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FTSE 100 Live 12 June: Index up 1% as US inflation declines, Fed holds

The US interest rate outlook is today’s major focus amid a stronger session for European markets.

A double bill from the world’s biggest economy features May’s inflation reading and the latest Federal Reserve policy decision. Inflation in the world’s largest economy declined, with core inflation coming in lower than expected, but it’s unlikely to change the Fed’s decision today.

The FTSE 100 has rallied after yesterday’s 1% slide, but with Legal & General lower on the back of a strategy update.

FTSE 100 Live Wednesday

  • US rates set for no change

  • Legal & General updates strategy

  • DFS shares slide on low demand

US Fed holds

Wednesday 12 June 2024 19:07 , Daniel O'Boyle

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The Federal Reserve has held interest rates, as expected.

It said: “June 12, 2024

Federal Reserve issues FOMC statement

For release at 2:00 p.m. EDT

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Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. In recent months, there has been modest further progress toward the Committee's 2 percent inflation objective.”

City Comment: Next Government must be focused on growth, not tinkering

Wednesday 12 June 2024 16:31 , Daniel O'Boyle

There are parts of California where it rains no more in a year than Britain received in a month in April.

Admittedly they are largely uninhabitable desert, but they will provide Rishi Sunak with a dry refuge should he one day decide to relocate to the west coast after the UK political career comes to an end.

How the Prime Minister must hate the sight of the wet stuff cascading down as it seems to have done almost without a break since last October.

Read more here

Does US inflation reading open door to Fed rate cut?

Wednesday 12 June 2024 15:22 , Daniel O'Boyle

Preston Caldwell, Chief US Economist for Morningstar, says: “In the Fed’s March FOMC projections, the central bank called for cutting rates three times in 2024 if core PCE merely dropped to 2.6% year over year by the fourth quarter of 2024. But we are ahead of schedule, with core PCE likely to drop to 2.5% year over year for May. It therefore seems logical that, today’s news would open the door to a July rate cut, although we still think that is very unlikely given the hawkish rhetoric from the Fed recently. However, rate cuts starting by September should now be cemented as overwhelmingly likely.

“We are wary of reacting too strongly to one month’s news, with bond yields dropping dramatically (the 10YR down 12 basis points). Still, this does push market expectations closer to our views of steeper rate cuts over the next two years, and corrects for the overreaction to the inflation uptick seen in the first quarter of 2024.”

Raspberry Pi hits unicorn status as IPO woos investors

Wednesday 12 June 2024 15:09 , Daniel O'Boyle

Raspberry Pi has become the latest British tech company to achieve unicorn status after the computing firm wooed investors with its London flotation.

On Tuesday the The Cambridge-based business, which makes small single-board computers, priced its shares at 280p in its IPO on the London Stock Exchange, raising £166 million from the listing with the terms suggesting a valuation of £541.6 million.

But shares in the company soared by as much as 40% to 390p within minutes of markets opening.

Read more here

US inflation fall 'cancels out' strong job growth

Wednesday 12 June 2024 14:24 , Daniel O'Boyle

By Kathleen Brooks, research director at XTB, says: “Overall, this confuses the outlook for the US economy: jobs growth is strong, yet inflation is moderating. What should the Fed do in this situation? If the market reaction is anything to go by, then the Fed will be dovish later on this evening when they announce their latest policy report. The 2-year Treasury yield fell 13 basis points, reversing Friday’s gain after the bigger than expected payrolls report.

“From a market perspective, the payrolls report and the CPI report cancelled each other out”

FTSE 100 up 1% after US inflation figures

Wednesday 12 June 2024 13:34 , Daniel O'Boyle

The FTSE 100 has climbed higher as US inflation declined, and is now up more than 1% for the day.

London’s top flight erased yesterday’s gains and is up 86 points at 8,233.83.

Rentokil remains the top riser.

Wednesday 12 June 2024 13:31 , Daniel O'Boyle

Inflation in the US came to 3.3% in May, in line with expectations.

Core inflation came in at 3.4%, a little below where it was expected.

On a month-on-month basis, prices were unchanged while core prices rose by 0.2%.

The reading is unlikely to change anything for the Fed’s meeting today, with a hold all but certain, but could push forward the timing of its first cut.

US inflation to tick down on economic eclipse day

Wednesday 12 June 2024 12:49 , Daniel O'Boyle

US inflation is expected to tick down slightly, ahead of today’s Federal Reserve meeting.

