- FTSE 100 closes 104 points higher
- Dow, S&P 500 higher, but Nasdaq down
- US inflation decelerates but not as much as hoped
4.50pm: Footsie finds gains
The FTSE 100 index ended higher on Wednesday helped by a morning rally from Wall Street blue-chips after US inflation data for April showed the first deceleration since last August, although it was still higher than consensus expectations.
At the close, the UK blue-chip index was 104.44 points, or 1.4% higher at 7,347.66, just below the day’s peak of 7,349.70 and well above the early session low of 7,238.97.
In New York, around London’s close, the Dow Jones Industrial Average was 313 points, or 1% higher at 32,473, while the broader S&P 500 index added 0.8%. But the Nasdaq Composite shed 0.1% as tech stocks stayed under pressure.
Chris Beauchamp, chief market analyst at online trading platform IG commented: “Efforts to build a sustainable base for a rally continue in equities, as an initial drop in US futures following the monthly US CPI figure is reversed and the opening hour of US trading sees some gains for embattled stock markets.
“To borrow a word, it is too soon to tell if the slowing of price growth is transitory or not, but slowing or not, 8.1% price growth is still far too hot for the Fed’s taste. Thus, while we might get a short-term, and dramatic, bounce in stocks, it is highly unlikely that we have seen the end of 2022’s volatility.”
Beauchamp added: “Jerome Powell has certainly been doing his best to fight inflation through higher rates, but comments from President Biden in the wake of inflation data shows that the administration expects the Fed to keep going in its quest to cool price growth. Some post-CPI dollar weakness is likely to give way to more upside for the greenback, at least until a global recession becomes a more distinct possibility.”
3.50pm: Windfall tax on oil firms?
A windfall tax on large oil and gas companies is not entirely out of the question, according to sources close to the Chancellor of Exchequer.
Rishi Sunak may issue the tax to alleviate the surging cost of living if the firms don’t reinvest their colossal record profits to accelerate the UK’s transition to green energy.
Sunak warned if sufficient investment was not upcoming "then, of course, that [windfall tax] is something I would look at."
Current policy of big energy companies not being taxed on excess profits is meant to encourage investments in renewable technologies. Boris Johnson agreed a windfall tax could put the future of UK energy under scrutiny.
3.28pm: Shell to install 100,000 EV charging points in UK by 2030
Shell PLC (LSE:SHEL, NYSE:SHEL) vowed to install 50,000 more electric vehicle (EV) charging points across the UK by 2030, on top of the same amount announced last year.
"Access to public charging needs to be made available to everyone, no matter where you live," Shell’s UK country chair David Bunch said in a statement.
The energy giant aims to help the government reach its target of 300,000 EV chargers by the decade end. There are just 31,000 currently.
So, that figure must increase by tenfold in eight years, the Climate Change Committee confirmed.
Meanwhile, The Department for Transport said it’ll invest £950mln into rapid charging points as part of its EV infrastructure strategy.
EV sales reached a new high in the first quarter, while new petrol and diesel vehicles will be banned from 2030.
The initial cost to purchase an EV is far greater, on average, compared with fossil fuel vehicles, but the operating costs are significantly lower.
2.55pm: US markets open lower
Unlike analysts’ expectations, US indices declined on open following American inflation figures that revealed rising prices eased to 8.3% year-over-year in April.
The tech-heavy Nasdaq, which has taken a battering in recent weeks as investors seek safe havens rather than riskier assets, sunk 80 points, or 0.68%.
The Dow Jones Industrial Average and S&P 500, however, experienced much smaller losses.
The Dow fell 9 points, or 0.03%, to 32,152, while the S&P eased 8 points, or 0.19%, lower to 3,994.
2.27pm: US inflation falls slightly to 8.3%
US inflation eased slightly in April to 8.3% year-over-year, according to the latest consumer price index (CPI) data released by the US Bureau of Labor Statistics this morning.
However, the CPI came in higher than the analyst consensus expectation of 8.1%.
The data indicates that while inflation remains high it may have peaked, with April reporting a smaller increase than the 8.5% jump reported in March which was the fastest annual gain since December 1981.
