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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

FTSE 100 surges over 8,000 points before rising US producer prices dampen mood; British Gas owner Centrica’s profits triple – as it happened

Centrica British Gas United States Jason Hollands United Kingdom
A dragon statue boundry mark guarding the entrance to the City of London
A dragon statue boundry mark guarding the entrance to the City of London Photograph: mauritius images GmbH/Alamy

FTSE 100 hits new closing high

And finally…. the UK’s blue-chip FTSE 100 index has ended the day at a new alltime closing high.

That’s despite disappointment over the higher-than-expected US producer price inflation data.

The FTSE 100 has closed at 8012 points tonight, up 14 points or 0.18%, having hit an intraday high of 8047 points this morning.

Centrica was the top riser, surging 5.7% after beating profit forecasts and announcing a new £300m share buyback programme today.

Thousands of workers at Britain’s Royal Mail voted in favour of further strikes on Thursday, warning of more walkouts until a long-running dispute over pay is resolved.

More than 95% of those who participated in the ballot voted for strikes, said the Communication Workers Union (CWU), which represents more than 110,000 postal workers at the centuries-old postal company.

Closing post

Time to wrap up… here are today’s main stories:

The head of the Rockefeller Foundation, Rajiv Shah, has emerged as the favourite to succeed David Malpass as head of the World Bank amid calls for the White House to lose its stranglehold on choosing who should run the global development body.

Shah, a doctor, health expert and former head of the US Agency for International Development, is one of the names hotly tipped to be the Joe Biden’s administration choice as a replacement for Malpass following his announcement that he would be leaving his post by June.

But the likelihood that Washington will use a “gentleman’s agreement” under which the US picks the World Bank president while Europe chooses the managing director of its sister organisation – the International Monetary Fund – brought immediate calls for the process to be opened up.

“With the dismal Malpass gone, the US are already manoeuvring to appoint the new head of the Bank”, said Oxfam’s head of inequality policy, Max Lawson.

Lawson added:

“This neo-colonial 80-year-old stitch up has to end if the World Bank is to retain any credibility with the rest of the world.

“Joe Biden should back a fully transparent open recruitment process to show the world that his administration is different.”

New Look cutting more than 500 warehouse jobs in move to axe night shift

More than 500 warehouse jobs are being cut at fashion chain New Look under plans to axe the night shift at its site in Staffordshire, PA Media reports.

The move to switch to a day shift only will impact 503 of its 1,200 workers at the group’s warehouse in Lymedale Business Park site, Newcastle-under-Lyme.

But New Look is hoping to be able to re-employ some of those employees affected as it hires an extra 300 staff on the expanded day shift.

A New Look spokesman said:

“With this shift, it has become increasingly clear that the processes at the distribution centre no longer suit our operational needs.

“Therefore, we are proposing a necessary change to working hours in the distribution centre, including the removal of the night shift. Regrettably, we expect this will result in a number of redundancies at the site.

“We are focusing on supporting our affected colleagues at this time and we expect to be able to offer a considerable number of these individuals new roles on the day shift.”

The nasty surprise from today’s US producer price inflation report means the FTSE 100 may not hit a new closing high tonight.

It’s currently down 6 points today at 7991, having soared to 8047 points for the first time this morning.

Rob Morgan, chief investment analyst at Charles Stanley, points out that the FTSE 100 has been a laggard in recent years:

“Over the past two decades, the UK’s FTSE 100 index has been a poor performer compared with most other markets. The index, representing the 100 largest stock market-listed UK companies, is a mere 25% higher than at the turn of the millennium.

“Admittedly, this represents an unflattering starting point. The index was puffed up by unsustainable valuations of ‘TMT’ stocks during the dotcom bubble in the late 1990s. Yet it has been a clear laggard against the US or emerging markets where investors have comfortably trebled their money – in capital growth terms alone.

