- FTSE 100 closes 107 points higher
- US stocks bound higher early on
- Fears over Omicron coronavirus variant recede
4.50pm: Strong rebound for markets
The FTSE 100 index bounded higher on Tuesday as fears over the Omicron coronavirus variant receded further, accelerating in the afternoon with strong gains on Wall Street after solid trade data.
At the close, the UK blue-chip index was up 107.62, or 1.5% at 7,339.90, just below the day's peak of 7,344.69 and well above the session low of 7,232.28.
On Wall Street, around London’s close, the Dow Jones Industrials Average was 536 points, or 1.5% higher at 34,763, while the broader S&P 500 index gained 2.1% and the tech-laden Nasdaq Composite jumped 3.0%.
Danni Hewson, AJ Bell financial analyst, commented: “Whilst the country might be being battered by Storm Barra, UK financial markets have been enjoying a fair wind. Confidence has returned with a lower-case c; investors are well aware that Covid’s new variant might have a sting in its tail even if every indication is Omicron is not as severe as had been feared. But it is incredibly transmissible and whilst investors seem content to buy the last dip, they are cautious, and they are right to be so.
“A noticeable bump for the FTSE 100 has come from miners bolstered by the decision by China’s central bank to up the amount of cash sloshing around the system by reducing the amount banks have to hold in reserve. Prudent policy it may be termed but it’s also policy with a clear target in sight. With fears that Evergrande’s delicate balancing act has reached the last scene the government needs to reassure its public that one collapse, even one with such a huge debt pile, won’t crash the whole system. And any growth, even prudent growth is an opportunity for businesses like BHP and Anglo American which have enjoyed a decent run of form on the UK’s blue-chip index today."
“But the name of the game has been tech. The Nasdaq’s relief rally followed on from European gains despite the spectre of inflation lurking in the wings. All the talk of tapering is becoming white noise and until rate rises become a fixture of the conversation many investors figure they’ve got breathing space before central banks stamp on the big break.
“There is still a degree of uncertainty about how consumers will respond to the shifting sands of Covid, though certainly the latest UK retail figures suggest they’re responding by simply getting on with life. Precautions will be taken; risk will be assessed but the appetite to put life on hold once more simply isn’t there. Even airline stocks, which will bear the brunt of new travel restrictions, have been surprisingly resilient. People might not be happy about shelling out for tests, but the alternative is depressingly familiar and where people can find a way to keep their plans viable, they are.”
3.55pm: Miners lead market higher
Leading shares remain near the day's highs, buoyed by easing omicron concerns and strong trade figures from China and the US.
The FTSE 100 is up 102.58 points or 1.42% at 7334.86, just shy of the 7336 it reached a little earlier.
The index was in positive territory from the start but the gains accelerated after a strong start on Wall Street.
The Dow Jones Industrial Average is up 1.55% or 545 points while the S&P 500 has jumped 2% and the tech-heavy Nasdaq Composite has added 3.01%.
Michael Hewson, chief market analyst at CMC Markets UK, said: "European markets have picked up where they left off yesterday, with the FTSE100 back above 7,300, and back at the levels it was trading at prior to US Thanksgiving, when it closed at 7,301...
"This week’s mood is in stark contrast to the hope and fear that bedevilled sentiment last week, as evidence continues to grow that omicron, while more transmissible, doesn’t appear to be as virulent when it comes to hospitalisations. The milder nature of the symptoms appears to be encouraging investors to look past, the uncertainty of the past week or so, and focus more on the global recovery story.
"The basic resource sector has been leading the gains in the London market, after the latest China trade numbers showed a big pickup in commodity demand, with iron ore imports hitting a 16-month high."
Anglo American PLC (LSE:AAL) has added 6.22%, BHP Group PLC (LSE:BHP) is 5.44% better and Rio Tinto PLC (LSE:RIO) has risen 4.79%.
Building materials group Ferguson PLC (LSE:FERG) is up 5.23% following its latest update.
Aveva Group (LSE:AVV) has added 4.72% as Bernstein issued an outperform rating, but AstraZeneca PLC (LSE:AZN) is down 2.69% after Jefferies moved from buy to hold.
3.02pm: US exports surge while imports slow down
US stocks jumped at the open as markets rebounded on easing fears of the omicron variant wreaking havoc on the global economy.
