Blow for City as WE Soda cancels IPO; Fed rates call; FTSE closes at 7,602.74

A return to growth for the UK economy in April was today offset by caution in the recruitment sector after staffing firm Robert Walters warned on profits.

The latest figures from the Office for National Statistics showed UK GDP rose by 0.2% in the month, a performance in line with expectations after a decline in March.

Eyes will be on the US later this evening, when the Federal Reserve makes its latest interest rate decision. It is expected to pause its cycle of rate hikes, after inflation fell to 4% in May.

FTSE 100 Live Wednesday

• UK economy returned to growth in April

• Staffing firm Robert Walters warns on profits

• Shell pledges boost to shareholder returns

Key market data after slight gains for FTSE

17:06 , Daniel O’Boyle

Take a look at the key market data as shares ticked slightly upwards, while gilt yields receded slightly from the highs reached yesterday.

FTSE closes at 7,602.74

16:38 , Daniel O’Boyle

The FTSE 100 closed slightly up at 7,602.74, with investors cautiously optimistic ahead of the Federal Reserve’s interest rates decision.

Mining, manufacturing and construction made up most of the risers board, with Smith and Nephew the biggest gainer. On the other hand, Ladbrokes Coral owner Entain was the biggest faller after offering shares at a 6.9% discount in order to buy olish bookmaker STS.

Gilt yields, meanwhile, came down slightly from the 15-year highs reached yesterday, but were still higher than on any other day since 2008.

Shock as WE Soda cancels London IPO

15:23 , Daniel O’Boyle

The desirability of London as a place to list was thrown into question again, as soda ash company WE Soda cancelled plans for an IPO that was meant to revive the City’s fortunes.

Alasdair Warren, CEO of WE Soda, blamed “extreme investor caution in London”.

He said: “Since our intention to float announcement some weeks ago, we had been encouraged by the breadth of investor engagement globally and the subsequent interest from prospective investors in our IPO. WE Soda is the largest and fastest growing producer of natural soda ash and one of the lowest cost producers of soda ash in the world. We are a leader within our industry, not only in terms of scale, but also in terms of innovation and sustainability.

Read more here

US shares up slightly

15:12 , Daniel O’Boyle

Shares on Wall Street were up slightly after the opening bell, as markets await the federal Reserve’s latest interest rates decision.

The S&P 500 is up 0.3% to 4,381 with hospital operator Universal Health Services the biggest riser.

The Fed is widely expected to pause its cycle of rate hikes, having received positive news on inflation this week.

Click through the graps to see all the key market data.

Pound highest since April 2022

14:46 , Daniel O’Boyle

The pound is at a 14-month high, as investors sell dollars in anticipation of the US Federal Reserve pausing its cycle of rate hikes today.

The dollar fell against all major currencies, but the decline was most drastic against the pound, which now buys $1.269. That is the highest value for Sterling since April 2022.

A pound buys €1.170.

EU says Google is abusing its position as it calls for break-up

14:07 , Simon Hunt

The EU competition regulator has accused Google of abusing its position in the online advertising market, calling for the break-up of its ad businesses.

The bloc’s competition regulator has said the tech giant should sell off its ad purchasing arms, Google Ads and DV 360, in order to reduce the conflict of interest they have with its online ad sales and auction arms, AdX and DFP.

A break-up of its ad businesses could come as a huge blow to Google, with its advertising empire worth as much as 80% of its annual turnover. The EU can impose a fine of up to 10% of Google annual worldwide turnover if it judges that the firm has breached competition law.

The Competition Commission said Google was favouring AdX over rivals in order to make it the most attractive ad exchange, which it considered to be an abuse of its dominant position in the market.

The regulator said: “A behavioural remedy is likely to be ineffective…the Commission’s preliminary view is therefore that only the mandatory divestment by Google of part of its services would address its competition concerns.”

read more here

Wall Street set for slight gains

13:52 , Daniel O’Boyle

US shares are set for some slight gains this morning, ahead of the Federal Reserve’s interest rates decision later today.

