Stock market reforms aim to revitalise City of London; oil and gas prices slide – business live | Business

The cost of wholesale gas in Europe has hit its lowest level since July 2021, which will hit Russia’s revenues to fund the Ukraine war.

The month-ahead cost of wholesale gas has fallen by 3.65% today to 36.95 euros per megawatt hour, tracking the fall in oil today.

After the full-scale invasion of Ukraine in February 2022, the European wholesale gas price tripled to €215/megawatt hour.

It then surged over €300/megawatt hour last August, when European countries were scrambling to fill their gas tanks before last winter.

But now, with the weather turning a little warmer, demand for gas for heating and power generation has dropped.

Energi Danmark analysts said in a morning note.

“Supply is abundant, with storage sites across the continent now 60% full, with prospects of reaching 100% before the winter. We expect further losses in Wednesday’s trading.”

The oil price has fallen to its lowest level in over five weeks, as traders fear that higher interest rates will drive the US economy into recession.

Brent crude, the international benchmark, has fallen below $75 per barrel for the first time since 27 March.

It’s down 2% today at $73.86 per barrel, following a 5% tumble on Tuesday.

Oil weakened as investors anticipated the US Federal Reserve will raise interest rates by a quarter-point today, to a range of 5%-5.25%. That would be the highest level since 2007.

The turmoil in the US banking sector also hit oil, says Ole Hansen, head of commodity strategy at Saxo:

Risk sentiment in general was challenged by continued worries about the stability of the regional US banking system despite the bailout of First Republic by JP Morgan.

Despite current demand and growth concerns, the Fed is expected to hike once again later today, and it continues to weigh on the demand outlook even as supply side is looking stable for now.

Britain’s Office for National Statistics has launched a new Shopping Prices Comparison Tool, to let you track inflation in more detail.

The Tool tracks how the average prices of over 450 individual goods and services in the basket used to measure inflation have changed over the last year.

It covers food and drink, clothing and footwear, food and drink establishments, health, household items, recreation and culture, services and transport.

It’s online here, and here’s an embedded version to try:….

The launch of this comparison tool follows complaints that the official inflation report wasn’t properly capturing the cost of living squeeze, particularly for poorer households.

The ONS today points out that some grocery items showed increases of over 40% in the year to March 2023, or around quadruple the headline rate of inflation.

For example, cheddar and other hard cheeses saw an average increase of over 40% in the 12 months in March 2023.

Oil and fats have also surged in price, partly due to the Ukraine war.

The ONS says:

All items in oils and fats have seen an increase in price but olive oil has increased the most, increasing by nearly 50% in the 12 months to March 2023.

Fast food and takeaway prices are up 13% over the last year, but fish and chips saw the largest increase, at 19%.

The finance chief of electronics products distributor RS Group has quit, revealing that he has had a personal relationship with a colleague.

David Egan resigned from his role as Chief Financial Officer (CFO) and as a director and will leave the business with immediate effect, RS Group told shareholders this morning.

Egan, who has also served as RS Group’s acting CEO twice, says his actions have “fallen short” of what is expected.

Egan explained:

“I have thoroughly enjoyed my seven years at RS and I am proud of what we have achieved. Very recently I notified the Board of a personal relationship with a colleague.

Following a detailed review by the Board, I recognise that there have been some shortcomings of judgment on my part and my actions have fallen short of the high standards expected of RS leadership. Therefore, it is right for me to step down from my role.

RS Group’s chair, Rona Fairhead (a former trade minister), says:

“Following a thorough review, the Board has accepted David’s resignation and in stepping down he recognises the importance of leaders setting and abiding by exemplary standards.

Egan will be replaced by RS Group’s VP Corporate Development, Jane Titchener.

The company says there are no changes to its profit expectations, but shares in RS Group are down 2.5% this morning, one of the biggest fallers on the FTSE 100 index of blue-chip shares.

RS Group, which distributes electrical and electronics components to manufacturers, has been hiy by a recent drop in sales in the US. Last month it predicted that operating profits for the last financial year would be slightly ahead of consensus expectations.

European stock markets have opened higher, as investors await tonight’s decision on US interest rates.

In London the FTSE 100 index has gained 37 points, or 0.5%, to 7810 points, having closed at the lowest level since 11 April last night.

Pearson, the educational publisher, is the top riser on the FTSE 100, up 3%. Yesterday Pearson’s shares tumbled 15%, as the education sector was rattled by fears that artificial intelligence could upend their business models.

As we reported last night, California-based online learning service Chegg spooked the market by reporting that its customer growth was suffering from a “significant spike in student interest in ChatGPT.”

Shares in Duolingo, the language learning site, fell 10%.

Efforts to make the UK a more attractive place must not come at the expense of investor rights, warns investment platform interactive investor.

Richard Wilson, CEO of interactive investor, is concerned that there are several ‘red flags’ in the FCA’s proposals, such as removing mandatory shareholder votes on takeover deals.

Wilson says:

“We strongly support the principles behind listing rule reform to make the UK more competitive, but eroding shareholder rights risks undermining market standards, and this is not the right answer.

“Dual-class structures, which come with differential voting rights, erode shareholder rights. Distorted rights distort governance and accountability. When company founders seek external capital from shareholders, as equity owners they must respect their shareholder rights. One share, one vote is a bedrock of shareholder democracy and we are concerned to see that the spectre of dual share classes, which we have actively lobbied against, still looms large.

Reference to removing mandatory shareholder votes on transactions such as acquisitions is another major red flag.

“We would also be concerned if the FCA were looking to sidestep responsibility for conducting due diligence as part of it acting as UK Listing Authority.

“It will be interesting to see which companies qualify for inclusion in FTSE trackers once the ‘premium’ definitional point is dropped.”

The FCA’s proposed changes to UK stock market listings are both “depressing and pragmatic”, our financial editor Nils Pratley writes.

For all the spin, the grand plan could be summarised “if you can’t beat ‘em, join them” – them being the US markets that have never shared London’s worries over shareholder rights and boardroom governance. It looks as if the UK financial authorities, prodded by ministers, have concluded that principles are great until they starting costing you business.

The FCA’s core proposal is to adopt a single class of listed company. So goodbye to London’s “premium” segment that could only be claimed by companies that signed up to strong governance standards. And, just as in the US, companies would no longer have to gain approval from shareholders for very large transactions, or ones with related parties.

What’s more, London would fling the doors open wider to companies with US tech-style unequal voting structures. So much for “equal rights for equal economic risk” – an entirely worthy cause, as many of us have argued for years. Thus it is hard to summon much real enthusiasm for the FCA’s vision. In governance terms, it looks a step backwards by about half a century.

But here, unfortunately for us purists, is the rub: there is little point in trying to operate the world’s most protection-heavy and virtuous stock market if fewer and fewer people want to use it. That way lies irrelevance.

And, since the theoretical governance protections have proved useless in preventing blow-ups like Carillion and NMC Health, one can reasonably ask if London’s high-minded ambitions were always hot air. Thus it is possible to see the regulator’s policy U-turn as simultaneously depressing and pragmatic.

Here’s the full piece:

Today’s proposed changes to the UK’s stock market listing rules will make it “easier for companies to join the market quickly,” insists the head of the FCA.

But Nikhil Rathi is also clear that they will make the market riskier.

Speaking on Radio 4’s Today Programme, Rathi says the FCA is proposing some “really important reforms”, at a time when there is a “global phenomenon” of companies leaving public markets.

Rathi says:

What this is doing is striking a new balance between companies that are selling shares and investors.

It does entail more risk for investors, having to get to know companies better and make their own judgments about how they wish to invest and at what price they wish to invest.

Q: But won’t scrapping the premium section of the stock market damage London’s reputation?

Rathi insists London will “always maintain high standards” regarding disclosure and regulation.

But in a world where companies are growing very fast, it makes sense to have a single listing regime rather than offering two which they have to choose from to list in London, Rathi argues.

