- FTSE 100 falls 17 points
- Pound drops on comments from Bank of England governor
- ...and mixed data from services PMI survey
- Tesco's first-half profits impress
4.06pm: FTSE gives up gains, along with rest of the market
The FTSE 100 and stock benchmarks in Europe and the US fell on Thursday as investors continued to act cautiously as fighting continued between Israel and its neighbours.
London's blue-chip index had lost 17 points or 0.2% to just over 8,273 with just under half an hour to go of the session.
Miners and financials were a big drag on the index, offsetting gains for Tesco, Shell, Rolls-Royce and a group of housebuilders buoyed by housing sector data earlier.
Oil prices spiked back up, with Brent crude rising 3.4% to $76.43 per barrel. Gold was little moved, but not far from last week's highs at $2,653.
OIL MARKET: Read it as you wish.
Biden was asked whether he would support "Israel striking Iran's oil facilities".
"We’re discussing that. I think that would be a little ... anyway"
He left it there, and moved to next question, adding: "Nothing will happen today."#OOTT
— Javier Blas (@JavierBlas) October 3, 2024
Across the Channel, the CAC-40 was down 1.3% in Paris and the DAX had fallen 0.8% in Frankfurt, while the continent-wide Euro Stoxx 600 had dropped 0.94%.
In the US, the S&P 500 fell 0.3%, the Dow Jones 0.6% and the Nasdaq 0.2% after giving up its early gains.
The VIX volatility index or 'fear gauge' rise to three-week highs.
"We’ll see some cautiousness due to two factors: the war headlines that continue to impact the equities market and tomorrow’s unemployment data," says economist Peter Cardillo at Spartan Capital Securities
"We’ll probably have a mixed market session today as investors’ cautiousness rises ahead of tomorrow’s key macro data of the month."
3.27pm: Revolut slams Meta over 'baby steps' fraud initiate
Revolut has called on Facebook owner Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB) to share reimbursement costs with banks for fraud victims as most originate from its social networks.
An initiative between Meta and high street lenders NatWest and Metro Bank "falls woefully short of what’s required to tackle fraud", the fintech said.
The Instagram and Whatsapp owner yesterday invited banks to take part in a data-sharing partnership to try and help prevent fraud.
Revolut issues a report today saying this "simply isn’t good enough", as 62% of scams reported by its customers originated from Meta's platforms.
"What is urgently needed now is for Meta and other social media companies to commit to supporting victims of fraud in the same way financial institutions do," said Revolut’s head of financial crime, Woody Malouf.
He said the pact agreed yesterday amounted to "baby steps, when what the industry really needs is giant leaps forward."
Platforms like Meta "share no responsibility in reimbursing victims, and so they have no incentive to do anything about it", he said. "A commitment to data sharing, albeit needed, simply isn’t good enough."
2.46pm: US stocks open lower
Wall Street stocks mostly opened lower but the tech-heavy Nasdaq has already pared most of those losses, down less than 0.1%.
Most of the tech giants started in the red, though Nvidia was an exception, rising 2%., with Microsoft just above flat.
The S&P 500 benchmark is down 0.3%, while the Dow Jones has fallen 0.7% and the small and mid-cap Russell 2000 is down 0.6%.
In Europe, the mood has turned more bearish too, with the FTSE 100 down 20 points at 8,270 in London, while the DAX, CAC and IBEX are also further in the red.
2.35pm: Anglo American boss says another takeover not inevitable
Anglo American PLC (LSE:AAL) boss Duncan Wanblad has told a mining conference the company is not a sitting duck after fitting off the BHP takeover earlier in the year and is a "viable standalone company".
The board of the FTSE 100 company plans to spin off the group's diamond, platinum, nickel and coal assets, leaving a group that will have around two-thirds of its assets focused on copper, which is expected to play a major part in the energy transition.
Asked about another potential bid, Reuters reported that Wanblad said: "I don't believe it's inevitable at all. We will be a viable, stand-alone company in the market."
2.22pm: Stocks slip after US jobless data
US stock futures have slipped lower, with those for the Nasdaq 100 now indicating a 0.5% fall, with S&P 500 futures down 0.3%.
This follows the US jobless numbers a short while ago.
Initial jobless claims printed at 225k up from 218k previously, above the 221k estimate.
Continuing jobless claims dropped to 1826k from 1834k, below the expected 1830k.
Yields on 10-year US Treasury notes hit their highest since early September at 3.819%.
The FTSE 100 is back in the red, down 2 points at 8,289, with the FTSE 250 down 30 at 20,753.
