Market rout after US credit downgrade; UK homebuyers taking out longer mortgages, says Taylor Wimpey – business live

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19m ago 10.45 BST Haleon posts higher sales; takes £30m restructuring charge Haleon, which makes a host of well-known consumer brands including Sensodyne toothpaste, Centrum vitamins and Panadol painkillers, has reported higher sales and profits - a year after it was spun off from drugmaker GSK. Revenues climbed 10.6% to £5.7bn while pre-tax profits rose 11% to £960m in the six months to the end of June. It now expects organic revenue growth of 7% to 8% this year, and adjusted operating profit growth of 9% to 11% at constant currencies. The company incurred restructuring costs of £30m, as it implements a three-year programme to save £300m in costs, with the benefits largely expected next year and in 2025. We reported last month that Haleon, which has 24,000 staff across 170 countries, intends to cut hundreds of roles in the UK and potentially thousands worldwide. It declined to provide further details today. Panadol maker plans sweeping job cuts a year after being spun off from GSK Read more Brian McNamara, the chief executive, said: One year from listing, we are very pleased with Haleon’s first half results. We delivered double digit organic revenue growth, with both price and positive volume mix. Encouragingly this trend was consistent across the first and second quarters. Our growth was also broad based across regions and categories. Performance in the first half also remained competitive with around 55% of our business gaining or maintaining share. Looking ahead, whilst we continue to expect a challenging environment given further pressure on consumer spending and global geopolitical and macroeconomic uncertainties, we remain confident in the resilience of Haleon’s incredible portfolio of category leading brands. Adam Vettese, analyst at trading and investing platform eToro, said: Haleon has posted a squeaky-clean set of numbers this morning, one year on from being spun out of GSK. The firm… has seen a positive uptick in revenues while increasing operating profits by 8.9%. It has now increased profit guidance four times in a row. This has been a familiar story in the past year for major name-brand consumer staples firms. The one thing that unites these companies is pricing power. Inflation has been passed on with no real dent to demand for firms like Haleon as the strong revenue growth suggests. In the past consumer staple brands have tended to be good value-oriented defensive moves for investors in times of economic stress. Haleon fits this mould well but since it is a spin-off, we don’t have a good past measure from the firm to guide what will happen to its demand during a recession. The company logo for Haleon is displayed on a screen on the floor of the New York Stock Exchange. Photograph: Brendan McDermid/Reuters 2h ago 09.33 BST US downgrade sends European shares to two-week lows It’s turned into a market rout. The FTSE 100 has tumbled 130 points, or 1.7%, to 7,533 while the German, Italian and French markets have lost 1.5%. The pan-European Stoxx 600 index fell 1.7%, touching its lowest level since 18 July. Laith Khalaf, head of investment analysis at the stockbroker AJ Bell, said: There is a saying that when the US sneezes, the rest of the world catches a cold. That is certainly true with how the US government’s credit rating downgrade has troubled markets globally. Ratings agency Fitch lowered the rating from the top level of AAA to AA+ amid concerns about the country’s finances and its debt burden. In effect, this is saying the US is now higher risk than previously thought. The news took markets by surprise, sending Asian and European indices down. When the debt of the world’s largest economy is seen as lower quality, it will naturally trouble investors and make them rethink their portfolios. It also might surprise some people given how the US economy is proving to be more resilient than expected. There are only three stocks in positive territory on the FTSE 100. BAE Systems jumped nearly 6% after upgrading forecasts on rising military spend. Taylor Wimpey’s results contained nuggets of good news, helping to lift its shares. Convatec moved higher after it lifted full-year guidance. Khalaf noted: Brent Crude advanced 0.6% to $85.45 a barrel, meaning the commodity price has now risen by 18% since the end of June amid signs of tightening supply. Justin Wolfers, professor of public policy and economics at the University of Michigan, tweeted: Fitch has downgraded the U.S. long-term credit rating from AAA to AA+. And I’m mad as hell, because it’s the direct result of a multi-decade campaign of