That is all from us today – here are some of our top stories:
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Unilever kicks off sale of majority of tea business
FTSE 100-listed Unilever has kicked-off the sale of large parts of its tea business, which could be valued at about £4bn, reported Bloomberg.
The news agency has more:
Unilever has reached out to potential suitors and is expecting first-round bids in September. Deliberations are ongoing and there’s no certainty it’ll decide to proceed with a sale.
The sale does not include Unilever’s tea units in India and Indonesia or its partnerships in the ready-to-drink tea market. The rest of the business could draw offers from private equity firms.
It is also considering an initial public offering of the tea business, or a partnership, the company said in a first-half results statement in July.
In January 2020, Unilever said it was starting a strategic review of its tea business that could result in a partial or full sale. Tea demand has suffered in recent years amid a shift to artisan coffee.
The tea business has drawn the interest in the past from buyout firms including Advent International, Bain Capital, Blackstone, Cinven and KKR.
Rolls sells Spanish engine supplier unit to Bain
Boston-based private equity firm Bain Capital has won a months-long battle to acquire Rolls-Royce’s ITP Aero division – a Spanish aircraft engine supplier – for about €1.6bn (£1.4bn), according to Spanish newspaper Expansión.
It said Bain will team with Spanish construction engineering firm Sener Grupo de Ingenieria. It comes after previous reports the auction had narrowed to Bain and London-based Cinven, which were both searching for Spanish partners to help get government backing for a deal.
Rolls-Royce has been contacted for comment.
Spain’s Sener is a former owner of ITP Aero, having co-founded the division in 1989 with Rolls to make engines for the Eurofighter Typhoon military jet. ITP also worked with Rolls to develop turbines used on Airbus and Boeing wide-body aircraft.
In 2016, Sener sold its 53pc stake in the operation back to Rolls for €720m. Since then, demand for larger aircraft powered by Rolls engines has plummeted, forcing the company to raise cash through selling shares and unloading assets. On Tuesday it agreed to sell Bergen Engines to Langley Holdings for €63m.
Oil continues to slip
Oil continued to decline throughout today, for a third day, due to the coronavirus spread in China (a key importer – see post at 10:39am), and a report that showed a surprise build in US crude inventories.
American crude supplies increased by 3.63m barrels, the biggest gain since March, according to a weekly report from the Energy Information Administration. The industry-funded American Petroleum Institute and analysts polled by Bloomberg had predicted draws.
West Texas Intermediate futures slumped as much as 3.4pc.
US markets regulator chair calls crypto “Wild West”
The head of America’s markets regulator has called cryptocurrencies a “Wild West” afflicted by fraud and scams in the clearest sign yet of a stricter approach towards Bitcoin and other digital coins, reports James Titcomb.
Gary Gensler, the new chair of the Securities and Exchange Commission, told a conference that “this asset class is rife with fraud, scams and abuse in certain applications” and that called for stricter oversight.
The comments are a major blow to cryptocurrency supporters’ hopes that Mr Gensler, who taught a university course on digital currencies before joining the regulator, would adopt a light-touch approach or seek to bring Bitcoin into the fold of other financial assets.
“Right now, we just don’t have enough investor protection in crypto. Frankly, at this time, it’s more like the Wild West,” Mr Gensler said at the Aspen Security Forum.
“There’s a great deal of hype and spin about how crypto assets work. In many cases, investors aren’t able to get rigorous, balanced, and complete information. We need additional congressional authorities to prevent transactions, products and platforms from falling between regulatory cracks.”
Mr Gensler has been widely expected to attempt to fill a regulatory vacuum around Bitcoin, whose value surged to more than $60,000 earlier this year before recently falling by as much as half.
Traders have speculated about whether he might attempt to legitimise the technology by pushing for guidelines around how banks and investors can hold it, or push for greater controls.
Bitcoin’s price was flat after Mr Gensler’s speech, rising by around 3pc to $39,301 later on Wednesday, as Google started accepting cryptocurrency adverts for the first time in three years.
John Lewis raises lorry driver salaries by £5,000
The John Lewis Partnership said it will raise lorry driver salaries by £5,000 as the industry continues to face damaging worker shortages.
