FTSE 100 closes 27 points higher
Bond yields plunge as rate cut fever takes hold in central banks
US stocks plunge
5.15pm: FTSE 100 closes in positive territory
FTSE 100 closed higher on Wednesday, reversing yesterday's loss, but there was still plenty of investor unease over the state of the global economy.
Britain's blue-chip benchmark closed up around 27 points on the day at 7,198.70. Yesterday, it fell over 52 points.
The mid-cap FTSE 250 also moved higher, adding nearly 100 points to finish at 18,945.
The weaker pound also gave a little support to Footsie's US dollar earning constituents, with cable down 0.08% against the greenback..
"Central banks in New Zealand, Thailand, and India all cut rates overnight and that highlights how concerned central bankers are about the state of the global economy," noted David Madden, at CMC Markets.
The market analyst highlighted that after the US Federal Reserve cut interest rates last month, there remains speculation of a further loosening of policy coming down the track.
On Wall Street on Wednesday, a drop-in bond yields caused stocks to fall, underlining tensions traders have over the US trade dispute with China.
The Dow Jones Industrial Average was down over 367 points, while the Nasdaq exchange shed 61 points.
3.30pm; Footsie turns positive
The chart of the Footsie’s movement today provided an almost classic bell curve, up until about 3.00pm when the index rallied.
Despite lack of enthusiasm for the heavily-weighted mining stocks, London’s index of heavyweight shares struggled back into positive territory – up 13 points (0.2%) at 7,185.
Investors’ focus was more on the bonds markets today, however, as the yields on 10-year government bonds moved sharply lower.
The yield on the 10-year US treasury note was down 6.8 basis points (100 basis points equals a full percentage point) at 1.639% while the 10-year gilt’s yield fell 4.3 basis points to 0.473%.
In a further sign that investors are seeking havens, the price of gold cranked up US$29 (1.95%) to US$1,513.20 an ounce, while the reference price of silver was up 3.5% at US$17.02.
“Contrasted with gold’s giddy gains was the 350 point plunge suffered by the Dow Jones. Undoing a good chunk of Tuesday’s rebound the Dow found itself back below 25650, the index suffering from a rush of investors heading for the exit door seeking safer pastures,” observed Connor Campbell at Spreadex.
2.45pm: US markets turn south
US markets opened sharply lower as US and European government bond yields hit new lows.
US benchmarks had been expected to open only modestly lower but rising concerns over bond yields sparked a sell-off in equities, with the Dow Jones industrial average down 384 points (1.5%) at 25,644 and the S&P 500 off 35 points (1.2%) at 2,847.
Reacting to global policy easing and heightened concerns about global growth,yield on 10-year US government #bonds, currently at 1.62%, is now threatening to go through 1.60%—this as part of a move down in yields across the entire curve. Meanwhile, the German 10-year is at -0.60% https://t.co/kaAan0RCfg
— Kerberos007 (@kerberos007) August 7, 2019
Investors were somewhat caught on the hop when the Reserve Bank of New Zealand (RBNZ) slashed its cash rate target by half a point overnight to 1%; the markets had been expecting a quarter-point cut.
“The double-cut caught many off-balance,” said Hugo Cusani, an associate director at JCRA.
“ Meanwhile, bank economists are still forecasting further loosening of monetary policy before the year is out.
“The RBNZ’s dovish stance is a response to a softening domestic outlook, with falling annual growth rates, faltering business and consumer confidence, and cautious spending attitudes prevailing across most sectors. More than this, the continuing risks to global economic growth have had a significant negative impact on New Zealand’s key trading partners,” he added.
Ipek Ozkardeskaya, a senior market analyst at London Capital Group, said the cut “can only spur the expectations of a similar size cut from the Federal Reserve”.
In London's equity market, the FTSE 100 was back to square one, having surrendered the morning's gains.
1.00pm: London moves into consolidation mode
London's leading shares have moved into consolidation mode ahead of what is expected to be a mixed start on Wall Street.
Spread betting quotes suggest the Dow Jones 30-share index will open some 19 points lower at around 26,010 while the S&P 500 is tagged to open little changed.
The FTSE 100, meanwhile, is up 57 points (0.8%) at 7,229, a few points below its intra-day high.
Away from the blue-chips, the bears have got their teeth into litigation financing specialist Burford Capital Ltd (LON:BUR), which is down 47% at 599p.
Notorious US short-seller Muddy Waters has taken a short position in the company and published a paper explaining why others should do so (and make the hedge fund a pile of money in the process).
