- FTSE 100 up 74 points
- Banks boosted by rate rise talk
- Rolls-Royce and Ocado rebound
4:50pm: FTSE 100 ends higher, US stocks down midday
The FTSE 100 finished the day on an up note, gaining 74 points, or 1%, to 7,372, even as the sell-off in US equities resumed.
“Despite some wobbles throughout the day the FTSE 100 has managed to hold on to most of yesterday’s rebound,” IG chief market analyst Chris Beauchamp said.
“Signs of a recovery in metals and oil have boosted the relevant sectors in the index, while higher yields have done their bit to lift bank stocks once again,” Beauchamp added.
Mining and energy companies were among the biggest gainers.
Other notable movers included shares of Unilever PLC (LSE:ULVR), which slipped 0.2% after the consumer products maker revealed plans to slash about 1,500 management jobs, while Royal Mail PLC (LSE:RMG) gained 1.3% on its job cut plans despite a profit warning being tagged on.
(Read more on that here: What does Royal Mail’s profit downgrade mean for investors?)
3.45pm: UK market remains positive despite range of concerns
UK shares have shrugged off a hefty opening fall on Wall Street, a cut in IMF growth forecasts, worries about inflation and concerns about the tensions between Ukraine and Russia.
Despite the Dow Jones Industrial Average dropping more than 400 points or 1.1%, the FTSE 100 is holding on to its gains and is currently up 68.2 points or 0.93% at 7365.35.
Michael Hewson, chief market analyst at CMC Markets UK, said: "European markets have had a slightly more resilient tone today, as some of the biggest losers from yesterday find a degree of buying interest; however we remain well below last Friday’s closing prices, with the FTSE 100 needing to get back above the 7,400 level, to have any degree of confidence that this lurch lower is merely temporary.
"Yesterday’s face-ripping US recovery saw a decent start for markets in Europe this morning, but progress has been difficult against a backdrop of 8,500 US troops being put on standby to boost NATO forces near Ukraine, which European markets appear to be taking in their stride, but US markets less so."
Among the day's risers, Ocado Group PLC (LSE:OCDO), which had been under pressure as tech stocks drop, has rebounded and is up 4.56%.
Banking shares continue to provide support, helped by positive noises from UBS.
Standard Chartered PLC (LSE:STAN) is up 3.05%, HSBC PLC (LSE:HSBA) is 2.65% higher and Lloyds Banking Group PLC (LSE:LLOY) has been lifted 2.38%.
But housebuilders continue to subside following a negative note from Jefferies on Monday and the prospect of increased costs for replacing dangerous cladding.
Barratt Developments PLC (LSE:BDEV) is down 2.8%, Taylor Wimpey PLC (LSE:TW.) has lost 2.28% and The Berkeley Group Holdings PLC (LSE:BKG) is 1.83% lower.
2.53pm: US markets in the red
US benchmarks started firmly in the red on Tuesday amid more volatility and after stocks pulled back from their worst levels on Monday.
In early deals in New York, the Dow Jones Industrial Average dropped around 349 points to stand at 34,015. Then S&P 500 lost around 52 at 4,357. The tech-heavy Nasdaq Composite Index shed around 173 at 13,681.
It comes as traders continue to be fearful on stalling growth, rising inflation and the prospect of hiked interest rates.
Sentiment was not helped by news the International Monetary Fund was cutting its forecast for global economic growth for 2022 due to weaker outlooks for China and the United States. It now sees growth of 4.4% this year. followed by a slowdown to 3.8% in 2023.
Its October forecast for this year has been lowered by 0.5 percentage points.
The global economy grew an estimated 5.9% last year.
The UK is expected to grow by 4.7% in 2022, a cut of 0.3 percentage points from the IMF's October report.
IMF Growth Projections: 2022
????????USA: 4.0%
????????Germany: 3.8%
????????France: 3.5%
????????Italy: 3.8%
????????Japan: 3.3%
????????UK: 4.7%
????????Canada: 4.1%
????????China: 4.8%
????????India: 9%
????????Russia: 2.8%
????????Brazil: 0.3%
????????Mexico: 2.8%
????????KSA: 4.8%
????????Nigeria: 2.7%
????????South Africa: 1.9%
— IMF (@IMFNews) January 25, 2022
All this has taken a little of the shine off the UK market.
