From 3h ago
FTSE 100 hits record high
Boom! The UK’s blue-chip share index has hit a new alltime high.
The FTSE 100 has jumped at the start of trading to hit 8068 points, up 43 points or 0.55% this morning.
That comfortably clears the previous all-time peak of 8,047 points set in February 2023.
This extends yesterday’s rally, when shares were lifted by rising hopes that the Bank of England will cut interest rates twice this year.
Markets are also more buoyant as fears about an escalating conflict in the Middle East eased.
Jim Reid of Deutsche Bank explains:
Sentiment was bolstered by the lack of any further escalation in the Middle East.
Indeed, yesterday saw Iran’s foreign ministry spokesman say that Israel had received the “necessary response at this stage”. The apparent easing in tensions helped oil prices fall back.
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The monthly purchasing managers index (PMI) is an closely watched barometer of economic prospects; here’s what economists are saying about today’s UK PMI report, showing a pick-up in growth:
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Rhys Herbert, senior economist at Lloyds Bank, says:
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“Today’s figures suggest that the UK’s economic conditions are continuing to improve.
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It’s encouraging to see Service providers recording the fastest growth for nearly a year, and businesses will be hoping that another slight drop in inflation will have a further positive impact on spending power for both households and businesses.
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Improving economic activity is telling a relatively optimistic story. While geopolitical tensions may cause some challenges in the months ahead, markets remain optimistic that interest rates have peaked and could begin to fall later this year.”
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But…Charles Hepworth, investment director at GAM Investments, points out that factories struggled:
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“UK Services PMI data rose more than expected in April to a reading of 54.9, a short term high not seen in almost a year. This reflects the continuing recovery from the slowdown seen in the second half of last year.
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However, the strong showing in services was in stark contrast to the contraction still seen in the manufacturing sector which continues to struggle with a contractionary reading of 48.7. Companies surveyed reported that prices they charged went up at the slowest pace in a number of years, less due to declining demand but more through competition.
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This may not be seen as good news for the Bank of England who still isn’t comfortable enough that the inflation dynamics are genuinely shifting, and that consumers are reducing demand.”
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Overall, the PMIs paint a picture of a recovering economy, says Thomas Pugh, economist at leading audit, tax and consulting firm RSM UK. He adds:
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“The robust increase in the flash S&P/CIPS composite PMI in April to 54.0, the highest since May 2023, suggests that the economy continued to pick up steam after last year’s mini-recession.
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An acceleration in growth in Q2 would, in theory at least, ease the pressure on the Bank of England (BoE) to cut interest rates. But in reality, with inflation still likely to fall to 2% this month, the labour market rapidly weakening and growth still low, the time for interest rate cuts has come.
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A delay in rate cuts beyond the summer would risk harming the economic recovery for no material impact on inflation.
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The FTSE 100 has slipped back from its early morning record high, as the news that Britain’s economy is recovering from recession weighs on shares.
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While a recovering economy is obviously good for companies, this month’s stronger-than-expected PMI report could make the Bank of England cautious about cutting interest rates quite as quickly as hoped.
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Joshua Mahony, chief market analyst at Scope Markets, explains:
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The FTSE 100 has started to reverse back from record highs, after a fresh PMI survey that saw the services sector reading jump into the highest level since May 2023.
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Crucially, traders are showing signs of concern that this rebound in UK growth could come at a cost, with economy-wide input price inflation rising at the highest level in 11-months. Between strong services sector wage growth, and rising material and transportation costs in the manufacturing sector, we are seeing fears grow over the potential for a more cautious approach from the Bank of England.
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With markets essentially viewing the June rate decision as a coin-toss, today’s data raises fears that the BoE will instead hold off until August.
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Nigel Farage is urging the public to boycott the government’s planned sale of NatWest shares until the group released a full report regarding the decision to close his account with its private bank, Coutts, last year.
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The message came just hours before NatWest is due to hold its AGM at its Gogarburn headquarters in Edinburgh, from 11am today.
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In a video release on social media platform X on Thursday, Farage said:
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“No member of the British public should put their money and invest in shares in Natwest while they continue to hide the facts, hide the information, to hide the truth about me.
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This debanking row is far from over and I still reserve the right to take legal action”
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Today is @NatWestGroup AGM.
They still refuse to give a full report into what was said in their “independent investigation”.
Worse still, the SAR I submitted to @TraversSmith doesn’t include all of the information said about me.
What are they hiding? I will find out the truth. pic.twitter.com/zsTcWX56yw
— Nigel Farage (@Nigel_Farage) April 23, 2024
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Farage said he had put in a fresh subject access request to NatWest, asking for all the information that related to him, from the independent investigation surrounding last summer’s debanking row. They came back with “over 100 pages of documents” that he says were simply copies of a variety of press articles and not the information he was hoping for.
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The debanking controversy started when Coutts – the NatWest-owned private bank for the ultra-wealthy – planned to shut Farage’s bank accounts, and snowballed after Farage obtained internal documents that showed the bank had concerns over his political views. The scandal escalated when it emerged that CEO Alison Rose had discussed Farage’s case with a BBC journalist.