In an initial comment, AvaTrade chief market analyst Naeem Aslam said the reality was that serious measures were needed to cool inflation, otherwise “stagflation is here.”
“The month-on-month CPI number is really a blowout number which no one expected, and this has crushed the confidence among traders now,” Aslam said.
“The gold price has also crushed as traders are betting that the Fed will increase the rate much faster than anticipated.”
Aslam noted that the numbers suggested that not only the Fed would need to do more to control inflation, but also the Biden administration.
2.05pm: Toyota profits to fall as costs surge
Toyota said an “unprecedented” hike in raw material prices could hit full-year profits, which are expected to fall by 20%, according to a statement.
Raw material costs are expected to double to £9bn for the year, although it hopes to offset some of that by selling more vehicles, with estimates currently 7.5% ahead of last year.
Operating profit is expected to fall to £14.9bn from £18.6bn.
“Since the price of materials is rising, we need to work to reduce the amount of materials we use as much as possible and to replace them with less expensive materials,” said chief executive Kenta Kon, cited by the Guardian.
1.34pm: Trade unions insist UK government failed to enforce laws when dealing with P&O 800 sackings
Trade unions have encouraged the United Nations to intervene on behalf of the 800 seafarers that were unlawfully sacked by P&O Ferries in March.
They argue the UK government failed to enforce relevant labour laws and punitive sanctions following the layoffs.
Unions believe it was a huge violation of the International Labour Organisation's principle on collective bargaining and the freedom of association.
The government did, however, introduce new laws this week in the Queen’s Speech that stated all ferry operators using UK ports must pay sea workers at least minimum wage.
Stephen Cotton, International Transport Workers’ Federation general secretary, said: “P&O Ferries’ CEO has admitted the company behaved illegally when it fired 800 seafarers without warning in March, and he has told parliament he would do the same again.
“P&O Ferries has behaved in the most calculated and egregious way and expects to get away with it.”
12.59pm: Two in five workers anxious to return to office
Nearly 40% of workers said they’re worried about returning to the office as normality resumes following the Covid-19 pandemic.
Slack, the messaging application, surveyed 1,000 workers and found almost half of them said hybrid working is best for their mental health. Just two in five think their employer cares for their mental wellbeing.
Seven out of 10 said a four-day working week would improve their mental health.
Many respondents believed returning to the office would affect their work-life balance, with just 25% able to choose when they go into the office.
Half blamed the rising cost of food and travel for their hesitancy to return.
Chris Mills, of Slack, said: "An employee who is cared for and supported will be inspired to do their best work.
"It's positive to see UK workers highlighting that hybrid work and technology has an important part to play in their wellbeing.”
12.29pm: US markets expected to open higher
US markets are expected to open higher as investors eye key inflation data - scheduled for release before the start of trade - that are likely to shape the extent of the Federal Reserve's future interest rate hikes.
Futures for the Dow Jones Industrial Average gained 0.78% in Wednesday premarket trading, while those for the broader S&P 500 index rose 0.96% and the Nasdaq added 1.1%.
Markets ended mixed on Tuesday, a day after the worst day for global stocks since June 2020, as shares of technology companies regained some lost ground.
The Nasdaq finished 1% higher at 11,738 after sinking 4.3% on Monday. The S&P 500 eked out a 0.25% gain to end at 4,001 but the Dow lost 0.26% to close at 32,161.
"Markets have begun to stabilise over the last 24 hours following Monday’s rout, but there’s no doubt that risk appetite is still very subdued as worries about a potential recession gather pace,” commented Jim Reid, chief credit strategist at Deutsche Bank.
April’s consumer price index (CPI) is expected to show year-on-year inflation of 8.1%, with a month-on-month increase of 0.2%. March’s reading of 8.5% was the fastest annual gain since December 1981. The report is due for release at 8:30am Eastern Time.
“This will be a very important one for markets and the Fed, since although policymakers have strongly signalled that they’re inclined to continue hiking by 50bps (basis points) at the next couple of meetings, there is still 25/50/75bps to play for after those meetings,” Reid added. “Today's report will help shape the early read into this and has an ability to move markets in a large manner if diverging from consensus too far.”
