- FTSE 100 ends 35 points higher
- Broadly flat performance over the week
- US stocks stay under pressure
4.50pm: Positive Friday in London
The FTSE 100 index ended higher on Friday supported by gains in heavyweight commodity stocks but finished off its best levels as Wall Street fell back in morning trading as investors assessed this week’s mixed bag of big tech earnings.
The UK blue-chip index closed 35.36 points, or 0.5% higher at 7,544.55, below the session peak of 7,569.80 but above the day’s low of 7,509.19.
In New York, however, around London’s close, the Dow Jones Industrial Average was another 282 points, or 0.8% lower at 33,633, while the broader S&P 500 index shed 1.3% and the tech-laden Nasdaq Composite lost 1.4%.
US investors were nervous following Thursday's after-hours news from giant technology firms Amazon and Apple, which signalled supply chain and price pressures may dent corporate earnings.
Chris Beauchamp, chief market analyst at online trading platform IG commented: “A gulf has opened between Europe and the US, as the former rally while the latter drops back. US stocks enjoyed such a strong day yesterday that some caution was inevitable, while the mixed picture following US tech earnings and the contraction in US GDP isn’t helping sentiment on Wall Street.
“But higher commodity prices have helped stabilise industrial European stocks, and crucially the magic promise of Chinese stimulus has appeared, pushing up commodity prices and giving stocks across the continent a lift.”
Beauchamp added: “A third day of gains for oil prices comes as talk of a European ban on Russian oil and gas imports steps up a gear. In addition, US consumption has taken a leg higher, assuaging some concerns about a slump in demand in response to higher prices. But next week’s FOMC meeting might prompt some nerves to creep back in again, either as the Fed signals its concerns about growth, or if the dollar bounces again on a more hawkish meeting.”
4.10pm: Flat week overall
London's blue-chip index looks set to close the week roughly where it started it, although it tumbled 44 points in the month of April.
Dow Jones in America has also had nearly 5% wiped off its index, while the Nasdaq will be glad to see the back of April, where it tumbled more than 13% in what has been a tough month for tech.
Sentiment is echoed in Asia, with Nikkei 225 in Japan ending the month 3.5% lower than where it started.
3.12pm: US markets open lower
As expected, US markets opened lower on Friday amid concerning news during Thursday’s after-hours from giant technology firms Amazon and Apple, which signalled supply chain and price pressures may dent corporate earnings.
Unsurprisingly, the tech-heavy Nasdaq slumped 0.7%, or by 85 points. This was similar to the fall of 0.9% seen in pre-market trading.
Evidence for slowing of economic growth in the world’s biggest economy was supported by the retreating Dow Jones Industrial Average and S&P 500 index, which gave up 0.3% and 0.8% respectively.
“Markets are being buffeted by wars, inflation, slowdowns, overheating economies, supply chain disruptions, energy shortages and monetary policy move,” said Jeffrey Halley, senior market analyst, Asia Pacific, at OANDA.
2.34pm: Deutsche Bank raided on money-laundering accusations
German authorities today raided the offices of Deutsche Bank over a potential money-laundering scandal.
In a statement, Germany’s largest lender said it was cooperating fully, and that the search involved suspicious transactions it had reported itself in relation to money laundering.
Reuters, which reported the story, said the prosecutors had a warrant and conducted the search alongside financial regulator BaFin.
Christian Sewing, chief executive of Deutsche Bank, has been attempting to repair the bank's reputation after several costly and embarrassing regulatory failings in recent years.
Earlier this week, it reported a 17% rise in profits which was better than expected but warned war in Ukraine has the potential to hit full-year revenues.
2.05pm: Bank of England anniversary approaches
Friday week (6 May) will mark the 25 year anniversary of the Bank of England (BoE) being granted independence.
In that period, consumer price index inflation averaged at 2.1% but there has been much significant variation. Nearly a third of monthly rates fell outside the range of 1% to 3%.
