Pound slides as retail sales fall | Adobe software deal
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4pm: Markets flash red – pound slides
Sterling lost 1% to trade at $1.1351, its lowest level since 1985, after a far worse showing on the high street than the 0.5% dip analysts had expected.
It was the biggest fall in retail volumes since December 2021, according to the Office for National Statistics.
“All main sectors – food stores, non-food stores, non-store retailing and fuel – fell over the month,” the ONS said.
Supermarkets’ sales volumes also fell by 0.9%, while alcohol and tobacco sales rose by 6.3%.
Stock markets were dragged down by miners, retail, engineering and packaging companies – industries whose fortunes are heavy tied to economic activity.
“Markets flashed red across the board on the last day of the trading week, ” says Russ Mould, investment director at AJ Bell.
“Investors have become increasingly nervous about the scale and pace of interest rate hikes after the recent bout of inflation data and next week we have some serious decisions to be made by some of the most important central banks.
“On Wednesday the Federal Reserve will announce its latest interest rate decision and its new economic predictions. There is scope for this event to really upset investors so today’s retreat on European and Asian markets indicates that many people are trimming positions in case we get another big leg down.
“Pre-market indicative prices suggest the US will follow suit, with futures data pointing to a 1% decline in the Nasdaq and a 0.8% drop in the S&P when North American markets open later today.
“The Bank of England also makes its interest rate decision next week (Thursday), followed a day later by a mini-Budget from the new Government.
“To make matters worse, Alfred Kammer from the International Monetary Fund yesterday gave some stark reminders of what could happen next. He said: ‘There are risks that inflation could well stay uncomfortably high for longer than expected and become entrenched. Therefore, central banks should keep raising policy rates under most scenarios.’
“Higher rates push up the cost of borrowing for consumers and businesses, thereby potentially leading to a drop in spending. That in turn results in lower economic activity, creating an even gloomier environment for stocks and shares. If you thought the worst was over, strap yourself in as it could be a bumpy ride as we move into autumn.
The FTSE 100 closed 45.39 points lower at 7,236.68.
7am: Capita disposal
Capita has agreed to sell Pay360 to Access PaySuite, a division of The Access Group in a £150m cash and debt free deal.
Adobe agrees biggest private software deal
Adobe is paying about $20 billion for software design startup Figma in the biggest ever takeover of a private software company.
It is Adobe’s biggest acquisition and investors, who felt the company had paid a high price, sent shares down as much as 18% in New York, the steepest decline in more than two years.
The deal, which is half cash and half stock, will expand Adobe’s suite of creative tools for professionals.
But after a decade in the spotlight, Adobe has been a target for sellers in the tech downturn, with its shares losing more than a third of their value since the start of the year.
Investors have become increasingly sceptical about the company’s line of software for design professionals, which makes up about 60% of its revenue.
Asian markets were weaker early today as investors braced for a US rate hike next week.
Japan’s Nikkei index slipped 1.2%, while Hong Kong’s Hang Seng Index was down 1.1%
Wall Street closed in the red as investors digested a mixed bag of data ahead of next Wedneday’s key decision from the Federal Reserve
The Dow Jones Industrial Average was down 0.56%, while the S&P 500 was 1.13% weaker and the Nasdaq Composite saw out the session 1.43% softer.
The Commerce Department revealed that retail sales had risen 0.3% last month, while first-time unemployment claims fell to 213,000 in the week ended 10 September, according to the Labor Department.
This was down from the previous week’s revised print of 218,000 and well below market expectations for a reading of 226,000.