“Where the FTSE has stood out, and consequently generated respectable returns, is dividends – the profits declared by companies and paid to shareholders. Reinvesting these for growth has boosted returns substantially, and the old fashioned values of seeking out sustainable and growing pay outs from shares are a large part of why the index has hit the landmark of 8000 points.”

Centrica’s record profits have made the front of the Evening Standard, who report that the surge in earnings has ‘sparked fury’.

They quote Liberal Democrat Leader Ed Davey saying:

“This is a betrayal for British Gas customers across the country who are struggling to keep their heating on. Once again the government’s failure to implement a proper windfall tax is allowing oil and gas businesses to make billions off the back of hardworking families.

Worryingly, a gauge of factory activity in the Philadelphia region has moved further into negative territory.

The Philadelphia Fedreal Reserve’s index of manufacturing activity has fallen to -24.3 this month, down from -8.9 in January,.

This is the sixth consecutive negative reading, and the lowest reading since May 2020.

Turkey’s central bank could cut interest rates next week, to support the economy after the devastating earthquake that struck last week.

JP Morgan has prediced that the Central Bank of the Republic of Turkey will lower its headline rate by a full percentage point, to 8%.

The Wall Street bank has also estimated that direct costs from the destruction of physical structures in Turkey from the devastating earthquake on Feb. 6 could amount to 2.5% of growth domestic product or $25 billion.

European Union countries are said to be “on good track” to adopt new sanctions against Moscow in time for the first anniversary of Russia’s invasion of Ukraine on 24th February.

Diplomats in Brussels have told Reuters that talks are underway between EU members over proposed new sanctions estimated to be worth some 11 billion euros ($11.8 bln) in trade flows.

One EU diplomat familiar with the discussions said:

“The package should be concluded well in time for February 24th, it’s on good track, there are no major sticking points.”

Switzerland, meanwhile, has ruled out confiscating private Russian assets to pay for the reconstruction of Ukraine, saying it would undermine the Swiss constitution.

The Swiss Justice Ministry said on Wednesday that:

“The confiscation of frozen private assets is inconsistent with the Federal Constitution and the prevailing legal order and violates Switzerland’s international commitments.”

Switzerland has frozen financial assets worth around 7.5 billion Swiss francs (£6.7bn) under sanctions against Russians.

Bond prices are also weakening, pushing up the yield (or interest rate) on US Treasury bills.

UK government bond yields are also higher, another sign that the markets are disappointed that inflation pressures are higher than hoped.

Stock markets are taking a knock from the strong US PPI inflation report just released.

The FTSE 100 has sunk back from its earlier record highs, and is now back below the 8,000-point mark which it cleared for the first time yesterday.

US producer prices inflation higher than expected

US goods and services producers hiked their prices by more than expected last month, dampening hopes that inflation is easing.

The Producer Price Index for final demand rose by 0.7% in January, the US Bureau of Labor Statistics has reported.

On an anual basis, producer prices jumped by 6% in the year to January. Economists had expected it would fall to 5.4%, from 6.5% in the year to December.

Goods prices rose by 1.2% in Janary alone, which is the largest monthly increase since last June.

This was driven by higher energy costs, with prices for gasoline increasing by 6,2% in the month.

This is a sign that US inflation may be stickier than hoped, which may push the US Federal Reserve to raise interest rates still higher, and hold them their for longer than expected. Especially with the US jobs market still strong last week.

The dollar is rallying in response, pushing the pound down below $1.20.

Updated

Key event

Just in: the number of Americans filing new unemployment claims has dropped, suggesting the jobs market is still strong.

There were 194,00o fresh ‘initial claims’ for jobless support last week, down from 195,000 the previous week, and lower than expected – suggesting firms are holding onto workers.

These are low figures in historic terms, which may indicate that the increase in US interest rates has not yet cooled the labour market.

Millions of consumers with O2 and Virgin Mobile contracts are to be hit with an inflation-busting 17.3% increase in their bills for making calls, sending texts and using data, adding to pressure on households amid the cost of living crisis.

The price hike is the latest in a series of big increases imposed on consumers for vital utilities, and will add to pressure on the government to step in with tougher protections.

The telecoms operators – merged under the same umbrella company since 2021 – confirmed the cost of their airtime contracts, or what customers pay for calls, texts and data, would go up by the annual rate of retail prices index (RPI) inflation announced this week, plus 3.9 percentage points.

Official figures on Wednesday showed RPI stood at 13.4% in January, landing consumers with a 17.3% increase in their airtime bills in total – almost triple the rate of growth for average workers’ pay. Consumers will see the increase from April.

More here:

France’s stock market is also celebrating a record high today.

France’s CAC 40 index broke over its previous lifetime high this session, hitting 7,387.29 points.

Hopes that Europe’s economy will avoid a recession have boosted stocks in Paris, as have Beijing’s push to reopen China’s economy

Reuters explains:

French stocks have risen nearly 14% so far this year, following a battering in 2022, boosted by hopes that the euro zone will narrowly avoid a recession and surging shares of luxury goods groups that rely heavily on Chinese shoppers.

“France has particularly leveraged the faster-than-expected Chinese reopening,” said Andrea Cicione, head of research at TS Lombard.

“The fact that there is significant chunk of consumer discretionary in there, particularly luxury goods as opposed to Germany for example, where consumer discretionary is mostly autos, is definitely a positive for France.”

Updated

The boss of Centrica is refusing to say if he will waive his bonus for the past year, after the British Gas owner tripled its profits this morning.

Chris O’Shea, chief executive of Centrica, could be in line for a personal financial windfall after the company beat forecasts with profits of £3.3bn last year.

However, he said on Thursday that it is “too early to have a conversation” about his potential bonus payout despite pressure from campaigners to reject it.

Mr O’Shea told reporters:

“On the bonus, we’ve been a bit more efficient this year, and we’re a bit earlier in the process.

“Last year we reported a little bit later. It’s a bit early for us to say – the annual report will be published in March and it will have everything that you need.”

Given the shocking revelations this month that agents working for British Gas had ignored customers’ vulnerabilities and broken into homes to fit pre-payment gas meters, there will surely be an outcry if O’Shea pockets a bonus for 2022.

Mike Ashley’s sports empire could drop out of the FTSE 100 when the index is next reshuffled, in March.

Frasers Group only rejoined the blue-chip index in September (when the takeover of defence firm Meggitt created a vacancy). It is currently the lowest-valued company on the FTSE 100, at around £3.7bn, so could be dislodged when index provider FTSE Russell recalculates which companies should be in the index.

Investec, the most valuable member of the FTSE 250 index of medium-sized firms, has a market capitalisation of £5.17bn, enough to propel it into the blue-chip FTSE 100.

FTSE Russell will conduct the review after the market closes on 28th February, with the reshuffle taking place on 20th March.

Proactive Investors reported yesterday that Frasers is on the brink of a drop back to the FTSE 250 index, saying:

In order to avoid companies yo-yo-ing between the two indices, a company must be able to climb into the top 90 by market cap to be promoted into the FTSE 100. Likewise, to be demoted, it must fall below the 110th position in terms of market cap.

Based on current market caps, Frasers is on the brink of the drop, with its £3.6bn market cap putting it in 109th position.

Updated

Ed Miliband MP, Labour’s Shadow Climate Change and Net Zero Secretary, has issued a statement on Centrica’s soaring profits:

“It cannot be right that, as oil and gas giants rake in the windfalls of war, the Rishi Sunak’s Conservatives refuse to implement a proper windfall tax that would make them pay their fair share.

“In a matter of weeks, the Government plans to allow the energy price cap to rise to £3,000. Labour would use a proper windfall tax to stop prices going up in April.

“When it comes to oil and gas interests, Rishi Sunak is too weak to stand up for the British people. Only Labour is on your side - with a plan to tackle the cost of living crisis now, and a long term plan to cut bills for good and make Britain a clean energy superpower.”

