- FTSE falls 6 points, or 0.10%
- Investors in no mood to take on risk
- International Consolidated Airlines the day’s top performer
4:45pm: FTSE 100 closes lower
The FTSE 100 closed slightly lower Tuesday as investors shun risk amid rising inflation.
At the close, the UK blue-chip index fell 6 points, or 0.1%, to hit 7,567.
Chris Beauchamp, chief market analyst at online trading group IG, said investors appear to have no “appetite” to take on risk at this time as the inflation threat looms large.
“For a second day markets are enjoying a break from heavyweight data on the economic and corporate fronts,” he said.
“While BP earnings provided an initial bounce for the FTSE 100 that has faded throughout the day and a sense of caution prevails as the index returns to 7600 and its January highs. Other indices continue to struggle, and if fears about a slowdown in growth gather pace then the FTSE 100 may end up moving back down to join other indices like the Dax rather than them playing catch-up with the UK index.”
He added: “US CPI looms over the week, bringing with it the potential to undo any gains made before the release. As a result, no one seems too keen to buy the dip this time around, lest they find the lower liquidity levels result in a sudden lurch lower that gets the buyers chased out of their positions.”
The top gainer was International Consolidated Airlines Group (LSE:IAG) SA, which increased by 3.2% to 166.21p.
3.55pm: Leading shares drift lower heading into the close
After a positive start for the FTSE 100, things are now firmly in the doldrums as we approach the end of trading.
The leading index is off its worst levels but is still marginally in the red, down 3.77 points or 0.05% at 7569.7.
Mining shares continued to provide support as metal prices move higher, with aluminium prices hitting their highest levels since 2008.
Anglo American PLC (LSE:AAL) has added 3.24%, Polymetal International PLC (LSE:POLY) has put on 2.57% and Glencore PLC (LSE:GLEN) has climbed 1.93%.
But a couple of companies are proving a real drag on the index.
Ocado Group PLC (LSE:OCDO) has lost 14.68% after it warned of wider losses while Airtel Africa PLC (LSE:AAF) was down 10.13% as institutional investors sold a 1.5% stake.
Support services group DCC PLC (LSE:DCC) is down 3.22% despite reporting third quarter operating profits in line with forecasts.
And BP PLC (LSE:BP.) has lost all the gains it made earlier after unveiling its highest profits for eight years.
With the oil price slipping back, it is now down 1.43%.
Michael Hewson, chief market analyst at CMC Markets UK, said: "European markets have slipped back from their intraday highs with the FTSE 100 briefly hitting a new two year high, before slipping lower, with a decline in oil prices acting as a wider drag on the energy sector."
3.10pm: Wall Street lacks direction but Pfizer drops after update
US stocks made a mixed start on Tuesday ahead of fresh data on inflation and after drugs giant Pfizer forecast sales below Wall Street expectations.
The Dow Jones Industrial Average gained 0.2%, or 92 points, at 35,183, while the tech-heavy Nasdaq Composite shed 0.2% and the broader S&P 500 lost 0.1%.
Pfizer fell 5.46% as it said full year sales would be between US$98bn and US$102bn. This would be a record, thanks to sales of its COVID-19 vaccine, but fell short of the forecast US103bn.
On the economic front, investors remain focused on the prospect of the Federal Reserve raising interest rates next month, as data continue to highlight inflationary pressures.
The latest snapshot on that front comes on Thursday with the US Consumer Price Index.
In the UK, the FTSE 100 continues to slip and is now down 18.24 points or 0.24% at 7555.23.
2.15pm: US trade deficit grows but less than forecast
America's trade deficit for December has come in better than expected.
It rose from US$79.33bn in November to US$80.7bn, but this was lower than the forecast figure of $83bn.
Exports rose to $228.10bn in December from $224.7bn the month prior, while imports rose to $308.9bn from $304bn.
Meawhile US markets are set for a mixed start, not helped by disappointing results from Pfizer, with the Dow Jones Industrial Average up 0.24% but the S&P 500 and Nasdaq Composite forecast to edge lower.
In the UK the FTSE 100 is now flat after its early gains, up just 0.37 points at 7573.84.
Perhaps Boris Johnson's mini-reshuffle in an attempt to hang on to his job has left investors underwhelmed.
12.41pm: Many UK households will be pushed into destititution, says NIESR
As for the UK, NIESR warns that the combined effect of rocketing prices and higher taxes in the form of National Insurance contributions will push many households into destitution.
Its headline projection is a 30% rise in destitution because of the differential impact of inflation upon the poor; however, there are large regional variations, with Northern Ireland projected to have more than twice the average increase.
It said: "Cost-of-living pressures are hitting the lowest income households hardest, as they spend a greater proportion of their income on food and fuel, and those households are heavily concentrated in some of the most economically deprived areas of the country, including parts of the North-West, Wales and pockets in London/South-East."
It added that with the Bank of England raising interest rates, there was a clear danger of overdoing policy tightening and provoking a recession.
Overall its forecast for the UK shows GDP growth of 4.8% for 2022, unchanged from its previous outlook, followed by a return to its pre-COVID-19 annual growth rate of well below 2% from 2023.
It said: "This equates to output being around 4% lower in 2025 than in our last pre-COVID-19 forecast and £370bn, or more than £5,500 per person, of activity having been lost over the past two years. We nonetheless expect less damage to the UK’s future growth path than in the aftermath of the financial crisis."
Professor Adrian Pabst, NIESR’s Deputy Director for Public Policy, said: “Stuttering growth as of next year will add to the cost-of-living pressures due to soaring prices and rising taxes. While we are projecting persistent disparities between and within regions as well as increasing inequalities among households across the income distribution, there is nothing inevitable about this.
"The Levelling Up White Paper is a welcome first step, but government needs to go much further. A lack of public investment and continuous central control do not bode well. We propose instead targeted policy interventions for energy and food purchases to help those who need it most, combined with a holistic strategy for sustained regional regeneration as well as more local design and delivery of policies to generate shared prosperity”.
12.37pm: Growth set to slow in 2022
Global growth will slow in 2022 but will still be above trend, according to the National Institute for Economic Research, although high inflation and rising interest rates remain risks.
The institute expects growth of 5.7% in 2021, down from the 5.8% it forecast in November before the emergence of the Omicron variant.
This will slow to 4.2% this year, again slightly lower than the 4.3% expected in its previous report.
???? Our #GlobalEconomicOutlook is OUT NOW ???? Despite forecasting #GDP growth in 2021 & 2022 a bit weaker than we previously thought, our forecast for the world economy is still for an expansion of 5.7 per cent in 2021 and 4.2 in 2022. Read the summary here: https://t.co/b2pXAGmJe9
— National Institute of Economic and Social Research (@NIESRorg) February 8, 2022
It said most regains would see slower growth in 2022 due to the fading of fiscal stimulus measures, still high infection rates, and the bounce back effect fading.
Most of the economic impacts of the winter Omicron and Delta waves will show in late December and early January., it said.This implies that the first three months of 2022 are vulnerable to weakness in global economy, and we expect to see a deceleration in activity this quarter.
Supply chain disruption is still significant but has begun to ease, it said but added that further disruptions could place further strains on global supply chain networks and, as a result, boost price pressures.
Corrado Macchiarelli, NIESR’s manager for Global Macroeconomics Research, said: “Since our Autumn Global Economic Outlook, a new COVID-19 variant has appeared, China's economic growth has continued to slow, and US inflation has soared to its highest level in over four decades.
"These factors, among others, will lead global economic growth to slow by 0.1 percentage point in 2022, from 4.3 per cent to 4.2 per cent. All eyes are now on the inflation outlook. There has been a large increase of policy rates across the board, and whether inflation will be a temporary phenomenon or not will be mainly a function of central banks’ behaviour going forward.”
It now expects the US Federal Reserve to hike rates four times this year and next.
11.40am: US markets cautious as earnings season continues
US stocks are expected to open virtually unchanged from Monday's levels as investors mark time ahead of corporate earnings reports due for release today, including those for Pfizer and KKR, while inflation concerns continue to niggle.
Futures for the Dow Jones Industrial Average rose 0.04% in Tuesday pre-market trading, while the broader S&P 500 index and the Nasdaq 100 hovered in and out of the red.
Stocks ended mostly lower on Monday, with the Dow gaining 1 point to 35,091, while the S&P 500 eased back 0.37% to 4,484 and the Nasdaq shed 0.58% to 14,016 as Facebook owner Meta shed a further 5.1% following a disappointing earnings report last week.
With earnings season in full swing, Uber and Disney are expected to unveil their quarterly reports on Wednesday. Coca-Cola, Twitter, and PepsiCo (NASDAQ:PEP) (PepsiCo (NASDAQ:PEP)) will also issue their earnings later this week.
“The Nasdaq continues to be the main driver for US markets and continues to look vulnerable to a return to its January lows, while below the 200-day MA (moving average),” commented Michael Hewson, chief market analyst at CMC Markets.
“All the while the S&P 500 is holding above its 200-day MA as the tug of war continues between the bulls and bears, as sentiment ebbs and flows."
