What’s moving the pound and FTSE 100? We’ll bring you economic data, breaking news and analysis vital to UK markets.
(Bloomberg) — 4 p.m. We’ll wrap it up for today, thanks for tuning into City Latest. Join us tomorrow, when we’ll bring you more news, data and analysis vital to UK markets and beyond. Have a good evening.
3:44 p.m. Time for one last look at markets as UK trading winds down. The FTSE 100 has maintained declines toward the end of the trading session, even as its more domestically-focused counterpart — the FTSE 250 — carved out gains for a third-straight day. Meanwhile, gilts advanced as a record deficit and speculation over recession risks drove investors to the relative safety of government bonds.
However, today’s Spotlight Move is all about the pound. After a stellar start to the year that drove it to a seven month high, sterling has lost some ground and is set for its biggest decline since Jan. 5. That’s likely due to investors confronting Britain’s downbeat economic outlook in the coming months, which lays out quite the challenge for the Bank of England officials when they meet next week.
2:49 p.m. Let’s check in on markets. The pound has taken another leg lower, trading below $1.23 as the US dollar’s gains picked up pace. The FTSE 100 is equally downbeat, led by declines in the healthcare sector.
Sentiment has also deteriorated in the US, where equities opened in the red. There was also added volatility at the start of trading on Wall Street, resulting in brief halts for multiple stocks before trading resumed.
2:28 p.m. The number of British businesses at risk of going bust rose by more than a third at the end of last year, according to a report by consultancy Begbies Traynor.
That adds to a number of downbeat reports today, which seem to have punctured the optimism surrounding the UK economy that many analysts were feeling in the new year.
Read More: Number of UK Firms Facing Collapse Jumps by Over a Third
1:38 p.m. In global markets, the kickoff to tech earnings this week — starting with Microsoft results today — will be in the spotlight and will serve as a big test for the resilience of investor sentiment. Bloomberg’s Ksenia Galouchko and Invesco Asset Management’s Benjamin Jones break down what to watch:
1:12 p.m. In my relentless quest to look on the bright side, I take a look at why inflation in Britain might come down faster than the Bank of England currently expects for today’s Money Distilled newsletter. Here’s a clue — it’s all about what’s going on around the world, not what’s happening in the UK. — John Stepek
Read More: UK Inflation May Fall Faster Than Expected
12:42 p.m. Let’s look more closely at the moves in UK markets today, where the worrying signs for the economy that we’ve talked about today are adding pressure on the pound and fueling a rally in government bonds. Naomi Tajitsu also writes that traders have trimmed bets on future BOE hikes, indicting they expect the bank to step down the pace of moves after next month’s meeting.
According to Roberto Cobo Garcia, head of G-10 foreign-exchange strategy at BBVA:
“Strikes, staff shortages, a weak external sector, the rising cost of living and tighter monetary conditions are having a toll on economic activity. We remain bearish and expect some additional weakness.”
Read More: Pound Tumbles, UK Bonds Lead Rally on Darkening Economic Outlook
12:03 p.m. More bad news on UK manufacturing from the Confederation of British Industry, which found that British factories are curtailing production at record rates. It was the highest share of factories operating below their full capabilities since January 2021 and also reflected a global slowdown in manufacturing.
As Anna Leach, deputy chief economist at the CBI, put it:
“Global supply chain pressures, labor shortages and energy costs are easing, enabling unit cost growth to ease back from record highs. But there are signs that demand is easing too.”
11:13 a.m. Twitter is facing its own set of troubles in the UK. The social media giant has been sued over its failure to pay rent by the Crown Estate, which manages a range of assets from shops and offices to the seabed around England that’s ultimately owned by the British monarch.
The Crown Estate filed a suit against Twitter over its London premises in the West End, according to court filings. In San Francisco, Twitter is also being sued by its landlord, who claims it quit paying rent on its headquarters in December.
Read More: Twitter Sued Over Unpaid Rent at London HQ by UK’s Crown Estate
10:20 a.m. The pound isn’t the only asset under pressure today. Europe’s Stoxx 600 Index is also sruggling to make gains and US equity futures are ticking lower after the best two-day rally since November.
