BOE's Liquidity Drain Is Finally Lifting Key SONIA Rate Again
The UK's most important market interest rate is rising for the first time in almost a year, reflecting the Bank of England's ongoing efforts to drain excess liquidity from the financial system.
The Sterling Overnight Index Average, or SONIA, rose for five sessions through Tuesday — the first consecutive gains since April, according to the latest data. That broke an abnormal paralysis where it was stuck exactly five basis points below the BOE's key rate for months.
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Yahoo
40 minutes ago
- Yahoo
Starmer heads to Canada for talks on security and trade
Sir Keir Starmer flies to Canada later to meet Mark Carney, the former governor of the Bank of England who became his country's prime minister in March. The two men will get together in the Canadian capital Ottawa on Saturday evening, ahead of the G7 summit, hosted by Carney, which begins in the province of Alberta on Sunday. It will be the first face-to-face gathering of world leaders since Israel's strikes on Iran. The talks between the two prime ministers on Saturday will focus on security and trade. Carney's office said the aim was to "strengthen the long-standing economic and security partnership between the two nations." Negotiations between the UK and Canada on a trade agreement broke down early last year, before the British general election, after a dispute over beef and cheese. Since then, officials on each side have remained in contact, but the conversations up to now were described to me by a Whitehall source as "not in earnest…not anything substantial". Downing Street has been proudly talking up three recent international deals over trade, with the European Union, India and the United States – at a time of volatility in the global economy following the return of Donald Trump to the White House. The two prime ministers have had a starkly different public approach to President Trump. Sir Keir has approached his dealings with the US president with a warmth critics have seen as fawning. Carney was frequently blunt in his rejection of Trump's branding of Canada as America's 51st state. He expressed irritation too that Sir Keir had theatrically doled out an invitation for a state visit to the UK for the president - in the midst of that questioning of Canada's sovereignty. On Sunday, Sir Keir and Carney will fly to Kananaskis in Alberta in the Canadian Rockies for the G7 summit. They will join Trump and the leaders of France, Italy, Japan, Germany and the EU for three days of talks. Ukraine's President, Volodymyr Zelenskyy, will also be there. UK, France and Canada threaten action against Israel over Gaza Mark Carney says Canadians are not 'impressed' by UK's invite to Trump Sign up for our Politics Essential newsletter to read top political analysis, gain insight from across the UK and stay up to speed with the big moments. It'll be delivered straight to your inbox every weekday.
Yahoo
15 hours ago
- Yahoo
What to watch next week: Inflation, Bank of England interest rates, Accenture, Berkeley and Whitbread
Inflation and interest rates will be in focus in the coming week, along with earnings from companies across a range of sectors. Markets will be closely monitoring the latest UK inflation data, which is due out a day before the Bank of England's (BoE) next interest rate decision, particularly given the sharp uptick in price growth in April. In terms of company earnings, investors will be keeping an eye on the latest results from US-listed consultancy firm Accenture (ACN), given the company narrowed its revenue growth guidance for the year and warned of the impact of federal spending cuts in its previous quarterly update. On the London market, Berkeley (BKG.L) is due to report, with focus expected to be on whether the housebuilder has any updates cash return plans. Premier Inn-owner Whitbread is another FTSE 100 (^FTSE) company due to update on its performance, following a slower start to year for its UK business. Here's more on what to look out for: In April, UK inflation rose to 3.5%, which was higher than the 3.3% forecast by economists and marked a jump from the 2.6% recorded in March. The Office for National Statistics (ONS), which publishes the data, said that the uptick in inflation was driven by large increases in household bills, with energy costs higher due to changes to the Ofgem price cap. The ONS later said the headline inflation figure had been overstated, due to an error in car tax data, revising it down to 3.4% – though this was still well above the March reading. Price growth is expected to remain sticky with Bank of America (BAC) economists saying in a note on Friday that they expected headline inflation to decline slightly in the May consumer prices index (CPI) report to 3.3%. Inflation data is closely watched by central banks, as they have been using higher interest rates to try to bring the rate of price growth back down to their 2% target. Read more: UK economy shrinks by 0.3% in April Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "Even though high wage growth