FTSE 100 Live 12 February: Arm shares rocket, ‘Bank of England will have no rush to cut interest rates’

FTSE 100 Live (Evening Standard)
FTSE 100 Live (Evening Standard)

Dealmaking in the City continues to enjoy an upturn after two property firms today unveiled a tie-up that will create a venture big enough for the FTSE 100 index.

Tritax Big Box, the owner of major warehouses used by retailers, will have a value of about £4 billion through its £924 million offer for UK Commercial Property REIT.

As well as the recent flurry of merger deals, traders are looking ahead to a busy week of economic updates including inflation figures in the UK and United States.

Key Points

  • Warehouse firms to create £4bn venture

  • Big economic week ahead

  • Heathrow reports strong month

FTSE 100 closes flat ahead of big economics week

16:39 , Daniel O'Boyle

The FTSE 100 has closed flat at 7,573.69 today, with trading subdued ahead of a big week of economic data.

Ocado, Frasers and Burberry were the top risers, while Rolls-Royce, AstraZeneca and GSK were the biggest fallers.

Tomorrow, investors will digest the latest employment data, before inflation on Wednesday, GDP - and the verdict on recession - on Thursday and retail sales on Friday.

US stocks break record again

16:34 , Daniel O'Boyle

The S&P 500 has climbed further to 5,046.45, led by Arm’s huge surge.

That’s another record for the US blue-chip index, after it closed above 5000 for the first time on Friday.

It’s now up 6.4% so far this year.

The Nasdaq has also hit a new record high, of 16,071.59, and is up 8.9% for the year.

Arm shares rocket in New York

16:29 , Simon Hunt

Arm has overtaken Unilever and HSBC to become the 4th most valuable UK-headquartered company after its Nasdaq-listed shares soared more than 30% when markets opened on Wall Street.

The Cambridge-based chip designer now has a market value of more than $160 billion, putting it behind only UK-headquartered oil giant Shell, gas giant Linde and fellow Cambridge firm AstraZeneca.

Arm shares have more than doubled in the past week as investors were enthused by signs of a rebound in the smartphone market for which it is the predominant chipmaker, as well as hopes raised for the adoption of its technologies in artificial intelligence.

Arm is now within touching distance of overtaking the market value of Intel, America’s best-known chipmaker, which is worth around $180 billion.

Arm was first listed on the London Stock Exchange before being taken private by Japanese firm SoftBank in a £23.4 billion deal in 2016. The semiconductor designer was then floated on the US-based Nasdaq exchange in September last year for more than double the value.

Read more here

UK economic recovery 'broadening'

14:13 , Daniel O'Boyle

While we may find out that the UK ended 2023 in a recession this week, January’s economic performance is expected to be stronger.

The latest PMI data shows that the UK’s economic recovery is spreading beyond London, though the capital is still leading the way.

Aldi to spend £550m on opening and upgrading shops this year

14:02 , Daniel O'Boyle

Aldi has revealed plans to spend £550 million on opening new stores and upgrading existing ones in the UK this year, as the discount supermarket steams ahead with countrywide expansion.

The chain, which was named 2023’s cheapest market by consumer group Which?, said more than 1,500 jobs would be created from new shop openings.

Giles Hurley, Aldi’s UK and Ireland chief executive, said this year’s expansion plans are aiming to address the fact that “there are still areas of the country that don’t have an Aldi, or that need more or larger stores to meet demand”.

The Germany-based chain, which overtook Morrisons as the fourth largest supermarket in 2022, has surged in popularity in recent years thanks to its lower prices and own-brand products.

Read more here

Data this week 'critical' Bank of England path

13:46 , Daniel O'Boyle

Matthew Ryan, Head of Market Strategy at global financial services firm Ebury, says that employment has tended to surprise on the upside recently which could provide further support to the pound and is eyeing a modest quarterly contraction which would show the UK entering a technical recession.

Ryan said: “Sterling reacted positively to the risk-seeking mood in markets last week, and a decent upward revision to the January PMIs of business activity didn't hurt either. The better than expected tone in economics news, and the highest rates in the G10, have propelled sterling to the second position in the G10 year-to-date rankings, behind only the US dollar.

“This week's employment and inflation reports will be critical for the future path of Bank of England policy. Employment data, in particular, has tended to surprise on the upside recently, which could further support the pound.

“Thursday’s fourth quarter GDP data will also be closely watched by market participants, given that this could show that the UK economy entered into a technical recession in the second half of 2023. Economists are eyeing another modest quarterly contraction, following the 0.1% downturn in Q3.”

Pound 'faces a couple of key tests'

13:43 , Daniel O'Boyle

rancesco Pesole of Dutch Bank ING says this week’s economic data could mean some short-term weakness for the pound, but long-term it is likely to remain strong.

Pesole said: “The second-best performing currency after the USD of 2024, the pound, is about to face a couple of key data tests this week. Tomorrow, jobs data for January is released, and Wednesday sees the CPI report and Thursday GDP data.