Inflation is set to dip to 3..3% year-on-year. On the month-on-month basis, the rate of price rises is expected to decline to 0.1%.

Core CPI inflation - which the Fed will be watching closely - could prove stickier though. It is expected to dick down as well, but only to 3.5%, or 0.3% month-on-month.

In a rare US economic eclipse, the US will publish its latest inflation figures just hours before the Fed announces its latest interest rates decision. But regardless of the data

Starling Group says still committed to future IPO as profits leap

Wednesday 12 June 2024 12:29 , Daniel O'Boyle

Starling Group has said it is “very committed” to future plans for a London stock market listing as the digital lender revealed higher interest rates helped annual profits surge by 55%.

The bank’s interim chief executive, John Mountain, said while the group had not decided when to list, plans for an initial public offering (IPO) were being discussed regularly by the board and shareholders.

London would also be its “natural home” for any potential flotation, he added, in what would see it buck the recent trend that has seen a swathe of firms choose overseas stock markets for their IPOs or to switch their listings abroad.

Read more here

Tools hire group HSS shares slide after losing major contract

Wednesday 12 June 2024 11:27 , Daniel O'Boyle

Tools and equipment hire group HSS has seen its share price tumble by a tenth on Wednesday after revealing that a major client was walking away from a contract.

HSS Hire Group told shareholders that infrastructure business Amey had decided to switch to a different supplier for its equipment rental services.

The deal with Amey had accounted for about 7% of HSS’s revenues and a tenth of its adjusted earnings in 2023, the firm said.

Read more here

Rentokil surges on Peltz stake, Frontier shares 6% higher after update

Wednesday 12 June 2024 10:30 , Graeme Evans

Rentokil Initial shares have jumped 15% after Nelson Peltz’s Trian Partners emerged as a top 10 shareholder in the pest control firm.

The interest of the activist investor comes with Rentokil’s valuation under heavy pressure due to weak US demand in the wake of 2021’s transformational deal to buy Terminix.

Bloomberg reported that Trian had built a “significant position” and that it was willing to discuss ideas and initiatives to improve shareholder value.

The interest of Peltz, whose previous London-listed targets have included Unilever and the plumbing supplies firm Ferguson, left shares 54.2p higher at 469.4p.

That’s the highest level since April but still down by around a third on the position last October.

AJ Bell investment director Russ Mould said: “Peltz is likely to pursue a big shake-up of a company which has struggled in comparison with its US peer Rollins.

“Given Rentokil does a large chunk of its business across the Atlantic this could include a push to shift its primary listing to the US, which would be another blow to the prestige of London as a listing venue.”

The Rentokil interest came during an improved session for the wider London market as the FTSE 100 index followed yesterday’s 1% reverse by adding 54.95 points to 8202.76.

Among smaller stocks, video games publisher Frontier Developments jumped 6% or 17.5p to 294.5p after reporting a robust end to its financial year.

The second half return to profitability was aided by a strong back catalogue performance and the successful release of Planet Zoo: Console Edition in March.

Analysts at Liberum today backed the shares to reach 500p after naming Frontier their “top pick in the gaming space”.

Co-op Bank apologises after payments appear to be taken twice from some accounts

Wednesday 12 June 2024 09:53 , Daniel O'Boyle

The Co-operative Bank has apologised after customers said a glitch had taken payments twice from some small business account holders.

One person on X, formerly Twitter, complained that they are “almost £5k down thanks to this with no resolution in sight”.

It is unclear how many accounts were affected by the glitch.

Read more here

Could stagnation be a positive catalyst for a rate cut?

Wednesday 12 June 2024 09:15 , Daniel O'Boyle

Michael Field, European Market Strategist at Morningstar, said the UK’s weak growth could be good news for those hoping to see a rate cut soon.

He said: “Weak economic readings such as these are never a cause for cheer. However, with the Bank of England poised to decide on when to cut interest rates, data points like todays might actually prove to be a positive catalyst, removing any concern the Bank might have of a potentially heating economy, and paving the way for a sooner than expected rate cut.”

FTSE 100 higher, Rentokil shares jump on activist stake

Wednesday 12 June 2024 08:31 , Graeme Evans

European markets have steadied after a turbulent week so far, with the FTSE 100 index up 45.79 points to 8193.60 and the Paris-based CAC 40 up by 0.3%.

Banking stocks are stronger on both sides of the Channel after SocGen and BNP Paribas lifted 1% and London-listed Lloyds Banking Group improved 0.8p to 54.1p.

