FTSE 100 hits highest since 2018
The UK’s blue-chip share index has hit its highest level in over four years.
The FTSE 100 index has climbed by around 0.7% to hit 7749 points, up 55 points today, the highest level since August 2018.
The Footsie has been lifted today by gains in mining stocks and retailers.
JD Sports are the best performing stock, up 7%, after lifting its profit outlook towards the top end of expectations this morning following strong sales growth in the run-up to Christmas.
Fellow retailers Frasers (+3.6%) and Next (+2.7%) are also among the top risers.
Mining stocks are also rallying, despite the World Bank’s warning yesterday that the world economy risked falling back into recession.
Copper-producer Antofagasta (+2.6%), Anglo American (+1.9%) and Glencore (+2%) are benefitting from China’s move to relax Covid-19 restrictions.
Commodity prices have been rising this year, as Raffi Boyadjian, lead investment analyst at XM, explains:
Copper futures have jumped about 7% so far this year and an increasing number of analysts are predicting that oil prices will top $100 a barrel again in 2023. In the meantime, though, concerns about a recession and some doubts about how quickly Chinese demand will rebound when Covid infections are so high are putting a lid on any upside in oil.
Investors are also relieved that Jerome Powell, the head of America’s Federal Reserve central bank, didn’t push back against expectations of a slowing in US interest rate rises when he spoke yesterday.
The markets are also hoping for a drop in US inflation, when the latest consumer price index figures are released.
Boyadjian points out that a drop in inflation could encourage the Fed to stop hiking interest rates as rapidly.
Sentiment was boosted on Friday from signs that wage pressures in the United States are easing and that the services sector is headed for a sharp slowdown, but the hawkish rhetoric that later followed revived recession worries.
If Thursday’s CPI figures point to further moderation in inflation in December, it’s likely to fuel bets that the Fed’s tightening cycle is nearing the end.
The internationally-focused FTSE 100 outperformed major rivals last year. It gained almost 1% in 2022, while global markets fell 20%.
It is now approaching its record high, of 7903.5 points, set in May 2018.
Key events
Afternoon summary
With the UK’s blue-chip share index at its highest level since 2018, it’s time to wrap up.
Here’s today’s main stories:
FTSE 100 finishes at highest close since 2018
In the City, the FTSE 100 share index has ended the day at its highest closing level since August 2018.
The blue-chip index closed 30 points higher at 7724 points, a gain of 0.4%. It earlier hit a four-year high of 7772 points, as the market rallied (see earlier post).
Retailers helped to lift the Footsie higher, with JD Sports finishing almost 7% higher after lifting its profit outlook this year, helped by younger shoppers having more cash to spend than a year ago.
Frasers, which owns Sports Direct, gained 4%, while warehouse operator Segro rose by 3.4%.
Michael Hewson, chief market analyst at CMC Markets, says there is optimism over consumer spending patterns, despite the cost of living crisis:
European markets have seen another positive session with the FTSE100 continuing to gain ground above the 7,700-level helped by another set of solid trading numbers from the UK retail sector.
For all the doom and gloom leading up to Christmas and the end of the year period, it would appear that while consumers are becoming choosier about where they spend their money, they are still spending it.
Milder weather in January also appears to be helping sentiment, fuelling optimism that the start of 2023 might offer some respite from further increases in energy prices.
The FTSE 100 is trading near an all-time high in an optimistic start to 2023, adding to gains for an index that managed to avoid last year’s global selloff https://t.co/2m47A2miLE via @markets
— Constantin Cotzias (@ConCotzias) January 11, 2023
Traders are also hoping for a drop in US inflation, when the latest data is released tomorrow. That could herald a slowdown in interest rate increases, which hit many markets last year.
Today’s gains leave the FTSE 100 closer to its alltime high of 7,903 points, set in May 2018.
Lauren Wills-Dixon, solicitor at law firm Gordons and an expert in cyber security, says the Royal Mail incident shows just how disruptive cyber incidents can be to an organisation’s core business processes.