The BoE’s Monetary Policy Committee (MPC) will decide on Thursday whether to hike interest rates for the fourth consecutive meeting. Markets are pricing in a 0.25 percentage point increase to 1%.
The Bank will be faced with the dilemma of balancing surging inflation against nudging the economy towards a recession.
Martin Beck, EY ITEM Club chief economic advisor, said: “The MPC’s dilemma in setting monetary policy amid rising inflation and slowing growth isn’t getting any easier.
“The EY ITEM Club thinks the MPC will raise bank rate to 1% from the current 0.75%.
“Recent comments by MPC members have put more emphasis on the prospect of economic slowdown and recession, so signals around further interest rate increases are likely to become more cautious.”
1.33pm: Inflation continues to bite
People’s daily lives continued to be heavily impacted by soaring inflation levels across various sectors, according to the Office for National Statistics.
9 in 10 adults (91%) noticed an increase in their cost of living between 13 and 24 April, up significantly from 62% at the start of November.
The most common reasons amongst those surveyed were rises in shopping prices (92%), gas or electricity bills (86%) or fuel inflation (80%).
An overwhelming four in 10 energy bill payers said they struggled to afford the surging gas and electricity prices.
There were also mentions of fuel shortages again. 20% of adults were unable to buy petrol or diesel at some point in the period, compared with 8% between 30 March and 10 April.
1.00pm: UK sickness absences advanced to highest level since 2010
UK sickness absence rose to its highest level since 2010 last year as Covid restrictions eased.
In 2021, the rate increased to 2.2% after reaching a record low of 1.8% the previous year as lockdowns prevented illnesses from spreading, the Office for National Statistics said.
This accounted for an estimated 149mln lost working days in the UK due to sickness or injury – equivalent to 4.6 days per worker. Covid was responsible for almost 25% of these last year.
These labour shortages put post-pandemic recovery in jeopardy. Firms, therefore, hiked wages, further pushing inflation higher.
London sickness rates were the lowest and Wales had the highest, while employees in the public sector had greater illness rates than those at private companies.
12.26pm: US markets expected to retreat
US stocks were expected to open lower on Friday after worrying news after-hours Thursday from some key big techs, including Amazon and Apple, signalled that supply chain and price pressures may work to dent corporate earnings.
News of slowing economic growth in the world’s biggest economy added to the note of disappointment amid fears that the wider economy will suffer as the US embarks on a series of interest rate increases.
Futures for the Dow Jones Industrial Average shed 0.3% in pre-market trading, while those for the broader S&P 500 index were 0.6% lower and contracts for the tech-heavy Nasdaq 100 lost 0.9%.
Overall, markets appear to be in a fragile state given the number of factors adding to uncertainties.
“The petrified tail-chasing we have seen this week as equity markets swing from ‘we’re all doomed, get me out,’ to ‘I don’t want to miss the absolute bottom of the stock market, get me in’ is perhaps indicative of the state of confusion out there,” said Jeffrey Halley, senior market analyst, Asia Pacific, at OANDA.
“Markets are being buffeted by wars, inflation, slowdowns, overheating economies, supply chain disruptions, energy shortages and monetary policy moves etc,” he added.
Halley noted that Amazon’s earnings disappointed as it struggled with supply and price pressures while Apple’s spectacular results were dimmed by its warning that revenue may take a hit due to supply chain problems. In after-hours trading, Amazon shares were around 8% lower.
US first-quarter GDP data, released on Thursday, showed a 1.4% contraction, serving as a warning that economic growth is faltering ahead of the Federal Open Market Committee’s series of expected interest rate hikes.
“The key takeaway is that the data won’t detract the FOMC from a 0.50% rate hike next week,” said Halley, adding that “ ... we get actual US Personal Consumption and Expenditure, Core PCE Prices and the Employment Cost Index. All three have upside risks I believe, and robust data will be further ammunition for a hawkish FOMC next week.”