The biggest rise in the FTSE 100 index was by Rentokil Initial, which jumped 14% or 58p to 473.2p after Bloomberg reported that activist investor Nelson Peltz has taken a big stake in the pest control firm

Legal & General topped the fallers board, down 4% or 9.3p to 233.8p as investors gave a cool response to its share buyback plans and the strategy of new CEO António Simões.

The FTSE 250 index rose 48.34 points to 20,315.19, with shares in Molten Ventures up 13p to 350p after the high growth tech investor posted annual results.

DFS shares sink 10% on 'record low' demand

Wednesday 12 June 2024 08:20 , Simon Hunt

Shares in DFS sunk as much as 10% to 101p in the opening minutes of trade after the furniture maker slashed its guidance and warned of ‘record low’ demand.

The firm has halved its full-year pre-tax profits forecast from £20-25 million to £10-12 million, while sales will sink from just over £1 billion to just under the £1 billion mark.

DFS said: “Consumer demand in the upholstery sector has declined c-10% in volume terms year on year from a weak starting point bringing overall market demand levels to record lows.”

Special Opportunities REIT: London's biggest IPO of 2024 falls through in fresh blow to City

Wednesday 12 June 2024 08:00 , Daniel O'Boyle

What would have been the biggest London IPO in a slow year has fallen through, after Special Opportunities REIT failed to raise the minimum £250 million required to go ahead with the plan.

The investment trust, which aimed to buy cut-price office properties as the sector readjusted to the rise of work from home, had initially planned to raise £500 million in a London Stock Exchange float. That would have been the largest amount raised in an IPO this year, with Air Astana and Raspberry Pi the only two other floats of any notable size.

Read more here

US interest rates on hold amid inflation's slow retreat

Wednesday 12 June 2024 07:49 , Graeme Evans

The Federal Reserve is set to keep interest rates on hold for a seventh meeting in a row, a few hours after the release of May inflation figures.

Wall Street economists expect an unchanged headline inflation rate of 3.4%, with the figure on core prices down slightly to 3.5%.

The stickiness of inflation means dot plot projections alongside today’s policy decision are likely to show only one or two rate cuts later this year.

Henk Potts, market strategist at Barclays Private Bank, said: “Concerns that it will take longer for inflation to sustainably return to the 2% target have supported postponing the start of the rate-cutting cycle, despite a slowdown in domestic activity.”

Legal & General overhaul to combine asset management units, £200 million share buyback on the way

Wednesday 12 June 2024 07:45 , Michael Hunter

Legal & General, one of the best-known names in the City, has announced major restructuring plans and unveiled a £200 million share buyback.

The pensions and investment behemoth – which has £1.2 trillion in assets under management – said today that it the move was “focused on three core divisions” and would mean a “simpler and better-connected business”.

It will create a single “Asset Management division” by combining Legal & General Investment Management with Legal & General Capital. The two units will become what L&G called a unified, global, public and private markets asset manager.

The 188-year-old firm has a market value of almost £15 billion and has spent 5 months reviewing the business.

Its CEO António Simões said: “L&G is in prime position to respond to and benefit from major structural and societal changes.

“Changing demographics, climate transition, economic uncertainty and technology are driving demand for trusted, experienced investors that can manage risk through the cycle, originate productive assets, and deliver returns for savers.”

There will be a revised capital allocation policy across the group and it will target an operating return on equity of over 20%.

That will help drive its capital return plans. L&G said the buyback announced today was “the first step of a plan to increase returns to shareholders”.

Alongside the Asset Management unit will be its Institutional Retirement pensions business for corporate pensions and a Retail unit for individuals saving for pensions.

Mixed bag for GDP as construction offsets services growth

Wednesday 12 June 2024 07:36 , Simon Hunt

The 0.2% growth in the services sector was offset by falls in both the production and construction sectors in April 2024, thr ONS has found.

FTSE 100 steadies after 1% slide, US rates in focus

Wednesday 12 June 2024 07:21 , Graeme Evans

The FTSE 100 index is poised for an improved session after leading Wall Street stocks rallied ahead of a big day for the US interest rate outlook.

The tech-focused Nasdaq jumped 0.9% to near a record while the S&P 500 lifted 0.3%, fuelled by a rebound of 7% for Apple on the back of its AI plans.

Today’s US session sees the release of inflation figures at 1.30pm UK time followed by the latest Federal Reserve policy decision in the evening.

