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Pub chain M&B warns on further wage inflationary pressure ahead
09:02 , Simon Hunt
The Christmas office party made a comeback in 2023, pub chain Mitchells and Butlers said today, as it cheered a jump in winter trading.
M&B said inflationary pressure had eased off but warned it was not over yet, with a near-10% rise in the National Living Wage set to push up staff costs considerable.
The Birmingham-based business, which operates the All Bar One, Harvester and Toby Carvery brands, posted 9% and 7.2% rises in food and drink sales respectively in the seven weeks to last Saturday. It said its full-year sales would be at the top end of market expectations, adding it would continue to grow market share and profitability.
CEO Phil Urban said: “Growth was particularly strong on key dates, with record sales for Christmas day based on 229,000 meals served, supported by strong trading in the run up to Christmas, with the return of work parties and festive gatherings driving sales.”
Shares fell 1.3% to 252p.
Inflation setback, but is it a sign UK avoids recession?
08:37 , Daniel O’Boyle
Michael Browne, chief investment officer at Martin Currie, says “continuing optimism” in the service sector led to today’s inflation setback.
That would be bad news for those hoping for interest rate cuts soon, but it could mean that the UK is more likely to escape an end-of-year recession. A decline in December GDP would likely mean the UK would meet the technical definition of a recession.
“The UKI CPI came in at a surprisingly high figure for December of 0.4% month on month and 4.2% year on year. Whilst this is a setback after the downward surprise in November, the cause is an acceleration in services inflation, in line with the continuing pick up in optimism in the sector as seen from the PMI data. Also rising sharply are travel costs, driven by tube, train and plane ticket price inflation while rentals costs are not yet falling.”
Miners and builders led FTSE 100 retreat, Trustpilot down 4% in FTSE 250
08:37 , Graeme Evans
Leading European benchmarks are more than 1% lower, with the FTSE 100 index down by 98.77 points to 7459.57 and the FTSE 250 index off 254.85 points to 18,938.47.
Big fallers in the top flight included Persimmon and Taylor Wimpey, with the housebuilders down more than 2% on the reduced chances of a near-term cut in UK interest rates.
The increased uncertainty over the UK economy meant NatWest shares lost 4.6p to 204.1p and Legal & General retreated 5.3p to 242.2p.
Copper miner Antofagasta fell 4% or 60.5p to 1561.5p after its production update, while Glencore shed 13.1p to 426.1p on the back of Deutsche Bank removing its “buy” recommendation.
The FTSE 250 fallers board included consumer reviews platform Trustpilot and luxury car maker Aston Martin Lagonda after declines of 4%.
Market snapshot as surprise inflation triggers stock selloff
08:18 , Simon Hunt
Blue-chip shares fell sharply in the opening minutes of trade in London after surprise inflation numbers forced investors to adjust their rate cut forecasts.
Here’s a look at your key market data this morning.
UK ‘recoupling’ with rest of world on inflation
07:54 , Daniel O’Boyle
The UK’s inflation rate may have risen, but economist Simon French notes that we are becoming less of an outlier among rich countries.
The difference between the UK CPI and the average of other G20 countries narrowed, as inflation picked up steam across most of the world in December.
But inflation here still remains higher than in most peer nations.
Rate cut predictions pushed back to June or August
07:54 , Simon Hunt
City analysts are now expecting the Bank of England’s first rate cut to be in June or August, rather than May, in light of this morning’s surprise rise in inflation.
Here’s a look at the latest predictions, according to Refinitiv data:
Black friday deals help sales at model train maker Hornby to steam ahead
07:50 , Joanna Bourke
Black Friday deals attracted a flurry of new customers to Hornby, the model train maker set said as it reported a 5% rise in third quarter sales.
The firm, which sells brands such as Scalextric, added that cumulative group sales for the financial year to date are ahead of last year by 6%.
It was helped by a strong Black Friday performance, with more than 50% of all those transactions from first time purchasers. Hornby also said: “We continue to work on responsibly reducing the excessive, historical, inventory position through the remainder of the year.”
FTSE 100 seen 100 points lower amid interest rate uncertainty
07:47 , Graeme Evans
Futures trading suggests the FTSE 100 index is about to open 1.3% or 98 points lower, a deterioration on the decline of about 50 points forecast by IG Index prior to the inflation reading.
Sentiment was already weak after a leading US Federal Reserve policymaker pushed back on Wall Street expectations for a series of rapid interest rate cuts.
The 10 year Treasury yield rose above 4% last night after its largest one-day increase in over two months.
Brent Crude this morning weakened to $77.69 a barrel following the developments, with the pound steady against the dollar at $1.2653.
‘Far from clear’ Bank can deliver rate cuts market expects
07:37 , Daniel O’Boyle
Melissa Davies, Chief Economist at Redburn Atlantic, disagrees with the commentators who think UK inflation will still fall fast enough for the Bank of England to cut rates soon.