In New York, the Dow Jones Industrial Average jumped over 416 points or 1.18% to stand at 35,643, while the S&P 500 added around1.76% or 80 points to stand at 4,673.
The tech heavy Nasdaq Composite index advanced around 372 points or 2.44% to 15,596.
Electric vehicle giant Tesla Inc (NASDAQ:TSLA) shares added almost 3% despite reports that it had had to replace Autopilot cameras in the front fenders of three of its models.
Elsewhere, the US trade deficit shrank 18% in October after the biggest surge in exports in 13 years and a slowdown in imports tied to congestion at domestic ports. The figure was $67.1 billion compared to record $81.4 billion in the prior month. Economists had expected a $67 billion deficit.
????????US #trade deficit narrows $14bn in Oct, from largest on record in Sep, as exports outpace imports
????Gds exports volumes +9.5% m/m: broad-based
✅+7.1% y/y (+6.5pt)
????Gds imports vol -0.1% m/m: industrial & capital gds down; autos & consumer gds up
✅+6.9% y/y (-2.9pt) pic.twitter.com/7o3PTjnfMt
— Gregory Daco (@GregDaco) December 7, 2021
Back in the UK, and the FTSE 100 has taken up the US baton and is now up 103.65 points or 1.43% at 7335.93, a high for the day.
2.27pm: Mid-cap index outperforms
Ahead of what is expected to be an upbeat opening on Wall Street, leading shares continue to be in a positive mood.
The FTSE 100 is up 84.13 points or 1.16% at 73126.41, not far off its high for the day.
The more domestically focused FTSE 250 is doing even better on hopes that the UK economy will ride out the latest COVID-19 variant..
The mid-cap index is currently 1.52% better at 23,228.
12.57pm: Oil price boosted by omicron hopes
Hopes that the omicron variant will not damage the global economy too much have helped give a lift to the oil price.
Brent crude is up 2.56% at US$74.95 while West Texas Intermediate is 3.01% better at US$71.58.
BP PLC (LSE:BP.) is up 0.71% while Royal Dutch Shell PLC (A shares) (LSE:RDSA) has risen 0.11%.
The FTSE 100 remains in buoyant mood, up 84.23 points or 1.16% at 7316.51.
11.57am: US markets poised to join global rebound
US stocks are expected to open higher, continuing a recovery made on reports that the new Omicron variant of coronavirus (COVID-19) is likely to be less damaging to the global economy than previous strains due to milder symptoms.
Futures for the Dow Jones Industrial Average rose 1.05% in Tuesday pre-market trading, while contracts for the broader S&P 500 index gained 1.33% and those for the tech-heavy Nasdaq 100 added 1.81%.
Stocks closed higher on Monday as companies linked to the reopening of the economy gained, boosting sentiment on the Dow Jones. General Electric (NYSE:GE) gained 4%, Boeing rose 3% and Chevron added more than 2%.
On the day, the Dow added 647 points, or 1.87%, to close at 35,227 and the S&P 500 jumped 1.17% to 4,592. The Nasdaq Composite increased 0.93% to 15,225.
“Following on from yesterday’s indicative news from South Africa that the new COVID-19 variant could be milder than previous versions symptom-wise, much the same message was reinforced by the US’s Dr Anthony Fauci overnight,” commented OANDA senior market analyst Jeffrey Halley.
“That was all markets needed to hear really and equity markets in Europe and the US followed Asia’s lead and piled back in."
The FTSE 100 is not bucking that trend, up 89.34 points or 1.24% to 7321.62.
11.07am: Housebuilders higher after latest price news
Leading shares remain buoyant as omicron concerns continue to fade and Chinese trade figures provide support.
The FTSE 100 is currently up 87.56 points or 1.21% at 7319.84.
Joshua Mahony, senior market analyst at IG, said: "European markets are continuing their upward trajectory, with traders feeling increasingly confident that the omicron variant will not ruin Christmas. Chinese trade data has impressed, boosting sentiment given recent logistical concerns. UK house prices are on the rise, boosting housebuilders...
