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FTSE 100 ends higher on Friday 13th after roller coaster week as Wall Street rallies following falls

Last updated: 16:45 13 May 2022 BST, First published: 06:31 13 May 2022 BST

London
  • FTSE 100 closes 184 points higher
  • Wall Street rallies after a rollercoaster week
  • Elon Musk puts Twitter takeover on hold

4.50pm: No horror show on Friday the 13th

The FTSE 100 index ended a rollercoaster ride of a week strongly, supported by a morning rally on Wall Street after big falls on the back of scary inflation numbers, with investors not running scared on Friday the 13th.

At the close, the UK blue-chip index was 184.81 points, or 2.6% higher at 7,418.15, just below the day’s peak of 7,421.95 and well above the session low of 7,233.34.

In New York, around London’s close, the Dow Jones Industrial Average was up 442 points, or 1.4% at 32,172, while the broader S&P 500 index gained 2.3%, and the Nasdaq Composite jumped 3.5% as tech stocks rebounded the most.

Michael Hewson, chief market analyst at CMC Markets UK commented: “For those of a superstitious nature, and after the week we’ve seen in equity markets, perhaps a hint of apprehension wasn’t surprising as we came to the final day of trading for this week on Friday 13th.

“As it turns out the price action today has been fairly orderly, as well as positive to boot with broad gains across the board, as we look to cap a week of gains for European markets, closing at the highs of the week, while the FTSE 100 has lagged.”

Hewson added: “US markets are taking their cues from today’s rebound in European markets, with a positive end to the week, although its not likely to prevent another weekly decline, which would be the 6th weekly decline in a row.

“The Nasdaq 100 is leading the gains, helped in some part by the sharp rebound in bitcoin and other related cryptocurrencies which are all higher, while the S&P 500 has managed to claw its way back above 4,000”.

3.30pm: US consumer lacks confidence

US consumer confidence took a knock this month as inflation continues to hit households.

The University of Michigan’s index of consumer sentiment declined 9.4% from April to hit its lowest since 2011.

It dropped to just 59.1 for this month, compared with 82.9 a year ago before price started their steep climb.

3.15pm: Scottish Mortgage on top

Everything is still coming up roses for the Footsie, which is up 141 points (2.0%) at 7,375.

Scottish Mortgage Investment Trust PLC (LSE:SMT), up 6.1% at 796.4p, is leading the advance as the Nasdaq Composite index in the US bounces back strongly.

US stocks opened higher on Friday after a week of significant losses amid continued inflation concerns and speculation over further tightening of monetary policy by the Fed.

Shortly after the open, the Dow was up 245 points or 0.8% at 31,976 points.

The S&P 500 had gained 47 points or 1.2% to 3,977 points and the Nasdaq had jumped 214 points or 1.9% at 11,585 points.

Meanwhile, Twitter Inc (NYSE:TWTR) (Twitter Inc (NYSE:TWTR)) stock had plunged about 11% following the news that Tesla Inc (NASDAQ:TSLA) (Tesla Inc (NASDAQ:TSLA)) CEO Elon Musk had put his $44 billion deal to acquire the social media company on hold.

Musk said he was waiting on confirmation that spam and fake accounts represent less than 5% of users on the platform, tweeting that he was "still committed to acquisition."

“Musk’s Twitter takeover was always destined to be a bumpy ride, and now it risks hitting the skids over the number of fake accounts on the platform. Twitter’s share price plunged by around 18% in pre-market trading following his tweet indicating the deal was temporarily on hold,” said Susannah Streeter at Hargreaves Lansdown.

“He is clearly intent in querying the company’s estimate that spam accounts make up less than 5% of active daily users – a key metric given that establishing an accurate number of real tweeters is considered to be key to future revenue streams via advertising or paid for subscriptions on the site. This is likely to come as highly frustrating for many in the company given that a number of senior executives have already been laid off in expectation of the takeover and the change in direction he was expected to pursue.

“There will also be questions raised over whether fake accounts are the real reason behind this delaying tactic, given that promoting free speech rather than focusing on wealth creation appeared to be his primary motivation for the takeover. The US$44 billion price tag is huge, and it may be a strategy to row back on the amount he is prepared to pay to acquire the platform,” she added.

2.15pm: Musk puts Twitter takeover on hold

Rising fuel prices has meant that Chancellor Rishi Sunak’s fuel duty cut has effectively been wiped out according to latest figures.