11.59am: National Grid to pay UK homes £200mln within two years
National Grid revealed it’ll pay £200mln in excess revenues to UK homes within the next two years rather than waiting for the culmination of the five-year review period.
The premature payback, which the energy regulator approved, is meant to reduce energy bills and alleviate the rising cost of living crisis.
Although Ofgem has not decided how the money will be repaid to households from the company’s power link profits, which are paid when a predetermined cap is exceeded.
John Pettigrew, chief executive of National Grid, said: “While National Grid’s impact on customer bills is relatively small, we strive every day to keep our costs as low as possible.
“Given how challenging the current rise in overall energy costs is for people across the country, we want to play our part in helping reduce consumer bills.
“That’s why we have requested this change to our standard regulatory process and are working with Ofgem to accelerate payments over the next two years to make a difference now.
11.28am: 1.5mln UK homes' food and energy bills to exceed disposable income
New research from a think tank expects nearly 1.5mln households across the UK to face food and energy bills that are more than their disposable income.
National Institute of Economic and Social Research (NIESR) believes the highest incidence rates will be in London and Scotland.
According to its research, the war in Ukraine and the impact this has had on prices would lead to a further rise in inflation, and consequentially, a fall in output and real income.
GDP is expected to slow over the next few years due to a “combination of stocks”, such as war, Brexit, Covid and energy prices.
NIESR also added that the Chancellor, Rishi Sunak, should provide a further £2.85bn of support in a one-off £250 payment to 11.3mln lower-income households to cushion the income shock for the next year.
10.57am: Scottish Mortage no longer UK's largest trust
Scottish Mortgage Investment Trust is no longer Britain’s largest investment trust by market cap, according to interactive investor, replaced by 3i Group PLC (LSE:III).
A brutal tech-sell off so far this year has seen the trust lose 38% of its share price. with its current market cap now £11.5bn.
“Scottish Mortgage Investment Trust provides global exposure to disruptive growth companies, public and private, selected by highly experienced managers,” said Dzmitry Lipski, head of fund research at interactive investor.
“The strength of their stock-picking skills combined with strong risk-adjusted performance and competitive fees make this a good choice for adventurous long-term investors.
“Investors should note, however, that it is higher-risk investment due to its high portfolio concentration, exposure to unquoted companies and tech stocks.”
“The risks of all this is enhanced further by gearing (borrowing), so it works better as a satellite holding in a well-diversified portfolio.”
“The style bias of the trust is toward growth, with less attention paid to valuation, meaning it can complement other funds with a core or value style orientation.”
“Despite the recent sell off, or as long-term investors would say, ‘short term volatility’, it is still well positioned to grow and reward patient investors over the longer term.”
“The size of assets should continue to provide easier access to more opportunities in both public and private markets and the managers expertise and their commitment to work with academia should allow them to find modern portfolio ideas and maintain a competitive edge against other players.”
“Support and access to wider resources from Baillie Gifford are also important, especially in such challenging times.”
10.12am: Quick snapshot
FTSE 100 started today as it finished yesterday, gaining 90 points to 7,333 as US stocks recovered slightly after Monday’s battering.
Elon Musk said he would reverse Donald Trump’s Twitter ban if his bid were to be successful. The world’s richest man claimed the decision was "morally wrong and flat-out stupid.”
Ilika said trading for the year to April has been in line with internal expectations, with the company continuing to explore opportunities for its solid-state batteries. Underlying loss is expected to be around £7mln, although that is due to the opening of its manufacturing facility.
Zephyr Energy said output from its asset portfolio in the Williston Basin, North Dakota, almost tripled in the first quarter of 2022. Sales from the (non-operated) portfolio averaged circa 1,600 barrels per day net, up from 548 in the previous three months.
Advanced Oncotherapy’s cancer treating LIGHT proton beam therapy system is able to deliver FLASH radiotherapy more effectively than the existing technology. That, at least, is the conclusion arrived at by two papers authored by senior research staff at the company.