Going the other way was Aussie oiler Oil Exploration Limited (LON:OEX), which was up 25% at 0.15p after it acquired Holloman Energy's 48.5003% interest in the 112 and 444 exploration licences in the Cooper-Eromanga Basins in South Australia.
ASX-listed #Oilex, which has spent much of its time in Indian courts tussling with GSPC over money owed for exploration costs the Cambay oil field, has moved into the Cooper-Eromanga basins in South Australia taking a 48.5% share in PEL112 and PEL444. ????https://t.co/5SeXoKu8NI
— EnergyNewsBulletin (@EnergyNewsAu) August 7, 2019
11.40am: Footsie extends its gains; dead cat bounce suspected
The Footsie has extended its gains, cementing its position back above the 7,200 level.
London's index of heavyweight shares was up 63 points (0.9%) at 7,235.
“We're seeing a bit of a rebound in early European trade on Wednesday, with US futures also a little higher as markets take a breather from the recent sell-off.
“It's too early to even try and associate this with any form of optimism given the events of the last week, while the size of the rebound compared to the days before gives it more an appearance of a dead cat bounce than anything else. There's been a lot to digest and I wonder whether investors are simply taking a step back and doing just that,” speculated Craig Erlam at Oanda.
“The environment continues to look very favourable for gold, which is up 1% on the day again and still pushing for a breach of $1,500,” he added, which probably explains why precious metals miner Fresnillo PLC (LON:FRES) remains the Footsie's top performer, up 4.3% at 672.2p.
October's House Price Index shows annual house price growth at 1.5%. The average UK house price is now £227,869. https://t.co/4OKLh7vuv7 #HalifaxHPI pic.twitter.com/i7ATkjrjPP
— Halifax Bank News (@HalifaxBankNews) November 7, 2018
The latest house price index from the mortgage lender, Halifax, revealed that house prices dipped for the second month in a row in July; it is the first time the index has fallen in successive months since September of last year.
In year-on-year terms, the index was 4.1% higher in the three months to the end of July, down from 5.7% increase in the three months to the end of June.
“It is notable that the Halifax house price index has shown less volatile monthly movements over the past three months. Between November and April, each month saw house prices change by at least 1% month-on-month, including an eye-watering spike of 6.0% in February,” said Howard Archer, the chief economic advisor to the EY ITEM Club.
“The three-month growth rate in house prices eased back sharply to 0.4% in July from 2.4% in June, 2.5% in May and 4.2% in April. It had spiked to April’s high from 1.6% in March.
“The Halifax house price measure has been an outlier in recent months, consistently delivering higher annual house price increases than other measures (and it was also more volatile in monthly movements up until May),” Archer noted.
|| HALIFAX HPI m/m (July)
-0.2% (Actual)
0.3% (Forecast)
-0.3% (Previous)
— Trading advisor (@KridhaAdvisory) August 7, 2019
Despite the slowdown in house price inflation, the percentage of people aged between 20 and 34 who are still living with their parents has risen to 25% (based on 2018 figures) from 21% in 1996, the Office for National Statistics reported today.
Housebuilding stocks did not seem too fazed by the apparent slowdown in house price inflation; the likes of Barratt Developments PLC (LON:BDEV), Berkeley Group Holdings PLC (LON:BKG) and Taylor Wimpey PLC (LON:TW.) were outperforming the market with gains ranging from 1.7% to 2.0%.
10.15am: FTSE 100 finds forward gear as sterling dips again
London's index of leading shares has pulled the old switcheroo and is now comfortably in positive territory, helped by sterling's weakness.
The FTSE 100 was up 34 points (0.5%) at 7,206, led by precious metals miner Fresnillo PLC (LON:FRES), up 4.1% at 671.4p, which continues to attract the attention of risk-averse investors seeking a haven for their money.
“Gold, currently just short of $1,500, is benefiting from the markets’ risk aversion, as their attention remains focused on the continuing trade tensions between the two global powerhouses,” noted Fiona Cincotta at City Index.
On the foreign exchange markets, sterling was down almost a quarter of a cent against the US currency at US$1.2147.
“A stabilisation in China’s yuan currency has helped to stop the rot for global markets and the FTSE 100 manages to claw back a bit of ground to trade above the 7,200 mark on Wednesday,” commented AJ Bell's Russ Mould.
“At the moment trade talks between the US and China are still scheduled for September and these, along with a meeting of the US Federal Reserve, are likely to be an increasing focus for the market as we move through August,” he added.