The group – which runs the John Lewis department store arm and Waitrose supermarket chain – said Large Goods Vehicle (LGV) drivers employed by bpth brands will receive a pay rise of around £2 an hour in their base pay across all regional and national distribution sites.
Around 900 people will benefit from the pay increase.
Mark Robinson, director of supply chain at the partnership, said: “We’re responding quickly to the national driver shortage by ensuring our drivers are paid competitively and by investing in training for the future.”
Expert reaction: Robinhood shares up 27pc today
Michael Hewson, chief market analyst at CMC Markets UK, comments:
Robinhood Markets has also carried on from where it left off yesterday, with another huge surge, building on its 24pc gain yesterday, with an 80pc surge above $80 a share before sliding back below $70 a share.
Last week Cathie Woods ARK Fintech Innovation loaded up on over 2.5m shares while adding another 90k yesterday, which may have prompted retail traders to pile in too given that retail volume surged soon afterwards.
While correlation doesn’t equal causation it’s hard to see what other explanation there could be as retail interest in it grows.
Given that the company touted itself as a vehicle for democratising financial markets it was a little surprising how little enthusiasm there was for the IPO in the initial days after the float. That lack of enthusiasm appears to have gone away if the events of the last couple of days are any guide.
Robinhood shares surge 60pc on IPO price
Shares in stock trading app Robinhood skyrocketed as much as 80pc in early trading on Tuesday, forcing US markets to halt buying amid fears of another speculative bubble, reports my colleague Matthew Field.
After listing last Thursday at a valuation of around $32bn, shares in Robinhood slipped on their first day of trading. But the company has since surged to a market cap of over $50bn. Its shares jumped as high as $85, up from their float price of $38.
Robinhood was at the centre of a regulatory storm in January this year as speculative investors piled into so-called “meme stocks” such as the video game retail GameStop. The otherwise struggling brick and mortar chain surged in value as amateur investors in forums such as Reddit bet hundreds of millions of dollars on the company.
Vlad Tenev, Robinhood’s founder, was hauled before Congress to defend his company’s enabling of en masse, high risk trading, with many users buying complicated products and using leverage to pump up the value of their favoured stocks.
Robinhood courted retail investors during its listing, offering them the option of buying up shares in the company through its app ahead of going public.
As well as retail buyers, Robinhood has attracted investment from stock picker Cathy Wood’s Ark Invest, which took out a position worth around $4.2m on Tuesday.
Robinhood’s shares have since fallen back, but are up around 25pc in trading on Wednesday. They remain up nearly 60pc on its initial public offering price.
Octopus energy expands into Spain
Challenger energy supplier Octopus has acquired a Valencia-based green startup called Umeme, which will form the foundation of new subsidiary, Octopus Energy Spain.
Octopus, which currently operates in 11 countries across four different continents, said it would invest up to £60m to fuel the company’s Spanish expansion.
Octopus has proven one of the biggest success stories in Britain’s energy supply sector in recent years. Late last year the company was valued at £1.5bn.
Ryanair passengers double in July
Ryanair has credited the rollout of the EU’s Covid-19 certificate for helping the airline more than double passenger numbers in July.
The group said it carried 9.3m passengers last month, up from 4.4m a year ago and 5.3m in June.
Its load factor – a measure of how well airlines fill their planes – improved to 80pc from 72pc in June as it ran more than 61,000 flights.
It put the improved passenger numbers down to the launch of the EU Covid certificate scheme on July 1, which allows those who have been vaccinated, tested negative, or recovered from coronavirus to travel within the bloc.
FTSE 100 lags as Entain jumps
The FTSE 100 has lots its upward momentum and is currently treading water at around 7,137.84 points, up 0.5pc compared to yesterday’s close.
The index is now being lead by Ladbrokes owner Entain. The betting firm’s shares have surged 5.7pc today to £19.09.
US stocks slip on growth fears
Wall Street opened lower this afternoon, dragged down over concerns of slowing economic growth and rising Covid-19 fears.
Markets have bounced between optimism and pessimism in the past few weeks, driving higher on signs of economic growth and lower on concerns the spreading delta variant could derail the world recovery.
The S&P 500 fell 0.27pc while the Dow sank 0.49pc as stocks linked to the economy pulled them lower. Energy sector stocks dropped 2.2pc on average due to lower oil prices, while banking stocks slipped 0.8pc over weakness in bond yields and the drop in July payrolls growth.
