- FTSE 100 up 46 points
- Darktrace lifted by update
- Flutter ahead after Citi upgrade
4:50pm: FTSE 100 ends higher, US stocks gain midday
The FTSE 100 finished the day on an up note, rising 46 points, or 0.6%, to 7,491, after US markets rallied in the wake of positive comments from Federal Reserve chair Jerome Powell at his congressional hearing.
After markets were spooked by the idea of four or more US rate rises this year, Powell seemed to soothe matters a little by maintaining the economy was still far away from a normal situation.
Danni Hewson, financial analyst at AJ Bell, said: “Wall Street’s indices couldn’t quite make up their minds in early trading about how the day was going to play out but so far, the Fed Chair’s comments to congress haven’t delivered any big shocks and Tuesday might just live up to its turnaround title after all.
"Inflation is clearly a mega issue for the new year and investors have been realigning their portfolios ready for rate rises. But yesterday’s sell off felt emotional and after a good night’s sleep some investors are already grabbing onto opportunities that have arisen, deciding that the long play might not look as different tomorrow as it did last week."
3.55pm: UK market shrugs off Wall Street woes
Leading shares remain in positive territory as we head towards the close, but it is by no means a convincing performance.
With Wall Street nervous about tomorrow's inflation figures, the FTSE 100 is off its best, up just 24.56 points or 0.33% at 7469.81.
The Dow Jones Industrial Average and S&P 500 remain in the red, down 0.62% and 0.51% respectively.
The Nasdaq Composite briefly moved into the green but is now down 0.46%.
Even so the tech investor Scottish Mortgage Investment Trust PLC (LSE:SMT) is still among the risers in the UK blue chip index, up 4.48%.
Next PLC (LSE:NXT) is up 4.42% after a strong performance in the twelve weeks to the middle of December compared to the rest of the clothing sector.
Positive updates have lifted Dechra Pharmaceuticals PLC (LSE:DPH) by 3.81% and Phoenix Group Holdings PLC (LSE:PHNX) by 2.18%.
And Flutter Entertainment PLC (LSE:FLTR) is up 2.38% as analysts at Citi moved from sell to buy.
Michael Hewson, chief market analyst at CMC Markets UK, said: "European markets have enjoyed a much better session today, although the bias has been much more defensive in nature with health care stocks outperforming, and today’s resilience continuing to contrast with how stocks are performing in the US, where the air looks a little bit thinner."
3.19pm: Storm clouds ahead - and not just inflation, says Deutsche
Inflation is not the only storm cloud on the horizon, according to Deutsche Bank, which believes the likelihood of a soft landing for the economy in 2022 "requires some favourable assumptions and a modicum of good luck."
David Folkerts-Landau, Deutsche's group chief economist, said: "First, although Omicron has a much lower hospitalisation rate than earlier variants and is less deadly, it will spread rapidly across the world and slow large swathes of the economic landscape. Second, central banks will come to realise that they have significantly underestimated inflation, which will turn out to be higher and more durable than was expected as recently as a quarter ago. Third, the stimulus in the system will be wearing off in 2022."
He said the Federal Reserve was likely to raise interest rates four times this year starting in March, which together could exceed 100 basis points, with quantitative tightening likely to commence in the fhird quarter.
He said: "Before June last year, the Fed weren’t expecting to raise rates until 2024 so they are rapidly responding to how extraordinarily loose and behind the curve policy was. In light of the Fed’s moves it is difficult to believe that the ECB will not raise rates in 2023.
"Many other central banks have or are in the process of tightening policy, and our strategists believe this newfound hawkishness, alongside stubborn inflation but decent growth, will help 10yr Treasuries hit 2.4% by mid-year with Bunds at +0.3%. But if inflation proves stickier and investors reassess the terminal rate higher, then there are certainly upside risks to these forecasts."
3.05pm: US investors cautious ahead of latest inflation figures
Confounding expectations, US markets have opening in the red as investors worry about tomorrow's inflation number and the prospects of a host of Federal Reserve interest rate rises this year.
The Dow Jones Industrial Average is down 266 points or 0.74% at 35,802 while the S&P 500 is 0.54% lower and the tech heavy Nasdaq Composite has lost 0.24%.
