- FTSE 100 ends 38 points lower at 7,634.52
- Sterling strengthens to 10-month high versus dollar
- US stocks extend falls on inflation worries, after data
4.45pm: Pound weighs on offshore earners
The FTSE 100 ended trade lower, shedding 0.5% to 7,634 and reversing solid opening gains as a stronger pound weighed on firms with large exposure to offshore earnings.
After pushing briefly above the 7,700 level to a three-week high, the blue-chip index retreated after the pound rose above 1.25 against the US dollar to its highest levels since June last year, noted Michael Hewson, chief market analyst at CMC Markets UK.
"Optimism over the UK economy has been improving in recent weeks, helping to drive the recent gains in sterling, however today’s resilience in the pound does appear to be acting as a bit of a drag on the wider UK market, which has slipped into negative territory, with basic resources, energy and industrials acting as the main drags, giving back some of yesterday’s gains," Hewson said.
By the London close, US stocks were also lower as weaker than expected jobs and factory data weighed on a market already under pressure due to the potential inflationary impact of higher oil prices.
The Dow Jones Industrial Average was 0.7% lower at 33,370, while the S&P 500 was 0.6% down at 4,101 and the Nasdaq Composite was 0.5% weaker at 12,133.
4.00pm: Dimon adds to caution
Comments from JPMorgan Chase chief executive Jamie Dimon were also a drag on market sentiment, with the longtime bank boss warning that the US banking crisis was far from being over.
"The current crisis is not yet over, and even when it is behind us, there will be repercussions from it for years to come," Dimon said in his annual letter to shareholders Tuesday, CNBC reported.
"Any crisis that damages Americans' trust in their banks damages all banks - a fact that was known even before this crisis. While it is true that this bank crisis 'benefited' larger banks due to the inflow of deposits they received from smaller institutions, the notion that this meltdown was good for them in any way is absurd," the JPMorgan Chase boss added.
3.50pm: JOLT for markets
Heading into the final 40 minutes of trading, the FTSE 100 index had sunk to session lows as US stock indexes extended their losses roiled by worries over the impact of higher oil prices on inflation, as well as some worrying economic data.
Ahead of Friday's March non-farm payrolls report - albeit due when markets are shut for the Good Friday holiday - the latest JOLT job openings data showed a fall of 632,000 to 9.9mln in February, according to the Bureau of Labor Statistics, the lowest level seen since May 2021 and short of market expectations for a print of 10.4mln, potentially indicating that the labour market may have finally started to cool.
In other data, US factory orders fell 0.7% in February, according to the Census Bureau, below January's revised 2.1% decrease but ahead of market expectations for a 0.5% decline. The drop, which marked the second consecutive month of decline in factory orders, came as demand for transport equipment was down 2.8% month-on-month.
3.10pm: Vodafone neutral
Analysts at Citi have resumed coverage of Vodafone PLC after a period of restriction, with a 'neutral' rating.
The bank's analysts said they see "significant" fundamental upside if the company executes well and/or in a breakup scenario, with the company seen as possibly in-play given recent stakebuilding by the likes of Liberty Global.
"But there are additional risks that may weigh on profitability in the coming quarters and with FY23 results due in May, we expect another reset to expectations," the Citi analysts said.
"After that, there are potential options that could materialise, though we note that most are outside of Vodafone's control and thus will only be attractive to investors if earnings risk is out of the way (at least temporarily)," they concluded.
2.50pm: Caution prevails
The FTSE 100 index slipped back into the red as US stocks swiftly reversed modest opening gains as investors continued to weigh-up rising oil prices and their possible impact on inflation and the Fed’s path for interest rates ahead of more key economic data.
Around 20 minutes after the New York market opened, the Dow Jones Industrials Average was down 36 points or 0.1% at 33,564, while the tech-laden Nasdaq Composite also fell 0.1%, with the broader S&P 500 index essentially flat.
“The rise in oil prices makes the Fed’s job to rein in inflation more complicated,” commented FOREX.com market analyst Fiona Cincotta. “This could ultimately mean higher interest rates for longer. That said, the market is still pricing in two rate cuts by the end of the year … pricing in a 58% chance of a rate hike in May, following the OPEC cut.”
