- FTSE 100 adds 85 points
- Standard Chartered leads banks higher
- Fresnillo falls again
4:50pm: FTSE 100 ends higher, US stocks up midday
The FTSE 100 finished the day on an up note, gaining 85 points, or 1.1%, to 7,554, boosted by bank stocks and a weaker pound.
“This week has seen morning optimism from European markets replaced by broader pessimism once US markets have begun trading,” IG chief market analyst Chris Beauchamp said.
“While a more guardedly-positive tone prevails than was the case in the wake of the Fed, this market does not yet look like it wants to rebound,” Beauchamp added.
Notable movers included shares of Mitie Group PLC (LSE:MTO), which climbed more than 7% after the security and cleaning services provider raised its annual profit outlook for the second time in four months.
4.07pm: Market recovers all of Monday's losses
It is turnaround Thursday as leading shares more than recover the losses suffered at the start of the week.
Investors have shrugged off worries about rising interest rates, despite the more hawkish comments coming from the US Federal Reserve on Wednesday.
With a strong start on Wall Street after better than expected US GDP growth in the fourth quarter, the FTSE 100 is up 101.35 points or 1.36% at 7571.13, on course for its second hefty gain in two days.
The moves come despite the worries about how central banks deal with rising inflation, as well as the continuing tensions in Ukraine and the political turmoil in the UK at the moment thanks to Boris Johnson's partygate scandal.
Michael Hewson, chief market analyst at CMC Markets UK, said: "The stock market rollercoaster has continued today. After opening sharply lower in the aftermath of last night’s sharp post Fed sell off and the weakness in Asia markets, European markets have slowly peeled themselves off the canvas.
"The FTSE100 has managed to recover back into positive territory, after trading down below 7,400 early on, we are now back to within touching distance of 7,600, and the highs this month, as we head towards the close."
Banks continue to provide support, with their business likely to be boosted by higher rates.
Standard Chartered PLC (LSE:STAN) has added 5.38%, while HSBC PLC (LSE:HSBA) is 3.6% higher.
Diageo PLC (LSE:DGE) is up 2.8% after a postive response to the drinks giant's latest update.
But Fresnillo PLC (LSE:FRES) fell again in the wake of this week's disappointing production report, down another 7.12%.
2.52pm: US markets on the front foot with Netflix recovering
US indices started Thursday on the front foot as traders appeared to brush off rate rise worries following the Fed meeting and mulled GDP data for the fourth quarterof last year.
The Dow Jones Industrial Average added over 296 points to 34,465. The S&P 500 rose 43 points to 4.394 and the tech-laden Nasdaq index climbed 112 points to 13,654.
Official data showed that US gross domestic product jumped 6.9% in the last three months of 2021 compared to the same period a year earlier. Economists has expected the US economy to have grown at a 5.5% annualized pace.
Yesterday, Federal Reserve chair Jerome Powell signaled that the first interest rate hike since late 2018 in the USA could come as soon as March this year, which sent markets lower.
Tech shares were on the up. Streaming giant Netflix added over 6% on news that billionaire investor William Ackman had bought 3.1 million shares and now has a stake worth more than $1 billion.
Meanwhile the FTSE 100 continues to gain ground and is now up 122.45 points or 1.64% at 7592.23.
2.12pm: US markets set for turnaround
Wall Street is showing signs of recovery after the positive US growth figures.
The Dow Jones Industrial Average is now tipped to rise by 0.48%, the S&P 500 by 0.75% and the Nasdaq Composite by 0.95%.
This has helped push the FTSE 100 higher.
It is now up 75.30 points or 1.01% at 7545.08, close to its high for the day.
1.36pm: US economy shows strong growth
More signs of strength in the US economy, adding to the pressure on the Federal Reserve to raise interest rates.
US GDP grew by 6.9% in the final quarter of the year on an annualised basis, up from 2.3% in the previous three months and better than the 5.5% expected.
US GDP Annualised (Q/Q) Q4 A: 6.9% (exp 5.5%; prev 2.3%)
— LiveSquawk (@LiveSquawk) January 27, 2022
The Bureau of Economic Analysis said: "The acceleration in the fourth quarter was led by an upturn in exports as well as accelerations in inventory investment and consumer spending.
