- FTSE 100 loses 88 points
- Ocado leads fallers as Germany steps into robot legal battle
- US markets move higher
4.45pm: FTSE turns negative at the close
The UK's blue-chip index finished Friday's trading session at 7,466 points, a loss of 88 points on the day although not the triple-digit drop that investors feared.
European stocks have taken the lead to the downside this afternoon, outpacing US markets which appear to have halted their slide for now, said Chris Beauchamp, chief market analyst at online trading platform IG.
“While we might not be at the end of the correction in US markets, it looks like a fresh one has started in Europe, where heavy losses predominate across stock markets as the week winds down," Beauchamp wrote
3.45pm: FTSE 100 down around 100 points as US stocks open flat
London's blue chips are heading for the weekend on the back of a triple-digit decline, with the index relapsing again after an attempt at a late afternoon rally petered out.
The index was down 115 points an hour before with close with flat US markets no help in lifting the mood.
Bright spots include telecoms giant British Telecom, which topped the Footsie leaderboard with a 1.7% gain to 197p.
A third-quarter update is due next week and with French group Altice now sitting on an 18% stake its recent run of good news needs to be maintained.
The vowel-challenged fund manager Abrdn PLC (LSE:ABDN) is also on the up after plans announced this morning to hand back the proceeds of the sale of a 4% stake in insurer Phoenix to shareholders.
Shares rose 1.3% to 241.1p, which might not look a lot but it has been a tough day for many.
Ocado especially is feeling the heat and not from its robots catching fire but from the suspension of its legal action in Germany against Norway’s Autostore over patent infringements.
The shares were down almost 10% to 1,411p near the close.
2.15pm: FTSE 100 sell-off continues
Traders and investors seem to have gotten over the worse of their earlier wobble, maybe helped by a nice cup of tea, and the Footsie is now off its worst levels and Wall Street is seen heading for a mixed start.
The London index is down 1.2%, still below 7,500, while across the pond, the S&P 500 and Dow are seen starting lower, with the techies of the Nasdaq opening higher.
Many are looking to next week, where the Bank of England is now seen raising interest rates for the second month in a row for the first time since 2004.
But, with inflation running well above 5% and the labour market as tight as it has ever been in recent memory, is the BoE behind the curve, asks Deutsche Bank.
READ: BoE interest rate hike - what it means for investors and markets
With the unemployment risks at the end of last year, it's not really fair to say the Bank's monetary policy committee (MPC) could have moved a whole lot quicker, but should the BoE be doing more? "Almost certainly." says Deutsche's chief UK economist, Sanjay Raja.
"In the week ahead, we're expecting the MPC to turn the page on its ultra easy policy stance...[and] also expecting the MPC to confirm the start of (passive) quantitative tightening (QT) with reinvestments dropping out of the Bank's balance sheet from next week onwards. This will be the first time ever that the Bank has embarked in QT, since the introduction of QE more than a decade ago."
Further forward, more hikes are likely given the scale and persistence of inflation, Raja added, expecting another hike to 0.75% in August, followed by two more hikes next year to take the terminal rate up to 1.25%.
Given the uncertainty around the inflation path and the potential pass-through into wages, the risk is that "more will be needed and perhaps at a faster pace," he said.
Over at Rabobank they are less hawkish, predicting a BoE hike next week but only one or two more after.
"A large proportion of the rise in inflation has been attributable to internationally tradable goods and commodities. These prices are largely unaffected by the central bank’s policies," says macro strategist Stefan Koopman.
"The passthrough from the real income squeeze to real spending should become increasingly visible over the course of 2022 – making the central bank’s policy hostage to fortune."
Over in the States, there are five hikes currently predicted for the US Federal Reserve, with some calling for seven.
