FTSE lowest since March
The FTSE 100 is at its lowest level since March, now down 1.8% today.
Of the 100 constituent members of the index, 96 stocks fell, compared with just 4 stocks that rose. Intertek was a major exception, with the stock up 3.2%.
Today’s shocking inflation figures have also led to an increase in gold-plated bond yields, amid growing concerns about interest rate hikes in the near term.
City comment: Did we avoid the recession or just delay it?
Rarely does good news feel so bad.
Of course, it’s a relief that the era of double-digit inflation seems to be finally over.
But the bond market hates what they see, especially an increase in core inflation.
The implications of this are quite profound – and unsettling.
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Investors panic as inflation shock fuels interest rate hike fears
Municipal markets today reacted with alarm over worse-than-expected inflation numbers with bond yields rising and equities falling on fears of continuing interest rate hikes.
The consumer price index fell to just 8.7% in April compared with economists’ expectations of 8.3%. Even more worrisome is that core CPI, which excludes volatile food and energy prices, actually rose from 6.2% to 6.8%, the highest level since March 1992.
The “sticky” data has forecasters rushing to revise their predictions with financial markets now predicting the Bank of England will have to raise interest rates at least two more times to 5% in August – and possibly even more in the fall.
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Lidl Supermarket announces third salary increase in a year
Supermarket chain Lidl has announced its third wage increase in a year, affecting all of their 24,500 hourly workers.
Shop and warehouse staff working outside the M25 will receive an hourly wage increase to £11.40 from £11.00, to £12.30 over time.
Hourly pay for those inside the M25 will rise to £12.85 from £11.95, rising to £13.15.
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FTSE 100 down 1.5%, Aviva down 3% after update
The threat of a US debt default and fears of more rate hikes sent London’s FTSE 100 index plummeting today.
Wall Street worries about the debt ceiling contributed to a bad session across Europe as the FTSE 100 index fell 1.5% or 114.13 points to 7648.2.
Persistent signs of high core inflation also mean selling in London homebuilder stocks as traders price higher interest rates.
Shares in Aviva sold off, falling 3 per cent or 11.5p to 412.3p although chief executive Amanda Blanc hailed the encouraging first quarter results.
This includes “attractive margins” in general insurance despite cost constraints, as well as an 11% increase in health and protection sales.
Among other insurers, Legal & General fell 7.1p to 230.4p and Prudential lost 39.5p to 1131.5p.
On the shortened FTSE 100 price tag, BT Group jumped 1.45p to 150p as Ofcom ruled that new prices at regulated division Openreach were not anticompetitive.
The FTSE 250 index fell 1.4% or 267.27 points to 18,941.04, with cruise stocks Carnival and TUI down 5%.
Homeowners warn they could be hit by two rate hikes this summer
Homeowners were warned on Wednesday that they could face two more rate hikes that could happen this summer.
Economists have sounded the alarm that the Bank of England’s Monetary Policy Committee could be forced to raise interest rates from 4.5% in June, then possibly again in within a few months, to strictly control inflation.
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Great Portland Estates owner joins call to rethink tourist tax
The chief executive of London property developer Great Portland Estates has joined a growing list of City voices calling for the government to consider eliminating the ‘tourist tax’.
GPE is best known for its offices, but it also has several retail locations including on Bond Street.
Many bosses have recently expressed concern about the impact on retail from the government’s repeal of VAT-free shopping when the UK leaves the EU in 2021.
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Banks colluding on bond transactions say watchdog
FIVE top banks could face hefty fines after competition watchdog announced they shared sensitive information about government bond trading.
Those confidential online chats can be detrimental to other investors and hurt both taxpayers and the Treasury.
The Competition and Markets Authority claimed Citi, HSBC, RBC, Deutsche and Morgan Stanley exchanged data on bond trading rather than compete with each other.
They did it in Bloomberg chat rooms from 2009 to 2013 after the global financial crisis when the UK government needed to raise money from bond auctions.
Both Citi and Deutsche have been commended for admitting their involvement in the scam and will escape severe punishment.
The remaining three banks did not admit any wrongdoing.
Michael Grenfell, executive director of enforcement at the CMA, said internal conversations “may have denied taxpayers, pension savers and financial institutions the benefits of being fully competitive for with these products, including minimizing borrowing costs.”
He added: “A well-functioning, competitive bond market will benefit tens of millions of taxpayers and pension savers and is at the heart of the UK’s reputation as a is a global financial center.”
The CMA said the conversations were believed to be related to the buying and selling of UK government bonds – specifically, asset and backend swaps – and included details on pricing and other transactions. Another aspect of trading strategy.
All five banks have been in a privileged position known as GEMMs – sharp market makers.
Bloomberg itself is not under investigation, the CMA said. Its findings are provisional and the investigation continues.
The watchdog has a “gang hotline” for anyone who wants to report similar actions. It’s 0203 7386888 or email@example.com.
Inflation “falls like a snail”
Susannah Streeter, head of currency and markets at Hargreaves Lansdown, said further rate hikes could hamper the economy’s early signs of growth, but they may be the only way out. to bring prices back under control.
She said: “’Inflation has skyrocketed like an eagle and tore through our standard of living, but it is falling at a snail’s pace and leaving a hard trail in prices afterwards. “Growing 8.7% in the year to April, overall consumer price growth was higher than expected and more than four times the Bank of England target. More worryingly, core inflation, which excludes volatile food and energy prices, has rebounded to 6.8%. It shows that the price spiral is still proving to be a stubborn beast to conquer for the Bank of England.
“Another rate hike could result in a herd of rhinos trampling on the economy, which is just seeing some green sprouts as the recession is expected to subside. But policymakers don’t have many other strategies to deploy right now to push inflation in the right direction.”
Inflation reading provides mixed signals for the pound
The British pound was almost unchanged against the dollar today at $1.2422.
Matthew Ryan, head of market strategy at global financial services firm Ebury, said the latest inflation figures present mixed signals to currency traders, but investors have seen more signs of strength than weakness in the short term.
“The data have relatively mixed meanings for the pound. On the one hand, persistently increasing inflationary pressures, especially in the core index, could raise new concerns about the UK economy’s outlook,” he said. “We continue to argue that a recession in the UK will be avoided by 2023, although it is clear that the still severe cost of living crisis poses serious risks to this outlook. On the other hand, today’s data makes additional Bank of England rate hikes increasingly likely.
“In our view, the latter will be of more pressing importance for investors in the near term, hence the pound to recover after today’s data. “