Today's business and finance round up 25th June 2021
📈Bank of England forecasts (temporary) inflation nation
24th June 2021
The travel green list was finally expanded last night, the government announced that from next Wednesday Brits arriving from the likes of Ibiza and Barbados will no longer need to quarantine.
- Bank of England forecasts (temporary) inflation nation
- Wise decides to go direct
Yesterday's market moves
FTSE 100 +0.5% 7,110
FTSE 250 -0.7% 22,510
It was a mixed bag in the markets with the FTSE 100 edging higher while the FTSE 250 moved in the opposite direction as investors weighed up the latest statement from the Bank of England (more below).
Bank of England forecasts (temporary) inflation nation
What’s going on?
The Bank of England has raised its expectations for near term UK inflation to 3%, that’s above its 2% target. The central bank also voted to keep interest rates at the record low of 0.1%.
Why is this important?
Earlier this month official data showed that inflation had risen to 2.1% - the fastest rate since 2019 and above the target level.
But the Bank thinks that prices will continue to rise in the coming months then settle down as life returns to normal.
It's also more upbeat about the speed of economic recovery, it expects the economy in June to be around 2.5% below its pre-Covid level.
This year inflation has been the hot topic of conversation in the European and US markets. The Bank of England joins other central banks like the US Federal Reserve in taking the stance that rising prices are transitory therefore not a major concern for the time being.
Investors can get nervy when inflation starts to creep up as it can mean that central banks will raise interest rates in order to control price rises. Higher interest rates make borrowing more expensive which can in theory hinder economic growth. Higher interest rates can also make investing in the stock market less attractive as investor turn to bonds for better returns.
So what’s behind the belief that growing inflation will be short term?
- Strong pent up demand for goods is pushing up prices, especially in the energy market, but this should tail off as economies fully reopen.
- There are supply chain issues that should subside as transportation bottlenecks are resolved.
Markets weren’t surprised by the Bank’s decision to keep interest rates unchanged.
The big focus was on whether the Bank still thought rising inflation was no big deal – which it does.
Wise decides to go direct
Wise, the UK fintech (formerly known as TransferWise), has confirmed that it will debut on the London stock market early next month.
Founded in 2010, the company is known for its cheap app-based money transfers across different currencies and has 10 million users.
The news has caught the attention of the market not just because it could be one of the biggest listing of the year – over £5bn – but the company is doing a direct listing not the traditional route of an IPO.
Unlike an IPO, with a direct listing the company does not raise any new cash. Instead existing shareholders sell their shares directly onto the market without the need for investment banks charging eye-watering fees.
Direct listings also mean that retail investors can get involved in trading from day one without having to wait for institutional investors who get first dibs in an IPO.
On the downside direct listings can lead to more volatile share prices.
Wise’s direct listing would be the first for the London market. Across the pond in New York many companies have chosen the method including Spotify and Slack.
The government is hoping that Wise’s decision lures other tech companies to choose London over New York when it comes to going public.
Stat of the day
One in 10 products at Poundland are no longer £1
Other stories to keep you in the loop
- Deliveroo shares surge after court rules its couriers are self-employed
- BuzzFeed valued at $1.5bn in SPAC deal to go public
- Lockdown didn’t lead to baby boom – in fact it seems to have put people off
- EE to reintroduce Europe roaming charges in January
- Nike shares surge as return of pro sports boosts outlook