- FTSE 100 drops 35 points, FTSE 250 adds 1 point
- UK unemployment and pay growth ease, advises caution with data
- Brent crude oil futures drop 4% to below $74
- Housebuilder Bellway reports improved recent trading
4.15pm: Commodities hit FTSE, Wall Street has worries about semis
Almost at the closing bell on Tuesday, London's FTSE 100 is down roughly 35 points, knocked back by a near-5% plunge in oil prices and falls in copper and other metals prices on the back of disappointment about China's potential economic stimulus.
Brent crude oil prices were down below $74, having started the week at $78 and topping $80 early last week, following cuts to demand from the IEA and US reports that Israel will only fire missiles at military targets.
The mid-cap FTSE 250 had climbed just above flat as the closing bell approached.
"Due to pressure from a stronger U.S. currency and uncertainty about the economic recovery of top user China, industrial metal miners saw a 1.9% decline in copper prices," said market analyst Patrick Munnelly at Tickmill.
Stronger recent trading and an upbeat outlook from Bellway PLC (LSE:BWY) saw it rise 6.6%, lifting shares in larger rivals Persimmon, Barratt and Taylor Wimpey.
In single stock stories following a reduction in first-half sales, Bytes Technology's shares in the UK The shares of Bytes Technology, the biggest loss on the FTSE mid-cap index, drops 6.1% to 463 pence. Hardware sales drop 48.1%, while the company reports a 2.9% drop in first-half overall revenue to 105.5 million pounds. Nonetheless, the business reported a 16.3% increase in operating profit for the first half, reaching 35.5 million pounds. Stock is down 22.6% so far this year, including losses from the current session.
In broker updates Paragon Banking Group's shares fall up to 7% to 716.5p after Jefferies downgrades the stock to "hold" from "buy" and lowers the price target to 780p from 875p. The stock hits a 5-month low and is the top percentage loser on the FTSE 250 index. Jefferies says the company is less appealing due to declining margins and lack of structural tailwinds, despite cheap valuations. Jefferies also double-upgrades NatWest Group to "buy" from "underperform", stating it is the easiest play on the hedge story. The brokerage prefers Lloyds Banking Group among its UK domestic bank coverage universe
US stocks turned red after a warning from ASML about a slower recovery than expected for semiconductor markets.
The Dutch microchip equipment giant fell 14%, with Nvidia and AMD dropping over 4% in the wake.
3.38pm: London indexes fall
The FTSE 100 and 250 have both slumped lower in the past half hour, down 0.4% and down 0.16% respectively, with the mid-cap index falling from positive into negative territory.
It's not clear why - yet.
The biggest fallers on the FTSE 250 are now Watches of Switzerland, Ocado and Paragon Banking.
2.59pm: Boots parent to close 1,200 drugstores
Boots owner Walgreens Boots Alliance Inc (NASDAQ:WBA, ETR:W8A) is one of the top risers on the S&P 500 in New York, helped by profits that beat forecasts, and despite reducing its outlook.
But investors were impressed by news that it plans to close around 1,200 US drugstores over the next three years, including 500 in 2025, which it said will be "immediately accretive" to its earnings and free cash flow.
Boots UK saw "meaningful" retail growth and achieved another sequential quarter of market share gains, the company said, with further cost cuts to prioritise free cash flow, where it is "on track to deliver $1 billion in cost savings this year".
2.42pm: Mixed start on Wall Street
It's been a mixed start on Wall Street.
The Dow Jones is down 0.6% (Caterpillar, Boeing, Amgen), while the S&P 500 is up very slightly in early trades, 0.05%.
Led by gains for semiconductor stocks like ARM Holdings, Qualcomm and ASML, the Nasdaq is up 0.2%.
2.30pm: Oil and commodities down in London, airlines up
Fewer than half of the FTSE 100's constituents are in the red, but many of those are among the larger members of the index, including six of the top eight.
Top fallers are BP and chemicals group Croda, both down 3.9%, followed by commodities trader Glencore, copper miner Antofagasta, Shell and Anglo American, all down more than 3%.
Top of the leaderboard are two airlines, British Airways owner International Consolidated Airlines Group SA (LSE:IAG), up 4.2%, followed by easyJet PLC, up 3.4% and a couple of housebuilders, Barratt Redrow PLC (LSE:RDW) and Persimmon PLC (LSE:PSN).
1.47pm: Gold steady
While oil prices have been falling, gold has been holding up the gains despite the pullback seen last week.
"Disappointment stemming from China, both in terms of data and in lack of follow-through in the stimulus measures announced by the government, has been keeping gold supported," says market analyst Daniela Sabin Hathorn at Capital.com.
"However, a resurgence in the dollar has been limiting the upside in XAU/USD as markets have now pushed back on expectations of another jumbo 50bps cut from the Federal Reserve in November.
"The renewed resilience in the US economic data has even led to markets pricing in a small chance of no cut at all at the meeting next week. If this dynamic continues, we could see the dollar strengthening further and gold feeling the pressure."
1.32pm: Prudent Budget expectations
While bond markets in particular seem a bit sceptical about the UK government, economist Paul Hollingsworth at BNP Paribas says he thinks the new Labour government "is likely to use its first budget on 30 October as a set piece event to send a message of fiscal prudence".
They expect a combination of tax increases aimed at filling the so-called fiscal ‘black hole’, plus changes to fiscal rules that will increase "fiscal headroom".
With more fiscal freedom will be allowed under the tweaks, BNP expects borrowing to be higher than previously estimated, and for total financing (the 'gilt remit') for the current fiscal year to be £304.9 billion, up from the DMO’s April figure of £277.7 billion.
"Despite higher borrowing, the fiscal stance is likely to remain in tightening territory in 2025. We don’t though see the Budget as a big driver of near-term monetary policy decisions.
"As the net supply picture becomes more favourable in November, we think the Budget announcement, if delivered with fiscal prudence, could in fact unlock longs as uncertainty unwinds."
1.24pm: Rate cut expected, not hike (just banks that are hiking)
It has been brought to my attention that I had 'rate hike' in the headline for the last half hour - sorry I meant cut!
"Oops" doesn't really cut it, eh? Apologies for that.
Just to confirm, an interest rate cut at the November meeting is "highly likely", says Matt Swannell, chief economic advisor to the EY ITEM Club.
A cut of 25 basis points at the November meeting "is a racing certainty", says Rob Wood at Pantheon Macroeconomics, while NIESR says today's jobs data "is positive news for inflation and might provide the Bank of England with increased confidence regarding interest rate cuts".
It's just some banks and building societies that are hiking rates, see the NatWest update below.
13.02pm: FTSE perked up as US wakes up
The FTSE 100 and 250 have both perked up a little in the past hour, as stateside investors wake up and we approach the US open - a similar thing happened yesterday.
London's blue-chip benchmark is down 30 points or 0.35%, compared to a 50-point deficit earlier, while the mid-cap index is down 0.1%
In Europe, the DAX and IBEX are up 0.3%, while the UK index is joined by France's CAC, down 0.8%, and Italy's FTSE MIB.
12.53pm: Applied Nutrition prospectus published
The Applied Nutrition IPO prospectus has just been published on its website.
It confirms the company will not receive any proceeds from the IPO, with shares just being sold by existing shareholders, including its founder and JD Sports.
Net proceeds for the selling shareholders of roughly £198 million are expected, at the mid-point of the price range revealed this morning, and assuming the maximum uptake - though further tweaks still possible.
Also revealed, JD Sports Fashion PLC is planning to sell down its stake, currently 31.36%, to a minimum of 5%.
12.26pm: Wall Street set for flat start
US stock market futures are flat, with the S&P 500 set to retreat less than 0.1% from its record high, while Nasdaq and Dow Jones futures are also down less than 0.1%.
Yesterday, the S&P 500 rose 0.8% to notch its 46th new high of the year, while the Nasdaq added 0.9% and the Dow Jones climbed 0.5%.
Nvidia was a big driving force, advancing 2.4% to come within touching distance of its own record high.
Oil-related stocks are likely to be part of the cause for the Dow, while Nvidia is also set to drop back 0.5%.
Earnings have been reported by Goldman Sachs and Bank of America Corp (NYSE:BAC) before the bell, with their shares up 3.5% and 2.2% in premarket trading.
Goldman reported a jump in third-quarter earnings to $8.40 per share, smashing the Street's $6.89 estimate, as revenue came in at $12.7 billion versus $11.8 billion forecasts.
This was on the back of investment banking strength where the 'vampire squid' benefited from a rebound in dealmaking, with CEO 'DJ' David Solomon hailing "the strength of our world-class franchise in an improving operating environment".
BofA reported a drop in third-quarter profit on Tuesday, but earnings per share of $0.81 beat the Street's $0.77 cents average estimate, while revenues of $25.49 billion were slightly ahead of expectations.
11.47am: Another Frasers deal
Missed this yesterday amid all the Mulberry stuff, but Frasers Group PLC (LSE:FRAS) has snapped up a stake in Malta-based retailer Hudson Holdings.
In a statement on the Malta Stock Exchange, Hudson said it has "successfully concluded negotiations and entered into a master framework and shareholders’ agreement" with Frasers, where founder Mike Ashley is sure to have led negotiations.
This formalises an agreement such that Frasers Group may acquire a noncontrolling shareholding in Hudson "with the possibility of further staggered acquisitions" resulting in the Sports Direct owner eventually taking on a controlling interest.
Hudson is a leading sports retailer in Malta and runs franchises such as Intersport and Urban Jungle on the Mediterranean island, in other southern European countries and parts of Africa, as well as being an agent for brands such as Nike.
11.36am: NatWest the first of the big six to hike rates
NatWest Group PLC (LSE:NWG) has joined the small group of lenders hiking mortgage rates, despite growing expectations that the Bank of England will cut the base rate next month.
The FTSE 100-listed bank announced that two-year and five-year fixed and tracker rate mortgages will increase by 0.3% later this week.
This follows Coventry Building Society and some smaller lenders raising mortgage rates on selected products in the past couple of weeks, after a period over the summer of almost universal cuts from banks and other mortgage providers in anticipation of the BoE bringing rates down.
But there has been a sharp rise in yields on gilts, which lenders use to price fixed-rate deals, with the 10-year government bond today paying 4.242%, up from around 3.75% in mid-September.
As well as reacting to volatile geopolitics, bond markets have been cautious ahead of the new Labour government's Budget, which is coming on 30 October and where a large increase in lending is expected.
11.04am: Eurozone industrial data
Ahead of the ECB meeting later this week, we've had strong euro-zone data on industrial production.
A 1.8% month-on-month rise in industrial production for August was a touch above the 1.7% consensus forecast, taking output to its highest level since December last year.
It was the strongest monthly rise in over a year, but "is probably not the start of a sustained recovery", says Elias Hilmer at Capital Economics.
"We think production is more likely to drop back over the rest of the year."
A production increase of 3.3% in Germany comes after a 3.3% fall in July, while there was a 4.5% jump in Ireland, "where the data are notoriously volatile", notes Hilmer.
Production also rose in France (1.4% m/m) and in the Netherlands (2.2% m/m) and was broadly flat in Italy and Spain (+0.1% and -0.4% respectively).
10.44am: IEA cuts oil demand forecast
Various factors are affecting the oil price this morning, as detailed below, with Brent crude now down almost 5% to $73.65 per barrel.
Following OPEC's cut yesterday to its forecast for global oil demand in 2024 and 2025, the International Energy Agency has also reduced its forecasts today, while also reassuring that it is ready to cover any supply disruption from Iran if such a situation arises.
The IEA expects a large surplus in the market next year, forecasting global oil demand to expand by almost 900k barrels per day in 2024 and close to 1 million barrels per day (mb/d) in 2025, sharply down from 2 mb/d seen between 2022 and 2023.
Lower demand from China is the key element in the deceleration, accounting for around 20% of global gains both this year and next year, compared to almost 70% in 2023.
Analyst David Mirzai at SP Angel notes that disappointing Chinese stimulus news was also a likely weight on oil prices.
Yesterday, OPEC revised is global oil demand growth expectations by 0.1mb/d to 1.9mb/d in 2024 and 1.6mb/d in 2025, implying Q4 demand up around 1mb/d on the prior quarter to 105.6mb/d, says Meyer.
10.13am: Applied Nutrition IPO priced
Applied Nutrition is aiming for a valuation of up to £400 million in its initial public offer on London's main market by the end of the month.
The price range of 136p-160p would give the protein shakes company an estimated market capitalisation at admission of between £340 million and £400 million.
As cornerstone investors, four "prominent and highly successful North West entrepreneurs", including Mohsin Issa of Asda fame (he recently resigned after an 'embarrassing' performance), have committed to participate in the IPO fundraise, buying a combined £25 million of shares.
Existing shareholders are selling up to 137.4 million shares in the IPO, raising £220 million that will not go to the company.
Retail investors at AJ Bell, Hargreaves Lansdown and Interactive Investor will be able to participate too, with the latest time and date for receipt of applications of 10am on 23 October.
9.54am: Crude oil analysis
Oil is the reason the FTSE 100 is in the red, while in Europe the DAX and IBEX are up 0.2% and 0.3%.
Here's market analyst Neil Wilson at Finalto with more details: "Oil prices fell as reports circled about Israel’s response to Iran, with indications they are likely to refrain from targeting oil or nuclear infrastructure.
"Flashes this morning indicate that Netanyahu and his defence minister Gallant have agreed what they do and approval is now required from the security cabinet.
