- FTSE 100 up 4 points
- UK inflation leaps to 30yr high of 7.0%
- Wall Street opens higher
4.50pm: FTSE ends flat
The FTSE 100 finished the day almost unchanged at 7,581 points, a 0.06% gain, helped by early gains on Wall Street as first-quarter earnings season kicked off.
Michael Hewson, chief market analyst at CMC Markets UK said it was another disappointing session for European markets, sliding back after another strong inflation report, this time from the UK, as investors worry about the effect a continued acceleration in prices might have on consumer incomes, and ergo company profit margins.
"After their big rebound yesterday crude oil prices have continued to push higher, reinforcing these concerns, ahead of tomorrow’s European Central Bank rate meeting where the ECB appears to be caught like a rabbit in headlights as inflationary pressures push them ever closer to a rate rise by year end."
The FTSE outperformed some of its European counterparts, helped largely by resilience in basic resources and energy, Hewson added.
On Wall Street by the London close, the Dow Jones Industrial Average was up 187 points, or 0.55% at 34,407, while the S&P 500 was 0.7% higher and the Nasdaq was 1.5% stronger.
3.06pm: ImmuPharma PLC climbs
With London's big caps and mid-caps mostly lower, we must look elsewhere for excitement.
Top riser today is ImmuPharma PLC, which rocketed 47% higher after successfully completing a pharmacokinetic study of its lead asset Lupuzor as part of its US regulatory process.
Elsewhere, MC Mining Ltd jumped 24% after announcing the completion of a bankable feasibility study for its Makhado hard coking coal project in South Africa's Limpopo province that suggested there was 296mln mineable tonnes in situ on a measured and indicated basis.
Elsewhere, Ocean Outdoor Ltd (LSE:OOUT) made waves as it confirmed it is in discussions with Atairos regarding a possible offer for the group.
A bigger splash was seen at Shearwater Group PLC, which surged 30% after revealing a cybersecurity monitoring contract with a potential value of up to around £21.0m with "a leading telecommunications and media company".
3.23pm: Are supermarkets keeping prices low? And if so why?
After Tesco’s profit warning today partly reflected its intention to continue investing in prices despite cost inflation, a line rival grocer Morrisons made last week and Marks & Spencer yesterday, we have looked into the "tricky decision” that grocery companies are having to make.
This is slightly undermined by the inflation figures from the Office for National Statistics, which showed that food and drink inflation rose to 5.9% in March, its highest rate since September 2011.
Economist Sam Tombs at Pantheon Macroeconomics said this was because supermarkets are passing on more of the recent surge in producer prices.
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But the surge in agricultural prices triggered by the war in Ukraine means food inflation is expected to climb even further, suggesting supermarkets' margins could be squeezed hard.
3.10pm: FTSE wallowing, Wall Street rebounding
The Footsie is now wallowing in the red, down 17 points, but Wall Street has opened in the green, led by the tech-powered Nasdaq, where all the FAANG stocks are on the up.
Semiconductor and chip names Nvidia, ASML and Qualcomm are among the higher risers.
JPMorgan is down 2.7% after its earnings release.
Falling further was Bed Bath & Beyond, which tumbled 12% after revealing a surprise loss per share and coming short on revenues as it said industry trends have worsened since February.
Elsewhere, Nasdaq-listed Sierra Oncology jumped 40% after being taken out by the UK’s GlaxoSmithKline PLC for US$1.9bn.
Sierra's lead product, momelotinib, treats a form of bone marrow cancer called myelofibrosis in a more effective way than the standard of care and is likely to come to the market in 2023 (read more on the deal).
2.02pm: More grim US inflation data
US stock market futures are now less bullish after some more inflation figures.
Wholesale prices rose 1.4%, which was more than expected, while the producer price index (PPI) rocketed to 11.2%, way above economists’ forecasts of 10.5% - in the largest increase records began in November 2010.
The Dow Jones is now set to start on the back foot with the S&P and Nasdaq both only expected to move slightly higher.
