Connect with us

AUTO MOBILE

FTSE 100 closes lower despite Wall Street optimism that inflation may have peaked

Published

on

[ad_1]

  • FTSE 100 closes at 7,369 points
  • Centrica climbs as it starts buy-back
  • Vodafone declines after disappointing forecast

4.45pm: FTSE finishes lower

Despite promising inflation data across the pond, the UK’s blue-chip index finished 0.2% lower at 7,369.

CMC’s Michael Hewson felt that the pound held back any gains from the US PPI data.

“The pound had already been edging higher in the lead-up to this afternoon’s numbers boosted by comments from Chancellor of the Exchequer Jeremy Hunt doubling down on fighting inflation, as well as pledging to keep the public finances in check,” Hewson wrote in a note. 

“The subsequent miss on the headline PPI number saw the US dollar sink and the pound surge above 1.2000 for the first time since 18th August.  It also rallied back towards the top of its recent range against the euro.”

3.50pm: Footsie fails to follow US markets higher

Leading shares remain in the red heading into the close, despite Wall Street moving higher after more signs that US inflation might be easing.

The FTSE 100 is down 25.33 points or 0.34% at 7359.84, close to the low for the day, with investors mulling over a slightly higher than expected UK jobless rate.

The pound is strengthening against the dollar as the US currency weakens after the US producer price index figures suggested the Federal Reserve could now be more cautious about interest rate rises.

But this does not help the UK blue chip index, given it is full of overseas earners who benefit from a weaker pound.

Michael Hewson, chief market analyst at CMC Markets UK, said: “European markets have seen another positive session, although the FTSE100 has slipped back, failing again to hold above the 7,400 level, with the rise in the pound post US PPI appearing to act as a bit of a drag on the UK index.”

Among the fallers, Ocado Group PLC (LSE:OCDO) is down 14.33%, following negative comments in the Times.

Vodafone Group PLC (LSE:VOD) has dropped 7.18% after it trimmed its full year guidance.

“A share price that is unchanged since 1998 is unlikely to be a good sign and for all of his efforts with disposals, mergers and spin-offs, chief executive Nick Read is struggling to get a tune out of Vodafone,” says AJ Bell investment director Russ Mould. “The company still looks like an investment trust of telecoms assets, is not offering much by way of sales, profit or dividend growth and remains saddled with a hefty debt burden as a result of 2019’s purchase of Liberty Global (NASDAQ:LBTYA)’s operations in Germany and Eastern Europe.”

 But Centrica PLC (LSE:CNA) climbed 4.77% as it began its £250mln share buyback programme, while BAE Systems PLC (LSE:BA.) added 2.15% and Melrose Industries PLC (LSE:MRO, OTC:MLSPF) 1.38% after their latest updates.

Technology investor Scottish Mortgage Investment Trust PLC (LSE:SMT) is up 1.44%, helped by a rise on the tech heavy Nasdaq Composite, now up 2.4%.

3.30pm: Oil down on China demand fears

Oil prices are slipping on continuing concerns about demand from China as COVID-19 cases there continue to rise.

Brent crude is down 0.85% at US$92.35 a barrel while West Texas Intermediate – the US benchmark – is 0.93% lower at US$85.07.

OPEC has cut its 2022 global demand forecast for the fifth time since April, with the prospect of an economic slowdown amid rising interest rates to control inflation.

Meanwhile a European Union bank on Russian oil is set to start on December 5, meaning that 1.1mln barrels will need to be replaced, according to the International Energy Agency.

2.55pm: Footsie fails to follow US markets

UK shares are not joining in with Wall Street’s gains.

The FTSE 100 is down 24.27 points or 0.33% at 7360.90, virtually at the day’s low.

The strength of the pound – up 1.43% against a weaker dollar at US$1.1918 – is not helping the leading index, given it is full of overseas earners which benefit from falls in sterling.

But the UK jobs data showing a rise in unemployment is also a factor, as are big falls in Ocado Group PLC (LSE:OCDO), down 12.42% after a negative Times piece, and Vodafone Group PLC (LSE:VOD), 6.73% lower after its results.