Craig Erlam, senior market analyst at OANDA, said: "The January blues are alive and well and with markets now eyeing up the possibility of four rate hikes this year, we may be approaching peak fear just in time for earnings season. We've quickly pivoted from the transitory inflation narrative to aggressive tightening including a combination of accelerated tapering, multiple rate hikes, and impending balance sheet reduction. That's quite the shift.
"I'm not sure the inflation data tomorrow is going to put investors' minds at ease, with CPI seen hitting a multi-decade high above 7%. A higher reading could spook investors once again."
Back in the UK, and the FTSE 100 has slipped further from the day's peak after the Wall Street open.
The leading index is now up 24.14 points or 0.32% at 7469.39.
2.25pm: Next ahead after substantially outperforming total clothing market
Leading shares have come off their best levels but are still in positive territory.
The FTSE 100 is up 33.6 points or 0.45% at 7478.85, and has no longer recovered all of Monday's losses.
Earlier it had climbed as high as 7497.
Next PLC (LSE:NXT) is now the biggest riser, up 4.3% in the wake of a Kantar report showing it grew 18.6% in the twelve weeks to the middle of December compared to 2019.
In the same period the total clothing market declined by3.3%.
12.06pm: US markets set to edge higher
US stocks are expected to open higher, supported by a recovery in tech stocks after a rough start to the year due to inflation concerns and looming interest rate hikes.
Futures for the Dow Jones Industrial Average rose 0.21% in pre-market trading, while the broader S&P 500 index added 0.32% and those for the tech-heavy Nasdaq 100 gained 0.45%.
Stocks had a mixed session on Monday after Goldman Sachs (NYSE:GS) (Goldman Sachs (NYSE:GS)) projected the Federal Reserve will raise interest rates four times in 2022.
At the close, the Dow slipped 0.45% to 36,069, while the S&P 500 eased back 0.14% to 4,670 and the Nasdaq recovered to close 0.05% up at 14,943, ending days of losses.
Back in the UK, the FTSE 100 is also in recovery mode, up 0.68% or 50.87 points at 7496.12.
Despite the market being spooked by the prospect of interest rates rising rapidly to curb inflation, the situation is by no means straightforward.
Julien Lafargue, chief market strategist at Barclays Private Bank said: " Some market participants could assume that the current macroeconomic situation will prevail for the rest of 2022. In reality, there are significant question marks remaining: will inflation fade or run away?; will a new variant emerge?; and will a hiking cycle ultimately threaten the economic momentum? With a strong consensus emerging around a fast-paced monetary policy normalisation from the Fed, the real risk might be now that the Fed pauses.
“While this could be ultimately positive for overall equity markets, it could also induce further sector rotations.”
Meanwhile new Bundesbank president Joachim Nagel said at his swearing in ceremony that there was more risk of inflation remaining higher than expected, than the reverse.
11.11am: Travel sector slips after passengers cancel plans
A report from Heathrow that at least 600,000 passengers cancelled their travel plans from the UK's busiest airport in December because of Omicron is not good news for the travel sector.
TUI AG (LSE:TUI) is down 2.95%, while Wizz Air Holdings PLC (AIM:WIZZ) has lost 1.73%, British Airways owner International Consolidated Airlines Group (LSE:IAG) is down 0.31% and easyJet plc (LSE:EZJ) has dipped 0.36%.
Overall though, markets remain in a relatively positive mood.
The FTSE 100 is up 44.97 points or 0.6% at 7490.22 while the FTSE 250 is 0.7% better at 23,162.
Among the risers, Micro Focus International plc (LSE:MCRO) is up 10.84% at 462.1p after analysts at Jefferies move from hold to buy with a 600p price target.
10.18am: Tech rebound helps UK investment group
The recovery in the Nasdaq market by Monday's close has helped give a lift to Scottish Mortgage Investment Trust PLC (LSE:SMT), a major tech investor.
Its shares are up 4.04% at 1185p, making it the second biggest riser in the FTSE 100 after Flutter Entertainment PLC (LSE:FLTR), which is 4.13% higher.
Russ Mould, investment director at AJ Bell, said: "Its shares [have jumped] following recent weakness caused by concerns of how rising interest rates would affect valuations for fast-growth stocks, many of which populate Scottish Mortgage’s portfolio.
