Proactive Investors -
- FTSE 100 slightly higher, up 6 points
- German business confidence improves in November
- ECB minutes point to a number of economies entering recession
2.10pm: ECB minutes paint a deteriorating economic outlook
ING Economics said at first glance, the minutes of the European Central Bank's October meeting do not point to a pivot any time soon.
However, reading between the lines, there seem to be growing recession concerns, at least with some members, which could lead to a pause in the hiking cycle in the coming months, ING suggested.
The minutes of the ECB's meeting in late-October, released this lunchtime, point out that the economic outlook has deteriorated.
"As regards the external environment, the latest data confirmed signals of slowing economic growth across countries and sectors and implied a substantial reversal of the pick-up in global activity recorded earlier in the year."
"It was observed that an increasing number of economies were expected to enter a recession."
"The concern was expressed that the cumulative impact of the slowdown, also including spillovers from synchronised monetary policy tightening, could even result in a “technical recession” at the global level."
However, ECB policymakers aren’t convinced that a limited recession will be enough to fix the eurozone’s inflation woes.
"It was argued that a shallow or technical recession was unlikely to keep inflation in check given its recent momentum and the risk that price increases would be difficult to reverse."
1.30pm: Number of businesses planning job cuts increases - ONS
The Office for National Statistics (ONS) has reported a jump in the number of businesses proposing redundancies while supply chain issues also continue bite.
The ONS said the number of employers proposing redundancies in the week to 13 November 2022 was 143% of the level in the equivalent week of 2021, although on the upside the total number of online job adverts rose by 3% on 18 November 2022 but was 14% down on the equivalent period of 2021
The ONS also reported that 13% of businesses reported experiencing global supply chain disruption in October 2022.
Commenting on the data Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown (LON:HRGV) said: "‘’The recession already appears to be piling up problems for businesses who are looking at ways to cut costs by slashing jobs."
"We’ve had plenty of warnings that the contraction of the economy would lead to a rise in unemployment. The forecasts from the Bank of England, and the Office for Budget Responsibility have varied in severity, but it’s already clear that redundancies are beginning to tick up."
"Although there appear to be plenty of positions still available in the labour market, those on offer may not be desired, and may be less likely to offer as favourable working conditions."
She also suggested the rise in job vacanies was mainly due ti a jump of a quarter in available part-time and weekend positions publicised, probably a seasonal boost.
12.40pm: Order books fall in November - CBI
British industrial orders weakened a little in November and manufacturers were gloomy about the outlook for the coming months, a survey showed on Thursday.
The Confederation of British Industry's (CBI) monthly order books balance fell to -5 from -4 in October, although it was still above the long-run average of -13.
The survey's gauge of output struck a five-month high, driven by supply chain improvements, but on balance factories surveyed expected output to weaken in the coming three months.
Anna Leach, CBI deputy chief economist, said manufacturers welcomed some aspects of finance minister Jeremy Hunt's budget statement last week.
"But little was said about two of the most pressing issues that are currently holding the sector back: the future of the business energy support scheme and access to skills," she said.
"This leaves big question marks hanging over the competitiveness of UK manufacturing."
12.05pm: UK to be best performing real estate market in Europe - AEW
The UK will be Europe's best performing real estate market over the next five years, according to AEW.
The US real estate investment firm said this was because UK property yields are less vulnerable to rate increases than their continental peers.
In its relative value analysis, only five markets are considered attractive while 47 are classified as neutral out of the 168 market segments covered.
The UK is ranked most attractive out of 168 covered market segments for the second year in a row on a relative value basis over the next five years, with Benelux second, reflecting an above average share of attractive and neutral markets, AEW said.
Hammerson took heart from the news with shares rising 3.1% while a number of REITs were also marked higher. Warehouse REIT PLC (AIM:WHR) rose 5.25%, Home REIT plc jumped 4.8%, UK Commercial Property REIT Limited advanced 3.65% and Tritax Big Box REIT PLC spiked 3.2% higher.