Interest rates are set to remain on hold, with traders looking to the latest projections for guidance on when borrowing costs might fall.

The FTSE 100, which finished yesterday’s session 1% lower at its lowest level since late-April, is forecast to open this morning 32 points higher at 8180.

UK still on for good Q2?

Wednesday 12 June 2024 07:19 , Daniel O'Boyle

Paul Dales, chief UK economist at Capital Economics, says the UK could still be on for a decent Q2 performance even without any April growth.

Dales says: “Even modest 0.1% m/m rises in GDP in both May and June would generate a 0.4% q/q rise in GDP in Q2 as a whole. That would be down from Q1’s 0.6% q/q gain. But it would be bit higher than our forecast of 0.3% q/q and as it would be stronger than the Bank of England’s forecast of a 0.2% q/q rise it further diminishes the already small chances of an interest rate cut next Thursday.

“Overall, despite the stalling of the recovery in April, the dual drags on economic growth from higher interest rates and higher inflation will continue to fade throughout the year. That will generate a bit of an economic tailwind for the next government.”

DFS cuts guidance on 'record low' demand and Red Sea delays

Wednesday 12 June 2024 07:18 , Simon Hunt

Furniture maker DFS has slashed its revenues and profits forecast, citing weak consumer demand and shipping delays brought about by troubles in the Red Sea.

The firm has halved its full-year pre-tax profits forecast from £20-25 million to £10-12 million, while sales will sink from just over £1 billion to just under the £1 billion mark.

DFS said: “Consumer demand in the upholstery sector has declined c-10% in volume terms year on year from a weak starting point bringing overall market demand levels to record lows.

“Consumer demand in the upholstery sector has remained challenging and Red Sea routing issues have persisted resulting in delays to customer deliveries and higher freight costs.”

Sofa seller DFS has reduced profit and sales guidance  (Nicholas T Ansell/PA) (PA Wire)
Sofa seller DFS has reduced profit and sales guidance (Nicholas T Ansell/PA) (PA Wire)

Weak GDP figures a 'blip'?

Wednesday 12 June 2024 07:15 , Daniel O'Boyle

Jeremy Batstone-Carr, European Strategist, Raymond James Investment Services, says that April’s weak GDP figures may just be a ‘blip’.

“Following a strong start to the year, the UK’s pace of growth stalled at the start of 2024’s second quarter.

“Flatlining economic activity in April can be partially attributed to an early Easter and its associated economic boost in March, as well as slow service sector output in part due to industrial action by rail workers. The automotive sector also experienced reduced activity, which was paired with adverse weather impacting the construction industry.

“On a more encouraging note, April’s slow figures are likely to be a blip rather than a prevailing trend. Inflationary pressures on UK households continue to ease, and the incremental impact of the April 1st increase to the minimum wage will also begin to appear in economic indicators in the months to come. “

UK GDP flat

Wednesday 12 June 2024 07:14 , Daniel O'Boyle

UK GDP was flat in April, as the economy returned to stagnation in the final reading before the general election.

It follows a surprisingly strong rise of 0.4% the previous month.

The flat reading is in line with economists’ expectations.

Many City economists fear that with little chance of an interest rate cut from the Bank of England before August the economy could slow again, although a return to recession is unlikely.

Gabriella Willis, UK economist at Santander CIB said: “Looking ahead, we see April as the start of more tepid growth in the second quarter, with growth cooling after a solid first quarter rebound.”

The Bank’s Monetary Policy Committee (MPC) meets next week to decide on rates. However, with wage growth running at 6% and services inflation still strong it is thought unlikely it will vote for a cut.

Recap: Yesterday's top headlines

Wednesday 12 June 2024 06:50 , Simon Hunt

Good morning from the Standard City desk.

The FTSE 100 suffered one of its worst sessions in recent months yesterday following a surprise increase in UK unemployment and continued political uncertainty in Europe.

The Office for National Statistics (ONS) said the rate of UK unemployment lifted to 4.4% in the three months to April, up from 4.3% in the three months to March. This marked the highest level for two years.

The increase defied expectations and signalled potential weakness in the economy.

London’s top index finished 80.67 points, or 0.98%, lower to end the day at 8,147.81.

Investors in the banking sector continued their sell-off from Monday, which had been driven by worries over the snap election in France.

President Emmanuel Macron’s decision was described as “credit negative” according to influential ratings firm Moody’s, weighing on sentiment across the continent.

~

Here’s a summary of our top headlines from yesterday: