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City Comment
Peter Cruddas is normally a chatty guy. You’re welcome to his opinions and if you feel like offering him some of yours, he doesn’t mind.
Today his CMC Markets business reported that it’s having a tricky time.
Profits tumbled 43% to £52 million. The dividend has been slashed. It’s tough out there.
What did Lord Cruddas have to say about this? Nothing.
The reason he isn’t talking on CMC results day is plainly because he doesn’t want to be asked about Boris Johnson, of whom he remains a big fan. The biggest, perhaps.
But it’s not like he is silent in general. He was in the Telegraph the other day, claiming Boris has been “stitched up like a kipper”. If this stands, no Conservative politician will be safe, he warned.
I don’t think there is anything wrong with Cruddas having strong political affiliations. It’s not like he is hiding them.
And he’s not obliged to speak to me, of course. But it’s hard to see how he can avoid speaking about his company for much longer.
It was his full-year results today, probably CMC’s biggest day of the year.
CMC said Cruddas isn’t talking because we’d all just ask him about Boris, and that would be a terrible distraction.
Sure. But he started it; the distraction wasn’t visited upon him.
Investors might be wondering if his politics are getting in the way of the business. Maybe they aren’t, but we can be forgiven for wondering.
Some might want to see him answer that suggestion as plainly as possible and in public.
It will be interesting to see if Cruddas backs away from Johnson at this point. If he does, he should say why.
US inflation at 4%
US inflation came in at 4.0% in May, slightly below economists’ expectations.
The figure is a stark contrast from the UK, where inflation in April, the last published figure, was still 8.7%.
The lower inflation was mostly due to energy prices declining by 11.7%. On the toher hand, transport services and shelter saw the biggest price rises.
Core inflation was 5.3%, in line with expectations.
‘This could get worse before it gets better’ — New mortgage fears as gilt yields top mini-Budget levels
Home owners were today warned to brace for even higher mortgage rates as the gilt yields used to set the price on fixed deals raced to levels even higher than those seen after last September’s mini-Budget.
The benchmark two year gilt was yielding 4.8% at one stage, up 18 basis points, even higher than the 4.73% seen immediately after Kwasi Kwarteng’s disastrous statement in the Commons.
The latest surge in yields was triggered by stronger than expected jobs data from the Office for National Statistics with wages rising at 7.2% in the three months to April.
Read more here
City comment: Today’s gilt crisis isn’t like the mini-Budget. This time, there’s no easy way to fix it
How worried should we be?
What was once a slow-moving car crash is now turning into a high-speed pile-up.
The gilts market provide the raw material for mortgage advances just as the oil market does for petrol and diesel.
Read more here
Eight of the top ten areas for tech are in London, report finds
London’s position at the centre of the UK’s tech economy was confirmed today after a new report found 8 of the top 10 constituencies for technology were in the capital.
The Cities of London and Westminster constituency, represented by Conservative MP Nickie Aiken, takes the top spot, with around 2,000 startups and over 70,000 jobs based in the constituency, according to a report by the Startup Coalition.
That was followed by Keir Starmer’s Holborn and St Pancras, home to Google’s Deepmind, and Labour MP Meg Hillier’s Hackney South and Shoreditch, the birthplace of many of the UK’s most well known tech unicorns, including finch giant Wise.
Read more here
‘This could get worse before it gets better’
Home owners were today warned to brace for even higher mortgage rates as the gilt yields used to set the price on fixed deals raced to levels even higher than those seen after last September’s mini-Budget.
The benchmark two year gilt was yielding 4.8% at one stage, up 18 basis points, even higher than the 4.73% seen immediately after Kwasi Kwarteng’s disastrous statement in the Commons.
The latest surge in yields was triggered by stronger than expected jobs data from the Office for National Statistics with wages rising at 7.2% in the three months to April.
Read more here
“Massive headache” for Bank
Danni Hewson, AJ Bell head of financial analysis, said the continued resiliency of the UK job market will create a “headache” for the Bank of England as markets have no almost fully priced in 5.75% interest rates.
Rates are also expected to now stay higher for even longer, with the City betting that they will remain above 5.5% into autumn of 2024.
“Resilient seems to be the key word when talking about where the UK jobs market is right now,” Hewson said. “Vacancy numbers might have fallen for the 11th successive month and the headlines have been full of job cut announcements, but unemployment is still skirting all-time lows.
“And that’s having a knock on to wages. Employers know how hard their workers are finding life right now. Every month seems to bring new pain at the supermarket and with many homeowners facing impossible hikes to mortgage payments, pay rises might seem like the only way to keep valued staff on board.
“And although those pay rises are helping bolster spending power as inflation begins its excruciatingly slow fall, people are still not feeling any better off. The sums still don’t add up and that’s fuelling unrest and industrial action with many workers simply unable to make budgets stretch to where they need to, boxing them into a corner.
“But those pay rises will be giving members of the Bank of England’s MPC a massive headache.”
China support lifts FTSE 100 miners, housebuilders lower
Mining stocks are supporting London’s FTSE 100 index, with shares in Glencore and Rio Tinto up 3% after China’s central bank reduced a key lending rate in an effort to boost the country’s economic recovery.
The move also helped the price of Brent Crude to steady at just below $73 a barrel, having slid by 4% on Monday due to fears over the slowing global outlook.
The FTSE 100 index stood 0.2% higher at 14.62 points at 7585.31, whereas leading European benchmarks rose 0.5%.
On the fallers board, car insurer Admiral reversed 7% or 157p to 2171p after Citigroup gave it a “sell” recommendation. Other UK-focused stocks fell on expectations for further interest rate rises, leaving Taylor Wimpey 2.4p lower at 112.2p and British Land off 6.2p to 337.7p.
The FTSE 250 index added 17.22 points to 19,208.03, but shopping centre landlord Hammerson fell 0.7p to 25.9p and Direct Line Insurance by 3.9p to 161.3p.
Housebuilder Bellway also dropped 52p to 2186p, despite a robust performance in its latest trading update.
CMC under pressure in blow to Tory Party
PROFITS tumbled at CMC Markets, the trading house led by major Tory donor and Boris Johnson backer Peter Cruddas in a possible blow to party coffers.
A Covid inspired trading boom is over, though CMC still managed to record a 2% jump in revenue to £288 million in the year to March. But profits tumbled 43% to £52 million and the dividend was slashed by 40% to 7.4p.
That’s a blow to the Cruddas personal fortune since he remains the biggest CMC shareholder — and perhaps to the Tory party. He made a £500,000 donation to the party just days after he was made a Lord against the advice of parliamentary watchdogs.
Cruddas was “too busy” to take questions today. He has been outspoken in his support for Johnson, whom he was working to get reinstalled as leader.
Euan Marshall, the chief financial officer, said: “Market conditions have been relatively quiet. The important thing is that we remain laser focussed on the future.”
CMC has expanded into simple share trading and ISAs, an attempt to take on Hargreaves Lansdown on its home turf.
Lord Cruddas said in a statement: “Since pioneering online trading over 30 years ago, CMC continues to innovate and respond to market changes and challenges.”
CMC shares fell 4% to 163p. They are down nearly 40% in the last 12 months.
Spanish banking giant gets new London hub
INTERNATIONAL finance house Alantra today opened a new HQ on Cannon Street in London, a boost to the Square Mile and a vote of confidence in the City.
The Spanish giant said the new offices are an expansion from previous offices on Queen Victoria Street and King William Street. They will house 180 staff of which 150 are investment bankers.
They will include Miguel Hernández, the CEO of investment banking, and other leading executives.
Alantra has offices in 22 countries. It said today: “It is a natural next step to create a key hub in London, given the significance of the City of London as a global financial centre which offers access to institutional capital and top talent from around the world.”
Post Brexit, many predicted bankers would leave London and head instead to rivals such as Frankfurt. In practice, very few major jobs have shifted.
Alantra has a 30% stake in Singer Capital Markets. It has advised on 450 deals in the last five years.
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