“Our economics team sees both wage growth and services inflation remaining sticky in the first quarter, meaning that the Bank of England will have no rush to turn to a more dovish communication in the near future. Markets are expecting the BoE to move with a delay (in August) compared to the ECB’s and Fed’s easing cycles. We agree, but also see 100bp (vs 80bp priced in) of cuts by year-end.”

“Some GBP weakness against the EUR down the road is therefore our base case, but the short-term outlook remains quite constructive for sterling.”

Zizzi and ASK Italian owner sees losses widen but dishes up sales hike

13:17 , Daniel O'Boyle

The owner of Zizzi and ASK Italian restaurant chains has reported widened annual losses despite cheering higher sales.

Azzurri Group, which also runs the Coco di Mama food-to-go chain, revealed that pre-tax losses widened to £16.4 million for the year to July 2 2023 – more than triple the £4.2 million losses seen the previous year.

But it notched up a 9% rise in total turnover to £257.8 million, although it did not provide like-for-like figures.

Read more here

Zizzi and ASK Italian owner sees losses widen but dishes up sales hike

13:09 , Daniel O'Boyle

The owner of Zizzi and ASK Italian restaurant chains has reported widened annual losses despite cheering higher sales.

Azzurri Group, which also runs the Coco di Mama food-to-go chain, revealed that pre-tax losses widened to £16.4 million for the year to July 2 2023 – more than triple the £4.2 million losses seen the previous year.

But it notched up a 9% rise in total turnover to £257.8 million, although it did not provide like-for-like figures.

Read more here

Market snapshot: FTSE 100 dips

12:43 , Daniel O'Boyle

Take a look at our market snapshot with the FTSE 100 a little lower

UK ended 2023 in recession, economists project, but decision on knife edge before official figures

12:09 , Daniel O'Boyle

Official figures are set to show the UK slipped into the shallowest recession in history, according to a survey of economists, but the decision remains on a knife edge.

Government statisticians will reveal on Thursday whether or not the UK slipped into the first non-lockdown-related recession since 2009 in the second half of last year.

Increasing numbers of City analysts are now forecasting a fall in GDP of 0.1% in the three months to December. That would follow the same level of decline in the third quarter and meet the technical definition of recession in another blow to Rishi Sunak. A recession is typically defined as two consecutive quarters of declining GDP.

Read more here

Biggest drop in average two-year fixed mortgage rate on the market since 2022

11:09 , Daniel O'Boyle

The average two-year fixed mortgage rate on the market recorded its biggest month-on-month fall since December 2022 in February, according to a financial information website.

Across all deposit sizes, the average two-year fixed-rate mortgage had a rate of 5.56% at the start of February 2024, down from 5.93% at the start of January this year.

The 0.37 percentage point fall was the biggest monthly decrease recorded by Moneyfacts since December 2022.

Read more here

FTSE 250 outperforms flat FTSE 100, food delivery firms in demand

10:01 , Graeme Evans

Shares in Deliveroo and Just Eat Takeaway are higher today after a City firm said it felt more optimistic about prospects in the food delivery sector.

The “buy” stance and 180p target of Deutsche Bank Research helped to lift Deliveroo shares by 3.7p to 123.2p, albeit small consolation for those who backed the 2021 flotation at 390p.

The heightened interest comes as the delivery app moves into DIY, electricals and homewares and targets mid-teens percentage transaction growth.

The bank said of the sector: “We think demand has started to recover and the addition of grocery and retail categories could drive incremental growth.”

Just Eat Takeaway jumped 6% or 76.8p to 1320.8p, its highest since the summer, after Deutsche Bank upped its target price by 5% to 1970p.

The rally for the pair was matched by Ocado, which put back 5% or 27.4p to 540.6p at the top of the FTSE 100 index. Other blue-chip risers included luxury goods group Burberry, up 34p to 1305p.

Frasers Group also put on 2% or 17p to 800.5p as the Sports Direct owner announced it will buy back another £80 million of its shares.

AstraZeneca remained in the red after last week’s results, with London’s second biggest company down another 2% or 214.4p at a fresh two-year low of 9546.6p.

The FTSE 100 index fell 7.38 points to 7565.20, underperforming the rest of Europe and the FTSE 250 index. The UK-focused benchmark improved 0.4% or 75.90 points to 19,138.22, aided by 3% rises for Dr Martens and publisher Future.

Upper Crust owner SSP buys Australian airport bar and cafe group

10:00 , Daniel O'Boyle

Upper Crust owner SSP Group has struck a deal to buy an airport bar and restaurant firm in Australia to further expand its global footprint.

SSP – which runs food outlets at transport sites including airports and railway stations – has agreed to take over privately-owned Airport Retail Enterprises (ARE) for an undisclosed sum.

It will see SSP add ARE’s 1,500 staff and 62 sites across seven airports, largely bars, casual dining restaurants and cafes.

Read more here

Charbonnel et Walker chocolate sales jump as City office return picks up

09:22 , Daniel O'Boyle

Upmarket chocolate company Charbonnel et Walker has enjoyed a sweet 31% turnover leap, with the brand helped in part by the City getting busier as more customers returned to offices.

