With the UK’s blue-chip share index at its highest level since 2018, it’s time to wrap up.

Here’s today’s main stories:

In the City, the FTSE 100 share index has ended the day at its highest closing level since August 2018.

The blue-chip index closed 30 points higher at 7724 points, a gain of 0.4%. It earlier hit a four-year high of 7772 points, as the market rallied (see earlier post).

Retailers helped to lift the Footsie higher, with JD Sports finishing almost 7% higher after lifting its profit outlook this year, helped by younger shoppers having more cash to spend than a year ago.

Frasers, which owns Sports Direct, gained 4%, while warehouse operator Segro rose by 3.4%.

Michael Hewson, chief market analyst at CMC Markets, says there is optimism over consumer spending patterns, despite the cost of living crisis:

European markets have seen another positive session with the FTSE100 continuing to gain ground above the 7,700-level helped by another set of solid trading numbers from the UK retail sector.

For all the doom and gloom leading up to Christmas and the end of the year period, it would appear that while consumers are becoming choosier about where they spend their money, they are still spending it.

Milder weather in January also appears to be helping sentiment, fuelling optimism that the start of 2023 might offer some respite from further increases in energy prices.

Traders are also hoping for a drop in US inflation, when the latest data is released tomorrow. That could herald a slowdown in interest rate increases, which hit many markets last year.

Today’s gains leave the FTSE 100 closer to its alltime high of 7,903 points, set in May 2018.

As we head into the European market close, International Distribution Services shares look set to end the day lower after a ‘severe service disruption’ to its overseas letter and parcel delivery service following a ‘cyber incident’, Victoria Scholar, head of investment at Interactive Investor tells us:

Its import services are continuing but are facing minor delays. Royal Mail says it is working hard to resolve the issue with some customers potentially experiencing ‘delay or disruption to items already shipped for export.’ It has asked customers to ‘stop submitting any export items into the network while we work hard to resolve the issue.’

This is yet another headwind for Royal Mail which had a torrid 2022, weighed down by heavy industrial action, the end of the pandemic era parcel boom, a structural long-term decline in letter volumes and cost inflation. International Distribution Services’ finances are in a tough spot too with its latest results outlining a half-year adjusted operating loss of £57 million, swinging from a profit of £404 million last year. Investor confidence is also in a bad way with shares down more than 55% over a one-year period, significantly underperforming the wider market.

Drastic action is needed to revamp the business with serious job reductions and other cost cuts on the horizon. First class stamps may also go up in price again while the postal service is arguing that it should stop weekend deliveries altogether in order to avoid the price hike.

Royal Mail is experiencing “severe service disruption” to its international export services following a cyber incident, the company announced.

In a service incident (online here), the company says:

Royal Mail is experiencing severe service disruption to our international export services following a cyber incident.

We are temporarily unable to despatch items to overseas destinations. We strongly recommend that you temporarily hold any export mail items while we work to resolve the issue. Items that have already been despatched may be subject to delays. We would like to sincerely apologise to impacted customers for any disruption this incident is causing.

In a fantasy world, the would-be rescuer of Britishvolt would be a consortium that included a car manufacturer or two, our finance editor Nils Pratley writes.

The ailing startup would instantly get what it needs most after six months of crisis: endorsement for a battery product that is still in development, plus some future customers.

At that point, the big political claims made about Britishvolt, its planned gigafactory in Northumberland and “the UK’s place at the helm of the global green industrial revolution”, as the former prime minister Boris Johnson put it a year ago, would start to sound more credible.

Sadly, the deal on the table does not resemble a dream version. The prospective buyer is a consortium led by DeaLab Group, a little-known UK-based private equity investor with backing from interests in Indonesia. Details are sketchy until Britishvolt’s board votes on the proposal on Friday but, as far as one can tell, the Indonesian angle seems to be access to metals needed to produce batteries – lithium, nickel, cobalt and so on. All useful, but, if the consortium has expertise in battery chemistry or in supplying the automotive industry with vital kit, it has so far kept quiet.

