- FTSE 100 drops 106 points
- UK retail sales volumes dropped by 1.4% in March
- UK PMIs also show weak demand
4.50pm: Friday falls for Footsie
The FTSE 100 index ended sharply lower on Friday following weak March UK retail sales data, and as Wall Street stocks fell amid worries over the pace of interest rate hikes.
At the close, the UK blue-chip index was 106.27 points, or 1.4% weaker at 7,521.68, the session low and well below the day’s early peak of 7,628.03.
Michael Hewson, chief market analyst at CMC Markets UK commented: “It’s been a disappointing end to the week for markets in Europe, after Fed chair Jay Powell signalled that the Federal Reserve could well go much harder, and a lot quicker when the central bank pulls the trigger on the first of what might be several 50bps rate hikes, starting next month.
“Financials appear to be taking the biggest hit, after a narrowing of yield differentials, prompted concern about the prospect of a policy mistake by central banks, and a possible recession by the end of the year. This has manifested itself in weakness in the likes of Schroders, Abrdn and Hargreaves Lansdown, as well as HSBC, and Barclays ahead of the start of UK bank Q1 results, which are due out next week.”
Hewson added: “Fears about an economic slowdown are an easy conclusion to draw, especially when you look at today’s disappointing UK retail sales numbers for March, and consumer confidence in April falling to its lowest levels since July 2008.
"Today’s retail sales numbers are a wake-up call, if any were needed, that consumer spending could be weak for some time to come, as households prioritise food and energy over non-essential spending, with this week’s fall in Netflix subscriber numbers revealing an interesting trend that is likely to get worse. Quite simply, food and energy are people’s priorities now, not watching ‘Stranger Things’.”
3.45pm: Footsie close to day's low
It may be earth day today but it's down to earth day for the market.
As we head into the close, leading shares are near their lows of the day, hit by a raft of disappointing data including a severe drop in retail sales as inflation hits consumers' spending power.
An opening fall on Wall Street after US Federal Reserve boss Jerome Powell hinted at a faster pace of interest rate rises has not helped sentiment.
So the FTSE 100 has fallen 89.82 points or 1.18% to 7538.13.
Meawhile the mid-cap FTSE 250 is down 1.08% at 20,932.
B&M European Value Retail SA (LSE:BME) is the biggest faller in the blue chip index, down 6.33% after the surprise announcement that its chief executive Simon Arora is stepping down.
Consumer stocks are on the slide after the poor high street sales figues, with B&Q owner Kingfisher PLC (LSE:KGF) falling 4.47%, Premier Inn firm Whitbread PLC (LSE:WTB) losing 3.81% and Ocado Group PLC (LSE:OCDO) off 3.62%.
Among the risers is Rentokil Initial PLC (LSE:RTO), up 2.06% after this week's well received update.
Defensive stocks are also wanted, including National Grid PLC (LSE:NG.) which has added 0.79%.
Housebuilder Berkeley Group Holdings PLC (LSE:BKG) is 0.79% better after a positive note from analysts at Jefferies.
3.12pm: US PMIs show mixed picture for services and manufacturing
This is not likely to make the Federal Reserve pause too long in its interest rate deliberations, but the latest US purchasing managers' report has come in below expectations while prices continue to rise.
The S&P Global composite PMI index fell from 57.7 in March to 55.1 in April, below the rise to 57.9 expected.
But the two components of the index were heading in different directions.
S&P said that overall growth, although still faster than January’s Omicron-induced slowdown, was dampened by a softer rise in service sector output following pressure on customer spending as prices continued to increase markedly. Manufacturers, on the other hand, indicated a stronger expansion in production on the back of rising demand
The services PMI fell from 58 to 54.7, below the forecast of 58.
However manufacturing rose from 58.8 to a better than expected 59.7.
And the increase in prices is likely to make the Fed uneasy.
S&P said April saw a series-record rise in input costs across the private sector as raw materials, fuel, transportation and wage bills ticked higher.
Service sector firms registered the fastest rise in cost burdens since October 2009, when data collection began, while goods producers recorded the sharpest uptick inthe sharpest uptick in expenses since November 2021’s record rise.
In an effort to pass through higher cost burdens to clients, businesses signalled the steepest rise in output charges on record.
US Economic Upturn Eases In April Amid Survey Record Inflation Pressures - Markit https://t.co/FMdO0L7w2m pic.twitter.com/TzO3gR8ous
— LiveSquawk (@LiveSquawk) April 22, 2022
Chris Williamson, chief business economist at S&P Global said: “Although still indicative of annualised GDP growth of approximately 3%, the April PMI surveys point to the upturn losing some momentum compared to the strong rebound seen in March, when services activity in particular had been buoyed by loosened pandemic restrictions in the US and abroad.
“Many businesses continue to report a tailwind of pent up demand from the pandemic, but companies are also facing mounting challenges from rising inflation and the cost of living squeeze, as well as persistent supply chain delays and labor constraints.
“These headwinds, plus increased concerns over the economic outlook and tightening monetary policy, meant business confidence about the outlook slipped sharply lower in April.
However, with the overall pace of economic growth and hiring remaining relatively solid, for now the focus from a policy perspective is likely to remain firmly on the need to rein in the record high inflationary pressures signalled by the survey.”
2.55pm: US investors unsettled by prospect of quicker Fed rate hikes
US stocks slipped at the open on the last trading day of the week as investor sentiment took a hit on fears of a bigger than expected interest rate hike from the US central bank in May.
The Dow Jones Industrial Average started around 202 points lower in New York to stand at 34,590. The S&P 500 lost around 16 at 4,376, while the tech-laden Nasdaq dropped nearly 11 points at 13,163.
"We have seen some big moves across the financial markets in the aftermath of hawkish commentary from the Fed as traders dumping equities, precious metals and commodity currencies," said Fawad Razaqzada, market analyst at City Index and FOREX.com.
"Jerome Powell has more or less now confirmed that the Fed will hike by 50-bps at their next meeting. But there’s even talk of 75 basis point hikes in the upcoming meetings.
"This is what is spooking equity market bulls, especially on US technology sector where the dividend yields are low and becoming increasingly less attractive as government bond yields continue to rise."
It all piles on the pressure ahead of big tech earnings from the likes of Alphabet, Microsoft, Apple and Amazon, which are due to report their quarterly results in the week ahead and for which expectations have been tempered due to continued inflation and price headwinds.
Back in the UK, the FTSE 100 has fallen further after the Wall Street open and is now down 71.82 points or 0.94% at 7556.13.
1.55pm: French election also in focus
To all the various issues facing investors - Ukraine, soaring inflation, worries about slower growth - can be added this weekend's French presidential election.
In the last few days, the incumbent Emmanuel Macron has seen his lead in the polls widen against far right opponent Marine Le Pen.
But the election is still close, and there is time for an upset, depending on how many voters actually turn out.
Craig Erlam, senior market analyst at Oanda, said: "Markets appear relatively calm going into the vote and the latest polls will be contributing to that. But that only increases the risk of a sharp knee-jerk reaction on the open Monday if Le Pen is victorious.
"Whether that would be sustained is hard to say. Remember, Trump and Brexit were perceived to be negative stock market events and in both cases, they bounced back quickly and went on to perform very well. The euro may be more vulnerable as Le Pen would no doubt be a disruptive force for the bloc."
Even so, with disappointing economic news around, France's Cac is currently down 1.41% even before election.
11.59am: US investors nervous after Powell comments
US stocks were expected to open lower on Friday closing out a week in which corporate earnings showed signs of faltering and the Federal Reserve gave perhaps the strongest signal yet that interest rates in the world’s biggest economy are set to rise rapidly.
In comments that led to falls in stock prices and rises in bond yields on Thursday, Fed chairman Jerome Powell signaled that he would be comfortable with a 50 basis point increase in interest rates at the next rate-setting meeting in response to a tight labor market and steep inflationary pressures. Many commentators are worried that higher interest rates may not work to dent inflation but may instead dampen economic activity, leading to a period of low growth alongside elevated levels of inflation.
Futures for the Dow Jones Industrial Average shed 0.35% in pre-market trading on Friday, while those for the broader S&P 500 index were down 0.36% and contracts for the tech-heavy Nasdaq 100 lost 0.41%.
“Federal Reserve Chairman Powell stopped an intraday equity rally in its tracks overnight, after he signaled a 0.50% rate hike in May and that he was not unamenable to ‘front-loading’ more 0.50% rate hikes,” said Jeffrey Halley, senior market analyst at OANDA.
“The pre-FOMC Fed speaker blackout starts tomorrow, and it looks like they are thin on the ground today. That just leaves US PMIs as the main point of interest tonight data-wise. A high print should keep the hiking noise going, while a low print could bring some relief to bond and equity markets into the weekend,” he added.
The PMIs for the US services and manufacturing sectors are expected to show continued growth but at a slower pace than in the previous month.
Investors also continue to digest corporate earnings which, so far, have been on the disappointing side. While net profit at Tesla Inc (NASDAQ:TSLA) rose seven-fold, Netflix Inc (NASDAQ:NFLX) reported a 200,00 drop in its subscribers and warned of further falls, spooking investors about waning consumer demand.
Elsewhere, oil prices were lower with concerns about slowing production in Russia being outweighed by fears that economic activity in China will slow down. Benchmark Brent crude futures were down 1.68% at $106.51 a barrel, while WTI was 1.78 % lower at $101.94 a barrel.
Back in the UK, the FTSE 100 continues to fall after the slump in retail sales.
The leading index is now down 64.37 points or 0.84% at 7563.58.
11.03am: Rentokil and Berkeley bright spots in falling market
Leading shares show no sign of improving, after the rather grim set of UK economic figures.
The FTSE 100 is currently down 57.1 points or 0.75% at 7570.85 while the FTSE 250 is off 0.5% at 21,053.
Dean Turner, economist at UBS Global Wealth Management, said: “A disappointing set of PMIs, coming on the back of a very weak retail sales release, highlights that the cost-of-living squeeze is hitting economic activity hard. Meanwhile, price pressures continue, but there is some evidence that firms passing these on to consumers is starting to negatively impact demand, offsetting the boost from the end of COVID-19 restrictions.
"Growth in the second quarter was likely to be weaker than in the first three months of the year as the COVID-19 reopening boost faded. And, to be clear, in level terms the PMIs show an economy that is still growing. However, the loss of momentum here and in the data more generally highlights the risk of the economy stalling in current quarter. Nevertheless, we still think that the BoE will press on and hike rates next month, but they are likely to pause earlier than markets currently expect.
"Sterling sold off on this morning’s data, falling to a 17-month low against the US dollar. We still see the pound higher this year, as a lot of bad news is already in the price. However, it is likely to be a tricky period for the pound in the short term.”
There were some bright spots in the market.
Rentokil Initial PLC (LSE:RTO) has risen 3.55% in the wake of this week's well received update.
Berkeley Group Holdings PLC (LSE:BKG) is 2.16% better at 4162p after analysts at Jefferies moved from hold to buy and raised their price target from 4703p to 5587p.
And with investors seeking a haven, defensive stock United Utilities Group PLC (LSE:UU.) is up 1.52%.
9.58am: Sterling slides further
The pound is continuing to slide as the downbeat PMI report adds to the disappointing UK retail sales.
Against the dollar, sterling is now down just over 1% at US$1.2888, its lowest level for a year and a half.
Against the euro, it has dropped 0.68% to €1.1934.
Meanwhile the FTSE 100 remains weaker, down 40.04 points or 0.52% at 7587.91.
9.41am: UK sees slowing demand and soaring price pressures
The UK economy saw the pace of growth slow in April, according to the latest initial readings from the monthly purchasing managers' reports.
The S&P Global/CIPS composite index - which includes manufacturing and services - fell from 60.9 in March to 57.6, a three month low.
While this was higher than the 54 expected and while anything above 50 signals expansion, it shows a marked slowdown in growth.
The manufacturing index climbed from 51.8 to 53.8 but services fell from 62.6 to 58.3.
On the inflation front, factory gate prices showed their fastest increase on record.
UK service sector business inflows grew at the slowest rate in 2022 to date. In manufacturing, order book growth has lost momentum, driven by an increasing loss of export sales, to result in the weakest rise in new orders since January 2021. 2/ pic.twitter.com/ILTWoMrdxw
— Chris Williamson (@WilliamsonChris) April 22, 2022
The UK is struggling with falling exports, as the war in Ukraine adds to pandemic woes and what appears to be the worst problem - Brexit.
#UK manufacturers and service providers reported demand having been hit by high COVID-19 infection rates and spending power having been squeezed by higher prices, but Brexit was also seen as having hit exports, and the Ukraine war/sanctions was cited as an additional headwind 3/ pic.twitter.com/uJmxwRFAay
— Chris Williamson (@WilliamsonChris) April 22, 2022
Williamson, the chief business economist at S&P Global Markit Intelligence, sums it all up thus: "UK April flash PMI surveys showed an unwelcome picture of slowing demand, slumping business confidence about the year ahead and soaring price pressures."
9.25am: Eurozone PMI stronger than expected
Ahead of the UK purchasing managers' report for Aprll due shortly, we have had the European report.
The Eurozone flash PMI for April came in stronger than expected, showing a rise from 54.9 to 55.8 instead of the anticipated decline.