2.48pm: US markets welcome producer price data

The Dow has opened up 366 points, more than 1%, at 33,903, the Nasdaq Composite gained 289 points, 2.6%, to 11,486 and the S&P 500 improved 67 points, 1.7%, to 4,026.

Investors reacted positively to the latest producer price index report, a measure of wholesale inflation, which rose 0.2% for the month. That came in below the consensus estimate of 0.4% from Dow Jones. 

That figure, plus last week’s consumer price index data, is indicative that inflation may be slowing. That could change the Federal Reserve’s calculus on interest rates, said Jeremy Siegel, professor emeritus of finance at the University of Pennsylvania’s Wharton School of Business.

“I think this moves up the [Fed] pivot,” Siegel said on CNBC’s Squawk Box. “All we need is for them to recognize what prices on the ground are actually doing, and they are not going up.”

2.00pm: Sterling and US markets lifted by US data

The pound has jumped as the dollar weakens following the weaker US inflation figures.

Sterling is up 1.759% at US$1.1957, while Wall Street futures have jumped sharply higher.

The Dow Jones Industrial Average is showing a 1.02% gain, S&P 500 futures are up 1.75% and Nasdaq Composite is 2.82% ahead.

But the FTSE 100 is unmoved by the excitement, down 1.64 points at 7383.53.

1.51pm: US producer price figures weaker than anticipated

In the wake of last week’s benign US consumer inflation figures, the producer price index which measures prices at the factory gate has also come in lower than expected.

The index rose 8% year on year in October, better than the 8.3% forecast and down from 8.4% in September (itself revised down from 8.5%).

The Bureau of Labor Statistics said: “In October, 60 percent of the increase in prices for final demand goods is attributable to the index for gasoline, which rose 5.7 percent. Prices for diesel fuel, fresh and dry vegetables, residential electric power, chicken eggs, and oil field and gas field machinery also advanced. In contrast, the index for passenger cars declined 1.5 percent.”

Together with last week’s CPI figures, the new data suggests inflation may have peaked, providing more fuel for the Federal Reserve to be more cautious about its interest rate policy.

However a key manufacturing index indicated growth rather than decline.

12.32pm: UK public sector workers hit again by lower wage growth

The UK earnings figures out earlier continue to show the largest disparity in public and private sector wages outside of the pandemic period.

 Paula Bejarano Carbo, associate economist at the National Institute of Economic and Social Research, said: “Average weekly earnings, including bonuses, grew by 6 per cent in the third quarter of this year; this figure remains outpaced by inflation as workers saw a 2.6 per cent fall in real total wages relative to this time last year.

“Worryingly, we observed the third consecutive month of a record disparity between average regular pay growth for the private and public sectors, as the former saw growth of 6.6 per cent while the latter only saw 2.2 per cent. We expect this disparity to continue growing through the fourth quarter of this year, undoubtedly causing further strain to many public sector workers struggling to cope with the cost-of-living crisis.

“Given the expected departmental spending cuts in the Chancellor’s upcoming Autumn Statement, this trend bodes poorly for public sector workers – who are increasingly resorting to industrial action to bargain for higher wages.”

12.05pm: US markets forecast for positive start ahead of inflation data

US stocks are expected to open higher, regaining some ground after yesterday’s falls, ahead of key producer price data due out later today.

Futures for the Dow Jones Industrial Average were 0.3% higher in pre-market trading, while those for the S&P 500 were up 0.7%, and contracts for the Nasdaq-100 rose 1.2%. 

Coming on the heels of last week’s softening in the consumer price index for October which led to a rally in share prices, investors are hoping for a similar easing in the producer price index, which measures inflation at the factory gate..

After rising by 0.4% in September, the headline rate is again expected to rise by 0.4% in October. A smaller-than-expected increase is likely to boost share prices and will strengthen hopes that US rate setters will scale back on interest rate hikes as inflation begins to respond to their monetary policy moves. The US Federal Reserve has delivered four straight 75 basis point increases so far this year. 

“Equities saw some profit taking in last week’s post-US inflation rally, as some Federal Reserve officials [reminded] investors that the 7.7% inflation is still high and that the Fed would continue fighting to bring it lower,” noted Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

Meanwhile, there was also good news from yesterday’s meeting between US President Joe Biden and China’s Xi Jinping, she added.

