- FTSE 100 loses 51 points
- UK GDP rise underwhelms
- All eyes on US earnings season
4:50pm: FTSE sheds 51 points by the close
The FTSE 100 started the week on a negative note, declining 51 points, or 0.67% to 7,618 on the first trading day.
Chris Beauchamp, chief market analyst at online trading platform IG, said stocks battled to make headway as a busy few days ahead kept investors nervous.
“A more active week for data and news means that stocks have struggled around the globe today," commented Beauchamp. “The prospect of a week of inflation data and central bank decisions, topped off by the beginning of US earnings season, has led to a broadly-risk averse day for global markets."
While Chinese conumer inflation data didn’t rise by a particularly terrifying amount, Beauchamp said producer inflation numbers suggest that the inflation surge isn’t going away, something that US data should reinforce later in the week.
"Beleaguered global markets will hope that earnings from Thursday onwards provide some better news to support stocks, as at present investors appear to be retreating from risk once again in the absence of more encouraging headlines,” he added.
On Wall Street by the London close, the Dow Jones Industrial Average was down 168 points, or 0.5% at 34,553, while the S&P 500 was 1.1% lower. The Nasdaq was 1.7% weaker.
3.48pm: Footse set for lower close
Footise is expected to close lower today, down 47 points to 7,623. Michael Hewson, chief market analyst at CMC Markets reflects on what's been a tough day for London's blue chip index so far.
"The FTSE100 has also had a poor start to the week with the decline in oil prices weighing on the energy sector as concerns grow about a sharp drop in demand in China, as a result of the draconian covid restrictions being implemented in Shanghai."
"Concerns about rising energy prices are front of mind for investors this week with the latest CPI inflation reports for the UK, Germany and the US due tomorrow and all expected to hit multiyear highs, thus putting further pressure on central banks to tighten policy faster."
"On the plus side, a pickup in passenger numbers through Heathrow in March, to their best levels since the pandemic began, has given the likes of IAG a lift, despite the various covid related problems being experienced at UK airports. easyJet shares are also higher, as is Rolls Royce as optimism over the summer holiday season acts as a boost to wider sentiment."
3.14pm: Le Pen victory not too harmful for markets
The political race in France will have the interest of investors over the next couple of weeks, but a Marine Le Pen victory shouldn’t cause too much harm to the equity markets.
“A Le Pen victory would very likely lead to some sell-off in French equities,” said Rupert Thompson, investment strategist at Kingswood.
“However, her economic policies at least are not market unfriendly, her hostility to the EU and the euro has waned and her ability to push through the more radical elements of her agenda is likely to be constrained by Parliament.”
“So, the market reaction could well be more muted than one might expect.”
2.45pm: Scottish Mortgage feeling the impact of Covid in China
Scottish Mortgage Trust was one of the index’s largest fallers today, hit by the surging covid cases and lockdowns in China.
The trust, which has many Chinese companies on its portfolio, was down 2.47% to 949p.
Released overnight, both consumer and producer price inflation was higher than expected at 1.5% and 8.3% respectively in the country, with food prices lifting the former.
The inflation numbers come amid continued Covid outbreaks in China and the government sticking to its "dynamic zero” COVID policy.
As well as Shanghai, which has been in lockdown 28 March, the southern city of Guangzhou has today suspended in-person classes for schools due to the virus, according to reports from local media CCTV.
2.15pm: Mortgage remodels
Purchasing a home is set to become increasingly more difficult for buyers as banks begin to factor the cost of living crisis into their mortgage models.
Santander became one of the first to restructure its models, with it expected Footsie banks HSBC, Lloyds, Barclays and Natwest will follow.
Samuel Tombs, chief UK economist and Pantheon Macroeconomics adds “The current tight spread between mortgage rates and risk-free rates is unsustainable; deposit rates will rise too.”
“Most refinancers will cope, but the rise in new rates will be severe enough to slow house price growth.”
1.46pm: Natural gas prices fall again
Natural gas prices fell for the seventh consecutive trading day as the European Union is still yet to issue sanctions due to its heavy reliance on Russian imports.
UK gas prices declined 4.4%, whilst overall benchmark prices slumped 2.2%.
Russian gas shipments, which come via Ukraine to the EU, rose on Monday although it was still below capacity.
The Yamal-Europe pipeline still flowed to Poland from Germany, while the main Nord Stream pipeline stayed high and stable.
Much of the West, including the EU, banned coal imports from Putin’s state but it won’t be implemented until mid-August.
1.16pm: US markets expected to open lower
US stocks are poised to open lower in what is expected to be a busy week with geopolitical concerns and economics as well as earnings data likely to dominate sentiment.
Russia’s invasion of Ukraine is well into its second month and a ceasefire still seems a distant prospect. Against this backdrop, investors fear that economic growth will slow alongside a rise in inflationary pressures.