Back in the UK, and the FTSE 100 has come off its best levels.
It is now up just 10.65 points or 0.14% at 7584.12, having earlier climbed as high as 7631.
10.30am: Micro Focus proves a drag on FTSE 250
The mid-cap index is also higher, but only just.
The FTSE 250 has edged up 0.08% to 21,813.
Builder Bellway PLC (LSE:BWY) is 3.14% after its latest update.
But software group Micro Focus International plc (LSE:MCRO) is proving a drag.
Its shares are down 11.07% despite the company narrowing its losses, with investors disappointed by the lack of specific guidance for the year.
9.57am: Ocado continues to slide
More on Ocado Group PLC (LSE:OCDO), which is now down 11.41% following its full year figures.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "Ocado’s core retail operation was a natural beneficiary of lockdowns, as the world shifted to online shopping. A reasonable portion of that increased demand should be permanent. However, Ocado is also battling against very strong comparatives from the pandemic, and growth looks lacklustre. It’s positive it can stoke more impressive levels of growth, but this may well prove more challenging in an inflationary environment.
"The real driver of subdued market sentiment comes from commentary around Ocado’s Solutions business. Enormous amounts are being funnelled into building out the Ocado Smart Platform and Customer Fulfilment Centres.
"Next year’s profits are expected to be lower than the market was hoping. The trouble is, Ocado’s impressive robotic grid systems and software are a fundamentally attractive product for retailers looking to boost their online footprints, but Ocado has been unable to scale as quickly as would have been ideal. That leaves question marks over its ability to capture as much of the addressable market as it might like.”
Russ Mould at AJ Bell said: "Ocado needs to show off its capabilities, yet its track record has been blemished by two fires at its fulfilment centres in recent years after its robots collided, and an ongoing legal battle with AutoStore around alleged patent infringement..
“Investors are getting tired of hanging around for the big earnings breakthrough and its share price has more than halved over the past 12 months.”
9.12am: Mining shares provide support
The FTSE 100 briefly hit its highest level since the pandemic began before slipping back.
It reached 7631, the best level since January 2020 and is still up 38.81 points or 0.51% at 7612.28.
Neil Wilson at Markets.com said: "The FTSE 100 has outperformed in 2022, rising over 3% whilst the DAX (–3.5%), Dow Jones (-3.5%) and S&P 500 (–6%) have all fallen. The Nasdaq Composite is down over 10% still.
"We’d talked up the FTSE being the place to be for the rotation from growth to value – the question is whether we see a double top around this 7,600 area or if there are legs to drive on to 7,700 to fully recover the pandemic losses."
At the moment the index is being helped by a strong performance from the mining sector, which is dominating the risers.
Anglo American PLC (LSE:AAL) has added 2.87%, Antofagasta PLC (LSE:ANTO) is up 2.8%, Glencore PLC (LSE:GLEN) has climbed 2.8% and Rio Tinto PLC (LSE:RIO) has risen 2.6%.
Elsewhere wealth manager St James's Place PLC (LSE:STJ) is 2.27% better after Morgan Stanley (NYSE:MS) raised its rating from equal weight to overweight.
9.01am: Airtel drops after share sale
The overall mood may be buoyant, but it's not all hunky dory.
Recent FTSE 100 arrival Airtel Africa PLC (LSE:AAF) has slumped 12.07% to 136.3p, the leading faller in the blue chip index.
The fall follows the completion of the sale of 58mln shares - a 1.5% stake - at 140p each by funds managed by Warburg Pincus and Morningstar Investment.
Meanwhile Ocado Group PLC (LSE:OCDO) has dropped 7.93% after full year revenues rose 7.2% but losses widened to £176.9mln from £52.3mln and labour shortages hit deliveries.
8.20am: Energy companies energised
On a busy day for corporate news but a quiet one for economic data, leading shares have made a positive start.
The FTSE 100 is up 37.69 points or 0.5% at 7611.16.
BP PLC (LSE:BP.) has added 1.73% after it reported annual profits of US$12.8bn, its highest for eight years, and a swing from a US$5.7bn loss.
It also announced a US$1.5bn share buyback programme.
Richard Hunter, Head of Markets at interactive investor, said: “The significant swing to profit is of little surprise given the strength of the oil price and the performance of other global behemoths, but BP is attempting to differentiate itself by the pace of its transformation.
"The company’s transformation towards becoming an integrated energy company is inevitably still in a relatively formative stage, but BP is attacking the change of balance with some force. In particular, there have been further developments in terms of its exposure to hydrocarbons, offshore wind and hydrogen possibilities."
Of course the massive profit figure this time round is only likely to fuel further calls for a windfall tax on energy companies.
Still with energy, and SSE PLC (LSE:SSE) is up 1.55% following its latest update
But Just Eat Takeaway.com NV (LSE:JET, NASDAQ:GRUB) has fallen 1.79% after it said it would end its listing on the US Nasdaq market and was still reviewing its position elsewhere, ie in London and Amsterdam.
Overall, investors may be getting used to the idea that central banks will be acting to curb inflation, but there is still nervousness about how quickly and how far interest rates will rise.
The Bank of England has already lifted the cost of borrowing, and the US Federal Reserve is expected to follow suit next month. This week's US inflation figures could give some guidance either way.
Michael Hewson, chief market analyst at CMC Markets UK, said: "Having digested what was an unexpectedly good January payrolls report last week, market attention is now firmly fixed on this week's US CPI numbers for January for evidence of whether the upswing in prices we’ve seen in the last three months of 2021 is set to show any signs of easing.
"In the last three months of last year US inflation jumped from 5.4% at the end of the third quarter to end 2021 at 7% and is expected to continue to rise later this week."
As for the European Central Bank, there seemed to be a more hawkish tone last week in contrast to the previous rather unruffled attitute.
But even that was rolled back a little on Monday.
Hewson said: "There is also increasing nervousness in Europe about rising prices with ECB President Christine Lagarde last week, refusing to repeat her assertion at the end of last year that interest rates in the euro area would not be rising this year. This position was reinforced by ECB Governing Council member Klaas Knot over the weekend when he said he expected the first rate rise to come in fourth quarter of this year.
"Lagarde’s hawkish shift of last week was dialled back a touch yesterday in comments to the European Parliament, when she said it was premature to talk in terms of rate hikes yet, despite the shift in the inflation narrative."
6.50am: Bright mood set to continue
The FTSE 100 is expected to extend its gains on Tuesday ahead of a busy day of corporate reporting in London.
After a solid start to the week, the blue-chip index has been called 18 points higher by spread betters on the IG platform, after adding just over 57 points to 7,573.47 the day before.
Investors will have news from a host of FTSE 100 and FTSE 250 companies to chew through this morning, including BP PLC (LSE:BP.), Bellway PLC (LSE:BWY), Micro Focus International plc (LSE:MCRO), Ocado Group PLC (LSE:OCDO), TUI AG (LSE:TUI) and SSE PLC (LSE:SSE), with US earnings season still rumbling on with Pfizer and Peloton among those coming later.
There was a mixed session on Wall Street overnight, with the Dow Jones Industrial Average remained unchanged, while the S&P 500 index dropped 0.37% and the tech-stocked Nasdaq fell 0.58%. The small caps of the Russell 2000 rose 0.51%.
Investors are “likely to remain worried and may stir up volatility in stock markets in coming days”, says market analyst Naeem Aslam at AvaTrade, with the market still getting its head around how the Federal Reserve will react to inflation data on Thursday.
“The American central bank has already hinted that it is likely going to start interest rate lift-off next month, but the number of interest rate hikes to be held in 2022 and by how much they are going to be raised is still a mystery,” Aslam added.
“Stocks of technology companies are being beaten down by forecasts of higher interest rates in coming months. This can be clearly seen from the price action of prominent technology companies and the Nasdaq index over the past few weeks.
“The Nasdaq index is bleeding because, when interest rates rise, the stock prices of technology companies fall because their valuations are based primarily on high growth factors and massive future cash flows. This is because, when interest rates climb, the present value of the companies' future cash flows falls, causing their stocks to become overvalued. When stocks are considered to be overvalued, investors begin selling these companies' stocks, causing their stock prices to fall.”
Around the markets
Pound - down 0.1% to $1.3527
Oil - up 0.1% to US$92.81
Gold - up 0.7% to US$1,820.2
Bitcoin - up 4.4% to US$44,661.5
6.50am: Early Markets - Asia / Australia
Asia Pacific shares were mixed on Tuesday as Nvidia’s planned acquisition of chipmaker Arm from SoftBank collapsed due to regulatory challenges.
SoftBank said Arm will now prepare to go public within the fiscal year ending March 31, 2023.
Japan’s Nikkei 225 and South Korea’s Kospi rose above the flatline, gaining 0.13% and 0.05%, respectively.
The Shanghai composite in China lifted 0.52% while Hong Kong’s Hang Seng index dipped 0.98%.
Australia’s S&P/ASX200 surged 1.07% to close at 7186.7 points after Prime Minister Scott Morrison on Monday announced that the country will open its borders to fully vaccinated tourists from February 21.