Markets: Close

ECB rates up | Primark profit warning | Ukraine hits Lloyd’s


5pm: FTSE 100 closes higher

London stocks closed up following new Prime Minister Liz Truss announced details of an energy bill support package.

The blue chip FTSE 100 index ended 24.23 points (0.33%) higher at 7,262.06, while sterling was 0.5% lower versus the dollar at $1.1481.

1.30pm: ECB raises rates

The European Central Bank confirmed a hike in interest rates by 0.75bps, prompting the prospect of deep divisions across the eurozone economies.

James Bentley, director of Financial Markets Online, said: “The ECB may have just driven a coach and horses through European unity. 

“With Italy’s debt mountain almost at the point of no return, the stage is set for relations to sour further between the bloc’s major economies. In other words, it could be about to turn ugly. 

“Essential economic reforms in the eurozone have been noticeable by their absence during ten years of low growth, while officials continued to dispense permanently loose monetary policy. With the ECB set to hike interest rates further in coming months, a reckoning is coming.

“The ECB’s rate hike should bolster the euro against the flailing pound. With sterling having fallen to its lowest level against the dollar for nearly four decades, it is under pressure from US rate hikes too but Britain’s exporters could reap a silver lining from this. That has its advantages as the country heads for recession.”

9.30am: Primark slip leads to profits warning

The strong showing in the US continued to underpin the FTSE 100 in early trading although a profits warning from Associated British Foods, owner of Primark, plunged to the foot of the blue chip index after a profits warning. It dragged down other retailers including Next and B&M.

ABF said: “As a result of the timing of the recent movements in currency and energy prices, and the commercial decision to limit further price increases next year, we now expect Primark’s profit margin for next year to be lower than the operating profit margin of 8.0% expected for the second half of this financial year.”

The FTSE 100 was up 20 points at 7,257.62.

7am: Restaurant Group

Total sales at the owner of Wagamama and Frankie & Benny’s came in at £423.4m for the half year to 3 July (2021: £216.8m).

Adjusted EBITDA was £41.7m on a pre IFRS 16 basis (2021: £11.2m). Adjusted Profit before tax came in at £10.2m on a pre IFRS 16 basis (2021: loss of £19.9m).

Chief executive Andy Hornby said: “We have made good progress in the past six months, delivering a robust financial performance in a challenging market, with continued LFL sales outperformance. 

“We have taken decisive management actions to reduce the impact of the industry cost pressures including fully hedging our utilities until December 2024 and reducing our interest rate exposure through interest rate caps.

“Whilst the uncertain consumer environment presents challenges for the hospitality sector, the Group is well positioned to further develop our brands to deliver long-term growth for all stakeholders underpinned by our strong balance sheet.”

7am: Lloyd’s loss

Insurance syndicate Lloyd’s, the marketplace for commercial, corporate and specialty risk solutions, has set aside £1.1 billion to pay claims related to the war in Ukraine as it plunged to a £1.8 billion for the half year because of rising interest rates.

It posted an underwriting profit of £1.2bn (HY 2021: £0.96bn).

John Neal, CEO, said: “With political and economic uncertainty looming large over society, it’s more important than ever that insurers are ready to support. Lloyd’s results today point to both the sustainable performance of our market and the resilience of our capital position, enabling us to continue supporting customers through whatever lies ahead.

“Rising interest rates, while prompting an unrealised investment loss on paper at the half year, will be good news for insurers in the long term as returns on assets strengthen in 2023 and beyond.

“Meanwhile, with the conflict in Ukraine continuing to inflict devastating consequences, we’ve taken proactive steps to protect our customers from the fallout while ensuring we can support them – and continue driving sustainable performance – through the uncertain times ahead.”

7am: National Express chair

National Express Group said Helen Weir will join the board as a non-executive director on 1 October and will succeed Sir John Armitt as the company’s chair on 1 January when he stands down from the board after almost ten years in the role.  

Ms Weir holds non-executive director roles at Greencore and Superdry. She had a lengthy executive career as a CFO of a number of listed companies and served in that position at Marks & Spencer plc between 2015 and 2018. She was also a non-executive director of Just Eat, SABMiller, Royal Mail Holdings and Cineworld Group.

Global markets

The European Central Bank meets today amid expectations it will raise interest rates buy 745 bps.

On Wall Street, stocks ended higher despite more tough talk from the Federal Reserve. The tech-heavy Nasdaq broke its seven-day losing streak, up 2.14%.

The Dow Jones Industrial Average was up 1.4% and the S&P 500 added 1.83%.

In Japan, the Nikkei was up 2.05%), while in China stocks were slightly down with the Shanghai Composite (-0.08%) struggling for direction on the extension of a lockdown in the city of Chengdu while the Hang Seng (-0.53%) was slipping in early trade.

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