- FTSE 100 ends nearly 68 points lower
- US stocks weak, notably the Nasdaq Composite
- Federal Reserve monetary policy decision due at 7.15pm GMT
4.50pm: Caution the watchword
The FTSE 100 index ended lower on Wednesday as Wall Street fell back in morning trading with investors nervously awaiting the latest Federal Reserve monetary policy decision, due at 7.15pm GMT.
The UK blue-chip index closed 67.88 points, or 0.9% lower at 7,493.45, the day’s low point and well below the session peak of 7,572.65.
In New York, around London’s close, the Dow Jones Industrial Average was 42 points, or 0.1% lower at 33,086, while the broader S&P 500 index shed 0.4%, and the Nasdaq Composite dropped 1.2% as sensitive tech stocks braced for another US interest rate hike.
Chris Beauchamp, chief market analyst at online trading platform IG commented: “It is not difficult to work out why stocks are edging down this afternoon. The Fed’s rate hike move might be broadly priced in, but markets are clearly nervous that an even more hawkish FOMC might prompt a surge in volatility that could push indices back below last week’s lows.”
“Even a dovish press conference might not help, since last week’s GDP contraction in the US has raised recession and stagflation concerns. Risk assets are still struggling to string together more than about two positive days in a row, and it seems unlikely that Powell can offer much in the way of good news,” Beauchamp added.
3.45pm: Retailers help drag market lower
Leading shares remain in the red ahead of two key central bank meetings, the US Federal Reserve later today and the Bank of England tomorrow.
Heading into the close, the FTSE 100 has fallen 38.68 points or 0.51% to 7522.65.
The mid-cap FTSE 250 meanwhile is down 1.4% at 20,234.34.
Retailers are a weak spot on concerns about a slowdown in spending as the cost of living crisis hits people's pockets.
B&Q owner Kingfisher PLC (LSE:KGF) is down 4.52%, JD Sports Fashion PLC (LSE:JD.) has fallen 3.63% and Primark owner Associated British Foods PLC (LSE:ABF) has lost 2.34%.
Elsewhere Just Eat Takeaway.com NV (LSE:JET, NASDAQ:GRUB) has dropped 7.07%.
Its chairman Adriaan Nühn said he would not stand for re-election at today's annual meeting, while chief operating officer Jörg Gerbig will not be re-appointed while an investigation takes place into a possible misconduct charge at a company event.
The home delivery service has been facing calls for the supervisory board to go from activist investor Cat Rock Capital.
Among the risers, gambling group Flutter Entertainment PLC (LSE:FLTR) is up 6.22% after its latest update, while the strong oil price has helped lift Shell PLC (LSE:SHEL, NYSE:SHEL) by 0.99%.
Michael Hewson, chief market analyst at CMC Markets UK, said: "European markets have spent most of the day trading lower ahead of tonight’s Federal Reserve rate decision, after the EU announced it had reached an accord to implement a ban on all Russian oil imports. This ban would take place “in an orderly fashion” by the end of this year, assuming that all parties can agree.
"In response oil prices have taken a leap to the upside, helping the likes of BP and Shell to outperform. It’s also the turn of Shell tomorrow to feel the harsh glare of politicians for making too much money from their underlying business as a result of the volatility in energy markets, although some of this will be tempered by the US$5bn write down to its Russian oil and gas assets."
3.05pm: US markets flat as investors weigh up data and rates
US shares started mainly flat as traders mull over jobs data and await an expected half-point rate hike by the Federal Reserve.
In early deals in New York, the Dow Jones Industrial Average gained around ten points to stand at 33,136. The S&P 500 added around two points to stand at 4,177.
The Nasdaq Composite Index shed nearly five points at 12,599.
It comes as processing firm ADP reported that private payrolls increased by just 247,000 for April this year. The figure is always closely watched as a pre-cursor to Friday's main event.
Estimates had been for a 390,000 gain so it was well short of expectations and also a significant decline from March this year, which saw an upwardly revised gain of 479,000.
It suggests that US companies are still struggling to find workers to fill open positions.
Meanwhile there were some confusing signals from two PMI reports.
The service sector of the US economy fell short of expectations in April, according to the ISM index.
US ISM Services Index Apr: 57.1 (exp 58.5; prev 58.3)
— LiveSquawk (@LiveSquawk) May 4, 2022
But the S&P Global surveys painted a different picture.
