- FTSE 100 climbs 35.58 points
- Travel stocks top leaderboard
- Elon Musk makes US$43bn bid for Twitter
Britain's benchmark FTSE 100 index closed higher as stocks have rallied following a dovish European Central Bank (ECB), which kept its monetary policy unchanged but confirmed the end of its bond buying in the third quarter amid surging inflation.
The blue-chip FTSE 100 made up of the largest companies listed on the London Stock Exchange, closed higher by 0.5%, or 35.58 points, to 7,616.38.
The ECB’s dovishness has given markets a break.
“European stocks have rallied following a dovish ECB, while on Wall Street the dour start to earnings season extended into another day,” said Chris Beauchamp, chief market analyst at online trading platform IG. “The ECB has decided not to follow fashion and has kept its hawks firmly under control.”
3.50pm: Increased default mortgage rates
Banks warned that mortgage defaults soared, which caused lenders to reduce loans amid the ever-increasing cost-of-living crisis.
The declining economy, tighter funding conditions and higher aversion to risks were the reasons that sparked concern in the financial sector.
If you remember correctly, it was over-lending by banks to homeowners that caused the US housing bubble, which, in turn, led to the 2008 financial recession.
The proportion of lenders intending to limit home loans reached its highest level since the first lockdown, the Bank of England said.
Lenders planning to slash mortgage availability in Q2 outweighed those hiking lending by over 22%.
Increased default mortgage rates coincided with rising interest rates across the globe.
3.15pm: US mixed bag on open
Just like pre-market trading and as expected, the Dow Jones Industrial Average climbed on open by 0.4%, or 144 points, to 34,709.
Tech-heavy Nasdaq began reversing Wednesday’s gain of over 2% by sliding 0.6%, or 85 points, lower under an hour into the start of America’s changing of hands.
S&P 500, which remained stagnant prior to open, was the smallest mover of the US indices – down 0.3%.
3.04pm: Twitter edges cautiously higher suggesting Musk may be unsuccessful
Twitter’s shares opened slightly higher, up 2.36% to US$46.93.
A reserved opening suggests investors don’t see the US$43bn being accepted, which may lead to Musk selling his 9% share.
The market is saying it’s not happening pic.twitter.com/kCi4J0UahY
— Tom Hearden (@followtheh) April 14, 2022
2.36pm: Twitter board to discuss Musk's offer
Twitter's board are set to meet at 3pm UK time to discuss Musk's hostile takeover bid, according to sources close to CNBC.
Twitter's board is meeting at 10am ET to discuss Elon Musk's takeover offer, sources tell CNBC. https://t.co/PuST2ud2YV
— CNBC Now (@CNBCnow) April 14, 2022
2.14pm: THG's 'delayed' update
Several brokers had expected an update from THG today that never arrived.
Full-year results are expected in the next week or two, confirmed by sources close to the company.
Shares had climbed for the e-commerce retailer of beauty and fitness products, up nearly 4% to 94.4p.
1.42pm: Twitter considering Musk bid
Twitter confirmed it received Musk’s unsolicited buyout offer of $54.20 a share in cash, and will review it, saying:
“The Twitter board of directors will carefully review the proposal to determine the course of action that it believes is in the best interest of the company and all Twitter stockholders.”
1.16pm: More trouble for P&O
P&O Ferries suspended all its passenger services between Dover and Calais this weekend as the company continues to be embroiled in controversy.
Customers were offered a 25% discount on their next rebooked journey with another travel operator, issuing an apology.
Affected services include all those over the bank holiday weekend.
"It is only fair and right that we make alternative arrangements for those customers, which include transferring them onto our Hull-Europort service to Rotterdam, or booking them onto services with Brittany Ferries between Portsmouth and Caen," the company said.
"Both of these options are at no extra cost to customers - if anyone chooses either of these alternatives we will reimburse them for any additional mileage expenses incurred and as well as all meals onboard our overnight crossing."
It’s the second consecutive weekend where services have been cancelled.
12.44am: Nasdaq Wednesday gains not reflected by Scottish Mortgage
The Nasdaq had a strong day yesterday, gaining 272 points, or just over 2%, to 13,643.
Markets rebounding in the US came as investors shrugged off the inflation report, where the producer price index rose 1.4% month over month.
Unfortunately, that boom experienced by the tech-heavy Nasdaq didn’t quite translate to the same amount of gains for the Scottish Mortgage Investment Trust, which invests in plenty of the US index's stocks.
Footsie constituent Scottish Mortgage remained stagnant at Wednesday's 961p close during early-afternoon midday trading.
12.15pm: US preview
US stocks are seen little changed in early trading as investors await the release of quarterly earnings from the biggest US banks.
Analysts said investors will be looking for clues as to how these financial institutions have weathered inflationary pressures in the first quarter as well as their outlook for the industry for the rest of the year.
Futures for the Dow Jones Industrial Average rose 0.21% in pre-market trading, while those for the S&P 500 fell 0.01% and contracts for the tech-heavy Nasdaq-100 were 0.06% higher.
