- FTSE 100 finishes 28 points lower
- Wall Street pushes higher after mixed start
- Royal Mail bags passport contract
4.45pm: FTSE closes in the red
London's blue chip index had reversed course at the close to finish around 28 points lower at 7,406 for a 0.4% loss on the day.
The lower metal prices were a result of weak growth in China, Tickmill Group's Patrick Munnelly noted.
"The second-quarter growth of China's economy was feeble, with the post-COVID momentum deteriorating rapidly. This has increased pressure on policymakers to implement further stimulus measures to support economic activity," Munnelly said.
"Industrial metal miners were particularly affected, experiencing a 1.8% dip as prices of most base metals faced downward pressure. Global mining giants Rio Tinto and Glencore also suffered losses, declining by 2.2% and 2.7%, respectively, however, the bottom spot on the index today is Coca Cola HBC as the bottler shed 4% on the session."
3.50pm: JMAT in demand
Johnson Matthey shares bucked the weaker market trend on Monday after analysts at Deutsche Bank upgraded their rating for the metals firm to 'buy' from 'hold' and lifted their price target to 2,500p from 2,300p.
The German bank’s analysts said they see upside potential for the FTSE 100-listed firm from a) a successful pivot or b) a break-up.
They noted that “Johnson Matthey is largely perceived as an autocatalyst business with an end date”.
However, they added: "1) We believe that management change is likely to unlock significant value. Ultimately, the situation can be win-win: if the growth/reinvention plan fails a value up to £35/share could be realised in a blue sky breakup scenario. 2) There is still substantial continued value in the autocatalyst business. 3) Though we expect earnings declines this year in PGM services, the segment is well-positioned to benefit from growing demand for recycled materials. 4) There is significant unrecognised potential in catalysts & hydrogen which can drive growth/reinvention."
The Deutsche Bank analysts noted that JMAT shares trades at 6.8 times EV/EBITDA which looks too low given the options.
In late afternoon trading, JMAT shares were ahead 0.8% at 1,768.50p.
3.25pm: Sunak has inflation priority
A day ahead of the latest consumer price index (CPI) data, UK prime minister Rishi Sunak has acknowledged that the taming of UK inflation is "taking longer than any of us would like".
Speaking on LBC radio today, Sunak said: "So, the first of my priorities is to halve inflation. Is that taking longer than any of us would like? Yes, it is. Am I the right person to tackle it? Yes, because I identified it as a problem before anybody else.”
He added: "Of course it's proving more persistent, but I'm being honest with people about the reasons for that, I'm not shying away from it.
"And I'm not apologetic about setting an ambitious target to bring it down. Because I think that's right to be ambitious for the country. I'm ambitious to make a difference to people. And the best way I can make a difference on their cost-of-living pressures is to bring inflation down."
The Office for National Statistics will publish the CPI figure for June on Wednesday morning.
In May, inflation was 8.7% and the consensus among economists is that June's figure will come in at around 8.2%, still way above the Bank of England’s 2.0% target.
3.00pm: Not up on the ROOF
Investor sentiment continued to decline last week across all markets followed by Qontigo according to its latest ROOF survey, ending at fresh 2023 lows in Australia, China, Developed ex-US Markets and Europe - with Developed Markets narrowly escaping that fate, for now.
Sentiment in five of the ten markets followed by Qontigo turned bearish last week, with sentiment in China on the brink of joining them.
Sentiment among US investors went from bullish the previous week to neutral last week, thanks to a better-than-expected inflation report for June, and stronger-than-feared Q2 earnings – albeit with only 6% of companies reporting – which has prevented investors from turning negative just yet.
Olivier d’Assier, Head of Applied Research, Qontigo commented: “During the first half of the year, markets gradually shook off their fears of a worst-case scenario for the economy, and with a lot of risk-averse investors having already jumped ship to fixed interest assets in 2022, the more risk-tolerant dominated market continually played the economic resilience game rather than the fear of a hard-landing one.