Tech stocks sank the least as traders cycled towards such so-called growth stocks. Robinhood Markets surged 40.3pc over interest from star fund manager Cathie Wood despite its weak public debut last week, while General Motors sank over 6pc despite coming back to profit in its second quarter.
“The drop in bond yields is like a canary in the coal mine and is for now helping growth stocks, while large cyclical stocks are showing signs of weakness maybe because investors are questioning the passage of the huge infrastructure package,” said Sam Stovall, chief investment strategist at CFRA Research.
Investors now await services sector data later this afternoon.
US Treasury to reduce debt issuances from November
The US Treasury has said it could begin to reduce sales of government debt as soon as November, though its upcoming quarterly auction of long-term securities will remain at a record size of $126bn.
It will sell $58bn in three-year notes, $41bn in 10-year notes and $27bn in 30-year bonds next week, unchanged from the previous quarter.
America should need to borrow less as the economy recovers and the need for government-funded relief programmes subsides.
Still, the Treasury said sales of inflation-protected securities will rise further, amid “solid demand.”
“Continuing current issuance sizes and patterns may provide more borrowing capacity than is needed to address borrowing needs over the intermediate-to-long term,” the Treasury added.
The US 10-year Treasury yield remained lower, at 1.14pc, following the announcement.
“This is the only logical outcome given the information they have,” Jefferies economist Thomas Simons told Bloomberg of the plans for cutting auctions from November. “Without more clarity on infrastructure or the debt ceiling, they can’t make any additional changes.”
Wall Street tipped to slide after payrolls miss
US stock markets are set for a drop when they open shortly, following that weak US employment data.
America added just 330,000 extra jobs to July payrolls, a number far less than half of the total economists had expected.
The S&P 500 is set to retreat from its record high by 0.36pc while the Dow is set to drop 0.42pc lower. The tech-heavy Nasdaq will slip by 0.14pc too, according to the latest futures prices.
Netflix, Amazon and Facebook were among the few pre-market risers as traders eyed growth stocks as a safer bet than economy-linked firms in areas such as finance and energy amid fears of a slowing economic recovery.
However, traders are waiting for a measure of US services sector activity expected to show it expanded from 60.1 in June to 60.5 last month, which would show a partial recovery from staff shortages and a lack of raw materials.
HSBC latest bank to boost junior banker pay
HSBC has become the latest bank to boost pay for junior investment bankers in the US, as the industry wrestles with staff burnout amid one of its busiest years for deals.
The London-headquartered bank is upping salaries for first-year analysts in its investment bank from $85,000 to $100,000, Financial News reported earlier.
Goldman, Credit Suisse Group, Morgan Stanley, Citigroup, Deutsche Bank and JPMorgan Chase & Co are among those increasing wages as the competition for talent heats up.
Banks are also trying to curb the industry’s work-till-you-drop culture, with firms promising to better enforce policies against weekend work.
US companies add fewer jobs than forecast
US companies added far fewer jobs than expected in July, indicating ongoing hiring obstacles despite broader improvement in the economy.
Businesses’ payrolls increased by 330,000 last month, the smallest gain since February, following a revised 680,000 gain in June, according to ADP Research Institute data released today. Economists surveyed by Bloomberg had forecast a 690,000 gain in the latest month.
“July payroll data reports a marked slowdown from the second quarter pace in jobs growth,” Nela Richardson, ADP’s chief economist.
“Bottlenecks in hiring continue to hold back stronger gains, particularly in light of new Covid-19 concerns tied to viral variants.”
Service-provider employment increased 318,000 in July. Payrolls at leisure and hospitality businesses rose 139,000 during the month, also the smallest advance since February.
ADP’s payroll data represent firms employing nearly 26 million workers in the U.S.
Pandemic delays battle for National Lottery
The battle to run the National Lottery for the next decade has been delayed as a result of the pandemic travel restrictions, reports Oliver Gill.
Camelot, which has run the lottery since inception in 1994, has been handed a six-month extension and will now run the draw until 2024, the Gambling Commission announced.