"If it’s non-escalatory – ie tit-for-tat rockets aimed into the desert then looks bearish for oil. If it’s a full-on strike aimed at national energy infrastructure than it would seem way more escalatory," says Wilson.
Prices were already looking softer yesterday as OPEC cut its demand outlook again.
Russ Mould, investment director at AJ Bell, says a big decline in the oil price is "welcome news for businesses and consumers as there was a moment last week when it looked like energy and transport bills could go through the roof".
Brent crude is down 3.7% at $74.59 per barrel, which he says is an "unusually large single-day movement", with markets taking a more cautious view over demand.
Reports yesterday from OPEC pointed to a lower outlook for global oil demand growth this year and next.
9.31am: Plumbing and newspapers
Victorian Plumbing Group PLC (AIM:VIC) said it will close rival Victorian Plum having acquired the business from its administrator in July after a prolonged legal battle over the use of the name. Shares are up almost 3%.
In a statement, Victorian Plumbing said it had finalised consultations with Victoria Plum's workforce with the closure of the Doncaster-based business expected to be completed by the end of December.
Since it was acquired, Plum contributed £15 million of revenue and incurred an underlying loss of £2 million...read more
Daily Mirror, Express and regional news website publisher Reach PLC shares climbed almost 3% too, after it said full-year profit should meet expectations despite a fall in revenue over the third quarter.
Adjusted operating profit for the year should be in line with consensus estimates for £97.7 million, Reach said, even though revenue fell 2.5% over the three months to September due to lower circulation and advertising turnover from printed newspapers...read more
9.26am: De La Rue's £300m sale
There's plenty of mid- and small-cap company news about, so lets have a look at some of those.
First, De La Rue PLC (LSE:DLAR), whose shares have fluttered 13% higher after the bank-note specialist announced the sale of its Authentication arm for £300 million cash to NYSE-listed Crane NXT.
De La Rue said the sale follows an "extensive and wide-reaching process" by the board, with the proceeds to "create a more resilient and flexible group", though 5% of the consideration will be held in escrow for up to 18 months.
The Basingstoke-based group will repay its current credit facility in full and be left with a net cash position, also paying a large chunk of the deficit on its pension scheme.
9.01am: Retreats being beaten
The FTSE 100 is sliding lower, down 0.25% to 8,272.08 to wipe out half of yesterday's late gains, with six of the top 10 largest companies in the red, including oil and mining giants, and HSBC.
Falls of 2% for Shell and 3.4% for BP are doing a bit of damage to the blue-chip index.
At the same time the FTSE 250 is also giving back some of its early progress, now up less than 0.1%.
Bytes Technology Group PLC (LSE:BYIT, JSE:BYI) is the main faller on the mid-cap index, down 6.3% on the release of its half-year results, though they were in line with September's trading update.
Analysts at Shore Capital note that forward-looking commentary indicates that the company expects to deliver on market expectations of circa 10% growth for both gross profit and adjusted EBIT, which offers "scope for a nudge up" towards their slightly higher expectations.
8.44am: Pay growth and what it means for the BoE
Today's UK labour market data "will give the Bank of England more confidence that inflation persistence is easing" and the that an interest rate cut at the November meeting is "highly likely", says Matt Swannell, chief economic advisor to the EY ITEM Club.
"If pay growth continues to cool in the next few months, the chances of back-to-back rate cuts will also increase."
But he added that ongoing methodological issues with the Labour Force Survey means the EY ITEM Club "doubts that the labour market is really as tight as the latest data implies" and means headline readings "have to be taken with a pinch of salt".
So while the unemployment rate was reported to have ticked down to 4%, other indicators continue to point to a gradual easing in labour market conditions, including vacancies continuing to fall in the three months to September, and HMRC's count of payrolled employees suggested the workforce shrank in September.
While pay growth is now well below the peaks seen in the middle of last year, "there is still further to go before it hits the 3%-3.5% rates that the Bank of England views as consistent with hitting the inflation target in the medium-term", he notes, but the data will give the BoE's monetary policy committee "confidence that inflation persistence continues to fade".
8.32am: The "ropey" ONS data
The ONS labour market data "are so ropey that the MPC can only hope to pick up long-running trends rather than laser focusing on small misses compared to their forecasts", says economist Rob Wood at Pantheon Macroeconomics.
He says the Bank of England's monetary policy committee will be "encouraged by slowing private sector pay growth but perplexed by another drop in the unemployment rate".
A cut in interest rates of 25 basis points at the November MPC meeting "is a racing certainty", he says, based on pay growth weakening, "but we think the MPC will cut rates only once a quarter after that as the labour market remains tight even if it is easing, and at the least the dodgy data leave the MPC with little confidence on how the labour market is evolving".