“Six months into 2023 and all we can say is that we are (probably) closer to finding out the economy’s fate. Central banks are also less sanguine about inflation, now that it has peaked and is on a downward slope towards their target rate, than they were at the start of the year. And there are a lot of risk-averse investors waiting on the sidelines for a clear sign that it is safe to jump back into equities.”
He added: “For now, without further clarity on the above, the base-case scenario for the second half of 2023 is a mirror of the first half’s performance, simply because markets hate giving even the appearance that they are being blatantly anti-symmetric.”
2.40pm: Mixed Monday on Wall Street
The FTSE 100 stayed weak but held off session lows midafternoon in London as US stocks made a mixed start to Monday as US investors looked cautiously ahead to a busy week for corporate earnings.
After around 10 minutes of trading in New York, the Dow Jones Industrial Average was off 47 points, or 0.1% at 34,461, but the S&P 500 added 0.1%, and the Nasdaq Composite gained 0.4%.
The July Empire State manufacturing index, which measures business conditions in New York state, fell to 1.1 from 6.6, above the consensus expectation of negative 4.3.
“The small drop in the headline index is a welcome change from the wild swings of recent months, but the bigger picture is that it has been broadly flat, net, since the end of last year,” Pantheon Macroeconomics senior US economist Kieran Clancy noted.
“The recent spike in auto production will lift aggregate manufacturing output in the second quarter, but manufacturing ex-autos remains in a sorry state, and the July Empire State signals that the malaise will continue into the third quarter.”
Major movers include Tesla, up 2.6% on the news it has commenced production of its Cybertruck after two years of delays, and Activision Blizzard, which gained 3.6% as Microsoft signed an agreement with Sony to keep the popular video game Call of Duty on PlayStation following its Activision takeover.
2.20pm: Tories to take a tonking
The Tories are tipped for a triple by-election battering this Thursday, with the Lib Dems and Labour dominating betting on the Somerton and Frome, Uxbridge and South Ruislip, and Selby and Ainsty contests.
Luke Tarr, Head of PR at Star Sports, said: “This week’s triple by-election is expected to spell further trouble for the Conservative party, and we forecast Rishi Sunak to lose all three seats when the voters take to the polling stations on Thursday.
“Somerton and Frome is predicted to be the trickiest for the Tories to hold onto and they are as big as 14/1 to come out on top on Thursday, with the Liberal Democrats the overwhelming 1/200 favourites.
“The other two votes are expected to be dominated by Labour, with Keir Starmer’s party heavily odds-on to claim Selby and Ainsty (1/10) and Boris Johnson’s former seat of Uxbridge and South Ruislip (1/12) from an increasingly desperate Conservative outfit.”
1.30pm: A look at some of today’s movers
Risers
Guild Esports - up 8% to 0.72p: Shares jumped higher on news it has penned a deal with Pixels AI in a bid to expand its advertising reach to a more specific audience of gamers.
Sovereign Metals - up 23% to 28.5p: Shares shot up after Rio Tinto was revealed as its new strategic investor, pumping in some A$40.4mln to help fund the Kasiya rutile-graphite project in Malawi.
East Imperial - up 12% to 0.96p: Shares jumped higher in Monday morning’s deals as it landed £2.2 million of convertible loan funding, to support working capital as the gin-mixer brand expands its footprint.
Oxford Cannabinoid - up 9% to 0.9p: Shares moved higher as the pharmaceutical company formally announced its expansion into oncology research. Having identified a potential “first in class” agent for the treatment of tumours, Oxford Cannabinoid the prospective drug would be cheaper and more convenient for cancer sufferers.
Fallers
Dianomi - down 40% to 47.1p Shares tanked on Monday morning as the digital advertising services firm lowered revenue guidance on the back of falling traffic levels. Anticipating an 18% drop in first-half revenue, Dianomi laid out expectations that revenue would miss previous guidance for the year to December 2023, now coming in as low as £30.5mln.
1.06pm: US preview
US stocks are expected to edge lower at the open on Monday following some weak growth data from China, as US investors look ahead to a busy week for corporate earnings.
In pre-market trading, futures for the Dow Jones Industrial Average (DJIA) were down 0.2%, while those for the S&P 500 lost 0.1%, and contracts for the Nasdaq 100 were flat.