She said: “UK inflation increased in December from 3.9% to 4.0% now that the bulk of the energy price deceleration is behind us. Core inflation stayed steady at 5.1%. Food price inflation continues to moderate but alcohol and clothing inflation rose. “
It is far from clear that the Bank of England’s job is sufficiently done to allow a swift series of rate cuts, as expected by the market. In fact, there are a number of reasons the Bank should hold the line on rates into the second half of the year and then proceed slowly with cuts.
“Wage inflation remains elevated, services inflation is high and sticky, while goods inflation is poised to bounce in the face of renewed supply chain pressures. Moreover, the housing market is reviving in response to falling mortgage rates, and fiscal policy is easing yet again, working against the Bank’s efforts to tame price pressures.”
888 – UK punters spent 18% less on average in 2023
07:34 , Daniel O’Boyle
William Hill owner 888 holdings says UK punters spent 18% less on average this year with the bookie as it implemented a number of the Government’s proposed safer gambling rules.
A series of gambling reforms were announced in the spring, headlined by requirements to perform checks on any customer that deposits more than £125 a month, with more detailed credit-check-like measures for those spending £1,000 a day. The reforms aren’t law yet but operators including 888 have already started to bring them in.
Today, the firm revealed its UK revenue was down 8% in 2023, despite a rise in customers. Average spend per customer was down 18% in the UK.
Elsewhere, the firm took an £80 million hit as it moved away from so-called “grey markets” where gambling is not regulated.
Total revenue was down 8% to £1.7 billion, while underlying profit margins are at the bottom of 888’s 18-19% range, suggesting profits of about £308 million.
Will inflation rise again this month after December increase?
07:30 , Daniel O’Boyle
Capital Economics deputy chief UK economist Ruth Gregory says inflation may rise again in January, but will get back on track in the following months.
Gregory said: “What we hadn’t anticipated was the sharp pickup in alcohol and tobacco inflation from 10.2% to 12.9%. And it is a little concerning that services CPI inflation popped back up from 6.3% to 6.4%. But that’s not too much of a blow as it held onto most of the fall since September from 6.9%, leaving it comfortably below the 6.9% rate the Bank projected at the time of the November Monetary Policy Report. Meanwhile, the further easing from -5.4% in November to -8.4% in December suggests there is no evidence of the rise in second-hand car prices that is supporting inflation in the US.
“Overall, we think that CPI inflation will rise a bit further in January. But favourable base effects will push down inflation in February, March and April. CPI inflation in April will also be dragged down by what is shaping up to be a fall in the Ofgem utility price cap of 10% or more. As a result, we still think that inflation will be below the 2% target by April and the Bank of England will be in a position to start cutting interest rates by June.”
BP unveils new CEO
07:23 , Simon Hunt
BP has unveiled its new CEO: Murray Auchincloss.
A long-serving BP employee, Auchincloss became interim CEO in September after Bernard Looney stepped down amid allegations that he was dishonest to the board over past relationships with employees.
Before that, Murray had been BP’s chief financial officer since July 2020, at which time he also joined BP’s board. He had previously served as CFO, deputy CFO and head of business development for bp’sâ¯Upstreamâ¯segment. From 2010-2013 Murray was head of GP’s group chief executive’s office, working directly with Bob Dudley.
The 53-year-old will receive a base salary of £1.45 million as well as a bonus and a cash allowance in lieu of a pension.
Liontrust sees £1.7bn in fund outflows
07:22 , Simon English
The strife in the active fund management sector continued today when Liontrust Asset Management said it had seen clients pull £1.7 billion out of the business in the last quarter.
Star stock pickers Terry Smith and Nick Train recently admitted to similar woes, as they failed to keep pace with markets and clients withdrew funds to cope with the cost of living crisis.
Liontrust CEO John Ions said: “Among the drivers of the net outflows in the last quarter, totalling £1.7 billion, were the ongoing negative sentiment among investors and the current challenges facing active asset managers. These challenges include the fact active managers have never been confronted by such a competitive environment to attract and retain assets as is the case now, both from within and outside the sector.”
Ions claims that many shares are now cheap and offer a good opportunity for investors to get into the market at bargain prices.
He has made two big hires.
Mark Hawtin – and his three-strong team – to join in May as Head of Global Growth Equities and Jeremy Roberts to join in April as Head of Global Distribution.
Liontrust says lately its fund performance has improved.
Bag brand Mulberry’s sales down amid luxury retail challenges
07:20 , Joanna Bourke
Mulberry Group has not been immune from challenges in the luxury sector in the run up to Christmas, with revenue at the bag maker down 8.4%.
The AIM-listed retailer, which stuck to a full price sales approach, saw the revenue decline most hard in the UK, down 4% in the 13 weeks to December 30.
