- FTSE 100 down nearly 45 points
- Sterling gains as no-deal Brexit worry fades for now
- US stocks, dollar volatile after ISM services index weak
5.10pm: Footsie finishes in the red
The FTSE 100 index felt the pain again on Thursday, extending Wednesday's big drop with global markets under pressure on recession fears, and as sterling strengthened as no-deal Brexit worries faded for the time being and the dollar took a tumble.
The UK's premier share index finished 44.90 points lower at 7,077.64 as traders continued to fret about the general malaise of the global economy following weak services sector data from the UK and the US. The more domestically focused FTSE 250 index shed 128.75 points at 19,348.16.
However, on currency markets, the pound added 0.8% against the US dollar as fears of a no-deal Brexit eased for now after UK prime minster Boris Johnson's new offer to the EU, which appears to be getting traction with Brexiteers in parliament.
Over on Wall Street, stocks were volatile, recovering from lows to trade fairly flat after posting sharp early falls as another batch of poor US data was interpreted as raising hopes for another interest rate cut by the Federal Reserve, sending the dollar lower.
Around London's close, the Dow Jones Industrial Average was up around 2 points at 26,079, while the S&P 500 gained nearly 7 points.
3.45pm: Sterling gains on dollar misery
While the weak US services data sent equities sliding on both sides of the Atlantic, one beneficiary was the pound, which was taking advantage of the dollar’s new weakness and in late-afternoon trading was 0.8% higher at US$1.2402.
The disappointing ISM non-manufacturing data, which fell well below estimates, has sent the Dow down below its 200-day average as traders continue to fret over the health of the world economy.
“The slowdown in manufacturing is spreading to services”, said Markets.com’s Neil Wilson, adding that the data had been critical to market sentiment and as a result, any optimism had now been “snuffed out”.
“Whilst still showing the sector in expansion, this was a major miss versus expectations. The market is reacting to the signs of a slowdown in the global economy. The fact these ISM numbers are printing weaker shows even the US is not immune”, Wilson said.
After flirting with a plunge of up to 1.6%, the FTSE 100 had recovered some lost ground after 3.30pm in London, but was still down 0.9%, or 67 points at 7,055.
3.15pm: US stocks tumble as service sector growth drops to three-year low
Wall Street was firmly in retreat in early trading in New York after the latest ISM non-manufacturing PMI showed growth in the US services sector had slowed faster than expected.
The data for September showed a drop to 52.6 from 56.4 in August, above the 50 growth level but below the expected level of 55 predicted by analysts.
Bad news still considered bad. ISM Non-Manufacturing drops big from August. Lowest reading since August 2016. Stocks don't like it.https://t.co/yVv8u0r3gV— Andrew Adams CFA, CMT (@DayTraderGator) October 3, 2019
Educational services, real estate and wholesale trade were among sectors reporting a decrease over the period, while retail, mining and mining were among areas reporting growth.
Shortly after the release, the Dow plunged 1.01%, followed by the S&P 500 which tumbled 0.86% and the Nasdaq which fell 0.88%.
The downturn also hit trading in London, with the FTSE 100 down 1.5%, or 108 points, at 7,014 in late-afternoon.
2.40pm: US markets mixed as services data awaited
Wall Street saw a mixed open on Thursday morning in New York as traders awaited services sector data.
Shortly after the opening bell, the Dow Jones Industrial Average was 0.09% lower with the S&P 500 up 0.03% and the Nasdaq 0.04% higher.
Traders are keeping their powder dry ahead of the US non-manufacturing data, which is expected to give a better picture of the health of the world’s largest economy.
In London, the FTSE 100 down 65 points at 7,057.
2.00pm: More misery expected for Wall Street
US markets looked set to follow London’s lead on Thursday morning, with Wall Street expected to open in the red.
Traders in New York are unlikely to have garnered any optimism from the latest weekly jobless claims report, which showed that in the seven days to 28 September the number of people claiming US unemployment benefits rose to a one-month high of 219,000.
Aside from the jobless figures, investors are also going to pay close attention to US non-manufacturing data, due at around 3pm London time.
Surprisingly weak manufacturing data on Tuesday, the lowest level in a decade, sent markets into a tailspin, so a sluggish performance from other areas of the US economy is likely to spark more concerns that a global downturn is in the offing.
Meanwhile, in London, the FTSE 100 had tumbled 81 points to 7,041.
12.45pm: HSBC highlights “worrying” slowdown in UK services
As the afternoon trading session began, the FTSE 100 had failed to pull out of its slump and was 40 points lower at 7,081.