"UK house prices grew at the fastest rate in 15 years over the past three months, allaying fears that we could see a crash once the stamp duty boost drew to an end. With elevated household savings and rampant global inflation in play, it should come as no surprise to see assets such as houses provide a key hedge against rising prices. For housebuilders this is a clear sign that demand continues to outstrip supply, with yesterday’s strong construction PMI highlighting continued strength within the sector. "
Persimmon PLC (LSE:PSN) has put on 0.83%, Barratt Developments PLC (LSE:BDEV) is 0.75% better and The Berkeley Group Holdings PLC (LSE:BKG) has built up a 0.6% gain.
Elsewhere Ashtead Group Plc (LSE:AHT) has added 3.17% after the equipment rental group said its full year results would be ahead of expectations after a 42% rise in first half profits.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “Ashtead’s heavy duty industrial rental equipment fell out of favour during the peak of the pandemic, which is why new results look so spritely in comparison. However it’s been achieved, knocking the lid off full year expectations is good going. As the world, and more specifically, industrial work, has started to resume, Ashtead stands to benefit. Plans to build out other revenue streams have merit, but for now, it’s still the traditional equipment rental business that’s bringing home the bacon.
"The group has enjoyed favourable market sentiment over the last few months, boosting the valuation in a big way. While the optimism can be understood, it shouldn’t be forgotten that Ashtead is an operationally leveraged business. As a cyclical company, its fortunes wax and wane with the wider economy too, so all-in, there could be some volatility if there are any unwelcome economic surprises.”
10.32am: German economy sees mixed picture
Mixed signals from Germany as the country struggles with a surge of COVID-19 cases.
Industrial production grew by 2.8% in October, better than expected.
But investor confidence has fallen this month.
The latest economic sentiment index from the ZEW economic research institute dropped to 29.9 from 31.7 in November.
The assessment of the economic situation dropped 19.9 points - 7.4 points, the first time since June 2021 that the indicator has been in negative territory.
ZEW President Professor Achim Wambach said: “The German economy is suffering noticeably from the latest developments in the COVID-19 pandemic. Persisting supply bottlenecks are weighing on production and retail trade. The decline in economic expectations shows that hopes for much stronger growth in the next six months are fading."
9.39am: Mining shares give support
Leading shares continue to head in the right direction, with mining shares benefiting from the strong Chinese data which prompted hopes of increased demand for commodities.
The FTSE 100 is now up 83.12 points or 1.15% at 7315.4, its highest level since mid-November.
Among the miners, Anglo American PLC (LSE:AAL) has added 4.05% while BHP Group PLC (LSE:BHP) is 2.92% better.
But the biggest riser so far is building materials group Ferguson PLC (LSE:FERG), up 4.84% after a positive first quarter update.
AJ Bell investment director Russ Mould said:“The more positive market sentiment seen at the start of the week extended into Tuesday, supported by waning fears about the Omicron variant and robust Chinese trade data.
“Suggestions the new Covid strain might only trigger mild symptoms are prompting relief among investors ...however given the typical gap between infection and hospitalisation with coronavirus it remains early days in our understanding of just how virulent Omicron is."
Mould added: "There were big gains for US-focused plumbing products outfit Ferguson. The business is not only enjoying strong demand but is also doing a good job of mitigating cost inflation, allowing it to boost profit expectations. The company will also have expectations of work coming down the pipe from the recently agreed US infrastructure package."
UBS analysts repeated their buy rating on Ferguson shares after the update: "Ferguson states that its full year expectations have increased as a result of the first quarter but this is not quantified.. As expected, management cites tougher second half comparators and lack of visibility on when inflationary tailwinds will moderate. .. We think full year consensus will move close to US$2.5bn following the first half upgrade, implying a nearly 10% consensus upgrade."
8.43am: Supermarket sales drop 3.8% in the last 12 weeks
Grocery sales fell back in the last quarter compared to last year, which was hit by lockdown restrictions which meant more people cooked and ate at home rather than going out.
With no lockdown this year in the 12 weeks to the end of November, supermarket sales fell by 3.8% compared to last year according to the latest figures from Kantar. But they were 7% higher than the same period in 2019.
Price inflation continues to have an effect, with grocery prices up 3.2% in the last four weeks, the highest rate of inflation Kantar has recorded since June last year.
And consumers can expect to spend 3.4% more on Christmas dinner than last year, with the average cost of a meal for four now £27.48.