She explains:
“The threat of cyber incidents to organisations of every size and scale is ever-increasing, and this is another reminder that businesses must have the right systems in place to combat attacks, along with business continuity and recovery plans should this type of event take place.”
Analyst: Another headwind for Royal Mail after torrid 2022
As we head into the European market close, International Distribution Services shares look set to end the day lower after a ‘severe service disruption’ to its overseas letter and parcel delivery service following a ‘cyber incident’, Victoria Scholar, head of investment at Interactive Investor tells us:
Its import services are continuing but are facing minor delays. Royal Mail says it is working hard to resolve the issue with some customers potentially experiencing ‘delay or disruption to items already shipped for export.’ It has asked customers to ‘stop submitting any export items into the network while we work hard to resolve the issue.’
This is yet another headwind for Royal Mail which had a torrid 2022, weighed down by heavy industrial action, the end of the pandemic era parcel boom, a structural long-term decline in letter volumes and cost inflation. International Distribution Services’ finances are in a tough spot too with its latest results outlining a half-year adjusted operating loss of £57 million, swinging from a profit of £404 million last year. Investor confidence is also in a bad way with shares down more than 55% over a one-year period, significantly underperforming the wider market.
Drastic action is needed to revamp the business with serious job reductions and other cost cuts on the horizon. First class stamps may also go up in price again while the postal service is arguing that it should stop weekend deliveries altogether in order to avoid the price hike.
Today’s cyber incident means Royal Mail is unable to send letters and parcels overseas.
It is telling customers to stop sending items overseas while it tries to resolve the issue, the BBC adds here.
Here’s Reuters’ take on the Royal Mail disruption:
Britain’s Royal Mail said on Wednesday it was facing severe disruption to its international export services following what it described as “a cyber incident”.
“We are temporarily unable to despatch items to overseas destinations,” Royal Mail, one of the world’s largest post and parcel firms, said in a service update on its website.
It advised customers to temporarily hold any export mail items while it works to resolve the issue.
The company, part of International Distributions Services Plc, said it was working with external experts to investigate the incident and had also reported it to regulators and security authorities.
Royal Mail said its import services remained operational, albeit with minor delays.
Royal Mail says its team are “working around the clock “to resolve the disruption to its international export services from a cyber incident.
It adds:
We immediately launched an investigation into the incident and we are working with external experts. We have reported the incident to our regulators and the relevant security authorities.
Royal Mail hit by ‘severe disruption’ to international services after cyber attack
Royal Mail is experiencing “severe service disruption” to its international export services following a cyber incident, the company announced.
In a service incident (online here), the company says:
Royal Mail is experiencing severe service disruption to our international export services following a cyber incident.
We are temporarily unable to despatch items to overseas destinations. We strongly recommend that you temporarily hold any export mail items while we work to resolve the issue. Items that have already been despatched may be subject to delays. We would like to sincerely apologise to impacted customers for any disruption this incident is causing.
Gold futures reached a fresh eight-month high today.
Gold futures for February delivery traded as high as $1,890.90, according to Marketwatch.
It says traders are betting that China’s decision to drop Covid-19 restrictions on its economy would continue to boost prices of precious and industrial metals.
Wall Street has opened higher too.
The Dow Jones industrial average of 30 major US companies has gained 75 points, or 0.22%, to 33,779 points, with the broader S&P 500 index up almost 0.5%.
The FTSE 100 index is continuing to climb to four-year highs.
It’s now up 69 points or 0.9% at 7763, having hit 7772 a few minutes ago extending its earlier gains to levels not seen since summer 2018.
Craig Erlam, senior market analyst at OANDA, says economic optimism is lifting shares:
Investors remain in an upbeat mood going into tomorrow’s US inflation report, buoyed still by the December jobs report and the prospect of the economy being less squeezed by interest rates.
Fed Chair Jerome Powell may have refrained from commenting on the monetary policy outlook on Tuesday but the chances are, he wouldn’t have said anything investors would have liked even if he had addressed it. It’s been clear from other commentaries that policymakers are sticking to the hawkish script.