The FTSE 100 is now up 46.83 points or 0.64% at 7343.98., having earlier hit 7381.
2.18pm: German business sentiment improves
Earlier there were some positive signs for the German economy.
The country's businesses have reported positive expectations for the first time since June, according to the Ifo Institute.
Its business climate index rose from 94.8 points in December to 95.7, and while assessments of the current situation dropped for the fifth month, the expectations component improved significantly.
Clemens Fuest. president of the institute, said: "Sentiment among German companies has brightened at the beginning of the year... The German economy is starting the new year with a glimmer of hope."
Carsten Brzeski of ING Bank said; "These Ifo index readings do not take away the recession fears for the German economy but suggest that there is growing comfort in the view that Omicron restrictions and supply chain frictions will subside soon."
But he added: "The German economy went into hibernation at the turn of the year. When the first official estimates are released on Friday, it will require a small miracle for them not to show a contraction in the economy in the final quarter of 2021. And despite today’s improvement in sentiment, the risk of Germany being in an outright recession has not disappeared."
Back in the UK, and the FTSE 100 is currently up 56.73 points or 0.78% at 7353.88.
Banks are now dominating the risers, on the idea they will benefit from higher interest rates and after a positive note from UBS>
Standard Chartered PLC (LSE:STAN) and Lloyds Banking Group PLC (LSE:LLOY) are both up 4.12%, HSBC PLC (LSE:HSBA) is 3.51% higher, Barclays PLC (LSE:BARC) is 3.42% better and NatWest Group PLC (LSE:NWG) has added 3.31%.
12.48pm: Mixed picture for oil market
Oil was on the slide on Monday and the market still looks fairly cautious.
Demand is likely to remain high as long as the Omicron variant does not disrupt the global economy too much, while Opec is taking care to eke out any production increases very carefully.
And if the tensions between Ukraine and Russia turn nasty, then supplies could be disrupted.
But all the uncertainty means investors are hesistant to go out on a limb.
So Brent crude is up 0.13% at US$86.38 a barrel but West Texas Intermediate is down 0.17% at US$83.17.
11.38am: US markets likely to see another bumpy ride
US stocks are expected to open lower, after rebounding in Monday trading, as the Federal Reserve starts its two-day rate-setting meeting amid rising geopolitical tensions, mixed corporate earnings reports and inflation that needs to be brought under control.
Futures for the Dow Jones Industrial Average declined 0.53% in Tuesday pre-market trading, while the broader S&P 500 index dropped 0.99% and the Nasdaq 100 shed 1.43%.
Stocks finished higher on Monday, bouncing back after the S&P 500 entered correction territory ahead of the Fed’s rate decision and some key earnings reports this week.
The Dow rose 0.29% to 34,365, while the S&P 500 added 0.28% to 4,410 and the Nasdaq gained 0.63% to 13,855 - after earlier trading close to 5% lower.
“Although indices lurched haphazardly back into positive territory on the Nasdaq and S&P 500, a heightened sense of nervousness remains about just how tough the Federal Reserve will talk and act to try and get increasingly troublesome inflation under control,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.
“The deteriorating situation in Ukraine with the stand-off continuing as diplomats moves falter is adding to heightened tensions on the markets, with fears a conflict could unleash a fresh front of chaos, including making the energy crisis facing Europe even worse.”
Meanwhile the FTSE 100 is off its best but still up 56.21 points or 0.77% at 7353.36.
Apart from the latest economic data and the situation in Ukraine, investors have to digest the latest political turmoil at Westminster.
The Metropolitan Police have now decided they should after all be investigating parties at Downing Street during lockdown.
But this will delay the publication of the much awaited Sue Gray report into the affair, meaning the whole situation will grag on. Presumably withl Boris Johnson hoping by then we will have all forgotten about the whole thing.
11.38am: UK banks lifted by rate rise talk
Banking shares are in demand on the basis they should benefit from any further interest rate rises.
The Bank of England may well raise the cost of borrowing again at its February meeting after it belatedly moved in December.
NatWest Group PLC (LSE:NWG) is up 3.57%, helped by UBS analysts upgrading their recommendation to buy.
The move came in a positive note of the sector: "We believe UK banks are attractively valued, absolutely and relatively, given the combination of payouts and profit gearing we expect to play out."