Yesterday, apart from JPMorgan, whose first-quarter profit dove from a year earlier, driven by increased costs for bad loans and the market upheaval caused by the Russian-Ukraine war, others such as BlackRock and Delta performed better than analysts’ expectations.
Richard Hunter, Head of Markets at interactive investor, said alongside slightly lighter volumes which have traditionally accompanied a shortened trading week leading into Easter, the quarterly earnings season is kicking off in earnest as US banks begin to report.
“Inflationary pressures such as energy and labour costs are expected to pressure earnings, which are unlikely to scale the heights of last year. While there are expected to be some strong numbers emanating from the energy and materials sectors, the likes of consumer discretionary and communication stocks may be feeling the pressure more than most,” he added.
A decent showing within the airline sector offset some of the disappointment from JPMorgan, whose numbers set the season off to a weak start as it reported a drop in quarterly profit, Hunter noted.
JPMorgan shares closed more than 3% lower on Wednesday after the biggest US bank by assets said first-quarter profit fell 42% from a year earlier to US$8.28 billion, but analysts said banks reporting today such as Citigroup, Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS) and Wells Fargo may not go the way of JPMorgan.
“The mood has lifted slightly as investors begin to assess the possibility that inflation could be nearing a peak,” Hunter said. “While the overall inflation number continues to run hot, core inflation – which strips out food and energy prices – saw gains which appear to be moderating in comparison to recent readings. This, in turn, raises the question of whether much of the negative news has already been priced into stocks, although the situation remains fluid.”
However, the performance of the main indices remains weak, he noted, with the Dow Jones Industrial Average losing 4.9% in the year to date, the S&P500 down 6.7% and the Nasdaq-100 12.8% lower.
Traders will also be looking towards US retail sales figures for March and weekly jobless claims, due later this morning.
On commodity markets, Brent crude, the international oil benchmark, was 0.98% lower at $107.71 a barrel, while gold prices were down 0.6% at 1,972.80.
11.45am: Musk's Twitter takeover
Elon Musk, the world's richest man, made his "best and final" offer to buy Twitter Inc for US$43bn.
He intends to pay US$54.20 per share in cash, which is an 18% premium on Wednesday's close price of US$45.85.
11.20am: Natural gas prices slide
UK natural gas prices declined 7.6%, whilst European benchmark prices slumped 5.6% ahead of a Putin-chaired meeting that is expected to clarify his demands for energy payments in roubles.
Logistical problems and paying for Russian oil and gas will be discussed, according to local media.
Global markets were closely examining approaching deadlines for Putin’s want of gas exports being paid for in the Russian currency.
Its President said he will cut gas supplies to Europe should they fail to meet his demands, which the West already rejected as it would violate sanctions.
10.40am: Pound strengthens amid further interest rate hike expectations
Sterling edged higher on Thursday for a second consecutive day on speculation that the Bank of England will further hike interest rates to offset soaring inflation.
The British pound was up 0.1% against the dollar to US$1.3180, whilst it was stagnant relative to the euro at 83.08p.
The UK’s Central Bank is expected to raise rates to 1% from 0.75% in May following the 0.25 percentage point increases in March and February.
December’s rise from 0.1% to 0.25% coupled with the two in 2022 meant it was the first time in over two decades the Bank extended the rate in three successive meetings.
Experts expect rates to be as high as 2% by the end of the year to combat inflation approaching 10%.
The UK Consumer Price Index showed on Wednesday that inflation jumped to 7% in March – another 30-year high and exceeded expectations.
9.50am: Tesco pays £50mln in bonuses, Abramovich has £5bn assets sanctioned
Footsie is trading lower, down 21 points to 7,559 as traders waited for the European Central Banks’ interest rate decision. That was despite good rises in the US and Asia overnight.
Roman Abramovich has had over £5bn worth of assets linked to him frozen by the Jersey court. They’re either located on the tax haven island or owned by Jersey-incorporated entities.
Tesco will pay almost £50mln in bonuses to workers following tripled profits. Roughly 290,000 staff will receive a bonus even though UK’s leading supermarket warned of tougher times ahead on surging inflation.
Hermes, the Birkin bag maker, saw sales exceed expectations in the first quarter with 27% organic growth. All divisions clocked double-digit growth including leather goods.
DiscoverIE Group PLC raised guidance after a strong end to the year. Orders in the final two months of the year to the March remained well ahead of sales, growing 27% compared with two years ago.
Poolbeg Pharma has been granted European patent protection over its key asset, POLB 002, a nasally administered treatment. The asset has the potential to protect against respiratory virus infections.
Voyager Life said revenues have grown strongly and it has cash in the bank at year-end to continue developing its business model. Revenue in the second six months of the financial year increased 88% compared with the first half, said the CBD product specialist.
9.09am: IAG leads the way
Leading the way is British Airways owner International Consolidated Airlines Group (LSE:IAG) after earnings from US peer Delta Airlines carried the sector higher overnight.