"In the fourth quarter, COVID-19 cases resulted in continued restrictions and disruptions in the operations of establishments in some parts of the country.
"Government assistance payments in the form of forgivable loans to businesses, grants to state and local governments, and social benefits to households all decreased as provisions of several federal programs expired or tapered off."
For the year, GDP growth was the strongest for almost 40 years.
In 2021, the US GDP grew by 5.7%, the strongest in a calendar year since 1984.
If you wanted the economy to bounce back, hard to see a better recovery.
— Yasmin R Nelson (@YasminRNelson) January 27, 2022
Meanwhile weekly jobless claims came in lower than forecast.
The number of Americans seeking unemployment benefit for the first time fell to 260,000 compared to expectations of a figure of 265,000.
The previous week's figure was revised up by 4,000 to 290,000.
12.38pm: Mid-cap index slips as Dr Martens drops sharply
The FTSE 100 may be in positive territory - currently up 37.5 points or 0.5% at 7507.28 - but the mid-cap index is not so lucky.
Dragged down by an 11.08% fall in Dr Martens PLC (LSE:DOCS) after its latest update, the FTSE 250 is off 0.59% at 21,744.96.
The boot maker has seen its shares drop despite saying revenues had risen 11% to £307mln in its third quarter.
Russ Mould at AJ Bell said: “On the face of it, Dr Martens’ third quarter update, covering its peak trading period, looks fairly robust thanks to record sales. However, look just a little bit closer and the stitching starts to fray.
“Dr Martens has been badly affected by supply chain issues and revenue growth has slowed from the first half.
“Management’s response has probably been quite sensible; it has prioritised its direct-to-consumer business over wholesale sales to third parties.
“This fits with the strategy pursued by other major brands and in the future might give the company greater control over its own destiny. The group has done a good job of boosting its e-commerce footprint too.
“However, Dr Martens has been hit hard by the Covid restrictions imposed in Australia and Asia and, with revenue growth slowing, the company is now heading into a typically quieter fourth quarter, raising the risk that it falls short of expectations in its first full year as a public company."
12.08pm: Bank of England likely to raise rates again
Markets might be unnerved by the prospect of rate rises by the US Federal Reserve, but the Bank of England has of course already begun that process, with more likely to come.
Laith Khalaf, head of investment analysis at AJ Bell, said: “It’s not just in the US where the prospects for tighter monetary policy are escalating, markets are also expecting a significant number of rate hikes in the UK this year. A rate rise at the Bank’s February meeting is all but inked in, which if realised would be the first time since 2004 that the bank has raised interest rates in two consecutive meetings. Market pricing suggests a further three hikes this year, taking base rate to 1.25% by the end of 2022, which would be its highest level since February 2009, just before an ‘emergency’ rate of 0.5% and QE were introduced.
“Rampant inflation is of course the reason markets are now expecting the Bank of England to start pressing on the monetary policy brakes. It’s a startling sign of how dramatically the economic outlook has changed in the last twelve months to consider that this time last year, the rate setting committee was talking about a negative base rate in the UK. Fast forward to 2022, and the market is thinking four rate rises could materialise this year alone.
“This would be a paradigm shift for investors, businesses and consumers, all of which have become accustomed to a prolonged period of extremely accommodative monetary policy. Indeed we estimate that 10 million people in the UK haven’t seen base rate above 1% in their entire adult lives. Little wonder then, that markets are getting in a bit of a tailspin about what rising interest rates might mean for stocks and bonds. The Chancellor might also be squirming in his seat. Higher base rate will mean the Exchequer needs to pay significantly more interest on the £875 billion of gilts held in the QE scheme, and that could have significant implications for the viability of any largesse the Chancellor might like to indulge in at the March Budget.
“Market pricing can change pretty quickly, and of course, this wouldn’t be the first time markets have got ahead of themselves when it comes to betting on rate rises that never materialised. Last November, markets were certain we were going to get a rate hike, but seven out of nine committee members voted to keep rates on hold. Today though, consistently high inflation and a buoyant labour market make a prima facie case for tighter monetary policy, and having raised rates in December, the Bank’s policy setting committee has some momentum behind it."