Bidders were due to deliver their final presentations to the regulator in September. However, it is understood that after some complained that they may not be able to appear in person due to Covid restrictions, the Gambling Commission agreed to push the timetable back.
Presentations will now take place in October, with the regulator taking an additional six weeks to come to a final decision in February.
Carlyle granted more time to consider renewed Vectura deal
Private equity firm Carlyle has been granted more time to consider whether to pursue a deal with London-listed Vectura, after its earlier approach was gatecrashed by Marlboro maker Philip Morris, reports Hannah Boland.
Carlyle’s offer had included conditions which required meetings to have been held on the deal by August 3, or falling outside of UK takeover codes.
Carlyle said on Wednesday that it had agreed with the Vectura board to extend that deadline to August 24, a move which will give it more time to weigh up whether to walk away or increase its offer.
It comes after an agreed takeover between the pair was scuppered by Philip Morris, which trumped Carlyle’s £958m offer for Vectura with a £1bn approach.
Vectura’s board had initially recommended shareholders accept Carlyle’s offer, but later withdrew that recommendation in favour of the PMI offer.
Chairman Bruno Angelici said: “We recognise the material increase in the price offered to shareholders under the acquisition when compared with the Carlyle offer and have accordingly recommended the acquisition to shareholders.”
Carlyle and Vectura declined to comment.
It follows questions from health organisations over the Vectura and PMI deal, with concerns centred around the idea of a tobacco company buying a business whose technology is used in NHS inhalers.
GM swings to profit despite product recalls
General Motors said today that it had swung to a second-quarter profit of $2.8bn, compared to a $806m loss of in the same period in 2020 when the pandemic shuttered its operations.
The company, which owns brands including Chverolet and Buick, suffered an $800m hit from the recalls of its Chevrolet Bolt electric vehicle. Last month, GM recalled the model for a second time due to concern about a potential battery defect that can cause fires.
Despite that, the company raised its full-year forecast for pre-tax profits to between $11.5bn and $13.5bn, from the previous $10bn-$11bn range.
FTSE 100 risers and fallers
Housebuilder Taylor Wimpey is still leading gains on the FTSE 100 this afternoon (up 3pc).
Close behind was Legal & General (up 2.7pc) after the insurer hiked its shareholder dividend payout as it saw half-year earnings rebound back above £1bn.
Betting businesses Entain and Flutter also rose by more than 2pc each,
At the other end of the index, Just Eat was trailing (down 2pc) and Fresnillo shares also slid (down 1.8pc) as the miner pared back gains made yesterday after its interim profit jumped on higher metal prices.
US stock futures waver
US stock futures wavered today, ahead of earnings reports from Uber, Ford, General Motors and Costco which are expected after markets close.
The Dow futures dipped 0.13pc while S&P 500 futures fell 0.1pc. Nasdaq Futures however inched 0.1pc higher.
Concerns over China’s gaming and technology clampdown eased, after Chinese state media toned down their criticism of the industry. As a result, the travel and leisure sector outperformed as shares of online gaming companies recovered.
SoftBank takes $5bn stake in Roche
Japan’s SoftBank has taken a $5bn (£3.6bn) stake in one of the world’s largest drugmakers Roche, increasing its exposure to the pharmaceutical sector in the wake of the pandemic, reports my colleague Hannah Boland.
Bloomberg data showed SoftBank has become one of Roche’s largest backers, building its stake in the company at a time when Roche’s shares have hit record highs.
The Swiss company is now worth just over $312bn, with its shares having risen 18pc this year.
According to Bloomberg, SoftBank is interested in the potential for Roche’s data-based drug discovery division, which it sees as currently undervalued.
It comes as SoftBank broadens its exposure to biotech and life sciences, having previously invested in names such as Sana Biotechnology and Pacific Biosciences.
In the UK, it has invested in Oxford’s Exscientia, a drug discovery company which uses artificial intelligence to develop medicines.
Roche’s largest backer is the Hoffmann-La Roche family, which own around 50pc of the business, with rival Novartis also a large shareholder in the business.
Roche is among the pharma companies to have worked on Covid-19 tests during the pandemic – something which helped spur sales in its diagnostics unit more than 50pc higher in the first half of the year.
It has also developed a Covid-19 antibody test, which was last year approved by Public Health England. Roche and SoftBank did not immediately respond to requests for comment.
