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Another £1bn out the door at Jupiter
JUPITER saw another £1 billion pulled from its funds in the last three months as investors sought better returns from turbulent markets.
Chief executive Matthew Beesley blamed the “challenging market environment” and says client needs are changing as assets fell to £51.4 billion.
Jupiter has cut the number of funds it offers in a bid to appeal to a “broader range of clients”.
Its own shares fell another 10% to 79p, leaving it with a market value of £434 million. The stock was closer to 400p just three years ago when directors were among heavy sellers of the shares.
Beesley added: “During my first year as CEO, we have continued to make progress against our previously stated strategic objectives and I believe the continued investment in our clients, our technology and our people will deliver long-term value.”
City fund managers are fighting to prove they are better value than robots that just track stock markets. History suggests that in the longer run, few individual stock pickers can outperform the stock market.
UK economy in ‘horrible’ bind with no room for tax cuts as recession looms – IFS
The UK economy is in a “horrible fiscal bind” as it heads for recession and with no room to cut taxes or increase public spending amid mounting political pressure on the Chancellor to do so, according to a report.
The Institute for Fiscal Studies (IFS) warned in its latest Green Budget that Britain will slump into a “moderate” recession in the first half of 2024 as borrowing costs stay elevated.
The report, funded by the Nuffield Foundation and using economic forecasting by Citi, analysed the challenges facing the Chancellor ahead of his autumn statement.
Read more here
Frontier Developments to cut jobs
F1 Manager maker Frontier Developments is poised to cut jobs and freeze hiring as it grapples with a slump in demand.
The Cambridge-based video games developer said it was seeking to cut costs by as much as 20% after it warned last month the release of F1® Manager 2023 had “so far not delivered the expected sales contribution.”
The shift to axe jobs comes in contrast to Frontier’s more upbeat attitude last month, in which it said it had “been able to continue with current headcount growth plans” and “will look to increase the number of our development teams.”
Frontier today said it had “refined its strategy to refocus on its core strengths following a period of disappointing financial performance and more challenging industry conditions.”
The firm said it expected to post an EBITDA loss of £9 million for the year to the end of May 2024, around double the loss for the previous year. Revenues were set to pick up slightly to £108 million but remain behind the £114 million levels achieved in 2022.
Frontier did not say how many redundancies would be made as part of the cost-cutting drive. It reported a headcount of just over 900 staff earlier this year.
Shares rallied 7.6% to 208p.
Heavyweight stocks boost FTSE 100, house builders under pressure
The FTSE 100 index is 31.94 points higher at 7662.57, with AstraZeneca and BP among the heavyweight stocks offering support to London’s top flight. Shell, which closed at a record high last night, also put on another 19.5p at 2770p.
The restructuring plans of Rolls-Royce lifted its shares by 3.8p to 217.3p, while GKN Aerospace owner Melrose Industries improved 6.6p to 485.1p.
Other blue-chip risers included St James’s Place after the UK’s largest wealth manager unveiled details of a new charging structure alongside a third quarter update. Shares rose 17.2p to 689.4p, having initially been in negative territory.
Housebuilders came under pressure on the back of today’s annual results by Bellway, with Taylor Wimpey and Barratt Developments both down by more than 1%. FTSE 250-listed Bellway dropped 40p to 2122p.
London’s second-tier index improved 33.70 points to 17,553.09. Risers included Moneysupermarket.com, which added 10p to 255p after its performance benefited from continued high levels of switching activity in car and home insurance.
Slower wage growth boosts hope interest rates have peaked
Economists believe that the cooling wage growth will further dissuade the Bank of England’s Monetary Policy Committee from any interest rate rises. Markets now price in a less than one-in-four chance of another hike when the MPC meets next on 2 November, and believe it is more likely than not that rates have already peaked.
Thomas Pugh, economist at leading audit, tax and consulting firm RSM UK, said: ‘The slowing in pay growth in August suggests that the MPC will keep interest rates unchanged again at its meeting next month.
‘However, there are obvious concerns about the reliability of the ONS’ measures of labour market tightness and pay growth. The response rate to the ONS labour force survey has fallen sharply since the pandemic when researchers stopped going door to door to gather responses. Indeed, the response rate currently stands at 14.6 per cent, down from about 40 per cent in 2019. What’s more, the ONS has found that the people most likely to answer a phone call from an unknown number during the day are those who aren’t working, heavily skewing the survey sample towards the unemployed and inactive.