Per @FerroTV, the "center of gravity" in #markets has moved to 5 #Fed hikes this year, with @BankOfAmerica calling for 7
The last few weeks have seen a stunning change in market rate expectations
In the process, the #Fed has lost
control of both the #inflation and rate narrative pic.twitter.com/u6zmhUVzaU
— Mohamed A. El-Erian (@elerianm) January 28, 2022
2.05pm: US data
Over in the US, price and wage inflation continues to remain at 40-year highs, according to fresh data.
Overall pay costs increased by 1.0% in the fourth quarter, pushing the annual growth rate up to 4.0%, from 3.7%, while wages & salaries for private workers increased by 1.2% in the quarter, with the annual growth rate hitting a 40-year high of 5.0%, from 4.6%.
Personal spending declined by 0.6% m/m in nominal terms in December and, allowing for the surge in prices, that means real consumption fell by a massive 1.0% month-on-month.
"The latest batch of data nearly illustrate the conundrum facing the Fed - with price and wage inflation running at 40-year highs, while at the same time underlying domestic demand growth is weakening," said Capital Economics.
"Even with the unexpectedly strong fourth-quarter GDP gain indicating that productivity growth was a little stronger than we had anticipated, 5% wage growth is nowhere near consistent with a 2% price inflation target."
12.33am: Sell-off squeal heard again
FTSE 100 stocks are being sold off heavily again and traders are expecting Wall Street to now open fully in the red.
The Londo benchmark is down over 120 points or 1.6% putting it on course for a weekly loss and close to erasing any progress for the month.
US stocks look set to open lower, making for a fourth consecutive weekly loss as investors await more earnings as well as the Federal Reserve’s preferred inflation gauge.
Futures for the Dow Jones Industrial Average are down 0.9%, while those for the S&P 500 index are pointing down 0.8%, and the tech-laden Nasdaq-100 is looking for a 0.5% drop.
The S&P 500 has fallen 1.6% so far over the week, putting it on course for its longest losing streak since September 2020.
The falls came after Federal Reserve chairman Jerome Powell added to expectations the central bank will start a series of interest-rate increases in March after the Fed’s policy meeting Wednesday.
Investors will have consumer-spending data to digest, where economists expect the figures to show a spending fell in December as rising coronavirus infections dented demand.
Also due is the Fed’s preferred inflation gauge is forecast to show a continuation of the price pressures that have pushed the central bank to unwind stimulus and make it set to raise interest rates.
Stocks have been choppy despite another solid round of earnings, with almost a third of the companies on the S&P 500 having reported fourth-quarter results so far and 78% of them have beaten analysts’ estimates for earnings per share, according to FactSet.
Companies reporting before the bell on Friday include Chevron, Caterpillar and Colgate-Palmolive.
In premarket trading, Apple Inc (NASDAQ:AAPL) shares are up around 5% after the biggest US company by market capitalization posted record revenue and profits after-hours on Thursday.
But shares of brokerage Robinhood Markets, which reported a quarterly loss of $423 million after-hours, dropped 14% in pre-market trading, below its $38 IPO price for the first time since going public this summer.
Third quarter crypto trading revenue fell 78% month-on-month to $51 million, although it still rose 860% versus the same period last year.
"After a stellar second quarter when Robinhood benefited from a boom in crypto trading, the third quarter has been a harsh reality check as the easing of covid restrictions and the resumption of sporting events have translated into a drop off in retail trading activity at home. After the second quarter, which was an exceptional period for Robinhood with crypto activity at a record high, the brokerage needs to examine new ways to boost revenue such as with its new plans to offer crypto wallets,” says Victoria Scholar at Interactive Investor.
Jonathan Boyar, President of Boyar Research, said: “Many of the high-flying companies that did so well in 2021 (and that have sharply reversed course thus far in 2022) were the favourites of the Robinhood crowd. The popular press often suggests that this new class of young investors who have entered the market should positively affect stocks’ long-term trajectory, bringing to mind similar stories written about day traders in the years prior to the dotcom collapse.