Therein lies one reason to be underwhelmed. Another is the fact that Britishvolt is being valued at only £32m, or 90%-plus less than a year ago. Good luck to DealLab but the outline proposal reinforces the fact that the fast action in the global gigafactory race is happening outside the UK…

More here:

The cost of living crisis is the most severe global risk to the world economy over the next two years.

It’s followed by natural disasters and extreme weather events, and the risk of geoeconomic confrontation, on the threats facing us over the next two years.

That’s the conclusion from the World Economic Forum’s latest Global Risks Report, released today ahead of next week’s Annual Meeting in Davos. It polls the views of 1,200 government, business and civil society professionals.

The report warns that the economic aftereffects of COVID-19 and the war in Ukraine have led to skyrocketing inflation, a rapid normalization of monetary policies and started a low-growth, low-investment era, adding:

Governments and central banks could face stubborn inflationary pressures over the next two years, not least given the potential for a prolonged war in Ukraine, continued bottlenecks from a lingering pandemic, and economic warfare spurring supply chain decoupling.

It also warns of the downside risks to the economic outlook also loom large, as “a mismatch” between monetary and fiscal policies could lead to liquidity shocks, causing a longer economic downturn and debt distress “on a global scale”.

Saadia Zahidi, managing director at WEF, says:

As the conflict between Russia and Ukraine approaches one year, economies and societies will not easily rebound from continued shocks.

In this year’s Global Risks Perception Survey, more than four in five respondents anticipated consistent volatility over the next two years. The persistence of these crises is already reshaping the world that we live in, ushering in economic and technological fragmentation.

A continued push for national resilience in strategic sectors will come at a cost – one that only a few economies can bear. Geopolitical dynamics are also creating significant headwinds for global cooperation, which often acts as a guardrail to these global risks.

Looking further ahead, the climate emergency dominates the top long-term risks. That list of topped by “Failure to mitigate climate change”, followed by “Failure of climate-change adaption”, “Natural disasters and extreme weather events” and “Biodiversity loss and ecosystem collapse”.

More here:

The publisher of the Mirror and the Express is to cut 200 roles in a £30m cost-cutting drive, after advertisers failed to spend heavily through the World Cup, Black Friday and Christmas season.

Reach, which also owns hundreds of regional titles including the Manchester Evening News, Birmingham Mail and Liverpool Echo, reported a slump of 20.2% in print advertising and 5.9% in digital ads in the traditionally strong fourth quarter.

The company said this was largely due to a significantly lower than anticipated benefit from traditionally stronger ad spending around Black Friday and Christmas, which has affected the whole sector.

It added:

“More broadly, we have also seen the continued impact of macroeconomic and consumer uncertainty, reflected in slowing market demand for advertising.”

More here:

UK bank NatWest has announced a new package of Cost of Living support measures, including £5.7m of funding for charities and partners.

NatWest is giving £1m to the Trussell Trust, the food bank charity, to support the Help through Hardship scheme, plus over £1.6m to the debt advice sector; £900k for Responsible Finance to support provision of accessible credit to people; and a £1m partnership with Federation of Small Businesses (FSB) to provide cost of living support.

NatWest is also giving struggling customers more time to repay debts, it says:

From early February this year, where customers have missed several payments on an unsecured debt such as a loan or overdraft, the bank will extend the time for them to repay their debt from 18 to 24 months, giving them more time and flexibility.

JD Sports said more work available for its young shoppers and better availability of key brands helped spur a surge in sales over Christmas, my colleague Sarah Butler reports.

The retailer, which operates in Europe and the US as well as the UK, said sales surged more than 10% in six months to New Year’s Eve, compared to 5% growth in the first half of the year.

Growth was strongest in the US and in stores - but it also saw growth online as shoppers could pick up orders from stores, staving off concerns about deliveries.

