- FTSE 100 up 42 points
- Shell and BP move higher
- Investors fret about recession
4:50pm: FTSE 100 ends higher, US stocks lower midday
The FTSE 100 finished the day on an up note, rising 42 points, or 0.6%, to 7,579, as oil and commodity share price gains outweighed inflation concerns.
“Higher commodity prices have rescued the FTSE 100 today, which has escaped the losses prevailing in continental indices,” IG chief market analyst Chris Beauchamp said.
“The prospect of heavy pressure on European consumers from higher energy prices is driving down the Dax and others, although the FTSE 100 has escaped the worst of it for now,” Beauchamp added.
Notably movers included shares of LLoyds Banking Group PLC, which slipped nearly 4% after RBC double downgraded the stock to “Underperform,” saying growth drivers did not appear to be “game-changing.”
3.55pm: Footsie supported by oil companies and miners
Leading shares remain in the green as we head into the close, but the gain is not convincing.
After the optimism on Tuesday that the Ukrainian crisis could be resolved, scepticism has grown over how much Russia is actually scaling back its attacks despite its earlier comments to that effect.
So the FTSE 100 is up 11.55 points or 0.15% at 7548.8.
The mood has not been helped by falls on Wall Street and in Europe, with Germany's Dax down 1.5% and France's Cac around 1% lower.
Given it is chock full of commodity companies, the UK blue chip index is being supported by a rise in the oil price amid worries about supply shortages due to the conflict. An Opec+ meeting on Thursday holds out little hope that the group will do more than stick to its previous production plans.
So Brent crude is up 3.68% at US$114.29 a barrel while West Texas Intermediate - the US benchmark - is 3.86% better at US$108.26.
That has pushed Shell PLC (LSE:SHEL, NYSE:SHEL) 4.08% higher and BP PLC (LSE:BP.) 2.3% better.
Shell has also seen the UK government grant a licence extension for the Cambo oil field west of Shetland, which it co-owns with Siccar Point Energy.
Shell withdrew from the scheme in December and said the extension gives it time to evaluate all future options.
Metal prices are supporting mining shares, with Fresnillo PLC (LSE:FRES) up 3.02% and Anglo American PLC (LSE:AAL) adding 2.99%.
But education group Pearson PLC (LSE:PSON) is down 5.4% after Apollo Global Management (NYSE:APO) withdrew its unwanted takeover offer.
And information specialist Experian (LSE:EXPN) has lost 3.52% after Citigroup analysts moved their recommendation from buy to neutral.
Chris Beauchamp, chief market analyst at IG, said: "Once again rising commodity prices have been the sticking plaster for the FTSE 100, masking losses across most of the rest of the index
"All this is a far cry from 2020, when the FTSE 100’s lack of tech names saw it fall far behind its peers
"Now it is commodities that are providing the steady hand, although even the big miners and oil stocks in the index will only be able to limit the damage if the broader outlook turns more cautious.”
2.53pm: Ukraine optimism turns to scepticism for US investors
US stocks started in the red on Wednesday as the optimism of yesterday over potential peace talks on the war in Ukraine gave way to more scepticism.
The Dow Jones Industrial Average shed around 68 points at 25,225. The S&P 500 lost 13 at 4,618, while the tech-heavy Nasdaq index dropped 88 points to stand at 14,532.
It comes as it emerged that US corporate profits rose again in the fourth quarter of last year, hitting a record high, despite widespread supply and labor shortages. Adjusted pre-tax profits rose 0.7% to an annualized $2.94 trillion in the fourth quarter from $2.92 trillion in the third quarter.
"Reports on Tuesday suggested we're finally seeing a de-escalation in Ukraine, as Russia indicated its intentions to scale back certain military operations. While that was initially viewed as a first step towards a ceasefire, it wasn't long before doubts started to creep in which weighed on sentiment once more," by Craig Erlam, senior market analyst at Forex firm Oanda.
"We've all watched how the last couple of months have unfolded so no one is going to get too excited until we see troops leaving Ukraine and a full ceasefire agreed upon. Until then, anything is possible," he added.
In the UK, the FTSE 100 is drifting, but at least it is in the right direction.
The leading index is up 8.37 points or 0.11% at 7545.62.
2.05pm: German inflation at its highest since 1981 as country plans for possible gas rationing
Back to Europe, and German inflation has hit a 41 year high thanks to higher energy and food prices.
The headline rate rose from 5.1% in February to 7.3%.
The news comes as the country braces itself for gas rationing, on fears that Russia will turn off the taps after tomorrow's deadline for gas payments in roubles.
Vladimir Putin said last week that unfriendly countries - those imposing sanctions - would have to pay in roubles, a move which could help support the struggling Russian currency.
Ima Sammani, FX Market Analyst at Monex Europe, said: "The stagflationary risk [to the German economy] is only exacerbated by concerns over Russian gas delivery, as Germany enters the “early warning phase” of its gas emergency law.
"While for now this means government officials will merely monitor the gas supplies from Russia, any escalation could result in government officials restricting energy delivery to German industries in order to continue supplying households. Compared to other countries in the eurozone, Germany is most dependent on Russian energy, increasing economic risks for the nation."
1.45pm: US jobs meet forecasts, GDP slips slightly
The latest US jobs figures are roughly in line with expectations, showing a fall in March from February.
Meanwhile US economic growth remained strong in the fourth quarter, albeit slightly below forecasts.
According to ADP, private payrolls grew by 455,000, down from 475,000 in February.
US ADP Employment Change Mar: 455K (est 450K; prev 475K)
— LiveSquawk (@LiveSquawk) March 30, 2022
In the latest revision to US GDP. annualised quarter on quarter growth was 6.9%, just below the 7% expected.
US GDP Annualised (Q/Q) Q4 T: 6.9% (est 7.0%; prev 7.0%)
— LiveSquawk (@LiveSquawk) March 30, 2022
Tom Hopkins, portfolio manager at BRI Wealth Management, said: “US GDP came in .. slightly below the forecasts of 7%. It remains the strongest expansion since a record growth of 33.8% in the third quarter of 2020.
"The figures show the economy performed strongly in the final quarter as lockdown restrictions continued to subside and the economy returned to near normal conditions, helped by positive consumer spending figures in October and November
"What’s encouraging is that the omicron surge in December posed little disruption given that over 70% of the US population has now had at least one covid vaccination
"Looking forward, the Federal Reserve will continue to face pressure to raise interest rates as inflation and related problems, such as tangled supply chains, may continue to challenge business leaders and policymakers.
"The Russian invasion of Ukraine is not likely to derail the US recovery, but it will push up inflation in the short run. That said, the labor force participation rate has started to pick up and corporate profits are more than satisfactory.”
12.35pm: Bank deputy governor warns of high inflation and weak growth
The UK has probably never had to deal with the economic impact of something like the invasion of Ukraine coming after a pandemic, says Bank of England deputy governor Ben Broadbent.
In a speech at Gresham College in London to mark the 25th anniversary of the foundation of the Bank's monetary policy committee, he said: "Coming on top of what was already a very steep rise in the cost of globally traded goods, in the wake of the pandemic, the invasion has led to substantial rises in the cost of energy and other commodities.
"As a big net importer of manufactures and commodities it’s doubtful that the UK has ever experienced an external hit to real national income on this scale. From the narrow perspective of monetary policy it will result in the near term in the difficult combination of even higher inflation but weaker domestic demand and output growth."
12.08pm: Pearson falls as bidder walks away
Educational specialist Pearson PLC (LSE:PSON) is the biggest faller in the leading index, after asset management group Apollo Global Management (NYSE:APO) said it would not proceed with its unwanted proposed takeover.
Apollo made a third approach to Pearson on Monday, which valued the business at 884.2p a share.
But Pearson again rejected this, so Apollo has walked away and will not return unless circumstances change dramatically, for example if another bid emerges.
Pearson said: "Pearson's board is confident that the direct to consumer, lifelong learning strategy set out by management in March 2021 will create sustainable, long-term value for Pearson stakeholders."
Its shares have dropped 10.64% or 83.6p to 702.2p on the news.
11.50am: US markets expected to lose ground
US stocks are expected to open lower on Wednesday as some of the early optimism arising from the progress seen in recent peace talks between Russia and Ukraine begins to fade.
A slight recovery in oil prices also revived worries about inflationary pressures and global growth, further weighing on sentiment.
Futures for the Dow Jones Industrial Average and those for the S&P 500 were both 0.4% lower, while contracts for the tech-heavy Nasdaq-100 were down 0.6%.
Into the second month of its invasion of Ukraine and Russia has signaled that it will scale back attacks on Kyiv. While the news brought some cheer to investors still holding out hope that a drawn-out conflict may be avoided, much scepticism remains. The coming days and weeks will tell if Russia will follow through to de-escalate hostilities on the ground.
“US and European futures are trading lower while investors continue to pay close attention to the landmark shift in geopolitical tension in Ukraine. Oil prices are highly volatile on the back of Russian military news, and traders are awaiting significant economic numbers, determining the future path for US equity markets,” said Naeem Aslam, chief market analyst at avatrade.com.
“Volatility in oil prices has taken another turn as traders are trying to make sense of the recent changes in geopolitical tensions. Basically, on the one hand, you have good news that there is some de-escalation in geopolitical uncertainty as Russia has withdrawn some army from Kyiv," he added.
Benchmark Brent crude futures were up 2.2% at $110.12 a barrel. Oil prices have been recovering after a COVID-19-related lockdown imposed on Shanghai dampened prices earlier this week but uncertainties over Russia and Ukraine are expected to keep markets nervous.
“On the other hand, the US hasn't acknowledged this thoroughly as it is saying that Russia's dial back on its military strategy in Ukraine is minuscule. The issue here is sanctions on Russian energy, which has put the oil supply further out of whack. If the US acknowledges that Russia is moving in the right direction, we can see the oil supply issues easing off. But if the US stance doesn't shift significantly, we will likely see oil supply issues anchored in place,“ Aslam said.
With US Federal Reserve chairman Jerome Powell recently noting the strength of the labor market in the world’s biggest economy, much attention will be on this afternoon’s US ADP employment figures which are seen as foreshadowing the crucial US non-farm payroll data due out on Friday.
“Last month, we saw tremendous improvement in the US labor market, making the Fed raise the interest rate. Traders are expecting a decent number this time as well, and the forecast is for 455,000 while the previous reading was 475,000. A strong reading is likely to trigger a risk-on rally for the US equities as investors will feel more comfortable with the Fed's tightening of monetary policy. If the number misses the forecast and shows weakness, speculators are likely to punish the markets because they believe that the Fed is making another policy mistake,” concluded Aslam.
Back in the UK the FTSE 100 is now virtually flat, up just 0.73 points at 7537.98.
11.33am: Consumers face even more price rises due to Ukraine conflict
There is likely to be significant disruption to supply chains that include Ukraine because of Russia's invasion and the continuing conflict, according to the Office of National Statistics.
It has laid out the details of the trade the UK does with Ukraine, which is the country's 53rd biggest importing partner.
In 2021, the UK imported £830mln of goods from Ukraine (0.2% of all goods imports) and exported £670mln of goods (0.2% of all goods exports).
The UK imported £270mln of material manufactures from Ukraine in 2021, which primarily included iron and steel, while the main goods export was machinery and transport equipment (£320mln).
And the UK imported £200mln of food and live animals from Ukraine in 2021, accounting for 0.5% of all imports of this commodity. This primarily included imports of cereals (£130mln) such as wheat, maize, barley, and rice. The UK imported £140mln of vegetable oils and fats in 2021, accounting for 11.3% of all imports of this commodity.
In the 12 months to September 2021, the UK imported £250mln of services from Ukraine (0.1% of all services exports) and exported £150mln of services (0.1% of all services imports).
The main services import from Ukraine was transportation (£110mln), specifically air transportation, while the main services export was financial services (£40mln).
The ONS added that the effects of the conflict were not yet reflected in the latest monthly trade data.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: ‘’Fresh warning lights are blinking about the chaos unleashed on supply chains caused by the crisis in Ukraine in this latest snapshot from the ONS.
"It’s cautioned that the repercussions of the conflict aren’t yet showing up in UK trade data, but we should be prepared for significant disruptions ahead.
"This report is yet another alert about looming price rises for groceries, as it shows that the UK was reliant on Ukraine for more than a tenth (11.3%) of all imports of vegetable oils and fats last year, so prices of such products are set for steep rises.
"With the planting season severely disrupted in Ukraine, as agricultural land turns into battlefields and farmers are sent off to fight, the squeeze on supplies from the country may only have just begun."
10.36am: A third of UK households can't afford an unexpected expense
More indications of inflationary pressure, as if we needed them.
More than 8 in 10 (83%) UK adults reported an increase in their cost of living in March 2022 compared with around 6 in 10 (62%) adults in November 2021, according to the Office for National Statistics.
Unsurprisingly, food, energy and fuel costs were the main reasons for the increase.
The ONS added that 29% of adults reported that their household could not afford an unexpected, but necessary, expense of £850.
And it helpfully added what seems fairly obvious, that adults on the lowest incomes, those renting their homes or those with no formal qualifications were most likely to report they could not afford this unexpected expense.
Government High Streets Task Force expert and ShopAppy founder, Dr Jackie Mulligan said: “The fact that over 8 in 10 UK adults are now feeling the squeeze, while nearly a third cannot afford an unexpected expense, shows the extreme gravity of the situation we're facing. The Government seems completely out of touch with the reality of how hard the cost of living crisis is hitting people and the level of anxiety it is causing."
Meanwhile Spanish inflation rose to 9.8% in March, the highest level for 37 years, mainly due to surging energy prices.
In February the figure was 7.6%.
Back with the markets, and investors really do not know which way to jump.
After dipping into the red, the FTSE 100 is now up again, adding 10.4 points or 0.14% to 7547.65 as optimism about the situation in Ukraine re-asserts itself.
9.44am: US bond market's trigger warning
More on the US bond market, and the sign of economic downturn suggested by the inverted yield curve.
Russ Mould, investment director at AJ Bell, said the moves in the bond market were an important warning trigger.
He said: "Last night the yield on two-year US government bonds rose above that of the 10-year note, causing an inverted yield curve – something that has historically preceded a recession.
“Traditionally investors demand a higher return and therefore a higher yield on longer dated bonds than shorter dated ones as compensation for the greater risks from inflation and issuer default.
“Therefore, to see higher yields on shorter dated bonds versus longer-dated ones is less common and hence why investors sit up and take notice when it happens. Yesterday’s event was the first time it has occurred with US Treasuries since 2019.
“Investors shouldn’t be surprised at the recession warning given the soaring cost of living and how inflationary pressures threaten to dampen economic activity.
“Central banks have already started the typical course of action when you have high inflation, namely putting up interest rates. They will need to walk a careful path, not being too aggressive with the pace and scale of rate rises so that it chokes off the economy. The US Federal Reserve is being watched the closest as there appears to be a growing risk that it does too much too fast.
“Despite a healthy jobs market and resilient consumer spending of late, stock markets have already been pricing in an economic hit later this year. For example, just look at the sharp decline year to date in UK consumer-facing stocks such as retailers and restaurant operators. It doesn’t much to realise that more expensive energy, food and fuel bills will eventually cause consumers to think twice before spending money."
Meanwhile the FTSE 100 has lost its initial - if cautious - enthusiasm and is now down 8.99 points or 0.12% at 7528.26.
But the rising oil price means Shell PLC (LSE:SHEL, NYSE:SHEL) has now moved to the top of the pile, up 2.6%.
8.57am: UK market outperforming European peers
The UK blue chip index is outperforming its European peers, helped by a rise in commodity stocks as the oil price heads higher again.
Brent crude is up 1.94% at US$112.37 a barrel while West Texas Intermediate - the US benchmark - is 2.24% better at US $106.5.
The market has been volatile on supply concerns amid the Russian attacks on Ukraine.
Investors are also awaiting Thursday's Opec+ meeting, where it is assumed the group will stick with its proposed 400,000 barrel a day increase in May.
Victoria Scholar, head of investment at interactive investor said: "With price action swinging between gains and losses this week, the market is attempting to weigh up the seriousness of peace talks between Russia and Ukraine alongside China’s policy response to its latest COVID-19 outbreak against the possibility of fresh Russian sanctions, Kazakhstan’s pipeline outage, falling US crude stockpiles and OPEC+’s expected plans to only modestly up supply at its meeting this week.”
The oil price rise today has helped push Shell PLC (LSE:SHEL, NYSE:SHEL) 1.73% higher while BP PLC (LSE:BP.) is 0.98% better.
Among the miners, Glencore PLC (LSE:GLEN) is up 2.08%, Anglo American PLC (LSE:AAL) has added 2.05% and Rio Tinto PLC (LSE:RIO) has risen 1.63%.
All this has helped lift the FTSE 100 17.85 points or 0.24% to 7555.1.
In contrast Germany's Dax is down 1.03% after the Ifo institute said a growing number of the country's businesses planned to raise prices, while France's Cac has lost 0.75%.
8.19am: Positive start for Footsie
Leading shares have made a tentative but positive start after Tuesday's optimism following reports that Russia was scaling back its military operations in Ukraine.
Almost inevitably, some scepticism has now set in, and traders are reluctant to take many chances until they see how the situation develops.
So the FTSE 100 - which on Tuesday hit its highest level since before the invasion - has added 8.19 points or 0.11% to 7545.44 in early trading.
Later come some key economic figures from the US.
There is the third estimate of fourth quarter GDP along with the monthly ADP private payroll numbers which provide a - sometimes imperfect - guide to the widely watched non-farm payroll numbers due on Friday.
Ipek Ozkardeskaya, senior analyst at Swissquote, said: "The US will reveal how many private jobs it added in March today. Analysts predict a strong 455K print and a 7% GDP growth in the fourth quarter. Strong economic data will certainly boost the idea that the US economy is strong enough to withstand a tighter Fed policy to fight back inflation, while soft figures will hardly the [placate] doves, after JOLTs [job openings] data confirmed more than 11 million jobs waiting to be picked up."
Meanwhile in the bond market, the yield curve inverted briefly, with short-term bonds giving better yields than those with long maturities, pointing to an economic downturn.
Ozkardeskaya said: "The US 2-year yield caught up, and even briefly surpassed the 10-year yield for the first time since 2019.
"No one knows if the latter means an imminent recession in the US, but we know for sure that the behaviour of the yield curve comes as a warning that the artificially supported growth since the subprime crisis will no longer be, and the economy will have to fly with its own wings until at least we see inflation coming back to policy target levels."
6.50am: Markets cautious on Ukraine ceasefire hopes
The FTSE 100 was called flat after global indices yesterday saw some of the highest levels for some five weeks, amid hopes for a ceasefire in Ukraine.
CFD firm IG Markets this morning made a price of 7,535 to 7,538 for the London index with just over an hour to go until Wednesday’s open, marking what would be a six-point gain.
“The ongoing talks between Ukraine and Russia as well as comments from Russia about scaling back on movement around Kyiv has created some optimism regarding a de-escalation of the war,” said Jens Peter Sørensen, analyst at Danske Bank.
“However, there is still a lot of scepticism whether Russia will de-escalate their presence around Kyiv and if there can be more progress in the peace talks in Turkey. Hence, it is easy to see a reversal of the recent moves in both equity and bond markets if peace talks stall.”
Wall Street equities had a positive close to Tuesday’s trade with the Dow Jones finishing up 338 points, 0.97%, at 35,294.
The S&P 500 meanwhile climbed 1.23% to 4,631 and the Nasdaq advanced more, rising 1.84% to 14,619. Small cap focussed index Russell 2000 notched 2.65% higher to 2,133.
In Asia, Japan’s Nikkei moved the other way losing 452 points or 1.61% to 27,800.
Hong Kong’s Hang Seng meanwhile gained 1.49% to 22,254 and the Shanghai Composite moved 1.6% higher to 3,255.
Around the markets
The pound: 1.311
Gold: US$1,924 per ounce, up 0.44%
Silver: US$24.88 per ounce, up 0.55%
Brent crude: US$110.96 per barrel, down 1.35%
WTI crude: US$105 per barrel, down 0.9%
Bitcoin: US$47,426, down 0.26%
Ethereum: US$3,393, down 0.09%