is easing off and vacancies are falling as firms hold back from recruiting, pay growth is still outpacing inflation." Annual wage growth excluding bonuses in April eased to 5.2%, according to ONS data released last week, which marked the second consecutive monthly decline. "Add Trump's tariffs into the mix of uncertainty, and policymakers are set to stay in 'wait-and-see mode', taking longer to assess the path ahead for prices," said Streeter. "But, with the latest GDP (gross domestic product) figures indicating that the economy is stagnating, financial markets are pricing in two more rate cuts this year, one by September and another in December." ONS data released on Thursday, showed that the UK economy shrank by 0.3% in April, which was a bigger contraction than the 0.1% expected by economists. The BoE is expected to keep interest rates on hold at 4.25%, when it announces its decision on Thursday. Bank of America (BAC) economists said that the BoE "likely to retain its current guidance (careful, gradual and meeting by meeting), given the uncertainty and recent data on inflation and tariffs." "Barring big upside surprises in May inflation, we expect the minutes to imply that a summer skip to quarterly cuts ... is less likely," they said. "This could be by emphasizing that progress in underlying inflation is continuing amid a looser labour market, lower pay awards and weaker growth." Read more: What you need to know about UK's private stock market Pisces BofA's (BAC) economists expected rate cuts in August, September and November, lowering the central bank's base rate to 3.5%. "Though we acknowledge that elevated domestic inflation puts our call for a September cut at risk, we think the bar to cut less than quarterly is high," they said. The US Federal Reserve is also due to announce its next interest rate decision next week, on Wednesday 18 June. The Fed is expected to keep rates on hold once again at this meeting, keeping them in the 4.25%-4.50% range. "However, there are expectations that the US central bank could resume cutting rates in September, given cooling inflation and job market data. Shares in Accenture (ACN) fell on the back of its second quarter results in March, after the consultancy firm warned of the impact of US federal spending cuts on its business. In a post-earnings call, Accenture (ACN) CEO Julie Sweet said that the "new administration has a clear goal to run the federal government more efficiently. During this process, many new procurement actions have slowed, which is negatively impacting our sales and revenue." US president Donald Trump's Department of Government Efficiency (DOGE), which was headed by Tesla (TSLA) CEO Elon Musk until his exit at the end of May, has sought to slash federal spending. Sweet said that the independent government agency, the General Service Administration (GSA), had instructed all federal agencies to review their contracts with the top 10 highest paid consulting firms, including Accenture Federal Services (ACN). This part of the business represented approximately 8% of the company's global revenue and 16% of its Americas revenue in 2024. Read more: Stocks that are trending today "The GSA's guidance was to terminate contracts that are not deemed mission critical by the relevant federal agencies," she said. "While we continue to believe our work for federal clients is mission critical, we anticipate ongoing uncertainty as the government's priorities evolve and these assessments unfold." Even so, Accenture (ACN) still beat expectations in the second quarter, posting revenue of $16.66bn (£12.3bn), which topped estimates of $16.62bn, according to a Reuters report. Diluted earnings per share of $2.82 were up 7% on the same period last year. The company continued to see growth in generative artificial intelligence (AI), with new bookings in this part of the business hitting $1.4bn. However, the company narrowed its full-year revenue growth guidance to between 5% and 7%. In the second quarter earnings call, Angie Park, chief financial officer at Accenture (ACN), noted "an elevated level of uncertainty, including in our federal business". She flagged a 0.5% negative impact of foreign exchange rates on Accenture's results in US dollars, compared to the 2024 fiscal year. For the third quarter, Accenture (ACN) expected revenue to be in the range of $16.9bn to $17.5bn, which would represent growth of 3% to 7%. Shares in Accenture (ACN) are trading 9.6% in the red year-to-date. Back in the UK, Berkeley Group (BKG.L) is due to report its full-year results, with shares in the high-end housebuilder up 10% year-to-date. In a trading update in March, the company said it remained "concerned by the impact of the extent and pace of regulatory changes of recent years, as we now await details of the new building safety levy. Taken together, these incremental changes place significant pressure on the delivery of new homes." The levy, which is set to come into effect in autumn 2026, is aimed at raising revenue to make residential buildings safer. It comes out of the 2022 Building Safety Act, which was introduced in the wake