FTSE 100 regains from slump as US stocks turn green on inflation figures

• FTSE 100 off 5 points
• Royal Mail bid clears security check
• US PCE undershoots expectations

16.04pm: FTSE 100 regains late on

London’s blue chips gained some steam as the weekend approached, entering late trading down 5 points at 8,100 but well off the near 100-point drop seen earlier in the day.

The improvement coincided with climbs into the green by Wall Street’s Dow Jones, Nasdaq and S&P 500 as relief appeared to set in on new inflation figures.

Figures earlier in the day had shown core personal consumption expenditures, the Federal Reserve’s preferred measure of inflation, below forecasts for November.

According to the US Commerce Department, the index climbed by 2.8% year on year in November, against expectations for a 2.9% increase.

Frasers Group PLC (LSE:FRAS) led risers on the FTSE 100 late on, up 4% as shareholders appeared to breathe a sigh of relief at the end of a spat with Boohoo Group PLC (AIM:BOO).

Frasers’ founder Mike Ashley had attempted to gain a seat on Boohoo’s board, but saw his bid rejected by the latter’s investors on Friday… Read more

Severn Trent PLC (LSE:SVT) and United Utilities Group PLC (LSE:UU.) continued to head up the fallers in the meantime.

15.48pm: Long-term borrowing costs approach 26-year high

Yields on 30-year UK gilts have edged towards their highest level in 26 years as traders look to the scope of interest rate cuts through next year with uncertainty.

Seven consecutive days of increases took 30-year gilt yields as high as 5.16% on Friday.

This meant government borrowing costs were on par with levels last seen in 2002 and not far off their highest since 1998.

The increase, which signals a sell off of bonds, coincided with a drop in expectations for interest rate cuts by the Bank of England ahead.

Thursday saw the central bank opt to hold interest at 4.75%, though its outlook appeared uncertain given renewed inflationary pressure but also an economic downturn.

Markets were pricing in just two rate cuts in 2025 as a result, against expectations for four seen last week.

15.12pm: Severn Trent, United Utilities give up price decision-fuelled gains

Severn Trent PLC (LSE:SVT) and United Utilities Group PLC (LSE:UU.) headed the FTSE 100’s fallers on Friday as the water firms gave up gains seen after Ofwat’s price decision for the sector.

The duo had been among few companies to tick up on Thursday, following Ofwat’s announcement they would be allowed to increase prices largely as requested ahead.

Severn Trent was granted a 47% increase in bills over the next five years to £583 annually, above the 46% rise it had asked for.

United Utilities Group was given confirmation it could up bills by 32%, in line with the rise it had asked for, to £585 annually.

Shares came under pressure into Friday after initial investor excitement around Ofwat’s update though, with Severn Trent down 3.4% and United Utilities off 2.5%.

2.46pm: Mixed start on Wall Street

Wall Street faced a mixed start on Friday as sentiment faced pressure on uncertainty around a potential government shutdown.

The Dow Jones moved 0.1% higher early on, though the Nasdaq and S&P 500 fell by 0.6% and 0.1% respectively.

Figures earlier in the day had shown core personal consumption expenditures, which is the Federal Reserve’s preferred measure of inflation, below forecasts for November.

According to the US Commerce Department, the index climbed by 2.8% year on year in November, against expectations for a 2.9% increase.

Uncertainty remained on whether Congress would be able to pass a bill preventing a government shutdown ahead of a deadline of midnight on Friday though.

A Donald Trump-backed spending bill for three months worth of funding was rejected earlier, threatening to see non-essential federal workers sent home from jobs.

14.09pm: Boohoo shareholders bat off Mike Ashley in vote

Boohoo Group PLC (AIM:BOO) shareholders have voted against Frasers Group PLC (LSE:FRAS)’s Mike Ashley joining the company’s board, laying to rest a months-long spat between the two.

Boohoo announced on Friday that 63.8% of votes were made against appointing Ashley, as shareholders also rejected restructuring specialist Mike Lennon being appointed.

Boohoo was trading flat after the news, while Frasers climbed by 2.6%.

14.00pm: Fed’s preferred measure of inflation undershoots forecast

Core personal consumption expenditures remained unchanged in November and sat below expectations as a result, figures showed on Friday.

According to the US Commerce Department, the Fed’s preferred measure of inflation came in at 2.8% year on year in November.

Analysts had expected a reading of 2.9%, with the headline figure of 2.4% also below anticipations for 2.5%.

Futures continued to show US stocks down ahead of Friday’s open after the figures.

13.25pm: Retailers point to sliding sales during vital Christmas period

Retailers have pointed to a drop in sales volumes over the course of December in a blow to hopes the usual Christmas rush can lift fortunes for the sector.