Average cost of a litre of fuel at the pump hit 178.4p, up from the previous high of 177.5p, two days before Sunak implemented the duty cut in March.

Compared to a year ago, it is £26 more expensive to fill up a 55-litre car.

Steve Gooding, director of the RAC Foundation said in Sky News, “As we feared, it didn't take long for the 5p reprieve to be swallowed up by global events which are driving pump prices back towards record levels.”

"The chancellor can't be blamed for the soaring cost of oil but he could and should go further in cutting the rate of duty.”

"Whilst all the attention is on the price of a barrel of Brent crude, the chancellor continues to quietly take in taxation only just less than 50% of everything that drivers pay on the forecourt.”

Labour MPs continue to call for a windfall tax from oil and gas giants, with Bernard Looney, chief executive of BP adding that the company’s investment plans “are not contingent on whether or not there is a windfall tax.”

1.52pm: Wedbush on Musk

More Wedbush and Dan Ives on Musk and Twitter. 

"The implications of this tweet will send this Twitter circus show into a Friday the 13th horror show as now the Street will view this deal as 1) likely falling apart, 2) Musk negotiating for a lower deal price, or 3) Musk simply walking away from the deal with a $1 billion breakup fee."

"In our opinion, with the nature of Tesla shares being used as leverage for Musk in the deal, the massive sell-off seen in Tesla and the overhang created by this deal has turned into a life of its own."

"The initial reaction will be positive for Tesla shares as now the Street will view the chances of a deal as less than 50%. If Musk does decide to still go down the deal path a clear renegotiation is likely on the table which calls into question a number of topics (financing path, leverage of Tesla stock, prior financing partners, employee reaction)."

"Many will view this as Musk using this Twitter filing/spam accounts as a way to get out of this deal in a vastly changing market. The nature of Musk creating so much uncertainty in a tweet (and not a filing) is very troubling to us and the Street and now sends this whole deal into a circus show with many questions and no concrete answers as to the path of this deal going forward."

1.22pm: US preview

US stocks were expected to open higher on Friday in a modest rebound after the hefty losses through most of the week as investors continue to grapple with the spectre of high inflation and rising interest rates.

Key indicators of inflation in the world’s biggest economy showed this week that price pressures are not letting up while the US Federal Reserve looks like it won’t waver from a path of aggressive interest rate increases.

Over in Europe, Russia’s invasion of Ukraine continues and the resulting sanctions on Russia’s oil exports are keeping commodity prices elevated.

Futures for the Dow Jones Industrial Average added 0.6% in premarket trading, while those for the broader S&P 500 index gained 0.95%, and contracts for the Nasdaq-100 rose 1.5%.
“Nothing has materially changed in the world from yesterday, and if anything, Russia/Europe risks are increasing. The rally today looks more like a technical rebound after a torrid week, than a structural turn in sentiment. As such, it should be taken with a grain of salt,” warned Jeffrey Halley, senior market analyst, Asia Pacific, at OANDA.

It has been a turbulent week for stock markets after US headline consumer price data came in higher than expected on Wednesday. Headline CPI inflation was 8.3% in April, slower thanthe  8.5% seen in March but higher than expectations of around 8.1%. There is no indication yet whether inflation has peaked. Factory gate prices for April, out on Thursday, drew a similar picture. The producer price index was lower in April compared with March but still beat expectations.

Meanwhile, US Fed chairman Jerome Powell went on record yesterday to say that achieving a hoped-for soft landing for the US may be a big ask.

“So a soft landing is ... really just getting back to 2% inflation while keeping the labor market strong. And it’s quite challenging to accomplish that right now, for a couple of reasons,” Powell was quoted as saying in an interview with Marketplace.

Elsewhere, oil prices were higher amid rising tensions between Russia and the European Union. WTI crude futures were up 1.6% at $107.81 a barrel while Brent crude futures were also 1.6% higher at $109.15 a barrel.

“While the Europeans are going around their own sanctions against Russia by opening accounts with Gazprom bank to pay the Russian gas in exchange of rubles, the latest news suggest that Russia is now cutting the German gas as a retaliation to its sanctions,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

12.57pm: Musk still pushing ahead

Musk tweeted to confirm he is still committed to taking over Twitter.

 

12.37pm: What next for Musk?

WedBush analyst Dan Ives has some interesting theories on what this all means for Musk and Twitter. 

 

12.23pm: Musk, Musk, Musk...