‘That said, the ONS remains confident in its previous estimates of the labour market, suggesting that the recent large jump in the unemployment rate isn’t just a statistical mirage and the labour market really is cooling, but it will add to the uncertainty facing the Bank of England. An MPC which is less confident in the data may decide to err on the side of caution though, which might make further interest rate hikes more likely.
Ashley Webb, UK economist at Capital Economics, said: “Cooling labour market conditions appeared to start feeding through into an easing in wage growth in August. That supports our view that interest rates have peaked at 5.25%. But as we suspect wage growth will fall only slowly, interest rates will probably stay at their peak until late in 2024.”
Market snapshot as FTSE 100 opens higher
The FTSE 100 is higher this morning as slightly slower-than-expected wage growth has increased hopes that interest rates have peaked.
Take a look at our full market snapshot
Housing market slowdown means Bellway to slash building by over 30% in 2024
Bellway, the FTSE 250 developer, gave fresh insight into the extent of the slowdown in the UK’s housing market today, with plans to cut the number of houses built next year by 31%.
The Newcastle-based firm said it will complete “around 7,500 homes in 2024, down from a “near-record” of 10,945 this year, which it called “a material reduction in volume” due to a “reduced order book and prevailing lower reservation rates.”
Higher mortgage costs after 14 consecutive interest rate hikes from the Bank of England took the base cost of borrowing up to 5.25% have been reverberating rounds the industry, hitting first time buyers particularly hard and slowing sales rates across the market.
Bellway also said today it expected the average selling price of its homes to drop in 2024 – to £295,000 from £310,306 this year, a drop of almost 5%.
For the financial year to the end of July, Bellway reported a 3.7% drop in revenue of £3.4 billion and an 18% fall in profit before tax of £532.6 million.
Rio Tinto boss hails “strong progress”
Rio Tinto shares have closed 1% higher in Sydney after the iron ore giant delivered its production update for the third quarter.
It said shipments from its Pilbara iron ore operations in western Australia rose 1% to 83.9 million tonnes as it continues to target a performance for the year in the upper half of the original 320 to 335 million tonnes range.
Chief executive Jakob Stausholm also reported “good headway” ramping up the Oyu Tolgoi high-grade underground copper mine in Mongolia, while Rio’s Kitimat aluminium smelter returned to full production.
He also highlighted agreements for a leading position in recycled aluminium in North America and a joint venture with Codelco to explore for copper in Chile.
Stausholm told investors: ““We are making strong progress towards building the Rio Tinto of the future, striking a balance between disciplined performance in evolving market conditions, investing to generate valuable long-term growth and delivering attractive shareholder returns.”
Chancellor hails real pay growth
The Chancellor of Exchequer, Jeremy Hunt, highlighted theat wage growth came in ahead of inflation, meaning that real pay is growing.
He said: “It’s good news that inflation is falling and real wages are growing, so people have more money in their pockets. To keep this progress, we must stick to our plan to halve inflation.”
However his counterpart on the opposition benches Rachel Reeves said: “Thirteen years of Conservative economic failure has left working people worse off, with low growth, low pay and high taxes.
“Working people saw pay rise faster under the last Labour government. But, with the Conservatives we have seen a decade of stagnant wage growth.
“Labour’s plan to grow the economy will boost wages, create good jobs and get Britain’s future back.”
Rolls-Royce to cut 2,000 to 2,500 jobs
Rolls-Royce has announced plans to cut between 2,000 and 2,500 jobs across its global operations as part of its long-term transformation under chief executive Tufan Erginbilgic.
The FTSE 100 engineer, which employs 42,000 people, said the changes would “remove duplication and deliver cost efficiencies”.
Its restructuring plans will bring its Engineering Technology & Safety unit “together as a single team across the group”. It will be “responsible for product safety, engineering standards, process, methods and tools,” Rolls-Royce said, and “enable engineering talent and technology to be used more effectively across the business.” It will be led by Simon Burr, currently the director of product evelopment and technology, in its Civil Aerospace division.
Rolls-Royce also said Grazia Vittadini, chief technology officer, will be leaving t in April 2024.
The plans also include a group-wide “procurement and supplier management organisation” to consolidate spending.
Tufan Erginbilgic said : “This is another step on our multi-year transformation journey to build a high performing, competitive, resilient and growing Rolls-Royce,” adding:
“We are building a Rolls-Royce that is fit for the future. That means a more streamlined and efficient organisation that will deliver for our customers, partners and shareholders.”
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