Phoenix Group Holdings PLC (LON:PHNX), the largest life and pensions consolidator in Europe, was 2% higher at 669.6p after well-received interims.
“Phoenix has announced a solid set of H1 2019 results this morning, 24% ahead of consensus expectations on the key metric of cash generation,” observed Shore Capital.
Bookmaker Flutter Entertainment PLC (LON:FLTR), which owns the Paddy Power and Betfair brands, also got the thumbs-up for its half-year results. The shares were up 1.8% at 6,342p.
Flutter Entertainment cites regulation and taxation changes as major factors in H1 performance #casino #gaming https://t.co/wnPVEfGmBX
— CasinoBeats (@casinobeatsnews) August 7, 2019
8.50am: Slow-start for Footsie as results from Spirax, Standard Life and Glencore get lukewarm receptions
UK blue-chips opened mixed-to-lower after yesterday's US rebound was not followed through in Asian markets this morning.
The FTSE 100 was down 13 points (0.2%) at 7,159, with the index weighed down by adverse reactions to half-year updates from engineer Spirax-Sarco Engineering PLC (LON:SPX), asset management firm Standard Life Aberdeen PLC (LON:SLA) and commodities trader Glencore PLC (LON:GLEN).
Spirax-Sarco was the top faller, shedding 4.4% at 8,230p after it said it expects organic sales growth in its Steam Specialties business to more than half in the second half of 2019.
Spirax Sarco Engineering : Sarco says sales growth at main business to halve #SpiraxSarcoEngineering #Stock #MarketScreener https://t.co/fUuQYWF6nP pic.twitter.com/AlCWt4u6xK
— MarketScreener.com (@Market_Screener) August 7, 2019
“While the group's strong first half organic sales growth was ahead of our expectations, industrial production growth forecasts for the second half of the year have weakened below earlier estimates,” revealed Nicholas Anderson, the group's chief executive, as the company left its full-year guidance unchanged.
Standard Life was off 3.6% at 271.7p despite announcing a 5% rise in assets under management to £577.5bn.
“These numbers were a little below market forecasts and showed a continuation of the outflows that the business has been suffering from in recent years but progress is being made nonetheless,” declared Steve Clayton, the manager of the HL Select UK Income Shares fund, which is a holder of the stock.
Glencore's chief executive officer, Ivan Glasenberg, said the group's performance in the first half reflected a challenging economic backdrop for its commodity mix, “as well as operating and cost setbacks within our ramp-up/development assets”.
The shares tumbled 2.5% to 225.55p after the group revealed adjusted underlying earnings (EBITDA) in the first half of the year declined 32% from a year earlier to US$5.6bn.
6.25am: London set for a subdued start as currency war fears subside
The FTSE 100 looks set to make a quiet start to the trading day after Asia’s main markets appeared to stabilise and the Wall Street clawed back some lost ground.
China’s move to place a floor under the yuan appears to have calmed nerves following a panic it may be ready to embark on a currency war in retaliation to US trade sanctions.
The People’s Bank of China set what’s called the reference rate at just under seven yuan to the dollar.
The Shanghai Composite was flat, with the Hong Kong’s Hang Seng and the Nikkei in Japan both nudging into positive territory.
Trade "back and forth"
“We could be in for a bit of back and forth when it comes to the Chinese currency in the near-term, and it is likely to be a driver of volatility,” said David Madden, analyst at CMC Markets.
“Yesterday, Larry Kudlow, an economic advisor to the White House, said the US can’t tolerate the depreciation in the yuan, but at the same time, trade talks with China are still set to take place in September.”
Back here in the UK, corporate news has almost slowed to trickle ahead of the traditional summer lull. Savings firm Standard Life Aberdeen (LON:SLA) and miner Glencore (LON:GLEN) are the biggies on the reporting schedule. After that, it’s a cluster of mid- and small-caps.
Around the markets: Pound worth US$1.2168; gold changing hands for US$1,484.07 an ounce, up US$9.65; Brent crude costs US$58.84, down 10 cents a barrel
Wednesday’s scheduled news
Interims: Glencore PLC (LON:GLEN), Hill & Smith PLC (LON:HILS), Legal & General PLC (LON:LGEN), Morgan Sindall Group PLC (LON:MGNS), Phoenix Group Holdings PLC (LON:PHNX), Spirax-Sarco PLC (LON:SPX), Standard Life Aberdeen PLC (LON:SPX), Ultra Electronics PLC (LON:ULE)
Economic data: Halifax house price index, US consumer credit
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