First-quarter results from JPMorgan Chase & Co showed profit down 42% as levels of dealmaking slowed and provisions for loan losses from inflation and the Ukraine crisis.
Nickel market chaos following the invasion of Ukraine less to a US$120mln credit losses.
"We remain optimistic on the economy, at least for the short term," said chief executive Jamie Dimon, but he said the lender sees "significant geopolitical and economic challenges ahead due to high inflation, supply chain issues and the war in Ukraine".
???? JPMorgan CEO Dimon: Inevitable Market Volatility ‘Could Be Good or Bad for Trading’
~ Yeah... Cheers for that insight
— PiQ (@PriapusIQ) April 13, 2022
The UK banks only moved very slightly in reaction, though JPMorgan's earnings are expected to set the tone for bank earnings as the biggest lender in the developed world.
Elsewhere in London, British Airways owner IAG (LSE:IAG) is now top of the FTSE 100 and the reason is not quite clear yet. The shares were in the red until midday and are now up 2%.
BA has cancelled over 1,200 flights this year, about one in every 20 it had scheduled, according to industry data from Cirium published in the FT, with its UK flights more prone to cancellations than its rivals.
Firing 10,000 workers during the pandemic and now trying to rehire 3000 (on worse terms) is at the heart of BA's problems, as the FT piece acknowledges.
Precious metals miner Fresnillo PLC (LSE:FRES) is next in the list, followed by Reckitt Benckiser Group PLC (LSE:RKT) and Shell.
1.05pm: Party political
Although Prime Minister Boris Johnson and Chancellor Rishi Sunak are currently rejecting calls to resign over their ‘partygate’ fines yesterday, would their removal have any impact on the FTSE or wider markets?
Changes in political leadership usually impact the equity markets, with the French Presidential race a perfect example of how just a tighter than expected election can cause jitters, but for some thoughts on the potential impact on this side of the channel, my colleague Jai Singh has this report.
12.43pm: Wall Street feeling more confident
Share prices in Europe are a bit wishy washy, with the FTSE wavering around the flat-line and continental bourses mixed, but US stocks are set for a rebound ahead of major earnings releases and as investors find some measure of comfort that inflation may be starting to peak.
JPMorgan Chase & Co, Delta Air Lines and BlackRock are some of the biggest companies expected to release their earnings results. Investors will be paying particular attention to the guidance they will provide for their performance for the rest of the year.
Tech stocks are expected to lead the gains, with futures pointing to the Nasdaq 100 rising 0.7%, with the Dow Jones and S&P 500 seen gaining 0.45% and 0.6% respectively.
Investors are taking hope from growth in core inflation slowing to its lowest since September..
This will take the pressure off the US Federal Reserve to move less hurriedly to raise its benchmark funds rates, said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, with the Fed widely expected at a series of 50 basis-point hikes in the coming few months.
While a rebound in Wednesday’s trading session is expected, Ozkardeskaya said high energy prices, the ongoing pandemic and the war in Ukraine will combine to keep the market’s outlook depressed.
As for JPMorgan's earnings, analysts at Saxobank said they "will set the tone for the earnings season as the US bank is the biggest bank in the developed world".
11.57am: China impact on commodities
Shell PLC (LSE:SHEL) and Glencore PLC (LSE:GLEN) are leading the FTSE risers, with the index up 10 points at 7587 but the latest trade data out of China suggest that recent Covid restrictions are "hitting commodity demand hard".
That's according to a new note from Capital Economics, where commodities economist Kieran Clancy explained that the team think "it will remain weak in the months ahead as activity in the commodity-intensive construction sector softens further".
He added: "We had expected a more accommodative regulatory stance to spur a rebound in Chinese property sales, which is typically positive for commodity demand (particularly demand for industrial metals). But any such rebound now seems to have been delayed by the surge in cases of COVID-19, with new home sales in 30 large cities falling sharply in the latest monthly data to their lowest level in over a decade."
