- FTSE 100 adds 18 points
- US stock indexes all higher again
- UK retail sales helped by sunny weather
4.45pm: Green end to the week
The FTSE 100 ended the week on a positive note as US stocks turned around and headed higher into the weekend. At the close, London's blue-chip index was up 18 points or 0.2% at 7,664, taking gains for the past five days to 3.1%.
"Investors seem to put aside disappointing results by Netflix and Tesla which provoked Thursday's rout and instead focus on next week's Alphabet, Microsoft and Intel earnings among a plethora of others," commented IG senior market analyst Axel Rudolph.
"The German DAX has been Friday's underperformer as a 4% drop in SAP shares weighed on the index. In the UK the FTSE 100 has risen for a second consecutive week, buoyed by slowing inflation and stronger-than-expected retail sales.”
By the London close, the Dow Jones Industrial Average was 0.3% higher at 35,320, the S&P 500 had gained 0.4% to 4,551 and the Nasdaq was 0.2% firmer at 14,097.
3.50pm: Crude gain
Oil prices were stronger late on Friday afternoon supported by fresh economic stimulus measures in China and amid evidence of tightening supplies.
Brent crude was up 0.9% at $79.67 a barrel, while US West Texas Intermediate (WTI) crude rose 1.0% to $76.61 a barrel.
For the FTSE in London it was helpful as both Shell PLC and BP PLC were in positive territory.
Investors welcomed stimulus measures designed to reinvigorate the world's second-biggest oil consumer following data that suggests the Chinese government’s 5% annual growth target will be missed.
Meanwhile, on the supply front, US inventories have fallen amid a jump in crude exports and higher refinery utilisation, according to recent data from the Energy Information Administration (EIA).
Separately, on Friday, UAE Energy Minister Suhail al-Mazrouei told Reuters that current actions by OPEC+ to support the oil market were sufficient for now and the group is "only a phone call away" if any further steps are needed.
3.30pm: Trump SPAC target soars almost 100%
Digital World Acquisition Corp (DWAC), the special-purpose acquisition company (SPAC) aiming to merge with Donald Trump's media company, is soaring having resolved a regulatory investigation with an US$18 million fine.
The US Securities and Exchange Commission (SEC) said late Thursday that DWAC will pay the fine if it completes a combination with Trump Media & Technology Group.
The SEC had alleged that DWAC misled investors who participated in its $287 million initial public offering in 2021. The company told investors that it did not have discussions with a merger target prior to raising money, but its officers had extensive merger discussions with Trump's company, the SEC said.
DWAC first disclosed the likely settlement in early July, though the SEC hadn't approved the deal yet.
The settlement clears one hurdle for DWAC's merger with Trump Media & Technology, which will become publicly traded if the SPAC tie-up is closed. The two parties have until September to complete the combination.
3.05pm: Global tech lay-offs rise
More than 221,000 global technology-sector employees have been laid off since the start of 2023, according to data compiled by the website Layoffs.fyi.
That number has gone up more than eightfold since mid-January, the website noted.
The data show that 2023 has easily surpassed 2022 for global tech redundancies, with 877 tech companies laying off 221,045 employees since the start of the year. Last year, 1,024 tech companies laid off a total of 154,336 employees, according to Layoffs.fyi.
Software giant Microsoft announced more job cuts last week, in addition to the 10,000 cuts the company announced earlier this year.
2.45pm: Dow Jones wavers, FTSE too
The FTSE 100 index ran back to near opening levels in midafternoon trading, giving up earlier gains as US stocks started mixed on Friday with US corporate earnings remaining the main focus.
Around 15 minutes after the New York open, the Dow Jones Industrials Average was down 11 points, or 0.03% at 35,213, but the S&P 500 index added 0.3%, and the Nasdaq Composite gained 0.6%.
DHF Capital asset manager Bas Kooijman noted that, as earnings contribute to US stock volatility, there could also be price corrections after the continuous gains of the last few months.