2.03pm: Diageo puts Pimms back in drinks cabinet
Diageo PLC (LSE:DGE) has shelved its planned sale of Pimm's, a favourite drink at Wimbledon and Lord's, after failing to reach a deal with potential buyers.
This is a story from Sky News scoop-hound Mark Kleinman, who says the FTSE 100 owner of Guinness and Smirnoff has abandoned the auction process it started in February, which also included Safari fruit liqueur and Pampero rum.
Bankers at Rothschild had been hired to ask the question, "anyone for Pimm's?"
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1.15pm: Oil elevated, other commodities too
Libya says it is resuming oil production today, though oil prices only wobbled slightly on the news.
Libya's largest oil field will resume output on Thursday, the country's oil minister said in a statement.
Brent crude oil is up almost 2% at $75.33 as the fighting between Israel and its neighbours continues.
Analyst at Saxo say: "While multiple geopolitical price spikes this past year deflated almost as soon as they emerged, the recent escalation poses a threat to supply, primarily arising from the risk of an Israeli counterattack on Iran’s nuclear and energy infrastructure, and for now, this threat to supply will counter a resumption of Libyan production and general sluggish demand."
Gold has levelled off slightly below last week’s record high, which the Saxo team said potentially highlights "a market where short-term focused traders have started to book some profit following gold’s strong September rally".
They also note that copper rose for a second day amid continued optimism over China’s demand prospects and the recent US rate cut, while iron ore holds onto most of last week's 20%-plus rally.
Elsehere in commodities, wheat prices trade a three-month high after a major Russian farming area declared a drought emergency, "underscoring parched conditions that are hampering winter sowing".
12.37pm: News for Chagossians
The UK has agreed to give up sovereignty of the Chagos Islands to Mauritius, in return for the lease on a UK-US military base on Diego Garcia.
Sovereignty of the island group in the Indian Ocean, currently a British Indian Ocean Territory, comes in exchange for an initial 99-year lease for the UK over Diego Garcia.
Mauritius wants to resettle the islands, after the UK forcibly relocated islanders many years ago.
Foreign Secretary David Lammy said the agreement secured a "vital military base for the future".
12.04pm: Wall Street heading lower
US stocks are likely to head lower, according to futures markets.
S&P 500 futures are down 0.3%, while those for the Nasdaq 100 are pointing to a 0.4% drop, while Dow Jones futures are down 0.35%.
In Europe, London's FTSE 100 and the IBEX 35 in Madrid are the only two major benchmarks in the green, with the DAX and CAC 40 down 0.5% and 0.7%, while the Euro Stoxx 600 has decreased 0.54%.
11.23am: Sterling work on the pound
Some thoughts on the pound from Rabobank currency analyst Jane Foley.
She notes how sentiment towards the pound has improved vastly since 2022, based on CTFC net positions (see graph below) and sterling being the best-performing G10 currency this year and the second-best performer last year.
"Many of the trials and tribulations of the pound in the past eight or so years have been political in nature. It follows that some of the improvements in sentiment since the start of last year have been related to a more stable political backdrop," Foley says.
"However, the perception that the BoE may cut interest rates more cautiously than the Fed and potentially the ECB have been a source of support for the pound.
"This view has been deeply shaken by comments made by BoE Governor Bailey in an interview with the Guardian newspaper."
She said that while Bailey’s comments provided the trigger for the sell-off in the pound this morning, "the aggressiveness of the move likely took its cue from a couple of additional factors".
One of these is the recent "go big or go home" attitude towards monetary stimulus, with the US Fed and the Chinese authorities opting for significant monetary boosts in the past couple of weeks, with the BoC and the Riksbank both mooting the idea of potentially cutting rates in 50bps increments, and expectations of a similar move for the RBNZ next week also growing and the ECB also appears more likely to cut rates by 25bps moves this year, rather than once.
"Since overseas rate cuts can have an FX impact, technically there could be an incentive for the BoE to follow suit," says Foley.
Inflation risks in the UK are still a source of concern, though as Bailey caveats his 'activist' comment with.
Headline inflation is projected to rise from 2.2% to around 2.6% on average in the fourth quarter, but as it is driven largely by energy and base effects, it is unlikely to prevent a BoE cut in November but could be enough to keep a December rate cut off the table.
"This backdrop suggests that this morning’s GBP sell-off may be overdone," says Foley.
11am: FTSE in the green
London's blue chips are a bit more full of beans as we move towards midday.
The Footsie is up 28 points or 0.3% to 8,319, while the mid-cap FTSE 250 is close to erasing its earlier losses, down just six points at 20,777.
Housebuilding companies are topping the FTSE 350 leaders, on the back of new sector data, with Tesco also up there after its half-year results earlier.