11.20am: US markets face further declines
US stocks look set to resume Wednesday's late sell-off at the open today after the Federal Reserve signaled a faster pace for interest rate rises following its latest policy meeting.
On Wednesday, the Fed signaled that it would begin raising interest rates in mid-March, its latest step toward removing stimulus to bring down inflation. Fed chairman Jerome Powell said the central bank could continue to lift rates faster than it did during the past decade.
Futures for the Dow Jones Industrial Average fell 0.6% on Thursday, those for the S&P 500 also lost 0.6%, and contracts for the Nasdaq-100 shed 0.5%.
US indexes have seen major indexes swing wildly in intraday trading this week, with the VIX hitting its highest level in a year on Wednesday. Aside from worries over the Fed decision, markets have also been buffeted by concerns about geopolitical tensions amid uncertainty over a potential Russian invasion of Ukraine.
The current earnings season is seen as the next big test of whether the stock market’s sky-high valuations can be justified.
Apple, Visa and food and beverage giant Mondelez (NASDAQ:MDLZ) are due to report after markets close.
Tesla shares declined in off-hours trading despite the electric-vehicle maker posting a record profit. Chief executive Elon Musk said that he wouldn’t introduce new models this year and that the company had been affected by supply-chain disruptions.
The latest US GDP data for the final quarter of 2021 and initial jobless claims are due later.
Cryptocurrencies edged down, with bitcoin extending its decline into a third day to trade below $36,000. Meta Platforms, formerly known as Facebook, is winding down its plans to build a cryptocurrency payments network and is selling its technology to a small bank, The Wall Street Journal reported.
Meanwhile the FTSE 100 remains in a positive mood, albeit off its highs.
The leading index is up 29.51 points or 0.4% at 7499.29.
11.10am: Downbeat outlook for UK retailers
Retailers are downbeat about sales in January, in the most gloomy report since September, according to the CBI.
Its latest Distributive Trades Survey showed respondents viewed retail sales as poor for the time of year, and they are expected to remain below seasonal norms next month.
Sales grew at an above average pace in the year to January, but this compares sales this month with January 2021, when COVID-19 restrictions required non-essential retail stores to close across the UK.
Internet sales were broadly flat in the year to January and are expected to remain broadly flat in the year to February.
Meanwhile in other parts of the distribution sector, both wholesalers and motor traders reported sales above seasonal norms – and expect this trend to continue next month.
Ben Jones, lead economist at the CBI, said: “It was not surprising that retail sales dropped back below seasonal norms in January, given the spread of Omicron, the reintroduction of restrictions late last year and increased consumer caution.
“Even as cases fall and Omicron-related restrictions are rowed back, retailers will be looking to the year ahead with a degree of concern. The sector faces an inflation double whammy, as rising energy and transport costs erode households’ spending power and retailers’ own costs continue to mount.
“It is vital that the Government comes forward with measures to protect the most vulnerable consumers, who will struggle the most with anticipated price rises.”
10.11am: FTSE 100 an outlier among global markets
Leading shares continue to defy expectations, shrugging off the US Federal Reserve's hawkish tone and heading higher.
The FTSE 100 is now up 26.48 points or 0.35% at 7496.26 and has once again regained all its losses since Monday's slump.
Whether this holds by the close is more uncertain given the current uncertain mood, with inflation, interest rate rises, Ukraine and the fate of the UK prime minister all weighing on investors' minds.
But so far this year the FTSE 100 is doing well by comparison.
Russ Mould, investment director at AJ Bell, said: “Once again, the FTSE 100 was an outlier among global markets, with 2022 proving to be quite a year for the underdog. For the past decade the UK market has been like the last child to picked for a team in gym class, no-one having faith in its abilities for fear it wouldn’t perform well. But the FTSE 100 is now one of the best performing major markets this year on a relative basis.
“While the FTSE is down 0.4% year to date, that’s considerably better than the 9.3% decline from the S&P 500 in the US and 10.7% slump from the Nikkei 225 in Japan.
“For once, investors are eager to own the FTSE’s ‘old economy’ companies in banking, tobacco and oil, as these are value stocks which are once again in fashion.”
Banks are indeed providing the support today, accounting for five of the top ten risers.
As for tobacco stocks, British American Tobacco PLC (LSE:BATS) is up 0.76% and Imperial Brands PLC (LSE:IMB) has added 0.66%.