More on Musk from Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

‘’Musk’s Twitter takeover was always destined to be a bumpy ride, and now it risks hitting the skids over the number of fake accounts on the platform. Twitter’s share price plunged by around 18% in pre-market trading following his tweet indicating the deal was temporarily on hold."

"He is clearly intent in querying the company’s estimate that spam accounts make up less than 5% of active daily users – a key metric given that establishing an accurate number of real tweeters is considered to be key to future revenue streams via advertising or paid for subscriptions on the site."

"This is likely to come as highly frustrating for many in the company given that a number of senior executives have already been laid off in expectation of the takeover and the change in direction he was expected to pursue."

"There will also be questions raised over whether fake accounts are the real reason behind this delaying tactic, given that promoting free speech rather than focusing on wealth creation appeared to be his primary motivation for the takeover. The $44 billion price tag is huge, and it may be a strategy to row back on the amount he is prepared to pay to acquire the platform.’’

11.52am: Musk's got cold feet

Analysts and reproters have speculated that Musk is simply looking for a way out of his US$44bn takeover of Twitter following the latest twist in the sage.

Twitter’s shares never reached Musk’s US$54.20 per share bid, with some arguing Musk has cold feet as a result.

 

11.23am: Musk puts Twitter deal on hold

Elon Musk said he is putting his Twitter deal on hold over concerns over the number of fake or bot accounts on the site.

 

Twitter estimated that less than 5% of its monetizable daily active users are fake accounts.

Musk had tweeted a few weeks ago that one of his actions as head of the social media company would be to remove ‘spam bots.’

The Tesla chief executive is waiting to see whether the figures are indeed true.

Read more here

11.04am: Raise interest rates, says Rees-Mogg

Conservative minister Jacob Rees-Mogg urged the Bank of England to increase interest rates and rejected calls for an emergency budget to help lower-income households.

The 52-year-old said to Times Radio higher borrowing costs would cool rising inflation.

Rees-Mogg also supported calls to cut over 90,000 civil service jobs after Brexit in attempts to redivert tax payer’s money elsewhere.

However, he did reject the idea of providing financial aid, despite the ever-growing calls, with the boss of John Lewis the latest to issue a cry to help those struggling the most.

“The right responses are tighter monetary policy, which is the responsibility of the Bank of England, and constrained fiscal policy.”

“An emergency budget is not likely to be an answer to this. What is going to be an answer are essentially long-term measures combined with the immediate help that’s been given to people who are particularly affected.”

10.34am: Cheap food era is over

Justin King, the former boss at Sainsbury’s, warned that the UK’s ‘golden era’ of cheap food is ending as inflation continues to soar.

King suggested that at some point, supermarkets will be forced to pass on costs to consumers, despite reporting higher earnings, with Tesco and Sainsbury’s last month announcing annual pre-tax profits had doubled.

“The headline profit numbers are of course, large in the context of any household budget,” King told BBC Radio 4’s Today programme.

“But the margins in supermarkets are around 3%. So even if supermarkets made no profits at all, they wouldn’t really be able to make a huge dent in the cost inflation that is coming through the system.”

Shoppers would have to start making hard choices, King warned, with regards to how they spend their money, with the Bank of England saying inflation will likely exceed 10% this year, the highest since 1982.

He also went on to acknowledge that many households may not be able to afford more expensive food and suggested that the government should intervene.

He said the decision to introduce a £20 a week uplift on universal credit during the Covid crisis could be a model for extra assistance. “I’d be very supportive of that kind of approach,” King said.

10.00am: Crypto recovery?

In what has been a torrid week for cryptocurrencies, there may be some early signs of recovery as the week draws to a close.

Bitcoin, the largest coin by market cap, rallied 13% to go to US$30,434, recovering from a low of US$26,000 yesterday.

Ethereum also surged 13%, climbing to US$2,100. The coin had dipped well below US$2,000 in the last 24 hours, to as low as US$1,700.

According to Ipek Ozkardeskaya, a senior analyst at Swissquote, “the dust seems to be settling in cryptocurrencies”.

“Terra and Luna are now worth almost nothing and probably won’t regain investors’ confidence.”

Terra, a stablecoin pegged to the US dollar, lost nearly all its value after an error in its algorithmic system, which manages supply, caused the coin to become unpegged. This set off mass selling, only worsening the situation.

Ozkardeskaya noted that Bitcoin rallying past US$30,000 “is a sign that the broader sector may not have been damaged as much as we first feared”.

9.34am: Copper hits seven month low

London's blue chip index rebounded strongly, offsetting most of yesterday's losses. 