That jump was fuelled by tech stocks, which will face more tests soon once a bevy of firms, including Microsoft, report earnings.
Read More: Stocks Waver as Risk Rebound Faces Big Tech Test: Markets Wrap
9:40 a.m. The pound has quickly lost altitude to trade well below $1.24 after data that showed UK business activity fell at the sharpest pace in two years — that’s according to the PMI gauge by S&P Global and CIPS.
Yet one silver lining from the report is that optimism regarding the year ahead picked up this month to the strongest level since May. That’s been supported by businesses hoping that global economic conditions turn around and cost pressures abate.
9:27 a.m. Budget fashion retailer Primark had a record week for sales in the run-up to Christmas, showing that shoppers were still spending on clothes and homeware.
The performance was better than expected and ahead in all markets the clothing retailer operates in. Owner Associated British Foods is still expecting profit to decline across the business this year as rising energy bills and the stronger dollar weigh on Primark. AB Foods shares rose initially before falling back 1% in early trading in London. — Katie Linsell
Read More: Primark Sales Set Christmas Record as Shoppers Kept Spending
9:07 a.m. For more on today’s biggest stories, watch the London Rush below, or read the newsletter here.
8:52 a.m. Here’s a sobering morning read from Philip Aldrick about the state of Britain’s health service. With the NHS in the grip of another crisis, Phil says that:
“Policy makers are facing a brutal reality: either taxes are raised, free NHS services are cut, other government departments are effectively scrapped — or Britain’s health service breaks.’’
Read More: Britain’s NHS Black Hole Is Devouring the Whole Country
8:36 a.m. Here’s the latest news on the UK’s effort to cut electricity demand from Bloomberg’s Rachel Morison — some homes are being requested to turn down power demand on Tuesday evening as the National Grid will seek to cut about 300 megawatts of demand for three half hour periods between 4:30 and 6 p.m., according to its website. It earlier called off its request for three coal-fired units to get ready to generate to help ease the power squeeze.
Read More: UK Homes Prepare to Turn Down Power for Second Day as Wind Fades
8:08 a.m. Despite the dour deficit data, the pound remains just below $1.24 and near a seven-month high as UK trading gets underway. The FTSE 100 has lost its opening gains and is now trading on the back foot.
Over in Europe, focus is on comments from European Central Bank President Christine Lagarde, who said the institution will do everything necessary to return inflation to its goal, pointing to more “significant” interest-rate increases at coming meetings.
Check out more top reads from today’s Five Things newsletter:
- Ford plans to trim about 3,200 jobs across Europe
- The US Justice Department is poised to sue Google regarding its dominance over the digital advertising market
- The US confronts China over evidence suggesting some Chinese state-owned companies may be providing assistance to Russia’s war effort in Ukraine
7:51 a.m. The cost of subsidizing gas and electricity has also taken its toll on the government’s finances. In December alone, the bill amounted to £7 billion — of that, £1.9 billion was a direct cost-of-living transfer to households and £5 billion was the money spent on an energy price-cap for consumers.
Chancellor of the Exchequer Jeremy Hunt said in a statement:
“We are helping millions of families with the cost of living, but we must also ensure that our level of debt is fair for future generations. We have already taken some tough decisions to get debt falling, and it is vital that we stick to this plan.”
7:43 a.m. One key driver of the UK government’s soaring debt costs is the fact that about a quarter of all UK government bonds are linked to the retail price index of inflation, which has surged to its highest level in decades.
Almost £14 billion of those payments went directly to index-linked debt. Inflation affects debt costs with a two-month lag, meaning December bore the brunt of a surge in the RPI in October to a peak of 14.2%.
7:35 a.m. Good morning and welcome to today’s edition of City Latest. We start with data that showed the UK government sank deeper into debt in December, sending the budget deficit to a record £27.4 billion. That’s almost triple the shortfall a year earlier, and well above economist forecasts for £17.3 billion, colleagues Phil Aldrick and Tom Rees report. Soaring interest payments and the cost of energy support were the key contributors to the ballooning deficit.
Read more: UK Deficit Soars to Record as Inflation Boosts Debt Payments
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