Régis Schultz, the chief executive of JD, said young shoppers had more cash in their pockets than a year ago thanks to the reopening of retail and hospitality which had provided jobs, while inflation had prompted people to go out and buy instead of waiting for bargains.

He added that competition from online pure plays was waning as the costs of delivery racked up.

“Investors are now saying to online players you have got to make money.

The era of the free lunch for online pure plays is a little bit over.”

The UK’s blue-chip share index has hit its highest level in over four years.

The FTSE 100 index has climbed by around 0.7% to hit 7749 points, up 55 points today, the highest level since August 2018.

The Footsie has been lifted today by gains in mining stocks and retailers.

JD Sports are the best performing stock, up 7%, after lifting its profit outlook towards the top end of expectations this morning following strong sales growth in the run-up to Christmas.

Fellow retailers Frasers (+3.6%) and Next (+2.7%) are also among the top risers.

Mining stocks are also rallying, despite the World Bank’s warning yesterday that the world economy risked falling back into recession.

Copper-producer Antofagasta (+2.6%), Anglo American (+1.9%) and Glencore (+2%) are benefitting from China’s move to relax Covid-19 restrictions.

Commodity prices have been rising this year, as Raffi Boyadjian, lead investment analyst at XM, explains:

Copper futures have jumped about 7% so far this year and an increasing number of analysts are predicting that oil prices will top $100 a barrel again in 2023. In the meantime, though, concerns about a recession and some doubts about how quickly Chinese demand will rebound when Covid infections are so high are putting a lid on any upside in oil.

Investors are also relieved that Jerome Powell, the head of America’s Federal Reserve central bank, didn’t push back against expectations of a slowing in US interest rate rises when he spoke yesterday.

The markets are also hoping for a drop in US inflation, when the latest consumer price index figures are released.

Boyadjian points out that a drop in inflation could encourage the Fed to stop hiking interest rates as rapidly.

Sentiment was boosted on Friday from signs that wage pressures in the United States are easing and that the services sector is headed for a sharp slowdown, but the hawkish rhetoric that later followed revived recession worries.

If Thursday’s CPI figures point to further moderation in inflation in December, it’s likely to fuel bets that the Fed’s tightening cycle is nearing the end.

The internationally-focused FTSE 100 outperformed major rivals last year. It gained almost 1% in 2022, while global markets fell 20%.

It is now approaching its record high, of 7903.5 points, set in May 2018.

Bernard Arnault, the world’s richest person, has appointed his daughter Delphine to run Christian Dior, the second-biggest brand in his LVMH luxury goods empire.

Arnault, 73, is the chief executive, chair and majority shareholder of the group, which owns a swathe of high-end businesses including Louis Vuitton, Tiffany, Givenchy, Kering and Moet Hennessy.

He announced on Wednesday that his eldest daughter would become Dior’s Cchief executive and chair as part of a shake-up of the €382bn (£337bn) conglomerate.

Delphine Arnault, who is the executive vice-president of Louis Vuitton and in charge of its product product-related activities, will take up the new position from 1 February.

The 47-year-old joined the family business in 2000 after two years at the management consultancy firm McKinsey and studying at the London School of Economics. She joined the LVMH board in 2003 – becoming the first woman and youngest person to serve on it.

Her father said:

“Under Delphine’s leadership, the desirability of Louis Vuitton products advanced significantly, enabling the brand to regularly set new sales records. Her keen insights and incomparable experience will be decisive assets in driving the ongoing development of Christian Dior.”

More here.

Britain’s largest housebuilder, Barratt Developments, has introduced a hiring freeze and is “significantly” cutting back on buying land as it steels itself for a further slump in the UK housing market, my colleague Kalyeena Makortoff reports.

Barratt said it was responding to a “marked slowdown” in the UK housing market after a rise in interest rates that had made mortgages more expensive for prospective homebuyers.

The company said the average weekly net number of private reservations of properties fell in the second half of last year, down from 259 to 155.