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Rose resigned, and was forced to forgo £7.6m in pay from NatWest, although independent lawyers hired by the bank concluded she had made an “an honest mistake” in speaking with the BBC and that concerns over Farage’s political views were not the driving factor in the decision to shut his accounts.
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The government’s stake in NatWest dates back to the bailout of Royal Bank of Scotland after the 2008 financial crisis. Jeremy Hunt confirmed in March’s budget that the government plans to sell a chunk of shares in NatWest in the summer.
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The sight of the UK’s FTSE 100 index climbing to a new record high this morning could help to buff up the reputation of the UK stock market.
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The London stock exchange has taken a battering recently as some major companies have chosen to float on Wall Street instead, such as chip maker ARM.
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Others, such as building materials group CRH, have chosen to move their listing from London to New York.
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The FTSE 100 has been tarred as a “Jurassic Park” of an index, due to its lack of fast-growing technology companies.
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But even if the Footsie is something of a lumbering Brontosaurus, it has still scaled new heights today.
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Russ Mould, investment director at AJ Bell, says that Brexit, and political ructions, have also weighed on UK share prices.
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Today’s positive showing is “exactly what’s needed to help repair the reputation of the UK stock market”.
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He adds:
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It’s going to be a slow process but every little helps
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“The UK has lived in the shadows of the US stock market for the past decade or more, delivering inferior returns on a relative basis as it has lacked the go-go growth stocks highly desired by investors. The FTSE’s low exposure to the technology sector has diminished the index’s appeal and seen investors look elsewhere for ways to turbocharge their portfolio.
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“Brexit and political uncertainty have also weighed on the index, even though approximately three quarters of its constituents earn money overseas. That’s led to cheap valuations and a mountain of unloved stocks. Investors are finally getting the message that a good chunk of these businesses still have a lot to offer, delivering slow but steady profit growth, and they’re available for a fraction of the price of some of their overseas peers.
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“The conveyor belt of takeovers continues to trundle along and that has put the spotlight on the market. At the same time, many UK-listed companies are simply getting on with the job at hand, delivering earnings and dividend growth. Investors who take a long-term view are still able to find plenty of opportunities.
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Newsflash: the UK economy continues to pull away from last year’s recession.
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The UK’s private sector is expanding at its fastest rate since May 2023, according to a new survey of purchasing managers at UK businesses.
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Data firm S&P Global’s Flash UK PMI has risen to 54.0 this month, up from March’s 52.8. That’s the highest level since last May, showing a pick-up in growth.
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The services sector, which makes up about three-quarters of the economy, is driving the growth, while the manufacturing sector is shrinking slightly this month.
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📢 Even more evidence of return to growth… 👍
Flash #UK #PMI Composite Output Index rose to 54.0 in April (March 52.8), an 11-month high.
Still led by services – #manufacturing output index actually dipped to 49.1 (March 50.9) – but also still outperforming the #euro area. pic.twitter.com/Yssr9cQUNI
— Julian Jessop 🏴 (@julianHjessop) April 23, 2024
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Services companies reported that output is growing this month, helped by a rise in new orders, leading to a small increase in hiring.
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The PMI report suggests the economic picture is improving, reports Chris Williamson, chief business economist at S&P Global Market Intelligence. He explains:
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“Early PMI survey data for April indicate that the UK economy’s recovery from recession last year continued to gain momentum.
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Improved growth in the service sector offset a renewed downturn in manufacturing to propel overall business growth to the fastest for nearly a year, indicating that GDP is rising at a quarterly rate of 0.4% after a 0.3% gain in the first quarter.
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We will find out next month whether the UK has officially escaped recession, when the GDP figures for January-March are released. The economy shrank slightly in the third and fourth quarters of 2023, which triggered a shallow technical recession.
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Today’s UK public finance figures (see opening post) shows the “difficult inheritance” that will face the Chancellor after the election, explains the Institute for Fiscal Studies:
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New figures show the first estimate of government borrowing for the past financial year was £121 billion, £7 billion more than the official forecast.
But the forecast fall in borrowing over the next five years is predicated on tight spending plans and large tax rises.
[1/3] pic.twitter.com/ma5fbBUN9H
— Institute for Fiscal Studies (@TheIFS) April 23, 2024
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Initial borrowing estimates are subsequently revised as better data becomes available.
Last year’s initial estimate was revised by £11bn and over the last eight years, the median revision to the borrowing outturn within a year was nearly one-tenth of the total amount.
[2/3] pic.twitter.com/OzswTmW1EB
— Institute for Fiscal Studies (@TheIFS) April 23, 2024
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Even if borrowing falls substantially over the coming years as under official forecasts, this will barely be enough to stabilise debt as a share of national income, leaving a difficult inheritance for whoever is Chancellor after the election.
[3/3] pic.twitter.com/RfoU4qvkZb
— Institute for Fiscal Studies (@TheIFS) April 23, 2024
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Engineering firm Rolls-Royce have been the top riser on the FTSE 100 so far this year. Its shares are up 37%, as profits have surged as it recovered from the pandemic.
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Chilean miner Antofagasta has gained 29%, lifted by a rise in the copper price this year.
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Banks have had a good 2024, with NatWest up 28% since the start of January amd Barclays 25% higher.
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Defense stocks have also benefitted from war in Ukraine, and the Middle East, with BAE Systems up 20% this year (on top of a 30% jump in 2023).
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Primark’s owner Associated British Foods is the top riser on the FTSE 100 this morning, up over 7%, helping to push the index to new heights.
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ABF predicted “significant growth” in profitability this year, and posted a 37% rise in pre-tax profits for the 24 weeks to 2 March, to £881m.
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It added:
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We expect Primark to continue to perform well in the second half driven by our store expansion programme and the modest levels of like-for-like growth, as we focus on driving volumes.
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Other retail stocks are also in the top FTSE 100 risers, including Ocado (+4.1%), JD Sports (+2.2%) and Marks & Spencer (+2%).
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Boom! The UK’s blue-chip share index has hit a new alltime high.
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The FTSE 100 has jumped at the start of trading to hit 8068 points, up 43 points or 0.55% this morning.
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That comfortably clears the previous all-time peak of 8,047 points set in February 2023.
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This extends yesterday’s rally, when shares were lifted by rising hopes that the Bank of England will cut interest rates twice this year.
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Markets are also more buoyant as fears about an escalating conflict in the Middle East eased.
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Jim Reid of Deutsche Bank explains:
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Sentiment was bolstered by the lack of any further escalation in the Middle East.
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Indeed, yesterday saw Iran’s foreign ministry spokesman say that Israel had received the “necessary response at this stage”. The apparent easing in tensions helped oil prices fall back.
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Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
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Jeremy Hunt’s hopes of being given more scope for large tax cuts later this year have been dealt a blow by the latest borrowing figures, just released.
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Britain borrowed more than £120bn last year to balance the books; over £6bn more than the independent Office for Budget Responsibility had forecast, but £7.6bn less than the previous year.
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And that looks to be a blow to Hunt’s ambitions to cut taxes in an autumn fiscal event, as well as pushing up the national debt to the highest since the 1960s.
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Ruth Gregory, deputy chief UK economist at Capital Economics, says the chancellor appears to have limited ‘headroom’ to cut taxes and still meet his fiscal mandate (to have debt falling as a share of GDP in five year’s time).
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She explains why Hunt may have limited scope for tax cuts:
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March’s figures show that public borrowing in 2023/24 came in £6.6bn higher than the OBR predicted only a month ago, casting further doubt on the ability of the government to unveil big tax cuts at another pre-election fiscal event later this year.
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Gregory adds:
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Just based on the larger-than-expected 2023/24 budget deficit and the recent shift up in market interest rates, he may have even less fiscal ‘headroom’ (perhaps about £5bn) for tax cuts than the £8.9bn left over in March.
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It also underlines why the International Monetary Fund was warning against pre-election giveaways last week:
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Public sector net borrowing excluding public sector banks was £120.7 billion in the 2023 to 2024 financial year, £7.6 billion less than in the previous year and around a third of that in 2020 to 2021 during #COVID19.
➡️ https://t.co/woXT9PFAJP pic.twitter.com/G0Jpc4OmL8
— Office for National Statistics (ONS) (@ONS) April 23, 2024
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The Office for National Statistics has also reported tha in March alone, the UK borrowed £11.9bn to cover the gap between government income and spending – higher than the £10.2bn which economists had expected.
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ONS deputy director for public sector finances Jessica Barnaby says:
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“Spending was up about £58 billion, with increased spending on public services and benefits outstripping large reductions in interest payable and energy support scheme costs. But with public sector income up £66 billion, overall, the deficit still fell.
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“At the end of the financial year, debt remained close to the annual value of the output of the economy, at levels last seen in the early 1960s.”
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Public sector net debt excluding public sector banks was £2,694.2 billion at the end of March 2024, provisionally estimated to be around 98.3% of the UK’s annual gross domestic product.
➡️ https://t.co/woXT9PFAJP pic.twitter.com/YGsWi1Dtlj
— Office for National Statistics (ONS) (@ONS) April 23, 2024
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Total tax receipts to HM Revenue and Customs rose by £39.1bn in the last year, to £827.7bn, including a £23.7bn increase in takings from Income Tax, Capital Gains Tax and National Insurance Contributions (NICs), while business taxes brought in £10.3bn more and VAT raised an extra £9.5bn.
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Inheritance tax brought in £400m more than the previous year, while stamp taxes raised £4.3bn less.
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Also coming up today
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The UK’s stock market could hit a record peak today, after the FTSE 100 finished yesterday’s session at an alltime closing high of 8,023 points.