Fraser McKevitt, head of retail and consumer insight at Kantar, said: “Grocery sales are now being compared against November 2020 when we had tighter restrictions across Scotland and Wales and the second lockdown in England. Circumstances are very different this year. With people back in the office a few days a week and restaurants and cafés open, we’re putting less in our grocery baskets for cooking at home and as a result, the average shop size has shrunk by 8% this month versus last year.”
Concerns about the spread of the omicron variant mean online sales - which fell 12.5% in the four weeks to late November - could start to pick up again.
Morrisons and Iceland showed the biggest falls in the last 12 weeks, both down 7.1%.
J Sainsbury PLC (LSE:SBRY) lost 5.3%, Asda dropped 5% but Tesco PLC (LSE:TSCO) outperformed the market, dropping 1.4%.Tesco also won 0.7 percentage points of share during this period, the retailer’s biggest jump over 12 weeks since 2007, taking it to its highest market share since February 2019.
Lidl and Aldi both limited their annual sales decline to just 1.1%. Lidl hit a new record market share of 6.4%, while Aldi won 0.2 percentage points to move to 7.9%.
Sales at Ocado Group PLC (LSE:OCDO) fell by 2.4% year on year but have grown by 35.0% compared with two years ago.
8.15am: BAT gains as market makes upbeat start
Leading shares have opened higher, keeping the week's more positive mood going.
Sentiment has been helped by better than expected Chinese trade data, which comes a day after the country cut its reserve requirements by 0.5%.
Chinese imports jumped by 32% and while export growth slowed to 22%, that was still higher than forecasts.
Michael Hewson at CMC Markets UK said the figures showed Chinese domestic demand was bouncing back.
He said: "In recent months Chinese exports have held up well due to businesses ordering early so that they can build up their pre-Christmas inventory levels, with machines and electrical goods seeing strong demand. This recovery trend has continued for the fourth month in a row as exports climbed by 22%, beating expectations of 20.3%.
"Imports also picked up, helped by inventory rebuilding as well as decent demand around “Singles Day” rising 31.7%, against an expectation of 21.5%. A rebound in coal imports to deal with an energy shortfall as well a higher demand for copper also helped boost the data."
However worries about the fate of China's beleaguered Evergrande property giant could yet cast another shadow over the markets.
Investors will also be watching any fallout from a video call between US president Biden and Russian president Vladimir Putin.
At the moment though the FTSE 100 is up 55.09 points or 0.76% at 7287.37.
British American Tobacco PLC (LSE:BATS) is 1.14% better as the company stuck to its full year forecasts and said more people were switching to its vaping products.
Richard Hunter, head of markets at interactive investor, said: “BAT’s move away from traditional tobacco products is continuing apace, as significant investment into its “New Category” segment begins to take shape...
"The New Category revenue target of £5 billion by 2025 is well on track, and indeed should contribute to profitability for the first time after a period of strong investment. Its Vuse vapour product is a global leader, while the tobacco heating product glo Hyper is enjoying strong volume share gains across all of its key markets...
"For the time being, the bulk of BAT’s sales still come from traditional tobacco products, where strong pricing power and the sheer scale of its operations leave the company well placed for future investment in alternatives. As such, overall revenue growth for the period is expected to be 5%, despite the headwinds of lower margin Emerging Markets and lower US volumes muddying the water within the set of combustible products.
"For BATs, the strategy is clear and the progress is measurable. However, the share price has been held back by the fact that there are many investors who will simply not touch the sector given the ethical issues, let alone the ever present threat of increased regulation. This is unlikely to change in the immediate future and is reflected by a price which has declined by 3.5% over the last year, as compared to a gain of 10% for the wider FTSE100."
7.44am: UK housing market at new record
More evidence that the UK housing market is booming despite the ending of the stamp duty tax holiday.
House prices rose for the fifth straight month in November, according to the Halifax, with quarterly house price inflation now at its strongest level since late 2006.
The average UK property price hit a new record high of £272,992, up £20,000 on this time last year.
Russell Galley, managing director at Halifax, said: “UK house prices rose again in November, with the value of the average property increasing by another 1%, or £2,808, tipping the annual rate of inflation up to 8.2%. This is the fifth straight month that average house prices have risen, with typical values up by almost £13,000 since June, and more than £20,000 since this time last year.