It was also forced to scrap building plans for 3,293 land plots, cancelling out the 3,003 plots that proceeded with construction. The net cancellation of 290 plots compares with the net addition of 8,869 a year earlier.

More here.

Shares of Darktrace have touched a record low this morning, after the UK cybersecurity firm cut its revenue forecasts and said the economic downturn was hitting sales.

Cambridge-based Darktrace says there was a “noticeable” slowdown in new customer additions towards the end of last year, as economic uncertainty made potential customers more reluctant to run product trials.

It says the impact of macro-economic uncertainty on new customer growth has been greater than expected, and is lowering its guidance for annual recurring revenue (ARR) from customers, and for revenue.

Darktrace uses artificial intelligence to spot attacks on a company’s network, and other security threats.

Cathy Graham, CFO of Darktrace, said the current macro-economic environment is creating challenges to winning new customers. In regions with historically higher conversion rates, those rates starting to decline, Graham adds.

Shares in Darktrace fell as low as 240p, below the 250p at which it floated in 2021, before recovering a little to 252p, down 14% today.

Last September, US private equity firm Thoma Bravo walked away from a potential takeover of the business.

Heathrow has reported its busiest Christmas getaway since 2019, but claimed that bringing in new Covid-19 tests on arrivals from China could hurt the recovery.

The airport handled 5.9m passengers in December, a 90% increase on the same month a year ago, as “Christmas and New Year reunions fuelled passenger growth”.

Transatlantic travel was a key driver behind last month’s high passenger volumes, making New York’s JFK the busiest route for Heathrow.

Heathrow CEO John Holland-Kaye says:

“2022 ended on a high with our busiest Christmas in three years and a smooth and efficient service for passengers, thanks to the hard work of our colleagues and close planning with airlines, their ground handlers and Border Force.”

Through 2022, Heathrow saw 61.6m passengers, an increase of 217% or 42.2m compared with 2021. Heathrow says this is the highest passenger increase of any airport in Europe, “and possibly worldwide”.

But it warns:

We are concerned that the recovery of the aviation sector, which is critical to the economy, could be set back by the reintroduction of testing for travellers in the UK and elsewhere in response to increasing COVID levels in China, even though governments acknowledge there is no scientific basis for doing so.

UK prime minister Rishi Sunak decided to introduce tests on arrivals from China at the end of December, after other countries including the US and Italy brought in similar measures.

But scientists told the Observer that screening people coming from China would make little difference, as the number of Covid-19 infections in the UK was already very high, while airport checks had been shown to be unreliable in pinpointing disease carriers.

Insurance company Direct Line is scrapping its final dividend for 2022 after a surge in claims from customers during the recent severe weather.

Penny James, Direct Line’s chief executive officer, says the fourth quarter of 2022 was “volatile and challenging”.

The UK was hit by snow and ice weather warnings in December, as the record for the coldest night of the year so far was broken.

James says:

We have seen a significant increase in claims as a result of the prolonged period of severe cold weather in December and I am proud of the way that we have supported our customers during this period.

These claims, combined with further increases in motor inflation, have had a significant impact on our underwriting result for 2022.

Direct Line says it expects around £90m of claims from the ‘freeze event’ in December. It has helped three thousand customers deal with burst pipes, water tanks and other related damage.

Direct Line says:

This, together with the freeze event from January 2022 and subsidence related claims over the summer means that we currently expect total weather claims to be in the region of £140 million for 2022, well above our 2022 expectation of £73 million.

Direct Line’s motor insurance division also saw an increase in third party claims inflation during the fourth quarter of last year, and more claims in the quarter --partly due to adverse weather conditions.

Shares in Direct Line have tumbled 28%, to 166p.

JD Sports has also predicted its profits will be towards the top end of expectations, following a jump in sales over Christmas.

JD Sports’ revenues grew by over 10% in the 22 weeks to 31 December 2022, accelerating to more than 20% in the six-weeks to 31 December 2022.

It now expects pre-tax profits for the year to 28 January to be “towards the top end” of market expectations (£933m to £985m), although the final performance depends how the post-Christmas sales go.