In London, around 2.50pm, the FTSE 100 index was 3 points, or 0.04%, lower at 7,669, well below the session high of 7,726.85.
2.30pm: Google action
Hundreds of Google employees staged a walkout at the company’s London offices on Tuesday, following a dispute over layoffs, Reuters has reported.
In January, Google’s US parent company Alphabet Inc said it was laying off 12,000 employees worldwide, equivalent to 6% of its global workforce amidst a wave of job cuts in the tech sector, which has so far seen companies shed more than 290,000 workers since the start of the year, according to tracking site Layoffs.fyi.
Trade union Unite, which counts hundreds of Google’s UK employees among its members, said the company had ignored concerns put forward by employees.
“Our members are clear: Google needs to listen to its own advice of not being evil,” said Unite regional officer Matt Whaley. “They and Unite will not back down until Google allows workers full union representation, engages properly with the consultation process and treats its staff with the respect and dignity they deserve.”
2.15pm: Gas savings
Centrica-owned British Gas and energy supply rival Octopus Energy paid out millions of pounds to customers who cut energy usage as part of National Grid’s demand flexibility service this winter.
Octopus paid £5.3mln to the near 700,000 people that took part, accounting for roughly half of the required demand shift, while British Gas shared out £1.8mln to 200,000 households.
Smart meter customers were rewarded by suppliers for using less energy during 13 separate demand flexibility service events between November and March, having bills cut based on how much they reduced usage compared to normal demand.
According to British Gas, the majority of savings were made by customers cooking or washing clothes at different times, with its customers saving £28.50 on average.
Octopus customers saved £7.60 on average meanwhile, though amounts paid by both suppliers varied widely.
Some customers gained between £40 and £50, rising to £332 for one British Gas customer.
1.30pm: Some of the top riser and fallers on the junior market
Ramsdens Holdings PLC (AIM:RFX) shares were 8% higher after the pawnbroker and foreign currency group said its first-half performance had been ahead of expectations. The stock, up a third in value in the last year, advanced 9.45p to 226.95p in the first hour of trade.
Solid State PLC (AIM:SOLI) went 2% higher to 1,120p after the component manufacturer said its full-year results be at least in line with consensus expectations.
United Oil & Gas PLC (AIM:UOG) shares gained just over 30% after a project update out of Egypt revealed that drilling has begun at its next well and as production data from its most recent additional confirmed a continuing strong performance.
Corcel PLC (LSE:CRCL) shares hopped 5% higher back to a six-month high of 0.40p (having fallen over 99% over the past five years) after it exercised its option to acquire 100% of the lithium rights to the Canegrass lithium project in Western Australia.
Saga PLC (LSE:SAGA) fell 11% despite swinging back into full-year profit on an underlying basis as revenue grew strongly due to continued Cruise and Travel recovery following the Covid-19 pandemic. The insurance company, which focuses on the over-50s, posted a reported loss before tax of £254.2mln, widened from £23.5mln, reflecting a £269.0mln impairment of insurance goodwill reported at the half-year stage.
R&Q Insurance Holdings Ltd (AIM:RQIH) shares fell 10% to 60p after the company said it expects to make a US$30 to 40mln loss for the past year and proposes spinning off Accredited, its program management business.
Physiomics PLC (AIM:PYC) shares dropped by more than a quarter after the oncology consultancy group said it faced revenue pressure due to the biotech funding squeeze and customer diversification efforts.
1.00pm: US stocks seen edging higher
Wall Street is likely to open moderately higher following a volatile session on Monday as the likely inflationary impact of a curb in oil production was balanced by ISM manufacturing data that came in weaker than expected, casting a shadow over the US economy.
Futures for the Dow Jones Industrial Average (DJIA) rose 0.1% in Tuesday pre-market trading while those for the broader S&P 500 index gained 0.3% and contracts for the Nasdaq-100 added 0.5%.
A rise in energy stocks in response to the decision by Opec+ to further reduce supply supported a 1% rise in the DJIA to 33,601 on Monday, while the S&P 500 added 0.4% to 4,125 for a fourth day of gains. But the Nasdaq Composite shed 0.3% to 12,189.