Lloyds Banking Group PLC (LSE:LLOY) has been lifted by 3.43%, Barclays PLC (LSE:BARC) by 3.04% and Standard Chartered PLC (LSE:STAN) by 3.87%.
11.16am: Firms see output and orders rising - but also costs
UK manufacturing output volumes in the quarter to January grew at a slower pace than in December, though growth remained firm compared with the long-run average, according to the latest CBI industrial trends survey
But costs grew at the quickest pace since April 1980, +74% from +71% in October. And firms expect costs to grow at a similar pace over the next three months.
Increasing costs continued to feed into higher prices, with average domestic prices growing near previous quarter’s record pace and export price growth at its quickest since April 1980. Both domestic and export price growth are expected to accelerate in the next quarter.
Increasing costs are continuing to feed into higher prices, with average domestic prices growing near previous quarter’s record pace and export price growth at its quickest since April 1980. Both domestic and export price growth are expected to accelerate in the next quarter pic.twitter.com/5Fqx8hy6MC
— CBI Economics (@CBI_Economics) January 25, 2022
Total new orders in the quarter to January grew at a faster pace compared to October, with the acceleration driven by faster growth in domestic and export orders. Manufacturers expect total new orders growth to slow in the next quarter, reflecting an easing of domestic and export orders.
Supply issues continue to bite, with the share of firms citing skilled labour shortages as a factor likely to limit output next quarter rising to its highest since October 1973 and concerns regarding other labour near the previous quarter’s record high.
Rain Newton-Smith, CBI Chief Economist, said:“Global supply chain challenges are continuing to impact UK firms, with our survey showing intense and escalating cost and price pressures."
Meanwhile the FTSE 100 remains positive, up 66.19 points or 0.91% at 7363.34, with Royal Mail PLC (LSE:RMG) remaining the top riser, up 4.01%.
10.36am: Recovery accelerates as FTSE 100 benefits from lack of tech stocks
It will take a lot to recover all of Monday's losses, but at least the market is making an attempt and heading further in the right direction.
The FTSE 100 is currently up 75.6 points or 1.04% at 7372.75, close to the day's high.
Russ Mould, investment director at AJ Bell. said risk appetite remained weak: "Tensions between Ukraine and Russia appear to be getting worse, inflation and interest rate pressures are front and centre, and central banks are still in the very early stages of withdrawing stimulus measures and reducing liquidity.
“It’s hard to see what’s installed a sudden bout of confidence in investors unless they are simply judging share prices relative to recent highs and assuming they are now bargains following the sell-off. They might be overlooking the fact that a lot of stocks were priced too highly in 2021 so the current correction is deserved.
“The FTSE 100 remains an outlier in global markets due to the construction of its index. For years it was criticised for lacking exciting fast-growth tech stocks, that’s now worked to its advantage."
10.30am: London maintains status as Europe's top IPO market
London remained Europe’s leading exchange in 2021 following a record-breaking year for the global IPO market, according to the latest edition of PwC’s IPO Watch Europe.
There had been concerns about London losing out to rivals, although that was mainly related to tech stocks and the US market rather than Europe.
London’s IPO market raised a total of £16.8bn from 100 issuances in 2021 which was more than previous years 2020 and 2019 combined. AIM IPOs continued to gain momentum, delivering a sixth consecutive quarter of growth, with 21 IPOs raising £1bn worth of proceeds in Q4 2021.
Overall, the 2021 European IPO market delivered 422 IPOs raising €75.0bn, compared to 135 IPOs raising €20.3bn in 2020.
The largest European IPO in 2021 was InPost at €3.2bn, followed by Volvo Car (€2.3bn) and Vantage Towers (€2.2bn).
The largest London IPOs were Deliveroo (€1.8bn) and Dr Martens (€1.7bn) with the exchange seeing five €1bn+ IPOs and three €1bn+ further offers.
Richard Spilsbury, UK Capital Markets Partner at PwC UK, said: “2021 was very much the year of the IPO. We have witnessed one of the busiest IPO markets in Europe in 2021 on record and evidence suggests that there is still a lot of money in the market that investors are looking to deploy.
