London’s good start to trading in 2022 was halted today as investors react to the prospect of a US interest rate hike as early as March.
Wall Street markets have fallen sharply and the FTSE 100 index is down 1% after the Federal Reserve meeting minutes were released suggesting rates could rise “relatively soon.”
The massive sell-off overshadowed another strong trading performance from Next, with the fashion chain improving its profit forecast following strong Christmas trading.
Women’s ready-to-wear company Sosandar welcomes increase in sales
Online womenswear retailer Sosandar toasted the festive trade, helped by “very strong” sales of festive clothing ahead of Christmas.
The AIM-listed company added that trading in early January was also strong, with demand for sports and leisurewear increasing since December 25.
Total revenue for the three months ended December 31 was £ 8.9million, up from £ 4million and representing a record quarter.
M&C Saatchi faces £ 250million offer from own vice president
M&C Saatchi, the famous Soho advertising company with close ties to the Conservative Party, is facing a £ 250million takeover bid from its own vice president.
Vin Murria, a software entrepreneur with an almost 10% stake in the company, is about to make an offer that would take the company off the stock market.
A story in the Daily Telegraph this morning signaled his intentions. Today, M&C was forced to tell investors that it had received “a preliminary approach from AdvancedAdvT Limited, a vehicle related to Vin Murria, a director of the company”.
Investors caught off guard by the Fed’s minutes
Rising U.S. rate expectations weighed on currency markets as the pound reversed part of its recent rally to stand 0.4% lower, just above 1.35 from the American dollar.
The pressure spread to Asian markets, where Tokyo’s Nikkei 225 ended down nearly 3%.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said the minutes took investors by surprise, but the decline in stocks seemed overdone.
He told his clients: “The normalization of Fed policy is not expected to affect the outlook for corporate earnings growth, which remains on solid footing due to strong consumer spending, rising wages, and rising wages. ” always easy access to capital.
“Keep in mind that the Fed has become more hawkish since last summer and the stock markets have done pretty well.”
Growth companies have been the main beneficiaries of low real and nominal interest rates, pushing valuations to high levels.
Haefele added: “As the Fed begins to normalize its policy, it makes sense that these actions face the strongest headwinds. In the US stock market, we continue to have a preference for value stocks over growth stocks. “
The company behind a British gas project goes up for sale
Buyers are circling around UK gas assets after soaring global prices prompted a renewed focus on domestic supply.
Angus Energy, listed on AIM, said it had recently received a “series of approaches” from buyers interested in its 51% stake in the Saltfleetby gas field in Lincolnshire and an offer to buy the whole business. Angus has thus initiated a formal sale process, with CEO George Lucan declaring that it is in the “best interests” of investors because public markets “place little value on hydrocarbon reserves in general”.
Meanwhile, Angus said he was continuing his plans to restart gas production at the Saltfleetby site, which was first discovered in the 1990s.
Shares jumped 14.5% to 0.88p.
Next “Crown Jewel of Main Street”
The following actions have not taken off, despite the retailer’s fifth profit improvement last year.
However, analysts were full of praise, as sales for the eight weeks leading up to Christmas Day exceeded management’s expectations of £ 70million and pre-tax profit forecasts for the entire year were raised from £ 22million to £ 822million.
Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown, said: “For all the bad news on Main Street, there is a shining gem to be found in the form of Next.
“There aren’t many traditional retailers that hand out special dividends or improve their advice multiple times. “
The latest upgrade means Next is able to pay another special dividend of 160p per share, on top of the 110p that has already been paid.
RIchard Hunter, Head of Markets at Interactive Investor, said: “This implies a dividend yield of over 3%, which is remarkable in the current interest rate environment, and which also leaves the potential for more than 3%. gas in the reservoir as the company reverts to the pre-pandemic ordinary dividend cycle, including the possibility of share buybacks if certain obstacles are encountered. “
FTSE 100 drops 1%, Next stocks drop
The FTSE 100 index is down 1% or 74 points to 7,440, although it is still above the 7,384 level where the first flight from London started the year.
British Airways owner IAG gave up its recent gains by falling 3% and the tech-focused Scottish Mortgage Investment Trust fell 2% as the latest rise in US bond yields put pressure on the market. value of holdings, including Tesla and Amazon.
Transatlantic retailer JD Sports Fashion also fell 2% amid fears of a consumer squeeze caused by an impending hike in U.S. interest rates.
The discount chain B&M European Value Retail rose 2% after revising its forecast for the full year upwards following a “Very strong Golden Quarter”, but there was no rally for Next shares. The stock listed on the FTSE 100 was 52p lower at 7986p, despite further improvement in earnings.
Greggs boss Roger Whiteside retires and Roisin Currie becomes CEO
Roger Whiteside, CEO of the Greggs bakery chain, will retire from the company he had been running since 2013 this year.
The boss, who is 63, will step down after Greggs’ annual meeting in May. He will be replaced by Roisin Currie, commercial and real estate director of the firm FTSE 250.
While he was running Greggs, the company’s domain grew from about 1,600 stores to 2,181, with more openings planned.
White side said: “Greggs is a fantastic organization with a very strong team. Roisin is a great leader and has played a key role in the development of the company for many years, most recently in shaping our ambitious plans for future growth.
Next shows other retailers how to do it (again)
Then it is on the rise. Not for the first time. Today it posts another improvement in earnings and another special dividend to shareholders.
Fear of US rates triggers fall of FTSE 100
The FTSE 100 index is expected to open sharply lower after the US Federal Reserve’s final minutes triggered a massive sell off on Wall Street last night.
Comments from the last Fed meeting in December suggested that a rate hike could come “relatively soon”, prompting traders to bet on a hike in March. Some Fed members have also questioned when would be the right time to reduce the size of the central bank’s balance sheet as monetary policy normalizes.
US inflation is currently well above 6% while the central bank also noted that the “very tight” US labor market was a reason to accelerate its policy response.
The outlook for a spring hike in interest rates put upward pressure on US bond yields for the third consecutive session, lessening the attractiveness of high growth companies valued on future cash flows.
The tech-focused Nasdaq closed 3.3% lower and the S&P 500 lost almost 2% of its value, although US futures markets point to a more stable session today.
London’s FTSE 100 index is expected to open more than 100 points lower, having gained ground in the first two sessions of 2022 after closing last night at its highest level since February 2020.
Michael Hewson of CMC Markets said: “What seems to have scared the markets are the discussions about reducing the balance sheet.
“This has caused quite a bit of anxiety, with some members of the Fed talking about the likelihood of when it might be appropriate to reduce the size of the balance sheet, thereby removing liquidity from the market.
“While this may be a valid concern, speculation that the Fed may start doing so seems a bit premature given that it has yet to stop increasing its balance sheet, let alone shrink it.”