“In particular, traders could become more cautious before the Federal Reserve’s meeting next week and could move to secure their gains,” he said.
“If a more stable outlook for interest rates is confirmed, the stock market could record a stronger performance. This could come in addition to reduced concerns about a potential recession.”
2.30pm: Going underground after London strikes shelved
A week-long series of strikes on the London Underground starting Sunday has been suspended by the unions involved after talks with Transport For London at Acas.
Members of Aslef and the RMT had both called off their separate actions, which had been predicted to cause severe disruption for commuters in the capital.
Aslef's Finn Brennan said: "After a week of intense negotiations, we have made real progress in making sure our members' working conditions and pensions are protected."
However, RMT general secretary Mick Lynch cautioned that the strikes had not been called off just suspended.
"RMT's strike mandate remains live until October and we are prepared to use it if necessary," Lynch said.
2.15pm: Crypto not gambling
The House of Commons Treasury Committee’s recommendation that the UK government regulate the cryptocurrency industry under gambling legislation has been shot down economic secretary Andrew Griffith.
The Committee laid out the government’s response to its ‘Regulating Crypto’ white paper filed in May in a recent statement.
According to the response, the government “recognises many of the consumer risks described in the report, as well as the pressing need for robust and effective regulation”.
However, the government “firmly disagrees with the Committee’s recommendation to regulate ‘retail trading and investment activity in unbacked cryptoassets as gambling rather than as a financial service’”.
1.33pm: A look at risers and fallers on LSE's junior market
Ascent Resources PLC (AIM:AST) shares added 8.8% after it announced an increase in the size of its claim against the Republic of Slovenia. The company said that Enyo Law LLP has on behalf of the claimants raised and validated the damages assessment up to €656.5mln as part of a formal filing of its claim memorial.
Filtronic PLC (LSE:FTC) shares rocketed 9% higher following news it has won a €3.7mln (£3.2mln) contract with the European Space Agency to develop space-based 5G mobile telecoms mobile communication systems.
Kistos PLC (AIM:KIST) saw its shares move on the front foot after the energy company revealed it had won an appeal in the Netherlands, reversing a prior decision by the Dutch government not to extend the span of the M10/M11 licence. The group added 4.2% to 238.6p.
Renalytix PLC (AIM:RENX) shares ramped 6.2% after it announced a distribution agreement for its kidneyintelX.dkd with Vector Pharma for the Middle East, a region that it notes has one of the highest incidence rates for type 2 diabetes globally.
BowLeven PLC's (AIM:BLVN) rollercoaster week continued as shares in the Cameroon-focused oiler bounced around on Friday. The company put out a statement early stating there was no reason it knew why its shares had jumped to 1.75p from 1.05p yesterday. Shares were down 9.4% at 1.58p.
12.45pm: FTSE staying above flat, mid-caps retreating
Just before the lunchtime handover, the FTSE 100 index is maintaining its modest morning gains, up 8 points or 0.1% at 7654.
The more domestically focused FTSE 250 is continuing its slow retreat after big jump on Wednesday, down 50 points or 0.26% today to 19,262.
Wider European markets are mixed, with Germany's DAX down 0.5%, Spain's IBEX flat and France and Italy's benchmarks both slightly in the green.
US stock indices are mixed. Following the 2% rout last night, futures for the Nasdaq 100 are pointing to a 0.4% rise at the open, with the S&P also predicted to reverse its overnight fall, while Dow Jones futures are indicating an end to its rally after nine consecutive days of climbing.
12.10pm: OpenAI and other AI developers give White House commitment
President Biden has announced that seven leading AI companies – ChatGPT developer OpenAI, Amazon, Anthropic, Google, Inflection, Meta Platforms and Microsoft – have offered commitments to "manage the risks" posed by the new technology.