Intercontinental Hotels Group PLC (LSE:IHG) and Rolls-Royce Holdings PLC (LSE:RR.) were also high up the blue-chip leaderboard, with Wizz Air Holdings PLC (AIM:WIZZ) and easyJet PLC (LSE:EZJ) topping the mid-cap list.
The biggest fallers, as usual, are not among the blue chips, with Russian miner Petropavlovsk PLC (LSE:POG) slumping a further 24% as it said sanctions recently imposed on its bank and principal offtaker Gazprombank effectively meant it couldn't sell any gold.
"With much of the world on holiday tomorrow... today is a technical Friday for markets, so I am expecting a noisy session," said analyst Jeffrey Halley at Oanda.
Richard Hunter at Interactive Investor said: “Alongside the slightly lighter volumes which traditionally accompany the four day trading week leading into Easter, the quarterly earnings season is now kicking off in earnest as the US banks begin to report.
“Inflationary pressures such as energy and labour costs are expected to pressure earnings, which are unlikely to scale the heights of last year. While there are expected to be some strong numbers emanating from the energy and materials sectors, the likes of consumer discretionary and communication stocks may be feeling the pressure more than most."
He said the decent showing from the airline sector offset some of the disappointment from JP Morgan's earnings, which were weaker than expected, and come ahead of the likes of Citigroup and Morgan Stanley reporting today.
"A signal of possible stimulus from Chinese authorities aiming to avert an economic slowdown following new Covid-related lockdowns led to a positive session in Asia, which has failed to wash through to the UK in early exchanges," Hunter added.
8.30am: Lower start and signs of slowing housing market?
FTSE 100 turned lower ahead of the Easter breakeven though Wall Street rallied as the latest quarterly US earnings season got underway.
Footsie was down around 20 points at 7,560 after closing more or less flat on Wednesday.
Fresh housing sector news from the Royal Institution of Chartered Surveyors provides some signs that demand may be cooling as real incomes are squeezed.
The RICS report showed a net balance of surveyors reporting that house prices have risen over the last three months fell to +74 in March, from +78 in February, below the consensus, +75.
"The latest RICS survey data suggest that the housing market remained strong at the end of Q1, but that rising mortgage rates and falling real incomes are starting to weigh on buyer demand," said Gabriella Dickens at Pantheon Macroeconomics.
On top of the small fall in the house price balance, she noted that new buyer enquiries balance dropped to a three-month low of +9, from +16 in February.
"This chimes with other signs that demand is cooling; for instance, Google Trends data show that searches for the three most popular property websites now are only 5% above their 2017-to-19 average level for the time of the year, having consistently exceeded that average by 15% in previous months.
"There are also tentative signs that the mismatch between supply and demand now is starting to ease. Indeed, while the average estate agent had 38 homes on their books, well below the long-run average, 55, the new sales instructions balance rose to a 12-month high of +8, from -1.
"Nonetheless, in the near term, a dearth of supply still is cushioning the impact of slightly weaker demand on house price growth. Indeed, the net balance of surveyors expecting house prices to rise over the next three months fell only marginally to +30, from +34, thereby remaining well above its +1 average level in the 2010s."
6.47am: Tailwind expected from US
US markets will give the market a bit of a tailwind with all three indices well up overnight and led by the tech-dominated Nasdaq, which gained more than 2%.
Earnings from Delta Airlines are expected to give UK carriers a boost ahead of what is expected to be one of the busiest and most chaotic Easter getaways for years.
The results were well ahead of expectations as travel demand bounced back strongly.
Flights from and to Britain have been cancelled all week due to staff shortages on planes and at airports.
Predictions are that passenger numbers will be back within 20% of pre-pandemic levels so Good Friday in particular looks likely to be tough for travellers.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank said: "Yesterday’s data showed that the US producer prices jumped by more than 11% in March, the highest since 2010.
"But the US indices rebounded on the belief that we could be approaching a peak in the actual higher inflation cycle as the pandemic-related distortions begin to fade."
JP Morgan was the major disappointment as it got the banks' earnings season off to a low key start with earnings down by 42%.
More reserves are being stashed due to the Ukraine war, which also seemed to be behind a US$540mln loss in trading.
A clearer picture of where the US banks are should emerge this afternoon with Morgan Stanley (NYSE:MS) Citigroup, Goldman Sachs (NYSE:GS) and Wells Fargo & Co all updating, which should give a read through for UK banks especially HSBC and Barclays as they have the largest overseas interests.
UK company updates include beleaguered online retail platform THG, fund manager Ashmore, households goods retailer Dunelm and recruiter Hays.
6.50am: Early Markets - Asia / Australia
Asian shares were mostly higher on Thursday as Bank of Korea announced a surprise 25 basis points hike in its base rate to 1.5%, a decision predicted by less than half of the economists in a Reuters poll.
The Shanghai Composite in China surged 1.49% and Hong Kong’s Hang Seng index rose 0.81%.
Japan's Nikkei 225 lifted 1.21% while South Korea’s Kospi traded near the flat line.
Australia’s S&P/ASX200 closed 0.59% higher as unemployment fell by 12,000 jobs in March and the jobless rate remained steady at 4%.