Tough COVID-19 measures in China and the ensuing lockdowns in the world's most populous country are also spooking markets and raising fears of supply chain constraints. The continuing war in Ukraine is also keeping investors on edge.
Elsewhere, oil prices were a little higher. Benchmark Brent crude futures were up 1.65% at $109.03 a barrel, while WTI was 1.33% higher at $106.76.a barrel.
"European oil import ban on Russia seems to be coming closer with oil prices rising overnight, with Germany and Hungary seemingly moving into that camp now," added Halley.
11.54am: Employee workforce composition and furlough contribute to pandemic pay growth
Employee workforce composition and furlough both largely contributed to pay growth during the pandemic.
At the start of Covid-19, the impact of employee workforce composition on earnings growth grew rapidly, the Office for National Statistics (ONS) said, citing Labour Force Survey data.
Changes in the composition contributed 0.5 percentage points (pp) of pay growth in 2020’s first quarter, climbing to 3.4pp in Q2.
Growth was at its highest (7.8%) in quarter one 2021, advancing 5.6pp, which the ONS attributed to falling part-time employees and a spike in the overall level of qualifications held.
During the worldwide financial crisis of 2008-09, changes to the employee workforce on pay growth were considerably smaller – peaking at 0.7pp in Q4 2008.
11.21am: Bulb officially a public sector body
Bulb, the UK’s former seventh largest gas supplier, can now officially be classed as a public sector body following its collapse at the end of last year.
The largest energy company to fail in 2021 entered the special administration regime (SAR) in November on surging wholesale gas prices. The administration is being handled by Teneo.
It’s the first company ever to use SAR, which is effectively nationalisation by the government and is expected to cost the taxpayer billions to unwind.
Bulb now needs government consent to take out contracts, make appointments and sell or acquire assets, the Office for National Statistics confirmed.
Government payments to the company will raise the budget deficit by £1.2bn in the last financial year, the Office for Budget Responsibility estimated.
10.50am: NatWest slides despite bumper earnings
NatWest followed the lead set by most the other banks in announcing bumper earnings for the quarter.
The footsie listed bank even maintained guidance, with full year-income expected to “be comfortably above £11bn.”
However, shares have fallen by 4% so far, with shares now trading at 213p.
According to Russ Mould, an investment director at AJ Bell the main focus for investors is “is much more on the outlook, which despite the boost to profit implied by rising interest rates, is heavily clouded by the risk of an increase in bad debts linked to the cost-of-living crisis.”
“Households are under such severe financial pressure that it seems almost inevitable that some of the bank’s customers will get into difficulty.”
10.15am: House prices slow down
The Footsie is taking longer to take off this morning than a Boeing 747 Dreamlifter cargo aeroplane.
London’s index of heavyweight shares was up 26 points (0.3%) at 7,533.
Housebuilding stocks don’t seem overly bothered by signs of a cooling housing market.
The average amount paid of a UK home climbed 0.3% to £267,620 in April after rising 1.1% in March.
The year-on-year increase in house prices slowed to 12.1% from 14.3% in March, the Nationwide reported.
Barratt Developments PLC (LSE:BDEV), Berkeley Group Holdings PLC (LSE:BKG), Persimmon PLC (LSE:PSN) and Taylor Woodrow PLC were nonetheless all trading higher with gains of around 1%.
Instant Info – Nationwide House Price Index pic.twitter.com/jnGk126DZ2
— BuiltPlace (@BuiltPlace) April 29, 2022
“A slower rate of house price growth could be a taste of things to come. The squeeze on real incomes from high inflation means fewer people will be able to afford to borrow the necessary amount they need to buy at higher mortgage rates. Consumer confidence – including households’ expectations of their own personal finances – fell to a near-record low in April and next week’s MPC meeting is likely to deliver another rise in interest rates, which will push up mortgage costs,” noted Martn Beck, the chief economic advisor to the EY ITEM Club, although he also forecast that, “just as during the pandemic, the housing market is likely to prove relatively immune to economic challenges”.