According to the Confederation of British Industry, a “moderate fall” in sales year on year was recorded in the run-up to Christmas.

Volumes in the year to December declined by a weighted balance of 15%, it reported, though this was against the minus 18% recorded in November.

Retailers had reported were “poor” for the time of year though, with December marking the third consecutive month of declining sales on an annual basis.

“Retailers have endured a gloomy festive period,” CBI principal economist Martin Sartorius commented.

Expectations were also for another contraction in sales in January, the Confederation of British Industry added.

12.45pm: Buy US energy or face tariffs, Trump warns EU

US president-elect Donald Trump has threatened the European Union with potentially crippling tariffs if the bloc’s constituents don’t buy more energy from the US.

“I told the European Union that they must make up their tremendous deficit with the United States by the large scale purchase of our oil and gas. Otherwise, it is TARIFFS all the way!!!,” he stated in typical combative nature on his Truth Social social media site.

European Commission spokesperson Olof Gill alluded to the comments in a statement: “The EU and US have deeply integrated economies, with overall balanced trade and investment.

“We are ready to discuss with President-elect Trump how we can further strengthen an already strong relationship, including by discussing our common interests in the energy sector.”

Trump has shown willingness to slap allies with tariffs in the past.

In his previous term, he imposed a 25% tariff on steel imports and 10% on aluminium imports from the EU.

12.16pm: FTSE 100 set for worst week in over a year

A further decline on Friday has placed the FTSE 100 on course for its worst week in over a year.

Come Friday afternoon, London’s blue-chip index was down 0.9% for the day and by 3.2% since Monday, reflecting the worst weekly performance since August 2023.

News the Federal Reserve had slashed its interest rate cut projections for the coming year in half of Wednesday had already battered stocks on both sides of the Atlantic.

Sentiment has been further hampered by fears of a government shutdown in the US after a Donald Trump-backed spending bill for three-months worth of funding was rejected.

12.03pm: Nasdaq to tumble as government shutdown fears cap off grim week for Wall Street

Wall Street looked on course to tumble further on Friday as caution ahead of further inflation figures and threat of a government shutdown hampered sentiment again.

Futures had the Nasdaq down 1.3% ahead of the opening bell, while the S&P 500 and Dow Jones were seen 0.8% and 0.4% lower respectively.

Another drop would worsen declines that have already seen the Nasdaq, Dow and S&P tumble this week on hawkish commentary from the Federal Reserve on Wednesday.

Attention on Friday is set to turn to the Fed’s preferred measure of inflation in personal consumption expenditures data, after Wednesday saw its rate cut expectations for the coming year halved.

Expectations are for the core rate to have increased by 2.9% on an annual basis in November, against October’s 2.8%, with the monthly figure up 0.2%.

Further clouding sentiment on Friday was renewed fears over a government shutdown after a Donald Trump-endorsed spending bill was rejected by US politicians.

Congress has been left with a deadline of midnight on Friday to avert a shutdown, which would see non-essential federal employees sent home from jobs, with a new bill.

11.40pm: Mortgage rates drop for month straight

Mortgage rates fell again this week, meaning prospective buyers enjoyed a straight month of declining borrowing costs.

According to Moneyfacts, the average rate on a two-year fixed mortgage edged lower from 5.4685% on Monday to 5.4603% as of Friday.

Rates had dropped in the three successive weeks prior, having sat at 5.5252% a month ago.

Major banks have been among those to cut rates recently in a reverse on hikes made since early October.

NatWest Group PLC (LSE:NWG), Barclays PLC (LSE:BARC) and Banco Santander (LSE:BNC) announced reductions most recently last week… Read more

11.18am: Diageo ditching Diddy-linked drink brand? Good news, says Jefferies

Diageo PLC (LSE:DGE) is reportedly considering the sale of Ciroc Vodka, the drinks brand backed by disgraced music mogul Sean “Diddy” Combs.

According to sources cited by Bloomberg, FTSE 100-listed Diageo has contacted potential buyers, including beverage companies and private equity firms, to gauge interest in the brand.

Diddy, who is currently incarcerated on sexual abuse and trafficking crimes, entered into a partnership with Diageo in 2007 to help promote Ciroc in exchange for a 50% share of the profits.

In 2023, Diddy filed a racial discrimination lawsuit against Diageo, thus ending their partnership.

Ciroc sold 1.4 million cases and generated retail sales of $1.47 billion in 2023, but sales have plummeted in 2024.

In a research note, broker Jefferies estimated the sale could add more than 50 basis points to Diageo’s group growth while diluting earnings per share by less than 1%.

2024 has been tough for Diageo, with shares falling 11% year to date.

But Jefferies analysts cited optimism in the stock going forward.

