Jan 27, 2023
Pound Stalls on Verge of Fifth Weekly Gain: City Latest
(Bloomberg) -- 4:04 p.m. Let’s take a look at UK markets one last time. While we’ve seen some day-to-day whiplash, the conclusion as trading draws to a close is that caution dominated this week.
The Spotlight Move shows tandem weekly declines for the pound, FTSE 100 and 10-year gilt yields, and the last time we saw such a scenario was in July. The moves underline the fact that while January has been kinder to investors, Britain’s challenges present a formidable hurdle to further gains. That should make for an interesting setup for the BOE next week.
3:28 p.m. Before we wrap up for the day, a quick look forward to next week. The big action then comes on Wednesday and Thursday, when we have the Fed, ECB, and — most importantly for the UK — the BOE announcing policy decisions.
Most analysts expect a 50 basis point hike from the BOE. But the big question is whether that marks then end of the aggressive portion of its tightening cycle, and if Andrew Bailey signals an imminent downshift — or indeed, halt — to their rate hikes. As for markets, traders this week moved to price in a pivot to rate cuts from the central bank later this year.
2:46 p.m. In more signs of a slowdown in inflation in the US, the nation’s personal consumption expenditures price index climbed 5% year-over-year in December, the slowest pace since late 2021, affirming expectations for Federal Reserve policymakers to further downshift the pace of interest-rate hikes.
Michael McKee breaks down the numbers on Bloomberg Television.
1:59 p.m. From remote working abroad to duvet days, workers in the UK are seeking to take advantage of the ultra-tight jobs market with higher pay and more perks.
Companies that either can’t or don’t want to offer homeworking as a perk for staff may fall short in the battle to attract staff.
Reed, the UK’s biggest recruitment firm, sees signs that employers that don’t offer some form of homeworking are having to pay a big premium to lure them in. -- Tom Rees
Read More: Want a Pay Raise? Work Five Days a Week in the Office
1:27 p.m. Short sellers have a bad reputation, particularly with private investors, but it's entirely undeserved. And if they target a company you're investing in, you should probably be grateful for the chance to stress-test your thesis.
Meanwhile, as Chancellor Jeremy Hunt talks of his ambition to get taxes down — eventually — we also take another look at just how much tax the average person pays. Surprise surprise, it's a lot more than you think.
I tackle all this in today's Money Distilled newsletter. — John Stepek
Read More: Be Grateful For Short Sellers
12:52 p.m. Let's turn now to the UK property market.
One piece of analysis jumped out at me from a Morgan Stanley this week: analysts at the US bank reckon London office rental prices are tracking the FTSE 100, suggesting rents could rise over the next year even as a recession takes hold. They say the FTSE — which outperformed during last year's stocks rout — is a pretty good gauge of business confidence, which also feeds into office demand.
Analysts including Bart Gysens elaborate:
“Rental markets are driven by demand more than by supply,” analysts including Bart Gysens wrote in a Jan. 25 note. “And demand is driven by confidence. And the stock market is arguably a pretty good confidence barometer.”
Should the three-decade correlation hold up, the cost of 1 square foot of London office space will rise to about £77.60 in a year’s time, based on a formula of the blue-chip index’s current value divided by 100 — Joe Easton
Read More: FTSE 100 Gains Point to Rising Rental Values for London’s City Offices
12:30 p.m. Hunt’s pushback on tax cuts aligns with this week’s assessment by Britain’s independent fiscal watchdog that the country’s reduced growth potential means there’s little room for giveaways in the March budget.
The Office for Budget Responsibility will produce growth forecasts alongside the budget, which will help determine how much the chancellor can spend against his self-imposed borrowing rules. And as Phil Aldrick and Joe Mayes noted, it certainly doesn’t help that the country’s trend growth has been in long-term decline since the 2000s.
11:36 a.m. A quick check on markets here as the dust settles on Chancellor Hunt’s speech. The pound remains on the back foot and trades below $1.24, while gilts retreat to follow a global pullback in bonds. The FTSE 100 is holding on to gains, led by the energy sector. Hunt’s message that prioritizing inflation over tax cuts has at least kept markets relatively stable. Beyond that, he also pushed back against green energy subsidies and spoke about the HS2 transport line, telling the BBC that it will go all the way to central London as planned.
11:16 a.m. Let’s turn now to some news about British fashion retailer Superdry, whose shares have tumbled more than 15% in Friday morning trading after it cut its profit outlook for the fiscal year.While it has seen shoppers returning to stores over the Christmas period, the optimism may be short-lived. Superdry said it's mindful about the challenges facing consumers and is still cautious about a potentially soft spring. — Lisa Pham
Read More: Superdry Plunges After Warning on Potential Consumer Weakness
10:48 a.m. Hunt has been speaking on Bloomberg TV after his speech. Here’s a clip
10:19 a.m. Here’s the full write up of Hunt’s speech from our political team. The top line? Hunt dismissed calls for tax cuts, warning that “sound money must come first” as he argued that Brexit will drive economic growth.
Read More: Hunt Rules Out UK Tax Cuts While Touting Post-Brexit Potential
9:49 a.m. In his speech, Chancellor Hunt pushed back against the “gloom” over the UK economy.
9:13 a.m. Let’s dig more into expectations for Chancellor Hunt’s speech at Bloomberg’s European headquarters in London, which is due in about 15 minutes.
He’s expected to rule out tax cuts and argue that Brexit will drive economic growth. Opposing what he called a narrative of “declinism” about Britain, Hunt will argue that Brexit can be a “catalyst” for prosperity, insisting: “Our plan for growth is a plan built on freedoms which Brexit provides.”
Tune in to his speech here:
8:53 a.m. Get more details on Sainsbury plus other top UK stories in today’s London Rush — check out the newsletter or watch the video below:
8:38 a.m. Sainsbury Soars
The FTSE’s drop comes despite a large jump in Sainsbury shares. The supermarket is surging after British convenience store operator Bestway Group bought a 3.45% stake in the UK’s second largest grocer and said it may look to buy more.
Bestway is one of the largest family-owned business in the UK with a turnover of about £4.5 billion
8:25 a.m. Pound, FTSE 100 Fall
UK markets are fully open now and its been a donwbeat start to the day for most asset groups.
The pound has extended declines, gilts and down and stocks are also in the red.
8:04 a.m. It's a bit of a mixed bag in markets globally as various stories garner attention.
In geopolitics, Japan and the Netherlands are reportedly poised to join the US in limiting China’s access to advanced semiconductor machinery. That would build a powerful alliance that will undercut Beijing’s ambitions to build its own domestic chip capabilities.
Check out more top reads from today's Five Things newsletter:
- Intel gives one of the gloomiest quarterly forecasts in history
- The European Union proposes a fresh round of sweeping sanctions targeting Belarus
- Companies linked to Indian billionaire Gautam Adani hit back at short seller Hindenburg Research
7:40 Pound stalls on verge of fifth weekly gain
The pound’s performance today will essentially decided its weekly fate.
If it manages to eek out a small gain, that will be the fifth-straight week of advances — the best run in almost two years.
7:30 a.m. Good morning and welcome to today’s edition of City Latest.
The pound is slightly lower this morning, trading under $1.24, while FTSE 100 futures are pointing to a quiet open.
Stick with us as we bring you more news and analysis vital to UK markets.
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