Futures for the Dow Jones Industrial Average were down 0.08% in Monday pre-market trading, while those for the S&P 500 were 0.36% lower and contracts for the tech-heavy Nasdaq-100 shed 0.79%.
“The geopolitical uncertainty is still on traders' dashboard, and they will be watching the meeting between the Austrian Chancellor Karl Nehammer, who will meet President Putin in Moscow today. The hope is once again to see some more peaceful talk,” said Naeem Aslam Chief Market Analyst at avatrade.com.
There is also much for investors to consider as the US earnings season starts.
“Traders are likely to be on the edge because we have the US banks kick-starting the first quarter's earnings,” said Aslam.“Traders would be focused on two aspects when it comes to bank earnings; they would like to know what these Wall Street giants think of the Fed's current monetary policy stance. A higher interest rate environment must add more value to their profit margins. These two important factors are likely to govern their price action this week.”
In March, the US rate-setting body raised interest for the first time since 2018. The minutes of that meeting, released last week, signalled that 50 basis point increases may be at hand.
US inflation data for March are due on Tuesday and will be closely watched.
“Inflation is already running way too hot. If the actual number comes even hotter than the forecast, we are likely to see much higher volatility in the equity, forex, and fixed-income markets. Traders are highly likely to be spooked by a strong inflation number as that will confirm that the Fed is more likely to increase the interest rate by 50 basis points rather than 25 basis points,” said Aslam.
Elsewhere, Benchmark Brent crude futures were down 0.2% at $100.412 while WTI futures were also 0.2% lower at $95.80.
12.44pm: Mining companies advance on positive Goldman Sachs (NYSE:GS) note
Mining companies Endeavour and Fresnillo are the second and third largest climbers on London’s blue-chip index today following a more than upbeat note from Goldman Sachs (NYSE:GS) on the mining sector.
Endeavour was up 2.18% to 2,012p while Fresnillo climbed 2.08% to 795p.
The investment bank was bullish on the sector as a whole, expecting to see “multi-year unprecedented metals bull cycle.”
Miners are expected to be supported by a strong macro backdrop during the period, leading to underlying profits (EBITDA) of circa US$80bn and sector free cash flow (FCF) of around US$40bn, implying a roughly 10% FCF yield.
Although the two Footsie companies were not mentioned as ‘buy’ ideas in the note, they have no doubt benefitted from it based on today’s movements so far.
Other index constituents were 'buy' ideas however, which included Glencore, up 0.8% to 532p, Rio Tinto, down 0.2% to 6,126 and Anglo America, which fell 1.6% to 4,103p.
12.13pm: Johnson visits Ukraine
Following Boris Johnson’s surprise visit to Ukraine to meet President Volodymyr Zelenskyy, the British Prime Minister has promised to keep increasing economic pressure on Russia.
Speaking at a joint press conference with Zelensky in Kyiv last Saturday, Johnson said the UK will "continue to offer whatever support we can."
"Together with our partners, we are going to ratchet up the economic pressure, and we continue to intensify week by week the sanctions on Russia. Not just freezing assets in banks and sanctioning oligarchs, but moving away from use of Russian hydrocarbons," he said.
Johnson also added that the UK, as well as other nations “will supply the equipment, the technology, the know-how, the intelligence, so that Ukraine will never be invaded again, can never be bullied again, never be blackmailed again, never be threatened in the same way again," Johnson said.
11.42am: More flight troubles
Flight chaos continued over the weekend as over 100 trips into and out of the UK were cancelled on Covid-related staff absences.
More domestic and European flights were grounded on Monday, although the number unknown, with London Heathrow, London Gatwick, Edinburgh and Glasgow all affected.
British Airways and EasyJet were the airlines that abandoned the vast majority of flights.
Despite the grounded departures, FTSE 100-listed British Airways rose 1.0%, while its smaller rival, EasyJet, climbed 2.8%.
Approximately 15,000 to 20,000 passengers were thought to be impacted by the cancellations on the weekend.
BA claimed travellers were given over a weeks’ notice, whilst also claiming it has not let anyone down on the day of flying, the Independent reported.
This combined with suspended P&O Ferries services, Easter traffic on roads and IT issues all added to the widespread travel congestion across the UK.
11.06am: Biggest labour growth since pandemic began but will only be shortlived
Advisory firm BDO said UK companies reported the fastest growth in labour since before the pandemic in March but warned the boom may be short-lived amid rising living costs and the impact of war.
The index, which measures sentiment among senior managers, rose for a fifth consecutive month, with a reading of 112.74, a two-point increase.
Anything above 95 is considered to be growth.
Its data found that the manufacturing and services sectors were most keen on hiring new staff.
“The labour market has shown resilience throughout the pandemic and then continued growth as restrictions have gradually lifted,” said Kaley Crossthwaite, a partner at BDO.
“While it’s reassuring to see employment return to near pre-pandemic levels, this strong form could come to an end as the cost of living crisis, rising inflation and wider geopolitical matters distract businesses from growth and place pressure on the employment index.”
Recent findings from the Office of National Statistics, which showed a fall in the UK’s unemployment rate to 3.9%, supported BDO’s findings.
An independent thinktank that monitors living standards said wage growth had been driven up by a competitive labour market, as firms pay top dollar to employ and keep the best talent possible.
However, it fears wage growth will soon be offset by rising inflation and soaring energy prices, meaning workers will not feel the effects of a buoyant labour market.
10.34am: Expect volatility in France
As the race for the presidency in France hots up, the CAC 40 has remained somewhat steady, up 22 points to 6,570, and up 170 points in the last month.
Current president Emmanual Macron edged out right-wing candidate Marine Le Pen by just over 4% of the votes in the first round of voting, with two set to lock horns again on 24 April.
According to ING Economics, a much closer race than in 2017 points to two weeks of market volatility.
“Macron’s better than expected score in the first round has been greeted by a relief rally in French assets,” ING added.
“This shouldn’t lull investors into a false sense of security.”
“Macron is the favourite to win, but the two weeks heading into the runoff will be characterised by higher volatility in our view, so long as polls put both candidates neck and neck and within the margin of error.”
9.44am: UK GDP slows
London’s leading equities remain lower on balance after unimpressive UK gross domestic product numbers this morning.
The FTSE 100 was down 24 points (0.3%) at 7,646, despite some support for banks and a 1.2% advance of J Sainsbury PLC (LSE:SBRY) – the latter after some positive broker comment.
“The UK economy is already showing signs of fresh fragility in its latest health check, which is far from surprising given that in February the world veered from one crisis to another. It eked out just 0.1% growth during the month, and that was despite a leap in demand for travel, with increases in tour operator travel agency and other related activities surging by a third (33.1%) on the month. Hospitality continued to bounce back from the unwelcome side effects of the Omicron variant, with accommodation and food services boosted by 8.6% but production fell by 0.6% and construction dipped by 0.1%,” noted Susannah Streeter at Hargreaves Lansdown.
GDP was weaker-than-expected in February – growing just 0.1% on the month. This out-turn pre-dates the Russian invasion of the Ukraine and associated increase in inflation. A short thread to follow... pic.twitter.com/3xbvR0yt4n
— JamesSmithRF (@JamesSmithRF) April 11, 2022
“It’s little wonder the economy overall is showing signs of stalling from its remarkable pandemic recovery, given the sense of foreboding which arose from mid-February as troops amassed on the Ukraine border and then the commodity shock unleashed by the invasion hit sentiment,” she added.
ING’s James Smith, who covers developed markets, described the 0.1% increase as “unexciting” and said that the data masked two large, offsetting underlying shifts in the data.
“Firstly – and not that surprisingly – consumer services recorded a strong bounce in what was really the first month of ‘business as usual’ again after Omicron. The bulk of Covid-19 restrictions (including work from home guidelines) had stopped, and card spending at social venues returned to comparable pre-virus levels. Both hospitality and arts/entertainment/recreation bounced by almost 9% compared to January – led by tourism-facing industries, according to the ONS.
“Acting in the opposite direction was health spending, which fell by close to 5%. This category has been driven almost solely by fluctuations in Covid testing levels and vaccine activity over the past year or so. Indeed even including the latest fall, monthly GDP is still over 1% higher than it would have been had health spending hypothetically stayed flat through the pandemic,” Smith added.
Meanwhile, the UK trade deficit narrowed to £9.3bn in February from a revised £12.8bn in January but the rebound was not as strong as economists had expected; the consensus forecast was for a deficit of £7.2bn.
“The UK’s trade balance is under ongoing pressure from higher energy prices. Indeed, the value of goods imports in February, £49.2bn, was well above its average in the previous 12 months, £41.0bn, largely due to a surge in imports of natural gas to £4.0bn, well above its prior 12-month average, £2.0bn. The value of the UK’s natural gas exports has risen too, but by far less than the increase in imports. As a result, the natural gas trade deficit remained well above its prior 12-month average, £1.6bn, despite narrowing to £3.6bn, from £4.7bn in January,” said Gabriella Dickens at Pantheon Macroeconomics.
“UK exporters continued to struggle, despite demand strengthening in key trading partners as the Omicron wave subsided. The value of total goods exports rose to £28.6bn in February, from £26.5bn in January, but stayed below the £29.2bn average level in 2018, before Brexit deadlines and then Covid-19 impacted the data,” she continued.
