- FTSE falls 16 points or 0.22%
- Rising oil prices spook investors
- BP PLC (LSE:BP.) the day’s top performer
4:45 pm: FTSE 100 closes lower on high oil prices
The FTSE 100 fell Wednesday as oil prices increased, renewing inflation fears.
The international oil benchmark Brent crude advanced about 5% to top $121 per barrel. US crude gained around 5% to more than $114 per barrel.
Also, traders and investors digested the latest news on the Ukraine-Russia war as Ukrainian President Volodymyr Zelenskyy called for more pressure on Russia from other countries as the conflict appears to be entering a stalemate.
At the close, the UK blue-chip index dropped by 16 points, or 0.22%, to hit 7,460.
Chris Beauchamp, chief market analyst at online trading group IG, said investors are retreating from risk.
“It’s back to risk-off for global markets, which are retreating this afternoon,” he said. “Another upward move for oil prices isn’t helping matters either.”
Beauchamp added: “The chancellor’s decision to cut fuel duty will be a small bit of welcome news, but in a sign how powerless governments are in the face of the oil price, WTI and Brent have both risen strongly once again, effectively wiping out some of the benefit from the Spring Statement for consumers. The day looks to be a recurrence of war concerns, boosting oil prices while continental European markets fall sharply – those looking for the Dax and others to begin forming a short-term high after the recent bounce will be watching eagerly. BP and Shell have topped the table this afternoon as the standout beneficiaries from yet another surge in oil prices."
The top gainer was BP PLC (LSE:BP.), which increased by 4.6% to 388.30p.
4.00pm: Energy sector boosted
Michael Hewson, chief market analyst at CMC Markets reflects on today's movements.
"The FTSE100 has performed slightly better, hitting a one month high before retreating, but is still holding up slightly better largely due to the outperformance of the energy sector with the gains being led by BP and Shell, on the back of firmer oil prices. Basic resources are also higher led by Antofagasta, Rio Tinto, and Glencore."
"Elsewhere we’re seeing modest losses in the likes of UK focused companies like housebuilders, and consumer discretionary on disappointment after the Chancellor of the Exchequer gave a downbeat assessment of the UK economy, as the OBR downgraded its outlook for 2022 and 2023. B&Q owner Kingfisher is lower again, as is Taylor Wimpey, Barratt Developments and Persimmon."
2.40pm: Quiet day for the markets
The markets remained relatively quiet immediately after Sunak’s announcement, with Mike Owens, global sales trader at Saxo markets providing some comment as to potentially why.
“Barely any reaction of note as the update focused on specific issues probably too nuanced to affect financial markets greatly.”
2.25pm: More oil and less green?
Sunak’s statement may have winked towards a future less reliant on oil and focused on greener sources of energy, with a 5% VAT fall for new installations of solar panels and other green energy pieces of equipment over the next five years.
A fuel duty cut was also introduced to offset some of the soaring prices oil has experienced since the onset of war.
However, a poll by The Independent suggested voters would support a windfall tax on the North Sea oil and gas companies instead.
Sunak says he can’t tax or they will no longer invest in the UK.
To further contradict the COP26 pledges of reducing the use of fossil fuels, “The PM’s special advisers are polishing the words for his new energy strategy statement, due imminently, which will include renewed drilling for fossil fuels in the North Sea and more nuclear power stations.”
This will be music to the ears of Shell and BP, which may be feeling some impact from the suspension of business in Russia.
Shares in the companies had climbed higher, with BP up nearly 4% to 386p and Shell climbing 3.14% to 2,070p, as Footsie trades 9 points higher.
2.04pm: Record interest repayments on national debt
The UK government faces record interest payments on national debt after today's Spring statement presented by Rishi Sunak.
Here is Sunak’s biggest headache, according to the OBR. Public spending has been revised up since October by £41bn - but with all this increase down to a projected £83bn of interest payments, which is a record in nominal terms and a 36 year high of 3.3% of GDP…
— Robert Peston (@Peston) March 23, 2022
1.56pm: Footsie in the red
London's blue-chip index has fallen by 9 points to 7,456 in the last hour, coinciding with the time today's spring statement was due to start.
Sunak announced cuts to fuel duty and VAT on household energy efficiency installations to offset the impact of the rising cost of living.
But the Office for Budget Responsibility said it will only offset around a third of the impact on households (read more).
1.12pm: Oil still on top after fuel duty cut
Shell PLC (LSE:SHEL, NYSE:SHEL) and BP PLC (LSE:BP.) led the FTSE 100 risers today, climbing 3.2% and 4.0% respectively, on Rishi Sunak’s announcement that fuel duty will be cut by a record 5p a litre.
It will be implemented from 18.00pm tonight for an entire year, the chancellor said in Wednesday’s Spring Budget statement.
“For only the second time in 20 years fuel duty will be cut, not by one, not even by two but by five pence per litre, the biggest cut to all fuel duty rates ever,” Sunak told the Commons.
“On the cost of a 55-litre tank, £47.30 is tax [and this] change will only cut this by £2.75,” Hargreaves Lansdown said.
1.03pm: Boris Johnson labels P&O sackings unlawful
Prime Minister Boris Johnson said in today’s PMQs ahead of Sunak’s spring statement that he believes the P&O sackings were unlawful, and that the government would be taking advantage.
Johnson said, “We will not sit by because under section 194 of the Trades Union and Labour Relations Act of 1992 it looks to me as though the company concerned has broken the law, and we will be taking action, therefore, and we will be encouraging workers themselves to take action under the 1996 Employment Rights Act.”
If found guilty, P&O could face millions in fines, according to Johnson.
12:35pm: US Preview
US stocks look set for an early retreat on Wednesday, while a sell-off in government bonds stabilses, as investors await further updates on the Russian war against Ukraine.
Futures for the Dow Jones Industrial Average and the S&P 500 index both fell 0.2%, while contracts for the tech-laden Nasdaq-100 lost 0.3%.
US stock indexes rose on Tuesday as investors shrugged aside worries that inflation will push the nation’s economy into a recession following comments from Federal Reserve chair Jerome Powell about an acceleration in the pace of interest rate rises. This had caused a sharp fall in US government bond prices while, conversely, yields rose to levels not seen since May 2019.
Stock markets seemed to have turned a corner in recent days, despite anxieties about mounting inflation and the war in Ukraine. The recent rally has come even as Russia’s attacks on Ukraine intensify and Western countries continue to pile on sanctions.
Crude prices have swung between gains and losses in choppy trading this week as investors weigh the likelihood of a European Union-wide ban on the purchase of Russian oil.
Richard Hunter, head of Markets at interactive investor, commented: “Markets continue on a tentative road to recovery, with investors still buying the dips on what have been considered to be oversold sectors.
"At the same time, the gruelling task of balancing interest rate and inflation considerations remains near the top of the investment agenda. The Federal Reserve has now signalled that a more aggressive round of tightening may be on the cards, which has elevated expectations for a 0.5% rise at the next meeting in May."
He added: "Inflationary pressures clearly remain, however, and a first-quarter reporting season which will kick off in the next few weeks has already been marked down in terms of expectations as the factors of supply chain blockages, rising prices generally and a cautious consumer may have affected revenues and profits. In the meantime, the oil price continues to be strong on concerns around tight global supplies as a result of the Russia Ukraine conflict and is currently ahead by 49% in the year to date."
"Despite the generally positive moves over the last few trading sessions, the main indices still have some way to go to offset 2022 declines, where the Dow Jones remains down by 4.2%, the S&P500 by 5.3% and the Nasdaq by 9.8%," Hunter concluded.
On the corporate front, in pre-market trading shares of GameStop climbed 11% after the company’s chairman, Ryan Cohen, disclosed his firm bought 100,000 shares of the company’s stock on Tuesday. Shares of AMC Entertainment Holdings (NYSE:AMC), which tend to move in correlation with GameStop, added 6.5%.
Meanwhile, shares of Adobe dropped 3% after the software company reported higher profit and better-than-expected revenue growth Tuesday, but said it expects a hit to annual revenue from the war in Ukraine.
12.07pm: P&O Ferries chief executive apologises on sacking 800
Almost a week since the sacking of 800 members of staff, P&O Ferries chief executive Peter Hebblethwaite has apologised.
He did also add that replacing the staff with cheaper agency employees was “the only way to save the business.”
“I want to say sorry to the people affected and their families for the impact it’s had on them, and also to the 2,200 people who still work for P&O and will have been asked a lot of difficult questions about this,” said Hebblethwaite.
“We needed fundamental change to make us viable. This was an incredibly difficult decision that we wrestled with but once we knew it was the only way to save the business, we had to act.”
11.40am: Tech stocks continue rebound
Footsie gained 13 points to 7489, as it hovers around the same level it was before war in Ukraine broke out.
The Scottish Mortgage Investment Trust inched slightly higher to change hands at 1021p.
Tech indices, such as the Nasdaq and Hang Seng performed strongly yesterday, continuing their respective rebounds.
The Scottish Mortgage trust mirrored these indices, up 4% in the last five days, compared to the Nasdaq which is up 7%, and the Hang Seng which is up 3.38% over the same period.
11.09am: Budget preview
At 12.30pm today, attention will turn to Rishi Sunak’s Budget, which once again will address current economic emergencies rather than the conventional fiscal plans laying out visions for the future.
The chancellor’s announcement comes just after UK inflation rose again to another recent record of 6.2%.
How Sunak juggles increasing household bills with the surge in prices will be the main focus of interest.
The chancellor is expected to reduce fuel tax and potentially raise the income level at which national insurance tax is due to help poorer families.
Although, even if these policies were to be implemented, petrol and diesel prices and the health and social care levy would still mean motorists and households would be paying more than this time last year.
Having already announced one heating support package, economists don’t expect anything else in that regard.
It is unknown whether Sunak, who seemed reluctant, will issue a windfall tax on oil producers.
With ever-soaring oil prices that are well beyond what was ever reasonably expected for 2022, now would be the time to implement such a tax on colossal companies.
10.37am: FTSE 100 still in green as Budget nears
Footsie has retreated from some of the gains made this morning, up now only by 23 points to 7499 as investors and the market prepare for Sunak’s statement and the impact that will have on London’s blue-chip index.
A fuel duty cut is likely, with today's biggest risers BP and Shell likely to be affected.
Drivers were warned earlier this week that prices could hit £2 a litrehttps://t.co/Lxjd9l8sfu
— Glasgow Times (@Glasgow_Times) March 23, 2022
10.02am: Output price inflation rises again
New data from the Office of National Statistics (ONS), showed that output price inflation rose to 10.1% in February, up from 9.9% in January.
That means businesses are paying for materials, prices that are likely to be passed onto the consumer sooner or later, with input prices rising 14.7% over the last 12 months.
Food products and metals and non-metallic minerals provided the largest upward contributions to the annual rates of output and input inflation.
That may come as no surprise, given Russia and Ukraine are among the largest producers and exporters of wheat, with geopolitical tensions causing the price of wheat to climb 20% in the last month.
9.30am: Oil giants on top
The oil and gas giants, BP and Shell, are today’s biggest risers so far as the Footsie gains 31 points.
BP climbed 3.08% to 383.2p while competitor Shell was up 2.77% to 2,063p.
Brent crude fell slightly, back towards US$116 per barrel, but Deutsche Bank believes the retreat will be short-lived, and the cost of oil will continue to soar as war and economic uncertainty put a squeeze on supply.
“The Russian invasion of Ukraine has added risk and volatility to global and gas markets that were already showing clear signs of increasing underlying tightness,” Deutsche Bank said in a note.
“On inventory levels alone, we see US$90/bbl Brent currently justified, implying currently US$$20/bbl additional risk premium being factored in by markets (albeit understandably very volatile)”.
Working through it on a company-by-company basis, the bank has raised its price target for Shell by 24% to 2,5510 from 2,038p among the UK-listees with BP tweaked a little to 450p from 455p, although both shares are on the bank's 'buy' list.
8.34am: Inflation hits 30 year high
There was plenty for Rishi Sunak to ponder in the latest inflation data, which showed that prices rose at 6.2% in February – their fastest pace in 30 years.
The Chancellor, preparing for his Spring Statement at around 12.30 pm Wednesday, was already under pressure to provide relief for families hit by soaring household bills.
The monthly cost of living update, which could be a staging point for inflation rates of 8-10%, will provide further ammunition to critics who say the government isn’t doing enough to support those in financial jeopardy.
The FTSE 100, anticipating the inflationary shock, opened 28 points to the good at 7,505.21, which means the index, after the wobble at the end of February at the start of the Ukraine invasion, is flat year-to-date.
“Markets continue on a tentative road to recovery, with investors still buying the dips on what have been considered to be oversold sectors," said Richard Hunter, head of markets at Interactive Investor.
Broker updates for BP and Shell lifted the oilers in the early session and by extension the index.
Among the small-caps, the stand-out stock was 4D pharma PLC (AIM:DDDD, NASDAQ:LBPS), which advanced 25% after enjoying early clinical success in a cancer trial.
6.55 am: FTSE 100 called higher
The FTSE 100 is seen starting on the front foot, though the next UK inflation stats and Rishi Sunak’s budget are likely to divert attention on Wednesday.
CFD firm IG Markets calls the FTSE 100 a little over 40 points higher, making a price of 7,503 to 7,506 with just over an hour to go until the open.
It comes after an upbeat session on Wall Street.
“The resilience of equity markets has been something to behold in recent days, despite the rise in bond yields that we’ve seen over the past two weeks, with the FTSE 100 and DAX both closing at a three-week high,” said Michael Hewson, analyst at CMC Markets.
“The Nasdaq 100 led yesterday’s gains for US markets, pushing up to one-month highs, and above the levels seen prior to the Russian invasion of Ukraine.”
The Dow Jones gained 254 points or 0.74% to finish Wednesday’s session at 34,807, whilst the S&P 500 added 1.13% to close at 4,511.
At the same time, the Nasdaq climbed 1.95% to 14,108 and small-cap focussed Russell 2000 tacked on 1.08% to 2,088.
In Asia, Japan’s Nikkei rallied 3% to 28,040 and Hong Kong’s Hang Seng got a 1.7% boost to 22,260. The Shanghai Composite nudged 0.32% higher to 3,269.
Around the markets
The pound: US$1.3274
Gold: US$1,918 per ounce, down 0.08%
Silver: US$24.80, up 0.16%
Brent crude: US$115.63 per barrel, up 0.13%
WTI crude: US$109.46 per barrel, up 0.17%
Bitcoin: US$42,171, down 0.25%
Ethereum: US$2,959, down 0.87%