As Brits reel from a cost-of-living crisis, the UK stock market quietly booms to an all-time high
The sun rises over the city on Feb. 6, 2023 in London, United Kingdom.
Leon Neal | Getty Images News | Getty Images
LONDON — The U.K. is facing the weakest growth prospects in the G-7 and a catalogue of cost-of-living pressures that are pushing the poorest into crisis and intensely squeezing the budgets of middle-income households.
At the same time, more investor money has never been pumped into the U.K.’s biggest companies. The FTSE 100 index has smashed through three intraday records over the last week, starting last Friday and hitting new heights in Wednesday’s and Thursday’s sessions.
That’s also coming off the back of a year in markets that was dominated by doom and gloom, with risk assets selling off and indexes from the pan-European Stoxx 600 to the U.S. S&P 500 to Shanghai’s SSE Composite emerging bruised.
The most recent uptick for the FTSE 100 shows that, as well as occurring despite harsh cost-of-living pressures, they are also linked to them.
Energy firms such as Shell and BP have reported record profits and promised higher shareholder dividends, boosting their share prices (with calls for higher windfall taxes to support consumers struggling with higher bills doing little to dampen their appeal).
Thursday’s FTSE climb to an all-time high of 7,944 points at midday in London was boosted by gains at Standard Chartered, one of many banks that have seen profits jump as a result of higher interest rates.
Meanwhile, the strong performance of commodity stocks has also lifted the index higher as they have been boosted by a rise in prices, supply constraints and, recently, the prospect of China’s Covid-19 reopening.
FTSE 100 chart.
“The U.K. FTSE 100 is not about the U.K. domestic economy,” said Janet Mui, head of market analysis at RBC Brewin Dolphin, noting over 80% of firms’ corporate revenue exposure is derived from overseas.
Mui told CNBC a confluence of factors had taken the index to a record high, including the plunge in sterling helping those overseas revenues (collected in dollars); its heavy weighting in energy, commodities and financials; and the relatively strong performance too of defensive staples in consumer products — such as Unilever — and health care — such as AstraZeneca.
What the U.K. stock market has frequently been criticized for — a lack of new, buzzy tech firms and preponderance of stalwarts of the “old economy” — has been a boon as monetary and financial cycles have turned.
The wider FTSE 250 does have stronger domestic links but still has 50% of revenue exposed to overseas, Mui added.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said that among other factors, the FTSE’s rise could be explained by glimmers of hope in the economic picture, such as housebuilder Barratt reporting a “modest uplift” in reservations of new homes. She also pointed to forward-looking signals of Europe avoiding a recession and an abating of the energy crisis.
Banks would perform even better if their net income margins improve but bad loans don’t come through, she noted.
Shell share price.
Among the factors weighing on the U.K. public are interest rate rises increasing borrowing costs, grocery price inflation at a record high of 16.7% and overall inflation above 10%.
A report published Wednesday by the National Institute of Economic and Social Research argued the U.K. was likely to avoid a technical recession this year — though growth would be near zero — but that one in four households will be unable to fully pay their energy and food bills, and middle-income households will face up to a £4,000 ($4,873) drop in disposable income.
And the disjunct between stock market gains and the dire outlook still facing many households jars for many.
“It is a cruel paradox that on the day that the FTSE 100 index hit a record high, campaigners on behalf of up to 7 million people on lower incomes in the UK were calling for the government to extend the support provided to them with regard to their energy bills,” Richard Murphy, professor of accounting practice at Sheffield University Management School, told CNBC.
In March, the U.K. government is set to end a broad household energy bill compensation program that has run through the winter. It comes as many governments attempt to wind down fiscal support to rein in public spending, with the European Central Bank recently arguing that maintaining support packages risks maintaining inflation.
But Murphy said that without the support, and with bills still elevated, “many will not be able to make ends meet and will go hungry, cold or even homeless as a result.”
“The picture that this provides of a country enormously divided by differing incomes and wealth is almost Victorian in its starkness,” said Murphy.
Tesla has stopped taking orders for its Model S and Model X flagship electric vehicles in China – seemingly in reaction to new tariffs.
In China, Tesla produces Model 3 and Model Y vehicles locally at Gigafactory Shanghai for the domestic market and some exports.
Model S and Model X are exclusively produced in the US at Tesla’s Fremont factory in California. The automaker imported the vehicles from the US into China.
Amid President Trump’s new trade wars, the US is now imposing 145% tariffs on all Chinese goods, and China responded by implementing 84% tariffs on US goods, including vehicles.
This would almost double the cost of US vehicles imported in China, including Tesla’s Model S and Model X.
In the middle of the night, Tesla shut down its Model S and Model X online configurations in China – meaning that Chinese customers can’t place new orders for the electric vehicles.
This isn’t expected to significantly impact Tesla’s business, considering the automaker delivered just over 2,000 Model S and Model X vehicles in China in 2024.
Tesla is still selling what it has in inventory already in China. Still, after a quick inventory check, it appears to have very low new Model S inventory and virtually no Model X.
Electrek’s Take
One of the first victims of the trade war in the EV space. It kills a relatively small market of about 2,000 vehicles for Tesla in China, but those are profitable vehicles, which is not the case for most vehicles Tesla sells in the country these days.
90% of the vehicles Tesla delivers in China are Model 3 and Model Y RWD, which are low-margin vehicles that Tesla has to subsidize 0% financing on to move. It results in the automaker making little to no profit on those vehicles.
In the case of Model S/X in China, we are only talking about roughly $170 million in potential lost revenue for Tesla, but at least the company was making some profits on those.
