaranko (@BenZaranko) October 26, 2022
11.11am: Fiscal statement delayed until November 17th
The government's fiscal statement will be delayed until November 17th according to a statement from the Treasury.
It was due on October 31st but this has been postponed.
The Treasury said the Autumn Statement would now de delivered on November 17th together with forecasts from the OBR.
The chancellor, Jeremy Hunt, said: "Our number one priority is economic stability and restoring confidence that the United Kingdom is a country that pays its way and for that reason, the medium-term fiscal plan is extremely important."
"It’s also extremely important that statement is based on the most accurate possible economic forecasts and forecasts of public finances, and for that reason the prime minister and I have decided that it is prudent to make that statement on 17th of November when it will be upgraded to a full autumn statement."
Prime Minister @RishiSunak & Chancellor @Jeremy_Hunt have agreed the Autumn Statement will be delivered on 17 November with an @OBR_UK forecast. It will contain the UK’s medium term fiscal plan to put public spending on a sustainable footing, get debt falling & restore stability. pic.twitter.com/3wiSAU1iaK— HM Treasury (@hmtreasury) October 26, 2022
11.00am: Bank of America (NYSE:BAC) remains committed to the UK - Sky
The chairman and chief executive of one of the world's biggest banks says he is "committed to the UK", despite recent political and economic turmoil, according to Sky News.
Brian Moynihan, of Bank of America, also told Sky that he is not concerned about the prospect of an increase in corporation tax, adding: "We don't live or die by our tax rate."
Moynihan said of the UK's recent political turbulence: "We don't get too wound-up about [elections].
"It's always something in the moment, but it's a population's job to elect officials and our job to manage our company given those elections.
"I think the UK is one of the leading economies and leading countries in the world and is a bastion of stability in general sense.
10.32am: IMF head expects Rishi Sunak to steer UK towards fiscal sustainability
MF chief Kristalina Georgieva said on Wednesday she expects new Prime Minister Rishi Sunak to steer Britain towards fiscal sustainability and said he was right to warn the public of difficult decisions ahead.
Speaking to Reuters in Berlin, Georgieva welcomed what she said was Sunak's clarity and constructive attitude that she knew from his time as finance minister.
She expects to speak to the recently appointed finance minister Jeremy Hunt in coming days.
"The new prime minister comes with a platform that he has shaped during his days as a chancellor, and it is one of being very prudent in bringing fiscal discipline in the UK," she said.
"I listened carefully to him talking to the British people, and this is a message that should resonate across the world. These are tough times, and tough times require tough decisions."
10.10am: Mortgage rates on the turn?
Better news for hownowners and signs that the recent falls in bond yields are feeding through to the mortgage market.
Data from Moneyfacts showed that the average 2-year fixed mortgage deal has fallen to 6.5%, from 6.54% yesterday and 6.65% last week.
The average 5-year mortgage rate is down from 6.5% last week to 6.36%.
As Sky’s Ed Conway pointed out this is still a lot higher than before the mini-budget when the 2-year rate was 4.74% and the 5 year rate was 4.75%.
NEWCost of fixed rate mortgages is now falling, acc to Moneyfacts data.
Average two year fixed deal down to 6.5%, vs 6.54% yday and 6.65% last week.
Avg 5yr deal down from 6.5% last week to 6.36%.
Still a LOT higher than before the mini-budget (2yr: 4.74%, 5yr: 4.75%)
— Ed Conway (@EdConwaySky) October 26, 2022
Bond yields, and mortgage rates, soared after the botched mini-budget by Kwasi Kwarteng in September which sparked financial turmoil.
9.41am: Standard Chartered (LON:STAN) on track to deliver 10% ROE in 2024
Shares in Standard Chartered PLC (LSE:STAN) fell slightly despite the bank reporting a 40% increase in pre-tax profits to $1.39bn and a 15% rise in income to $4.33bn in the third quarter.
Underlying profits grew 32% to $1.42bn, the Asian-focused bank said.
The bank’s largest unit, Corporate, Commercial & Institutional Banking, posted a 23% increase in operating income to $2.75bn driven by strong performances across Transaction Banking supported by higher interest rates.
Return on tangible equity in the division increased to 18% from 11%.
The Consumer, Private & Business Banking arm increased to $1.60bn from $1.43bn with higher income in retail partially offset by wealth management, which continues to face headwinds due to "market volatility."
The bank lifted its bad debt provisions to $227mln from $108mln and said its cost-to-income ratio fell in the third quarter to 62.3% from 70.3% a year before.
For the year the group forecast grow at around 13%, in line with year-to-date growth, while bad debt charges are seen slightly above the year-to-date annualised loan-loss rate of 18 basis points.