Naeem Aslam, chief investment officer at Zaye Capital Markets commented: "Market sentiment is pretty much negative among traders and investors due to the Chinese economic data, which missed the forecast and raised concerns that the second-biggest economy in the world is suffering from a crisis.
"Basically, going into Monday, traders and investors were highly focused on China’s GDP data, and they were hoping that the country’s economic data would print a decent reading if not a strong one. But the number confirmed today that the Chinese GDP printed a reading of 6.3% for the second quarter, which was 0.8% lower than the previous quarter and a 2.2% drop in GDP on a quarter-on-quarter basis. The country set a goal of achieving 5% growth in 2023, and the lawmakers are still confident that they can revive growth in the country despite enormous geopolitical and economic challenges."
He also noted that later this week "we will have the US Retail Sales number, which will actually tell us the real position of consumer spending."
Aslam added: "Nothing out of the ordinary is expected as inflation continues to remain a challenge for them. Also, traders will continue to focus on earnings as more banks report their numbers, while traders will also pay close attention to earning numbers from airlines and tech earnings."
Wall Street ended mixed on Friday after a strong weekly performance, with the DJIA closing 113 points, or 0.3% higher at 34,509, boosted by some solid big bank earnings. But the S&P 500 index and Nasdaq Composite shed 0.1% and 0.2%, respectively.
Over the week, however, the DJIA gained 2.3% to notch up its best weekly gain since March, while the S&P 500 and Nasdaq Composite added 2.4% and 3.3%, respectively.
The moves higher came on the heels of softer inflation reports that lifted investor sentiment and heightened some hopes the Federal Reserve may be able to tame inflation without tipping the economy into a recession.
This week ushers in the Fed’s “blackout period” ahead of its July policy meeting. Traders anticipate a near 97% chance the central bank increases interest rates later this month, after pausing hikes in June, according to CME Group (NASDAQ:CME)’s FedWatch tool.
Second-quarter earnings due this week include results from big financial institutions such as Bank of America, Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS). Numbers are also due from United Airlines, Las Vegas Sands and technology giants Tesla and Netflix.
Wall Street is bracing for what be a gloomy earnings season with analysts forecasting a more than 7% decline in S&P 500 earnings from a year ago, according to FactSet.
12.52pm: Shapps to meet supermarket bosses
Bosses of Sainsbury’s, Tesco and Morrisons are set to meet with energy secretary Grant Shapps after he warned that he would hold retailers to account over “sky high” petrol prices.
Shapps will also meet executives from oil and fuel specialists BP, Shell and Esso.
The energy secretary will call on the retailers to share their fuel prices live by the end of August as part of efforts to prevent overcharging.
The Competition and Markets Authority (CMA) warned that drivers in the UK paid an extra £900mln in fuel last year as costs jumped by 6p per litre.
As a result, the CMA said it would launch a voluntary scheme to provide customers with live and transparent fuel price data.
Prices of petrol and diesel soared last year following Russia’s invasion of Ukraine, although they have since fallen back from peaks.
“I want to now hear how they are going to fix this,” Shapps said. “I will be telling them to do the right thing and immediately end any attempt to overcharge at the pumps.”
12.39pm: Markets across Europe
A quick glance at a look across markets in Europe.
The DAX in Germany is down 0.5% to 16,026, while the CAC 40 has shed 1.1% to 7,285 as markets feel the impact of weaker-than-expected economic data from China.
The IBEX 35 in Spain fared slightly better, down 0.04% to 8,434, while the FTSE 100 was down 0.24% to 7,416.
12.18pm: Mortgage rates ease
UK fixed-rate mortgage costs stabilised for the first time in nearly two months following weeks of steady rises.
Financial data provider Moneyfacts said that the 2-year fixed residential mortgage rate today is 6.78%, matching the rate recorded on Friday.
The average 5-year fixed residential mortgage rate also remained flat at 6.3%.
The last day the average rate did not go up between two working days was 24 and 25 May, when the average two-year mortgage was 5.34% and the five-year was 5.01%.
