etail sales figures today showed busier high streets and retail parks before the blow to confidence caused by the Omicron variant.
The Office for National Statistics said the proportion of online sales was its lowest level of the pandemic as shoppers got out in November to buy early Christmas presents and snap up Black Friday deals.
Live from the floor of the City’s top trading house…
I’m standing in the centre of the biggest trading floor in the City listening to the sound of a billion dollars flash past.
At TP ICAP in the heart of the City, just near Liverpool Street station, they execute 24 million trades a year with a value of £350 trillion.
That’s nearly £1 trillion a day including weekends and holidays. That’s £41 billion an hour. Or £11 million a second.
There are 650 brokers trading interest rates, credit, foreign, money markets and boring old shares, a bit. (In this bit of town, equities, like Gordon Gekko’s lunch, are for wimps).
HSBC gets another fine for money laundering
HSBC was today hit with a £64 million fine for “serious weaknesses” on money laundering, the latest blow to the global bank’s reputation.
City watchdog the Financial Conduct Authority said the bank had “unacceptable failings” between 2010 and 2018, including “inadequate monitoring” and poor assessment of risk.
The fine comes just days after rival NatWest was fined £265 million for money laundering. Gangs of criminals deposited hundreds of millions of pounds in cash at more than 50 NatWest branches, the investigation found.
Tech stocks under pressure
Richly-valued sectors bore the brunt of market jitters today as the dust finally settled on a significant week in the battle to contain inflation.
The pressure on London-listed technology stocks came after Wall Street’s Apple, Tesla and Microsoft skidded 3% and more as investors reacted to this week’s Federal Reserve guidance for three hikes in interest rates in 2022.
Higher rates tend to diminish the appeal of tech-focused stocks, whose lofty valuations are built around strong future cash flows.
Baillie Gifford’s Scottish Mortgage Investment Trust, which has 5% of its portfolio invested in Tesla, led the FTSE 100 fallers board with a decline of 3% or 34.5p to 1325p.
AI cyber security firm Darktrace also fell 10.2p to 400.8p, marking a lacklustre final session before its relegation to the FTSE 250 index on Monday.
Lloyds Banking Group continued to improve on hopes that yesterday’s margin-enhancing hike in UK interest rates will be followed by another in February or March.
The shares added half a penny to 47p, compared with 44.5p on Wednesday afternoon.
Other risers included British Airways owner IAG, up 2.1p to 129.1p, as the FTSE 100 index edged 6.15 points lower at 7254.46. The FTSE 250 was down 11.99 points at 22,635.97.
Strong clothing sales in November’s official figures boosted Next shares 114p to 7872p, but there was no respite for AIM-listed Boohoo after yesterday’s profits warning.
Shares fell another 3.95p to 102.1p as City analysts reviewed their price targets. Andrew Ross at Barclays cut to 135p from 395p, adding that while some of the pressures are transitory it will be difficult for Boohoo to build confidence in the near term.
Elsewhere on AIM, Tekmar rose 2.5p to 50.5p after it secured a contract to supply cable protection systems for the giant Dogger Bank wind farm off the North East coast.
Halifax forecasts UK house price growth to be around 1% next year
UK house price growth next year may be in the range of flat to 2%, and not match bumper rises seen during the pandemic, mortgage lender Halifax has forecast.
While Halifax predicts growth of around 1%, its new outlook report cautioned “forecast uncertainty remains very high”.
The market has been boosted during the coronavirus crisis by many people during lockdowns reassessing how much space they want and where they want to live, and attractive mortgage deals. There was also a stamp duty holiday which finished at the end of September.
Small consolation for retailers
Capital Economics said the strong retail sales in November will feel like “a consolation prize” for retailers as they come to terms with a difficult Christmas period due to Omicron.
The 1.4% month-on-month rise in retail sales volumes in November compared with City forecasts for 0.8%.
Its UK economist Bethany Beckett said: “Some of that strength was related to a recovery in fuel sales after September’s panic buying dampened sales volumes in October.
“But it was mostly due to a stronger-than-usual boost from Black Friday and people starting their Christmas shopping early in light of worries about shortages and shipping delays.”
FTSE 100 steady, Scottish Mortgage lower
Boohoo shares came under further pressure today, falling another 3% before settling 0.5% or 0.4p lower at 105.65p. They had been 373p as recently as February.
Today’s sell-off wasn’t helped by general weakness in the tech sector as rising bond yields erode the appeal of high growth stocks.
Scottish Mortgage Investment Trust fell 2% in the FTSE 100 index after Tesla, which accounts for 5% of its portfolio, slid 5% on Wall Street last night.
The FTSE 100 index rose by a better-than-expected 7.73 points to 7268.34, aided by a resilient showing from mining stocks including BHP.
A 4% rise for MoD supplier Qinetiq led the FTSE 250 index, which was 4.35 points lower at 22,643 amid weaker trading for greetings card firm Moonpig and IT supplier Kainos.
Black Friday boost for high streets helps UK retail sales to rise 1.4%
The monthly gain was led by growth in clothing stores, up 2.9% and surpassing their pre-Covid level for the first time, data from the Office for National Statistics shows.
Other non-food shops also recorded higher sales volumes, up 2.8%, covering firms that sell goods such as toys, jewellery and computers.
Red pen for Boohoo shares
Today’s official figures suggested online shopping fatigue in November as consumers took the chance to visit high street and retail parks for Black Friday and pre-Christmas deals.
The trend added to the headwinds facing fashion firm Boohoo as it reduced sales guidance yesterday, sending shares down 23% to 106p. The chain highlighted factors ranging from higher freight costs to a spike in the level of customer returns.
City analysts have published significantly lower price targets on the back of the warning, with Andrew Ross at Barclays cutting to 135p from 395p. He said some of the issues are transitory, but adds that it will be difficult to build confidence in the near term.
Adam Cochrane at Deutsche Bank is more optimistic at 230p, but is cutting his earnings forecasts by 35% for 2022 and 2023.
Tech stocks lower in Nasdaq sell-off
Last night’s big Wall Street sell-off has set a downbeat tone for the London market at the end of a week in which investors got a clearer view of monetary policy in 2022.
The tech-heavy Nasdaq slid 2.5% on Thursday, wiping out gains in the previous session after the Federal Reserve on Wednesday signalled the likelihood of three interest rate rises next year.
The prospect of higher rates chipping away at the attractiveness of some of the more richly valued sectors meant shares in Apple, Tesla and Microsoft fell 3% or more. In contrast, US banks were higher to limit the decline for the Dow Jones Industrial Average to 0.1%.
Asia markets followed the US lead while the FTSE 100 index is due to slip 25 points to 7235 after its 1.25% rally yesterday, when the mood was helped by relief that the Bank of England’s had hiked interest rates in response to spiralling inflation.
Investors now expect the Bank to make a full quarter point hike by the time of the March meeting and possibly as soon as the next gathering of the monetary policy commitee in February.
Sterling, which rose to a three-week high after the Bank’s surprise move to 0.25%, remained at just above 1.33 versus the US dollar.
The uncertain demand outlook put pressure on the oil price, with Brent crude futures continuing to trade below $75 a barrel.