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That has left the Footsie tantalisingly close to its intraday peak of 8,047 points, which it reached in February 2023.
","elementId":"053c51dc-85c0-41c4-bd7d-ee1e507c5d91"},{"_type":"model.dotcomrendering.pageElements.RichLinkBlockElement","prefix":"Related: ","text":"FTSE 100 hits record closing high amid hopes of interest rate cuts","elementId":"480f81be-82dd-4aba-90a5-9bf84cadd564","role":"thumbnail","url":"https://www.theguardian.com/business/2024/apr/22/ftse-100-record-high-interest-cuts-rate-pound-dollar"},{"_type":"model.dotcomrendering.pageElements.TextBlockElement","html":"
And in the futures market, the FTSE 100 is currently on track to jump to 8070 points – taking it to a new peak! We’ll find out at 8am….
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The agenda
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7am BST: UK public finances for March and 2023-24
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8am BST: Kantar’s index of grocery inflation for March
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9am BST: Eurozone flash services and manufacturing PMI report
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9.30am BST: UK flash services and manufacturing PMI report
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12.15pm: Bank of England chief economist Huw Pill gives a speech at the University of Chicago’s Booth School of Business, London
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2.45pm BST: US flash services and manufacturing PMI report
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3pm BST: US new home sales for March
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Key events
Filters BETA
Bank of England policymaker Jonathan Haskel does not sound like a man itching to cut interest rates.
Speaking at a seminar at City University’s Bayes Business School in London today, Haskel says its important to see more slack in Britain’s labour market to be confident that inflation will stay at 2%.
Asked if he now thought it possible inflation would hold at 2% rather than rise later this year, Haskel explained:
“The labour market is central to the inflation aspect,”
[Reminder, last week BoE deputy governor Dave Ramsden argued that UK inflation could hold around the Bank of England’s 2% target for the next three years, rather than rise back towards 3% as previously expected].
Haskel added that labour market tightness – as measured by the ratio between job vacancies and unemployment – was reducing [data last week showed a drop in job openings, and a rise in the jobless rate].
However, it may not be falling fast enough to keep inflation on target.
In a hint towards the different views around the monetary policy committee (MPC) table, Haskel added:
“Reasonable people might reasonably disagree about the risks.”
Bank of England's Haskel warns of potential upside risks to inflation remaining at 2%, emphasizing the need for careful consideration. #BOE #inflation
— Markets News (@MarketsDotNews) April 23, 2024
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Bank of England’s Haskel warns of potential upside risks to inflation remaining at 2%, emphasizing the need for careful consideration. #BOE #inflation
— Markets News (@MarketsDotNews) April 23, 2024
The MPC is next due to set interest rates on 9th May; the money markets indicated there’s an 82% likelihood of no change, and just 18% chance of a cut.
UK PMI rises: What the experts say
The monthly purchasing managers index (PMI) is an closely watched barometer of economic prospects; here’s what economists are saying about today’s UK PMI report, showing a pick-up in growth:
Rhys Herbert, senior economist at Lloyds Bank, says:
“Today’s figures suggest that the UK’s economic conditions are continuing to improve.
It’s encouraging to see Service providers recording the fastest growth for nearly a year, and businesses will be hoping that another slight drop in inflation will have a further positive impact on spending power for both households and businesses.
Improving economic activity is telling a relatively optimistic story. While geopolitical tensions may cause some challenges in the months ahead, markets remain optimistic that interest rates have peaked and could begin to fall later this year.”
But…Charles Hepworth, investment director at GAM Investments, points out that factories struggled:
“UK Services PMI data rose more than expected in April to a reading of 54.9, a short term high not seen in almost a year. This reflects the continuing recovery from the slowdown seen in the second half of last year.
However, the strong showing in services was in stark contrast to the contraction still seen in the manufacturing sector which continues to struggle with a contractionary reading of 48.7. Companies surveyed reported that prices they charged went up at the slowest pace in a number of years, less due to declining demand but more through competition.
This may not be seen as good news for the Bank of England who still isn’t comfortable enough that the inflation dynamics are genuinely shifting, and that consumers are reducing demand.”
Overall, the PMIs paint a picture of a recovering economy, says Thomas Pugh, economist at leading audit, tax and consulting firm RSM UK. He adds:
“The robust increase in the flash S&P/CIPS composite PMI in April to 54.0, the highest since May 2023, suggests that the economy continued to pick up steam after last year’s mini-recession.
An acceleration in growth in Q2 would, in theory at least, ease the pressure on the Bank of England (BoE) to cut interest rates. But in reality, with inflation still likely to fall to 2% this month, the labour market rapidly weakening and growth still low, the time for interest rate cuts has come.
A delay in rate cuts beyond the summer would risk harming the economic recovery for no material impact on inflation.
FTSE 100 reverses away from record high….
The FTSE 100 has slipped back from its early morning record high, as the news that Britain’s economy is recovering from recession weighs on shares.