“Both leaders criticized Russia for loose nuclear talk, which certainly helped melt the ice between the two nations. Joe Biden said a new cold war isn’t necessary. Xi said the world is big enough for everyone to prosper. Xi still warned the US that it doesn’t want to see its nose in its Taiwan matters,“ Ozkardeskaya said. 

“But overall, the three-hour discussion happened as if Joe Biden hadn’t forbidden US chipmakers to sell their stuff to China to keep China in retreat for technological advance,” she noted.

Back in the UK, the FTSE 100 is unmoved by any recovery on Wall Street, remaining virtually flat with a dip of just 5.03 points to 7380.14.

11.42am: Firms hoping for end of year boost to avoid joining corporate insolvencies

Businesses will be looking for a World Cup and Christmas boost to help them out, but without it many could join the list of corporate insolvencies, according to restructuring trade body R3.

Vice president Nicky Fisher said: “A series of economic issues, the end of temporary insolvency legislation, and a lack of a post-COVID-19 bounce have hit all parts of the economy and the supply chain hard, and have resulted in more directors choosing to close their businesses and more creditors calling in debts as a means of balancing their own books.

“The current outlook is tough for many businesses as costs rise and consumer confidence remains low. Worries about the price of food and fuel as winter approaches means many people are saving their money ahead of their bills coming in and simply aren’t spending – and a range of businesses, including household names, are struggling as a result. 

“On top of this, business owners are worried about the economy, the prospect of an imminent and prolonged recession, and where they’ll find the money to meet employees’ requests for increased pay as their own costs of living increase. 

“The jury is still out on whether the Christmas trading period, which will include an unseasonal football World Cup, will lead to the traditional boom many businesses are hoping for or whether disappointing sales over the festive period will lead to businesses turning to an insolvency process to resolve their financial issues.”

11.22am: Number of companies collapsing continues to grow

The number of UK companies collapsing rose by 38% last month compared to this time last year.

Official figures showed there were 1,948 company insolvencies in October, up from 1,410 last October when there were restrictions on winding up companies due to the COVID-19 pandemic.

It was also up from the 1,684 registered in September this year, as companies struggled with rising costs and economic slowdown.

The bulk of the insolvencies were voluntary liquidations, up 28% year on year to 1,594.

But the Insolvency service said there were also 242 compulsory liquidations, more than four times as many as in October 2021.

This was partly as a result of an increase in winding-up petitions presented by HMRC, while there were also a large number of petitions from a single bank which accounted for 45 of the compulsory liquidations..

The rest of the total was made up of five company voluntary arrangements and 107 administrations.

For individuals, 531 bankruptcies were registered, which was 14% lower than in October 2021 and 62% lower than October 2019.

10.42am: Aston Martin leads mid-cap index fallers

Leading shares continue to drift around their opening level, and have now dipped lower.

The FTSE 100 is now down 2.17 points at 7383.00.

Meanwhile the FTSE 250 is down a little more, falling 0.25% to 19,573.4.

Aston Martin Lagonda Global Holdings PLC (LSE:AML) is the biggest faller in the mid-cap index so far, down 11.26% to 126.95p.

Analysts at Jefferies moved their recommendation from hold to underperform and slashed their price target from 530p to 120p.

But Drax Group (LSE:DRX) has joined in the positive move in the utility sector, gaining 5.48%.

10.04am: Japan GDP shows surprise fall

Over in Japan, the country’s economy unexpectedly shrank in the third quarter.

The latest figures show GDP fell by 0.3% compared to forecasts of a 0.3% increase, with the weak yen pushing up the cost of imports.

But John Vail, chief global strategist at Nikko Asset Management, said there was a silver lining for the fourth quarter.

He said: “Notably the second quarter figure was revised up quite a bit, so excluding such, the third quarter was only a relatively slight decline.

“The silver lining is that the weak third quarter figures will just make the [fourth quarter] measure look even stronger, as inventories gained less than expected and imports likely overshot. Barring third quarter revisions, the current quarter will likely be well over 5% annualized.

“Real Personal Consumption Expenditures finally matched its pre-COVID-19 levels and the fourth quarter should surge on re-opening trends, especially regarding tourism. Net exports should also improve due to strong auto exports, while import growth should decelerate.”

