- Chancellor Kwarteng goes for growth.
- MADE.com warns on trading, begins Strategic Review and possible Formal Sale Process.
- Revolution Beauty – not looking pretty.
- Bank of England calls time on paper banknotes.
- Russia plans to cut gas supplies to Europe, boost supplies to China.
Steve Clayton, fund manager at HL Select commented on today’s market news:
“Markets are set for a gloomy start to the day, with Wall Street having pushed lower last night and markets across Asia also weak ahead of UK and European trading hours. With the outlook for the course of interest rates seemingly pushing upwards, investors are facing up to the end of an era of cheap money, just as the impact of an energy price shock hits home. Bond yields jumped across Europe yesterday when the Bank of England raised rates by half a percent. Investors treated that as a half-hearted attempt to get on top of the inflationary pressures challenging the UK, compared to the US Federal Reserve’s string of successive three-quarter percent increases in recent months. UK long-dated gilts saw yields rise by almost 0.2% in response to yield 3.5%
Chancellor Kwasi Kwarteng delivers a “Fiscal Event” later today where he will set out how new PM Liz Truss’s pro-growth agenda will be put into action. We’ve already seen measures to limit the impact of rocketing energy bills. Look out for potential cuts to stamp duty to support a wobbling housing market, measures to boost domestic energy production and controversially, an easing of the cap on banker’s bonuses.
MADE.com, the online furniture and homewares retailer came to market in January last year at a price of 200p per share, valuing the group at £775m. The shares have steadily slumped ever since and were trading at just 6p yesterday. This morning the group has revealed a whole catalogue of woes, ranging from slumping sales and ballooning debts to supply chain struggles. The Board have concluded they are unable to raise sufficient new funds from investors to recapitalise the business. The group is entering a Strategic Review, one outcome of which could be a formal sale process. The shares have dropped as much as 30% this morning in very volatile trading of the stock.
Revolution Beauty is not looking pretty this morning. Having already released a string of announcements surrounding the progress of their year-end audit and trading difficulties, Revolution Beauty have today revealed things have got a whole lot worse. Forensic accountancy specialists have been called in after auditors BDO identified a “number of serious concerns that have arisen during the course of its work on the FY22 audit” BDO have declined to provide an audit opinion on the accounts until these are resolved. Additionally, the group have warned that trading is weak, and results will be materially below their previous guidance and the market’s expectations. The shares have been suspended from trading until those accounts can be published.
The Bank of England has revealed that old paper banknotes will cease to be legal tender in a week’s time. Over £11bn of paper notes, mainly £50 and £20 denominations remain in circulation. The old notes can be exchanged for new polymer notes at the Bank of England, where queues were reportedly forming on the street yesterday. Main post offices can also exchange the notes and many banks will still accept them as deposits.
Gazprom set out its latest three-year plan yesterday, which showed that the squeeze on supplies to European customers is set to continue. A reduction of 40% in supplies to Western European customers seems likely. In contrast, China is set to receive larger amounts of Russian gas. The news is unlikely to surprise Western leaders but underscores the urgency behind the restructuring of European energy supplies to pivot away from an increasingly unreliable Gazprom.
The US dollar continues to climb as investors look to the safe haven of the world’s most liquid asset at a time of economic and political turmoil. The flip side of that is weakness in other currencies. This morning a euro buys you just 98USc, a decisive break below parity with the dollar. Brits contemplating transatlantic trips might want to run the numbers one more time, because a pound sterling now buys just $1.12, almost 20% less than it did a year ago.”