“Note too that the ongoing surge in prices means that real goods exports were a massive 12.2% below their 2018 average level. The result is that UK exporters’ have continued to lose market share; data from the CPB Netherlands Bureau showed that real goods exports from advanced economies in January were 12.4% above their 2018 average. Services exports, meanwhile, were 5.2% above their 2018 level in values terms. Again, though, that was partly down to the surge in prices; in volumes terms, services exports were a smaller 2% above their pre-Covid and Brexit average,” Dickens said.
8.56am: Inflation worries haunt the market
FTSE 100 opened slightly lower, losing 18 points to 7,651. Official figures today showed that the UK economy grew at a slower pace than expected in February, weighing on investor sentiment.
Elon Musk will no longer be joining Twitter’s board after making a u-turn. The world’s richest man was due to be appointed over the weekend following his purchase of a 9.2% stake in the social media website.
Goldman Sachs (NYSE:GS) acquired Dutch-based investment manager NN Investment Partners for €1.7bn. It will expand its asset management footprint in Europe and increase its sustainable investment capabilities.
Caracal Gold announced the first gold production from its new heap leach plant in Kenya. It has been achieved ahead of schedule, marking an important milestone in its wider expansion strategy to increase output to 24,000 ounces per year.
Blencowe Resources has boosted the resource at its Orom-Cross graphite project in Uganda by 50% to 24.5mln tonnes of ore grading 6% total graphite content. The resource is sufficient to cover the first 15 years of mine life.
Bradda Head Lithium Ltd raised about £7.92mln before expenses from a placing and will use the proceeds to explore and advance its lithium projects in Arizona and Nevada in the US. It placed about 58.7mln shares at 13.5 pence each with investors in North America.
8.20am: FTSE opens lower
The FTSE 100 opened lower after official figures showed the UK economy grew at a slower pace than expected in February.
Gross domestic product nudged up 0.1% in the month, half the predicted 0.2% and well off the 0.8% expansion seen in January.
“The UK economy is already showing signs of fresh fragility in its latest health check, which is far from surprising given that in February the world veered from one crisis to another,” said Susannah Streeter, markets and investment analyst at Hargreaves Lansdown.
Inflation worries and the potential of an upset in the French elections also weighed on sentiment as the Footsie started 46 points lower at 7,623.92, wiping out just under half of Friday’s impressive gain.
Nerves ahead of America’s consumer prices print were to blame as was the news that Marine Le Pen may challenge Emmanuel Macron a lot harder for the French presidency than many commentators and analysts were predicting.
6.55 am: Inflation worries to the fore
The FTSE 100 looks set to open in the foreshortened trading week in the red with inflation once again the pre-occupation.
Tuesday’s US consumer price report is expected to reveal a month-on-month 1.2% rise in prices, giving an annual rate of 8.5%.
Whether this prompts the Fed’s rate-setters to accelerate the pace of interest rate increases remains to be seen.
However, already the portents aren’t good with raw material, food and labour costs all rising at a pace unpredicted at the start of 2022.
On Thursday, the European Central Bank is likely to provide further hints on its direction of travel following its monthly catch-up.
Monday’s economic data is domestically focused with the GDP print set to show the UK economy grew by 0.2% in February, a sharp deceleration from January’s 0.8% growth.
Over in France, there was a bout of the collywobbles as the far-right candidate, Marine Le Pen, made it into a run-off for the French presidency alongside the current incumbent, Emmanuel Macron.
One report described a Le Pen victory at the polls on April 24 as something akin to Brexit, given the fissures, it is likely to cause with the EU.
“When all is said and done, in the final analysis, it will come down to who French voters dislike the least, which seems to be par for the course in politics all over these days,” said Michael Hewson, an analyst at CMC Markets.
Here at home, it looks set to be a busy week for corporate news with updates from The Hut Group, Tesco, ASOS, Deliveroo and JD Sport.
Around the markets
- Pound US$1.3014 (-0.08%)
- Bitcoin US$42,307.70 (+0.39%)
- Gold US$1,944.60 (flat)
- Brent US$100.57 (-2.15%)
6.50am: Early Markets - Asia / Australia
Asian shares were mostly lower on Monday as China’s producer inflation for March rose 8.3% compared to a year ago, above expectations for a 7.9% increase in a Reuters poll.
Chinese consumer inflation also gained more than expected in March, with the consumer price index rising 1.5% year-on-year, above expectations in a Reuters poll for a 1.2% increase.
The Shanghai Composite in China declined 2.2% while Hong Kong’s Hang Seng index tumbled 2.78%.
Japan's Nikkei 225 fell 0.72% and South Korea’s Kospi slipped 0.34%.
Australia’s S&P/ASX200 closed 0.1% higher, having lost most of the earlier gains because of the surge in bond yields.
The yield on the 10-year Australian government bond jumped to 3% today, its highest level since June 2015.