9.25am: Centrica climbs but Ocado falls

Leading shares are now in positive territory, but it is not a convincing move.

The FTSE 100 is now up 10 points or 0.14% at 7395.17 as strength in Centrica PLC (LSE:CNA), up 3.76% after it starts its share buyback, and BAE Systems PLC (LSE:BA.), 3% better after a trading update, outweighs a 5.26% fall in Vodafone Group PLC (LSE:VOD) following its half year results.

Ocado Group PLC (LSE:OCDO) is down 7.6%, not helped by the Tempus column in the Times telling investors to avoid the shares.

The paper said the group faces heavy costs in fitting out its proposed customer fulfilment centres in the UK and overseas, and there is no solid guidance in sight on the company generating a statutory profit. Despite a fall of two thirds in the shares since their peak in 2020, the paper says they are nowhere near bargain territory.

On the economic front, investors are attempting to interpret the latest mixed UK jobs data.

Danni Hewson, AJ Bell financial analyst, said: “There’s no denying the UK’s jobs market is still robust but October’s slight creep in the number of people claiming unemployment benefit does jangle distant alarm bells. Whilst jobs vacancies are still at record numbers they are falling and have been falling for four consecutive quarters. Businesses are weighing up their options, in some cases scaling back their recruitment plans and once again news about job cuts are making headlines.

“Wages are rising and the three months to September delivered the ‘strongest growth in regular pay’ since the pandemic. But 5.7% doesn’t cut it in today’s uber inflationary environment and real pay fell by 2.7%. Hard work is paying less every month and life is becoming just that little bit harder.”

Later come some key UK inflation numbers in the shape of the producer price index.

Michael Hewson, chief market analyst at CMC Markets UK, said: “Particular attention will be on today’s PPI numbers in the wake of last week’s positive reaction to the lower-than-expected CPI. In recent months PPI has tended to act as a leading indicator, although there was a spike in June, the general trend has been a gradual decline in prices since the end of Q1. Final demand PPI is expected to slip back to 8.3% from 8.5%, while core PPI excluding food and energy is expected to remain steady at 7.2%.

8.35am: BAE gives some support to market

BAE Systems PLC (LSE:BA.) is bucking the downward trend, up 2.3% after an upbeat trading statement.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “There are a few things that BAE is beholden to, and one of those is government defence budgets. We’ve learned today that many of the countries the defence giant operates in are upping their defence spending in response to the more threating geopolitical climate. This should feed into a sticky source of revenue for the group. New government contracts tend to be long-term in nature, giving BAE exceptional visibility over demand, which is hard to find in today’s uncertain environment. Since the half year the defence group has seen £10bn of order intakes and profits on a constant currency are expected to come in in-line with expectations.

“The group is still grappling with supply chain issues, especially in areas of the business that rely on microelectronics. For now, BAE is able to offset the worst of these issues, operating in a sector with high barriers to entry means margins can enjoy a certain level of protection. However, an extremely protracted bout of disruption could cause pain.”

Utility shares are also providing some support to the market, with British Gas owner Centrica PLC (LSE:CNA) climbing 2.8% as it started a £250mln buyback programme, SSE PLC (LSE:SSE) up 2.02% and National Grid PLC (LSE:NG.) 1.14% higher.

But overall the FTSE 100 remains marginally lower, off 1.65 points at 7383.52.

8.14am: Footsie struggles for direction in early trading

Leading shares have opened virtually unchanged following news that the UK unemployment rate was higher than expected, while wages also beat forecasts but still lag behind inflation.

With a late turnaround on Wall Street and despite a positive session in Asia, the FTSE 100 is down just 0.66 points at 7384.51, shrugging off a number of disappointing results.

Vodafone Group PLC (LSE:VOD) has fallen 4.12% after the telecoms firm lowered its full year earnings forecast and announced plans for a further €1bn of cost savings by 2026.

It warned the worsening global macroeconomic climate, rising energy costs and increased inflation had hit financial performance.

Imperial Brands PLC (LSE:IMB) and Land Securities Group PLC (LSE:LAND) were also lower after their latest updates, down 1.18% and 1.06% respectively.

7.49am: Sterling gains on the dollar while euro surges

This morning’s price action provides more fuel to the thesis of a dollar top.