While a recovering economy is obviously good for companies, this month’s stronger-than-expected PMI report could make the Bank of England cautious about cutting interest rates quite as quickly as hoped.
Joshua Mahony, chief market analyst at Scope Markets, explains:
The FTSE 100 has started to reverse back from record highs, after a fresh PMI survey that saw the services sector reading jump into the highest level since May 2023.
Crucially, traders are showing signs of concern that this rebound in UK growth could come at a cost, with economy-wide input price inflation rising at the highest level in 11-months. Between strong services sector wage growth, and rising material and transportation costs in the manufacturing sector, we are seeing fears grow over the potential for a more cautious approach from the Bank of England.
With markets essentially viewing the June rate decision as a coin-toss, today’s data raises fears that the BoE will instead hold off until August.
Farage: Boycott NatWest share sale until debanking report released
Kalyeena Makortoff
Nigel Farage is urging the public to boycott the government’s planned sale of NatWest shares until the group released a full report regarding the decision to close his account with its private bank, Coutts, last year.
The message came just hours before NatWest is due to hold its AGM at its Gogarburn headquarters in Edinburgh, from 11am today.
In a video release on social media platform X on Thursday, Farage said:
“No member of the British public should put their money and invest in shares in Natwest while they continue to hide the facts, hide the information, to hide the truth about me.
This debanking row is far from over and I still reserve the right to take legal action”
Today is @NatWestGroup AGM.
They still refuse to give a full report into what was said in their “independent investigation”.
Worse still, the SAR I submitted to @TraversSmith doesn’t include all of the information said about me.
What are they hiding? I will find out the truth. pic.twitter.com/zsTcWX56yw
— Nigel Farage (@Nigel_Farage) April 23, 2024
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Today is @NatWestGroup AGM.
They still refuse to give a full report into what was said in their “independent investigation”.
Worse still, the SAR I submitted to @TraversSmith doesn’t include all of the information said about me.
What are they hiding? I will find out the truth. pic.twitter.com/zsTcWX56yw
— Nigel Farage (@Nigel_Farage) April 23, 2024
Farage said he had put in a fresh subject access request to NatWest, asking for all the information that related to him, from the independent investigation surrounding last summer’s debanking row. They came back with “over 100 pages of documents” that he says were simply copies of a variety of press articles and not the information he was hoping for.
The debanking controversy started when Coutts – the NatWest-owned private bank for the ultra-wealthy – planned to shut Farage’s bank accounts, and snowballed after Farage obtained internal documents that showed the bank had concerns over his political views. The scandal escalated when it emerged that CEO Alison Rose had discussed Farage’s case with a BBC journalist.
Rose resigned, and was forced to forgo £7.6m in pay from NatWest, although independent lawyers hired by the bank concluded she had made an “an honest mistake” in speaking with the BBC and that concerns over Farage’s political views were not the driving factor in the decision to shut his accounts.
The government’s stake in NatWest dates back to the bailout of Royal Bank of Scotland after the 2008 financial crisis. Jeremy Hunt confirmed in March’s budget that the government plans to sell a chunk of shares in NatWest in the summer.
FTSE record high will help “repair the reputation of the UK stock market’
The sight of the UK’s FTSE 100 index climbing to a new record high this morning could help to buff up the reputation of the UK stock market.
The London stock exchange has taken a battering recently as some major companies have chosen to float on Wall Street instead, such as chip maker ARM.
Others, such as building materials group CRH, have chosen to move their listing from London to New York.
The FTSE 100 has been tarred as a “Jurassic Park” of an index, due to its lack of fast-growing technology companies.
But even if the Footsie is something of a lumbering Brontosaurus, it has still scaled new heights today.
Russ Mould, investment director at AJ Bell, says that Brexit, and political ructions, have also weighed on UK share prices.
Today’s positive showing is “exactly what’s needed to help repair the reputation of the UK stock market”.
He adds:
It’s going to be a slow process but every little helps
“The UK has lived in the shadows of the US stock market for the past decade or more, delivering inferior returns on a relative basis as it has lacked the go-go growth stocks highly desired by investors. The FTSE’s low exposure to the technology sector has diminished the index’s appeal and seen investors look elsewhere for ways to turbocharge their portfolio.
“Brexit and political uncertainty have also weighed on the index, even though approximately three quarters of its constituents earn money overseas. That’s led to cheap valuations and a mountain of unloved stocks. Investors are finally getting the message that a good chunk of these businesses still have a lot to offer, delivering slow but steady profit growth, and they’re available for a fraction of the price of some of their overseas peers.
“The conveyor belt of takeovers continues to trundle along and that has put the spotlight on the market. At the same time, many UK-listed companies are simply getting on with the job at hand, delivering earnings and dividend growth. Investors who take a long-term view are still able to find plenty of opportunities.
UK’s recovery from recession continues as PMI rises
Newsflash: the UK economy continues to pull away from last year’s recession.
The UK’s private sector is expanding at its fastest rate since May 2023, according to a new survey of purchasing managers at UK businesses.