Standard Chartered said it expects net interest margin progression to average around 165bps in 2023, which combined with continued strong business momentum and positive jaws ratio, means it "remains on-track" to deliver its 10% return on target equity target in 2024.
9.23am: Heathrow warns it may reintroduce passenger cap at Christmas
Heathrow Airport has warned that a cap on passenger numbers could be reintroduced on some of the busiest days in the run-up to Christmas to avoid further travel chaos, as Europe’s busiest airport admitted it is still short of 25,000 staff to meet demand at peak times.
The airport, which is due to lift the current cap of 100,000 passengers a day this Saturday that was introduced in July as summer holiday travel descended into chaos, said it was in talks with airlines over the selective cap.
“We are working with airlines to agree a highly targeted mechanism that, if needed, would align supply and demand on a small number of peak days in the lead-up to Christmas,” Heathrow said.
“This would encourage demand into less busy periods, protecting the heavier peaks, and avoiding flight cancellations due to resource pressures.”
9.00am: FTSE 100 little changed
The FTSE 100 was little changed in early trading as investors digested a hefty batch of results on either side of the pond and waited to hear if the government’s fiscal statement due on 31 October would go ahead as planned.
At 08.55am London’s blue-chip index was up 1 point at 7,014 while the FTSE 250 rose 52 points to 17,884.
The Times reported that the new prime minister Rishi Sunak is considering delaying next week’s planned fiscal statement to plug a gap of £40bn in the country’s finances.
Sunak is expected to meet chancellor Jeremy Hunt today to discuss his proposals to increase taxes and squeeze public spending.
A short delay wouldn't be a "bad thing" if that gives the government time to get it "right", foreign secretary James Cleverly told the BBC today.
The pound continued its recent rally, pushing ahead 0.75% against the US dollar to $1.1569 following yesterday’s weak US economic data which showed that the Federal Reserve’s aggressive rate rising strategy is denting the US economic growth.
Victoria Scholar, head of investment, interactive investor said: “Part of sterling’s rally was driven by the US dollar’s depreciation, which slumped to a three-week low amid signs of a slowing economy stateside and corresponding expectations for less hawkish hikes from the Fed.”
On a busy day of corporate news AstraZeneca PLC (NASDAQ:AZN) topped the FTSE 100 risers as it reported positive developments on its capivasertib breast cancer drug.
The pharmaceuticals giant said the when combined with Faslodex hormone treatment the drug demonstrated a "statistically significant and clinically meaningful improvement" in progression-free patient (PFS) survival during a late-stage trial.
The trial met both primary endpoints, improving PFS in the overall patient population and in a prespecified biomarker subgroup of patients whose tumours had qualifying alterations, AstraZeneca said in a statement.
On the downside, WPP PLC (LON:WPP) fell as an upbeat trading statement was overshadowed by concerns that a slow down in economic growth would hit advertising revenues as results from US tech giant, Alphabet overnight, showed a fall in advertising revenues at YouTube.
Keith Bowman, financial analyst, interactive investor said: “A highly uncertain economic outlook for its corporate customers is tough to ignore.”
“Advertising has historically been geared to economic ups and downs; business costs generally are rising while its China business is being hindered by ongoing pandemic lockdowns” he added.
8.18am: FTSE 100 weaker at the open
FTSE 100 fell in early trading as investors digested a hefty batch of results in the UK and the US where shares in tech giants Alphabet and Microsoft fell in after hours trading after their results pointed to a slowing economy.
At 8.15am in London, the lead index had slipped 17 points to 6,997, while the broader FTSE 250 fell 45 points to 17,787.
On a busy day of results shares in Barclays PLC (LON:BARC) rose slightly as it reported better than expected quarter three pre-tax profits of £2bn although it increased provisions for bad debts to £0.4bn.
John Moore, senior investment manager at RBC Brewin Dolphin, said: “Barclays has delivered a strong set of results, benefitting from the performance of its fixed income division, market volatility, and an increasing net interest margin.”
Moore commented: “Looking ahead, the uncertain economic backdrop will likely put a brake on some of Barclays markets, particularly at its credit cards and investment banking divisions, with the outlook for corporate action – such as capital raises – more difficult.”
He concluded “Barclays remains the best positioned of the major UK banks with a more diversified income stream – but there are still challenges ahead.”
But Reckiit Benckiser Group PLC saw its shares fall despite posting above forecast quarter three revenue growth of 7.4%, driven by price increases, as the company, whose products include Dettol and Strepsils said that sales volumes had fallen 4.6%.
The pound held firm after a strong rally yesterday, trading up 0.08% against the US dollar at $1.1479.
Rishi Sunak will make his first appearance in Parliament today as prime minister at Prime Minister’s Questions with speculation that the fiscal statement, due on 31 October, will be delayed. Talks with the chancellor, Jeremy Hunt, are due to take place today.