8.25am: Bellway and discoverIE lead FTSE 250 higher
The FTSE 250 has climbed sharply, up 51 points so far, led by Bellway PLC (LSE:BWY), whose shares have jumped 8.5% after its results earlier showed a big fall in profits for the year to July but an improving outlook.
Recent trading has seen improved level of demand, with the first nine weeks of the new financial year seeing a sales rate of 0.59x, helped by falling mortgage rates, well ahead of last year’s 0.41x.
The order book of £1.43 billion is also ahead of the prior year's £1.23 billion.
Analysts at Peel Hunt said: "At first look, we expect to increase our PBT forecasts modestly (2-4%), but do not anticipate major changes to consensus."
Next on the FTSE 250 leaderboard is discoverIE Group PLC (LSE:DSCV), up 5% as the custom electronics group said first-half earnings would match expectations, with strong operational cash flow and "robust" margins reported.
In a trading update, investors were told destocking had slowed, order levels have stabilised and design wins, "a key forward-looking barometer", increased 33% to an estimated £205 million.
DiscoverIE also said it still sees plenty of acquisition opportunities, supported by its high cash flow, and painted a more optimistic picture overall.
8.09am: FTSE starts lower
The FTSE 100 has been dragged lower at the open by its oil heavyweights, which slipped on a retreat in crude prices.
London's blue-chip index stumbled 15 points lower to 8,278 in initial trades.
Shares in BP PLC (LSE:BP.) lurched 3.2% lower, while Shell PLC (LSE:SHEL) dropped 2.4%.
Miners were also a weight, with Anglo American, Glencore, Rio Tinto and Antofagasta down between 2.5% and 1.5%.
China-facing financials were in the red too, namely HSBC Holdings and Prudential.
7.56am: Bellway profits slump
Housebuilder Bellway PLC (LSE:BWY) reported a slump of almost two-thirds in full-year profit as revenue and completions dropped 30%.
Statutory pre-tax profit fell 62% to £183.7 million, which was in part driven by legacy building safety bills of £37.0 million and transaction costs of £5.4 million.
The total dividend per share of 54p was cut from 140p in 2023, as the FSTE 250 group moved into debt of £10.5 million compared to a £232.0 million cash surplus previously.
7.37am: Oil prices ease
Oil prices are down, which could act as a brake on the FTSE by hitting Shell and BP's shares.
Brent crude has dropped another 3.6% to $74.67 per barrel, continuing its retreat from the spike early last week on worries about how far Israel would take reprisals for the missile attack by Iran.
"Reports overnight suggested that Israel will opt for a strike on military facilities, leaving Iran's oil and nuclear infrastructure untouched," says market analyst Chris Beauchamp at IG.
"Coupled with OPEC's downgrade of demand yesterday, the news has been enough to remove any lingering buying pressure in the commodity, with more losses looking likely."
7.26am: ONS says take data with a pinch of salt
The ONS has put out a message alongside its jobs report, which showed pay growth falling to a two-year low, saying "we advise caution when using the data".
It noted that the labour force survey (LFS) estimates have been affected by increased volatility due to fewer responses it has been able to drum up in recent years, meaning that "estimates of change should be treated with additional caution".
The LFS, it recommends, should be used alongside workforce jobs survey, claimant count data and the pay as you earn real time information estimates it also releases.
The ONS acknowledges that "external sources are suggesting that recent increases in LFS measures of employment are likely to be overstating underlying employment growth".
Therefore it expects underlying changes in the other labour market measures will also be affected.
As such, "the more modest growth we see in alternative employment sources may indicate that unemployment and/or economic inactivity have fallen by less than the LFS has recently suggested".
7.15am: FTSE 100 to extend gains, UK wage growth eases
The FTSE 100 has been tipped to extend its gains on Tuesday, carrying on the momentum from late yesterday and as unemployment figures from the Office for National Statistics are chewed over.
Having added 39 points at the start of the week to close at 8,292.66, futures for the London benchmark are pointing to a gain of around 18 points this morning.
Overnight, the S&P 500 rose 0.8% to reach a new all-time high, its 46th of the year, while the Nasdaq added 0.9% and the Dow Jones climbed 0.5%.
Nvidia was a big driving force, advancing 2.4% to come within touching distance of its own record high.
A quick peek at the UK labour market report shows the unemployment rate fell to 4.0% from 4.1%, which was not expected.
Average earnings including bonuses eased to 3.8% in the three months to August from 4.0% before, which was not quite the 3.7% that had been forecast, while if you exclude bonuses earnings growth eased to 4.9% from 5.1% as predicted.