11.30am: Binance aims to set up $1bn fund to buy distressed crypto assets
Crypto giant, Binance, said it is aiming to set up a roughly $1bn fund for the potential purchase of distressed assets in the sector and will make another bid for bankrupt lender Voyager Digital.
Chief executive Changpeng Zhao said there would be a blog post about the fund soon and that his company has spoken to a number of industry players about it.
"If that's not enough ($1bn) we can allocate more," Mr Zhao told Bloomberg Television.
"We are going with a loose approach where different industry players will contribute as they wish."
10.50am: BoE's Ramsden backs further rate rises but much depends on inflation/economy
Bank of England deputy governor Sir Dave Ramsden backed more interest rate hikes on Thursday, but said he would consider cutting rates if the economy and inflation pressures panned out differently to his expectation.
Ramsden is the latest member of the Monetary Policy Committee to mention the possibility of cutting Bank Rate at some point, after the BoE earlier this month said market expectations for interest rates north of 5% were too high.
Dave Ramsden looks back over 2022 and reflects on why the economy and path for inflation have turned out differently. Read his speech in full:????https://t.co/ivkcK5e6eT
— Bank of England Press Office (@BoE_PressOffice) November 24, 2022
"Although my bias is towards further tightening, if the economy develops differently to my expectation and persistence in inflation stops being a concern, then I would consider the case for reducing Bank Rate, as appropriate." Ramsden said in a speech at King's College London.
But Ramsden also said he would "continue to respond forcefully" if inflation pressures proved to be more persistent than expected.
He described his approach to setting policy as "watchful and responsive."
10.10am: German business confidence improves in November
Over in Europe, the closely watched IFO Institute’s business climate index rose to 86.3 in November suggesting an improvement in German business morale.
Although still at a low level the improvement from 84.5 in October was welcomed by economists.
????????The @ifo_Institut Business Climate Index rose to 86.3 points in November, up from 84.5 points in October (seasonally adjusted). The recession could prove less severe than many had expected. #ifosurvey pic.twitter.com/NHGGOYijVY— CESifo (@CESifoNetwork) November 24, 2022
Carsten Brzeski, global head of macro at ING Economics said: “The strong improvement of the Ifo index adds to recent glimmers of hope.”
“However, this simply reflects a stabilisation at low levels and there is no reason to change the recession call, yet.”
“The sheer fact that things are no longer getting worse doesn't mean that improvement is around the corner.”
“The downsides still outweigh the upsides: new orders have dropped since February and inventories have started to increase again, a combination that never bodes well for future industrial production.”
Invoking a football analogy he concluded: “At the current juncture and despite today's encouraging Ifo index reading, the question is what is more likely: the German economy avoiding recession or the German national football team still making it into the next round. We wouldn’t put much money on either of the two.”
9.47am: Unite and Empiric advance as RBC lifts price target
Shares in Unite Group (LON:UTG) rose 3% and Empiric Student Property PLC by 1.8% as RBC Capital Markets upped its price targets for both companies by around 7% to 1,100p and96p respectively.
“The rising demand-supply imbalance for UK student accommodation and continued double-digit rent growth in the wider private rented sector lead us to raise our mid-term market rent growth estimates by c.100bp on average” analysts at the broker wrote.
EPS estimates for Unite and Empiric were also increased by around 4% and the broker kept an outperform rating on Unite and sector perform rating on Empiric.
“We believe Unite's relatively attractive room pricing leaves it well positioned to maintain close to full occupancy and deliver higher rent growth” it said.
9.10am: Subdued start for Footsie but sterling advances
FTSE 100 is hovering around opening levels with rising Covid cases in China denting sentiment although trading is likely to be subdued with US markets closed for Thanksgiving.
Victoria Scholar, head of Investment, interactive investor said: “On a quieter than normal day because of the Thanksgiving holiday stateside, European markets have opened tentatively higher except for the FTSE 100, which is trading softer.”
Vodafone (LON:VOD) PLC topped the FTSE 100 fallers, down 3.7%, after a downgrade to underperform by Credit Suisse (SIX:CSGN). The stock is also trading ex-dividend today.