The gloomy PMI readings this week, topped off by a move into contraction by the UK’s services sector, which accounts for around 80% of GDP, has spooked analysts at HSBC, who said that the fact the critical sector had fallen into decline in September was a “worrying sign” for the national economy.
The bank said the UK had “clearly lost momentum” and that the current picture was currently pointing towards more job cuts from UK firms.
While there was some potential upside should a Brexit deal materialise, HSBC said this outcome seemed “some way off” and the even if the UK’s political situation improved, the alarm bells ringing in the global economy meant the outlook was “not encouraging”.
In other Brexit developments, MPs could be given a vote on Boris Johnson’s new Brexit deal before a crunch EU summit on 17 October, with the Prime Minister telling the Commons on Thursday afternoon that he would “reflect” on suggestions from Frank Field MP to vote prior to presenting the proposals to Europe's leaders.
However, while BoJo seems focused on securing the backing of MPs, analysts at Bank of America Merrill Lynch said previous statements by the EU suggested they would “not approve” of the UK’s latest gambit, and that even if a deal was agreed the outcome was expected to be “economically costly”.
Ted's troubles were also seemed to be causing some pain for its clothing industry brethren, with Next PLC (LON:NXT) dropping 1.4% to 5,984p and online fashion giant boohoo Group PLC (LON:BOO) down 2% at 266.1p.
11.15am: Losses extended as ex-div stocks weigh down the Footsie
The Footsie’s losses have lengthened as economists pick over the bones of this morning’s disappointing services purchasing managers’ index release.
London’s index of heavyweight shares was down 38 points (0.5%) at 7,084.
“September’s purchasing managers survey pointed to the sector contracting for the first time since March,” noted Howard Archer, the chief economic advisor to the EY ITEM Club.
The purchasing managers’ index (PMI) fell to 49.5 in September; a value below 50 indicates a decline in activity. The services PMI averaged just 50.5 over the third quarter.
“Overall, the purchasing managers' surveys point to the UK economy struggling in September and over the third quarter; however, these surveys do tend to present an overly gloomy picture at times of heightened uncertainty,” Archer asserted.
“We think the economy probably saw GDP growth of 0.3-0.4% quarter-on-quarter in the third quarter, although this was buoyed by monthly GDP growth of 0.3% in July and is likely to have overstated the economy’s underlying strength,” Archer revealed.
Sterling has eased back against the dollar to around US$1.2284 from US$1.23 overnight but that has offered little succour to blue-chip stocks, even though many of them get a boost from a weak UK exchange rate.
On the other hand, it is a Thursday which means a number of high-profile stocks have gone ex-dividend, which has opened a trap-door beneath the likes of DS Smith plc (LON:SMDS), Kingfisher plc (LON:KGF), Taylor Wimpey PLC (LON:TW.), British American Tobacco PLC (LON:BATS), British Land PLC (LON:BLND) and WPP PLC (LON:WPP), all of which are down by 2% or more.
9.55am: UK service sector falls into decline in September
The UK’s poor economic performance was confirmed once again on Thursday after the latest Services PMI showed the sector had fallen into decline in September.
The data from IHS Markit showed the index fell to 49.5 in September from 50.6 in August, with a level below 50 indicating a contraction.
It is only the fifth time in a decade that the index has dropped below 50, while the sector also saw job cuts for the first time in five months and at the fastest rate since August 2010.
???????? UK Services PMI falls to 49.5 (50.6 - Aug), while the labour market showed signs of weakness as jobs were cut. With the exception of the Brexit aftermath (July '16), all three sectors posted in decline for first time since 2009. More: https://t.co/ivYBrBUYAi pic.twitter.com/2POVdLMc9m— IHS Markit PMI™ (@IHSMarkitPMI) October 3, 2019
The composite PMI, which incorporates reading from services, construction and manufacturing, also made for grim reading, falling to 48.8 in September from 49.7 in August, indicating that the UK’s private sector was declining at a sharper rate than previously.
Chris Williamson, chief business economist at IHS, said the data pointed to a 0.1% decline in UK gross domestic product (GDP) for the third quarter, which on top of a second-quarter shrinkage placed the economy at “heightened risk” of recession.
He added that the readings suggested a “greater likelihood” of an interest rate cut from the Bank of England when it meets in November.
However, the pound seemed relatively unmoved by the data and was flat against the dollar at US$1.2309 shortly after 9.30am, while the FTSE 100's decline had eased off slightly with the index down 24 points at 7,098.
Meanwhile, economic red flags are continuing to pop up around the world as the German private sector reported a contraction for the first time since 2014, fuelling fears that Europe’s largest economy could be about to tip into recession.
Neil Wilson, chief market analyst at Markets.com, said the data from Deutschland was a “real blow” when combined with similarly weak output from fellow eurozone countries such as France, Italy, Ireland and Spain.
