Market report

Borrowing costs ‘falling’ | Glencore sweetens offer


IMF: interest rates on way down, UK economy sluggish

Interest rates in the UK are projected to head back to pre-pandemic levels, according to the International Monetary Fund (IMF), but says the global economy faces a period of low growth.

It says the UK economy’s performance in 2023 will be the worst among the 20 biggest economies, known as the G20 – which includes sanctions-hit Russia – and predicts it will shrink by 0.3% in 2023 before a slight rise next year.

The IMF also warned of a “rocky road” for the global financial system.

The positive news is that interest rate rises are “likely to be temporary” as price rises would quickly ease back and allow rates to ease back to around 0.5% above inflation, which would mean a nominal interest rate of 2.5% if the Bank of England is able to return inflation to its 2% target.

Chancellor Jeremy Hunt said: “Thanks to the steps we have taken, the OBR says the UK will avoid recession, and our IMF growth forecasts have been upgraded by more than any other G7 country.

“The IMF now say we are on the right track for economic growth. By sticking to the plan we will more than halve inflation this year, easing the pressure on everyone.”

London market close

Swiss mining giant Glencore has revised its offer to Canadian group Teck Resource to persuade it of the benefits of a merger.

The initial all-share proposal, now involves an $8.2bn cash element with Teck shareholders holding 24% of the two companies’ metals businesses plus a stake either in their merged coal interests (CoalCo) or the cash alternative.

Glencore added that it believes CoalCo would be a leading highly cash-generative bulk commodity company, but appreciates some Teck investors either want a full coal exit or to move away from thermal coal.

But the revised plan may face more resistance from the Teck board.

“Glencore hasn’t presented a coherent plan for its proposed coal company,” chief executive Jonathan Price told The Globe and Mail last week.

“There’s no market for shares for a massive new thermal coal-focused company, and it would expose our shareholders to significant jurisdictional, ESG and execution risk.”

Glencore has seemingly addressed those concerns with the new plan but faces a battle to convince the firm’s controlling shareholders the Keevil family.  

Prior to Glencore’s approach. Teck had announced its own plans to split into two companies: Elk Valley Resources, which would hold its metallurgical coal assets and Teck Metals, which would hold its copper and zinc assets.

Glencore, which powered up 15p (3.3%), to close at 472.25p. Higher metals prices and the prospect of some mega-buyout deals led other miners upwards. Rio Tinto closed up 260p (4.9%), at £55.55. Antofagasta and Anglo American followed suit as the pair advanced 71.5p (4.8%), to 1551.25p and 108.5p (4.2%) to 2709p, respectively.

Other big risers included Persimmon, which perked up 33p (2.7%) to 1266p after Barclays upgraded the house builder to “equal weight”.

The FTSE 100 closed 44.16 points higher at 7,785.72.

9.20am: CBI fires Danker, appoints new Director General

The CBI has sacked director general Tony Danker and announced that Rain Newton-Smith will return to the organisation.

Full story here

7am: Harbour and BP join forces on CCS

Harbour Energy rig

Harbour Energy and BP have joined forces to develop the Viking carbon capture transportation and storage (CCS) project in the Humber. 

The deal will mean Harbour Energy continuing as operator of Viking CCS with a 60% holding while BP will take a 40% non-operational stake.

Full story here

7am: Black Sheep Brewery

The Black Sheep Brewery, the Yorkshire brewery and pub operator which was a spin-off from Theakstons, has appointed Teneo to conduct a review, including the possible sale of the company.

Full story here

7am: UK retail sales stable

UK retail sales increased 5.1% in March against the previous year, slowing from an increase of 5.2% in February.

This was above the three-month average growth of 4.8%, however, as well as the 12-month average of 2.6%, according to the British Retail Consortium.

Like-for-like retail sales increased 4.9% in March against the previous year, unchanged from February. The LFL figure was also above the three-month average growth rate of 4.6% and the 12-month average of 2.1%.

Global markets

Wall Street ended Monday’s session with mixed outcomes. The Dow Jones Industrial Average closed up 0.3%, the S&P 500 was 0.1% higher and the Nasdaq Composite finished marginally lower.

Sterling was quoted at $1.2407.

Japan’s new central bank chief said Monday no major rate hikes were on the horizon and the Nikkei 225 index rose 1.3%.

Markets in China fell following weak economic data. The Shanghai Composite was down 0.5%, while the Hang Seng index in Hong Kong was marginally lower..

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