Sterling was a touch firmer today, after strong recent gains, briefly topping $1.21 for the first time since mid-August after the FOMC minutes yesterday which suggested smaller rate rises may be on the way across the pond.
A stronger pound could help cool the UK’s inflation crisis, as it will make imported goods like fuel and energy less expensive – although sterling is still down 10% against the dollar this year.
8.45am: Ofgem lifts energy price cap
The government will have to pay more to support households with their energy bills from January, after the regulator increased its energy price cap.
However, it will not affect how much households pay as this has been limited by the government.
Under the Energy Price Guarantee (EPG), the typical household is currently paying £2,500 a year for energy.
But Ofgem said that without government support households would have paid £4,279 from January.
In normal times, the energy price cap would set the maximum amount suppliers can charge households per unit of energy.
8.17am: FTSE 100 a touch higher, Dr Martens slumps
FTSE 100 hovered around opening levels in early trading in what may be a subdued session with US markets closed for Thanksgiving.
Just after the open the lead index was up 3 points to 7,469.
Retailers were in focus following a series of trading updates. Dr Martens PLC slumped 17.6% after the shoe retailer reported slower revenue and lower profits in the first half and warned that it expects lower profit margins for the full year due to further investment.
Due to the investment, full year EBITDA margin will be 100-250 basis points lower than last year, the company cautioned.
Kingfisher PLC (LON:KGF) dipped 2%, despite a rise in third quarter sales, as it lowered the top-end of its full-year profits guidance to £760mln from £770mln before giving a range of £730mln to £760mln.
But Jet2 PLC was an early riser as the low cost airline and holiday operator reported higher interim revenues and profits and said it was on course to deliver above forecasts full-year profits.
Shares rose 1.5% as the company said “We are presently on track to exceed current average market expectations for group profit before FX revaluation and taxation for the year.”
7.45am: Kingfisher boosted by demand for energy efficient products
A busy day for updates from retailers. B&Q owner, Kingfisher PLC (LSE:KGF), reported a slight improvement in third quarter like-for-like sales reflecting strong demand for energy efficiency products which supported DIY sales.
Third quarter sales of £3.3bn were up 1.7% in constant currency and 0.2% like-for-like, an improved picture when compared to the 4.1% fall in the first half.
The FTSE 100 listed retailer also pointed to a good start to trading in the fourth quarter with three-year like-for-like growth of 16.2% and 2.8% for the three weeks to 19 November 2022.
“Sales remain resilient across our customer segments (DIY and DIFM/trade) and banners, with ongoing strength in energy efficiency product sales and demand from the trade segment.”
But it lowered the top end of guidance for full-year 2023 adjusted pre-tax profit in the range of c.£730mn to £760mln from £730mln to £770mln before.
7.00am: FTSE 100 seen slightly lower
The FTSE 100 is set to open slightly lower despite gains in US markets after the release of the FOMC minutes was viewed positively.
Spread betting companies are calling the lead index down by around 7 points.
The minutes from the Fed's November policy meeting showed "A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate.”
They noted that a slower pace would better allow the Federal Open Market Committee to "assess progress toward its goals of maximum employment and price stability".
Michael Hewson chief market analyst at CMC Markets UK said: “Last night’s Fed minutes reaffirmed the initial market reaction to the Fed statement earlier this month with most officials backing the slowing of the pace of hikes soon, with several officials seeing risks from further rapid hikes.”
“This tone reinforces the narrative that 50bps is coming in December with subsequent hikes likely to be between 25bps and 50bps.”
But he added: “Last night’s positive US finish doesn’t look as if it will give markets here in Europe a significant early leg up, with the FTSE100 feeling the drag from further weakness in oil prices on the back of rising covid cases in China, however trading is quite likely to be light in the absence of the US for the Thanksgiving break.
In London, trading updates and results are due from Intertek Group PLC (LON:ITRK), Kingfisher PLC, Safestore Holdings PLC, Dr Martens PLC and Motorpoint PLC amongst others.