"While the market is expected to calm in early 2022 as investors display more selectivity, this will mean that IPO candidates will need to be well prepared. A robust equity story and an ability to adapt to evolving regulation and the geopolitical environment will be crucial, especially with increasing expectations over net zero commitments and ESG reporting.”
9.45am: Unilever to cut 1,500 management jobs
Unilever PLC (LSE:ULVR) has been under pressure since its failed attempt to buy the consumer division of GlaxoSmithKline PLC (LSE:GSK) and the arrival of activist investor Nelson Peltz on its share register. In an attempt to regain the initiative, the company has announced it plans to cut 1,500 management roles across the globe.
Its shares have edged down 0.22%, not helped by a sell note from analysts at UBS.
UBS lists four possible strategic options for Unilever: "1. Accelerated portfolio rotation - i.e. pursuing a GSK type of deal which, combined with some substantial divestments, would significantly improve the group's Underlying Sales Growth prospects and Gross Margin; 2. Status quo - although this appears increasingly unlikely in our view, 3. Enhanced focus on cash generation - which would require the company to lower its Underlying Sales Growth ambitions but could translate into consistent double-digit total shareholder return, and 4. A breakup of its operations."
9.07am: Is this the calm before another storm?
Leading shares are off their peak but still in positive territory despite the deteriorating situation in Ukraine.
The FTSE 100 is currently up 30.86 points or 0.42% at 7328.01, having earlier touched 7359.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: ‘’A calm before another potential storm has descended on the FTSE 100... as bargain hunters head out to try and capitalise on yesterday’s losses.
"Some of the companies marking out the biggest falls yesterday are among the top risers today including mining and travel stocks, with Rolls Royce also regaining ground, following airlines up on a recovery trajectory. Tech heavy Scottish Mortgage Investment Trust, also reversed some of yesterday’s losses but it’s still down 20% year to date..
"A string of corporate results for some of the beasts of tech, such as Microsoft, Apple and Tesla could either quell fears about valuations tumbling further or build up a barrier of support around the sector. Microsoft will report later and expectations will be high given how accustomed investors have become to outstanding results, with double digit growth in every division in the last quarter. With such high bars set, falling short of expectations could set off a fresh round of selling.’’
Meanwhile Rolls-Royce Holdings PLC (LSE:RR.) has risen 2.87% and Scottish Mortgage Investment Trust PLC (LSE:SMT) is up 2.61%.
8.35am: Royal Mail rises after update
Royal Mail PLC (LSE:RMG) is the leading riser in the blue chip index, adding 3.3%
The company has delivered a positive update but also news of further job cuts.
It said trading for the three months to December - which of course includes the key festive period - was in line with expectations.
Operating profits for the year are forecast to be around £500mln in line with previous guidance. This is before a £70mln restructuring charge as part of its transformation programme, and it has started a formal consultation on a reorganisation to streamline its operational management, which could see 700 jobs going.
It believes there has been a structural shift in parcel volumes since the start of the pandemic.
Chairman Keith Williams said: "We expected some decline in parcel volumes given most retail stores were open during the period, unlike last year. However, the trend towards customers wanting more parcels remains , and responding to that change efficiently is key. Our domestic parcels business in the UK has seen demand increase by around a third over two years, as has our GLS business across its markets ."
With the spread of the Omicron variant, sickness absence has been twice pre-COVID-19 levels, with around 15,000 staff off sick or isolating in early January, although it said the situation was now improving.
8.18am: Positive start despite Ukraine worries
Leading shares have recovered some of Monday's losses in the wake of a rebound on Wall Street, even though the signs are that US markets will head south again later today.
Having lost 2.6% yesterday - its biggest one day fall since the end of November - the FTSE 100 is up 45.15 points or 0.62% at 7342.30.
A number of factors are causing the current worries. Investors are nervous about what the US Federal Reserve might do or say about interest rate rises at this week's meeting, as inflationary pressures continue.
But the biggest concern at the moment is the escalating situation in Ukraine.
Michael Hewson at CMC Markets said: "It appears that the penny has finally dropped with financial markets that events in eastern Europe have the potential to get even worse, after NATO announced it is putting additional ships and aircraft on standby for mobilisation, and that the US is considering sending troops to shore up its Baltic defences, in response to requests from the likes of Estonia for a greater US presence to deter a potential Russian escalation."
