- FTSE 100 closes down almost 1%
- UK manufacturing output is slowing
- GSK confirms spin-off date for Haleon
4.52pm: FTSE closes in red
FTSE 100 closed in the red on Wednesday ahead of the Jubilee holiday celebrations as traders were in downbeat mood.
Britain's blue-chip benchmark closed down around 74 points, or 0.98%, at 7,532.
"It looks like it’ll be 7600 and no further for the FTSE 100 ahead of the UK’s Jubilee holiday," noted Chris Beauchamp, chief market analyst at online trading platform IG.
"UK markets have been in no mood for celebrations today, running out of steam after last week’s rebound and suggesting that we are in for more losses as June gets underway.
"It looks like investors remain much more cautious about chasing gain in equities, and if anything remain firmly averse to recommitting themselves to stocks as the outlook for growth and inflation continues to worsen."
3.45pm: US stocks down
Over an hour into US trading, the main three indices were all changing hands in the red despite analysts anticipating a mixed bag.
The Dow slumped 0.6%, or 199 points, to 32,791 but was slightly outpaced by the S&P 500 in its decline, which slumped 0.7% to 4,103.
The tech-heavy Nasdaq was having the least turbulent start to Wednesday, having eased 0.3%, or 36 points, lower to 12,046.
2.50pm: ECB to hike interest rates next week
With the Jubilee weekend rapidly approaching, investors have already cast half an eye to the events of next week.
The European Central Bank will hike interest rates on Thursday 9 June following the euro zone’s record high inflation of 8.1% in May, as unveiled on Tuesday.
But by how much?
Governing council member Robert Holzmann, who is also the Austrian central bank chief, has pushed for a 50 basis-point (bps) rise, or 0.5 percentage points, rather than a 25bps hike.
The Dutch and Latvian central bank chiefs called for the same level rise.
Holzmann said: “A 50 basis-point rise would send the necessary clear signal that the ECB is serious about fighting inflation.
“A clear interest-rate signal would also help to support the euro’s exchange rate.
“The weak euro is not helpful on the inflation front.”
Although not everyone had the same opinion, with the Italian and Spanish governors urging for gradual increases.
Inflation in 19 countries last month was over four times the European Central Bank’s target of 2%.
2.00pm: Airline bosses bite back at Shapps
Airline bosses snapped back at transport secretary Grant Shapps’ allegations that they oversold flights they knew would end up being cancelled.
Shapps had said airlines knew the demand would be this high and had months to prepare for half-term and the Jubilee weekend.
Steve Heapy, Jet2 chief executive, hit back by blaming Shapps for the chaos witnessed at airports in recent days, with hundreds cancelled since the start of the week alone.
He added ministers have a “scant” understanding of how the aviation industry operates and really works.
Shapps will meet with airports, airlines and ground handlers to "find out what's gone wrong and how they are planning to end the current run of cancellations and delays.”
Meanwhile, Department for Transport officials are to hold a call with trade body Airlines UK on Wednesday to try and alleviate the issue.
1.14pm: IAG investors surprisingly flying high
Investors in British Airways owner IAG seem impressed with the number of cancellations their company is making, with the Heathrow-based airline withdrawing 124 short-haul flights in and out of its main UK hub today.
easyJet PLC (LSE:EZJ) also scrapped at least 31 flights, with the airline saying passengers were given advance notice but some travellers taking to social media to reveal how they were only informed having reached the airport.
My @easyJet flight to Bologna has been cancelled 10 minutes ago - two hours before departure. Appalling service.
— Gianluca Mezzofiore (@GianlucaMezzo) June 1, 2022
Shares in (International Consolidated Airlines Group SA (LSE:IAG)) are up 1.3% but easyJet's are down 0.2%, while those in TUI are down 0.4% after the tour operator cancelled six flights a day from Manchester airport for the whole of June.
Manchester said this was due to staffing shortages at the Anglo-German group and for baggage handling provider Swissport.
12.08pm: No-one's feeling bullish
The FTSE 100 has attempted to erase losses but is remaining in the red, with much of Europe in a similar position.
Wall Street is heading for a mixed open with trading likely to be choppy ahead of key economic data, while elsewhere in North America a rate hike is expected from the Bank of Canada.
US manufacturing sector PMIs are due today while later in the week the big non-farm payrolls figure is awaited. Both sets of data will show how the US economy is faring amid elevated levels of inflation and rising interest rates.
Futures for the Dow Jones were up 0.4% in pre-market trading, while S&P 500 futures are up 0.1%, but the Nasdaq-100 is on course for a 0.1% dip.
US manufacturing is expected to show continued growth in May but at a slightly easier pace than in the previous month.
“Today is also the first day of June which means today is the first day that we will see the Fed in the US begin the process of reducing the size of its balance sheet," said Naeem Aslam, chief market analyst at AvaTrade.
“It is highly possible that most traders may sit on the sideline today as they would like to see the reaction of this activity and how market players react to this monetary policy decision.”
The US Federal Reserve is expected to continue raising interest rates by 50 basis points and investors fear that higher interest rates will crimp economic growth and hit corporate bottom lines.
“The current quarterly earning period is almost coming to end, and the message that we have heard from companies is that they are preparing themselves for higher cost, and for an environment where consumers may not want to dig deep into their pockets,” said Aslam.