fiscal vandalism and political sabotage by Republicans, and the rest of us are left footing the bill.https://t.co/7Bfm0nvbXE — Justin Wolfers (@JustinWolfers) August 1, 2023 Updated at 10.03 BST 2h ago 09.12 BST Market sell-off gathers pace The sell-off in stock markets has gathered pace, with the FTSE 100 index now down 1.5% at 7,48, a fall of 117 points. There are only three risers on Britain’s blue-chip index: BAE Systems, Taylor Wimpey and Convatec. Germany’s Dax has tumbled 203 points, or 1.3%, to 16,035 while France’s CAC has lost 81 points, or 1.1%, to 7,324 and Italy’s FTSE MiB is down 455 points, or 1.5%, to 28,901. Wall Street futures are also trading lower, pointing to a lower open later, down 1.2% for the Nasdaq, 0.86% for the S&P 500 and 0.67% for the Dow Jones. 2h ago 09.07 BST BAE upgrades outlook, boosted by higher defence spending Britain’s biggest defence company BAE Systems is the biggest riser on the FTSE 100 this morning, after it upgraded its outlook for 2023, boosted by increased government spending on military equipment “in an increasingly uncertain world”. The company’s shares rose 5.6%, after it forecast growth of 10% to 12% in annual earnings per share, up from 5% to 7% forecast in February, and also lifted its sales outlook. It had an order intake of £21.1bn in the first half of the year, resulting in a record order backlog of £66.2bn. It said demand from customers, including the US, UK, Saudi Arabia and Australia, meant its full-year results would be better than expected across the board. Since Russia’s invasion of Ukraine in February last year, demand for weapons, ammunition and military equipment has jumped as western countries support Ukraine and shore up their own positions. BAE makes submarines, fighter jets, ships, combat vehicles and other kit, and chief executive Charles Woodburn said the company was well-positioned to deliver “sustained growth in the coming years”. He said: Our global footprint, deep customer relationships and leading technologies enable us to effectively support the national security requirements and multi-domain ambitions of our government customers in an increasingly uncertain world. 2h ago 08.49 BST Taylor Wimpey: UK homebuyers take on longer mortgages UK homebuyers are taking on longer mortgages to cope with higher borrowing costs, said Taylor Wimpey, one of the country’s biggest housebuilders. It explained: More of our customers are adapting to the challenging backdrop by extending their mortgage terms. For example, according to data provided by an independent financial advisor relating to H1 2023, 27% of our first time buyers are taking mortgage terms of over 36 years compared to 7% in 2021. For second time buyers, those taking out mortgages with durations of over 30 years has increased to 42%, compared to 28% in 2021. The company reported lower first-half profits and sales as it warned that the Bank of England’s rate hikes, in response to stubbornly high inflation, had weakened the housing market and made homes less affordable to buy (for those needing a mortgage). But its shares rose 3.5% as the results were better than expected, and it stuck to its full-year outlook. Rivals Barratt and Persimmon also saw share gains. Andy Murphy, director at the investment research firm Edison Group, said: This update from Taylor Wimpey constitutes a clear case of “it could have been worse”, as a weakening property market and high operational costs having combined to put huge pressure on the construction sector during H1 2023. With the impact of the building hiatus, induced by Covid-19, still being felt by the industry, current market conditions are naturally taking their toll. That being said, tight cost management, strong brand awareness, and savvy operational maneuvers have helped to mitigate the effect of these external factors on Taylor Wimpey’s profits. Moreover, while not currently translating to strong market demand, the fact remains that Britain needs new homes and will continue to need new homes when mortgage rates stabilise. Current conditions are unfavourable, yes, but the question now is what position Taylor Wimpey will be in when the situation turns. Updated at 08.51 BST 2h ago 08.36 BST More people miss bill payments amid cost of living crisis Joanna Partridge Higher numbers of people are missing payments for essential bills including for energy, water or council tax, according to a consumer group, as the cost of living crisis continues to hurt household finances. Which?’s consumer insight tracker found that 2.4m UK households missed or defaulted on essential payments including for housing, loans or credit cards in the month to 13 July, returning to the high levels seen last winter. The number of people missing