“These are recessionary readings and as such will heap pressure on the European Central Bank to be more accommodative”, Wilson said, although despite being faced with a recession, the ECB has run out of ammo.
“[The ECB is] already about as loose as it can go – what good does another 20 [basis points] of cuts do? Zilch. Nada. Rien.”
In company news, investors in tobacco giant Imperial Brands PLC (LON:IMP) seemed mostly unmoved by the news of its chief executive’s departure, with the shares down just 0.15% at 1,827p in mid-morning trading.
Alison Cooper’s exit will leave just five FTSE 100 companies with female bosses.
8.35am: FTSE 100 starts in the red
The FTSE 100 began the day in reverse gear after posting its biggest drop in three years on Wednesday.
Recessionary fears were compounded by Donald Trump opening a new front in his global trade offensive – this time focusing his ire on the European Union and its support for Airbus.
The invective from the White House may provide a little cover for Boris Johnson, who has presented his Brexit plans to EU leaders.
The depressed state of the pound, which was changing hands for US$1.2285, suggests the PM has little or no chance of getting his deal accepted by Brussels.
“Ugly is the only way to describe it. Not quite free-fall or panic, but very ugly,” said Neil Wilson of Markets.com.
“Investor confidence has crumbled off the back off a couple of weak US data prints, whilst impeachment talk and geopolitical troubles from Hong Kong to North Korea are not helping.
“European investors also battling the real prospect of a no-deal Brexit and worries about a new tariff war with the US after the WTO back Washington over the Airbus case.”
On the market, recruiter Hays (LON:HAS), a potential victim of any economic slowdown, was off 6% early on.
Proactive news headlines
One of TomCo Energy plc’s (LON:TOM) technology partners is confident that an optimal design for the company’s innovative oil recovery method is now nearer, amid new modelling following a recent field test.
IronRidges Resources PLC (LON:IRR) has identified more potential targets at its Dorothe gold prospects in Chad from a wide-ranging electrical resistivity programme.
MTI Wireless Edge Ltd (LON:MWE) has won orders worth just over US$1mln for the supply of military antennas to an existing Israeli customer.
Amphion Innovations PLC (LON:AMP), the developer of medical, life science, and technology businesses, has trimmed its stake in Polarean Imaging PLC (LON:POLX). Amphion, which will use the proceeds to pay down debt, indicated it was a reluctant seller of the shares and said it remains excited by the future prospects of the medical imaging technology company.
Ades International Holding PLC (LSE:ADES) chief executive Mohamed Farouk Abdelkhalek bought US$61,335 worth of the company's shares.
6.45am: Back foot start predicted
The FTSE 100 is set to start Thursday on the back foot as quite broad fear and anxiety continue to weigh on investor sentiments.
It feels something like there's persistent grinding negativity around America’s trade ‘war’ with China and Europe, plus, of course, Brexit. More granularly, this week there’s also softer US manufacturing and employment figures along with downgraded economic growth stats for Germany. The fact that the US is now increasingly aiming its trade tirade at the European Union provided the latest headlines.
London’s FTSE 100 is called about 23 points lower by spreadbetter and CFD provider IG Markets which makes a price of 7,096 to 7,099 with just over an hour to go until the open. Elsewhere, equity markets were moving lower.
“Stocks in Asia traded lower overnight as the US announced $7.5bn worth of tariffs on EU goods like aircrafts as well as agricultural products,” said David Madden, analyst at CMC Markets.
“The move comes after the WTO found that the EU provided illegal subsidies to Airbus, and the international body said the US can impose levies on EU goods as a retaliation. In light of what has been going on this week, the timing of the tariffs is terrible."
The analyst added: “The softer-than-expected ADP employment report added weight to the argument the US economy is slowing down.”
On Wall Street, the Dow Jones fell nearly 500 points, losing 1.86% to 26,078 while similarly the S&P 500 dropped 1.79% to 2,887 and the Nasdaq chucked off 1.56% to finish Wednesday at 7,785.
Japan’s Nikkei shed 427 points or 1.96% to trade at 21,347, Hong Kong’s Hang Seng dipped 0.52% to 25,906 and the Shanghai Composite was 0.92% lower at 2,905.
Around the Markets
Pound: US$1.2295, down 0.06%
Gold: US$1.498, down 0.14%
Brent crude: US$57.66, down 2.13%
Bitcoin: US$8.322, up 1.61%
Significant announcements expected for Thursday 3 October:
FTSE 100 ex-dividends: DS Smith (LON:SMDS)
Economic data: Services PMI from UK, EU, US, US initial jobless claims, ISM non-manufacturing PMI