Summing up, Clancy said the trade data paint a picture of "significantly weaker commodity demand" and, together with a recovery in supply, he expects this "will drag the price of copper (and many other commodities) lower by year-end".
11.12am: Crypto crunch
It wasn't long ago that the cryptocurrency faithful were trumpeting the abilities of decentralised digital coins as inflation headges.
Bitcoin has continued to languish at three-week lows amid rampant inflation around the world, though ethereum is up 0.6% to just over US$3k.
Both fell yesterday after US CPI inflation hit new 40-year highs at 8.5%.
Bitcoin has formed a strong correlation with stocks, noted Naeem Aslam at AvaTrade, with the correlation of the 'king crypto' with the gold price not as strong as it used to be.
"This fact is quite intriguing, primarily because Bitcoin is considered one of the biggest hedges against inflation. Yesterday's soaring inflation reading failed to bring any meaningful moves in the asset's price.
"On the bright side, bitcoin's volatility has dropped significantly, favourable for its fundamentals in the past few days."
Speaking of fundamentals, he said investors are looking to see if other stable coins like TerraUSD will add Bitcoin to their reserve currency basket.
"Terra's stable coin has been adding bitcoin to its reserve currency basket. By the time it completes its target, it will have more bitcoin than Tesla or MicroStrategy," Aslam said.
While the rampant inflation has added to concerns of a recession looming, Marcus Sotiriou, analyst at GlobalBlock, said, "I think the CPI data was bullish.
"This is because core CPI, which strips away gas and food, was up just 0.3% month-over-month, which is lower than the expected 0.5%. This signals that inflation is actually slowing down, as the factors that are not affected by the war are showing a decrease in month-over-month inflation."
10.53am: House price inflation
Amid the inflation drama, there were also official house price number released by the ONS, showing a 0.5% month-to-month rise in February.
In seasonally adjusted terms, prices increased 0.8%, with year-on-year growth climbing to 10.9% from 10.2% in January, higher than the consensus forecast, 10.1%.
Yearly house price growth therefore accelerated to its fastest pace since September and well above the average rate in the 2010s, which was 3.9%.
Prices for detached homes increasing 14.4%, whereas prices for flats rose 8.1%, showing the impact of pandemic and ongoing cladding-related.
On a regional basis, meanwhile, London continued to lag behind other regions. Timelier survey data suggest that house price growth has remained strong more recently.
"The housing market strengthened further in February, despite the intensifying squeeze on households’ real disposable incomes and rising mortgage rates," said Pantheon Macroeconomics.
The ONS figures come after Nationwide's measure of house prices jumped by 1.1% month-to-month in March, pushing up the year-over-year growth rate to its highest rate since late 2004.
In addition, year-over-year growth in asking prices picked up to a seven-and-a-half-year high of 10.4%, from 9.5% in February, according to Rightmove's latest numbers.
The FTSE 100 meanwhile has lost all its gains, dropping momentarily into the red at 7575.
Big retailers are almost all in the red, following Tesco's profit warning earlier and the inflation numbers.
10.14am: Tesco spooks investors
Tesco shares have tumbled more than 5% to below 260p for the first time since November, after investors were spooked by the FTSE 100-listed grocer's outlook statement.
Acknowledging the significant external uncertainties, the grocer stacked up a wider than usual guidance range for the new financial year, with retail adjusted operating profit expected to decline 7-14% to between £2.4bn and £2.6bn.
The level of the decline would be dependent on cost inflation and how much of this can be “partially offset”, investment in price positioning and promotions to maintain market share, and the extent to which consumers return to pre-pandemic habits.
Analyst Clive Black at broker Shore Capital said the "resolute but more guarded" outlook statement would result in 4-5% downgrades to earnings per share for the new financial year.
"Perhaps the more important element of the update is Tesco's commentary around rapidly evolving food markets and so the context within which it sees both its own business and the wider ecosystem operating."
The broker downgraded its stance on Tesco's shares to 'hold' from 'buy', with Black saying "retaining a more positive stance feels like pushing water up a hill".