Data firm S&P Global’s Flash UK PMI has risen to 54.0 this month, up from March’s 52.8. That’s the highest level since last May, showing a pick-up in growth.
The services sector, which makes up about three-quarters of the economy, is driving the growth, while the manufacturing sector is shrinking slightly this month.
📢 Even more evidence of return to growth… 👍
Flash #UK #PMI Composite Output Index rose to 54.0 in April (March 52.8), an 11-month high.
Still led by services – #manufacturing output index actually dipped to 49.1 (March 50.9) – but also still outperforming the #euro area. pic.twitter.com/Yssr9cQUNI
— Julian Jessop 🏴 (@julianHjessop) April 23, 2024
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📢 Even more evidence of return to growth… 👍
Flash #UK #PMI Composite Output Index rose to 54.0 in April (March 52.8), an 11-month high.
Still led by services – #manufacturing output index actually dipped to 49.1 (March 50.9) – but also still outperforming the #euro area. pic.twitter.com/Yssr9cQUNI
— Julian Jessop 🏴 (@julianHjessop) April 23, 2024
Services companies reported that output is growing this month, helped by a rise in new orders, leading to a small increase in hiring.
The PMI report suggests the economic picture is improving, reports Chris Williamson, chief business economist at S&P Global Market Intelligence. He explains:
“Early PMI survey data for April indicate that the UK economy’s recovery from recession last year continued to gain momentum.
Improved growth in the service sector offset a renewed downturn in manufacturing to propel overall business growth to the fastest for nearly a year, indicating that GDP is rising at a quarterly rate of 0.4% after a 0.3% gain in the first quarter.
We will find out next month whether the UK has officially escaped recession, when the GDP figures for January-March are released. The economy shrank slightly in the third and fourth quarters of 2023, which triggered a shallow technical recession.
There are encouraging economic signals from the eurozone this morning, where business activity in the euro area is growing at the fastest rate for nearly a year.
The latest survey of eurozone purchasing managers from S&P Global shows that Europe is pulling out of its recent downturn.
Germany returned to growth in April and France came close to stabilising, while growth was especially solid outside of the eurozone’s two largest members.
This pulled the HCOB Flash Eurozone Composite PMI Output Index up to an 11-month high of 51.4, up from March’s 50.3, a level that shows faster growth.
IFS: whoever is Chancellor after the election faces ‘difficult inheritance’
Today’s UK public finance figures (see opening post) shows the “difficult inheritance” that will face the Chancellor after the election, explains the Institute for Fiscal Studies:
New figures show the first estimate of government borrowing for the past financial year was £121 billion, £7 billion more than the official forecast.
But the forecast fall in borrowing over the next five years is predicated on tight spending plans and large tax rises.
[1/3] pic.twitter.com/ma5fbBUN9H
— Institute for Fiscal Studies (@TheIFS) April 23, 2024
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New figures show the first estimate of government borrowing for the past financial year was £121 billion, £7 billion more than the official forecast.
But the forecast fall in borrowing over the next five years is predicated on tight spending plans and large tax rises.
[1/3] pic.twitter.com/ma5fbBUN9H
— Institute for Fiscal Studies (@TheIFS) April 23, 2024
Initial borrowing estimates are subsequently revised as better data becomes available.
Last year’s initial estimate was revised by £11bn and over the last eight years, the median revision to the borrowing outturn within a year was nearly one-tenth of the total amount.
[2/3] pic.twitter.com/OzswTmW1EB
— Institute for Fiscal Studies (@TheIFS) April 23, 2024
\n\n"}}” config=”{"renderingTarget":"Web","darkModeAvailable":false}”>
Initial borrowing estimates are subsequently revised as better data becomes available.
Last year’s initial estimate was revised by £11bn and over the last eight years, the median revision to the borrowing outturn within a year was nearly one-tenth of the total amount.
[2/3] pic.twitter.com/OzswTmW1EB
— Institute for Fiscal Studies (@TheIFS) April 23, 2024
Even if borrowing falls substantially over the coming years as under official forecasts, this will barely be enough to stabilise debt as a share of national income, leaving a difficult inheritance for whoever is Chancellor after the election.
[3/3] pic.twitter.com/RfoU4qvkZb
— Institute for Fiscal Studies (@TheIFS) April 23, 2024
\n\n"}}” config=”{"renderingTarget":"Web","darkModeAvailable":false}”>
Even if borrowing falls substantially over the coming years as under official forecasts, this will barely be enough to stabilise debt as a share of national income, leaving a difficult inheritance for whoever is Chancellor after the election.
[3/3] pic.twitter.com/RfoU4qvkZb
— Institute for Fiscal Studies (@TheIFS) April 23, 2024
The London stock market is benefitting from expectations that interest rates will be cut sooner in the UK than in the US.
The Financial Times reports this morning that some traders are building up bets that the US Federal Reserve will raise interest rates higher, as inflationary pressures in America look stubbornly high.
