The FTSE 100 jumped at the open after the Federal Reserve accelerated the winding down of its huge stimulus package and paved the way for interest rate rises.
In a hawkish turn on inflation, the US central bank said it will cut its bond purchases by $30bn (£23bn) a month – double the previous pace – a predicted three rate rises next year.
The move sparked a rally on Wall Street last night, while the FTSE gained 1.2pc at the open.
Oil prices have also gained ground following the Fed’s decision, as well as lower US crude stockpiles.
Reddit files confidentially to go public
Reddit, known for its message boards that became the go-to destination for day traders during this year’s meme stock frenzy, said it’s confidentially filed for an initial public offering.
Reuters has the details:
Founded in 2005 by Steve Huffman and entrepreneur Alexis Ohanian, Reddit was valued at $10bn (£7.5bn) in a private fundraising round earlier this year.
Reuters reported in September that the company was hoping for a more than $15bn valuation by the time an IPO takes place.
The filing comes as US IPOs touched record highs in 2021, fuelled by ample liquidity due to accommodative monetary policies. Robinhood, Coupang and Coinbase are some of the companies that launched IPOs in the US this year.
BoE rate rise ‘could come today’, says Goldman economist
The Bank of England could surprise markets with an interest rate increase today after a surge in inflation, according to a top Goldman Sachs economist.
Jari Stehn said he expects “a risk management approach will dominate” in the face of the new omicron variant and the latest restrictions.
The US bank expects rates to be held at 0.1pc “but it’s not a done deal”. He told Bloomberg: “We could get the first rate hike today.”
On the ECB, Mr Stehn said the Governing Council will stress “flexibility” and will keep the option of doing more asset purchases if the economic situation darkens.
Business leaders urge Sunak to ‘come out of hiding’
Incredulous business leaders appealed to Rishi Sunak for help on Wednesday night after Boris Johnson and his Covid advisers urged Britons to cut back on socialising but offered no financial support for the trades affected.
My colleagues Matt Oliver and Helen Cahill have more:
The Chancellor was urged to “come out of hiding” and provide urgent support after Boris Johnson warned Britons to “think carefully” about going out in the run up to Christmas.
Chris Whitty, England’s chief medical officer, also urged people to “prioritise” social engagements and reminded them that catching the coronavirus in the days to come could thwart their hopes of celebrating with family.
The announcement – which stopped short of formally restricting social gatherings – infuriated business groups, who are concerned that increasingly gloomy rhetoric is imposing “lockdown by stealth” and throttling trade.
Many are particularly frustrated by the lack of financial support to compensate them for the impact of the pronouncements, as well as recent guidance to work from home.
Eurozone growth slows to nine-month low
Following lacklustre PMIs for the UK, things aren’t looking much better on the continent either.
The eurozone’s economic growth dropped to its slowest pace in nine months in December as a fresh wave of Covid rattled businesses, especially in Germany.
The PMI reading fell to 53.4 this month from 55.4 points in November. It had hit a high of 59 in August.
The IHS Markit survey added that prices in Europe were continuing on their upward march, though rates of increase had peaked from their record highs a month earlier.
Despite this, the outlook for the future remained strong, with survey respondents confident that pandemic related problems, especially on supply chains, would retreat next year.
Chris Williamson at IHS Markit said:
The eurozone economy is being dealt yet another blow from Covid-19, with rising infection levels dampening growth in the service sector in particular to result in a disappointing end to 2021.
Germany is being especially hard hit, seeing the economy stall for the first time in a year-and-a-half, but the growth slowdown is broad based across the region
Expert reaction: Omicron dashes momentum
Rhys Herbert, senior economist at Lloyds Bank, says:
The UK economy continues to grow but there are signs of a loss of momentum this month in the wake of the doubt created by the emergence of omicron.
To date, the impact is relatively limited. Fewer holiday bookings and cancelled Christmas functions are already hurting those subsectors furthest behind in their recovery, but the wider services industry and the economy as a whole are yet to feel the impact as acutely.
However, it remains to be seen whether the latest restrictions will be successful in curbing infection rates while limiting the impact on businesses.
Fresh uncertainty over the pandemic, and a threat of omicron leading to damper demand, will be influential factors as the Bank of England reveals its decision on the immediate course for interest rates at midday.
Economic growth slumps to slowest since lockdown
Economic output has slumped to its slowest growth since the height of the national lockdown 10 months ago as a surge in cases clouds the outlook.
IHS Markit’s latest PMI showed output falling to 53.2 this month from 57.6 in November. The figure reflected weaker-than-expected growth in service industries including hotels, restaurant and travel-related businesses.
Optimism about the outlook fell to its lowest in four months. Service industries grew at their slowest pace in 10 months following the re-tightening of restrictions.
Manufacturing was still hit by raw material and staff shortages in December, though there were some signs inflationary pressures had eased from November’s highs.