Russian central bank not planning to ease capital controls soon - governor

Over in Moscow, Russia’s top central banker has dashed hopes that capital controls could be lifted soon.

Capital controls were introduced almost a year ago, including curbs on foreign currency withdrawals. They were brought in after the full-scale invasion of Ukraine sent the rouble plunging, helping the currency to recover.

Reuters has the details:

Russia’s central bank does not yet see an opportunity to significantly ease capital controls, Governor Elvira Nabiullina told reporters on Thursday, stating that it could extend restrictions on foreign currency withdrawals in March.

Nabiullina said the controls that have been left in place are important for financial stability. Russia introduced capital controls to stabilise the FX market shortly after Moscow sent troops into Ukraine a year ago and the rouble tumbled to a record low.

UK consumer spending weakened last week, the latest realtime economic data shows.

But, takings at Pret A Manger rose, as workers returned to the office following rail strikes the previous week.

The Office for National Statistics has reported that aggregate UK spending on debit and credit cards is estimated to have dropped by 3 percentage points last week. Younger shoppers cut back the most; debit card transactions by those aged 18-34 fell by 12 percentage points.

But, the number of in-store transactions at all Pret A Manger locations increased in the week to 9 February 2023, apart from in “London Suburban” where they were broadly unchanged.

Pret takings are a proxy for consumer spending and high street visits.

The ONS says:

This latest recovery in transactions may be partially because of the rail strikes in the previous week. Manchester stores saw the largest increase of 12 percentage points compared with the previous week, followed by Regional Stations where they increased by 9 percentage points.

Centrica has beaten City forecasts with its 2022 earnings this morning, reports Keith Bowman, investment analyst at interactive investor:

Bowman explains:

Higher energy prices following the war in Ukraine helped push upstream adjusted operating profit to £1.79 billion from last year’s £663 million. Profit on the same basis for its British Gas supply business fell 39% to £72 million, while profit at its Irish supply business rose 11% to £31 million. Hindered by the loss of customer numbers as consumers look to reduce outgoings, its boiler and other services business saw an adjusted loss of £9 million.

A final dividend of 3p per share follows the reinstatement of shareholder payouts at the half year results in July, and leaves the shares sat on an historic yield of around 4%. Centrica’s existing £250 million share buyback scheme is being extended by a further £300 million.

In all, and as with business in general, elevated inflation is raising costs, Bowman adds:

The weather and its unseasonal swings also cause uncertainty over customer energy demand, while a lot is already in the price after outperforming the FTSE 100 by 20%-plus over the last year.

Here’s Ed Miliband, Shadow Climate and Net Zero Secretary, on Centrica’s profit surge:

Shares in Standard Chartered are now up 3.5%, after the bank upgraded its forecasts and posted a 28% rise in profits for last year.

Standard Chartered said the reopening of China after the pandemic is giving grounds for optimism, after it made a statutory pre-tax profit of $4.3bn (£3.56bn) for last year.

Standard Chartered, which is focused on the Asia-Pacific region, told shareholders that the pace of economic recovery in many of its “footprint markets” was encouraging.

“The recent opening-up of China and the generally receding impacts of COVID-19 should help,” it added.

It also saw its net interest margin – the difference between what a bank charges for loans and pays for savings – increase by 0.2 percentage points as it benefited from a higher interest rate environment.

CEO Bill Winters says the bank is upgrading its expectations, and now targeting “a return on tangible equity approaching 10% in 2023, to exceed 11% in 2024, and to continue to grow thereafter”.

The scandal-hit owner of British Gas has reported record profits of £3.3bn boosted by soaring wholesale gas prices after Russia’s invasion of Ukraine and as many households in Britain struggle with the cost of living, our energy correspondent Alex Lawson reports.

Centrica’s bumper profits are likely to anger campaigners calling for tougher windfall taxes, lower bills and better treatment of vulnerable customers against the backdrop of the prepayment meter scandal.