9.36am: Footsie opens strong
The Footsie has extended its earlier gains, now up 71 points or almost 1% to 7,314 to erase a portion of yesterday's losses, while the FTSE 250 is up 94 points or 0.5% higher to 19,479 after hitting a two-month low on Tuesday.
Looking around, TUI AG (LSE:TUI), the German tour operator is helping drive positive sentiment, saying it expects to climb back into the black this year as the travel market continues to recover.
The today’s update indicates that bookings are moving in a positive trajectory and holidaymakers are yet to be dissuaded by the 20% jump in peak season average selling prices versus 2019.
"This suggests that Tui can pass some of its additional costs from rising fuel bills and cost inflation onto customers as it aims to simultaneously pay back its debts and restore profitability," said Victoria Scholar, market analyst at Interactive Investor.
Elsewhere in FTSE 100 company results, a positive first-quarter update from ITV PLC (LSE:ITV), where it beat expectations for ad revenues, has not helped its shares recover after the fright markets took to its March launch of another streaming service, ITVX.
Reports that the company might be interested in a £1bn bid for Channel 4 have been treated with indifference, with the shares earlier this week sliding to their lowest levels since October 2020 and up only a fraction of a penny this morning.
"All in all today’s update while a decent one, does little to inspire confidence that ITV has a clear strategy when it comes to its digital offering, and certainly doesn’t inspire confidence that it can reach its target of £750m of digital revenue by 2026," said market analyst Michael Hewson at CMC Markets.
8.29am: Positive start delivered
The FTSE 100 made a positive start to the trading day with the overnight recovery in US stocks helping to buoy sentiment.
The index of UK blue chips advanced 34 points 7,277.51 in the first half-hour.
Compass PLC, the contract caterer, led the way with a near-8% jump after it upgraded guidance for the year in the wake of a strong first-half showing, with trading back to 2019 levels.
Scottish Mortgage Investment Trust PLC (LSE:SMT), one of the UK’s largest investors in Silicon Valley, was up 2.6% after the tech-led Nasdaq righted itself after the recent bloodletting.
Bargain hunting after the recent China-inspired sell-off propelled the miners towards the top of the Footsie leader board.
Anglo American PLC (LSE:AAL) led the way with a 2% gain, closely followed by Rio Tinto PLC (LSE:RIO) and Antofagasta PLC (LSE:ANTO).
6.55am: Positive start predicted
The FTSE 100 is set to start into positive territory on Wednesday as Wall Street gyrations continue to move global market indices.
CFD firm IG Markets sees the London benchmark up close to half a percent, up 38 points, making a price of 7,293 to 7,296 with just over an hour to go until the open.
Mixed-bag trading on Wall Street remains the lever, with US inflation data looked out for later.
“The ebb and flow of US markets continues to be the main driver, with the S&P500 making a new one year low at 3,958, before recovering back above 4,000, to eke out a modest gain, while the Nasdaq 100 closed higher, and the Dow closed lower,” said Michael Hewson, analyst at CMC Markets.
“This slightly more positive turn should help markets here in Europe open modestly higher this morning.” He added: “We’ve seen plenty of speculation as to whether we’re close to seeing a plateau in short term inflationary pressures over the past few days, having seen bond yields slip back sharply in the last day or so.”
The Dow Jones closed 84 points or 0.26% lower at 32,160 for Tuesday, whilst the S&P 500 recouped 0.25% to 4,001 and the Nasdaq rallied nearly 1% to close trading at 11,737. The small-cap focussed Russell index meanwhile edged slightly lower to 1,761.
In Asia, Japan’s Nikkei was trading up 0.3% at 26,243 and Hong Kong’s Hang Seng strengthened more than 2% to 20,055. The Shanghai Composite similarly gained 1.9% to 3,094.
Around the markets
The pound: US$1.2336, up 0.18%
Gold: US$1,837 per ounce, up 0.22%
Silver: US$21.50 per ounce, up 1.03%
Brent Crude: US$104.90 per barrel, down 0.98%
WTI Crude: US$102.27 per barrel, down 0.78%
Bitcoin: US$31,508, down 0.67%
Ethereum: US$2,381, sown 0.2%