However, fears over a recession still linger and is hitting the price of copper, often seen as a measure of a healthy economy.

The metal is trading at seven-month lows, around US$9,051 per tonne.

Copper is on track, therefore, to fall for the sixth consecutive week

9.01am: Snapshot

A quick look at what's going on.

Two Twitter bosses are leaving and hiring has been paused to improve efficiency ahead of Elon Musk’s US$44bn takeover.  

Boris Johnson urged ministers to slash 90,000 civil service jobs to free up billions to reduce taxes and help households. The civil servants' union labelled it “another headline-grabbing stunt or a reckless slash-and-burn to public services" 

More renters are looking for homes with bills included as energy prices and the cost of living surges.  This comes as the demand for renting increases drastically.  

Elsewhere in the market, Condor Gold said its La India open pit was essentially construction-ready and materially de-risked. The chief executive also said the definitive feasibility study should be unveiled in the third quarter.

Hydrogen Utopia confirmed speculation about a possible tie-up with Powerhouse Energy.  The two parties are in discussions over a project opportunity in the Republic of Ireland.

Capital Metals, a company developing the Eastern Minerals Project in Sri Lanka, announced the results of an independent study of the project. The development study demonstrated exceptional economics resulting in a high margin operation.

8.31am: Footsie starts strong

Footsie rallied as it looks to end an extremely volatile week on a high note, up 60 points to 7,293.

Ocado leads the way as the index’s biggest riser, closely followed by insurance giant Prudential.

Despite the strong open “’ investors are continuing to wrestling with worries over inflation,” according to Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“As the oil price climbs back up again and supply concerns resurface amid ongoing geo-political tensions. As the era of cheap money has hurtled to an end, lowering liquidity in the markets, trading in the sessions ahead is set to stay volatile”

Oil prices have surged once more, trading just over US$109.

“Prospects loom of a European ban on Russian crude while work on a compromise to cater for Hungary’s demand for an exemption continues,” Streeter added.

“Tensions have been pushed up after Russia slapped sanctions on European subsidiaries of state owned Gazprom. For now though a lid is being kept on the oil price by China’s zero-Covid policy and its city wide whack-a-mole approach of using mass lockdowns to quash infection spikes.”

6.31am: Pre-market expectations

Equity investors are set to get some respite from their suffering as London is set to follow the lead of Asian markets and rally.

Spread betting quotes point to the FTSE 100 index opening 74 points higher at 7,307 after US markets had a placid day (by recent standards) on Thursday.

In the US, the Dow Jones slipped 103 points to 31,730 while the S&P 500 dipped 5 points to 3,930.

“New York had another tumultuous session overnight, dominated by noise from the crypto sector where (un)stable coins continued to suffer from untethering. Either the crypto noise was pushing equities down, or vice versa, I know not. Regardless, the intraday sell-offs reversed, and a semblance of calm descended on Wall Street into the close. For that we can probably thank Jerome Powell, who stuck to the 0.50% rate hike script overnight, temporarily dispelling 0.75% nerves,” said Jeffrey Halley at OANDA.

Asian markets are mostly higher this morning with Japan’s Nikkei 225 669 points heavier at 26,418 and Hong Kong’s Hang Seng index 387 points to the good at 19,767.

Even cryptocurrencies are feeling chipper, with Bitcoin US$2,027 more expensive at US$30,599, while on the currency markets, sterling has got up off the deck and regained some ground against the US dollar.

As ever, the performance of the Footsie at the opening will be dependent on reaction to news flow from the index’s constituents but also as ever, there is not much news flow expected on a Friday.

The Sage Group PLC (LSE:SGE) has top billing and is expected to reveal in its interims that it is on track to hit revenue growth targets for the full year.

“On balance we believe guidance may be left unchanged or at best raised to the upper end of the range. We think this is largely priced in,” said analysts at UBS.

Cloud-native annual recurring revenue grew 44% in 2021, which UBS said should translate into revenue growth at the same rate in the first quarter, and “we expect a similarly strong showing in Q2 albeit management may caution on tougher comparatives in H2”.

Around the markets

  • Sterling: US$1.2221, up 0.2 cents
  • Gilt: 1.665%, down 16 basis points
  • Gold: US$1,824,70 an ounce, up 10 cents
  • Oil: US$109.48 a barrel, up US$2.03
  • Bitcoin: US$30,599, up US$2,2027
  • Ethereum: US$2,098, +US173


 

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