As expected, say analysts at Jefferies, Tesco's H1 results "show a business thriving in a changing UK landscape", with the stock up over 25% in the year to date to reflect "a newfound appreciation" for the group's merits.
"A 7% EBIT beat today should be the focus, instead of an upgrade to guide perhaps a little more circumspect than anticipated."
Power company SSE PLC (LSE:SSE) is another blue-chip riser on the back of a trading update that was very misleadingly entitled 'notice of closed period'.
The renewable energy specialist said it expects to report half-year adjusted earnings per share of more than 45p, with its first-half energy performance 44% higher than the previous year but in line with expectations, reflecting weather conditions as well as capacity increases.
SSE also confirmed the six-month delay to the commissioning date of the Dogger Bank wind farm, reiterating a message from last week that commissioning has now been delayed into the second half of 2025.
10.31am: What the UK data suggests about interest rates
A deeper look at the PMI and BoE DMP surveys earlier, from Rob Wood, chief UK economist at Pantheon Macroeconomics.
He feels the PMI suggested the services sector was in a wait and see mode before the Budget later this month.
The Bank of England's MPC "will take comfort" from easing output price inflation in the month but "will be wary of rising input costs feeding through at a later date".
Overall, he said the survey signalled a dip in growth in September related to uncertainty ahead of the October 30 Budget, "but forward-looking parts of the survey suggest growth will rebound later in the year", and the price balances pointed to gradually easing price pressures.
"We think these factors support the MPC taking a gradual approach to reducing Bank Rate."
But, with Bailey's "more aggressive" comments on cutting interest rates to the Guardian, if inflation news "continued to be good", Wood says the risks to his call that the MPC will cut rates in November and then wait until February to change borrowing costs again are now "skewed towards the MPC moving in back-to-back meetings".
Wood said the BoE's decision maker panel survey "gives the MPC enough reason to keep cutting interest rates", though it does not green-light faster cuts, with wage growth and price rises proving stubborn.
"The MPC can hold on to easing recruitment difficulties and slowing settlements, but will likely need to see that feed through to wage growth in future DMP surveys before feeling confident enought to ease rates in back-to-back meetings."
10.10am: Pound continues to fall as UK and European data flows in
The FTSE 100 is sitting slightly higher now, after its drop into the red earlier, while the pound has continued to fall against the dollar and euro.
GBP is now down 1.1% versus the USD at 1.312 and 1.1% against the euro at 0.8414.
There has been PMI data from across the major Eurozone economies and also factory gate prices.
Eurozone producer prices were up 0.6% on the month, higher than the 0.5% expected, easing from 0.8% the month before. Year-on-year deflation reached -2.3%, as expected, prior -2.1%.
The overall euro area PMI slid to a seven-month low of 49.6 from 51.0 in August, 0.7 points above the initial estimate and consensus of 48.9.
By country the PMI rose in Spain but fell in France, Germany and Italy in September.
"Even with the relatively large upward revision the PMI suggests that private sector activity growth in the EZ lost pace at the end of Q3, as the Olympics boost to French services disappeared," say economists at Capital Economics.
The index’s average over Q3 is consistent with EZ GDP broadly stagnating, they noted, but as the PMI has been underestimating growth in recent quarters "we have to take it with a pinch of salt".
9.53am: Bank of England decision maker survey
Released at the same time at the PMI, the Bank of England's decision-maker panel survey showed business uncertainty fell in the three months to September.
The DMP reading on output prices remained at 3.6%, though, higher than the 3.4% consensus estimate.
One-year CPI price expectations also remained unchanged, at 2.6%, below the 2.7% estimate.
Average employment growth across companies surveyed for Sep was 0%, the lowest in the survey since Covid.
⚠️ This from the latest DMP survey will add fuel to the fire around front-loaded BoE cuts. Average employment growth across companies surveyed for Sep was... 0% (lowest in the survey data since Covid and significantly softer than pre-Covid levels). UK jobs mkt looks bleak $GBP pic.twitter.com/TKvD3KBHc8
— Viraj Patel (@VPatelFX) October 3, 2024
9.46am: Services PMI adds to inflation positivity
The UK services purchasing manager's index came in lower than expected but had encouraging news on inflation.
September's final services PMI reading was 52.4, down from 53.7 in August and below the 52.8 flash estimate. A reading above 50 indicates growth.
Business activity growth eased to three-month low last month, says S&P Global, which runs the survey, though "robust" order books underpinned positive business expectations for the year ahead.
Prices charged inflation slowed for third month in a row to the lowest since February 2021.