Chris Williamson, chief business economist at IHS Markit, said:
With Covid-19 infections set to rise further in coming weeks due to the spread of the omicron variant, and more restrictions being introduced, the pace of economic growth looks likely to continue to weaken as we head into 2022.
The bigger uncertainty will be on how rising infection rates both at home and abroad might cause further supply and labour shortages, and whether this means the easing of inflationary pressures seen in December proves frustratingly short-lived.
Creditors sue Evergrande for £10bn
Chinese credits are reportedly suing Evergrande for more than $13bn (£10bn) over alleged overdue payments.
The Financial Times reports that a Chinese court assigned to handle civil lawsuits against Evergrande accepted 367 cases, with claims totalling 84bn yuan.
The cases were accepted between late August and earlier this month, in the period after financial regulators told the developer to resolve its debt problems and up to Fitch Ratings’ downgrade of the developer to “restricted default” last week.
Meanwhile, rival property group Shimao jumped as much as 11pc in Hong Kong trading after its shares had fallen to a decade low.
Calm also returned to China’s junk dollar bond market, with average prices rising as much as 2 cents on the dollar in morning trade after Citigroup strategists turned overweight.
FCA slaps GAM and star fund manager with fines
The City watchdog has handed down fines GAM and one of its star fund managers over a conflict of interests scandal.
The Financial Conduct Authority (FCA) slapped the Swiss firm with a £9.1m fine for failing to conduct business with due care and diligence between 2014 and 2017.
The scandal, which sparked a share price crash in 2018, was centred on star fund manager Tim Haywood’s purchase of illiquid debt linked to metals magnate Sanjeev Gupta and Australian financier Lex Greensill.
Mr Haywood, who was subsequently fired by GAM, was also handed a £230,000 fine for failing to comply with conflict of interest rules and the company’s gifts and entertainment policy.
GAM chief executive Peter Sanderson said:
We fully accept the findings of the FCA and acknowledge the conflicts of interest shortcomings which occurred at the firm between late 2014 and early 2018.
Since then we have significantly strengthened our senior management team, governance, control frameworks, policies and training to ensure that all lessons learned from that period are fully embedded into our firm and culture.
Pound gains ground ahead of BoE decision
Sterling has pushed higher against the dollar ahead of the Bank of England’s interest rate decision later today.
While fresh figures showed inflation surged to a 10-year high in November, the rapid spread of omicron has dampened expectations of a rate rise at today’s meeting.
Despite the Fed’s hawkish tilt on Wednesday, money markets are expecting the Bank to hold steady today, with the first rise coming in February.
The pound is up 0.6pc at $1.3293. Against the euro, it dipped 0.1pc to 85.07p.
Schroders confirms talks over Greencoat Capital deal
Fund manager Schroders has confirmed it’s in talks to buy a significant stake in renewables investment firm Greencoat Capital.
It comes after Sky News reported that the company was close to buying a 75pc stake in Greencoat for around £360m, with a potential option to buy the remainder of the firm.
Shares pushed 1.7pc higher following the confirmation.
FTSE risers and fallers
The FTSE has eased off slightly since the open, but it’s still up 1pc. Traders took their cue from the Fed’s hawkish move on stimulus, while attention will now turn to the Bank of England decision at midday.
Miners are leading the gains this morning, with rising copper prices helping to drive a 2pc increase.
Schroders is up 1.4pc after it revealed it’s in talks to buy a 75pc stake in Greencoat Capital for around £360m.
The FTSE 250 has gained 1.1pc, led by Domino’s Pizza, which is up 21pc after ending a long-running dispute with franchisees.
Meanwhile, Boohoo and Asos have both dropped amid a deteriorating outlook for retailers.
France toughens border controls with UK
France will imposes tougher border controls on travellers arriving from the UK in an effort to slow the spread of the omicron variant.
A government spokesman said the validity of Covid tests will be reduced to 24 hours from 48 hours for people coming to France.
Justifications for travel to France will also be limited, with tourist and business travel for non-French and non-EU citizens not resident in France restricted.
People arriving in France from the UK will also have to self-isolate for seven days. This can be lifted after 48 hours on proof of a negative test.
The move will come as a further blow for the travel industry as the new strain of the virus threatens to derail the already fragile recovery.
Boohoo shares slump as outlook darkens
Shares in Boohoo have tumbled to a five-year low after the online fast fashion brand warned increased freight costs and higher return rates would hit sales and profits.
The company lost as much as a fifth of its value, before settling 15pc lower, as it slashed its outlook for the full year.
The downbeat forecast also dragged down rival Asos, which dropped as much as 11pc amid wider jitters among retailers.
Heathrow cleared to increase charges by seven times rate of inflation
The cost of flying from Heathrow will increase next year after regulators signed off on a rise of more than seven times the rate of inflation, writes Oliver Gill.