“In the US, the tech-heavy Nasdaq index is down nearly 6% year to date, but yesterday’s session saw investors start to buy on the dip meaning that losses earlier in the day were eventually clawed back by the market close.
“It might be too early to call the start of a proper recovery for tech as pre-market indicative prices show minimal gains in the Nasdaq on Tuesday. Investors are likely to be waiting for US inflation figures tomorrow before committing to any big trades on the market."
9.50am: Miners higher on hopes for demand recovery
Mining shares are providing some support to the market, with analysts at Deutsche Bank forecasting a recovery in demand.
They said: "With policy makers in China recently adopting a more supportive stance, we expect commodity consumption to recover through 2022 from current depressed levels, adjoined by a larger-than-usual post winter rebound in activity....Our top commodity picks reflect a combination of China leverage, tight supply and autos exposure (copper, iron ore, platinum).
They raised their target prices for Rio Tinto PLC (LSE:RIO), which has risen 2.08% in the market, BHP Group PLC (LSE:BHP), 1.88% better, and Anglo American PLC (LSE:AAL), up 0.96%.
Overall the FTSE 100 has now regained Monday's losses and a little more, and is up 44.68 points or 0.6% at 7489.93.
9.40am: Dechra agrees rights deal for canine treatment
With little in the way of economic news, company updates are helping to move the market.
Another business on the way up is Dechra Pharmaceuticals PLC (LSE:DPH),
Its shares have climbed 3.81% after it agreed terms with US pet healthcare group Anivive Lifesciences to acquire the worldwide rights to verdinexor, a treatment for lymphoma in dogs. Under the terms of the agreement Dechra will acquire the global product rights and a first right of refusal for other species along with the trademark.
9.24am: Darktrace upgrades full year guidance
One technology company the UK market does have is cybersecurity firm Darktrace PLC (LSE:DARK).
The business may have been ejected from the FTSE 100 after a rather tumultuous start to life as a public company, but its shares have moved sharply higher today.
They have jumped 17.02% to 462p after it upgraded its guidance for the year after a strong performance.
The move has helped lift the mid-cap FTSE 250 index by 0.6% to 23,139, allowing it to outperform the FTSE 100, which is now up 0.46% or 34.44 points at 7479.69.
One of the top risers in the blue chip index is Phoenix Group Holdings PLC (LSE:PHNX).
Its shares are up 3.68% as it completed four bulk purchase annuity transactions during the second half of 2021 covering £4bn of premiums. It has contracted a total of £5.5bn for the year.
Chief executive Andy Briggs said: "I am delighted with the progress we are making in building a market-leading Bulk Purchase Annuity business which contracted £5.5bn of premiums in 2021, more than double our 2020 premiums.
"As a result, we have now delivered on our ambition for our new business cash generation to more than offset the run-off of our heritage business."
8.20am: FTSE 100 benefits from switch away from tech firms
The UK market is notably short of technology companies these days - with the likes of Arm snapped up by overseas buyers and taken private.
This has held it back to some degree as tech shares have surged. But with such companies now under pressure at the prospect of rising interest rates, the UK's blue chip index is benefitting from a move away from tech and towards more defensive and recovery stocks.
Richard Hunter, head of markets at interactive investor, said: "The FTSE 100 was somewhat held back over recent times by its perceived exposure to mature, cyclical stocks, as opposed to growth stocks such as technology. This has resulted in some form of defence in the early part of this year, mirroring global rotation trends and also being helped along by a rising oil price, which has given a tailwind to the majors.
"There has also been something of a revival in fortunes for bank stocks, based on both a more supportive rising interest rate environment as well as a reset of share prices following a prolonged period of undervaluation. Barclays is ahead by 11% this year and Lloyds Banking has added 10.5%, while both NatWest and HSBC have seen a spike in excess of 9%. The FTSE 100 as a whole currently stands ahead by 1.3% for the year, although the more domestically focused FTSE 250 has yet to get into gear, having shed 1.4% in the first few days of trading.”
8.12am: UK shares regain some lost ground
Leading shares have recovered some ground after a spate of selling on Monday.
The FTSE 100 is up 39.44 points or 0.53% at 7484.69, just failing to regain the 40 points lost yesterday.