At Barclays Capital, analysts said it was a "strong set" of results for last year, cash generation in particular, allowing the share buyback run-rate being accelerated 50% to £750mln for the coming year.
"However, we always expected the market to be most focused today on Tesco's profit outlook given the current extremely limited visibility – not just due to high food inflation but also due to sharply rising labour and energy costs (partly offset by lower COVID costs)."
While, the analysts suggested it could be argued that retail profit guidance "represents a reasonably tight range in the circumstances," trimming forecasts for the year was the "unavoidable conclusion".
Barclays concluded that it believes Tesco "is doing the right things for its customers and that this will continue to fuel its market share momentum".
Despite the weight from Tesco, the FTSE is moving higher, up 20 points to 7596, driven by Shell PLC's new presence near the top of leaderboard.
9.11am: Holding onto small gains
The FTSE is gripping onto the early gains it has clawed, after staring the week with two down days.
More thoughts on UK inflation numbers being at the highest since 1992 (not to mention US prices rising at their fastest since the early 80s and prices rising pretty much everywhere else too).
And it's only going to get worse.
The EY ITEM Club expects inflation to rise to at least 8.5% in April, as the 54% rise in the energy price cap and rise in the VAT rate for the hospitality sector affect the index.
While April should mark the peak, the risk of persistently high commodity and energy prices means inflation could be slow to fall back as 2022 progresses, said Martin Beck, chief economic advisor to the club.
“There’s no way to sugar coat what’s happening to prices," said Danni Hewson, financial analyst at AJ Bell.
“Pretty much everything is significantly more expensive than it was a year ago and there is every indication the situation is just going to get worse."
She noted that the price of clothing and footwear, household equipment and "the price of doing anything nice" were all rising by the fastest rate since ONS records began.
“Buying those things are a choice, unless you’ve got growing kids, but putting food on the table is not. Whilst the 5.9% surge isn’t quite a record breaker I doubt anyone visiting the supermarket over the next couple of days will be worrying about the distinction.
“But what’s causing most concern is the realisation that this really is just a taste of what is to come. The next set of inflation figures will reflect the shock most households have been feeling when they’ve taken a look at their new energy bill."
We know inflation is going to rise significantly next month as the energy price cap rises. It now looks like inflation will be well above 8 per cent and could well hit a 40-year high. Leading to a huge fall in real incomes. pic.twitter.com/sMREKsGguu
— Jack Leslie (@jackhleslie) April 13, 2022
Looking at the producer price index, this shows there is unlikely to be any respite for a while, with input prices surging by almost 20% and ongoing supply chain issues, including food from Ukrain and microchips from Asia are likely to continued trouble.
Sharon Graham, general secretary of trade union Unite, said: “The double whammy of soaring inflation and falling wages is creating an historic cost of living crisis for workers. The bankers and big business are trying to force workers to pay the price for the pandemic.”
And for the financial markets perspective, here's Intertrader’s head of electronic trading, Shafiq Shabir: “The Bank of England is likely to move to try and curb additional inflationary pressures in the medium term, with another interest rate hike at May’s MPC meeting possible. But we won’t see immediate change in inflation in the short term. All eyes will be on Threadneedle Street when they next meet, but traders should remain vigilant when it comes to riskier and more speculative assets in the meantime.”
8.31am: Searching for direction
London's blue-chip share index slid lower in early trades but quickly recovered as traders reacted to worsening inflation numbers on both sides of the Atlantic and commodity gains as Russia-Ukraine peace talks were said to be at a dead end.
The FTSE fell 20 points at the open, as predicted but within minutes was peeking its head above the waterline, up 10 points at 7586.
Mining giants Glencore, Anglo American, Rio Tinto and Antofagasta topped the leaderboard.
Despite China's Covid-19 outbreak continuing, Asia focused banks Standard Chartered and HSBC were not far behind.