“On a rolling quarterly basis the uptick in house prices was 3.4%, the strongest gain since the end of 2006, bringing the new average property price up to a record high of £272,992. Since the onset of the pandemic in March 2020, and the UK first entering lockdown, house prices have risen by £33,816, which equates to £1,691 per month
“The performance of the market continues to be underpinned by a shortage of available properties, a strong labour market and keen competition amongst mortgage providers keeping rates close to historic lows. Those taking their first step onto the property ladder are also playing an important role in driving activity, with annual house price inflation for first-time buyers at 9.1% compared to 8.8% for homemovers."
But he added: “Looking ahead, there is now greater uncertainty than has been the case for quite some time, with interest rates expected to rise to guard against further increases in inflation. Economic confidence may be also be dented by the emergence of the new Omicron virus variant, though it remains far too early to speculate on any long-term impact, given insufficient data at this stage, not to mention the resilience the housing market has already shown in challenging circumstances.
“Leaving aside the direct impact of a possible resurgence in the pandemic for now, we would not expect the current level of house price growth to be sustained next year given that house price to income ratios are already historically high, and household budgets are only likely to come under greater pressure in the coming months.”
6.50am : Leading shares set to extend gains
The FTSE 100 is expected to extend its comeback run this week as Wall Street joined in the positive momentum overnight.
London’s blue chip index has been called 13 points higher by the City’s spread betters, following its strong start to the week, having surged almost 110 points or 1.5% to 7,232.28.
Unlike last week, US markets carried on the gains from markets in Europe, led by a 2.1% gain from the small caps of the Russell 2000 index, followed by a 1.9% rise for the Dow Jones, 1.2% for the S&P 500 and 0.9% for the Nasdaq, as yields recovered most of the ground lost at the end of last week.
Hopes that the omicron Covid variant will not be as bad as feared appear to have driven the market’s gains, said market analyst Michael Hewson at CMC Markets.
“Investors looked past the negativity of last week and chose to focus on the expectation that the omicron variant, while more transmissible, may well not be as virulent as the delta variant that is wreaking havoc across Europe.
“Indications so far still show that it isn’t prompting a big rise in hospitalisations and deaths, raising the hope that while it may be as transmissible as the common cold, that could be as bad as it gets.”
However as the last week has shown us, he added that, “while sentiment has been shown to be positive on one day, it doesn’t take too much to flip it on its head, and turn it negative the next”.
Meanwhile, analyst Naeem Aslam at AvaTrade reminded investors of the rocky relationship between the United States and China, the world's two largest economies, with a significant feud between the two potentially being detrimental to stock markets.
"Washington recently announced that it would boycott the Winter Olympics in Beijing. Washington claims that the boycott is a means of protesting Beijing's alleged violations of human rights. According to Speaker Nancy Pelosi, the move is intended to reprimand China for its actions against Muslims in Uyghur," he said.
"Similarly, relations between the United States and Russia have also taken a turn for the worse as the United States and European countries are considering implementing sanctions against Russia if it takes over Ukraine. Washington will likely target large banks in Russia and block Russia’s ability to convert its legal tender, rubles, into U.S. dollars and other major currencies."
He also flagged the "clear positive correlation" between broader stock markets and cryptocurrency markets, as evidenced by the price of digital coins over the last few days, when cryptocurrency prices fell in tandem with stock market indices.
"This occurred despite the fact that cryptocurrencies are regarded as a potential alternative to gold and a hedge against inflation. As a result, the price of Bitcoin fell below the critical $50,000 mark.
"However, since then, investor sentiment has improved and major stock market indices have recovered. Similarly, the price of Bitcoin has also been able to surpass $50,000, which is very encouraging for the blockchain space as we approach the end of 2021."
6.50am: Early Markets - Asia / Australia
Asia Pacific shares were mostly higher on Tuesday following a rally overnight in the US on optimism that the omicron variant may not be as bad as feared.
The Nikkei in Japan jumped 1.89% and South Korea’s Kospi rose 0.62%.
China’s Shanghai Composite slipped 0.14% while Hong Kong’s Hang Seng index surged 2.09%.
Australia’s S&P/ASX200 lifted 0.95% to close at 7313.9 points after the Reserve Bank of Australia kept the cash rate on hold at 0.1% and said it will continue to purchase government securities until at least mid-February 2022.