of the Grenfell Tower tragedy in 2017. Berkeley (BKG.L) aid it was "working hard in preparing the building safety cases" required under the pre-start approval process implemented by the new building safety regulator. At the same time, the housebuilder said it remained "hugely encouraged by the change in mind-set over planning, brought about by the government's planning reforms and housing delivery ambitions which we fully support." Stocks: Create your watchlist and portfolio In terms of financial performance, Berkeley (BKG.L) reaffirmed its earnings guidance of delivering at least £975m ($1.32bn) of pre-tax profit across its 2025 and 2026 fiscal years, with this figure expected to come in at £525m this year and £450m for the coming year. AJ Bell's (AJB.L) investment experts Russ Mould, Danni Hewson and Dan Coatsworth said that current analyst consensus is looking for pre-tax profit of £524m this year and £461m next year. As for completions, they said that analysts currently expect around 4,000 in each of the years to April 2025 and 2026, versus 3,521 last year. However, the average selling price is expected to have fallen to £611,000 this year and then £568,000 next year. Analysts will also be keeping an eye out for updates on Berkeley (BKG.L) cash return plans, with the current aim of returning £283.5m to shareholders via a mix of buybacks and dividends. "That programme runs to the end of September 2025, after which point the Berkeley (BKG.L) 2035 growth strategy kicks in," AJ Bell's investment experts said. "Under the auspices of this scheme, Berkeley (BKG.L) believes it will generate £7bn in free cash flow. Of that sum, £2.5bn will be spent on land, to replenish the land bank after completions, with £1.2bn going on build-to-rent (BTR) schemes. Shareholder returns will, at a minimum, consume another £2bn and the final £1.3bn slice will be allocated on a flexible basis between the other options." Profits fell at Premier Inn-owner Whitbread (WTB.L) in its 2025 fiscal year, according to results released in May, with the hotel operator flagging higher costs and the impact of its accelerated growth plan. Adjusted pre-tax profits were down 14% for the year at 14% to £483m, while revenue was down 1% for the year at £2.92bn. Whitbread also reported a softer start to its current financial year, with UK accommodation sales down 1% in the first seven weeks of trading. However, the company said its forward booked position was ahead of last year, helped by "strong peak leisure demand". For its UK food and beverage business, which includes steakhouse chain Beefeater, Whitbread (WTB.L) said sales in the first seven weeks were 16% behind the previous year, but explained that this reflected the removal of a number of lower-returning brand restaurants and was in line with its expectations. Read more: Why Rachel Reeves' spending review may lead to tax rises Meanwhile, total accommodation sales were up 23% versus 2025 for the company's Premier Inn Germany business. Derren Nathan, head of equity analysis at Hargreaves Lansdown, said: "If rival Travelodge's first quarter update is anything to go by, there's little reason to believe that Whitbread's trading statement next week will show an improving trend later in the first quarter, with hotel prices showing some softness. "However, there are some early signs of bookings picking up for the second half of 2025," he said. "Growth in the less mature, but much smaller, German division was much stronger last year, and investors will be keen to hear if it's still on track to deliver its maiden pre-tax profit contribution this financial year." For the current fiscal year, Whitbread (WTB.L) said it expected the one-off impact of its accelerated growth plan, of £20m to £25m to UK adjusted profits before tax, to be fully reversed. As for its business in Germany, Whitbread (WTB.L) said it expected to deliver adjusted profit before tax of between £5m and £10m. Monday 16 June Lennar (LEN) Tuesday 17 June RWS (RWS.L) Capita (CPI.L) Colruyt (CUYTY) Jabil (JBL) Wednesday 18 June AO World (AO.L) S & U (SUS.L) Thursday 19 June Urban Logistics REIT (SHED.L) NCC (NCC.L) Friday 20 June Record (REC.L) Cathay Pacific ( Darden Restaurants (DRI) Carmax (KMX) You can read Yahoo Finance's full calendar here. Read more: BT CEO hails telecom networks as 'UK's real digital backbone' Why UK can leapfrog EU and US on crypto, according to Coinbase exec How far will your pension go as retirement costs soar?Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
18 hours ago
- Bloomberg
UK Household Inflation Expectations Fell Before April CPI Spike
UK households had been expecting inflation to slow over the coming year, according to a Bank of England survey that was conducted before the sudden jump in consumer prices reported last month. The BOE's quarterly Inflation Attitudes Survey published on Friday showed the public believed inflation would fall to 3.2%, down from 3.4% at the last survey in February, in a sign that the central bank has had some success in bringing down people's expectations of price growth. It was the first decline in almost a year.
