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2pm: ECB follows Fed with rate rise

European stock markets fell back as the European Central Bank repeated the US Federal Reserve’s decision yesterday to hike interest rates by 25 basis points.

Eurozone inflation data released earlier this week showed a slight rise in headline inflation in April, to 7%, and slight fall in core inflation, to 5.6%.

“Underlying price pressures remain strong,” the ECB said in a statement. “At the same time, the past rate increases are being transmitted forcefully to euro area financing and monetary conditions, while the lags and strength of transmission to the real economy remain uncertain.”

Economic growth in the bloc was stagnant in the first quarter.

ECB president Christine Lagarde will give a press conference that may offer more direction on the central bank’s thinking.

The US Federal Reserve last night hiked rates as widely expected, bringing the federal funds rate range to 5%-5.25% — its highest level since August 2007, but hinted at pausing the m onths-long policy.

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9am: Markets fall on miners, Fed

Falling miners led the FTSE 100 lower, while market sentiment was also downbeat following comments from US Federal Reserve Chairman Jerome Powell about the need to keep up the battle against inflation.

“Many investors thought falling inflation would be the principal reason why the Fed would pivot,” says Russ Mould, investment director at AJ Bell. “That’s not the case now. Under the current circumstances, the Fed is more likely to pause rate hikes because the US faces the prospect of a recession and in light of more banks struggling. Therefore, not a reason to celebrate.”

The blue chip index was around 30 points lower at 7,756.75. Miners fell amid lower base metal prices and a weaker demand in to China.

The Fed Reserve last night raised interest rates by 25 basis points and signalled it may pause further increases. However, Fed chair Jerome Powell’s view that inflation was still a concern caused uncertainty among investors on its monetary policy trajectory.

The European Central Bank will announce its rate decision at 12.15pm.

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7am: Virgin Money

Rising impairment charges for bad debts and higher investment cost saw Virgin Money post lower pre-profits of £236m for the first half against £315m a year earlier.

Provision for bad debt surged to £144m from £21m, as Virgin updated economic assumptions with some signs of a modest increase in arrears on customer credit cards.

Higher interest rates drove an improvement in income to £933m, up 10%, while the bank’s net interest margin – the difference between what it charges for loans and pays on deposits – grew by eight basis points to 1.91%.

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7am: Next

Next reported a slight dip in sales but said it was ahead of guidance for the first quarter of the year.

Full price sales were down 0.7% against last year, moderately ahead of Next’s guidance of 2%. Full year guidance is unchanged with Next still expecting profit before tax of £795m, down 8.7% on last year.

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7am: Shell

Energy company Shell posted earnings of $9.65bn (£7.6bn) for the first three months of this year, joining its rival BP in beating forecasts..

However, profits are lower than the $9.8bn it made in the final quarter of last year as oil and gas prices fall from their highs last summer.

Full story here

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7am: Rathbones

Wealth manager Rathbones said total funds under management and administration rose 1.1% in the first quarter to £60.9 billion, reflecting positive market and investment performance.

Net inflows in our discretionary and managed business were £303 million, representing a 2.6% annual growth rate with net operating income increasing 6.4% compared with the previous quarter to £117.8 million.

Rathbones remains on track to meet the operating margin targets provided in the 2022 preliminary results, supported by the successful delivery of Saunderson House synergies and the launch of an enhanced digital capability.

Over the coming months Rathbones expects to complete the combination with Investec that was announced on 4 April, subject to regulatory approvals. The Prospectus and Circular in relation to the combination will be published later this quarter.

Paul Stockton, group chief executive, said: “This transaction represents a significant opportunity in our sector to become the UK’s leading discretionary wealth manager.”

Financial highlights:

–    Total funds under management and administration totalled £60.9 billion at the end of the first quarter* (31 December 2022: £60.2bn).

–      £45.8bn in the Investment Management business (31 December 2022: £45.1bn).

–      £11.4bn in the Rathbone Funds business (31 December 2022: £11.0bn).

–      £3.7bn in Saunderson House (31 December 2022: £4.1bn).

–    Discretionary and managed net inflows totalled £0.3bn (Q1 2022: £0.3bn), representing an annualised growth rate of 2.6% (Q1 2022: 2.5%, Q4 2022: 3.1%).

–    Underlying net operating income totalled £117.8 million for the three months ended 31 March 2023, a decrease of 2.2% from the £120.5m in the corresponding period last year.  

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6am: Mobile tie-up

Vodafone and CK Hutchison are said to preparing a £15 billion merger that would create Britain’s biggest mobile phone operator.

The deal would value the equity of the combined entity at around £9bn, with £6bn of debt, according to the FT. It would have around 28m customers.

The two parties are expected to reveal the merger later this month after the appointment of Margherita Della Valle as Vodafone’s new chief.

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ECB to set rate

The European Central Bank’s interest rate setters make their latest decision today, with markets forecasting a quarter-point rise, though Bank of America says it would be no surprise to see a fourth half-point rise this year as the bank struggles to contain inflation.

Data this week showed the first rise in headline inflation in six months in April from 6.9% to 7%, with food prices making up the bulk of the price growth. A measure of core inflation remained close to highs of 5.6%.

However, eurozone businesses have reported higher levels of confidence in recent months and with demand for workers keeping unemployment low. Germany’s 2.9% rate is the smallest figure since the country’s reunification.

The US Federal Reserve last night raised interest rates by a quarter of a percentage point and indicated it may now pause to give officials time to assess the fallout from recent bank failures and monitor the course of inflation.

The unanimous decision lifted the Fed’s benchmark overnight interest rate to the 5%-5.25% range, the tenth consecutive increase since March 2022.

At a press conference following the release of the statement, the bank’s chairman Jerome Powell said the Fed still views inflation as too high and said high price pressures remain a matter of concern. Mr Powell said it is too soon to say the rate hike cycle is over.

“We are prepared to do more with rate rises if needed, and officials did not decide at the meeting to pause on a hike at the June policy meeting, and what happens next on rates is a decision that officials will make on a “meeting by meeting” basis, he said.

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US bank in trouble

Shares in US bank PacWest plummeted by half in after hours trading in New York amid talks of a rescue for the US regional bank.

The bank has instructed boutique investment bank Piper Sandler to help it explore strategic options including a sale, according to Bloomberg. It comes after the Federal Deposit Insurance Corporation seized control of First Republic Bank on Monday before securing a sale to JP Morgan.