US S&P Global Services PMI Apr F: 55.6 (exp 54.7; prev 54.7)
- S&P Global Composite PMI Apr F: 56.0 (exp 55.1; prev 55.1)
— LiveSquawk (@LiveSquawk) May 4, 2022
Back in the UK and the FTSE 100 is still in the red, but off its worst levels.
It is down 27.68 points or 0.37% at 7533.65, having earlier fallen to 7510.
2.47pm: Banks face protestors at AGMs
Climate change protestors are out in force at annual meetings of both Barclays and Standard Chartered.
Inside Barclays chaotic shareholder meeting: AGM halted as security chase and drag out climate activists https://t.co/koaIc7uU58 pic.twitter.com/rWpVyy1FiE
— City A.M. (@CityAM) May 4, 2022
Extinction rebellion protest at the standard chartered AGM in London #cityintel #protest #London #uk #AGM @standardchart19 pic.twitter.com/ZAKF0wrRPn
— Cityintel (@Cityintel1) May 4, 2022
1.39pm: US job gains lower than forecast
Fewer US jobs were added last month than expected, according to the latest private payroll figures.
Ahead of the widely watched non-farm payroll numbers on Friday, the ADP report showed 247,000 new jobs added, compared to forecasts of a figure of 383,000.
US ADP Employment Change Apr: 247K (est 383K; prev 455K)
— LiveSquawk (@LiveSquawk) May 4, 2022
This was the weakest gain since the COVID-19 lockdowns.
“In April, the labor market recovery showed signs of slowing as the economy approaches full employment,” said Nela Richardson, chief economist at ADP. “While hiring demand remains strong, labor supply shortages caused job gains to soften for both goods producers and services providers. As the labor market tightens, small companies, with fewer than 50 employees, struggle with competition for wages amid increased costs.”
The miss is unlikely to deter the Federal Reserve from raising rates, however, or tightening its balance sheet.
11.56am: US investors await Fed rate rise
US stocks were expected to open flat to higher on Wednesday ahead of the Federal Open Market Committee’s rate decision later today, with markets pricing in a 50-basis point (bp) hike.
Investors will be watching for clues as to whether the Federal Reserve is planning many more rate increases amid the backdrop of commodity-driven price inflationary pressures and a tight labor market.
Futures for the Dow Jones Industrial Average rose 0.4% in pre-market trading, while those for the broader S&P 500 index gained 0.4%, and contracts for the Nasdaq-100 increased 0.3%.
“While the 50-basis point hike is fully priced in, there is a chance for the Fed to get more aggressive and hint at a 75bp hike in a future meeting, despite the economic indicators that start showing signs of slow down,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, noting that a 50bp would be the first such increase in two decades.
To some extent, the main focus for the day will be on the Fed's press conference rather than the rate decision which is being viewed as a foregone conclusion. Comments from chairman Jerome Powell will be closely watched for signs of a further aggressive tightening of monetary policy.
Among economic data out today, the latest ADP jobs figures will be key.
“The latest jobs data will throw light on what happened in the US jobs market in April. Due today, the ADP report is expected to print 395,000 new private job additions last month, and NFP data, due Friday, is also expected to add near 400,000 near non-farm jobs,” noted Ozkardeskaya.
Continued strength in the US jobs market means that the weakness in the latest GDP data is unlikely to change the Fed’s tightening plans, she added: “Therefore, the US policymakers will remain focused on the inflation battle for the coming quarters, at the expense of growth.”
Back in the UK, the FTSE 100 is down 41.91 points or 0.55% at 7519.42.
11.38am: Mid-cap index underperforms Footsie
The FTSE 100 remains in the red, down 40.94 points or 0.54% at 7520.39 at the moment.
But the FTSE 250 is putting in a far worse performance.
The mid-cap index is down 1.32% at 20,250 despite Aston Martin Lagonda Global Holdings PLC (LSE:AML) accelerating 10.95% following news it had appointed former Ferrari director Amedeo Felisa as chief executive as part of an immediate boardroom shake-up.
Among the losers is Direct Line Insurance Group PLC (LSE:DLG), down 6.85% as it reported a 2.4% fall in written premium in the first quarter.
And mid-cap retailers were also under pressure, with Frasers Group PLC (LSE:FRAS) falling 4.45% and Currys PLC (LSE:CURY) losing 4.2%.