The commitments will apply immediately and "underscore three principles that must be fundamental to the future of AI – safety, security, and trust – and mark a critical step toward developing responsible AI", a statement from the White House said.
In short, they are committing to: ensuring products are safe before introducing them to the public, building systems that put security first and earning the public’s trust.
On the former, the statement said the companies "commit to internal and external security testing of their AI systems before their release. This testing, which will be carried out in part by independent experts, guards against some of the most significant sources of AI risks, such as biosecurity and cybersecurity, as well as its broader societal effects."
The companies also commit to sharing information across the industry and with governments, civil society and academia on managing AI risks, including best practices for safety, information on attempts to circumvent safeguards, and technical collaboration.
11.38am: Markets deadlock, traders looking forward
Investors in London are keeping their powder dry before the US open, looking to see if the tech sell-off has more legs.
The FTSE is up 5 points at 7,651, with Wall Street futures pointing at a positive start there.
Next week, as well as four of the Nasdaq's biggest tech behemoths reporting, there is also a Federal Reserve meeting.
Or in the words of Deutsche Bank's Jim Reid: "After a pretty strong last couple of weeks for bonds and equities, both sold off yesterday in the US, with tech having one of the worst days of the year. Ironically, outside of disappointing tech earnings, the main catalyst was actually some positive US data, which shifted the debate back towards next week not necessarily being the last Fed hike in the cycle."
After making 10 consecutive interest rate hikes over the previous 15 months, the Federal Open Market Committee left rates unchanged at 5-5.25% in June.
"While it was a unanimous decision, there was hawkish messaging in the accompanying press conference and updated Fed forecasts, signalling a broad consensus behind the idea of two more rate rises later in the year," points out James Knightley, economist at ING.
Fed chair Jerome Powell stressed that varied lags in monetary policy meant that the decision should be interpreted as a slowing in the pace of rate hikes rather than an actual pause.
"While inflation is moderating, it is still far too high and with the jobs market remaining very tight, the Fed can’t take any chances," Knightly says.
The commentary from Fed speakers since then remains consistent with this messaging, with broad support for another 25bps rate rise at next week's meeting, taking the Fed funds range to 5.25-5.5%.
Fed funds futures contracts are pricing 24bp with economists nearly universally expecting a 25bps hike.
ING puts a 70% probability on the 25bps hike scenario with commentary from Powell and co emphasising the need to be attentive to inflation risks, that growth needs to slow below trend and that further rate hikes “may be appropriate”.
"We would then say there is a 25% chance of a more dovish 25bp hike, signalling a likely peak for rates, while the 0bp and 50bp outcomes each have a 2.5% chance of materialising."
10.55am: FTSE fighting
The FTSE is caught equally between bullish and bearish forces so far today, up 2.5 points at just under 7,649.
Little sibling the FTSE 250 is down 32 points at 19,280.
But both are higher for the week, 2.9% and 3.8% respectively, and both are in positive territory for the year to date.
The blue-chip index is on course to close out its best week in months, says Danni Hewson, AJ Bell's head of financial analysis.
“The impressive resilience of Britons’ spending appears to have been boosted by last month’s hot sunny weather, but the more unsettled weather in July has been matched by a drop in consumer confidence as the clouds of surging mortgage costs and stubborn inflation draw in."
She said the weak performance for Netflix and Tesla, down 8.4% and 10% overnight, "shows the risk for the US market from a tech sector reporting earnings into elevated expectations and toppy valuations".
Next week is a busy one on both sides of the Atlantic, with five of the FTSE’s top 10 and eight of the top 20, including Astrazeneca, Unilver and Lloyds, plus in the US we have the likes of Alphabet, Amazon, Meta and Microsoft.
It "could be a key one for the trajectory of stocks across the pond", says Hewson.
10.34am: Babcock, Firstgroup top of tables
Top of the FTSE 350 risers this morning is Babcock, extending its gains thanks to some positive headlines this morning after results from the defence contractor yesterday.