Rates had been rising as concerns over further interest rate hikes began to rise, although market expectations have eased in recent days from a peak of 6.5% to 6.25%.
12.01pm: Crude futures on the fall
WTI crude futures fell below $75 per barrel on Monday, extending losses made after weaker-than-expected Chinese economic growth raised concerns about demand in the world's second-biggest oil consumer.
Two of the three Libyan oil fields which shut last week resumed production on Saturday evening, bringing a total output capacity of 370,000 barrels per day (bpd) back to the market.
Russian oil exports from western ports are set to decline by some 100,000-200,000 bpd next month from July levels as the country follows through on its pledge for supply cuts in tandem with OPEC leader Saudi Arabia.
Shares in Shell were flat, changing hands at 2,309p as of midday on Monday, with BP also unchanged at 454p.
11.44am: FCA to be probed
The UK’s financial regulator is set to be probed by the National Audit Office (NAO) into the effectiveness of its work.
The Financial Conduct Authority (FCA) which regulates anything from high street banks to crypto trading apps will be reviewed by the independent body to “examine how the FCA is working with others, particularly HM Treasury.”
The NAO said the FCA’s portfolio has swelled following technological innovations like crypto assets and artificial intelligence, while it has also had to deal with new regulatory regimes.
11.20am: Barclays announces further closures
Major high-street lender Barclays will close 14 more branches this year as it aims to accelerate its switch to mostly online operations.
Closures will take place in October, November and December this year, and include locations in Cardiff, Salford, and Norwich.
The most recent announcement comes just less than a month after Barclays confirmed it would be closing ten more branches, taking the total closures announced so far in 2023 to 40.
"Where there is no longer enough demand to support a branch, we maintain an in-person presence though our Barclays Local network, live in over 200 locations, based in libraries, town halls, mobile vans and our new banking pods,” a spokesperson said.
Shares in Barclays were up 0.25% to 155p, while the broader FTSE 100 was down 24 points to 7,409.
10.58am: Wheat prices soar as agreement draws to close
Wheat futures in the US rallied, surging past $6.8 per bushel from the one-month low of $6.3 touched on 12 July after Russia refused to extend the deal guaranteeing a safe trade corridor for vessels to export Ukrainian grain out of Black Sea ports.
Russian authorities previously signalled that the deal would not be extended past the 17 July deadline due to restrictions that the West placed on logistics impacting Russian exports, marking an end to the year-long scheme that linked wheat exports from one of the world's top producers just before this marketing year’s harvest.
First inked last year, the United Nations-brokered Black Sea Grain Initiative was set up to abate a global food crisis following Russia’s invasion of key grain exporter Ukraine.
10.26am: Carlsberg and Danone Russia arms seized by Kremlin
Over in Russia, and the Kremlin has taken control of subsidiaries of French yoghurt maker Danone and Danish beer company Carlsberg.
The units have been put in “temporary management” of the state in a new order signed by President Vladimir Putin.
Moscow introduced rules earlier this year allowing it to seize the assets of firms from "unfriendly" countries.
This came after many companies halted business in Russia following its invasion of Ukraine.
Botd Danone and Carlsberg were in the process of selling their Russian businesses.
The FTSE 100 was down 12 points to 7,422.
10.00am: Steel prices near five-week low
Steel rebar futures fell to below the CNY 3,675 per tonne mark in the middle of July, approaching a five-week low after China’s GDP growth disappointed market expectations and deepened concerns of low resource demand in the world’s top steel consumer.
Data also showed that property investment for the first half of the year sank by nearly 8%, pressured by low demand for new housing and persistent stress from the property sector’s debt crisis that started in 2020.
The underwhelming data added to hopes of renewed stimulus from the Chinese government, cushioning the drop in prices.
On the supply side, steel output rose by 1.1% from the previous month in June, while some mills in the production hub of Tanghsan returned to activity following some suspensions due to air quality concerns.
Anglo-American lost 2.7% to 2,286p, while Glencore shed 2.6% to 454p. Rio Tinto fell around 1.9% to 5,113p and Antofagasta lost 1.8% to 1,508p.