But Fresnillo PLC (LSE:FRES) continues to fall after Wednesday's forecast of lower production in 2022, down 4.97%.
Polymetal International PLC (LSE:POLY) has lost 3.16% as it said output was higher than previous guidance but costs were rising.
Analysts at RBC lowered their rating from outperform to sector perform.
9.11am: Pandemic continues to put the brake on motor manufacturing
In a dismal year for UK motor manufacturers, they turned out the lowest number of cars last year since 1956, mainly due to the continuing effects of the pandemic.
According to the Society of Motor Manufacturers and Traders (SMMT), UK car production in 2021 fell 6.7% to only 859,575 units
Output was 61,353 less than 2020, which itself was badly affected by coronavirus lockdowns, and 34.0% below pre-pandemic 2019.2
On the bright side, British car factories produced a record number of electrified vehicles. up 29.6% to more than a quarter of the total output.
UK car production in 2021 fell -6.7% to only 859,575 vehicles the worst total since 1956
Output was 61,353 less than 2020, which itself was badly affected by coronavirus lockdowns, and -34.0% below pre-pandemic 2019https://t.co/SSg2cqD18k pic.twitter.com/iRepIjCMsv
— SMMT (@SMMT) January 27, 2022
The overall poor performance can be attributed to several factors, most of them direct consequences of the pandemic, said the SMMT. The shortage of semiconductors, a critical component in modern car manufacturing, was the principal cause of the decline, with factories having to reduce or even pause production while awaiting parts whose supply has been heavily constrained by the global pandemic.
But the SMMT said there were grounds for optimism in 2022 with a potential £4.9bn of investment announced and an expected recovery in production.
The latest independent production outlook for 2022 forecasts UK car production to increase to more than one million units, representing a 19.7% uplift on the 2021 total, despite the loss of production in Swindon.
Mike Hawes, SMMT Chief Executive, said: "2021 was another incredibly difficult year for UK car manufacturing, one of the worst since the Second World War which lays bare the exposure of the sector to structural and, especially, COVID-19-related impacts.
"Despite this miserable year, there is optimism. With Brexit uncertainty largely overcome with the Trade and Cooperation Agreement deal, investments have been unleashed, most of which will help transform the sector to its zero-emission future. This is a vote of global confidence in the UK but must be matched by a commitment to our long-term competitiveness; support for the supply chain in overcoming parts shortages, help with skills and training and, most urgently, measures to mitigate the escalating energy costs which are threatening viability."
8.52am: "A lot can change in the course of a session"
With the support from the banks - which benefit from higher interest rates - leading shares have now edged into positive territory.
The FTSE 100, having fallen to 7388, is now up 1.93 points at 7471.71.
Victoria Scholar, head of investment at interactive investor, said: "This week’s price action has been characterised by sharp volatility and wild intraday swings. In this market mood, a lot can change throughout the course of a session with little correlation between where stocks open and close.”
Banks are dominating the risers, with Standard Chartered PLC (LSE:STAN) now up 3.86%, HSBC PLC (LSE:HSBA) 1.7% higher, NatWest Group PLC (LSE:NWG) up 1.52%, Barclays PLC (LSE:BARC) 1.26% better and Lloyds Banking Group PLC (LSE:LLOY) lifted by 1.04%.
8.30am: Diageo toasts positive results
Drinks giant Diageo PLC (LSE:DGE) is also on the rise, with its shares up 1.3% following its latest update.
Half year sales grew by 15.8% with operating profits up by 22.5%.
Richard Hunter, head of markets at interactive investor, said “Diageo has again proved its worth as a core portfolio constituent, with a performance which has underlined both its pricing power and its ongoing growth potential.
"Cost inflation has been the subject of much debate in corporate boardrooms, but Diageo benefits from the nature of the sector in which it operates. Its ability to pass on price increases, as well as ongoing productivity savings, has more than offset such inflation, with its move towards “premiumisation” providing additional insurance."
8.21am: Markets under pressure as volatility continues
The week's rollercoaster ride for the market continues.
Leading shares are lower again after Wednesday's surge, thanks to the US Federal Reserve's unexpected hawkishness after this week's meeting.