9.29am: Pound falls as six BoE cuts expected by end of 2025
Some thoughts on the comments from Andrew Bailey earlier, where he said the Bank of England could become "more aggressive" and "more activist" on rate cuts if inflation proves to be contained.
Over the past five days the pound has dropped over 2% against the dollar from $1.34 to $1.313 now, with the Iran-Israel fighting leading to safe haven flows into the US currency and taking another leg lower today thanks to the Bailey interview.
These "dovish" comments rattled sterling, says market analyst Katheleen Brooks at XTB, which has had "a bruising week" that leaves the $1.35 predictions some were making seeming "like a mountain to climb from here".
Bailey’s comments have "undermined the pound’s yield differential with the US and Europe", Brooks says, noting that the market has fully priced in a rate cut from the BoE at the November 7 meeting, and has a 61% chance of another cut in December, up from 47% not long ago.
She says the market is now expecting six rates from the BoE by the end of next year, up from just over five rate cuts earlier this week.
"The market has used Bailey’s comments as a green light to price in more monetary loosening. GBP/USD has already sold off sharply this week, so further downside could be limited in the short term, however, Bailey has made it harder for the pound to recover. For that to happen, we may need to see both upside surprises to UK price data and an easing of tensions in the Middle East."
9.10am: European benchmarks in the red, London the least worst
The fall in London's benchmark brings it in line with other European blue-chip indices, which all started the session lower and have mostly continued to fall.
France's CAC-40 and Germany's DAX are down 1.1% and 0.9%, respectively, while in Milan the FTSE MIB has dropped 0.9%, while in Madrid the IBEX 35 has dropped 0.4%.
A dip of four points for London's FTSE puts it out in front again this week.
Housebuilders and retailers are the main driving forces this morning, on the back of the Zoopla report and Tesco's interim results.
Persimmon, Barratt, Vistry and Taylor Wimpey make up four of the top five, all up between 1.9% and 3%, with Tesco up 2% in the middle.
Sainsbury's and Marks & Spencer are among the top risers, while oil heavyweights Shell and BP are up 0.7% and 0.3% respectively.
8.54am: FTSE in the red
The FTSE has dropped into the red, down seven points at just under 8,284.
Miners seem to be a key drag, with Glencore and Rio Tinto both down around 1%. Some banks and financials are also lower.
Mirroring the fall seen in the Hang Seng index, London's China-related stocks are also lower this morning, including Prudential and Burberry, though not HSBC.
Bottom of the fallers is Phoenix Group, which is among a group of stocks that has gone ex-dividend today, along with Centrica, Weir, Smith & Nephew, Hargreaves Lansdown and F&C Investment Trust.
Looking at the Middle East situation, there are reports from the Israeli military that it struck a municipality building in southern Lebanon, killing at least 15 Hezbollah members.
An Israeli air strike killed nine people in a Beirut medical facility with Hizbollah links, Lebanese health officials said.
8.42am: Market commentary
Markets have "remained on edge" over the past 24 hours, says Deutsche Bank strategist Jim Reid.
While there has not yet been any fresh escalation since the strikes earlier in the week, Israeli PM Netanyahu has said they intend to retaliate, warning that Iran "will pay" for its actions, though US President Biden urged Israel not to attack nuclear facilities.
"So there doesn't seem to be a desire from the US at the moment for a sizeable escalation," says Reid.
The financial market reaction has been seen in a further rise in oil prices, with Brent crude yesterday on track for its biggest two-day gain of 2024 so far, before 3.5% gains to above $76 a barrel at the highs were mostly pared back.
This morning Brent is up 1.3% this morning at $74.85.
"Whilst investors awaited any geopolitical news, the other main story yesterday was a substantial bond selloff," says Reid, noting that it was primarily driven by the higher than expected US ADP jobs data.
"So that was an important sign of strength in the US labour market, particularly ahead of tomorrow’s all-important jobs report."
This, and cautious Fed speaker comments on inflation, led investors to dial back the chance of aggressive rate cuts over the coming months, with the amount of cuts priced by the end of next year down 4.4 basis points on the day to 188bps.
8.23am: British Land raises funds for retail parks purchase
British Land Company PLC (LSE:BLND) shares are down 1.4% after the real estate investment trust agreed a discounted £301 million fundraising to buy retail parks.
The property developer said it was a "non-pre-emptive" placing of £293 million and £6.7 million retail offer, which has both been priced at 422p per share, a 3.6% discount to the last close.
Simon Carter, chief executive, said: "We are delighted with the outcome of this important equity placing for British Land, which we are using to acquire this attractive portfolio of retail parks with strong rental growth prospects."