As we previously reported, Tesla’s biggest concerns amid this trade war are the tariffs on Chinese battery cells entering the US, which support its Megapack and Powerwall energy business, and Chinese buyers turning away from American brands.
If the trade war with China escalates even more, Tesla could even start worrying about the status of its factory in Shanghai, which is a rare auto factory wholly owned by a foreign automaker in China.
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Lucid Motors has announced that it acquired some of Nikola Motor’s assets out of its bankruptcy, including its factory, and it will offer jobs to over 300 of its employees.
Nikola, a manufacturer of electric and hydrogen trucks, went bankrupt earlier this year after several tumultuous years.
Now, Lucid Motors, an electric vehicle manufacturer, has announced that it purchased some of Nikola’s assets out of a bankruptcy auction.
The company wrote in a press release:
Lucid Group, Inc. (Nasdaq: LCID), maker of the world’s most advanced electric vehicles, today announced it has reached an agreement to acquire select facilities and assets in Arizona previously belonging to Nikola Corporation, subject to approval by the U.S. Bankruptcy Court for the District of Delaware. The transaction does not include the acquisition of Nikola’s business, customer base, or technology related to Nikola’s hydrogen fuel cell electric trucks.
In Arizona, Lucid’s Casa Grande factory, where it produces the Air and Gravity EVs, is only about 25 minutes away from Nikola’s Coolidge factory, where it used to assemble its trucks.
Lucid confirmed that it is taking over this facility and Nikola’s headquarters in nearby Phoenix:
As part of the agreement, Lucid will take over Nikola’s former Coolidge manufacturing facility (680 E Houser Rd, Coolidge, AZ), as well as the Phoenix facility (4141 E Broadway Rd, Phoenix, AZ) previously used as Nikola’s headquarters and product development center. These buildings collectively add more than 884,000 square feet to Lucid’s Arizona footprint. Most of this space is comprised of state-of-the-art manufacturing and warehousing buildings, which executes against Lucid’s prior planned expansion in Arizona. These facilities also include development equipment with extensive battery and environmental testing chambers, a full-size chassis dynamometer, machining equipment, and more.
The deal is valued at $30 million in cash and non-cash considerations.
As it takes over those facilities, Lucid plans to offer “more than 300 former Nikola employees” jobs in Arizona:
Additionally, Lucid plans to offer employment to more than 300 former Nikola employees in roles across Lucid’s Arizona facilities. These offers will encompass various technical salaried and hourly positions including manufacturing engineering, software, assembly, vehicle testing, and warehouse support as Lucid welcomes employees with strong backgrounds in EV technology and further supports its local community.
Marc Winterhoff, Interim CEO at Lucid, commented on the announcement and hinted that the new facilities and workforce would help Lucid toward bringing its next vehicle platform to production:
“As we continue our production ramp of Lucid Gravity and prepare for our upcoming midsize platform vehicles, acquiring these assets is an opportunity to strategically expand our manufacturing, warehousing, testing, and development facilities while supporting our local Arizona community. We are delighted to extend employment offers to more than 300 former employees, who bring valuable industry experience, and together with our outstanding teams, will continue powering Lucid’s industry-leading innovation.”
Lucid is mainly known for the Air, a super-efficient and long-range electric luxury sedan, and it recently launched the Gravity, an SUV based on the same platform.
Now, it plans to develop a new vehicle platform to deliver smaller and cheaper vehicles.
Electrek’s Take
This makes sense. While Lucid has a lot of operations in California, they were neighbors in Arizona when it came to manufacturing operations.
It may be able to utilize some of Nikola’s manufacturing equipment and quickly put the former Nikola workers to work, reducing the bankruptcy’s impact on local employment.
Lucid has its own financial problems as it’s not yet profitable and relies on raising more capital, but it is undoubtedly in a much more solid financial situation than Nikola has been over the last few years.
Also, $30 million in cash and non-cash considerations is pretty cheap.
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Tesla has officially launched a new version of the Cybertruck RWD for $70,000 in the US and Mexico.
It’s more expensive than previously announced and loses a ton of features, but it has more range.
Earlier today, we reported on Tesla unveiling in the Middle East a new ‘Cybertruck Long Range’.
The automaker confirmed that it had a single rear-wheel-drive (RWD) motor, but unlike the previously announced Cybertruck RWD, Tesla said it had 350 rather than 250 miles of range.
This would point to having the same battery pack as the Dual Motor and Cyberbeast currently available.
At the time, it wasn’t clear if Tesla was launching this specific version for the Middle East or if it was the new Cybertruck RWD to replace the previously announced $62,000 version.
Now, Tesla has opened orders in the online configurator for the US and Mexico of the new Cybertruck Long Range RWD:
It starts at $70,000 before incentive – $9,000 more than the previously announced Cybertruck, but it has 100 more miles on a single charge at 350 miles.
It’s also $10,000 less expensive than the Cybertruck Dual Motor.
You not only lose a motor, but you also lose the powered tonneau. You can buy a “soft tonneau” for $750 and it increases the range to 362 miles:
The new cheaper version also loses the adaptive suspension, the lightbar at the back, the rear screen, and even the bed outlets, according to Tesla’s website.
Tesla says that deliveries are going to start in June.
Electrek’s Take
I might be wrong, but I would assume that the previously announced $61,000 Cybertruck is not going to happen. The Cybertruck is likely proving to be too low-volume to warrant producing different sizes of battery packs.
However, this version might be just to make the $80,000 Cybertruck look better.
It’s not to lose the AWD, the tonneau, the adaptive suspension, and even the bed outlets for $10,000.
These are all pretty essential features of the Cybertruck. I don’t think this version will sell much at $70,000. Maybe they get a few sales of people trying to take advantage of the $7,500 tax credit.
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