But the fall is not as bad as first feared. Not yet at least.
The FTSE 100 is down 29.09 points or 0.39% at 7440.69.
Michael Hewson, chief market analyst at CMC Markets, said: "There was always the risk that yesterday’s strong rebound was predicated on the premise that the Federal Reserve might feel compelled to be less hawkish about policy due to the recent volatility in markets, as well as the uncertainty around events in eastern Europe..
"While there was no surprises around the statement and the decision to keep monetary policy on hold, the Powell press conference saw the heat quickly come out of the rally, as Powell indicated that while a rate hike was likely to come in March, the FOMC wouldn’t hold back from continuing to do so at a faster pace than it did in the last tightening cycle, and that it would be appropriate to start shrinking the size of the balance sheet, as well at the same time.
"The press conference also sent the message that the Fed could well raise rates at every meeting, or even consider a 50bps hike if the need arose, as Powell passed up the opportunity to rule out any of those possibilities. While this keeps the Feds options open, which seems entirely sensible, rule nothing out and everything in, it wasn’t the message increasingly nervous markets wanted to hear. In essence it was the Fed saying to markets that the days of handholding are over; our priority now is inflation.
"His admission that there was 'quite a bit of room to raise rates before it hurts the labour market', sent the message of a Federal Reserve appearing ambivalent about the risks of moving too quickly to combat an inflation problem that they appear increasingly concerned about."
More fuel to the US economic fire comes later. The country's economy is expected to have grown by around 5.8% year on year in the final quarter, compared to 2.3% in the previous three months.
A strong start to the fourth quarter is likely to have faded as the Omicron variant spread.
Meanwhile weekly jobless claims are expected to fall from 286,000 to 265,000.
Higher interest rates are seen as positive for banking business.
So the sector is bucking the downward trend, with Standard Chartered PLC (LSE:STAN) up 1.37% and Barclays PLC (LSE:BARC) 0,8% better.
6.50am: Markets set to give up Wednesday's gains
The FTSE 100 is set to give back all of yesterday’s gains and more after a hawkish tone by US Fed chair Jerome Powell sent US and Asian shares tumbling.
An hour before the open, spread betters were forecasting Footsie would shed around 100 points when trading gets underway, wiping out all of Wednesday’s 98-point gain to 7,469.
There was no change to policy at the actual meeting of the FOMC, which sets US interest rates and monetary policy, but comments afterwards from Powell indicated that can change very quickly if required.
A rise in interest rates is already pencilled in for March he confirmed but after that the hikes might be more frequent than previously suggested and be larger to curb rising US inflation.
"We are going to need to be, as I’ve mentioned, nimble about this. The economy is quite different this time," he said.
Analysts said there was a marked shift in the style of the FOMC announcement this time with a relatively dovish statement followed by a relatively hawkish press conference.
US bond yields rose sharply after Powell spoke and stock markets fell, with the Dow Jones and S&P 500 both closing lower after bright starts.
The Fed news overshadowed results from Tesla Inc (NASDAQ:TSLA), which posted record profits of US$5.5bn as sales jumped 71% to US$54bn.
The EV group sold a record 936,000 cars in 2021 and predicted growth of 50% this year.
Diageo to lift spirits
In the UK, Diageo, Dr Martens and IG are the main companies reporting today.
Diageo should be good, with the Johnnie Walker maker already flagging up interim organic net sales growth of 16%.
Spread bet group IG will have benefited from the volatility seen in markets recently, while supply chain disruption will be the focus at iconic boot maker Dr Martens.
6.50am: Early Markets - Asia / Australia
Asia-Pacific shares tumbled across the board on Thursday after the US Federal Open Market Committee said overnight that a quarter-percentage point increase to its benchmark short-term borrowing rate is likely forthcoming.
Some investors have started to bet on as many as five rate hikes this year, following Fed Chair Jerome Powell’s news conference on Wednesday.
The Nikkei in Japan and South Korea’s Kospi both plunged more than 3%.
China’s Shanghai Composite fell 1% while Hong Kong’s Hang Seng index slumped 2.55%.
Australia’s S&P/ASX200 closed 1.77% lower at 6838.30 points and officially entered correction territory on a 10.4% fall since its August high of 7632.8 points.