The company’s profits for 2022 more than tripled compared with the £948m in 2021, aided by soaring profits in its North Sea oil and gas division. They also surpass the company’s previous profit high of £2.7bn, recorded in 2012.

British Gas faced widespread criticism earlier this month when it emerged that debt agents working for Britain’s largest energy supplier had ignored customers’ vulnerabilities and forced them on to prepayment meters to recover debts.

The company suspended the use of court warrants to install prepayment meters and the government and Great Britain’s energy regulator, Ofgem, later ordered all energy suppliers to pause the tactic.

Centrica’s North Sea profits are subject to a windfall tax on North Sea oil and gas operators while it also has a 20% stake in Britain’s nuclear power stations, which are subject to the electricity generator levy implemented by the chancellor, Jeremy Hunt, to capture windfall gains.

However, Labour has called for the oil and gas windfall tax to be expanded to capture a greater proportion of profits.

More here:

Windfall tax calls will grow louder following Centrica tripling its profits to £3.3bn last year, even though the company paid nearly £1bn, predicts Tom Gilbey, equity research analyst at investment management firm Quilter Cheviot:

Gilbey say:

“Centrica produced some strong results this morning as its trading division took advantage of energy trends that came to dominate in 2022.

Its adjusted profit grew over 250% to over £3bn , and it more than doubled its free cash flow, putting this to use by paying a dividend – which they only reinstated a year ago - and getting approval to buy back a potential 10% of their shares. It is this that may draw controversy given it is also benefiting from elevated energy prices and it has come under fire in recent weeks for its consumer practices.

“The business still expects conditions to remain tough for customers and stressed it will try and support them, pointing to the fact it recruited 700 additional people over 2022 to help.

Interestingly, Centrica paid around £1bn in tax, perhaps putting the larger energy producing giants to shame. However, with these profits quite so extraordinary for Centrica, calls are only going to grow for stricter windfall taxes, particularly in the run up to the general election next year. While the results are strong, it is a reminder that Centrica faces a number of headwinds, some of its own making but some out of their control.”

FTSE 100 hits new record over 8,000 points as Centrica shares jump

Shares in Centrica have jumped by 6% at the start of trading in London.

Investors are cheering its new £300m share buyback plan announced this morning, on top of the tripling of its profits last year.

This has helped drive the FTSE 100 index to a fresh alltime high. It’s gained around 48 points or 0.6% to 8046 points, beating yesterday’s record high.

The FTSE 100 share index
The FTSE 100 share index Photograph: Refinitiv

Asia-Pacific focused bank Standard Chartered are also rallying, up 1.7% after reporting a jump in profits and a new $1bn share buyback programme.

As flagged in the introduction, the FTSE 100’s surge to record highs reflects hopes that the world economy may avoid recession, rather than optimism specifically about the UK economy.

Matthew Ryan, head of market strategy at global financial services firm Ebury, explains:

“With more than 80% of FTSE 100 revenues earned abroad, we see the move as more of a consequence of growing optimism surrounding the easing in inflation rates and risk of recessions globally, rather than necessarily an improvement in sentiment towards the domestic economy.

“The harsh reality is that with UK inflation still stubbornly high, a recession remains very much on the cards, and that does not present a particularly encouraging environment for British stocks. Indeed, the FTSE 250 index, which has a greater weighting towards British firms, is still trading around 17% off its 2021 highs.

“The recent drop in the value of sterling, which has fallen by more than 2% on the dollar so far this month, can also partly explain the boom, as this boosts the value of earnings from overseas.”

Updated

Aldi to hire 6,000 UK staff

The British arm of Aldi, the German discount supermarket chain, has announced plans to hire more than 6,000 workers in the UK, as part of its expansion plans.

Aldi said new stores were planned in Norwich and Newcastle in England, and that it was also recruiting for 450 jobs across its 11 regional distribution centres.