7.52am: Public sector borrowing falls but government debt highest since 1963
The UK government borrowed less than expected in December, but it was still the fourth highest amount for the month since records began in 11993.
Public sector net borrowing excluding public sector banks came in at £16.8bn last month, lower than the £18.5bn forecast by economists.
For the year, the figure was £146.8bn, the second-highest financial year-to-December borrowing since monthly records began in 1993, £129.3bn less than in the same period the previous year.
Public sector net debt excluding public sector banks was £2,339.9bn at the end of December 2021 or around 96.0% of gross domestic product, the highest ratio since March 1963 when it was 98.3%.
And with inflation rising, the cost to the government of servicing the debt is increasing.
???? ???? Ouch. There’s a real warning in todays public borrowing figures about the impact of soaring inflation on government debt payments - which jumped to £8.1bn in December alone - much more than forecast as RPI hit 7.5%
— Scott Beasley (@SkyScottBeasley) January 25, 2022
Laith Khalaf, head of investment analysis at AJ Bell, said: "“With the debt to GDP ratio sitting at 96%, the highest level since the 1960s, the Chancellor is still wedged in a tight spot after the pandemic has ravaged the nations finances
"The good news is so far this financial year, public sector borrowing is coming in below OBR forecasts.
"The bad news is the government is facing calls to help out with the cost of living crisis, including pressure to postpone the new Health and Social Care Levy, which is expected to raise £12.7 billion in the coming financial year. That would leave a sizeable hole for the Chancellor to fill in his March Budget.
“Two months is of course a very long time in politics, and given the political turmoil in Westminster, we can’t even be sure who will be delivering the Budget when March rolls around. We can be more certain that the pressure on government finances will be considerable.”
6.50am: UK market set for rebound after Monday's slump
The FTSE 100 has been predicted to rebound higher on Tuesday after a turbulent start to the week for global stock markets.
After London’s top share benchmark plunged 197 points or 2.6% yesterday, spread-betters on the IG platform are anticipating a 44-point come back today.
European losses were even higher, with Germany, Italy and France’s indices down almost 4% - and also expected to make repairs today.
As so often, it was an even more dramatic rollercoaster in New York overnight, with the main indices down between 3% and 5% before they all finished higher, with the Nasdaq closing up 0.6%, the small-cap focused Russell 2000 rebounding to a 2.3% gain, and the Dow Jones and S&P 500 both up 0.3%.
However, this may have been a "dead-cat bounce", said market analyst Naeem Aslam at AvaTrade, with US futures pointing to further falls of 0.8% to 1.4% today, with knees knocking ahead of the US Federal Reserve decision due tomorrow.
“Due to stock prices' significant drops, investors may now feel that stocks are undervalued and, hence, are capitalizing on the opportunity to bag stocks of good companies at bargain prices,” said Aslam.
“Having said that, as we are expecting various economic reports this week along with the Fed’s monetary policy, stock markets are likely to remain volatile over the next few days.
“The main issue that investors are facing is trying to understand what the aggressive pace of winding down the Fed’s quantitative measures would mean for valuations of companies and global financial markets. Moreover, rising geopolitical tensions in the Middle East and Ukraine may also cause waves of uncertainty among investors.”
Despite the uncertainty, Aslam said the strength in corporate earnings and earnings growth is likely to support growth in stock markets in the short term.
Today’s big quarterly earnings report from Microsoft Corporation (NASDAQ:MSFT) is due after the stock market’s closing bell, but before markets open there will be updates from the likes of Johnson & Johnson (NYSE:JNJ), Verizon and American Express.
6.50am: Early Markets - Asia / Australia
Asia-Pacific shares tumbled on Tuesday as Australia’s core inflation surged to its fastest annual pace since 2014 in the December quarter as fuel and housing costs led broad-based price pressure.
Data from the Australian Bureau of Statistics showed the headline consumer price index (CPI) rose 1.3% in the fourth quarter and 3.5% for the year, topping forecasts.
Australia’s S&P/ASX 200 index dived 2.5% in its second-biggest sell-off this year to close at 6961.6 points.
China’s Shanghai Composite fell 2.37% and Hong Kong’s Hang Seng index slipped 1.86%.
The Nikkei in Japan declined 1.66% while South Korea’s Kospi plunged 2.56%.