“However, when the bubble eventually burst, those day traders sustained such large losses that they exited the market completely and, in many cases, did not return for many years. With a good deal of the high-flyers having already lost 50% or more of their value, we’ll be interested to see whether this new class of investor will leave the market in a similar fashion.”
11.11am: Small bounce
The FTSE has made a small bounce of its interday low, now down less than 1.3%.
Market analyst Ipek Ozkardeskaya at Swissquote said markets were reacting to Ukrainian tensions, "which support the rally in energy prices, and by doing so further boosts the inflation expectations and the Fed hawks didn’t do good to the overall market mood".
Looking for positives in the last full week of the first month of 2022, she said: "Although it has been a blood-red month for the US equities, the FTSE 100 managed to eke out 3% gains in January, as a sign that the British blue-chip index is in a good place to be the winner of the finally-happening reflation trade."
So just how bad has January been for investors?
Here are the figures year to date for major markets:
Hang Seng (Hong Kong) +1.2%
FTSE 100 (UK) 0%
Dax (Germany) -4.4%
Nikkei (Japan) -8.8%
S&P (US) -9.8%
Nasdaq (US) -15.7%
Bitcoin -22.5%, Gold -5.5%, Brent Crude +15.4%
— Dan Coatsworth (@Dan_Coatsworth) January 28, 2022
Looking across the Atlantic, a mixed start is predicted on the futures market, with the Dow Jones and S&P 500 both seen dropping around 0.2%, while the Nasdaq is seen starting on the front foot.
10.45am: Rout about
A mini rout is underway across Europe, with the FTSE 100 one of several national benchmarks down around 1.4%, led by tech and financials stocks.
Germany's Dax is the worst, down 1.9% on the back of weaker than expected GDP numbers, with the economy shrinking 0.7% at the end of last year on the back of weak private consumption amid the fourth wave of the pandemic, new restrictions and high energy prices.
The choppy stocks markets in Europe are joined by mixed futures for US indices.
Market analysts Neil Wilson at Markets.com said futures for the US Russell 2000 small caps index indicate a new cycle low, the weakest since December 2020, but the rest are holding within Monday’s range – no new highs, no new lows.
He points to "some indecision" as 3% intraday swings "are becoming common - but it was the tenth straight day where decliners outpaced advancers"...so overall selling continues.
"Earnings so far are good with 80% of the 145 companies in the S&P 500 that have reported so far beating estimates but the market has other things on its mind," he noted.
"Trash is still trash", he tongue-lashed, with Coinbase down 5%, MicroStrategy down 10%, Cathie Wood's ARKK down 4% and Tesla (Ed: trash?) down 11%.
Elaborating on Tesla, Wilson said: "Tesla shares declined 11% after the solid earnings...down 30% YTD now as Elon Musk said the priority is to make a robot rather than new cars. Investors gave it the thumbs down. But you have to hand it to Musk – he sold at the top and managed to make it look like he did it because Twitter told him to. A lot of overhanging supply that will want out."
Electric vehicle rivals Rivian and Lucid were also down double digits, and down 50% and 30% in the year to date.
9.45am: Losing support?
The Footsie is now down almost 1%, 73 points lower to below the key 7,500 support mark, with banks and industrial stocks adding to the weight of declines in the index.
Barclays PLC (LSE:BARC) and Standard Chartered PLC (LSE:STAN) are the two banks nearest the bottom this morning.
Bottom of the table is now Ocado, which has fallen 11% over the month and 47% over the past 12 months, with news about the online groceries company's court battle with Norway’s Autostore over patent infringements.
A court in Munich has suspended Ocado’s effort to get the sale of Autostore’s B1 robot banned in Germany.
The recovery from the FTSE 100 seen earlier this week had run out of puff, says Russ Mould, investment director at AJ Bell, though he noted the index is still comfortably ahead of most global counterparts year-to-date though as a turbulent January draws to a close.
“Once seen as about as fashionable as socks under sandals thanks to the absence of any big tech firms, the FTSE 100 is enjoying a renaissance amid renewed appetite for tobacco, banking and resources stocks – the latter helped by an oil price at $90 per barrel," he said.