Exxon Mobil rallied 6%, Chevron gained 4.2% and Marathon Oil jumped 10%.
“Markets generally made measured progress, although the fallout from the surge in the oil price tempered sentiment,” commented Richard Hunter, head of markets at interactive investor.
“In the US, the potentially inflationary effect of a higher oil price, prompted by surprise production cuts being announced by OPEC+, added to concerns that the Federal Reserve could be tempted to maintain its rate hiking policy,” Hunter said. “The tech-heavy Nasdaq index, which has been the bearer of good news for investors this year in anticipation of a pause in the hiking cycle, slipped slightly at the close but nonetheless remains ahead by 16.5% so far this year.”
More positively for investors keen to see an end to the monetary tightening environment, other economic releases suggested that the policy is beginning to take hold, he noted.
“US manufacturing activity dipped to its lowest level in almost three years in March, with new orders slumping amid the possibility of further falls if the expected credit tightening from banks washes through. This could have a particular impact on the important auto market in the US, where cars are largely purchased on credit, and more broadly could dampen big-ticket purchases," Hunter concluded
Back in London and the Footsie has run out of steam trading 1 point higher.
12.30pm: Hammerson faces investor pressure over sales/dividends
Hammerson, one of Britain's biggest shopping centre owners, is facing demands from its biggest shareholder to accelerate asset sales and resume dividend payments ahead of its annual meeting next month, according to Sky News.
A report said Lighthouse, the investment vehicle of former Hammerson director Desmond de Beer, has tabled resolutions to appoint two new board members amid simmering discontent over its strategy.
In a letter published in Hammerson's annual report, Lighthouse, which holds a near-23% stake in the Brent Cross-owner, said it did "not have confidence in the Hammerson board as currently constituted, having regard to the operational and strategic weaknesses reflected in Hammerson".
Shopping centre owner Hammerson under siege from biggest shareholder https://t.co/SP49HQdLe0
— Sky News (@SkyNews) April 4, 2023
De Beer, who quit the company's board last October, expressed unhappiness at its record of reducing administration costs.
"Relative to the size of its managed portfolio, Hammerson's administration costs have increased and objectively are high," Lighthouse said.
"This is a matter Hammerson can rectify in the short term through disciplined management."
Lighthouse added that Hammerson, led by CEO Rita-Rose Gagne, had shifted its focus "away from its core proposition as a retail REIT [real estate investment trust]".
11.54am: Opec+ move could pose bigger threat than banking crisis - SocGen
The oil price extended its gains after yesterday’s surprise cut in production by members of OPEC+ and analysts think there is more to come with one seeing the increase as a bigger medium term risk for credit that the banking crisis.
Brent crude advanced 0.9% to US$85.69/barrel while West Texas Intermediate prices climbed a further 1% to US$81.18/barrel.
Goldman Sachs (NYSE:GS) thinks the cuts by OPEC+ could result in a significantly larger deficit in the market, driving a rally in prices to US$100 per barrel by April 2024.
It sees "elevated OPEC pricing power - the ability to raise prices without significantly hurting its demand - as the key economic driver", and estimates that the production cut will raise OPEC+ revenues as the boost to prices more than offsets the drop in volumes.
The US investment bank reiterated its view that the market will return to sustained deficits from June onward given rapid emerging market growth, falling Russia supply, and sluggish US supply.
The broker lifted its price forecast for Brent for December 2023 by US$5 to US$95 a barrel on Monday.
Analysts at Barclays also see a US$5 upside to its US$92 per barrel price target, while Jefferies noted Brent prices could still end the year at US$96 per barrel.
At Societe Generale analysts believe the production cuts pose a bigger medium-term challenge for credit than the banking crisis.
The first problem SocGen highlights is that Opec+’s targeting of US$90 a barrel is a very big ask effectively a return to levels last seen in the first months after Russia’s invasion of Ukraine.
SocGen feels this creates two challenges for credit, likely higher energy prices will increase pressure on the central banks to hike interest rates and second, higher energy prices are set to weigh on corporate margins and results.