And he points out that that there will be “greater risk for shareholders” by allowing companies to rely more on disclosures rather than shareholder votes on major questions such as deals.

Rathi syas:

That does entail greater engagement with shareholders and greater risk for shareholders and I think that’s the trade off which we’ve been quite open about, as we think about how these reforms will work.

Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.

New measures to encourage companies to float on the London stock exchange rather than abroad are being revealed today, but the changes would expose investors to more risk.

The UK’s financial watchdog plans to shake up the City’s listing rules, in the hope of halting the flow of companies to rival markets such as Wall Street.

The plans being detailed today by the Financial Conduct Authority (FCA) aim to make London a more attractive site to list, removing some of the eligibility requirements that can deter start-ups and newer companies.

The FCA is proposing several measures in a new consultation document, including:

• simplifying the market, by merging London’s standard and premium markets into a single category for equity shares, scrapping the gold-standard “primary listing” category.

  This “single equity category” would include measures to tempt company founders to list in London, such as being more tolerant of dual class share structures with different voting powers, such as so-called ‘Golden Shares’

• Ditching removing mandatory shareholder votes on transactions such as acquisitions, so companies can press on with deals and grow faster

• removing a requirement for firms to have three years of audited financial accounts, which would make it easier for companies to join the market

The FCA says:

The proposed changes aim to provide a simpler and more accessible UK listing regime for companies, improving the attractiveness of listing in the UK and providing a wider range of investment opportunities for investors.

But…shifting to a listing regime based on disclosure and engagement, rather than regulatory rules, does bring more risk into the system.

So, the FCA says it wants an open discussion about the change to risk appetite that this would entail.

A recent review found that the number of listed companies in the UK has fallen by about 40% from a recent peak in 2008, and that between 2015 and 2020, the UK accounted for only 5% of IPOs globally.

My colleague Jasper Jolly reports:

The Financial Conduct Authority (FCA) on Tuesday night said it plans to abolish the stricter “premium” class of London stock market listing, and make it easier for company founders to keep control of businesses using US-style “golden shares”, among a series of big changes to City regulations.

The changes are part of a push by the Conservative government to arrest the decline of the London stock market since the global financial crisis and lure new companies to list here. There were 2,101 companies listed on London’s main market in 2003, but that number has fallen to 1,097 today, according to London Stock Exchange data. The average number of companies floated has fallen from 177 a year before the financial crisis in 2008 to 66 a year in the period since then, according to the data company Dealogic.

Also coming up today

The US Federal Reserve is expected to raise US interest rates again tonight, as it tries to push inflation down to its 2% target.

The Fed’s FOMC committee is forecast to lift its benchmark policy rate by a quarter of one percent, to a new target range of 5-5.25 per cent, the highest level since mid-2007.

The Fed meeting is overshadowed by jitters over America’s regional banks. Shares in midsize lenders fell again yesterday, despite president Joe Biden insisting the banking system was ‘safe and sound’ following the collapse of First Republic.

JPMorgan’s takeover of troubled Californian lender First Republic’s deposits and most of its assets on Monday has not stemmed concerns over the health of the sector.

Trading in PacWest, the Los Angeles-based lender, was briefly halted for volatility yesterday and closed down almost 28%.

Western Alliance of Phoenix, Arizona, lost 15%.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, explains:

Banking relief after JP Morgan swallowed the First Republic Bank on Monday remained short-lived, as some regional bank stocks, like Valley National Bankcorp lost another 3%, Western Alliance Corporation another 15%, and PacWest Bancorp another 28%, even though it had said last week that the deposit outflows had slowed in March.

As such, SPDR’s US regional bank ETF was down by more than 6%.

It means that, no, the US regional banking crisis is hard to wane, high interest rates are truly being felt and the latter will likely have a sizeable impact on credit lending, hence on economic activity.

The agenda

• 9.30am BST: Office for National Statistics report: “How is the average price of items changing over time?”

• Noon BST: US weekly mortgage applications data

• 7pm BST: Federal Reserve interest rate decision

• 7.30pm BST: Federal Reserve press conference