They said: “Companies do not change overnight; however, we think that Diageo will start to look different as confidence in spirits growth increases and under a new, heavyweight CFO, where we expect to see a renewed focus on growth, profit and cash.”

11am: FTSE 100 crumbles

The FTSE 100 blue-chip index is now down 75 points on the day, making for nearly one percentage point of losses.

Water firms United Utilities Group PLC (LSE:UU.) and Severn Trent PLC (LSE:SVT) are the worst performance, shedding more than 2.5% each.

The footsie is now more than 275 points lower from the start of the week, marking one of the worst weeks for the index in months.

10.04am: No growth in fourth quarter, warns BoE

The Bank of England’s Monetary Policy Committee (MPC) has delivered an end-of-year economic projection of zero growth in the fourth quarter, marking a downgrade from the previous projection of 0.3%.

The MPC indicated the downgrade was in response to economic pressures following Labour chancellor Rachel Reeves’ inaugural Budget.

It said it was “considering the impact on growth and inflationary pressures from the measures announced in the Autumn Budget”.

Yesterday, the MPC voted to keep interest rates on hold at 4.75%, as was widely expected by the market.

Although it was expected, stocks tumbled following the announcement and have continued to fall today.

The FTSE 100 blue-chip index is currently down 43 points at 8,062.

9.51am: Water firms lose buoyancy

The UK’s largest market-traded water firms are down sharply today following yesterday’s seemingly positive (if not for customers but for earnings) final determination from regulator Ofwat.

Ofwat gave the green light for water providers to hike bills by 36% over the next five years; a better outcome (for earnings) than the previously expected 21% rise.

 

Shares in FTSE 100-listed Severn Trent PLC (LSE:SVT), which was granted the right to a 47% increase, fell more than 2.2% this morning.

Shares in United Utilities Group PLC (LSE:UU.), which was granted the right to a 35% increase, fell more than 2.5%.

Investors may have been spooked by the £18 million fine handed out to Thames Water for making unjustified dividend payments to shareholders.

9.29am: Government borrowing nothing short of early Xmas gift for Reeves

“As early Christmas gifts go, this one will be roundly welcomed by everyone at Number 11,” Danni Hewson, AJ Bell’s head of financial analysis, said of today’s government borrowing data.

According to ONS data, the rate of government borrowing dropped to its lowest level for November in three years.

The amount of cash coming in has increased substantially, even when you factor in the cut to National Insurance implemented by Rachel Reeves’ predecessor.

Tax receipts, meanwhile, climbed by £3.8 billion year on year to £61.8 billion year on year thanks to a higher income, corporation and VAT take.

The cost of servicing national debt is also down, although the “hard truth”, according to Hewson, “is the government is still spending substantially more than it’s got coming in and though borrowing to fund day-to-day spending was £3.5 billion less than the same time last year, it was still a hefty £6.8 billion”.

9.10am: Bitcoin slips below $100,000

Bitcoin (BTC)’s foray into the $100,000-plus zone came to a screeching halt yesterday evening when the world’s largest cryptocurrency fell nearly three percentage points against the US dollar.

It was the second day of sizable losses following a 5.6% dip on Wednesday.

At the time of writing, the BTC/USD pair was trading just below the $98,000 mark.

Bitcoin first rallied above $100,000 on 5 December before hitting numerous all-time highs thereafter, culminating in a record $108,353 earlier this week.

The coin’s historic achievement was first set in motion after the US elections in early November, when Donald Trump swept to victory over the Democrat Party on a comparatively pro-crypto platform.

8.48am: Car production down almost a third in ninth consecutive drop

The number of cars that rolled off production lines in November fell by almost a third for a ninth consecutive monthly decline, figures on Friday showed.

Some 64,216 cars were produced last month, down by 27,711, or 20.1%, against November 2023, the Society of Motor Manufacturers and Traders (SMMT) reported.

All major manufacturers faced declines as factories were refitted for electric vehicle production, SMMT said.

The drop meant monthly car production had hit its lowest level since 1980, with output over the year so far down 12.9% at 734,562 units.

Battery electrics and hybrids accounted for around a third of output, though volumes were down 45.5% year on year.

Production for domestic sales slumped by 56.7% in the meantime, as export volumes dropped by 21.3%.

“These figures offer little Christmas cheer for the sector,” SMMT chief executive Mike Hawes said.

“While a decline was to be expected given the extensive changes underway at many plants, manufacturing is under pressure at home and abroad.”

8.23am: Government borrowing hits lowest level for November since 2021

Government borrowing dropped to its lowest level for November in three years last month, according to the Office for National Statistics.

Borrowing totalled £11.2 billion in November, down £3.4 billion year on year and was the lowest level for the month since 2021.

“Central government tax receipts grew compared with last year, while increased spending on public services and on benefits were offset by lower debt interest payable,” ONS public sector finances deputy director Jessica Barnaby noted.

Tax receipts climbed by £3.8 billion to £61.8 billion year on year, as more was collected through income, corporation and value added tax.

Expenditure came to £0.2 billion less at £88.2 billion in the meantime, with interest payments on government debt dropping by £4.7 billion to £3.0 billion.

8.11am: FTSE 100 heads even lower

London’s blue chips extended a sharp decline for the week as trading got underway on Friday.

The FTSE 100 shed 33 points to sit at 8,071 following Friday’s open, following a 93-point drop on Thursday.

Barclays PLC (LSE:BARC) led the early fallers, having also dropped on Thursday, followed by the likes of Standard Chartered PLC (LSE:STAN) and United Utilities Group PLC (LSE:UU.).

8.06am: Tencent and Honor launch partnership for cloud and AI

Tencent Holdings (HKG:0700, OTC:TCEHY) Ltd and Honor Devices Co have unveiled a long-term partnership around cloud and artificial intelligence (AI) development.

Chinese smartphone maker Honor will adopt Tencent’s cloud infrastructure under the deal, including for the likes of analytics and search tools.

Tencent, China’s most valuable company, and Honor will also jointly develop a coding assistant to aid the latter’s software engineers.

Tencent shares had surged earlier this week on reports it was in discussions with Apple Inc (NASDAQ:AAPL, ETR:APC) to provide generative AI tools for iPhones.

Tencent shares climbed by 2.8% on Friday.

7.50am: Royal Mail takeover bid clears national security laws

Czech billionaire Daniel Kretinsky’s bid to buy Royal Mail’s has passed another major milestone towards completion with approval under national security laws.

Kretinsky’s EP Group noted on Friday that the Chancellor of the Duchy of Lancaster had conditionally approved its bid for Royal Mail owner International Distribution Services PLC (LSE:IDS) under the National Security and Investment Act.

“The order approves the acquisition, subject to the parties ensuring that Royal Mail remains able to and continues to provide services that are in support of UK national security,” it said.

EP had tabled the £3.6 billion bid in May, paving the way for Royal Mail to be taken into foreign ownership for the first time in its 500-year history.

However, national security concerns had been raised over the offer, threatening to slam the breaks on the takeover

IDS and EP were separately granted approval to move forward with the takeover from the government earlier this week, marking a key moment in Kretinsky’s bid to buy the postal service.

Approval under the act was separate to the government’s support, EP noted, with the deal expected the be completed in the first quarter of next year.

7.24am: Retail sales edge higher in November

Sales across Britain’s retail sector edged upwards in November as a drop at clothing stores was partly offset by growth at supermarkets.

Volumes increased by 0.2% month on month, following a 0.7% decline in October, according to an estimate by the Office for National Statistics.

Clothing and footwear sales dropped by 2.6%, while department store and automotive fuel sales were down by 0.7% and 0.9% respectively.

Sales at food stores increased by 0.5% in the meantime, as other non-food store volumes grew by 2.5% and household goods shops enjoyed a 1.1% increase.

“For the first time in three months there was a boost for food store sales, particularly supermarkets,” ONS statistician Hannah Finselbach commented.

“It was also a good month for household goods retailers, most notably furniture shops.

“Clothing store sales dipped sharply once again, as retailers reported tough trading conditions.”

7.11am: FTSE 100 set to drop further

London’s blue chips appeared on course for another drop ahead of trading on Friday, with futures showing the FTSE 100 down 30 points at 8,131.

The FTSE 100 had shed 93 points over the course of Thursday’s session, following a blow to Wall Street after the Fed signalled fewer rate cuts ahead earlier in the week.

The Bank of England’s rate call on Thursday, which saw interest held at 4.75%, did little to move the dial, after Monetary Policy Committee members voted six to three in favour of maintaining.

Overnight, Asian markets faced a largely negative showing, with South Korea’s Kospi down 1.3% and the biggest mover.

Back in London, attention on Friday was set to be on a key shareholder vote over Fraser’s spat with Boohoo, while Carnival was among those due to update.

5.00am: Friday’s schedule

Carnival will be among those to update on Friday, while Boohoo’s spat with Frasers over Mike Ashley’s bid to gain a seat on the formers board will reach a climax.

Carnival’s update should reflect plain sailing once again… Read more

Boohoo shareholders will decide whether Frasers boos Mike Ashley gets a seat on its board… Read more

Announcements due:

Trading update: Carnival Corporation & PLC 

AGMs & EGMs: Boohoo Group PLC (AIM:BOO)

Economic news: Retail Sales (UK), Consumer Confidence (EU), CBI Distributive Trades (UK), Core PCE Price Index (US)