In a decision that will enrage airlines, passengers will pay £30.19 each in 2022, up from £22 this year. The 37pc increase compares with the current inflation rate of 5.1pc.
But the decision will also disappoint Heathrow, which wanted to increase landing fees to £37 per passenger.
The Civil Aviation Authority (CAA) confirmed its decision on Thursday morning, having previously consulted on a figure of £29.50 per passenger. The £31.19 charge includes an inflationary increase based on April’s consumer prices index.
The rise will apply for the first six months of next year. It is an interim agreement as airlines and the airport argue over a deal that will cover the following five years.
FTSE 100 jumps
The FTSE 100 has made a bullish start to the day following on from the Fed’s decision to wind down stimulus more quickly than previously planned.
The blue-chip index has jumped 1.2pc to 7,254 points.
Traders will now be turning their attention to the Bank of England’s interest rate decision, due at midday.
Rothermere secures deal to take Daily Mail private
Lord Rothermere has secured the backing of shareholders for his deal to take the Daily Mail group private.
The publishing tycoon, who upped his bid to £871m earlier this month, said he had received acceptances for 52.8m shares.
Taken together with the shares he already owns, it means the deal has the support of 57pc of all shares in Daily Mail and General Trust.
It marks a win for the newspaper group’s founding family, which tabled an offer to take the company off the stock exchange following the sale of its insurance business and the listing of online car seller Cazoo.
Domino’s reaches deal in franchisee dispute
Domino’s Pizza said it’s reached an agreement to end a long-running dispute with its franchisees.
Under the terms of the deal, the company will invest £20m over three years, increase marketing spend and improve incentive schemes for new store openings.
In return, franchisees will agree to participate in national promotions, open more stores and test new products.
It marks an end to a bitter row between the company and its store operators over profit share that has rocked its growth plans.
Domino’s also raised its sales targets for the medium term and said it expects to beat its previous aim of opening 200 new stores.
Boohoo warns on profits as supply crunch hits
Boohoo has issued a warning over sales and profits as the online fashion firm battles supply chain disruption, surging costs and higher return rates.
The group said it was bracing for a profit hit of about £20m due to higher freight costs to the UK, while European and overseas trading was also being hampered by consumer uncertainty and delivery delays.
While Boohoo’s UK sales rose by almost in a third over the last three months, they tumbled in all its other markets. Full-year sales growth is now expected to come in between 12pc and 14pc, down from the 20pc to 25pc range previous forecast.
John Lyttle, chief executive of Boohoo, said:
In international markets, our proposition continues to be significantly impacted by ongoing service disruption due to the pandemic, which, in addition to increased recent consumer uncertainty, has weighed on our performance.
Oil and stocks rally on hawkish Fed
As expected, the Fed struck a hawkish tone on inflation following its meeting on Wednesday.
The US central bank said it will ramp up the tapering of its huge bond buying programme, adding it expects three interest rate rises next week.
The move to tame price pressures came after US inflation picked up to 6.8pc in November, the highest rate since 1982. Fed chairman Jay Powell noted the risks of omicron, but played down the economic risk of the new variant.
It comes ahead of the Bank of England’s interest rate decision, due at midday. The European Central Bank will also be making its latest policy update this afternoon.
5 things to start your day
1) Inflation surge gives gives Andrew Bailey an even bigger headache Costs are likely to keep rising even further, putting the Monetary Policy Committee under huge pressure to raise interest rates
2) Heathrow cleared to increase charges by seven times rate of inflation The rise will apply for the first six months of next year as airlines bosses and the airport are arguing over a final deal
3) Rishi Sunak urged to ‘come out of hiding’ to save pubs and restaurants Businesses have called on the Chancellor to provide financial support as more restrictions are implemented
4) Sadiq Khan threatens £20 council tax rise to bail out the Tube Mayor also plans to raise age for free travel on London’s public transport network unless Government gives TfL a multibillion-pound bailout
5) New German chancellor encourages more immigration Olaf Scholz says he will allow multiple citizenships, meaning immigrants can retain their existing nationality while also becoming Germans
What happened overnight
All three main indexes on Wall Street rallied after the Federal Reserve announced it was speeding up the taper of its pandemic financial support, and much of Asia followed suit: Tokyo was up more than 1pc as the dollar’s rise against the yen helped exporters, while Shanghai, Singapore, Seoul, Taipei, Manila and Jakarta were also up.
Coming up today
- Corporate: Go-Ahead Group, IntegraFin, Hyve Group (Full-year results); ITM Power (Interims); Petrofac, Serco, Hunting (Trading update)
- Economics: Bank of England interest rate decision (UK), ECB interest rate decision (EU), PMIs (UK, US, EU), jobless claims (US), employment (EU), housing starts (US)