9.42am: Royal Mail bags passport contract
Royal Mail said it won a five-year contract with the Passport Office for the delivery and collection of passports.
The postal service, owned by International Distributions Services, will also deliver a range of other important documents relating to UK visas and Immigration travel documents.
As part of the contract, Royal Mail will develop a dedicated customer experience team to manage any delivery queries.
The FTSE 250 company has already begun delivering some documents on behalf of the passport office and will become the primary service provider by October this year.
“We are immensely proud to have been awarded the contract for delivering the UK’s Passports. Everyone knows and trusts their postie and trust is so important for critical items like this. We are already working with HM Passport Office on further enhancements to the service that will roll out later this year,” said Nick Landon, Royal Mail chief commercial officer in a statement.
FTSE 100 is down 20 points to 7,414.
9.07am: Bad start in London
FTSE 100 got off to a bad start, down around 9 points to 7,425 with Chinese economic data taking its toll in London.
China’s economy grew by 6.3% year-on-year in the second quarter, falling short of expectations of a 7.3% rise.
As a result, Chinese sensitive stocks in London, such as miners Glencore and Anglo-American, were under pressure and dragging the index.
In what is panning out to be a relatively quiet day in terms of economic data in the UK, all eyes are therefore on inflation figures on Wednesday, which will give a big hint on the Bank of England's next rate move.
“After defying expectations by coming in hotter-than-anticipated last month, the UK headline rate of inflation is seen falling back on Wednesday, although it is expected to remain above 8%, highlighting the lingering price pressures in the domestic economy,” said Victoria Scholar, head of investment at interactive investor.
“On the one hand, energy prices have been coming down and food price inflation is expected to ease with supermarkets cutting prices to attract customers while consumers feel the squeeze.
“On the other hand, wage growth hit a record high in the three months to May, raising the risk of second-round inflationary effects if businesses pass on their additional cost pressures to consumers through higher prices," she noted.
8.51am: UK wealth plummets
Surging interest rates have led to the largest contraction in UK household wealth on record, according to a new report.
The value of assets has collapsed by just over £2tln since early 2021, driven largely by a sharp fall in bond prices following rising UK borrowing costs, economic think tank the Resolution Foundation said.
Household wealth as a share of the economy has plummeted by 185 percentage points since 2021 as a result.
Wealth as a share of the entire economy is now down to 650%, the Foundation said, a huge reversal from the over decade-long boom in property, debt and equity values.
“Holders of UK government debt have seen around a 30% loss in the value of their investments since the Bank of England started raising interest rates [in December 2021], and holders of sterling corporate bonds have lost 20%,” the report said.
“House prices have also started to weaken, with inflation-adjusted prices already down by seven per cent from their peak in mid-2022,” the think tank added.
When central banks raise interest rates, traders have to cut the price of bonds to bring the yield closer to the rate investors could gain elsewhere.
8.34am: Twitter sees ad revenue slashed in half
Bad news continues to pile up for Elon Musk ahead of his billionaire battle with Mark Zuckerberg after he confirmed Twitter lost almost half of its advertising revenue since last October.
Musk said the social media platform, which he bought for US$44bn around nine months ago, had not seen the increase in sales it hoped for in June, but that was a “bit more promising.”
Twitter is also struggling under heavy debt and a negative cash flow.
Advertisers quickly left the site after Musk completed his takeover over concerns about the new content moderation rules.
After laying off thousands of employees and cutting cloud service bills, Musk said Twitter was on track to post $3bn in revenue in 2023, down from $5.1bn in 2021.
8.25am: Miners weigh on market
FTSE 100 opened lower, as expected, shedding 5 points on the bell to 7,430.
The index is being dragged by a host of miners, with Anglo-American, Antofagasta and Glencore all down, losing 2.47%, 2.36% and 2% respectively.
Falling share prices among the miners comes as the largest consumer of metal, China, reported weak GDP figures which have raised fresh concerns about growth in the Land of the Dragon.
“With youth unemployment and the property sector remaining additional thorns in the economic side, investor impatience for further stimulus from the authorities is rising as the initial post-pandemic bounce seems to be fading fast,” said Richard Hunter, head of markets at interactive investor.