S&P 500 futures are up by six points to 4422, while Nasdaq futures are up 18 points to 15117 and Dow Jones futures are down 0.2% to 34450.

Market snapshot as shares rise

13:49 , Daniel O’Boyle

Click through the tabs to see all the key market data

US Producer Price Inflation falls, adding to rate pause hopes

13:36 , Daniel O’Boyle

US producer price inflation fell to just 1.1% year-on-year in May, below the expected 1.5% and likely giving the Federal Reserve reason to pause its cycle of rate hikes today.

The Producer Price Index was down by 0.3% month-on-month, with foood and energy prices both declining.

The core PPI, closely watched by the Fed,, fell to just 2.8%, showing signs of US inflation getting closer to the 2% target.

The Fed will announce its latest decision at 7pm UK time.

Today’s business pages

13:30 , Daniel O’Boyle

Pick up a copy from any of our distribution points

City voices: It’s back to the 1980s as the bond vigilantes get busy

13:16 , Daniel O’Boyle

Michael Keaton may be reprising his role as Batman in the summer blockbuster Flash, but an altogether different vigilante is running roughshod over UK bond markets.

Following inflation far higher than the Bank of England predicted (again), yields on two-year gilts have risen dramatically to 4.84%. It might have escaped many people’s notice given the lack of media coverage compared with last September, but interest on government borrowing is now above the level seen at the peak of the Kwasi Kwarteng fiscal fiasco.

Read more here

Mortgage chaos continues as HSBC raises prices for second time in a week

12:30 , Daniel O’Boyle

HSBC will raise the price of its mortgages for the second time in less than a week as lenders expect interest rates to rise to 5.75% by the end of the year.

The bnking giant pulled its mortgage products last week after UK gilt yields surged higher, signalling expectations that the Bank of England will keep interest rates higher for longer, as inflation proved more stubborn than expected. The gilt market is widely used by mortgage lenders to price their deals.

Read more here

Vodafone and Three merge to create UK’s biggest mobile network

11:35 , Daniel O’Boyle

Telecoms giants Vodafone and Three have agreed a deal to merge their UK businesses, creating a £15 billion behemoth that will be the country’s biggest mobile network operator.

However, the deal could still be scuppered by competition authorities.

Vodafone and Three’s parent company CK Hutchison Group Telecom Holdings will create a new entity, in which Vodafone will hold a 51% stake and CK Hutchison 49%.

Read more here

E.On Next to pay compensation to 500,000-plus customers for poor call services

11:04 , Daniel O’Boyle

Power supplier E.On Next has been ordered to pay £5 million in compensation to more than 500,000 customers for “unacceptable” call services.

Ofgem said a review of customer service standards and complaints-handling across the sector uncovered “severe weaknesses” at E.On Next, with customers facing long call waiting times and a high level of unanswered calls.

Customers were forced to wait on hold for 18 minutes on average, while half of all calls were dropped and failed to contact the supplier, according to Ofgem.

Read more here

Profit warnings offset FTSE progress, upgrade lifts Wizz shares

10:17 , Graeme Evans

A robust performance by the FTSE 100 index today masked troubling signs elsewhere after profit warnings in the recruitment and industrial sectors.

Today’s downgrade to guidance by professional staffing firm Robert Walters left shares in FTSE 250-listed rivals Page Group and Hays lower by 9% and 7% respectively.

And days after a warning by speciality chemicals firm Croda International, the former ICI polymers business Victrex cut expectations for the year to September.

The Lancashire-based company, whose high-performance solutions are found in smartphones, aeroplanes, cars and medical devices, said industrial headwinds meant that volumes are running more than a fifth lower on last year’s record.

The mid-point of its new guidance for annual profits of between £80 million and £85 million is about 11% short of City expectations, sending the stock down 9% or 144p to 1393p in the FTSE 250 index. It had been above 1900p in February.