Shell PLC (LSE:RDSB) and BP PLC (LSE:BP.) are both among the fallers this morning however.
But potential EU and UK sanctions on Russian gas projects would only add to the upward pressure on energy prices, Mould says.
8.37am: Opening lurch
The FTSE 100 has defied predictions and lurched lower in early trading on Friday, with European markets tracking a further wobble stateside overnight.
London's blue-chip benchmark has stumbled down 49 points or 0.65% to 7,505.05, though it was the least saggy of the main European indices.
Top Footsie faller was life insurance group Phoenix Group, as asset manager Abrdn PLC (LSE:ABDN) sold £264mln of shares.
It is followed by some tech-focused named in Ocado Group PLC (LSE:OCDO) and Scottish Mortgage Investment Trust PLC (LSE:SMT), along with Primark owner Associated British Foods PLC.
Topping the leaderboard is ITV PLC (LSE:ITV) after a bullish write-up from analysts at Barclays.
“Investors remain on high alert after another blustery session which saw stocks oscillate between positive and negative," said Richard Hunter at Interactive Investor.
"Mixed corporate earnings are not helping to lift sentiment. Although the majority of companies who have reported so far have beaten expectations and may in aggregate post growth of over 20%, the outlook and guidance statements have been less inspiring. The impact of the Omicron variant, such as it is, will not wash through fully until the first quarter earnings of 2022 become available."
6.36am: Firmer start predicted
The penultimate trading day of January is set to get off to a modestly firmer start despite a weak showing by US stocks yesterday.
The FTSE 100 is expected to crawl 9 points higher.
In the US, although the Dow Jones made a decent fist of things, closing 7 points lower at 34,161 the broader-based S&P 500 shed 23 points at 4,327.
After hours, Apple Inc (NASDAQ:AAPL) topped expectations with its quarterly sales numbers. Net sales increased 11.2% from a year earlier to US$123.9bn, with growth in all regions except for Japan.
There is now a record number of active Apple devices, tracking their owners’ every move.
“Apple has shown its core strength in a stellar round of quarterly numbers. That’s resulted in a positive initial reaction from the market, despite concerns continuing to swirl about the upcoming Fed announcement, and what this could mean for US high-growth companies. The wider tech sell-off has made for difficult watching, but while some are bolting for the exit when it comes to US tech, this is likely a case of turbulence, not a mayday situation – especially for Apple,” suggested Sophie Lund-Yates.
In Asia this morning, despite not apparently being burdened by an overpowering urge to own Apple products, Japanese investors are driving the Nikkei 225 higher, to 26,730, up 560 points.
In Hong Kong, the Hang Seng is off 219 points at 23,588.
“Today we’ll get the latest Q4 GDP numbers from both France and Germany, with the French economy set to grow 0.5% in the final quarter of 2021. The German economy, on the other hand is expected to contract by 0.3%, a significant drop from the 1.7% growth we saw in Q3, largely due to the disruption caused by first Delta, and then the Omicron variant, and finally by the huge surge in energy prices, that forced large parts of the manufacturing sector to close,” said CMC’s Michael Hewson.
“We then get to see the latest inflation, as well as personal spending and income numbers from the US economy for December,” he added.
In the UK, trading updates are expected from Avon Protection PLC (LSE:AVON) and ITM Power PLC (AIM:ITM).
The former recently announced it is winding down its armour business and that this year would be one of transition.
As for ITM's interims, revenue is likely to be around £4.1mln and the underlying loss around £13mln.
Around the markets
- Sterling: US$1.3410, up 0.27 cents
- Gilt: 1.23%, up 2.84 bps
- Gold: US$1,797.10 an ounce, up US$4.00
- Brent crude: US$88.74 a barrel, up 57 cents
- Bitcoin: US$37,409, up US$1,186
- Ethereum: US$2,461, up US$101