“Those that can afford to buy are more likely to have accumulated unplanned savings during the pandemic, an element of which may be going towards deposits on houses and flats and cost of living pressures from rising inflation and the increasing price of essentials, such as energy, are weighing heavier on low-income households, who disproportionately rent, than the better-off, who are primarily owner-occupiers or in the market to buy. So while a period of relatively sluggish price growth is likely, the EY ITEM Club thinks any serious correction in property values is unlikely,” he concluded.
10.00am: House price growth slows to 12.1% in April
Annual house price growth declined slightly in April but remained in double figures in percentage terms for the 11th consecutive month.
The 12.1% rate fell just over two percentage points from the 14.3% growth seen in March, according to figures from Nationwide Building Society.
“Homebuyers are being hit by a double whammy of surging house prices and rising mortgage rates, forcing many with aspirations of buying their first property to dream on,” Myron Jobson, Interactive Investor senior personal finance analyst, commented.
Although the growth will continue to slow from here in the coming months, according to experts.
“It is surprising that conditions have remained so buoyant, given mounting pressure on household budgets which has severely dented consumer confidence," Robert Gardner, Nationwide chief economist, said.
Property values rose by 0.3% month-on-month, taking the average UK house price to £267,620 in April.
9.30am: Market gives thumbs up to Pearson... and thumbs down to AstraZeneca and NatWest
FTSE 100 was up 26 points to 7,536 in Friday morning trading led by Pearson, although AstraZeneca was dragging on the market.
Shares in the pharma giant fell even though it repeated its guidance for the full year after it reported forecast-beating results for the first quarter, boosted by sales of its diabetes drug and Covid-19 vaccine.
NatWest doubled its profits in the first quarter to £1.2bn. The nationwide lender warned that its outlook for the rest of the year would be clouded by the rising cost of living crisis.
It was a big session for tech overnight in the US, with Apple reporting a record-breaking March quarter for revenues, demonstrating strong consumer demand for the company’s products and services. Revenues exceeded analyst expectations of US$94.4bn.
Amazon though reported its first quarterly loss since 2015. The e-commerce and streaming giant blamed it on a significant write-down in value of its investment in electric-vehicle start-up Rivian.
In the UK, Travis Perkins (LSE:TPK) said it is now "more uncertain" about its forecast for price inflation in building materials, having previously expected it to ease into the second half of the year. Pricing is now expected to account for a larger share of sales growth this year than previously expected for the FTSE 250 company.
Among a host of quarterly small-cap mining updates, European Metals said it's on track to finalise the definitive feasibility study of its flagship asset at Cinovec in the Czech Republic. Discussions are also ongoing with potential off-takers for the project’s lithium and tin.
8.39am: Pearson and Reckitt lead the way
London’s blue-chip index got off to a less vibrant start than anticipated, thanks in part to lukewarm responses to earnings updates from two heavy hitters.
The FTSE 100 was up 22 points at 7,531, with Pearson PLC (LSE:PSON), up 2.6%, to the fore after its first-quarter trading update cheered the market.
The academic publisher saw underlying year-on-year sales growth in the first quarter and reaffirmed 2022 operating profit guidance.
In contrast, AstraZeneca PLC (LSE:AZN) slipped 0.9% to 10,470p after its first-quarter results were noticeably short on fireworks.
Total revenue increased 60% from a year earlier to US$11,390mln, reflecting growth across the company, the contribution of the Alexion medicines and several Vaxzevria contracts that are expected to be confirmed in the first half of 2022, Astra said.
Meanwhile, NatWest Group PLC (LSE:NWG) retreated 1.0% to 220.7p on the back of its interim management statement.
