Proactive Investors –
- drops 46 points, flat
- UK and pay growth ease, advises caution with data
- Housebuilder Bellway (LON:) reports improved recent trading
NatWest the first of the big six to hike rates
NatWest Group PLC (LON:) has joined the small group of lenders hiking mortgage rates, despite growing expectations that the Bank of England will cut the base rate next month.
The FTSE 100-listed bank announced that two-year and five-year fixed and tracker rate mortgages will increase by 0.3% later this week.
This follows Coventry Building Society and some smaller lenders raising mortgage rates on selected products in the past couple of weeks, after a period over the summer of almost universal cuts from banks and other mortgage providers in anticipation of the BoE bringing rates down.
But there has been a sharp rise in yields on gilts, which lenders use to price fixed-rate deals, with the 10-year government bond today paying 4.242%, up from around 3.75% in mid-September.
As well as reacting to volatile geopolitics, bond markets have been cautious ahead of the new Labour government’s Budget, which is coming on 30 October and where a large increase in lending is expected.
Eurozone industrial data
Ahead of the ECB meeting later this week, we’ve had strong euro-zone data on industrial production.
A 1.8% month-on-month rise in industrial production for August was a touch above the 1.7% consensus forecast, taking output to its highest level since December last year.
It was the strongest monthly rise in over a year, but “is probably not the start of a sustained recovery”, says Elias Hilmer at Capital Economics.
“We think production is more likely to drop back over the rest of the year.”
A production increase of 3.3% in Germany comes after a 3.3% fall in July, while there was a 4.5% jump in Ireland, “where the data are notoriously volatile”, notes Hilmer.
Production also rose in France (1.4% m/m) and in the Netherlands (2.2% m/m) and was broadly flat in Italy and Spain (+0.1% and -0.4% respectively).
IEA cuts oil demand forecast
Various factors are affecting the oil price this morning, as detailed below, with now down almost 5% to $73.65 per barrel.
Following OPEC’s cut yesterday to its forecast for global oil demand in 2024 and 2025, the International Energy Agency has also reduced its forecasts today, while also reassuring that it is ready to cover any supply disruption from Iran if such a situation arises.
The IEA expects a large surplus in the market next year, forecasting global oil demand to expand by almost 900k barrels per day in 2024 and close to 1 million barrels per day (mb/d) in 2025, sharply down from 2 mb/d seen between 2022 and 2023.
Lower demand from China is the key element in the deceleration, accounting for around 20% of global gains both this year and next year, compared to almost 70% in 2023.
Analyst David Mirzai at SP Angel notes that disappointing Chinese stimulus news was also a likely weight on oil prices.
Yesterday, OPEC revised is global oil demand growth expectations by 0.1mb/d to 1.9mb/d in 2024 and 1.6mb/d in 2025, implying Q4 demand up around 1mb/d on the prior quarter to 105.6mb/d, says Meyer.
Applied Nutrition IPO priced
Applied Nutrition is aiming for a valuation of up to £400 million in its initial public offer on London’s main market by the end of the month.
The price range of 136p-160p would give the protein shakes company an estimated market capitalisation at admission of between £340 million and £400 million.
As cornerstone investors, four “prominent and highly successful North West entrepreneurs”, including Mohsin Issa of Asda fame (he recently resigned after an ’embarrassing’ performance), have committed to participate in the IPO fundraise, buying a combined £25 million of shares.
Existing shareholders are selling up to 137.4 million shares in the IPO, raising £220 million that will not go to the company.
Retail investors at AJ Bell (LON:), Hargreaves Lansdown (LON:) and Interactive Investor will be able to participate too, with the latest time and date for receipt of applications of 10am on 23 October.
analysis
Oil is the reason the FTSE 100 is in the red, while in Europe the and IBEX are up 0.2% and 0.3%.
Here’s market analyst Neil Wilson at Finalto with more details: “Oil prices fell as reports circled about Israel’s response to Iran, with indications they are likely to refrain from targeting oil or nuclear infrastructure.
“Flashes this morning indicate that Netanyahu and his defence minister Gallant have agreed what they do and approval is now required from the security cabinet.
“If it’s non-escalatory – ie tit-for-tat rockets aimed into the desert then looks bearish for oil. If it’s a full-on strike aimed at national energy infrastructure than it would seem way more escalatory,” says Wilson.
Prices were already looking softer yesterday as OPEC cut its demand outlook again.
Russ Mould, investment director at AJ Bell, says a big decline in the oil price is “welcome news for businesses and consumers as there was a moment last week when it looked like energy and transport bills could go through the roof”.
Brent crude is down 3.7% at $74.59 per barrel, which he says is an “unusually large single-day movement”, with markets taking a more cautious view over demand.
Reports yesterday from OPEC pointed to a lower outlook for global oil demand growth this year and next.