But there was a record rise in selling prices, puttng more pressure on the European Central Bank to raise interest rates.
Eurozone flash #PMI rises to 55.8 from 54.9 in March, defying consensus expectations of a slowdown. Broadly indicative of GDP rising at a solid quarterly rate of just under 0.7%. pic.twitter.com/2RylxtbSST
— Chris Williamson (@WilliamsonChris) April 22, 2022
Soaring costs for inputs such as energy, staff and raw materials are meanwhile being pushed through to customers, leading to a record rise in eurozone selling prices. pic.twitter.com/zDgUqKEQju
— Chris Williamson (@WilliamsonChris) April 22, 2022
April eurozone flash #PMI input price and output data plotted against #ECB policy decisions suggests more hawkish stance likely, reflecting the persistence of unprecedented inflationary pressures at a time of encouragingly robust economic growth. pic.twitter.com/EjknmDwPNQ
— Chris Williamson (@WilliamsonChris) April 22, 2022
Some members of the ECB do seem hawkish, but perhaps not its president who was speaking at the IMF on Thursday.
Michael Hewson at CMC Markets said: "ECB President Christine Lagarde..capped off a couple of days of some rather hawkish comments from the likes of Belgium’s Pierre Wunsch, and ECB vice president Luis De Guindos who followed on from Latvia’s Martin Kazaks by arguing that a July rate rise was on the table.
"She didn’t come across as anywhere near as hawkish as her colleagues, pointing to the June meeting as the moment to decide on next steps, and lightly pushing back on the idea of a fixed point."
8.24am: Downbeat start for Footsie
A combination of the weak retail sales and concerns about a faster pace of US rate rises has seen the UK market get off to a downbeat start.
The FTSE 100 is down 32.47 points or 0.43% at 7595.48 in early trading, following on from declines elsewhere.
However the fall is not quite as bad as expected earlier.
Richard Hunter, head of markets at interactive investor, said: "The shaky end to the US trading session and a mixed performance in Asia overnight have also pulled the rug from the UK market in early trade...
"A weak UK retail sales print, while not unexpected, was further proof of the increasing pressures on the consumer wallet and could well be reflected in imminent company reports, such as the half-year numbers due from Primark owner Associated British Foods next week.
"In early exchanges the retailers have been marked down in anticipation, while the general backdrop also leaves the Monetary Policy Committee treading the fine line between combatting inflation without derailing a vulnerable economic recovery in the UK."
Adding to the gloomy mood, consumer confidence fell sharply in April according to the latest report from analysts Gfk.
Its index dropped by 7 points, from -31 to -38, much worse than forecasts of a figure of -33 .
Joe Staton, GfK's client strategy director, said: "This is dire news for consumer confidence and with little prospect of any economic relief on the horizon we can only forecast further falls in the index for the year ahead”.
Among the fallers is B&M European Value Retail SA (LSE:BME), down 5.02% as its chief executive said he was stepping down.
Analyst Nick Bubb said: "Out of the blue, Simon Arora, after over 17 years leading the B&M business, has announced that he intends to retire in 12 months' time from his role as CEO and that a “succession process”, led by the chairman Peter Bamford, will consider both internal and external candidates.
"The statement doesn’t mention Simon’s age, but we can inform you that he is only 52, although we don’t know what he plans to do post-B&M."
Luxury goods firm Burberry Group PLC (LSE:BRBY) has lost 3.56%, Marks and Spencer Group PLC (LSE:MKS) is off 2.33% and JD Sports Fashion PLC (LSE:JD.) has slipped 0.98%.
Defensive stocks are, inevitably under the circumstances, among the risers.
United Utilities Group PLC (LSE:UU.) is up 0.67%, Severn Trent PLC (LSE:SVT) has added 0.46% and British American Tobacco PLC (LSE:BATS) is 0.64% better.
7.58am: Sterling slips after disappointing high street sales data
The pound has slipped back as the weak UK retail sales figures increase uncertainty over Bank of England rate rises.
Against the dollar, sterling is down 0.41% at US$1.2968.
Michael Hewson, chief market analyst at CMC Markets UK, said: "In cutting back on their spending, consumers will .. have had one eye on the upcoming surge in energy bills, as well as other price rises, which will have hit their wallets in April.
"We also can’t forget to mention the fiscal own goal of the Chancellor of the Exchequer Rishi Sunak in going through with his National Insurance tax hikes, against a chorus of voices urging him to defer them. He can’t say he wasn’t warned...