8.10am: FTSE opens higher as housebuilders lead gains
The FTSE 100 has rushed out of the gate more bullishly than expected. rising 26 points or 0.3% to 8,317.
Tesco shares are up 1.6%, but they are not the top of the leaderboard.
House builders Persimmon PLC (LSE:PSN) and Barratt Developments PLC (LSE:BDEV) are top of the blue-chip risers in early trading.
This follows the release of a report from Zoopla overnight, showing house sales on the rise.
According to the online property firm, the number of sales agreed in the four weeks to September 22 was up by 25% year on year.
The drop in mortgage rates coincided with a “modest” increase in house prices. These ticked up by 0.7% across the whole of the UK to £267,100, Zoopla added
8am: National Grid earns more from ESO
National Grid PLC (LSE:NG.) said it expects to earn £70 million more than expected from its Electricity System Operator (ESO) mechanism in the first half of its financial year ending on 7 November.
In a breezily short trading update, the FTSE 100 group said this was due to “ownership and held-for-sale accounting treatment”.
The ESO, which is the mechanism that is responsible for managing and balancing the electricity system in Great Britain, was recently sold by National Grid back to the UK government for £630 million, putting it back into public hands for the first time since the 1990s.
7.53am: Tesco's Murphy hails momentum
Tesco chief executive Ken Murphy said the supermarket chain has been "the cheapest full-line grocer for nearly two years" with these leading to volume growth that has delivered strong financial performance shown in the interim results.
"We've been working really hard to offer our customers the best possible value, quality, and service and they are shopping more at Tesco as a result.
"We have lowered prices on thousands of lines, launched or improved over 860 products in partnership with our suppliers and growers, and our customer satisfaction scores continue to improve across a broad range of measures."
He said Tesco's "strong momentum allows us to continue to focus on value, quality, innovation, and the broader customer experience, whilst investing in growth opportunities in a disciplined, returns-focused way".
Make of that what you will.
7.43am: Tesco hikes guidance as profits jump
Tesco PLC (LSE:TSCO) has hiked its interim dividend 10.4% as it grew its share of the UK grocery market and nudged up its full-year profit guidance despite slower sales growth in the second quarter.
Retail like-for-like sales grew 2.9% in the 26 weeks to 24 August, down from the 3.4% rate seen in the first quarter.
Adjusted operating profit from the retail business climbed 9.7%, while retail cash flow shrank 7.8% to £1.3 billion and net debt rose 2.1% to £9.7 billion.
The supermarket chain said sales volume growth was ahead of its expectations for the first half and so it now expects to deliver around £2.9 billion retail adjusted operating profit for the full year, up from "at least £2.8 billion" previously.
7.28am: Pound falls on Bailey rate comments
The pound is down 0.7% to $1.3177, a two-week low, after comments from Bank of England Governor Andrew Bailey that the central bank could become a "bit more aggressive" and "a bit more activist" on rate cuts if inflation continued to ease.
Bailey, who next convenes with the BoE's monetary policy committee in early November, gave the comments during an interview with the Guardian.
Asked about the fighting between Israel and Iran, he said "geopolitical concerns are very serious" and there "are obviously stresses and the real issue then is how they might interact with some still quite stretched markets in places".
This week, with oil prices rising again, there have been concerns raised about inflation being pushed up after falling back during the past year, with the consumer prices index most recently falling to 2.2% – just above the BoE's official 2% target.
Bailey said the Bank watches development closely to see the impact of the latest news, but conversations with counterparts in the region suggest "a strong commitment to keep the market stable".
7.15am: FTSE 100 to be slow out of blocks
The FTSE 100 is anticipated to be slow out of the blocks on Thursday, as markets continue to adopt a risk-off attitude in fear of a potential wider war in the Middle East.
London's blue-chip index has been called two or three points higher on futures markets, after finishing up 14 points at just under 8,291 yesterday, the only major European benchmark to close in positive territory.
US stock indices all closed modestly higher too, with the S&P 500, Dow Jones and Nasdaq all up less than 0.1%.
Asian markets are mixed this morning, with the pan-continental Asia Dow just above flat, the Nikkei 225 rising almost 2% in Tokyo but Hong Kong's Hang Seng retreating after eight days of gains, down 1.5%, with Mumbai's Sensex also down.
Among major commodities, Brent crude oil is hovering just under $75, after dropping slightly overnight, while gold is also holding steady at $2665, just below all-time highs.
Economic data later includes the PMI survey on the important services sector later this morning, while in the US later the main focus is on the jobs market.
Tesco results are the pick of the City diary.