Shares in JD Sports have jumped 4.6% in early trading, to the top of the FTSE 100 leaderboard.

Record sales of Champagne and prosecco have helped to push profits at Sainsbury’s to the upper end of forecasts.

The supermarket chain has reported that profits this year are expected to be towards the upper end of its guidance range of £630m to £690m, although still below last year’s profits of £730m.

J Sainsbury’s retail sales, excluding fuel, rose by 5.2% year-on-year in its third quarter (to 7th January). Grocery sales were 5.6% higher – and 12.5% ahead of pre-pandemic levels.

And in the Christmas period, sales rose 7.1%, with grocery sales up 7.1%, general merchandise sales up 7.4% and clothing sales up 5.1%.

That included a 22% jump in Taste the Difference Mince Pies, and a 49% rise in Taste the Difference Panettone, while there was “record sales for Champagne and prosecco”.

But Simon Roberts, chief executive of J Sainsbury, flags that 2023 will be tough for households.

“We understand money will be exceptionally tight this year particularly as many people wait for Christmas bills to land.

We are working together with our suppliers to battle cost inflation and we’re keeping prices low again this year with our biggest value campaign yet in January, price matching Aldi on around 300 of our most popular products.

John Moore, senior investment manager at RBC Brewin Dolphin, says Sainsbury’s traded strongly during the key Christmas period, but faces a darkening outlook.

Notable within the results is that grocery sales are 19% above pre-pandemic levels and Argos has helped add sales, and no doubt footfall, in the more integrated click-and-collect model the company has adopted.

However, the backdrop for consumers is expected to darken in 2023, and there are several hints at this in today’s statement.

That said, Sainsbury’s is reasonably well placed in terms of the balance of its business offering and still has levers to pull in property – which could be sold and leased back – and further cost and efficiency savings, giving it the opportunity to keep pace with competitors and reinvest in product pricing.”

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

The UK housing market has seen a “marked slowdown” in the last six months, according to housebuilder Barratt this morning.

The UK’s largest housebuilder has told the City that demand in the first half of 2023 is likely to be hit by rising mortgage rates and the cost of living squeeze, which will “undoubtedly impact trading”.

In a trading update for the half year to 31 December, Barratt warns that the outlook for the second half of its financial year is “uncertain”. Homebuyer confidence and the availability and competitive pricing of mortgages will be “critical to the health of the UK housing market in the coming months”, it says.

If demand picks up in the spring as nomal, Barratt will be on track to complete 17,475 homes, as the market expects. But, if trading remain at recent levels, home completions will be lower – at 16,000 to 16,500.

Its forward order book has dropped to 10,511 homes, worth £2.5bn, over £1bn less than a year ago when it was 14,818 homes (worth £3.8bn).

Barratt says it has already responded to the slowdown, by significantly reducing land approvals, pausing recruitment of new employees and introducing further controls for new site openings to manage its working capital deployment.

David Thomas, chief executive, says Barratt delivered “a strong operating performance” for the last six months, despite challenges.

Thomas says:

The first half of the financial year has however seen a marked slowdown in the UK housing market.

Political and economic uncertainty impacted the first quarter; this was then compounded by rapid and significant changes in mortgage rates which reduced affordability, homebuyer confidence and reservation activity through the second quarter.

That ‘political and economic uncertainty’ included the turmoil around the mini-budget in September, which drove up mortgage rates and hit demand.

Barratt’s net bookings rate per average week fell to 0.30 from 10th October to the end of December, lower than the 0.69 seen during the corresponding period a year earlier.

Halifax and Nationwide have both reported that house prices have fallen in recent months, as those rising borrowing costs weighed on the market. Many forecasters predict prices will drop this year.

The agenda

• 9.30 am GMT: World Economic Forum publishes its 2023 Global Risks Report

• Noon GMT: US weekly mortgage application data

• 3.30pm GMT: US crude oil stocks data