While the US Dollar Index (DYX) did end up marginally higher by the end of yesterday’s session, the index has stayed within the 106 – 106.7 range for the past three days.

Market indecision is demonstrated by the spinning top candlestick patterns formed on the daily chart; a third today would act as further confirmation of a rangebound dollar stuck at three-month lows.

Recent chat performance suggests indecisive DYX sentiment – Source: capital.com

Recent chat performance suggests indecisive DYX sentiment – Source: capital.com

Today’s UK unemployment data came in a tad higher than expected, by edging up to 3.6% in the three months to September of 2022 from 3.5% in the previous period, with average earnings up 6% year on year- still way below an inflation rate that’s predicted to hit 10.5% in tomorrow’s reading.

GBP/USD is up more than 50 pips to US$1.18, with most gains added in the hour since the unemployment data release.

Can Cable extend past August highs? – Source: capital.com

Can Cable extend past August highs? – Source: capital.com

EUR/GBP is changing hands at 87.8p, with the euro gaining the upper hand given the past three days of solid gains on the pair

Monday’s Euro Area industrial production reading came as a surprise, having advanced 4.9% from a year earlier in September 2022, easily beating the 3.3% forecast.

While that did little to stir momentum in the euro yesterday, the EUR/USD pair is definitely rallying today. Having added 0.6% so far, the pair has cleared a four-month high of US$1.038.

Euro area GDP figures due this morning are expected to be grim; we’ll see if that pours cold water on the euro’s bullish performance.

7.34am: Unemployment rate up to 3.6%, wage growth edges higher

Ahead of UK inflation figures tomorrow and the Autumn Statement on Thursday, UK unemployment has come in slightly higher than expected, according to government figures.

The jobless rate rose from 3.5% in the three months to August to 3.6% in the quarter to September, the Office for National Statistics reported, when an unchanged figure had been forecast.

Wage growth was also higher than expected, with average weekly earnings excluding bonuses rising an annual rate of 5.7%, up from 5.4%. Analysts had pencilled in a rise of 5.5%.

Including bonuses it rose by 6%, the biggest rise outside the pandemic period.

But it still remains well below the annual inflation rate of 10.1%, which is itself expected to rise to 10.5% in tomorrow’s report.

Taking into account inflation, average pay including bonuses fell by 2.6%.

The number of people not working or looking for work rose by 0.2 percentage points to 9mln. Around 21.6% were classed as economically inactive, up from 20.2% in the previous quarter.

The ONS said the increase in economic inactivity was driven by those who are long-term sick, who increased to a record high.

In August to October 2022, the estimated number of vacancies fell by 46,000 on the quarter to 1,225,000. Despite four consecutive quarterly falls, the number of vacancies remain at historically high levels. An increasing number of businesses are now reporting holding back recruitment because of economic pressures.

Meanwhile the number of working days lost to strikes hit a record high, unsurpringly in the light of the current rail, mail and other disputes.

7.00am: FTSE seen slightly lower

FTSE 100 expected to open slightly lower following late falls in the US and after China reported slower-than-expected growth in factory output and retail sales for October, as a surge in Covid cases and a deepening property slump weighed on the world’s second largest economy.

Spread betting companies are calling London’s blue-chip index down by around 7 points.

US markets tumbled in late trading to end the day in negative territory, giving up some of last week’s strong gains, as another tech giant was reported to be set to announce swathing job cuts.

At the close the Dow Jones Industrial Average was down 211 points, or 0.63%, at 33,537, the S&P 500 fell 36 points, or 0.89%, to 3,957 and the Nasdaq Composite dropped 127 points, or 1.1%, to 11,196.

Shares in tech giant, Amazon.com Inc (NASDAQ:AMZN). dropped 2% as The New York Times reported it was set to axe 10,000 jobs becoming the latest tech giant to cull its workforce.

A busy day of corporate and economic news will kick off with unemployment and average earnings data while results are due from Imperial Brands PLC (LSE:IMB), Land Securities Group PLC (LSE:LAND) Wincanton PLC (LSE:WIN), Vodafone Group PLC (LSE:VOD) amongst others while BAE Systems PLC (LSE:BA.) is due to give a trading update.



[ad_2]

Trending