The bank’s attributable profit in the first quarter was £841mln, up from £434mln in the preceding quarter. The return on tangible equity rose to 11.3% from 5.6% in the fourth quarter of 2021.
$NWG NatWest beats profit forecasts for quarter as interest rates rise https://t.co/Ly1W9gy0HT @NatWestGroup #NWG #Katie_Proactive
— Proactive (@proactive_UK) April 29, 2022
Fast-moving consumer goods giant Reckitt Benckiser Group PLC (LSE:RKT, ETR:3RB) headed 1.5% higher to 6,298p after it reported a 5.6% increase in net revenue growth in the first quarter, driven by a 20% jump in health and nutrition, which more than offset a 9% drop in its hygiene division.
The company is now guiding for 2022 net revenue growth towards the upper end of its guidance of 1-4%.
“There has been an interesting contrast this week between Reckitt and Unilever with the former expecting margins to come in towards the upper end of its expected range whereas Unilever issued softer full-year margin guidance. Both companies are grappling with similar headwinds from pressures related to cost inflation with both responding with pricing actions. Reckitt said its investments in brand, innovation and execution have also supported its share price. After a shaky start to the year, shares in Reckitt have started to enjoy some upward momentum since the March lows, rallying around 15% with the potential to re-test the 2022 peak,” suggested Victoria Scholar at interactive investor.
consumer staples remain in a better position than consumer discretionary overall. Reckitt Benckiser (RKT LN) results today clearly highlight this, with Q1 revenues lfl rising 5.6%; of which 5.3% was price and 0.3% volume: cc: @SkeleCap @lhamtil pic.twitter.com/v75zSjXElc
— BionicBanker (@BrokenBanker) April 29, 2022
6.38am: Rally expected to continue
Yesterday’s rally is set to continue after a sparkling performance by Wall Street yesterday, marred only by underwhelming updates from Amazon.com and Apple after-hours.
Spread betting quotes suggest the FTSE 100 will open 59 points firmer at 7,568.
In the US, the Dow Jones leapt 614 points to close at 33,916 while the S&P 500 advanced 104 points to 4,287.50.
$AMZN Amazon stock dives as earnings reveal impact of pandemic, labour shortages https://t.co/YKmrosc08x #AMZN
— Proactive USA (@proactive_NA) April 28, 2022
“Amazon disappointed on earnings as it struggles with supply and cost increase issues and a cloudy outlook. Apple posted spectacular results, but in the ensuing press conference, warned of revenue hits from supply chain problems as well. Intel also released decent results but also warned of a challenging outlook. In extended trading, both Apple and Amazon stock was sold heavily, unwinding a part of the overnight recovery and pushing Nasdaq and S&P futures lower in Asia,” reported Jeffrey Halley at OANDA.
"Apple CFO Luca Maestri warned of several challenges in the current quarter, including supply constraints related to Covid that could hurt sales by between $4 billion and $8 billion. Apple also warned that demand in China was being hurt..." https://t.co/QZhgSZh6Nb
— Alex Kantrowitz (@Kantrowitz) April 28, 2022
In Asia today, the Japanese market is on holiday. In Hong Kong, the Hang Seng is 410 points to the good at 20,686.
In London today, we have updates expected from NatWest Group PLC (LSE:NWG) and AstraZeneca PLC (LSE:AZN).
At NatWest, “the main focus is expected to be on lending patterns to not only consumers, but business more broadly,” according to Michael Hewson at CMC Markets while with AstraZeneca, investors will e hoping for good news from the company’s growth drivers – Tagrisso, Lynparza and Imfinzi – after a disappointing showing in the final quarter of 2021.
Around the markets
- Sterling: US$1.2503, up 0.45 cents
- Gilt: 1.879%, up 6.19 basis points
- Gold: US$1,907.50 an ounce, up US$16.20
- Oil: US$108.29 a barrel, up US$1.03
- Bitcoin: US$39,561, down US$367
- Ethereum: US$2,922, down US$27