Market report

Fed agrees tapering | Next sales slow | Cairn changes name


10pm: Fed to scale back tapering

The US Federal Reserve will start scaling back its £88bn a month pandemic stimulus package in November with plans to end bond purchasing in 2022.

The S&P 500 and Nasdaq notched record all-time closes for their fifth straight sessions, while the Dow Jones Industrial Average posted a record close for the fourth session in a row.

Danni Hewson, a financial analyst at AJ Bell, said: “While the Fed hasn’t altered interest rates it is going to start tapering bond buying – a tacit admission that inflation, though still expected to be transitory, might well hang around a little longer.”

Inflation has been rising in the US, hitting 5.4% in September, much higher than the Fed’s 2% goal.

Fed chairman Jerome Powell said: ‘As the pandemic subsides, supply-chain bottlenecks will abate and job growth will move back up.

“And as that happens, inflation will decline from today’s elevated levels. Of course, the timing of that is highly uncertain.”

5pm: Cairn changes name and expects India payout

Cairn Energy closed 0.16% weaker, having gained earlier as the Scottish oil and gas producer’s long-running dispute with the Indian government appeared to be drawing to a close.

Cairn plans to change its company name to Capricorn Energy from 13 December 2021. The LSE stock ticker will remain as CNE.

This follows an agreement at the time of the Cairn India IPO that the name would ultimately be changed. 

“Given the recent legislative change in India and our participation in the related tax refund process, we are now putting in place the planned name change,” said the company.

“The new name reflects continuity and evolution: the majority of Cairn’s subsidiaries have been known as Capricorn for some time. It is an established and respected name across our global operations, maintaining stakeholder confidence in our long-standing reputation for responsibility, relationships and respect.”

Miners regained some ground as copper and iron ore prices rose, with Antofagasta up 1.18%, Anglo American adding 1.49%, Glencore rising 0.35% and BHP 0.77% higher.

Fashion and furnishing chain Next fell 3.32% after the it reported better-than-expected full-price sales in the last five weeks, but warned that momentum would slow in the final quarter due to diminishing pent-up demand.

Online ticket seller Trainline drifted 7.07% even after posting a return to profitability in the first half.

The departure of Pets at Home CEO Peter Pritchard had investors howling and shares fell 1.88% despite upgrading its full-year profit expectations.

The FTSE 100 index was 25.92 points, or 0.4% lower at 7,248.89, below the day’s peak of 7,277.64 but above the session low of 7,235.32 as Wall Street made mixed progress ahead of the Federal Reserve’s latest monetary policy decision following upbeat US data.

9.30am: Scottish GDP

Scotland’s onshore GDP grew by 0.1% in August, according to statistics announced today by the Chief Statistician. Output remains 1.3% below the pre-pandemic level in February 2020.

In the three months to August, GDP is estimated to have grown by 2.6% compared to the previous three month period. This reflects a slowdown in growth during the third quarter so far, relative to the upwardly-revised growth of 5.6% in Quarter 2 (April to June) which was also published today in the GDP Quarterly National Accounts.

Output in the services sector grew by 0.2% in August, with increases in 11 of the 14 subsectors. The largest positive contribution to growth was from accommodation and food services, offset by a drop this month in the health and social work subsector.

The production sector contracted by 0.8%. There were falls in the three of the four sub-sectors, including a contraction of 2.6% in manufacturing output.

The construction sector is provisionally estimated to have grown by 0.2%.

Finance Secretary Kate Forbes said: “Today’s figures provide further evidence of Scotland’s economic recovery, with output now just 1.3% below the pre-pandemic level of February 2020.

“It is encouraging to see such strong growth in accommodation and food services, where activity increased by 8.7% during August.

“These businesses were particularly badly hit by coronavirus (COVID-19) restrictions and benefited from the move beyond Level 0 on 9 August, along with other consumer-facing sectors such as arts, recreation and culture. It is a tribute to their innovation and resilience that they are bouncing back so robustly.

“The pandemic is not over and challenges remain, but we are working hard to ensure Scotland emerges with a stronger, greener and fairer economy.”

9am: Markets unmoved

The FTSE 100 index was trading flat while the mid-cap FTSE 250 index was up 25.53 points, or 0.1% as traders awaited a decision from the US Fed on tapering.

7am: Next expects slower sales

Fashion and home furnishings company Next said it expects sales growth to slow down in the run-up to Christmas as pent-up demand seen during the summer diminishes.

It added that stock availability has improved but “remains challenging”, with delays in its international supply chain being compounded by labour shortages in the UK transport and warehousing networks. 

“However, to date, stock limitations appear to be offset by strong underlying demand,” it said in an update.

It is maintaining its guidance for full price sales to be 10% higher in the fourth quarter and full year profit before tax at £800m (up 6.9%).

Although consumer finances are in good shape, price increases in essential goods (such as fuel) may moderate demand for more discretionary purchases.

Full price sales in the 13 weeks to 30 October were up 17% on 2019.

7am: Pets At Home boss quits

Peter Pritchard, chief executive of Pets at Home, has announced he will leave the business next summer after 11 years with the firm.

Mr Pritchard joined the retailer as commercial director and became chief executive in March 2018.

A search for his successor will begin both internally and externally.

He will be paid his salary and bonuses for the rest of the year – £2.1 million last year – and will also be entitled to cash in some of his long-term share plans.

Pets at Home said profits in the six months to the end of September are expected to be at the top end of City expectations.

7am: LV= members to vote on Bain Capital deal

Insurance and pensions group LV= said the proposed acquisition by Bain Capital will move to a vote by members on 10 December.

The company said members will share £111m in one-off payments, with every eligible member receiving a payment of £100.

There will be a £101m increase in future with-profit policy payout enhancements for all members holding eligible LV= With-profits policies.

Full story here

Global markets

London equity markets are expected to open lower ahead of today’s meeting of the US Federal Reserve which is expected to set out the first steps for a tapering of its $120bn a month bond-buying programme.

Traders are also looking ahead to the Bank of England meeting on Thursday, where interest rates may be raised.

“The central banks’ wider problem is how to temper expectations about future rate rises,” said Michael Hewson, chief market analyst at CMC Markets. 

All three major US indexes were higher. The Dow Jones Industrial Average was up 0.4%, the S&P 500 rose 0.9% and the Nasdaq Composite closed 0.3% higher.

Data overnight showed China’s services economy expanded for the second month in succession, producing a modest rise in the nation’s overall private sector.

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