Although a despite with the Ministry of Defence over the Type 31 frigate led to a £100mln profit hit from cost overruns, the company is set to deliver the first of the new fleet of warships next year, it is being reported in various newspapers.
Defence company Babcock confirmed it is on track to deliver the first of five Type 31 vessels next year in spite of its dispute with the Ministry of Defence over the project’s budget.
Transport outfit FirstGroup chugged higher on a brief trading update that confined things are in line with expectations, despite the ongoing impact of rail strikes. It extended its share buyback scheme too.
Glencore shares are down 1% as it posted lower production volumes for the first half, saying commodity markets have normalised from their elevated levels after the Ukraine invasion.
Profits from trading metals and oil and coal this year will be close to US$4 billion, it said, which is ahead of its long-term guidance but lower than 2022, which was buoyed by the surge in oil and coal prices after the start of the Ukraine war.
“Elevated commodity market imbalances and volatility levels that prevailed through much of 2022, have largely normalised," said chief executive Gary Nagle.
10.15am: Hargreaves lifted on FTSE leaderboard, cinema hopes from 'Barbenheimer'
Hargreaves Lansdown PLC (LSE:HL.) is one of the top risers this morning, following an upgrade from broker Jefferies after the fund supermarket's update yesterday.
Analysts upped their stance on the FTSE 100-listed outfit to 'buy' from 'underperform', with the price target hiked to 1,015p from 800p.
Similarly, after easyJet's numbers, broker Stifel raised its rating to 'buy' from 'hold) - price target 650 (550) pence
Elsewhere, cinema companies such as Cineworld Group PLC (LSE:CINE) and Everyman Media Group PLC (AIM:EMAN) are expecting to reap the rewards of the “Barbenheimer” social media meme.
Hundreds of thousands of people having bought to see Barbie and Oppenheimer on the same day, according to an FT report, citing Comscore.
This is a “maybe a once-in-a-decade” moment for cinemas, said Comscore analyst Paul Dergarabedian.
Today, #BarbieTheMovie and #Oppenheimer open in theaters, both expected to break the box office. Most fans are calling it #Barbenheimer. @Comscore's @PDergarabedian joins to discuss the impact on theaters: pic.twitter.com/qFi9JXCOiu
— Squawk Box (@SquawkCNBC) July 21, 2023
Leisue analyst Mark Brumby at Langton Capital said film buffs are "fretting" about the upcoming clash between Barbie and Oppenheimer.
"They’re asking if you can’t watch both films the instant they hit the screens, will it ruin your life, etc. and, presumably in order to help them out, a Barbenheimer industry has sprung up whereby you can purchase T-shirts, posters and mugs featuring a mashup of both films.
"And some of them look rather good.
"Not that I’ll be wearing such a T-shirt in EC2 any time soon. But the pics are suitably jarring though, I have to say, I’d have thought the obvious one was to have an inanely grinning Ken saying ‘I am become death, the destroyer of worlds’ whilst supping a soda and carrying a surfboard."
Meanwhile, the FTSE is back in the green, up a mighty 4 points at 7,650.
9.40am: More thoughts on the big tech sell-off
After the 2% tumble for the Nasdaq index last night, Hyun Ho Sohn, portfolio manager of the £13.9bn Fidelity global technology fund, says investors should remain realistic in the gains companies will accrue from AI spending.
Technology stocks have rallied significantly so far this year as investors look past weak macro indicators and remaining uncertainty over inflation to but "this is in reality a very narrow, thematically-driven market" focused on the ‘hot’ theme of generative artificial intelligence (AI).
While AI is "not new and has been being used in many areas for some time", he says ChatGPT and other large language models are new, an important breakthrough and have made people believe in an inflexion in AI technology akin to the emerging internet in the 1990s.