The sector has faced slowing demand as wealthy shoppers look at the impact of rising inflation and economic uncertainty. More to follow
Asia shares slide as China GDP misses hopes, FTSE 100 seen lower
07:18 , Graeme Evans
European markets are set for another poor session after Wall Street began a holiday shortened week in the red and China reported GDP short of hopes.
The FTSE 100 index closed 0.5% lower last night and is forecast to shed another 53 points to 7505, according to CMC Markets.
In Asia, the Hang Seng index tumbled 4% and the Shanghai Composite lost 2% after China said its economy expanded 5.2% in the fourth quarter.
That’s an improvement on the 4.9% of the previous quarter but below the 5.3% forecast. Excluding the pandemic years, the growth rate for 2023 of 5.2% is the weakest in three decades as the country’s performance is hit by debt fears in the property sector.
On Wall Street, the Dow Jones Industrial Average closed 0.6% lower after Morgan Stanley missed profit expectations and a leading Federal Reserve policymaker cooled expectations on the outlook for US interest rate cuts.
Inflation ‘still on course to hit target sooner than Bank expects
07:10 , Daniel O’Boyle
Jeremy Batstone-Carr, European Strategist, Raymond James Investment Services, says: “The ONS’s announcement of December’s inflation data confirms a pause for breath following sharper declines than expected in the two months prior. The monthly headline rate of CPI edged up by 0.4%, the same rate as November, a consequence of retailers increasing prices following the Black Friday sales, but this rise disguises continued falling food prices seen across autumn. Although prices are still rising in aggregate and remain above the Bank of England’s desired 2% target, the general direction of travel indicates that the economy will begin to blossom again as winter turns to spring.
“When the Bank releases its overhauled forecasts, estimates will likely reflect this encouraging trend in domestic price pressures. This data has come too soon to capture any potential upside risk associated with shipping disruptions in the Red Sea, but this will likely be reflected in next month’s figures and will likely make little more than a marginal difference.
“The Bank’s rate-setters will take heart from the strong likelihood that price pressures will continue to subside in the months to come. Energy regulator Ofgem is also expected to deliver a sharp drop in the utility price cap in April, which will ease pressures on British households and may well be sufficient to drive inflation down to target far sooner than the Bank’s current expectations.”
Just Eat orders slip
07:05 , Simon Hunt
Just Eat Takeaway order numbers fell 6% in the UK last year and as much as 16% in Southern Europe as consumers on squeezed incomes pared back their takeaway orders.
Global order numbers fell 9% in 2023, the London-listed firm said today, while gross transaction value, a measure of the total size of orders, declined 6%. Demand in the UK and Northern Europe faired better, with GTV up 5% in the fourth quarter.
Just Eat said its earnings had come in ahead of expectations at €320 million, and the firm had now become cashflow positive.
CEO Jitse Groen said: “We are excited that both our Northern European and UK and Ireland segments have achieved their all-time high quarterly GTV level, showing the strength of our European business.
“At the same time, we have achieved a significant milestone with the Company now becoming free cash flow positive. We are very much looking forward to 2024.”
Inflation back up to 4%
07:03 , Daniel O’Boyle
Inflation ticked back up to 4% in December, slightly ahead of expectations.
Economists had expected the rate of price rises to dip to 3.8%.
Core inflation, which strips out food and energy prices, was also ahead of expected at 5.1%, unchanged from November.
ONS Chief Economist Grant Fitzner said: “The rate of inflation ticked up a little in December, with rises in tobacco prices due to recently introduced duty increases.
“These were partially offset by falling food inflation, where prices still rose but at a much lower rate than this time last year.
“Meanwhile, the prices of goods leaving factories are little changed over the last few months, while the costs of raw materials remain lower than a year ago.”
06:39 , Simon Hunt
Good morning from the Standard City desk.
Yesterday, a merger between Panmure Gordon and Liberum was announced.
The surprising thing is not that it has happened, but that it took so long.
Ever since Bob Diamond — the former Barclays chief once dubbed the unacceptable face of banking, but really just a deal maker like many others — rocked up at Panmure in 2018 the talk has been of when he would strike.
The arrival two years ago of acolyte Rich Ricci — bankers called Diamond and Ricci sound like cartoon characters — heightened expectations.
But other possible deals — with Numis and then Cenkos — went to other places. Had Diamond lost his touch?
Today’s all-share merger with Liberum suggests he was just biding his time.
The deal breathes new life into both firms and gives hope to the under-served smaller firms who desperately need what the City has to offer but discover the likes of Goldman Sachs et al find them not worth the bother.
Goldman and co have also been slashing jobs due to a dearth of the big deals on which they thrive.
Panmure Liberum is about growth. It will have 300 staff in the heart of the City and about 250 UK corporate clients.
Those clients suddenly have access to the extensive contacts Diamond and Ricci have built up after all these years.
Moreover, Panmure itself recently turned a profit for the first time in a long while.
We should wish them and their new venture well.
Here’s a summary of our other top stories from yesterday:
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