out on payments last month was significantly higher that the levels seen in May, suggesting that consumers remain under pressure even in the warmer months of the year when energy costs are lower. The figures come as the Bank of England is expected to further raise interest rates on Thursday, in a bid to tackle stubbornly high inflation, increasing the squeeze on borrowers including consumers and businesses. Of the missed payments, 1.5m households missed or defaulted on settling up a household bill such as for energy water or council tax in the month to mid-July, Which? found. A domestic gas ring of an oven in Durham. Photograph: Lee Smith/Reuters 3h ago 08.19 BST European stocks fall after Fitch surprise downgrade European stock markets have fallen following Fitch’s surprise downgrade of the US government’s triple-A credit rating. The UK’s FTSE 100 fell 66 points, or 0.86%, to 7,600 in early trading while the French and German markets slid 1.3% and the Spanish and Italian indices both lost 1.1%. The downgrade triggered a brief sell-off for the US dollar last night. The dollar index briefly dipped to an intra-day of 101.96 but the decline was quickly reversed. It is now down 0.1% at 102.19. US Treasury Secretary Yellen was quick to downplay the announcement, saying it was “arbitrary” and “outdated” and ”does not change what Americans, investors, and people all around the world already know: that Treasury securities remain the world’s preeminent safe and liquid asset, and that the American economy is fundamentally strong”. Lee Hardman, senior currency analyst at MUFG Bank, said: When S&P downgraded the US credit rating in August 2011 it triggered a sharp selloff in risk assets and boosted safe haven demand for US Treasuries. The US dollar reaction was more muted. On this occasion we are expecting the immediate market reaction to be relatively more modest. The timing of the downgrade was somewhat surprising although Fitch did warn back in May that they were weighing up lowering the credit rating. The announcement sheds more light on the health of the US public finances which we have already highlighted as a negative structural factor for US dollar performance over the medium to long-term. The US Treasury just announced on Monday that it has increased the net borrowing estimate for Q3 to $1 trillion which is well above the $733 billion it had predicted back in May. The Treasury is due to preview its quarterly financing plans later today. 3h ago 08.09 BST Energy bosses meet Grant Shapps amid debate over net zero The bosses of big energy companies are set to meet Grant Shapps, the energy security secretary, today to discuss the future of net zero as a debate rages over the UK government’s green policies. The meeting comes just days after the government announced it would grant more than 100 new oil and gas drilling licences off the coast of Scotland. The move was immediately condemned by climate campaigners as sending a “wrecking ball” through the government’s climate pledges. Executives from the utility companies EDF and SSE and the oil and gas giants Shell and BP are meeting Shapps, who has faced criticism from his own ranks, including former energy minister Chris Skidmore, who said it was “the wrong decision at precisely the wrong time, when the rest of the world is experiencing record heatwaves”. Shapps told GB News: I’m meeting today with a bunch of energy companies at No 10 who are going to invest £100bn in renewables, and that’s great. Secretary of State for Energy Security and Net Zero Grant Shapps during a visit to Teesside's Transmission System Gas Terminal in Middlesbrough yesterday. Photograph: Owen Humphreys/PA 3h ago 07.43 BST Here’s more reaction to the US credit downgrade. Tony Sycamore, analyst at IG, said this would spark a flight to safety among investors. Risk aversion flows means lower equities and safe haven buying of currencies such as the Japanese Yen and Swiss franc… It will also likely see buying of treasuries. Stephen Innes, managing partner at SPI Asset Management, said: Global Funds buy US debt because it’s the safest and most liquid investment option. However, after the rating downgrade on Tuesday, the US bond appeal could tarnish slightly. Still, the significant issue is that the downgrade could negatively affect various funding pipelines, such as mortgage rates and global swaps contracts. While debt downgrades seldom, if ever, have long legs, investors may pause and let the dust settle before re-entering risk markets. However, within this super market-friendly environment of stable growth and a Fed close to the end of its hiking cycle creating fertile ground for stock gains, its unlikely risk sentiment will wander too far off the soft landing path.