“However, it is important to remain cautious - or perhaps realistic. Every technology company seems to be pitching an AI angle. While some stand to make tangible near term gains from AI, most firms seem to be trying to promote AI-related products, with limited and likely near-term customer traction."
With some investors concerned about a ‘bubble’ in technology, similar to 2000, he said there are some similarities between the market then and now, but also important differences.
"Technology demand today is much more diversified. In 2000, demand was driven by new internet ventures. The supply/demand mismatch was huge, as internet business took off slower than people expected.
"But even if AI adoption turns out to be slower than expected, IT demand will not collapse, given its much broader diversification across consumer and enterprise fields than was the case two decades ago."
9.20am: Blue chips in the red
London's blue-chip index has dropped back after strong gains over the past two days.
This is in line with the wider European trend this morning, with the Stoxx 600 down very slightly, led by a 0.5% fall for the DAX in Frankfurt and 0.3% decline for the IBEX in Madrid.
It's not entirely surprising in light of the 2% tumble for the Nasdaq on Wall Street last night, with the S&P 500 also falling 0.7% but the Dow completing its ninth up-day in a row, while was followed by a mixed bag in Asia.
Is this the "bubble popping or just index rotation" wondered market analyst Neil Wilson at Finalto, noting that tech fell sharply while defensives like healthcare and utilities rose along with energy and financials as yields climbed.
The Nasdaq 100 will complete a 'special rebalance' designed to reduce the weightings of the largest names in the index, with Nvidia, Microsoft, Alphabet, Amazon, Apple, and Tesla have risen by an average 60% this year and make up 50% of the index.
This "will add fuel to a spiky options expiry day today", said Wilson, with estimates suggesting about US$2.4 trillion notional tied to US equity options.
"I don’t think it amounts to a hill of beans – the Nasdaq 100 is already a kind of weird tech bubble measure. But a case in point – NDX equal weight declined by around half the amount the market cap weighted index did yesterday."
9.05am: Japanese yen tumbles
Let's have a quick forex update. The main mover among the majors is the Japanese yen, which has fallen against the US dollar, down 1.2% to 41.793 JPY.
Ahead of a Bank of Japan meeting next week, data showed inflation picking up again, while firmer US Treasury yields lifted the dollar.
Japan's core CPI rose to 3.3%, whilst 'core-core' inched lower to 4.2% from the 41-year high of 4.3%.
"The data could see the BoJ revise up its inflation forecast when it meets next week but it seems unlikely it will move on adjusting yield curve control just yet. The opportunity for normalising policy may be behind us already," said analysts at Markets.com.
Sterling meanwhile is down 0.1% at 1.2849 versus USD. The euro-dollar and EUR/GBP are roughly flat.
8.56am: FTSE 100 has a measured Friday opening
Financial services and retail segments are bolstering the FTSE 100’s prospects today.
Ocado managed to etch out early-morning gains by adding 0.7% on the back of some promising retail sales figures showing 0.7% month-on-month growth compared to the 0.2% forecasted.
Spirits supplier Diageo also trended in the right direction, although the top of today’s leaderboard comprises a disparate bunch of blue chips.
Leading the footsie gainers is equipment rental company Ashtead Group, which has added 1.5% to hit a four-month high of 5,583p.
Financial services heavy hitter Hargreaves Lansdown is also on a rip, adding 1.4% to 922p, while Ladbrokes owner Entain takes the third spot among the risers.
The wider FTSE 100 index saw some early-morning volatility but has essentially stayed flat at yesterday’s closing price of 7,646.
Assessing the state of the market this Friday, Richard Hunter, head of markets at intereactive investor said: “The premier index had a measured open after what has been a strong week buoyed by hopes of a soft landing in the US and potentially improving conditions in the UK, and has now risen by 2.7% in the year to date.
“Next week will provide new tests, with a raft of blue chips reporting including the UK banks, which should provide some colour in their response to the recent banking turmoil, the ongoing effects of a rising interest rate environment and also whether loan impairment provisions have been raised given the possibility of recessions this year in some of the developed economies.”