Tesco PLC was the biggest faller, down over 4% after guarded comments about the outlook for costs and prices. Ocado Group PLC and J Sainsbury PLC were both dragged lower.
7.40am: UK inflation leaps higher
The FTSE 100 is expected to fall 20 points now, following the release of UK inflation figures that showed the consumer price index (CPI) accelerated to a new 30-year high of 7% in March, meaning household finances are being squeezed even more than expected.
Headline CPI was up from 6.2% in February and ahead of economists’ expectations of 6.7%.
This resulted in the sharpest fall in the value of real wages since 2014, with wages data published yesterday revealing a rise of only 5.4%.
The Office for National Statistics also revealed core inflation, which excludes more volatile prices such as for energy, food and alcohol, rose to 5.7% from 5.2% and also higher than the consensus forecast of 5.4%, which was also a 30-year high.
Fuel prices surging 9.9% month-on-month in March was a big contributing factor to the rise in the headline rate of CPI, being the largest monthly rise on record.
Fuel inflation is now at 30.7% versus a year ago, while food and drink inflation rose to 5.9% from 5.1%, now at its highest rate since September 2011.
“The surge in agricultural prices triggered by the war in Ukraine means we expect food inflation to soon climb to 7.0%,” said Ruth Gregory at Capital Economics.
She said the rise in CPI inflation in March continued the run of upward surprises “and will add more pressure on the Bank of England to raise interest rates rapidly”.
Capital Economics thinks the Bank’s monetary policy committee will hike interest rates to at least 2.00% next year, from 0.75% currently.
6.39am: Starting a smidge lower
London’s FTSE 100 is expected only a smidge lower of Wednesday ahead of a UK consumer price index (CPI) print that’s likely to be staggeringly high.
IG Markets sees the FTSE 100 starting just 2 points lower, making a price of 7,581 to 7,584 with just over an hour to go until the open.
The highest level of inflation for thirty-odd years is quite widely expected and evidently mostly priced in at the moment – the data coming during a decidedly quiet holiday appears also to be help rather than a hinderance.
As well as Boris Johnson becoming the first serving prime minister to be sanctioned for breaking the law yesterday also saw UK unemployment fall back to 3.8%, matching the levels seen in 1975, and at the end of 2019.
This was “probably the only silver lining in what is likely to be a difficult summer for UK consumers, as the UK economy gears up for its worst cost of living squeeze in 10 years,” said Michael Hewson, analyst at CMC Markets.
“The wages data, when adjusted for inflation showed the biggest fall in real wages since 2013, in a trend that is only likely to get worse as we head into Q2, given recent rises in energy and food prices, along with the April NI rises, which have yet to be factored into the data, as we look to the summer months.”
The analyst added: “expectations for today’s CPI numbers are expected to see a rise to 6.7% and potentially closer to 7%, with the very real possibility we could see a test of the 1991 peaks of 8.3% by the middle of the summer. The RPI inflation measure could even retest the 1990 peaks of 10.4% in the next two to three months, however today’s number is expected to rise to 8.8%. PPI input prices are forecast to rise to 15.1% from 14.7%.”
Last night, on Wall Street, the Dow Jones dipped 87 points or 0.26% lower to close at 34,220.
The S&P 500 meanwhile slide 0.34% lower to 4,397 and the Nasdaq marked a 0.3% fall to 13,371.
America’s small-cap Russell 2000 index was actually on the front foot, rising 0.33% to 1,986.
In Asia, Japan’s Nikkei rose by 1.64% to 26,767 whilst Hong Kong’s Hang Seng moved 0.75% higher to 21,482. The Shanghai Composite pinched only a sliver higher to 3,214.
Around the markets
The pound: US$1.3002, up 0.01%
Gold: US$1,969, up 0.2%
Silver: US$25.50, up 0.4%
Brent crude: US$104.54 per barrel, up 6%
WTI crude: US$100.34 per barrel, up 6.4%
Bitcoin: US$40,174, up 0.37%
Ethereum: US$3,058, up 1.7%