11.05am: BoE's Tenreyro - rates need to come down to avoid inflation undershoot
A Bank of England rate setter said interest rates will need an "earlier and faster reversal" to avoid inflation falling well below its 2% target.
Speaking at the SES annual conference Monetary Policy Committee member Silvana Tenreyro suggested the Bank had pushed rates too high to 4.25%.
She said as the effects of the large and rapid tightening come through in 2023 and 2024 this is likely to drag demand well below its potential, loosening the labour market and pulling down inflation.
She believes a looser stance is needed to meet the inflation target in the medium term.
In general, a looser stance can be achieved either through lower Bank Rate today or through lower Bank Rate in future, which leads to a lower market curve.
A lower market curve would then lower lending rates and loosen financial conditions today, she added.
Tenreyro has consistently argued against rate rises at the MPC’s monthly meetings.
10.35am: Credit Suisse attacked by investors as chair says sorry
Credit Suisse chair Axel Lehmann has apologised to investors for the collapse of the 167-year-old Swiss bank at its final shareholder meeting as an independent business on Tuesday.
“It is a sad day. For all of you, and for us,” Lehmann told shareholders at the bank’s AGM in Zurich.
“The bitterness, anger, and shock of all those who are disappointed, overwhelmed, and affected by the developments of the past few weeks is palpable.”
BREAKING: Credit Suisse Chairman Axel Lehmann apologizes to shareholders, saying he's "truly sorry" for failing to stem a loss of trust in the bank https://t.co/HWswlH10yl pic.twitter.com/2LyXRTUIym
— Bloomberg (@business) April 4, 2023
Shareholders expressed their anger at the way Credit Suisse was forcibly taken over by UBS as Switzerland's government sought to avoid triggering a global banking crisis.
Shareholder advisory firm Ethos decried the "greed and incompetence of its managers" as well as pay that reached "unimaginable heights", as it prepared to challenge top executives at the shareholder meeting.
"Shareholders have lost considerable amounts of money and thousands of jobs are on the line," it said.
Dominik Gross of the Swiss Alliance of Development Organisations said: "The government's use of emergency powers to push this deal through goes beyond legal and democratic norms."
"Swiss taxpayers too are on the hook for billions of francs of junk investments and yet the government, (regulator) FINMA and the central bank have given little explanation about the state's 9 billion (franc) loss guarantee to UBS."
9.52am: Attention switches to US labour data
With a shortened trading week ahead attention will soon focus on US non-farm payrolls figures due later this week.
Ahead of that the US labour market will be in focus with the publication of the latest ‘JOLTS’ Job Openings and Labor Turnover Survey.
Russ Mould at AJ Bell notes the headline figure will be the number of job vacancies, which is still very high by historic standards, to suggest employers cannot find the staff they need – usually a sign of a strong economy.
“In January, the number of vacancies dipped by 400,000 but still came in at 10.8mln,” he noted.
“Bears will say that is below the March 2022 peak of 12mln million. Bulls will say is it higher than normal for the 20-year history of this dataset and also miles above the 7.1 million vacancies on offer in 2020 just before Covid struck.”
Consensus expectations according to FXStreet for February is 10.4mln.
9.29am: Rio supports Energy Resources fundraising
The Footsie has settled around 16 points to the good for now with its European counterparts ijn Frankfurt and Paris also in the green, up 0.4% and 0.3% respectively.
In company news, Rio Tinto PLC (LSE:RIO) will support Energy Resources of Australia Ltd's recently disclosed plans for an interim entitlement offer, which seeks to raise up to A$369mln.
In a statement the Anglo-Australian mining and metals company said this is to address funding requirements for the Ranger rehabilitation project in Northern Territory, Australia to the end of the second quarter of 2024.
Rio Tinto said it will subscribe for its full entitlement under the IEO for A$319mln.
Funds raised will be used partly to repay a A$100mln credit facility provided by Rio Tinto to assist ERA with its management of immediate liquidity issues.
Rio Tinto added funds from the IEO are not expected to generate any financial return and will be dedicated strictly to the Ranger project and repayment of the credit facility.