In the cryptocurrency space, bitcoin (BTC) has stumbled below US$30,000, with the BTC/USDT pair swapping for US$29,750 at the time of writing.
The benchmark cryptocurrency has struggled to sustain the 30k price point after posting six out of seven red candlesticks in the past week.
Bitcoin may be seeing some profit-taking since hitting a 12-month high on July 13.
8.27am: Ocado among Friday’s FTSE 100 leaders
Grocery technology company Ocado was buoyed by today’s solid retail numbers, adding 1.3% to 691.4p in opening trades.
Retail sales data beat market expectations today, coming in at 0.7% month-on-month growth compared to the 0.2% forecasted.
Another retail-adjacent blue chip, Diageo, has also pulled ahead, adding 0.7% to 3,423p.
Also among the leaders are insurance groups Hargreaves Lansdown and Beazley, adding 1.4% and 0.7% respectively.
As a whole, the FTSE 100 index opened flat at 7,643, as predicted by pre-market spread betters.
7.48am: Tories slapped by Labour, Lib Dems in by-elections
Rishi Sunak’s Conservatives faced a reckoning this Friday after Labour secured the largest by-election win on record in Sebly and Ainsty.
The North Yorkshire seat overturned a 20,000-plus Tory majority to win by over 4,000 votes, with 25-year-old Keir Mather pipping Tory Candidate Claire Holmes to the post.
It marks the first time that Labour will represent the constituency since its 2010 inception.
Elsewhere, Labour’s attempt to overthrow the Tories in Boris Johnson’s former seat of Uxbridge didn’t pan out, with the Conservatives holding a small majority of 495 votes.
Labour party deputy Angela Rayner told BBC Breakfast “the decision in Uxbridge was related to Ulez”, adding: “The Uxbridge result shows that when you don’t listen to the voters, you don’t win elections.”
The Tories suffered another loss in the by-elections though, with Somerton and Frome going to the Liberal Democrats with an 11,000-vote majority.
The by-election was triggered by MP David Warburton's resignation in June after admitted to using cocaine.
Somerton and Frome, in Somerset, had traditionally been a Lib Dems stronghold before Warburton took over in 2015.
7.34am: UK public sector borrow hits third-highest June on record
The UK spent more than it earned in taxes and other income in June 2023, resulting in borrowings of £18.5bn.
Although this was a slight improvement of £0.4 billion compared to June 2022, it marked the third-highest June borrowing since records began in 1993, following the peaks in June 2020 and 2022.
The increase in central government tax receipts and a significant reduction in debt interest payments from the previous year were partially offset by higher costs driven by inflation and the escalating cost of living. These expenses included energy support schemes introduced in October 2022 and increased benefit payments.
Public sector net borrowing (excluding public sector banks) was £18.5 billion.
This is £0.4 billion less than in June 2022 and the third-highest June borrowing since monthly records began in 1993.
— Office for National Statistics (ONS) (@ONS) July 21, 2023
As of the end of June 2023, public sector net debt stood at £2.6tn, representing around 100.8% of the UK's annual gross domestic product (GDP), a level not seen since the early 1960s.
7.12am: Blue-chip index seeks out bullish week
London’s FTSE 100 index could be set for the best week in months depending on how today’s session pans out.
As it stands, the blue-chip index is around 2.8% higher since Monday's open, with futures traders expecting Friday to kick off pretty flat.
But with miners and housebuilders on a bit of a rip this week, further upside could be in store.
This morning’s solid retail sales figures could also provide some tailwinds.
Forecasters have consistently undershot the level of UK consumer confidence, and once again retail sales data beat market expectations, coming in at 0.7% month-on-month growth compared to the 0.2% forecasted.
That’s the macroeconomic calendar basically done for the day; we’ll see that markets react when trading commences at 8am.