The downbeat start to the week came amid a growing conviction that the US Federal Reserve could raise interest rates more times than expected this year.
But Ipek Ozkardeskaya, senior analyst at Swissquote, said: "The question is, does the Fed have any interest in wreaking havoc in the financial markets just to fight back inflation? The answer is no. This is why the whole thing is data-dependent and given how hawkish the market shifted recently, there is a chance we see a certain softening in hawks’ positioning, which could lead to a certain positive correction to the latest equity selloff."
In that respect tomorrow is a key time, with US inflation figures due.
Ozkardeskaya said: "US inflation may print a figure at or above the 7% mark tomorrow. A softer figure will likely give hope that the positive pressure may be coming to an end and give a sigh of relief to investors, but in all cases the actual levels remain very high for a country like the US which targets a 2% average inflation. And it also shows that insisting on the fact that inflation is transitory was a mistake."
Back in the UK, Flutter Entertainment PLC (LSE:FLTR) as analysts at Citigroup moved from sell to buy. The gaming company also completed the £402mln cash acquisition of online bingo business Tombola.
6.50am: Leading shares forecast to open a little higher after Monday's selling
The FTSE 100 is expected to stick its head above the parapet after a day of selling across financial markets at the start of the week as the realisation dawns that the era of rock-bottom rates is ending.
London’s blue-chip index has been called at least 20 points higher or up to 35, by different spread-betting sources in the City, following a 40-point decline yesterday to 7,445.25.
On Wall Street overnight, there were further declines for the Dow Jones and S&P 500 indices, of 0.45% and 0.14% respectively, while the tech-filled Nasdaq fell to a 10-week low before bargain hunters dived in and the index registered a 0.05% rise by the closing bell. Earlier the Nasdaq had slipping into correction territory, 10% of its recent highs.
The spark for the sell-off has been a change of Federal Reserve rate-rising narrative over the past few days, with market analyst Michael Hewson noting that speculation has now grown from a couple of rate rises this year to prospects of four hikes, as well as balance sheet reduction, towards the latter part of the year.
“As expectations go it’s been quite a shift and it’s a change that is prompting some significant capital reallocations, as bonds and stocks both sell off, although the failure of the US 10-year yield to make the move above 1.8% stick yesterday may have helped mitigate some of the weakness in US equity markets,” Hewson said.
“The shift in bond markets is a trend we’re also seeing in UK and European bond markets as well with the German 10 year closing back on 0%, and levels last seen in May 2019. UK gilts have also sold off with the 10-year yield edging back to the October peaks of 1.22%, though much will depend on the Bank of England here, and whether it has the stomach for another rate increase after its surprise decision to raise rates at its last meeting in December.”
Hewson said there is a sense that markets might be getting slightly carried away when it comes to how aggressive the Fed might be in the coming months, though a better sense of things could arrive today when Fed chair Jerome Powell testifies to the Senate Banking Committee at his reconfirmation hearing in Washington DC.
In the UK, the latest data from the British Retail Consortium and KPMG shows total retail sales rose in the key month of December were up 2.1% compared with a year earlier, with a 4.6% rise on 2019.
But Helen Dickinson, chief executive of the BRC, warned that the retail sector "faces significant headwinds in 2022, as consumer spending is held back by rising inflation, increasing energy bills, and April’s national insurance hike. It will take continued agility and resilience if they are to battle the storm ahead, while also tackling issues from labour shortages to rising transport and logistics costs.”
Today's company news in London includes results from Games Workshop and Shoe Zone, plus updates from Electrocomponents, SIG and Robert Walters - read more in the daily preview.
6.50am: Early Markets - Asia / Australia
Shares in Asia mostly fell on Tuesday following overnight declines in the U.S. where the Dow Jones Industrial Average and S&P 500 dipped while Nasdaq finished fractionally higher.
The Nikkei in Japan slipped 0.90% while South Korea’s Kospi rose 0.02%.
China’s Shanghai Composite fell 0.73% and Hong Kong’s Hang Seng index declined 0.30%.
Australia’s S&P/ASX200 tumbled 0.77% to 7390.1 points, with the major banks and consumer staples stocks dragging the benchmark index lower.