Fears grow over higher for longer US rates
Expectations of another interest rate hike by the Federal Reserve last night lifted the 10 year US Treasury yield to its highest closing level since 2008 at 4.25%.
The move followed minutes from the central bank’s July meeting, when there was broad agreement on a 0.25% increase to a range of 5.25%-5.5%.
The majority of participants also “continued to see significant upside risks to inflation” that could require further tightening of monetary policy.
Deutsche Bank strategist Henry Allen said markets are taking the prospect of another hike from the Fed increasingly seriously, with futures now pricing in a 45% chance of a further hike by the November meeting.
He said: “As well as the upcoming decisions, it’s clear that investors are adjusting to the fact that rates could remain at a higher level for some time.”
He added that futures for the interest rate at the Fed’s December 2024 meeting are now at their highest level so far this cycle at 4.34%
London holding back Grosvenor Casinos owner Rank Group
Casino and bingo hall owner Rank Group has seen strong growth for its Grosvenor casino brand outside of London this summer, but “softer” performance in the capital due to slow return of overseas visitors.
In the last six weeks, revenue outside of London had been up by 25%. However, performance in London was much weaker, rising by only 5%.
That comes as revenue for the year to 30 June fell to £306.3 million, down 15%. Again, this was mostly driven by a decline in London, where revenue fell by 26%.
CEO John O’Reilly said: “The return of customers to our Grosvenor and Mecca venues continues to pick up and our second half numbers give cause for optimism after a very challenging couple of years.
“During that time, our UK venues have faced a surge in energy costs, high wage inflation, a tightening in the regulatory environment, the slow return of overseas visitors to London’s casinos and the more general pressures on the consumer’s discretionary expenditure.”
The business has faced labour challenges, especially in terms of hiring croupiers, as before Brexit most of these staff came from the EU. This led to higher wage costs for the business.
Between the lower revenue and higher wage costs, profit halved to £20.3 million.
FTSE 100 seen lower after Federal Reserve inflation warning
This week’s downbeat run for global markets is continuing after minutes of July’s US Federal Reserve meeting hinted at the need for further interest rate rises.
Whereas traders had hoped last month’s 0.25% increase to a range of 5.25%-5.5%would be the last in the cycle, the hawkish message from policymakers was that more action may be required due to significant upside risks to inflation.
The minutes put downward pressure on US shares to leave the S&P 500 index 0.8% lower and the Dow Jones Industrial Average down 0.5%. The tech-focused Nasdaq Composite lost 1.1%, with the selling continuing during Asia trading hours after the Hang Seng index declined by almost 1%.
The FTSE 100 index, which is heading for its worst weekly decline in over a month, fell by 0.4% yesterday and is forecast by CMC Markets to open 37 points lower at 7320.
BAE Systems to acquire Ball Aerospace for $5.6 billion
Defence company BAE systems has reached an agreement to buy US firm Ball Aerospace from the Ball Corporation in a $5.6 billion deal.
BAE said the acquisition would be funded by a combination of new external debt and existing cash resources.
Colorado-based Ball Aerospace designs spacecraft and defense systems for national governments. The firm has more than 5,200 employees, of whom over 60% hold US security clearances.
CEO Charles Woodburn said: “The strategic and financial rationale is compelling, as we continue to focus on areas of high priority defence and Intelligence spending, strengthening our world class multi-domain portfolio and enhancing our value compounding model of top line growth, margin expansion and high cash generation.”
Recap: yesterday’s headlines
Good morning. Here’s a summary of our headlines from yesterday: