- FTSE 100 down 36 points
- Ex-dividend stocks weigh on the London market
- Wall Street weaker after release of Fed minutes
4.50pm: FTSE sheds 36 points by the close
The FTSE 100 finished the day on a negative note, weighed down by a swathe of ex-dividend stocks and the hawkish tone struck by the US Federal Reserve in the minutes of its most recent meeting.
London's blue-chip index ended trade 36 points, or 0.47% lower at 7,552, after trading as low as 7,537 shortly before the close.
“A slew of UK names have gone ex-dividend today," explained Chris Beauchamp, chief market analyst at online trading platform IG. "Combined with a decline for Shell over its $5 billion hit due to the withdrawal from Russia, the day has been a gloomy one for the FTSE 100."
Beauchamp said the picture is not much better in the US, where the Dow Jones Industrial Average lost 200 points in the opening hour of trading.
“Last night’s Fed minutes have recommitted the central bank to its path of tightening policy, leaving equities vulnerable in the short term after the bounce from the March lows," he added. "While the economy continues to grow, there is a clear lack of bullish momentum in this market at the moment.”
By the London close, the Dow was 0.6% lower at 34,291, while the S&P 500 was down 0.5% and the Nasdaq was 0.9% off the pace.
3:17pm: Wall Street opens lower
Blue-chip stocks in the US (and France) have joined those in London in the red.
The FTSE is down 36 points at 7,552, while Wall Street's three major indices all opened lower, extending the losses from yesterday as investors gird their loins for some serious monetary tightening by the Fed.
Among US stocks, HP jumped sharply higher after Warren Buffett’s Berkshire Hathaway bought a US$4.2bn stake in the business.
Buffet and his number two, Charlie Munger, have been on an acquisition streak of late, including buying a stake in Occidental Petroleum.
Levi Strauss was also moseying higher after its quarterly earnings and revenues beat expectations, as demand for its jeans held up despite supply-chain challenges.
2.35pm: BP staff reject pay offer
After BT announced its pay offer earlier, it is now facing strike action as the Communication Workers Union rejected the increase of between 3% and 8%.
The union said: "We have no choice now but to immediately prepare for a statutory industrial action ballot. We will be sending further communications to members via email and social media later today."
Shares in BT are still up 1.6%.
2.29pm: Tesco pay rise
The Footsie is down 20 points at 7,567, with lots of news about pay rises today.
Following the BT announcement earlier, Tesco PLC (LSE:TSCO) has announced a pay rise for its staff, putting the pressure on Sainsbury's which is facing a resolution to pay staff a living wage at its upcoming AGM.
Tesco shop staff and warehouse workers on hourly wages will get a 5.8% hike to £10.10 from £9.55 from late July.
Jason Tarry, boss of the supermarket group's UK and Ireland business, said the deal has been agreed with the Usdaw union.
He said the deal gives staff "a well-deserved pay rise, more access to extra hours and setting out a long-term commitment and investment in their careers at Tesco.”
The Tesco pay deal compares to the real Living Wage, which is calculated according to the cost of living and for 2022 works out at £11.05 in London and £9.90 for the rest of the UK.
And in comes after Morrisons last year became the first supermarket to guarantee at least £10 an hour to its direct staff and Sainsbury's announcement in January that it would be increasing workers’ base pay to £10.00 per hour for directly employed staff outside of London.
But activist investment group ShareAction and a coalition of institutions and individual investors have lodged a resolution for Sainbury's to start paying a living wage to all its staff.
The January £10.00 per hour move was welcomed but ShareAction said "it leaves many of those working for Sainsbury’s still falling short of a wage that meets their needs".
1.10pm: Taming of the SPACs
Deals involving SPACs (special purpose acquisition companies) last quarter fell to their lowest point since early 2020, with only 78 listings and the median deal size cut in half compared to last year, according to a new report from Pitchbook.
Post the 'deSPAC' deal, performance is "suffering", the report said, after the "elevated valuation climate of the past two years", as high-growth sectors get a bit of tap from markets.
"The macroeconomic headwinds for the once-manic SPAC market look to be substantial, and the outlook is uncertain for both new listings and mergers," Pitchbook says.
12.47pm: Ukraine spike quickly evaporates
The Footsie is treading water in the red, down 10 points at just under 7,578, while the mid-caps of the FTSE 250 are the other side of the flatline, up 20 at 21,119.
Just after midday there was a spike higher on both indices, after Russia's foreign minister said Ukraine presented a new "new draft agreement", said to be different from the Istanbul ones.
The spike quickly disappeared after Sergei Lavrov added that the plan "is unacceptable", accusing Ukraine of "trying to stall" and undermine the talks.
London's blue-chips are the only ones in the red today, with continental cousins all higher.
Across the Atlantic, Wall Street stocks are poised for a mixed open following the release of minutes from the Federal Reserve’s March meeting overnight, which solidified expectations that the policymaker will aggressively tighten its monetary policy as early as next month.
After a down day yesterday, futures for the Dow Jones are pointing to the index opening just below flat, while those for the S&P 500 were up 0.1% and the Nasdaq-100 are up 0.3%.
"A strong hawkish message sent by FOMC minutes exerted some pressure on indices with the tech sector, which is viewed to be the most vulnerable to changes in the level of rates, took a significant hit," said Walid Koudmani, chief market analyst at XTB.
"While central banks have been at the center of attention in recent weeks, the ongoing Russia-Ukraine conflict continues to be a critical situation which could cause some unexpected moves across markets. On the other hand, investors await today’s ECB minutes which may cause some short term volatility across european stocks and indices as the bank attempts to mitigate the risks of the ongoing conflict."
12.20am: BT pay plan
BT Group PLC (LSE:BT.A) has today announced what it said would be the largest staff pay rise in over 20-years.
This pay rise has been offered to 58,000 engineers, contact centre and retail workers in the UK out of its total national workforce of 83,000.
Pay will be hiked "up to 8%" for some and "more than 3% for even the highest paid frontline workers", BT said.
The Communication Workers Union (CWU) is currently consulting with their members on this award.
In a statement accompanying the news, BT chief exec Philip Jansen said: “BT Group has continued to support the country as it recovers from the pandemic: keeping families connected, helping businesses to grow in new, online markets and supporting organisations to stay connected and adopt hybrid working. We took the decision not to use redundancy and the government’s furlough scheme as a direct consequence of the pandemic, and thanks to the contribution of all 100,000 BT people, we’ve continued to improve customer ratings and invest in growing our full-fibre and mobile networks.
“While we have continued to extend and strengthen our networks to support the country’s recovery, the pandemic has hit our financial performance, like that of most companies. We know that the cost of living continues to rise and by making this award, we’re ensuring that our lower paid workers will benefit most and as soon as possible."
BT shares were up around 2% today before the news, and 1.9% after.
11.53am: Clampdown on 'problem firms'
The UK financial services regulator has set out its new strategy for the next three years, centring around reducing consumer harm, setting higher standards and promoting competition.
As part of this, some 80 new staff are being recruited by the Financial Conduct Authority as part of a key focus of the strategy of "shutting down problem firms, which do not meet basic regulatory standards".
FCA chief Nikhil Rathi said: "Our new strategy enables the FCA to respond more quickly to the rapidly changing financial services sector. It will give us a foundation to continuously improve for the benefit of our stakeholders, and respond swiftly to economic and geopolitical developments."
This is a welcome step forward, said Anne Fairweather, head of government affairs & public policy at Hargreaves Lansdown.
“In particular we welcome the fact that the FCA sees informed and empowered consumers as an important defence against bad conduct."
She said the FCA should have "a wider ambition that consumers improve their financial resilience".
The FTSE meanwhile is almost flat at 7,585.
Telecons, tech and media are topping the leaderboard, with Airtel Africa, Ocado Group PLC (LSE:OCDO) and BT Group PLC (LSE:BT.A) the top three, with ITV PLC (LSE:ITV) and Scottish Mortgage Investment Trust PLC not far behind.
US tech stocks sold off overnight as investors girded their loins in preparation for the Fed shrinking its balance sheet by US$95bn per month alongside six more rate hikes this year.
So what does this mean for tech stocks in a rising rate environment and reduced Fed balance sheet?
Here's US broker Wedbush: "Clearly tech stocks are now selling off with this macro news as well as 'fighting the Fed' fears into a 1Q tech earnings season in which investors are fearing the worst. In our opinion, at this point the NYC cab driver knows about the transparent tightening Fed path ahead and we believe fears around a fundamental tech slowdown are way overdone relative to our recent tech checks in the field.
"In a nutshell, we believe 1Q earnings will be a positive catalyst for tech stocks rather than the 'silver bullet' negative data point and thus speaks to our bullish view of the sector heading into the rest of the year.
"We view tech stocks very positively from these oversold levels just like Tiger Woods playing the Masters today; the skeptics a year ago said it was impossible yet here we sit against all odds watching history play out in Augusta and Amen Corner."
11.22: Analyst thoughts on UK nuclear and wind strategy
Downing Street's new energy strategy including a target of 24 gigawatts (GW) of new nuclear targeted by 2050, this compares to current operating capacity of circa 4.5GW.
"We believe nuclear will become a huge theme," energy analysts at Barclays said in a note this morning.
The PM also raised the UK's offshore wind targets for 2030 to 50GW from 40GW, saying the aim is to cut planning times from four years to just one year.
"In our view it takes 5-8 years to commission new offshore wind farms, so 2030 targets need to have farms in development now," says Barclays.
Following the UK recently allocating offshore wind leases with 25GW in Scotland and 8GW in England and Wales, Barclays says: "With 10GW already commissioned, circa 7GW under construction, and a further circa 12GW of sites under development this 50GW target is eminently achievable – albeit it would need some floating wind farms in the mix – the Govt estimates this at 5GW."
The analysts sad they see Drax Group (LSE:DRX), Centrica PLC (LSE:CNA) and SSE PLC (LSE:SSE) as "key UK utility beneficiaries from these themes" (read more on the Barclays report here).
10.39am: Inflation worries
Inflation and supply chain issues are big concerns for businesses, according to a new report from the Office for National Statistics.
The ONS found 28% of all firms with 10 or more employees experienced supply chain issues over the last month, while 52% within the manufacturing industry reported global supply chain disruption.
Input price inflation and energy prices were the two main concerns among companies in recent weeks, with at least 20% of businesses citing them at top of their list.
One in six businesses said they were paying sick leave for staff self-isolating after testing positive for Covid, while 24% reported they were not.
More than a quarter of businesses, or 26%, reported revenues were lower than normal in March 2022, which is the best reading since late October 2021.
10.22am: More cladding provisions
More housebuilders have signed the government’s cladding and fire-safety pledge, aka DLUCH, with Bellway PLC (LSE:BWY) (Bellway PLC (LSE:BWY)), Countryside Partnerships PLC (LSE:CSP) (Countryside Partnerships PLC (LSE:CSP)) and Vistry Group PLC (LSE:VTY) (Vistry Group PLC (LSE:VTY)) signing up pledge, with £343mln more provisions.
Set up (a long time) following the Grenfell Tower disaster, the groups have pledged to fix cladding safety issues at all of their building that are 11m-18m high built in the past 30 years.
Vistry (the former Bovis) has guided to extra provisions in the range of £35-50m, consistent with guidance it gave with full year results in March.
Bellway's extra provision is £300m, which is "large, but not far away from what the market had inferred when it reported results last week", says broker Liberum.
Countryside has not quantified the extent of extra provisions but estimated that it developed around 290 buildings of 11m or more over the last 30 years, many of which will not require remediation.
So far, the industry has taken or identified £1.7bn of provisions. "This is more than we expected, but still less than the market's worst fears. The total amounts to 7% of assets, before tax, or under 6% after tax - compared to a hit to the shares of around 10% (in our view)," says Liberum.
Shares in Countryside are down 12% as the company put out a wider trading update, where sales and profits for the half year are below last year.
9.50am: Shell down, 888 up
The Footsie is recovering but not any thanks to Shell PLC (LSE:SHEL, NYSE:SHEL), where the shares have dropped almost 2% after it provided more details about its forced exit from Russia in February, following the invasion of Ukraine.
The exit of three joint ventures with Gazprom will result in a hit of up to US$5bn from the write-down of receivables, expected credit losses, and onerous contracts.
In the same announcement, the market was told the oil giant had seen US$7bn of cash outflow reflecting the “unprecedented volatility in commodity prices prevailing up to the end of the quarter".
It added that “material additional movements could be seen in cash flow from operations from margining effects on derivatives, changes in inventory volumes and in accounts payable and receivables”.
Read the full story: Shell's Russia exit to result in US$5bn hit
Down on the FTSE 250, there are some bigger movements, with 888 Holdings PLC (LSE:888) shares leaping 30% after it cut a cheaper deal to acquire William Hill’s assets outside the US.
Having agreed in September to pay casino operator Caesars Entertainment £2.2bn, 888 had expected it would need to raise around £500mln of equity to cover the deal, but it has now agreed to pay between £1.95bn and £2.05bn.
To ensure the accelerated deleveraging, the company said it will suspend dividend payments until such a time that net leverage is at or below three times earnings.
Read the full story: 888 Holdings shares soar as it gets money off William Hill deal
9.28am: More nuclear plants, new North sea licences, more green hydrogen
More detail on the PM's new National Energy Strategy, which Downing Street says should reduce Britain's "dependence on power sources exposed to volatile international prices we cannot control".
The plan includes the setting up of a new nuclear power body, Great British Nuclear, with state money helping to drive one new nuclear reactor a year up to 2030, while a £120mln Future Nuclear Enabling Fund will launch later this month.
A new North Sea oil & gas licensing round was also announced, to be launched in Autumn and assisted by 'bespoke support' for new exploration and projects.
Offshore wind and solar, however, are seemingly two of the most ambitious steps of the strategy, along with mentions for upping green hydrogen production and building more heat pumps for residential buildings.
Read the full report: Nuclear, offshore wind and revitalised North Sea the bedrocks of PM's new energy plan
The FTSE has now extended its losses, down 44 to 7544.
Miners are adding to the losses, with Anglo American PLC (LSE:AAL) and Glencore PLC (LSE:GLEN) down more than 2%.
8.58am: Same as the old quarter?
Less than a week into the second quarter and the way markets are performing is "shaping up to be very similar to Q1 thus far", say strategists at Deutsche Bank.
This observation was based on yesterday seeing "another bond selloff and significant declines for global equities as markets gear up for the fastest monetary tightening we’ve seen in decades".
"Indeed, it seems to be progressively dawning on investors that this cycle of hikes is going to be very different to the one we saw from 2015, when even at its fastest in 2018, the Fed still only hiked rates by 100bps in a single year."
As Jim has written, if we could erase the post-GFC cycle from people’s memory banks, there’s a case that markets would be pricing 300-400bps this year given where inflation is right now, not least given we saw hikes on that scale in the late-80s and from 1994 with inflation at much lower levels than it is at the minute.
DB Research published new global growth forecasts this week, expecting a US recession by the end of next year as the baseline.
"We also got a look into the Fed’s outlook yesterday with the release of the March FOMC minutes, where it looks like they would have hiked by 50bps in March were it not for the Russian invasion, and they are ready to entertain 50bps hikes going forward. The markets got the message, and upgraded the probability of a 50bp hike at the next meeting in early May to 85%," the strategists said.
Government bond yields moved up to fresh highs on both sides of the Atlantic, with those on 10yr Treasuries up to 2.598%, which was its highest closing level since 2019, albeit some way beneath its intraday high of 2.656% shortly before noon in London, and this morning they have fallen a further 1.5bps to 2.583%.
8.30am: Lower open
The FTSE 100 opened slightly lower as the balance of sellers slightly outweighs the buyers.
London's blue-chip index was down 13 points to 7,574.
Entain PLC (LSE:ENT), the owner of Ladbrokes and Sportingbet, was one of the big fallers, as its first-quarter update saw online gaming drop 8% compared to the strong period during lockdown in the previous year.
Oil prices are on the up this morning after falling overnight, with Brent crude down 5.22% to $101.07/bbl, its lowest closing level in three weeks.
That was supported by confirmation that the International Energy Agency would release 60m barrels of crude, on top of the Biden Administration’s release from the Strategic Petroleum Reserve.
BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL) are both significant weights around the Footsie's neck, with the latter also putting out a trading update.
Shell said its decision to exit Russia will result in a hit of up to US$5bn in the first quarter, while the period has also seen US$7bn of cash outflow from the supermajor amid “unprecedented volatility in commodity prices prevailing up to the end of the quarter".
Elsewhere, investors were poring over Boris Johnson's National Energy Strategy, which aims to revive the UK’s nuclear industry, offshore wind and the rejuvenation of North Sea oil and gas production.
7.20am: House price jump
New house price data from the Halifax was published earlier, showing monthly house price growth of 1.4%, the biggest increase for six months.
The average property price reached another new record high of £282,753. This means after two years from the first lockdown, house prices have now risen by £43,577.
6.39am: Flattish start expected
The FTSE 100 was set to open largely flat according to spread bet calls before the start of trading.
The index dropped 26 points on Wednesday as US markets tanked on concern about the direction of interest rates, something that was seemingly confirmed by last night's minutes from the last US Federal Reserve meeting.
Economists at ING said the minutes showed "an intensifying desire to regain control of the inflation narrative via a series of aggressive rate rises and a rapid shrinking of the Federal Reserve's balance sheet".
That could mean a 0.5% interest rate rise in May along with a reversal of the quantitative easing policies in place for years, with only the situation in Ukraine seemingly staying its hand last time.
“We expect the outcome to be a 3% Fed funds rate by early next year, but with recession risks rising, rate cuts will be on the cards again before end of 2023,” said ING.
US share indices finished down though did rally late in the day. Asian markets were also largely in the red heading towards their close.
In the UK, the government should announce its new national energy strategy today with the aim to reduce the need for Russian oil and gas while also making progress on Boris Johnson’s zero-carbon targets. Nuclear is expected to be a big winner.
Reports that chancellor Rishi Sunak’s wife is classified as a non-domicile and so is exempt from some UK taxes might make more headlines, however.
Company updates are due from bookmaker Entain and DIY retailer Topps Tiles while recruiter Robert Walters should give an insight into the health of the white-collar jobs market.
6.50am: Early Markets - Asia / Australia
Asia Pacific markets slipped on Thursday as they faced a confluence of headwinds including the Russia-Ukraine conflict, inflation and rising interest rates.
Japan's Nikkei 225 tumbled 1.54% while South Korea’s Kospi declined 1.24%.
The Shanghai Composite in China fell 1.03% and Hong Kong’s Hang Seng index dipped 1.06%.
Australia’s S&P/ASX200 declined 0.6% by the last hour of trading as losses for tech shares deepened.