9.02am: Okyo Pharma adds to London exodus
The FTSE has continued to hold firm but is well off earlier highs, now up 10 points.
OKYO Pharma Limited has become the latest firm to signal an exit from the UK stock market. The ophthalmology-focused bio-pharmaceutical company which is developing OK-101 to treat dry eye disease is to keep its main listing on Nasdaq.
Shares fell 20% on the news.
Victoria Scholar at interactive investor said: “This abandonment of its London listing adds to worries about corporate flight away from the London Stock Exchange post Brexit. WANdisco said last month it is proactively exploring the United States to create a dual listening.”
“Arm Holdings abandoned London as a potential location for its IPO, FTSE 100 building business CRH also said it was planning to list in the US and Flutter has been considering a secondary listing in New York.”
Heading the other were shares Digital 9 Infrastructure which rose 3% after it moved to reassure investors following continued volatility in its share price.
Shares in the investment firm, which specialises in the infrastructure used to run and manage the internet, have lost 27% over the last month, and 30% in the year to date.
But Digital 9 insisted earlier that it was not aware of any portfolio-specific factors that might have caused the decline.
8.40am: Virign Media offline
Virgin Media is racing to fix a problem with its broadband which has stopped working for thousands of customers today.
Nearly 29,000 users have reported issues with their service on the outage tracking website Downdetector.
The company tweeted: "We're aware of an issue that is affecting broadband services for Virgin Media customers as well as our contact centres.
We’re aware of an issue that is affecting broadband services for Virgin Media customers as well as our contact centres. Our teams are currently working to identify and fix the problem as quickly as possible and we apologise to those customers affected.
— Virgin Media (@virginmedia) April 4, 2023
This is a map of areas hit so far.
"Our teams are currently working to identify and fix the problem as quickly as possible and we apologise to those customers affected,"
Virgin Media said.
8.17am: FTSE firmer in early exchanges
The FTSE 100 made solid early progress as investors took encouragement that Australia’s central bank had paused its interest rate hikes.
At 8.15am, London’s lead index was up 34.57 points or 0.45% at 7,707.57 while the FTSE 250 rose 78.18 points, or 0.4% to 18,957.59.
Richard Hunter, head of markets at interactive investor, said: "Despite some further strength in sterling which tends to hamper the primary index given its heavy exposure to overseas earnings, the FTSE100 traded higher in early exchanges, with broad-based gains across several sectors."
In Australia, the central bank decided to leave interest rates unchanged at its April meeting. The cash rate target remains 3.60% and the interest rate on exchange settlement balances remains 3.50%.
This stoked hopes that interest rates could be close to peaking across the globe although the picture has been muddied once more by an energy shock, this time a sharp rise in oil prices following the surprise call by members of Opec+ to cut production which sent oil prices soaring on Monday.
Prices have continued to climb today with Brent crude 0.5% higher at US$85.29/barrel supporting BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL) up 0.5% and 0.6% respectively.
Elsewhere and Rathbones Group PLC (LSE:RAT, OTC:RTBBF) firmed over 2% after news it is to combine with Investec’s UK wealth business to create the UK's leading discretionary wealth manager.
The all-share deal will see Rathbones remain an independent listed company with Investec as a long-term, strategic shareholder. Investec will have a 41.25% interest in Rathbones after the deal with voting rights limited to 29.9%. The deal values Investec’s UK business at £839mln.
The agreement excludes Investec’s wealth and investment businesses Switzerland and its international business.
The enlarged group will have around £100bn of funds under management and administration.
Shore Capital’s Ben Williams said the deal makes sense. He noted: “Rathbones Group’s problem has been a lack of growth, because its clients are too old, and the omnibubble deflated a little.”
But he feels “this is an elegant step forwards in profitability.”
But Saga PLC (LSE:SAGA) fell back 2.4% despite a swing back into profit on an underlying basis at the year-end as revenue grew strongly due to continued Cruise and Travel recovery following the pandemic.
Revenue for the year ended 31 January advanced 54% to £581.1mln from £377.2mln a year prior with underlying pre-tax profit of £21.5mln compared to a loss of £6.7mln in the comparative period.