"Today’s numbers could also play into the calculus around next month’s Bank of England rate decision with the prospect that we could get a split between those members who may want to go down the 50bps rate hike route, and those who would prefer to hike by 25bps. The central bank is facing an unenviable task this summer, facing an inflation problem that it is behind the curve on, and having to consider raising rates further into the teeth of an economic slowdown...
"Until we get some further clarity on what the Bank of England might do next month in terms of outlining a policy response, the pound could well remain under pressure, with the recent lows at US$1.2970 likely to give way to a potential move towards US$1.2800. This has become much more likely given the perception that the Federal Reserve seems more determined to squeeze down on inflation much harder."
7.43am: Consumers cut back on food and fuel
UK retail sales fell sharply in March as consumers cut back on food and petrol as prices soared.
The result was worse than expected, with overall sales volumes down by 1.4% compared to forecasts of a 0.3% decline.
The February figure was revised down from a fall of 0.3% to 0.5%, said the Office for National Statistics.
* Revisions *
UK Retail Sales Inc Auto Fuel (M/M) Mar: -1.4% (est -0.3%; prev -0.3%; prevR -0.5%)
- UK Retail Sales Inc Auto Fuel (Y/Y) Mar: 0.9% (est 2.8%; prev 7.0%; prevR 7.2%)
— LiveSquawk (@LiveSquawk) April 22, 2022
The ONS said "Food store sales volumes fell by 1.1% in March 2022 and have fallen each month since November 2021; higher spending in pubs and restaurants linked to reduced coronavirus restrictions, as well as the impact of rising food prices on the cost of living are possible factors for reduced spending in food stores.
"Automotive fuel sales volumes fell by 3.8% in March 2022 with other data sources indicating that some non-essential road travel had been reduced following record high petrol and diesel prices."
But the biggest fall came in non-store retailing, including online shopping, fell by 7.9% over the month following a fall of 6.9% in February as consumers curtailed their discretionary spending.
Retail sales volumes fell 1.4% in March, with the biggest driver coming from ‘non-store retailing’ (including online shops), which fell 7.9%.
However, retail remains 2.2% above its pre-pandemic level https://t.co/q4w0Tx8mQk pic.twitter.com/fyBUF1mnmI
— Office for National Statistics (ONS) (@ONS) April 22, 2022
Darren Morgan added⬇️
— Office for National Statistics (ONS) (@ONS) April 22, 2022
Government High Streets Task Force member and ShopAppy founder, Dr Jackie Mulligan said: “For countless small independent retailers, March was merciless. The thousands of small high street businesses we work with said it was extremely challenging last month and this data reflects that. Inflation is really starting to take its toll on people's finances and that is rapidly impacting sales on the high street."
6.50am: Footsie set to end week on down note
The FTSE 100 is seen starting Friday more than 1% lower, following US equities which cratered through much of Thursday’s dealing.
Friday’s corporate diary looks quiet at the end of the second short week in a row, though most attention will be on economic data with retail sales stats due along with consumer confidence numbers.
IG Markets has London’s blue chip benchmark losing close to 90 points, making a price of 7,540 to 7,543 with just over an hour to go until the open.
It comes after slightly puzzling panic in the United States over interest rates.
“US markets turned tail and slumped after the European close, after Fed chair Jay Powell laid out the case for a possible 50bpos rate hike at next month's May meeting of the Federal Reserve,” said analyst Michael Hewson.
“This seems a rather strange reaction given that nothing he said yesterday was in any way surprising. A 50bps rate hike is already priced in, as well as the prospect that we could well see another one soon afterwards...
" That said the tone of his remarks could have been taken that while markets aren’t concerned about a 50bps hike in May, they are concerned that the Fed might go harder for longer, that is another two 50 basis points hikes subsequently by the end of the summer."
The Dow Jones gave up 368 points or 1.05% to close at 34,792 whilst the S&P 500 lost 1.48% finishing at 4,393.
At the same time, the Nasdaq shed just over 2% to 13,174 and the small-cap Russell 2000 was 2.29% lower at 1,991.
In Asia, Japan’s Nikkei moved down 1.63% to 27,103 and Hong Kong’s Hang Seng dipped just 0.11% to 20,660. The Shanghai Composite edged 0.5% higher to 3,095.
Around the markets
The pound: US$1.3026, down 0.04%
Gold: US$1,951 per ounce, down 0.01%
Silver: US$24.53 per ounce, down 0.4%
Brent crude: US$107.21 per barrel, up 0.38%
WTI crude: US$102.51 per barrel, up 0.31%
Bitcoin: US$40,718, down 1.92%
Ethereum: US$3,015, down 2.14%