Lindsay James, investment strategist at Quilter Investors, explains:
With economic growth still lagging many of its G7 peers, the UK has turned this to its strength in the fight against inflation, which last month fell below that of the US and saw Governor Andrew Bailey announce that this data shows the UK is “pretty much on track” with the central bank’s forecasts.
“This has led investors to anticipate that rate cuts could arrive in the UK well before the US, weakening sterling by just over 3% against the dollar so far this year, and continuing a long running trend that has seen the pound decline more than 25% against the dollar in the past decade, a period over which the FTSE 100 has delivered only around a quarter of the returns generated by the S&P 500.
With the bulk of FTSE 100 company earnings generated internationally, this currency weakening conversely benefits UK-based investors as those earnings have risen in sterling terms, offering some relief in the story of long-term underperformance of the home market relative to Europe and the US.
Which FTSE stocks have driven the market this year?
Engineering firm Rolls-Royce have been the top riser on the FTSE 100 so far this year. Its shares are up 37%, as profits have surged as it recovered from the pandemic.
Chilean miner Antofagasta has gained 29%, lifted by a rise in the copper price this year.
Banks have had a good 2024, with NatWest up 28% since the start of January amd Barclays 25% higher.
Defense stocks have also benefitted from war in Ukraine, and the Middle East, with BAE Systems up 20% this year (on top of a 30% jump in 2023).
The FTSE 100 soared to its record high today amid a rise in investor confidence, reports financial services company Hargreaves Lansdown.
Emma Wall, head of investment analysis and research at Hargreaves Lansdown, says investor confidence has ticked up once again in April in all sectors, but particularly in the UK stock market.
Wall points out that UK stocks still look cheap when compared to international markets:
The UK market is currently on a considerable discount to developed market peers of around 40%, but features high quality companies with global revenues, good cash reserves, and in many cases well-covered, attractive dividends.
The economic picture is not as rosy as in the US, but there is a potential benefit to this if you’re a shareholder, it means that the Bank of England is likely to cut interest rates sooner than the Fed across the Pond.
This should prove a tailwind to corporates and consumers alike, increasing disposable income for those with mortgage debt, and lessening the load for bond issuers too.
It took the FTSE 100 just over 40 years to rise to today’s record high of (currently) 8076 points, from its opening value of 1,000.
The index was created by the London Stock Exchange in January 1984, and was designed for the new age of electronic trading and derivative products that was being carved out in the City in the 1980s.
My colleague Nils Pratley calculated in January that with dividends reinvested, a £1,000 investment in the Footsie in 1984 was worth £22,550 40 yearss later (it’ll be a bit more today).
Here’s Nils’ feature, from January, about the FTSE over the decades:
Retail stocks rallying
Primark’s owner Associated British Foods is the top riser on the FTSE 100 this morning, up over 7%, helping to push the index to new heights.
ABF predicted “significant growth” in profitability this year, and posted a 37% rise in pre-tax profits for the 24 weeks to 2 March, to £881m.
It added:
We expect Primark to continue to perform well in the second half driven by our store expansion programme and the modest levels of like-for-like growth, as we focus on driving volumes.
Other retail stocks are also in the top FTSE 100 risers, including Ocado (+4.1%), JD Sports (+2.2%) and Marks & Spencer (+2%).
The FTSE 100 is still climbing… hitting a new alltime high of 8071 points.
FTSE 100 hits record high
Boom! The UK’s blue-chip share index has hit a new alltime high.
The FTSE 100 has jumped at the start of trading to hit 8068 points, up 43 points or 0.55% this morning.
That comfortably clears the previous all-time peak of 8,047 points set in February 2023.
This extends yesterday’s rally, when shares were lifted by rising hopes that the Bank of England will cut interest rates twice this year.
Markets are also more buoyant as fears about an escalating conflict in the Middle East eased.
Jim Reid of Deutsche Bank explains:
Sentiment was bolstered by the lack of any further escalation in the Middle East.
Indeed, yesterday saw Iran’s foreign ministry spokesman say that Israel had received the “necessary response at this stage”. The apparent easing in tensions helped oil prices fall back.
The UK also borrowed more than expected in the 11 months leading up to March.
ONS has revised its forecast for borrowing in the 11 months to February up by £1.9bn, after raising its estimate for the cost of subsidising low-carbon electricity generators.
💷Slightly awkward UK public finances data this morning. 2023/24 budget deficit ends up somewhat higher than forecast.
• March borrowing at £11.9 billion (Reuters poll: £10.2 billion)
• Feb, Jan revised higher
• FY 2023/24 borrowing at £120.7 bln (OBR: £114.1 bln)— Andy Bruce (@BruceReuters) April 23, 2024
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💷Slightly awkward UK public finances data this morning. 2023/24 budget deficit ends up somewhat higher than forecast.