Thales sells HS2 train maker
Hitachi has struck a €1.7bn (£1.5bn) deal to buy part of a French engineering company that is expected to play a key role in the building of HS2, reports Oliver Gill.
The Japanese conglomerate is to buy Thales’ transportation arm as it tightens its grip on a slew of lucrative contracts to build the near-£100bn train line.
Hitachi and joint venture partner Bombardier are set to be awarded a £2.8bn contract to build HS2’s trains.
The award, subject to a legal challenge by rival Siemens, follows weeks of turmoil on Britain’s railways after cracks were found on Hitachi express trains running from London to Scotland and Wales.
Thales makes more money from aerospace, defence and security operations. The Sunday Telegraph revealed last month that the French blue-chip had put its transport arm up for sale.
The division is hoping to win contracts worth hundreds of millions of pounds from HS2 to deliver electronic signalling, configure high voltage power lines and information screens for passengers.
Bosses at the French firm sought to play down the prospect of a sell-off a few weeks ago. “Thales still considers rail signalling an attractive market,” a spokesman said.
But today, Thales’ Philippe Keryer said: “After discussions with key market players, Thales has selected the best industrial partner to ensure a successful long term development of its ground transportation business.”
UK’s two biggest holiday park operator to merge, says Sky
Two of Britain’s biggest holiday park operators are merging as Away Resorts attempts to buy rival Aria, according to Sky News.
Aria Resorts operates 14 sites in the UK, including Retallack Resort & Spa in Cornwall and The Bay Colwell on The Isle of Wight.
Sources told Sky that Away, which was recently acquired by CVC Capital Partners, had agreed to buy Aria from investment firm Angelo Gordon.
Sky said the deal could be confirmed as early as today.
Petrol prices rise to eight year high
Petrol prices have surged to an eight-year high of 135.13p per litre, a level not seen since September 2013, according to the RAC.
The latest RAC Fuel Watch data showed that 3.4p was added to a litre of petrol in July, the ninth straight month of price rises and the largest rise in the price of unleaded since January.
Diesel also climbed 2.7p to cost an average of 137.06p per litre – its highest price since 2014.
RAC fuel spokesperson Simon Williams said:
Right now it’s hard to see what it will take for prices to start falling again. While we’re not past the pandemic by any means, demand for oil is likely to continue to increase as economic activity picks up again, and this is likely to have the effect of pushing up wholesale fuel prices, costs which retailers are bound to pass on at the pumps.
Unless major oil producing nations decide a new strategy to increase output, we could very well see forecourt prices going even higher towards the end of the summer.
City of London will struggle to lure back workers, L&G boss says
The City of London is struggling more than other UK office districts to lure back workers to the office, said the boss of one of the UK’s largest insurers and investors.
Speaking on Bloomberg TV, Nigel Wilson, chief executive officer of Legal & General Group, said since lockdown restrictions were eased, other centres were showing greater signs of life than the capital’s main financial districts.
Employers will have to step up efforts in the “next few years” to refill their offices, he added.
“The challenge for us that we have in the UK is how do we get people back to working in the City,” Wilson said. “If you travel around the rest of the country, there is a lot more economic activity going on in the core areas within those cities.”
L&G has made regional regeneration a key part of its investment thesis, and hasn’t been “long” central London office buildings for many years, Wilson said.
He was speaking after L&G released half-year results, which saw the firm’s return on equity jump 22pc versus 6.3pc a year earlier thanks to investments in real assets.
Here’s the daily round-up from The Telegraph’s Money team:
Oil is dropping again, for a third straight day, as concern grew that the fast-spreading outbreak in key importer China could curb demand.
Brent was down 5.2pc on the beginning of the week to trade near $72 per barrel.
West Texas Intermediate also edged lower to trade close to $70 a barrel after sinking 4.6pc over the first two days of the week.
The variant has been detected in nearly half of China’s 32 provinces within just two weeks. At least 46 cities have advised residents not to travel unless it’s absolutely necessary.
However, support for prices came from signs of increasing tightness in the US market.
Crude stockpiles fell 879,000 barrels last week, while gasoline holdings dropped by 5.75m barrels, according to people familiar with inventory data from the industry-funded American Petroleum Institute. Official numbers are due later Wednesday.