The insurance company which focuses on the over 50s posted a reported loss before tax of £254.2mln, widened from £23.5mln, reflecting a £269.0mln impairment of insurance goodwill reported at the half-year stage.
7.59am: Saga revenue jumps, posts underlying profit
Saga PLC (LSE:SAGA) swung back into profit on an underlying basis at the year-end as revenue grew strongly due to continued Cruise and Travel recovery following the pandemic.
Revenue for the year ended 31 January advanced 54% to £581.1mln from £377.2mln a year prior with underlying pre-tax profit of £21.5mln compared to a loss of £6.7mln in the comparative period.
The insurance company which focuses on the over 50s posted a reported loss before tax of £254.2mln, widened from £23.5mln, reflecting a £269.0mln impairment of insurance goodwill reported at the half-year stage.
Euan Sutherland, Saga's Chief Executive Officer, said despite a “particularly challenging external backdrop, Saga made progress against its strategy while achieving significant revenue growth and returning to underlying profit.”
He noted the Ocean Cruise business continued to see strong customer demand and bookings for 2023/24 are on track to meet targets while in Travel, bookings are significantly ahead of the same point last year and “that business will return to profit this year.”
Saga said it remains in discussions in relation to the possible sale of its Insurance Underwriting business.
7.35am: Rathbones to merge with Investec UK's wealth arm
A deal struck firmly in the Square Mile to start the day. Rathbones Group PLC (LSE:RAT, OTC:RTBBF) is to combine with Investec Wealth & Investment Ltd to create the UK's leading discretionary wealth manager.
The all-share deal will see Rathbones remain an independent listed company with Investec as a long-term, strategic shareholder.
Investec will have a 41.25% stake in Rathbones following the deal with voting rights limited to 29.9% with the deal valuing Investec's UK business at £839mln. The agreement excludes Investec’s wealth and investment businesses Switzerland and its international business.
The enlarged group will have around £100bn of funds under management and administration.
Cash synergies of at least £60mln are forecast primarily cost savings but also higher net interest income.
The deal is expected to enhance earnings for Rathbones in year one after completion with low-teens EPS accretion targeted by year three and a double-digit post-tax return on invested capital in the third full year also forecast.
Fani Titi, Investec Group chief executive, said: “The strategic fit of the two businesses is compelling with complementary strengths and capabilities to enhance the overall proposition for clients.”
Clive Bannister, chair of Rathbones, said: “This transaction not only presents a compelling strategic and financial rationale, but also accelerates Rathbones' growth strategy.”
7.00am: Bright start seen for the Footsie
The FTSE 100 is expected to open higher after a mixed session in Asia and the decision by Australia's central bank to pause interest rate rises.
Spread betting companies are calling London’s lead index up by around 16 points.
The Reserve Bank of Australia decided to leave interest rates unchanged at its April meeting. The cash rate target remains 3.60% and the interest rate on exchange settlement balances remains 3.50%.
"The board took the decision to hold interest rates steady this month to provide additional time to assess the impact of the increase in interest rates to date and the economic outlook," said RBA Governor Philip Lowe.
Ipek Ozkardeskaya at Swissquote Bank described it as a "hawkish hold", as "the RBA didn’t close the door to further rate hikes saying that ‘some further tightening of monetary policy may well be needed to ensure that inflation returns to target’."
"Still, it’s the first major central bank to hold fire since the banking crisis," she noted.
In Tokyo on Tuesday, the Nikkei 225 index was up 0.3%. The Shanghai Composite was up 0.3%, but the Hang Seng index in Hong Kong was down 1.0%. The S&P/ASX 200 in Sydney closed up 0.1%.
US stocks closed mixed on Monday as soaring oil prices supported the blue chips but knocked tech stocks. The rise in the oil prices raised inflationary concerns prompting worries interest rates would stay higher for longer. The Dow Jones Industrial Average ended up 1.0% and the S&P 500 up 0.4%, but the Nasdaq Composite lost 0.3%.
With the economic diary looking quiet the early focus will be results from insurance form for the over-50s, Saga.