10.38am: Cost of living crisis hits retail shares
Retailers are among the fallers as leading shares continue to head south ahead of the key interest rate decisions in the US and UK.
The sector is being weakened by more evidence of the growing cost of living crisis.
The British Retail Consortium and research group NielsenIQ said that non-food inflation jumped to 2.2% in April, up from 1.5% in March, and the highest rate since their report began in 2006.
Food inflation rose to 3.5% in April from 3.3% in March.
And with hefty price rises all round, the prospect of higher interest rates is not likely to do anything to boost the current fragile consumer confidence.
B&Q owner Kingfisher PLC (LSE:KGF) is the biggest faller in the Footsie, down 4.4%, closing followed by JD Sports Fashion PLC (LSE:JD.), off 4.23%.
Primark owner Associated British Foods PLC (LSE:ABF) is 3.28% lower.
Overall the FTSE 100 is now down 38.04 points or 0.5% at 7523.29.
10.08am: UK mortgage borrowing increases
Signs of continuing strength in the UK housing market.
Net mortgage borrowing increased to £7bn in March, up from £4.6bn the previous month, according to the latest Bank of England figures.
It remains above the pre-pandemic average of £4.3bn in the 12 months up to February 2020. Gross lending rose slightly to £26.5bn in March from £26.0bn in February, while gross repayments fell to £19.7bn in March from £21bn in February.
Approvals for house purchases, an indicator of future borrowing, were little changed at 70,700 in March, from 71,000 in February, but remain above the 12-month pre-pandemic average up to February 2020 of 66,700.
Andrew Montlake, managing director of mortgage broker Coreco, said: “Overall, the mortgage market remained strong during the first three to four months of the year, but is being straitjacketed by the lack of stock.
"There are, of course, countless headwinds ahead. Interest rates are rising to contain spiralling inflation, energy, food and fuel bills have gone through the roof and tax hikes have arrived with a bang. In the months ahead, it's likely that people's borrowing power will wane as lenders take into account the extra cost of living.
"However, though rates are rising, they are still low in historical terms and with competition among lenders fierce, this will continue to drive a certain level of transactions during the summer. A lot will depend on the jobs market and how it holds up during 2022, especially if we enter recession."
Meanwhile the Bank's figures also showed that individuals borrowed an additional £1.3bn in consumer credit in March, on net, following £1.6bn of borrowing in February
9.22am: Oil lifted by EU move
Oil is heading higher after the European Union announced plans to reduce dependency on Russian oil following the invasion of Ukraine.
Brent crude is up 3% at US$108.12 while West Texas Intermediate, the US benchmark, has added 3.1% to US$105.58.
The EU will ban imports of Russian oil by the end of this year, European Commission President Ursula von der Leyen says, pledging to "maximise pressure on Russia" and "minimise the collateral damage to us and our partners"https://t.co/DU4A92QCWC pic.twitter.com/XLa2Xp45MO
— Bloomberg UK (@BloombergUK) May 4, 2022
Neil Wilson, chief market analyst at Markets.com, said: "Crude oil rose as the EU said it would phase out Russian oil by the end of the year. WTI.. continues to chop around through the April range at $105.
"Obviously it’s going to be tricky to remove all Russian fossil fuels as not all members are equally in favour of the plan, but it’s showing the direction of travel. EIA crude oil inventories are later today, seen at -0.7m. API figures showed inventories fell by 3.5 million barrels for the week ended April 28th."
8.48am: Miners weigh on markets
Mining shares are weaker again, amid continuing concerns about the effects of the COVID-19 lockdowns in China.
Fresnillo PLC (LSE:FRES) has fallen 2.12%, Anglo American PLC (LSE:AAL) is down 1.77% and Rio Tinto PLC (LSE:RIO) is off 1.29%.
Even with a strong performance from Flutter Entertainment PLC (LSE:FLTR), now up 5.36%, the FTSE 100 remains in the red, down 18.64 points or 0.25% at 7542.69.
Victoria Scholar, head of investment at interactive investor said: “European markets are treading water as investors await the outcome of the Fed’s two-day policy meeting tonight.