PMI data shows UK private sector growth slowing
Britain granted ‘dialogue partner’ status by ASEAN nations
Britain has been granted ‘dialogue partner’ status by the Association of Southeast Asian Nations, a joint communique issued by the group said.
“We agreed to accord the United Kingdom the status of Dialogue Partner of ASEAN in view of its individual relationship with ASEAN as well as its past cooperation and engagement with ASEAN when it was a member of the European Union,” the communique said.
ASEAN members are: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.
Becoming a dialogue partner gives Britain high-level access to ASEAN summits. Britain has been seeking the status as part of its post-Brexit policy shift to focus diplomatic and trade towards Asia and the Indo-Pacific and away from the European Union.
Expert reaction: July PMI data
Tim Moore, economics director at IHS Markit, which compiles the survey, said:
July data illustrates that recovery speed across the UK economy has slowed in comparison to the second quarter of 2021. More businesses are experiencing growth constraints from supply shortages of labour and materials, while on the demand side we’ve already seen the peak phase of pent up consumer spending.
The full easing of pandemic restrictions appears to have helped limit the overall loss of momentum towards the end of July. At 59.6, the PMI reading for services output was much stronger than our earlier ‘flash’ figure of 57.8 in July, largely due to the final index covering an extra five working days since ‘freedom day’.
Any re-acceleration of growth in August looks unlikely, however, as new orders increased at a much-reduced pace at the start of the third quarter. Moreover, business expectations softened again during July, with UK firms the least optimistic about the growth outlook since January. Survey respondents cited worries about recruiting staff to meet business expansion plans and some suggested that escalating costs would hinder the recovery.
Expert reaction: ‘The best of the post-pandemic recovery could be behind us’
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said:
With new orders the weakest since February, demand in the services sector appears to be waning along with business optimism as supply and staff constraints impacted on activity last month.
Unfilled vacancies due to skills shortages and low stocks at suppliers meant further gains were obstructed and backlogs of work increased. Adding to capacity pressures, the relentless rise in input cost inflation to its highest for a quarter of a century meant businesses were paying more for wages, transport and food, and consumers were beginning to bear the brunt with onward price inflation the most elevated since the survey began in 1996.
We suspect the best of the post-pandemic recovery could be behind us, especially if higher leisure and hospitality costs diminish appetite for consumer spending. Consumer Price Inflation reached 2.4pc in June, surpassing the 2pc target set by the Bank of England, and it is likely to go higher in the coming months as salary increases add pressure on prices through the summer.
Weakest rise in business activity since March
The post-lockdown bounce-back for British services firms slowed again in July and inflationary pressures continued their surge to hit a new record high, a survey showed today.
The IHS Markit/CIPS Purchasing Managers’ Index (PMI) for the sector edged down to 59.6 from 62.4 in June but was above the key 50.0 no-change mark.
“A substantial loss of momentum was seen for new business growth during July, with this index the lowest since February,” the survey said.
“While many firms commented on strong consumer spending and a sustained recovery in demand for business services, there were also reports that COVID-19 isolation rules had negatively influenced sales volumes.”
Sterling inches higher against the dollar
Sterling has edged higher against the dollar today, in anticipation of a hawkish turn from the Bank of England when it meets on Thursday.
Sterling has rebounded after lockdown restrictions were relaxed in England on July 19, reaching as high as $1.3984 at the end of the month. Since then it has stayed mostly above $1.39.
Today, the currency is up 0.1pc against the dollar at $1.3927. Against the euro, the pound was down 0.2pc at 0.8511p.
At tomorrow’s BoE meeting, officials are expected to maintain its nearly £900bn bond-buying programme.
However two policymakers have broken ranks recently to suggest that the time for tighter monetary policy might be nearing. The BoE is expected to be among the first of the world’s main central banks to begin the process of stopping stimulus support.
Overnight implied volatility on the pound increased by 2 points, indicating that traders are bracing for potential swings in the currency around the central bank meeting.
“We think meaningful BoE shifts will wait until after unemployment support via the furlough scheme is over so the Bank can get a cleaner read on the labour market,” said CitiFX analyst Adam Pickett, in a note to clients.