The chocolatier, which was founded in London in 1875, recorded sales of £20.6 million for the year to April 30. Demand for new seasonal products, such as Valentine’s hearts and Easter collections, contributed to the growth.

A spokesman added that London branches "have seen a good increase in sales, especially our City of London stores at Broadgate and Canary Wharf where people are increasingly coming back to work in the office vs working from home".

Read more here

Market snapshot: FTSE 100 steady

08:34 , Daniel O'Boyle

Take a look at today’s market snapshot, as the FTSE 100 held steady in early trading

Burberry leads FTSE 100, NatWest and AstraZeneca under pressure

08:34 , Graeme Evans

The FTSE 100 index stands 1.59 points higher at 7574.17, led by a strong session for Burberry after its shares rebounded 3% or 40.5p to 1311.5p.

Frasers Group also put on 2% or 14.5p to 798p after the Sports Direct owner announced the launch of a new buyback programme worth up to £80 million.

Other risers included Lloyds Banking Group following a gain of 0.3p to 41.7p, whereas rival NatWest fell 1.8p to 208.9p ahead of Friday’s annual results.

AstraZeneca remained under pressure after last week’s results as shares in London’s second biggest company lost another 2% or 230p to 9531p.

The FTSE 250 outperformed the top flight through a rise of 128.40 points to 19,190.72, with UK Commercial Property REIT up 6% or 3.8p to 68p following a merger with Tritax Big Box.

Another 6 million passengers fly through Heathrow in January

07:58 , Daniel O'Boyle

Another 6 million people travelled through Heathrow Airport in January, with little sign that fears about flight safety or geopolitical events hit the West London hub.

But Heathrow bosses warned that the lack of VAT-free shopping for international travellers was continuing to hold back the UK. It has joined forces with two business groups, the British Chambers of Commerce and the Federation of Small Businesses, in an attempt to get Jeremy Hunt to reintroduce VAT-free shopping at the spring Budget next month.

The airport said: “While exports are thriving, Britain has shut the door on home grown growth, turning away international shoppers through the tourist tax and tarnishing the UK’s reputation as a competitive country to spend and do business with.”

Read more here

Warehouse firms to merge as Tritax Big Box offers £924 million for UKCM

07:39 , Michael Hunter

Tritax Big Box, the owner of a major warehouses used by retailers, has made a £924 million, all-stock offer for another real estate investment trust, UK Commercial Property REIT.

The deal would create the fourth-biggest company of its kind in the UK, brining together a property portfolio worth £6.3 billion and a market capitalisation of £3.9 billion.

Investors are being offered 0.444 of a new share in Big Box, which equates to 71.1p per share in UKCM based on Friday’s closing pice.

That represents a premium of almost 11% for UKCM investors and it is being backed by the board.

Big economic week ahead

07:39 , Daniel O'Boyle

Today kicks off a big week for UK economic data, with the most closely watched being Thursday’s GDP release, which will reveal whether the UK ended 2023 in recession.

Employment data will be on Tuesday and inflation on Wednesday, with January retail sales on Friday.

Inflation is set to rise, but unemployment is likely to remain at historically low levels. GDP is set to grow slowly in December. But the big question, whether fourth-quarter GDP grew, will be an extremely close call.

FTSE 100 seen higher after Wall Street record, Brent Crude at $82

07:12 , Graeme Evans

The FTSE 100 index is set to open higher after tech stocks drove a strong end to the week on Wall Street, with the S&P 500 closing above 5000 for the first time.

The start of this week is expected to be a quiet one, particularly with a number of Asian markets closed for the Lunar New Year or Japan’s National Day.

Events are likely to pick up from tomorrow, with the release of UK unemployment and wage figures followed by the monthly reading on US inflation.

IG Index reports that futures trading is pointing to a 0.2% or about 17 points rise to 7590. The gains follow a robust session for US markets after the S&P 500 closed 0.6% higher to stand at a record 5026.

In commodities, the price of Brent Crude today held firm at $82 a barrel while gold traded at $2024 an ounce.

Recap: Friday's top stories

06:36 , Simon Hunt

Good morning.

Hold on to your hats. The tumbleweed has all blown away and the M&A gunslingers are back in town.

What a few days it has been for the dealmakers. On Wednesday we had the £2.5 billion tie-up between Barratt Developments and Redrow to create a £7 billion sector superheavyweight. On Thurday it emerged that FTSE 100 packaging giant Mondi is in talks with rival DS Smith about a potential £10 billion merger.

On Friday Tesco Bank being sold to Barclays for up to £700 million.

But is the flurry a sign of a sustained pick-up in M&A… or just a blip?

City advisers have been saying privately for some time that they expected something like this to happen early in 2024. So many stalled deals have been stuck on the runway for so long it was inevitable that once there was a break in the clouds there would be a rush to get them airborne.

That said, who knows what the landscape will look like in a Trump-Starmer era possibly just a few months away?

Maybe that is why the M&A pipeline is suddenly so full. That window of relative stability may only be a brief one.

Here’s a summary of our other top stories from Friday:

And in City Spy...