LIVE – Updated at 08:48
‘Chances of a 0.5% rate hike just got higher’
08:37 , Daniel O’Boyle
Nicholas Hyett, investment analyst at Wealth Club, warned that today’s GDP data makesa 50-basis-point interest rate hike more likely.
“More important than monthly shifts in the economy is what the numbers mean for the future direction of interest rates,” he said. “With wages and prices continuing to rise the Bank of England is expected to raise rates further to stem inflation. GDP growth, albeit modest, creates the space for the Bank of England to be more aggressive in its rate hikes. The chances of a 0.5% rate hike just got higher.”
Entain shares down 10% after £600m fundraising, Robert Walters slides 18%
08:31 , Graeme Evans
A flat performance by the FTSE 100 index masks some big movements elsewhere on the London market, with recruitment firm Robert Walters and former ICI polymers business Victrex down 18% and 11% respectively after profit warnings.
Games Workshop is 5% higher on the back of its latest trading update, while steel contractor Severfield has risen 7% following its annual results.
The FTSE 100 index is 14.33 points higher at 7609.11, but there was no bounce for Shell shares despite announcing a plan to increase dividend payments. The oil giant’s shares rose by less than 1%, up 13.5p to 2309.5p.
Ladbrokes owner Entain slumped 10% at the top of the FTSE 100 fallers board after it last placed new shares at a 6.9% discount as it looks to raise £600 million towards the acquisition of a leading sports betting firm in Poland.
Entain’s shares fell 132p to 1189.5p, which compares with the placing price of 1230p.
The FTSE 250 index stood 26.02 points higher at 19,214.52, with broker upgrades helping shares in Wizz Air and Aston Martin Lagonda to rise by more than 2%.
Key market data as FTSE opens flat
08:31 , Daniel O’Boyle
The FTSE 100 started close to flat today as GDP came in roughly in line with expected. Gilt yields, meanwhile, remain around 15-year highs after yesterday’s surge.
Cost conscious shoppers help sales at Marks Electrical to jump
07:46 , Joanna Bourke
Consumers looking to slash energy costs have significantly lifted demand for air fryers and other products at Marks Electrical, helping the online retailer to reach record sales.
The company, which also pointed to a strong performance for A-rated energy efficient washing machines, said revenue jumped 21.5% to £97.8 million in the year to March 31.
Marks Electrical saw pre-tax profits rise to £6.4 million from £3.8 million. It added that there has been strong trading momentum in the first two months of this financial year, with revenue growth exceeding 30%.
Shell pledges to boost investor payout to $5 billion and cuts spending plans
07:42 , Michael Hunter
Shell, the energy giant, has unveiled plans to boost its share buyback payout to investors by $1 billion to $5 billion and lift its dividend by 15% from the second quarter of the year, alongside a cut in its capital spending programme.
The new strategy, outlined by CEO Wael Sawan, is likely to be controversial, coming after a spell of record-breaking profits in the industry when high energy prices drove the cost-of-living crisis. The industry has also pushed back against windfall taxes by pointing to the importance of its capital spending as investment to secure reliable energy supplies.
Shell reported annual profit of almost $40 billion for 2022, doubling from 2021 and the highest in the company’s history.
Today, it said share buybacks in the second half of this year would be at least $5 billion. Capital spending will fall to between $22 million and $25 billion per year for 2024 and 2025.
Shell stood by its plans to become a zero emissions company by 2050. But it also sees a future for its traditional business, saying today:
“Shell will continue to invest in providing secure supplies of energy, while actively working to reduce carbon emissions … Shell is making good progress towards its target to become a net-zero emissions energy business by 2050, by reducing emissions from its operations, and from the fuels and other energy products it sells to customers.”
With GDP coming in as expected, analysts said the Bank of England is unlikely to change its course on rate rises. A hike this week is widely seen as certain, and markets have fully priced in rate rises all the way up too 5.75%.
Neil Birrell, chief investment officer and fund manager at Premier Miton Investors, said: “After figures showing that wages and employment remain strong in the UK, the GDP data did not provide any solace for the Bank of England, coming in as expected and showing that the economy continued to grow in April.
“With such robust data across large parts of the economy and inflation staying stubbornly high, interest rates can only be going higher. The question is how much higher and 6% is a possibility.”
Board games beat video games — profits soar at Games Workshop but sales slide at F1 Manager maker Frontier Developments
07:32 , Simon Hunt
Profits jumped to £170 million at miniature wargame maker Games Workshop after another year of strong sales growth.
The firm plans to redistribute £11 million in profits as staff bonuses.
But sales fell to £104 million at video game maker Frontier Developments, as it warned it would report an operating loss for the year.
The company said it would suspend acquiring new titles under its ‘Foundry’ games label because of its disappointing results.
It said: “Financial performance across the Foundry portfolio has been disappointing, and overall, the business has not delivered Frontier’s expectations of a positive return on investment within the first year of each title.”
Federal Reserve rates guidance in focus, FTSE 100 seen lower
07:18 , Graeme Evans
An inflation rate of 4% for May means the US Federal Reserve will tonight have room to pause interest rate rises for the first time since early 2022.
The country’s most aggressive tightening of monetary policy in four decades has left the central bank’s core interest rate in a range of 5-5.25%.
Wall Street sees a 60% chance of a further hike at July’s meeting, while traders will be looking for guidance at tonight’s press conference with chair Jerome Powell over the potential for rate cuts later in the year.
US markets have rallied ahead of the meeting, aided by yesterday’s bigger-than-expected fall in headline inflation rate from 4.9% seen in April. The core inflation rate dropped to 5.3% from 5.5%.
The S&P 500 index moved deeper into bull market territory last night by adding another 0.7% to its highest level since April 2022. The tech-focused Nasdaq Composite improved 0.8% and the Dow Jones Industrial Average gained 0.4%.
The FTSE 100 index, which closed 0.3% or 24.09 points higher at 7594.78 last night, is today forecast by CMC Markets to open ten points lower at 7585.
Yesterday’s top stories
07:13 , Daniel O’Boyle
Good morning, here are some of yesterday’s top stories:
- Home owners were today warned to brace for even higher mortgage rates as the gilt yields used to set the price on fixed deals raced to levels even higher than those seen after last September’s mini-Budget.
- Odey Asset Management has halted redemptions in two funds and closed another as investors head to the exits in the wake of sexual assault accusations against the firm’s founder Crispin Odey.
- Ashtead, the FTSE 100 industrial rentals firm, backed London as the main trading venue for its shares today as it reported a surge in earnings of $1.1 billion (£0.9 billion), mainly made in the US.
UK GDP returns to growth, up by 0.2%
07:04 , Daniel O’Boyle
GDP grew by 0.2% in April, bringing the economy back into growth after a decline in March.
The services sector, which dominates the economy, drove the growth, up by 0.3%. On the other hand, construction and production output were both down.
The growth was in line with economists’ expectations.
ONS Director of Economic Statistics Darren Morgan said: “GDP bounced back after a weak March. Bars and pubs had a comparatively strong April, while car sales rebounded and education partially recovered from the effect of the previous month’s strikes.
“These were partially offset by falls in health, which was affected by the junior doctors’ strikes, along with falls in computer manufacturing and the often-erratic pharmaceuticals industry. House builders and estate agents also had a poor month.
“Over the last three months as a whole the economy grew a little, driven largely by the construction industries. The services sector dragged growth downwards, partly due to the impact of public sector strikes.”