"Key earnings continue to trickle out but central bank action is the most important theme for markets this week amid the global shift towards monetary tightening as inflation takes its toll. Flutter is trading at the top of the FTSE 100 after an upbeat trading statement while miners like Rio Tinto, Anglo American and Fresnillo struggle at the bottom of the UK index.”
8.16am: Just Eat under pressure
With the US Federal Reserve set to raise interest rates later and possibly announce the start of a reduction in its balance sheet - the opposite of quantitive easing - it's going to be a cautious kind of day.
UK investors also have the prospect of a rate rise from the Bank of England tomorrow, with the only real question being, how big a rise?
Before all that come the latest US private payroll jobs figures, which sometimes give a guide to the widely watched non-farm payroll number on Friday, and a few other bits and pieces of economic data.
So in early trading the FTSE 100 has edged down 19.73 points or 0.26% to 7541.6.
Shares in Paddy Power owner Flutter Entertainment PLC (LSE:FLTR) continued their recent winning streak, jumping 4.08% after the gambling group said first half revenues grew by 6% after strong growth in the US, with a good result from the Super Bowl.
Excluding the US, revenues fell by 3%.
Elsewhere Just Eat Takeaway.com NV (LSE:JET, NASDAQ:GRUB) is down 2.6% as its chairman Adriaan Nühn announced he would not be seeking re-election at today's annual meeting, while chief operating officer Jörg Gerbig will not be re-appointed while an investigation takes place into a possible misconduct charge at a company event.
The home delivery service has faced calls for the supervisory board to go from activist investor Cat Rock Capital.
Now Nühn says: "It is clear that shareholders have concerns about the challenges the company is facing. The supervisory board shares and understands these concerns, and the company has been in the process of addressing them.
"To ensure that the supervisory board can fully focus on the challenges and opportunities ahead, I believe it is important that there is strong support, particularly also among shareholders, for both the company and the supervisory board.
"Not seeking re-election is, I believe, the best decision I can take with regard to serving the interests of the company and its stakeholders, including its shareholders."
On Gerbig, the company said he was fully cooperating with the investigation and had full confidence in the outcome.
It added: "In order to avoid unnecessary uncertainties, the company deems it important to confirm that the complaints were not related to financial or reporting obligations. Given the confidential nature of [the company's] Speak Up Policy procedures and the requirement for a thorough process, recognising the privacy and interests of all involved, no additional information can be provided at this time."
6.50am: Markets cautious with Fed rate rise and balance sheet plans in focus
The FTSE 100 is predicted to make a slow but steady start to Wednesday as most investors are prepared for a US interest rate rise when the Federal Reserve meet later today.
CFD firm IG Markets has the London benchmark starting 12 points higher, making a price of 7,556 to 7,559 with just over an hour to go until the open.
Today’s American rate call comes after Tuesday’s equities respite which sweetened sentiments on Wall Street.
CMC Markets analyst Michael Hewson, in a note, said that a 50 basis point rate rise today would be of no surprise to most in the market, taking the Fed interest rate to 1%.
“This is the least of market expectations, when it comes to what the Fed may well announce today, with an outside chance we might get some members push for a 75bps hike,” the analyst said in a note. “The biggest question will be around the pace of its balance sheet reduction program along with the pace of subsequent rate hikes, with the potential for another 50bps hike to come in June,”
He added: “Powell’s comments at the IMF, that the Fed could well go much harder, and a lot quicker on rate hikes has prompted concern that the Fed may well overplay its hand at a time when the global economy looks set for a sustained slowdown, as China continues to lose its battle with Covid.”
Wall Street’s Dow Jones added 67 points or 0.2% to finish at 33,128 whilst the S&P 500 nudged up 0.49% to 4,175.
The Nasdaq notched up 0.22% to close at 12,563, whilst the small-cap Russell 2000 index performed best, rallying some 0.85% to 1,898.
In Asia, Japan’s Nikkei traded slightly lower to 26,818 and Hong Kong’s Hang Seng was marked 1.2% lower at 20,850. The Shanghai Composite, meanwhile, traded up slightly to 3,047.
Around the markets
The pound: US$1.2475, down 0.14%
Gold: US$1,863 per ounce, down 0.28%
Silver: US$22.52 per ounce, down 0.36%
Brent crude: US$106.40 per barrel, down 1.4%
WTI crude: US$103.62, down 1.4%
Bitcoin: US$38,102, down 0.9%
Ethereum: US$2,796, down 1.8%