The latest economic storm clouds failed to derail the FTSE 100 index, which improved 5.71 points to 7600.49 amid optimism that the US Federal Reserve will tonight pause a run of rate rises going back to early 2022.

The US-focused plant hire firm Ashtead led the top flight with a gain of 3% or 136p to 5548p, while miners Anglo American and Rio Tinto were 1% higher.

Ladbrokes gambling group Entain provided the biggest fall after it tapped investors for £600 million by issuing new shares at a 6.9% discount to last night’s closing price.

The proceeds will go towards the planned acquisition of a leading sports betting firm in Poland. Entain shares fell 132p to 1189.5p, compared with the placing at 1230p. Paddy Power and FanDuel rival Flutter Entertainment also fell, down 1% or 160p to 15,615p.

The FTSE 250 index added 18.27 points to 19,206.77, with Wizz Air among the best performers after UBS raised the low-cost airline to a “buy” recommendation with a target price of 4300p. Shares lifted 90p to 2920p.

Aston Martin Lagonda also improved 7.6p to 286.4p as analysts at US bank Jefferies removed their “underperform” stance on the luxury car maker.

City Comment

10:01 , Simon English

Those who think Bank of England governor Andrew Bailey is doing a terrible job might soon be able to apply to do it themselves.

The criticism coming his way is understandable. There’s not much doubt that the Bank’s monetary policy committee (MPC) was too slow to raise interest rates when the global news flow looked remarkably sunny, if only by comparison to today.

But two things. One, that problem predates Bailey. His predecessor Mark Carney had any number of opportunities to lift rates from nearly zero.

He fluffed it. Emergency interest rates remained in place long after the emergency had receded.

Second, it’s not clear that putting rates up then would have done anything to reduce inflation that is largely a result of Russia’s Ukraine invasion. Vlad Putin is not on the MPC, Bailey might note, as helpful as that might have been.

No, the advantage of having raised them then would be that the Bank at least had something to cut if faced with a looming recession.

So some of what is coming the Bank’s way is harsh. He has an incredibly difficult job.

The FT’s Lex column today weighs in: “The deference its forecasters show to government policies creates an impression of political subservience.”

Should we be shocked that the Bank is, for all its mooted independence, mostly a tool of government policy?

I don’t think we should. Its job is to manufacture the money that the government says it needs. It’s still doing that, just at greater cost. Those costs might even be peaking.

Bailey might not be around to take credit for that.

Shares in Robert Walters crash

09:19 , Simon English

Robert Walters shares crashed 15% today after a profit warning that took the market by surprise.

The recruiter said fees in the second quarter fell 10% year on year. Full year profits will be “significantly lower than market expectations”.

The shares fell 71p to 395p, taking the company value below £300 million.

The statement said: “Reduced levels of candidate confidence and lengthening time to hire were signalled in the second half of 2022 and, contrary to the Board’s prior expectations, are not yet showing sustained improvement.”

That’s a bad sign for the wider economy. So far, jobs have been a strength, with unemployment levels low.

Lately, looming recession fears have seen companies cut jobs or freeze hiring plans.

The group will issue another trading update on July 6.

Robert Walters has 4000 staff in 31 countries.

West End landlord Shaftesbury Capital reveals strong performance

08:58 , Joanna Bourke

Landlord Shaftesbury Capital has said tenant demand for space is strong, as it revealed businesses across its huge West End estate are seeing sales ahead of pre-pandemic levels.

The FTSE 250 company was created earlier this year through the £5 billion merger of Capco and Shaftesbury. The group now owns around 670 buildings home to shops, bars, restaurants and offices in Covent Garden and parts of Chinatown and Carnaby Street.

A flurry of deals and openings have happened since then. They include Story Cellar, the second restaurant venture from two Michelin Star chef Tom Sellers launching in Neal’s Yard, and fashion brand Hollister welcoming customers to a new Soho store.

Read more HERE.

‘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.”

07:35 , Daniel O’Boyle

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.”