At the other end and leading the index, however, was Entain, which shares up 0.95% to 1,284p.
The Ladbrokes owner said it has completed the acquisition of Angstrom Sports for a potential £122mln, payable over the next three years.
A statement from the sports betting company said the UK-based firm is a “specialist provider of next-generation sports modelling, forecasting, and data analytics,” focusing on US products and markets.
7.57am: House prices fall as base rates weigh on sellers
The average property price coming to market fell by 0.2% according to data from Rightmove as new sellers temper their expectations following recent Base Rate hikes and growing buyer affordability constraints.
Prices on average fell by £905 to £371,907, marginally below the 0% norm for this time of year.
Consistent hike rates from the Bank of England (BoE) to combat the sticky inflation have weighed on the number of sales, with those agreed in June 12% behind the same period in 2019.
Despite this, buyer demand remains resilient, 3% higher than four years, with agents reporting that homes that are “right-priced” are still attracting motivated buyers due to the shortage of property for sale.
“The interest-rate brakes being applied more strongly to slow the economy are now beginning to bite in the housing market,” said Tim Bannister, Rightmove’s director of property science.
“While prices and sales bounced back this year much more strongly than most expected, the unexpectedly stubborn inflation figures and the surprise of further mortgage rate rises when many felt that they had stabilised, have contributed to the fall in prices and number of sales agreed.”
“However, buyer demand remains resilient at 3% above 2019’s more normal market levels, buoyed by a shortage of quality property for sale and ongoing housing needs.”
“First-time buyers, trader-uppers and downsizers with higher deposits and lower mortgage requirements appear to be still keenly searching the market, not wanting to miss out on the right property that is not over-priced and that they can still afford.”
7.37am: DFS posts 'record' market share
DFS, the furniture retailer, said it had a record market share last year as it expects profits to grow in the upcoming 12 months.
The group said in a trading update that it had a market of 38% to the year-end 25 June 2023.
Underlying profit before tax and amortisation was in line with previous guidance of slightly above £30mln, “despite the market being significantly worse than expected.”
Sales in the period were however down 4% year-on-year, although 15% higher than the last -pre-pandemic year.
Looking ahead, DFS said trading so far has been in line with expectations, with the board forecasting underlying profits to be slightly higher than last year, despite the uncertain economic outlook.
“We are in the strongest position we have ever been as a Group in terms of market share, and when the market recovers, we will be well placed to deliver our strategy and grow our earnings and cash flows towards our longer-term plan,” said chief executive Tim Stacey.
7.22am: Entain goes shopping
Ladbrokes owner Entain said it has completed the acquisition of Angstrom Sports for a potential £122mln, payable over the next three years.
A statement from the sports betting company said the UK-based firm is a “specialist provider of next-generation sports modelling, forecasting, and data analytics,” focusing on US products and markets.
Entain said the purchase secures its place as the only global operation with a full in-house suite of end-to-end analytics, risk and pricing capabilities for US Sports betting products.
“Their next-generation forecasting, pricing and risk management capabilities will unlock significant opportunities across BetMGM's US sports betting offering, particularly in the fast-growing markets of parlay and in-play wagering,” said Entain CEO Jette Nygaard-Andersen.
The acquisition is expected to be completed during the third quarter.
7.12am: London to open lower
FTSE 100 is expected to open lower to kick start the week, down 46 points to 7,395 according to spread betting firms.
Naeem Aslam, chief investment officer at Zaye Capital Markets, believes sentiment is weak among traders and investors following concerning Chinese economic data.
“Going into Monday, traders and investors were highly focused on China’s GDP, and they were hoping that the country’s economic data would print a decent reading if not a strong one,” Aslam said.
“But the number confirmed today that the Chinese GDP printed a reading of 6.3% for the second quarter, which was 0.8% lower than the previous quarter and a 2.2% drop in GDP on a quarter-on-quarter basis.”
Looking ahead to the week, all eyes in London will be focused on inflation, with fresh numbers to be released on Wednesday.