• March borrowing at £11.9 billion (Reuters poll: £10.2 billion)
• Feb, Jan revised higher
• FY 2023/24 borrowing at £120.7 bln (OBR: £114.1 bln)— Andy Bruce (@BruceReuters) April 23, 2024
Michal Stelmach, senior economist at KPMG UK, points out that UK exchequer benefitted from a surge in revenues from taxing corporations and workers last year.
“Preliminary estimates for the 2023-24 financial year showed government borrowing at £120.7 billion. While this was higher than the OBR’s March forecast of £114 billion, it still marked a 5.9% reduction from a year earlier, representing the lowest deficit in four years.
“Corporation tax receipts totalled a whopping £102.8 billion, up by 19% relative to previous fiscal year. This reflected an increase in the main rate from 19% to 25%, continued strength in company profits, as well as a boost to banks’ net interest margins resulting from higher interest rates. Elevated pay growth has also supported income tax receipts, which brought in £25 billion more in 2023-24 despite the National Insurance cut which came into force in January.
Stelmach also warns that the “goldilocks fiscal outlook” faces a number of risks.
The recent repricing in market expectations of fewer interest rate cuts could already add around £6 billion to spending this year. Furthermore, the OBR’s projected cost of the National Insurance cuts – which relies on the assumption of a hefty 200,000 increase in labour supply – could prove an underestimate if participation continues to stall.”
Introduction: UK borrowing leaves limited scope for tax cuts
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Jeremy Hunt’s hopes of being given more scope for large tax cuts later this year have been dealt a blow by the latest borrowing figures, just released.
Britain borrowed more than £120bn last year to balance the books; over £6bn more than the independent Office for Budget Responsibility had forecast, but £7.6bn less than the previous year.
And that looks to be a blow to Hunt’s ambitions to cut taxes in an autumn fiscal event, as well as pushing up the national debt to the highest since the 1960s.
Ruth Gregory, deputy chief UK economist at Capital Economics, says the chancellor appears to have limited ‘headroom’ to cut taxes and still meet his fiscal mandate (to have debt falling as a share of GDP in five year’s time).
She explains why Hunt may have limited scope for tax cuts:
March’s figures show that public borrowing in 2023/24 came in £6.6bn higher than the OBR predicted only a month ago, casting further doubt on the ability of the government to unveil big tax cuts at another pre-election fiscal event later this year.
Gregory adds:
Just based on the larger-than-expected 2023/24 budget deficit and the recent shift up in market interest rates, he may have even less fiscal ‘headroom’ (perhaps about £5bn) for tax cuts than the £8.9bn left over in March.
It also underlines why the International Monetary Fund was warning against pre-election giveaways last week:
Public sector net borrowing excluding public sector banks was £120.7 billion in the 2023 to 2024 financial year, £7.6 billion less than in the previous year and around a third of that in 2020 to 2021 during #COVID19.
➡️ https://t.co/woXT9PFAJP pic.twitter.com/G0Jpc4OmL8
— Office for National Statistics (ONS) (@ONS) April 23, 2024
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The Office for National Statistics has also reported tha in March alone, the UK borrowed £11.9bn to cover the gap between government income and spending – higher than the £10.2bn which economists had expected.
ONS deputy director for public sector finances Jessica Barnaby says:
“Spending was up about £58 billion, with increased spending on public services and benefits outstripping large reductions in interest payable and energy support scheme costs. But with public sector income up £66 billion, overall, the deficit still fell.
“At the end of the financial year, debt remained close to the annual value of the output of the economy, at levels last seen in the early 1960s.”
Public sector net debt excluding public sector banks was £2,694.2 billion at the end of March 2024, provisionally estimated to be around 98.3% of the UK’s annual gross domestic product.
➡️ https://t.co/woXT9PFAJP pic.twitter.com/YGsWi1Dtlj
— Office for National Statistics (ONS) (@ONS) April 23, 2024
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Total tax receipts to HM Revenue and Customs rose by £39.1bn in the last year, to £827.7bn, including a £23.7bn increase in takings from Income Tax, Capital Gains Tax and National Insurance Contributions (NICs), while business taxes brought in £10.3bn more and VAT raised an extra £9.5bn.
Inheritance tax brought in £400m more than the previous year, while stamp taxes raised £4.3bn less.
Also coming up today
The UK’s stock market could hit a record peak today, after the FTSE 100 finished yesterday’s session at an alltime closing high of 8,023 points.
That has left the Footsie tantalisingly close to its intraday peak of 8,047 points, which it reached in February 2023.
And in the futures market, the FTSE 100 is currently on track to jump to 8070 points – taking it to a new peak! We’ll find out at 8am….
The agenda
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7am BST: UK public finances for March and 2023-24
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8am BST: Kantar’s index of grocery inflation for March
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9am BST: Eurozone flash services and manufacturing PMI report
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9.30am BST: UK flash services and manufacturing PMI report
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12.15pm: Bank of England chief economist Huw Pill gives a speech at the University of Chicago’s Booth School of Business, London
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2.45pm BST: US flash services and manufacturing PMI report
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3pm BST: US new home sales for March