Market report

ECB to raise rates | Mitie buyback | Scotgold record | DFS


10pm: Wall Street dives

Wall Street stocks were sharply in the red at the close of trading ahead of today’s inflation reading.

At the close, the Dow Jones Industrial Average was down 1.94%, while the S&P 500 was 2.38% weaker and the Nasdaq Composite saw out the session 2.75% softer.

5pm: ECB to raise rates next month


The European Central Bank left interest rates unchanged but will introduce a 25bps hike at the July meeting. It will be first increase for the first time in 11 years, and will be followed by another hike in September.

The decision sees it follow other central banks in fighting rapidly-rising inflation.

The Bank of England has approved four rate increases since December and the US Federal Reserve raised its rate by a half-point in May. Markets have priced in another rate rise by the Bank of Englan at next week’s meeting.

The ECB described inflation as a “major challenge” that has “broadened and intensified” in the 19 countries where the euro is used.

It said: “The governing council intends to raise the key ECB interest rates by 25 basis points at its July monetary policy meeting.”

Danni Hewson AJ Bell financial analyst said: “The announcement from the ECB that, not only will it finally raise rates next month, but following hikes might be significantly higher than 0.25% have spooked already nervous market watchers. Anything but a fall in that US inflation number tomorrow will lead to speculation that the Fed will have to fast track plans to cool the overheating economy.”

Following the Prime Minister’s plans for the housing market, shares in FTSE 350 UK house builders mostly dipped as have the UK’s high street banks. 

“There are huge questions about how the proposals would actually work, particularly with average house prices now coming in at almost £290,000, according to latest figures from the Halifax,” said Ms Hewson..

The FTSE 100 fell 116.79 points to close at 7,476.21.

Mitie Group rose 6.3% on a swing to annual profit and a share buyback. DFS Furniture fell 12% after saying it has seen a reduction in orders in its fourth quarter.

2.15am: Rail dispute breakthrough

Train drivers union Aslef said it will recommend an improved pay offer to its members in a move likely to resolve the current dispute.

Full story here

9.30am: FirstGroup conditions ‘won’t wash’

Russ Mould of AJ Bell says the split offer for FirstGroup is clearly not attractive to shareholders as there is uncertainty over how much they would get, given one component is dependent on the outcome of various factors. Furthermore, FirstGroup doesn’t think the main cash component is generous enough.

The board of FirstGroup has rejected a proposed £1.2bn takeover by I Squared Capital Advisors, saying the cash component of 118p per share “significantly undervalues” FirstGroup’s continuing operations and its future prospects, while the additional 45.6p per share “does not provide shareholders with sufficient certainty”. Full story here

7am: FirstGroup rejects I Squared approach

The board of FirstGroup has rejected a proposed £1.2bn takeover by I Squared Capital Advisors, saying the cash component of 118p per share “significantly undervalues” FirstGroup’s continuing operations and its future prospects, while the additional 45.6p per share “does not provide shareholders with sufficient certainty”.

The company will announce its results for the year on 14 June.

7am: Mitie unveils buyback, reinstates final dividend

Mitie Group has launched a £50m share buyback programme alongside a “robust” financial performance, with strong underlying growth, delivering a record £4bn of revenue in FY22, operating profit of £167m and free cash flow of £133m.

The company has reinstated its final shareholder payout, with a proposed final dividend of 1.4p per share, taking total dividend for FY22 to 1.8p (FY21: nil).

Phil Bentley, group chief executive, said: “The current year has started well, with significant contract wins from Hammerson, Netflix, Poundland, and Primark as well as renewals/extensions of our contracts to support military bases in Cyprus, Ascension Islands, and the Falklands. 

“This new business momentum, together with a full year’s contribution from significant contract wins including FDIS and BAE and the uptick in Government projects and variable works (as our customers experience higher utilisation rates across their buildings), gives us confidence in our growth outlook.

“The impact of inflation on our business continues to be well managed and we will see further benefits this year from our margin enhancement initiatives.

“As a result, in FY23, after excluding the £448m COVID related contract work that was delivered in FY22, we expect to deliver mid to high single digit revenue growth, together with good operating margin progress.”

7am: Scotgold reports record May

Scotgold Resources, operator of the Cononish Gold Mine at Tyndrum, posted record production for April and May totalling 1,984 ounces of gold and 10,810 ounces of silver.

Scotgold Resources CEO, Phil Day said: “We are pleased to report that April and May have delivered record profitable gold production, a trend we expect to continue in June and the rest of 2022, in line with our mine schedule.”

7am: DFS sees slower Q4

Furniture retailer DFS said the third quarter (ending on 27 March), saw double digit growth in the volume of orders taken across the group relative to a FY19 pre-pandemic comparative period.

Moving into the fourth quarter the UK furniture market has seen a change in demand patterns with recent data from Barclaycard suggesting a c. 2.1% reduction in transactions in April relative to pre-pandemic periods.  The company has seen a similar change in order volumes across the group.

Global markets

Stock prices in London are seen opening lower ahead of an interest rate decision from the European Central Bank at 1245 BST.

China’s exports rebounded strongly in May, with factories restarting and supply chains untangling as Shanghai slowly emerged from a suffocating lockdown.

As restrictions have eased, overseas shipments from the world’s second-biggest economy bounced back 17% on-year in May, up from 3.9% in April, according to new customs data.

Imports rose 4.1% last month, also beating expectations.

However, the Shanghai Composite was down 0.8%, and the Hang Seng index in Hong Kong was down 0.5%. Tokyo’s Nikkei 225 index was up 0.5%.

The Dow Jones Industrial Average fell 0.8%, nearly 300 points, while the S&P 500 lost 1.1% and the tech-heavy Nasdaq Composite 0.7%.

Oil jumped to a 13-week high, trading at $123.91 a barrel.

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