“Hint on liftoff contingencies in the minutes and risks around an updated QT strategy also leave hawkish risks. Net-net we don’t think we see enough to move GBP this week.”
Housing market ‘entirely healthy and stable’ says Taylor Wimpey boss
Chief executive of housebuilder Taylor Wimpey has rejected suggestions that the UK housing market is in a bubble after it announced swinging back to a profit.
On the BBC’s Today programme, Taylor Wimpey chief executive Pete Redfern said market conditions were not the same as when the housing market last crashed in 2007.
In 2007, mortgage lending had been “significantly laxer” than it is right now, while house price growth had been “well above” inflation levels, he said.
There was also a higher number of investors buying homes, he said, adding “none of those things is true today” and the UK currently had an “entirely healthy and stable housing market”.
Expert reaction: Taylor Wimpey swings to profit
Laura Hoy, Equity Analyst at Hargreaves Lansdown, comments:
Another set of strong results from the UK’s housebuilders adds to mounting evidence that the pandemic has been a tailwind for the housing market. Turns out being locked inside for months on end has caused many people to re-evaluate their current living situation. Add to that the rising popularity of working from home, and you have the perfect excuse to move house.
Over the past few months, there’ve been mutterings of a potential slowdown in the UK’s red-hot housing market—Halifax reported a small decline in house prices in June—but from Taylor Wimpey’s perspective things are still ticking over nicely. The group reported a double-digit rise in house prices, a strong forward order book, and cancellation rates in line with 2019 levels.
If things carry on like this, Taylor Wimpey could be one of the pandemic’s biggest winners. The group was bolder than some of its peers with an aggressive land buying strategy that will pay off if the market remains buoyant. Of course, the group will suffer if the economy stumbles in the wake of the pandemic, but so far the group is building from a strong base.
What happened on Wall Street yesterday
US stocks lifted higher on Tuesday, with the S&P 500 reaching a new closing high of 4423.15, up 0.8pc from Monday’s close.
The Dow Jones also rose 0.8pc to 35116.40 and the Nasdaq Composite inched 0.5pc higher to 1476.29.
Shares of sports clothing brand Under Armour jumper 7pc higher after the company said strong sales by its golf and running products helped the business swing to profit.
Ralph Lauren also lifted 6pc after its first quarter revenue nearly tripled to $1.4bn compared to a year earlier, exceeding analyst expectations.
The Hut Group acquires beauty retailer Cult Beauty
Shares of The Hut Group (THG) have lifted 2.8pc in early trading, after the e-commerce company agreed to buy online beauty retailer Cult Beauty in a £275m deal.
THG said the acquisition will boost its sales for the next full year by £140m, with an earnings lift of around £10m. It added it is now expecting to overtake previous sales growth targets for this financial year.
THG founder Matthew Moulding – who began working life as a pot washer in his local pub – initially embarked on a career as an accountant before helping to set up The Hut Group in 2004.
FTSE 100 boosted by results
Leading gains on the FTSE 100 today are housebuilder Taylor Wimpey (up 6.2pc) and Legal and General (up 2pc), after both companies reported strong results this morning.
Pensions giant Legal and General reported its profit before tax had jumped to £1,320m from £285m in the first half of 2020, boosted by its investments.
Nigel Wilson, the chief executive officer, said: “We’re continuing to make investments that are economically, environmentally and socially valuable, in line with our long-term commitment to delivering Inclusive Capitalism and supporting the Building Back Better and Levelling Up agenda.”
Shares of Just Eat takeaway were trailing the index, down 2.9pc.
FTSE rises higher
The FTSE 100 has opened 34.92 points or 0.5pc higher at 7,140.64.
The FTSE 250 has also lifted 74.25 points or 0.3pc to 23,360.97.
Cash for jabs at Vanguard
The world’s second largest asset manager is offering $1,000 to employees who get vaccinated before October, according to Bloomberg.
Vanguard Group is offering the payment to all workers who can prove they are vaccinated, even if they received the vaccine before the firm made the offer will also qualify for the incentive.
“We are offering a vaccine incentive for crew who provide Covid-19 vaccination proof,” a Vanguard spokesperson said, adding that the company rewards employees “who have taken the time to protect themselves, each other, and our communities by being vaccinated.”
