MARKET REPORT: Sterling plagued by UK energy crisis amid fears shortages of goods and workers could derail recovery
Sterling plunged to its eight-month low as the fuel crisis sweeping Britain scared investors.
On a tumultuous day in financial markets, from foreign exchange to commodities and equities, the pound fell nearly 1.3 percent to $1.35 against the dollar.
That was the lowest level since January. It also fell more than 1 percent against the single currency, to below €1.16.
Sterling slump: On a tumultuous day in financial markets, the pound plunged nearly 1.3 percent to $1.35 against the dollar
The slump came as panic buying gasoline and other problems, including shortages of goods and workers, as well as rising prices, derailed the economic recovery.
Bank of England governor Andrew Bailey warned Monday evening that ‘hard yards’ lay ahead for Britain.
At the same time, he said that interest rates could rise before the end of this year as the Bank tries to tame inflation.
In a sign of further trouble down the line, oil briefly rose above $80 a barrel for the first time in three years and wholesale gas prices hit new all-time highs.
Stock Guard – Animal Care
Vet and veterinary drug company Animalcare Group jumped higher after raising its annual forecast amid a boom in pet ownership.
For the six months to July, the group reported “particularly strong” growth in its companion animal business, which includes dogs, cats and other pets.
This increased sales by 13 percent to £39 million and profits by 44 percent to £7 million.
As a result, the company announced yesterday that earnings for the year are expected to “be ahead of current market expectations.”
Shares were up 4.2 percent, or 17p, to 420p.
Gas for winter delivery to UK buyers rose more than 20 per cent to 218.4pa therm, fueling fears a cold winter could cripple businesses and hurt the economy.
Against that backdrop, the FTSE 100 fell 0.5 percent or 35.3 points to 7028.1 while the FTSE 250 fell 2 percent or 479.53 points to 23129.1.
Rising government bond yields also took their toll, with UK 10-year government bond yields crossing 1 percent for the first time since March 2020 at the start of the coronavirus crisis.
Engineer Smiths Group topped the FTSE 100 leaderboard after reporting an increase in profits while shaking off supply chain concerns.
For the year to the end of July, the group posted profits of £372 million, up 7 percent year on year, while sales fell 2 percent to £2.4 billion.
Looking ahead, Smiths said the order book had good momentum and was “well positioned” as markets recovered from the Covid-19 pandemic.
Chief executive Paul Keel, who took over in May, said a global shortage of semiconductors, components used in electronics of all kinds, as well as ongoing crises in energy costs and shipping, won’t hit the company as badly as some other companies.
Keel highlighted the group’s local supply chains in the 50 countries it operates in, saying the rise in energy costs would be a “tailwind” for its energy company John Crane, which it says is helping customers navigate the transition. from petrochemicals to cleaner energy sources’.
The company also confirmed a binding agreement to sell its medical business with US-based ICU Medical, after announcing the deal this month.
Smiths is lining up for around £2bn from the sale in a combination of cash and shares in ICU. Shares of the company rose 3.5 percent, or 47.5p, to 1411.5p.
Irn-Bru creator AG Barr lost some of its bubbly after warning that the soda’s delivery could be called into question. It signaled ‘increased challenges in the UK road transport fleet, in part related to the Covid-19 pandemic, impacting customer deliveries and inbound materials’.
The uncertain outlook overshadowed a strong run of half-year results for the group, which reported profits rose 43 percent in the six months to August to a record £24 million.
The company also restored its interim dividend to 2 pence per share, in addition to a special 10 pence payout to investors. Shares fell 3.3 percent, or 18p, to 521p.
Easyjet saw strong take-up for its £1.2 billion cash call, saying investors had bought about 93 per cent of the 301 million new shares offered at 410p each.
The budget airline announced the fundraiser earlier this month in an effort to restore its balance sheet after mistreatment during the pandemic. Shares fell 3.5 percent, or 24.8p, to 684.6p.