Giles Hurley, chief executive officer of Aldi UK, said:

“Demand for Aldi has never been higher as more and more people realise they can make significant savings on every shop without compromising on quality. It’s more important than ever that we are making it even easier for more people to shop with us – including by opening dozens of new stores.

“Our success is dependent on the amazing work that colleagues do, day in and day out, and we’re looking forward to welcoming thousands more colleagues to Team Aldi throughout 2023.”

Aldi currently has more than 990 stores and employs around 40,000 people.

Market research firm Kantar has reported that Aldi, and rival discount chain Lidl, have both seen sales growth, boosting their market share, as households have tried to control their shopping bills.

Updated

Centrica has announced a new £300m share buyback this morning.

That’s on top of its existing £250m share buyback programme.

Share buybacks are a way of returning cash to shareholders (and to pump up a company’s stock price). Critics say they simply funnel money from customers, who may be strugging in the cost of living crisis, to wealthier investors.

Dr George Dibb, head of the Centre for Economic Justice at IPPR, says the UK should tax such buybacks.

”These scandalous profits are undeserved and come directly from the pocket of bill-payers. We all know that wholesale energy prices have been sky-high for the past year, but that’s no reason that gas suppliers should be making higher profits on the back of higher bills.

These profits, which are then being transferred directly to shareholders via buybacks and dividends, are a direct transfer away from bill-payers during a cost of living crisis. It is time to introduce a tax on share buybacks and use those revenues to support public services.”

In the US, Joe Biden pushed through a 1% tax on corporate stock buybacks. Last week, the US president called for it to be quadrupled, in his State of the Union speech.

Scope, the disability equality charity, are calling for a social energy tariff to help disabled people through the cost of living crisis.

Tom Marsland, policy manager at Scope, said:

“It’s obscene that energy companies continue to make massive profits as disabled people face devastating situations because they can’t afford enough energy.

“Life costs a lot more when you’re disabled. We’re being inundated with heart-breaking calls from disabled people who haven’t eaten for days, who can’t afford energy to charge wheelchairs and stairlifts, but are still racking up huge energy debts.

“As we’ve seen, many have been forced onto prepayment meters as a result, putting lives and health in danger.

“Energy companies need to start putting disabled customers first.

“We need a social energy tariff - a discounted rate - for disabled people, to put an end to sky-high energy bills.”

Scope and Age UK have drawn up an open letter asking the government to introduce a social tariff, which can be signed here.

Friends of the Earth are also calling for a tougher levy on energy company profits.

Sana Yusuf, climate campaigner at Friends of the Earth, says Centrica’s earnings will fuel ‘further outrage’, given the cost of living crisis:

“Another set of bumper profits from one of the companies fuelling the energy and climate crises will no doubt spark further outrage as millions of people struggle to pay their bills and face a drop in government support from April.

“The new Energy Security and Net Zero Secretary [Grant Shapps] needs to step up and back growing calls for a tougher windfall tax on the excessive profits of fossil fuel companies like Centrica to help fund the investment in insulation and homegrown renewables needed to bring down bills and cut emissions.”

Unite: Obscene Centrica profits confirm need for tougher energy windfall tax

The “obscene” profits reported by Centrica this morning show that the government should bring in a meaningful windfall tax on the energy industry, says the Unite union.

Unite general secretary Sharon Graham says:

“British Gas owner Centrica has been coining it in from our massive energy bills while sending bailiffs to prey on vulnerable consumers the length and breadth of the country.

“These energy companies are showing us everything that is wrong with the UK’s broken economy.

“Rishi Sunak should get a grip – pull the plug on rampaging energy profiteering, impose a meaningful, tough windfall tax and give the NHS a pay rise with the proceeds.”

Centrica says today it paid nearly £1bn in tax related to its 2022 profits.

The current windfall tax, or ‘energy profits levy’, was introduced last May and then increased in November. But critics say it is flawed, because it allows energy producers to offset increased development in the North See off their tax bill.