Another good inflation number tomorrow could change that as the trend has already been very encouraging and the jobs data that appeared to throw a spanner in the works last month has since been revised out. From an investor perspective, it would take something pretty terrible tomorrow – the inverse of what we were treated to on Friday – to really rock the boat.
Nils Pratley on Britishvolt, and the great electric car battery race
Nils Pratley
In a fantasy world, the would-be rescuer of Britishvolt would be a consortium that included a car manufacturer or two, our finance editor Nils Pratley writes.
The ailing startup would instantly get what it needs most after six months of crisis: endorsement for a battery product that is still in development, plus some future customers.
At that point, the big political claims made about Britishvolt, its planned gigafactory in Northumberland and “the UK’s place at the helm of the global green industrial revolution”, as the former prime minister Boris Johnson put it a year ago, would start to sound more credible.
Sadly, the deal on the table does not resemble a dream version. The prospective buyer is a consortium led by DeaLab Group, a little-known UK-based private equity investor with backing from interests in Indonesia. Details are sketchy until Britishvolt’s board votes on the proposal on Friday but, as far as one can tell, the Indonesian angle seems to be access to metals needed to produce batteries – lithium, nickel, cobalt and so on. All useful, but, if the consortium has expertise in battery chemistry or in supplying the automotive industry with vital kit, it has so far kept quiet.
Therein lies one reason to be underwhelmed. Another is the fact that Britishvolt is being valued at only £32m, or 90%-plus less than a year ago. Good luck to DealLab but the outline proposal reinforces the fact that the fast action in the global gigafactory race is happening outside the UK…
More here:
Cost of living dominates global risks in the next two years
The cost of living crisis is the most severe global risk to the world economy over the next two years.
It’s followed by natural disasters and extreme weather events, and the risk of geoeconomic confrontation, on the threats facing us over the next two years.
That’s the conclusion from the World Economic Forum’s latest Global Risks Report, released today ahead of next week’s Annual Meeting in Davos. It polls the views of 1,200 government, business and civil society professionals.
The report warns that the economic aftereffects of COVID-19 and the war in Ukraine have led to skyrocketing inflation, a rapid normalization of monetary policies and started a low-growth, low-investment era, adding:
Governments and central banks could face stubborn inflationary pressures over the next two years, not least given the potential for a prolonged war in Ukraine, continued bottlenecks from a lingering pandemic, and economic warfare spurring supply chain decoupling.
It also warns of the downside risks to the economic outlook also loom large, as “a mismatch” between monetary and fiscal policies could lead to liquidity shocks, causing a longer economic downturn and debt distress “on a global scale”.
Saadia Zahidi, managing director at WEF, says:
As the conflict between Russia and Ukraine approaches one year, economies and societies will not easily rebound from continued shocks.
In this year’s Global Risks Perception Survey, more than four in five respondents anticipated consistent volatility over the next two years. The persistence of these crises is already reshaping the world that we live in, ushering in economic and technological fragmentation.
A continued push for national resilience in strategic sectors will come at a cost – one that only a few economies can bear. Geopolitical dynamics are also creating significant headwinds for global cooperation, which often acts as a guardrail to these global risks.
Looking further ahead, the climate emergency dominates the top long-term risks. That list of topped by “Failure to mitigate climate change”, followed by “Failure of climate-change adaption”, “Natural disasters and extreme weather events” and “Biodiversity loss and ecosystem collapse”.
More here:
Mirror and Express publisher Reach to axe 200 roles in £30m cost-cutting drive
Mark Sweney
The publisher of the Mirror and the Express is to cut 200 roles in a £30m cost-cutting drive, after advertisers failed to spend heavily through the World Cup, Black Friday and Christmas season.
Reach, which also owns hundreds of regional titles including the Manchester Evening News, Birmingham Mail and Liverpool Echo, reported a slump of 20.2% in print advertising and 5.9% in digital ads in the traditionally strong fourth quarter.
The company said this was largely due to a significantly lower than anticipated benefit from traditionally stronger ad spending around Black Friday and Christmas, which has affected the whole sector.
It added:
“More broadly, we have also seen the continued impact of macroeconomic and consumer uncertainty, reflected in slowing market demand for advertising.”