7.51am: Reckitt Q3 revenue growth tops forecasts but sales volumes fall
Reckitt Benckiser PLC reported third-quarter like-for-like revenue growth of 7.4% to £3.735bn, ahead of City forecasts of 6.1%, helped by price increases as fewer people bought its goods.
The company, whose products include Dettol and Strepsils throat sweets also tightened its guidance for full-year revenue growth to between 6%-8% versus its previous estimate of an increase of 5%-8%.
Sales volumes fell 4.6%, it said, although excluding Lysol sales, which were boosted by Covid-19 this time last year, they declined 1%.
Prices for the company's products rose 12% in the quarter, Reckitt said.
Nicandro Durante, chief executive officer, said: “We have an excellent portfolio of trusted, market-leading brands in high margin, high-growth categories and a strong culture of ownership and delivery.”
“My priority is firmly focussed on continuing to execute on our strategic path, to deliver sustainable mid-single digit growth, and mid-20s adjusted operating margins by the mid-2020s."
7.47am: US dollar cools off, opening up gains for Sterling and euro
The US dollar has cooled off over the past 24 hours, primarily driven by soft economic data.
US house prices, for instance, rose 11.9%- the least since December 2020.
Manufacturing data also came in cooler than expected, as did consumer confidence figures.
A cooler dollar means the possibility of looser fiscal policy emerging from the Federal Reserve next Tuesday.
It’s good news for the rest of the G10 set too.
The pound is at its strongest position in three weeks, with the GBP/USD pair changing hands at US$1.146.
Softer US economic data led to a spike in the GBP/USD pair – Source: capital.com
The euro also spiked to three-week highs of US$0.997, raising hopes of a material return to parity.
Both the Australian and Canadian dollars gained on USD too, while the USD/JPY pair fell below the 148 yen price point.
The euro fell back against the pound by nearly 100 pips from yesterday’s high of 87.5p, though has managed to correct itself around the 86.9p price point.
Volatility is expected for the EUR/GBP pair during today’s session.
7.40am: Fiscal statement could be delayed
Prime minister Rishi Sunak is considering delaying Monday's fiscal statement, as the decision on whether it would be revealed on the scheduled date of October 31 remains up in the air.
The statement could also potentially be pushed back by a couple of days so it is presented before November 3, when the Bank of England is set to announce its plans for further interest rate hikes.
Sunak is expected to meet with chancellor Jeremy Hunt today to discuss his proposals to increase taxes and squeeze public spending.
7.22am: Barclays Q3 pre-tax profits hit £2bn but bad debts rise
Barclays PLC (LSE:BARC) reported third quarter pre-tax profits of £2bn, better than expected, driven by a 17% increase in income at its UK business.
Attributable profit of £1.5bn compared to £1.4bn last year while return on total equity (ROTE) improved to 12.5% from 11.4%.
The FTSE-100 listed lender said group income rose 9% to £6.0bn which included a £0.5bn charge related to the over-issuance of securities.
Bad debt provisions were £0.4bn, up from £0.1bn last year reflecting the “deteriorating macroeconomic forecast” but the banking giant said business failures remain below historical levels.
Total group operating expenses were £3.6bn, unchanged from last year, which includes a provision reduction of £0.5bn in relation to the over-issuance of securities (Q321: £0.1bn charge).
The bank’s common equity Tier 1 ratio of 13.8% in line with the bank’s targeted range of 13-14%.
Barclays said it was targeting a RoTE of greater than 10% in 2022.
Costs for the full year are expected to remain at previous guidance of £16.7bn with a reduction in litigation charges offset by forex headwinds.
C S Venkatakrishnan, group chief executive, said: "We delivered another quarter of strong returns, and achieved income growth in each of our three businesses1, with a 17% increase in Group income.”
“We are ready to provide support for customers and clients facing an uncertain economic environment and higher cost pressures.”
7.00am: FTSE 100 seen slightly lower
FTSE 100 set to open lower this morning after falls after disappointing earnings from Alphabet and Microsoft led to their shares being sold off in after-hours business in the US, taking the shine off another strong day for US markets.
Spread betting companies are calling London’s blue-chip index down by around 19 points..
US markets forged ahead once more driven by falling Treasury yields and hopes that the aggressive rate rising stance of the Federal Reserve might soften in light of a series of soft US economic data.
At the close the Dow Jones Industrial Average was up 338 points at 31,837, the S&P 500 advanced 62 points to 3,859 and the Nasdaq Composite rose 247 poiints to 11,199.
Investors are also awaiting confirmation that the fiscal statement will still take place on 31 October with speculation that it may be delayed.
The banking reporting season continues with Barclays PLC (LSE:BARC) the latest high street lender to report numbers today as well.
Read more on Proactive Investors UK