Updated

British Gas’s adjusted operating profit decreased by 39% to £72m in 2022.

Centrica says this “largely reflects voluntary donations made to support customers and the repayment of furlough funds received by the Group in 2020”.

In August, British Gas announced it would donate 10% of its profits to help its poorer customers.

Centrica profits triple to over £3bn

The owner of British Gas has reported a surge in annual profits this morning, becoming the latest energy giant to benefit from the jump in energy prices since the invasion of Ukraine.

Centrica made total operating profits of £3.3bn, a record, and more than three times as much as the £948m adjusted profits it made in 2021.

The jump in earnings comes just weeks after British Gas suspended the forced installation of prepayment meters due to concerns over its treatment of vulnerable customers.

Centrica says it benefitted from “strong gas production and electricity generation against a backdrop of higher commodity prices”.

The company operates oil and gas production in the North Sea, plus holds interests in Britain’s nuclear power plants and operates an energy trading business. These divisions, rather thatn British Gas, provided the bulk of Centrica’s profits.

Such high profits, when the energy crisis is fuelling the cost of living crisis, will intensify calls for tougher windfall taxes on the industry, with BP and Shell have also reported record profits for 2022.

Chris O’Shea, Centrica chief executive, says:

“Our performance in 2022 demonstrates the benefits of our balanced portfolio and our strong balance sheet.

The energy crisis and cost of living pressures have created a challenging environment for customers and communities, but we have been able to provide much needed stability and support.

We invested £75m in supporting our energy customers in 2022, which was greater than the £8 post-tax profit per customer earned by British Gas Energy. Whilst customers may see some relief given recent easing of prices, it remains clear that some will continue to need help and we will do what we can to support them in the year ahead.”

Updated

Introduction: FTSE 100 to power over 8,000 points

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The UK’s blue-chip share index is set to hit new record highs today, after hitting the 8,000 point mark for the first time on Wednesday.

The FTSE 100 hit 8,003.65 points yesterday, before closing just below the 8k milestone at 7997.83 (a new closing high), as hopes grow that inflation may have peaked.

Shares are set to keep rising today, as global stock markets continue to be cheered by optimism that central banks may ease their interest rate increases soon.

Jason Hollands, managing director of online investment service Bestinvest, says the UK market is increasingly seen as a bargain by international investors.

A number of large investment banks are taking a positive view on the opportunity, Hollands says, while some private investors have been “heavy sellers of UK equity funds for several months”, probably ground down by relentless gloomy news on the domestic economic outlook.

However, the FTSE 100 is not a barometer of the UK domestic economy, given its dominance by multinationals such as banks, mining companies and oil giants.

Hollands explains:

It is a highly international index, which makes around 79% of its revenues overseas. This includes around 13% of revenues earned in China, and so these companies should also be a beneficiary of the expected rebound in the Chinese economy this year following its ditching of draconian COVID restrictions in December.

“In recent years, many investors have dismissed UK blue chip shares as ‘boring’, lacking exposure to exciting sectors like technology and social media. But in a more trying economic environment, solid companies churning out reliable dividends are well worth considering. Boring is the new sexy. With an abundance of exposure to energy, commodities, consumer staples and healthcare companies, the FTSE 100 looks well placed for the current environment.”

Since the start of January, the FTSE 100 index has gained 7% – which wouldn’t be a bad return for a full year.

Other European markets have made an even more sparkling start, with Germany’s DAX and France’s CAC having gained around 12%.

We get new US producer prices data and jobless claims figures later today, which may move the markets – if they change investors’ views of the path of inflation and interest rates.

The agenda

  • 9am GMT: ECB Economic Bulletin

  • 9.30am GMT: UK business insights and economic activity data

  • 1.30pm GMT: US PPI index of producer prices

  • 1.30pm GMT: US weekly jobless figures

  • 5pm GMT: Bank of England chief economist Huw Pill gives a fireside chat at the Warwick Think Tank on the UK economy

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