Taylor Wimpey swings to profit
FTSE 100 listed housebuilder Taylor Wimpey has raised its full-year earnings outlook, after swinging to a first-half profit as a result of Britain’s booming property market.
The group posted pre-tax profits of £287.5m for the six months to July 4, against losses of £39.8m a year ago.
Its half-year operating profits totalled £424m and it completed a record 7,303 homes, helped by delayed transactions from the end of last year and a property market that has been firing on all cylinders.
Taylor said it now expects full-year group earnings to beat market expectations – at around £820m – with completions also set to be at the top end of forecasts.
Rolls Royce agrees to sell Norwegian business to British Langley
Rolls-Royce has agreed to sell its Norwegian maritime engine business to British engineering group Langley Holdings for an enterprise value of €63m.
The deal follows a previous agreement Rolls Royce struck to sell its Bergen business for €150m to a Russian company, however Norway blocked the sale on national security grounds.
Warren East, Rolls-Royce chief executive, said: “We believe that this agreement will provide Bergen Engines and its skilled workforce with a new owner able to take the business on the next step of its journey. The sale of Bergen Engines is a part of our ongoing portfolio management to create a simpler, more focused group and contributes towards our target to generate at least £2bn from disposals, as announced last year.”
The agreed sale includes the Bergen Engines factory, service workshop and foundry in Norway; engine and power plant design capability; and a global service network spanning more than seven countries.
Bergen Engines employs more than 900 people worldwide including 650 in the main factory in Hordvikneset. In 2020, the business generated revenues of around €200m.
FTSE 100 set to drive higher after Asian stocks shrug off delta fears
Good morning. The FTSE 100 is set to climb around 0.20pc to add 15 points this morning as markets look to maintain their upward momentum. The FTSE 250 and Euro Stoxx 600 both reached new record highs yesterday while Wall Street rebounded from a weak start to push on, with Asian stocks shrugging off delta variant fears to drive higher on strong US earnings and vaccine rollouts.
Stronger than expected earnings for US companies are expected to fuel markets in the second half, according to JP Morgan analysts, who wrote in a note: “Our baseline forecast for strong global growth to further gather steam in 2H21 has remained unchanged in recent months.”
“The central pillar of our global outlook is that vaccines will sever the link between Covid-19 and economic activity,” they added.
The main risk remains the transmission of the delta variant, especially after a fresh outbreak of cases in China.
5 things to start your day
1) Mike Ashley set to step down from Sports Direct: Tracksuit tycoon expected to become deputy chairman of Frasers Group and promote his future son-in-law Michael Murray.
2) Britain must take ‘golden share’ in defence firms like Meggitt, say MPs: Chairman of defence select committee says the FTSE 250 firm should be protected from foreign takeovers in same way as BAE and Rolls-Royce.
3) Rolls-Royce lines up funding for mini nuclear reactor revolution: Private backing for Rolls-led consortium to build new generation of “mini nukes” unlocks hundreds of millions of taxpayer support.
4) Amazon’s drone deliveries in doubt after Cambridge cutbacks: Online retail giant’s Prime Air division has reportedly cut up to 100 staff but says it remains committed to UK development centre.
5) Pepsi sells Tropicana in $3.3bn deal as juice falls out of favour: PepsiCo will offload its juice brands to French private equity firm PAI Partners but retain a 39pc stake through a joint venture.
What happened overnight
Asian stocks were mostly higher on Wednesday as traders mirrored overnight gains on Wall Street during another busy earnings week.
The Kospi in South Korea advanced 0.9pc to 3,264.78 and the Hang Seng in Hong Kong added 1.5pc to 26,589.87. The Shanghai Composite index gained 0.3pc to 3,458.31.
Sydney’s S&P/ASX 200 was also 0.3pc higher at 7,497.40. Tokyo’s Nikkei 225 fell 0.1pc to 27,612.29.
Shares edged higher in Singapore, Indonesia and the Philippines but fell in Malaysia.
Coming up today
Corporate: Ferrexpo, Ibstock, L&G, Morgan Sindall, Taylor Wimpey (Interim); UDG Healthcare (Trading update)
Economics: Services PMI (UK, EU, US, Asia); retail sales (EU); oil inventory (US)