Looking at energy markets, Aslam said supply is the major concern, with the EU prepared to move away from Russian oil leaving traders to wonder “how the supply and demand equation will come to a level under which we could see oil prices back below the $100 price level.
“For now, it is very much clear that oil prices are likely to remain high for an extended period as OPEC is in no mood to pump extra oil supply."
11.35am: Those Germans...
The chief executive of DWS, the asset manager controlled by German-based Deutsche Bank, resigned on Wednesday following the lender’s second police raid within a month on greenwashing allegations.
Law officials entered both firms on Tuesday, which seemed to be the final nail for Asoka Woehrmann after months of turbulent times.
Stefan Hoops, head of the lender’s corporate bank, will replace Woehrmann as the boss of the world’s largest manager of alternative investments.
The departure of Woehrmann, who was a close acquaintance of Deutsche Bank chief executive Christian Sewing, further piled the pressure on the lender following ex DWS chief sustainability officer Desiree Fixler’s allegations of inflated ESG credentials by the bank.
11.03am: More flight cancellations exacerbate Jubilee travel chaos
More flights have been cancelled from UK airports, in what seems to be a daily occurrence of late, as the Jubilee weekend travel chaos continued to mount.
Tui, formerly known as Thompson, and EasyJet were amongst the holidaymakers to make cancellations, with the latter cutting at least 31 from Gatwick to other European destinations.
Although most customers were warned in advance, transport secretary Grant Shapps said airlines had “seriously oversold flights and holidays.”
The operators and airlines blamed staff shortages, while Airlines UK, which represents the major British airlines, insisted the “vast majority” of flights would be operating as scheduled.
Shapps will meet with airports, airlines and ground handlers to "find out what's gone wrong and how they are planning to end the current run of cancellations and delays.”
10.31am: Manufacturing slows
The manufacturing PMI "suggests the recovery in manufacturing output is slowing", says economist Samuel Tombs at Pantheon Macroeconomics.
"The drop in the headline index in May left it at its lowest level since Janaury 2021, when the U.K. still was in full lockdown".
He said this largely reflected a sharp decline in the output index, while a new orders index also fell to reflect a decline in external demand, he noted, along with the new export orders index to its lowest level since June 2020.
"Note too that the export balance remained below its Eurozone equivalent for the 17th consecutive month, despite the fact that European firms have a greater exposure to Ukrainian supply chains and final demand from China.
"UK manufacturers, therefore, still appear to be uniquely disadvantaged by Brexit."
9.44am: FTSE flops
The Footsie has slumped into the red after starting higher, with the oil majors weighing on the index as their shares flattened off.
UK manufacturing data worsened is the latest data this morning.
The S&P Global/CIPS manufacturing PMI fell to 54.6 in May from 55.2 in April, in line with the consensus and the flash estimate figure of 54.6.
Outside the ex-divs mentioned below, miners Anglo American PLC (LSE:AAL) and Glencore PLC (LSE:GLEN), plus Prudential PLC, Intermediate Capital and Experian (LSE:EXPN) were among the big fallers.
Elsewhere, the retail sector is making headlines, with Dr Martens PLC shares stomping 29% higher after the bootmaker reported a strong set of results and upgraded guidance for the new year.
Mike Ashley showed his taste for a cut-price deal is still strong, as his Frasers Group PLC (LSE:FRAS) swooped to buy failed online women's fashion retailer Missguided from administrators for £20mln.
In merger news, Tullow Oil PLC, now three-quarters of its size in late 2019, and Capricorn Energy have agreed to merge to create “a leading African energy company”.
In demerger news, GlaxoSmithKline said its consumer healthcare spin-off Haleon PLC should begin trading as an independent company in London on 18 July and Wood Group (John) PLC (LSE:WG.) has agreed to sell its Built Environment arm for £1.4bn.
9.01am: Retail and house price inflation
Economic data this morning includes UK house prices from Nationwide and retail prices from the British Retail Consortium (BRC).
Annual house price growth slowed in May to 11.2% from 12.1% but that's still pretty strong. Nationwide called it a “slight slowing”, with monthly growth of 0.9% being the tenth successive monthly increase.
Retail prices meanwhile rose by 2.8% in May from 2.7% in April, according to the BRC in partnership with NielsenIQ, which was the highest rate of inflation since July 2011.
“With little sign that the cost burden on retailers will ease any time soon, they will be left with little room for maneuver, especially those whose supply chains are affected by lockdowns in China and the war in Ukraine,” Helen Dickinson, the British Retail Consortium’s chief executive, said.
Food inflation accelerated to 4.3% in May, from 3.5% a month earlier, which was its highest inflation rate since April 2012, the report said, a day after the ONS released figures indicating that value brands are not rising faster than others but some 'poorer' staples are seeing steep increases in price.
The BRC said non-food price inflation slowed to 2% in May from 2.2% in April.
8.35am: Starting on the front foot
The FTSE 100 opened higher to start the month of June and finish the curtailed pre-jubilee week on a positive note, with banks and travel-related shares driving the gains.
London's blue-chip benchmark had added 12 points to 7,620 after almost half an hour of trading.
Airline engine maker Rolls-Royce Holdings PLC was top of the leaderboard, up 1.8%, with hotel owners (Intercontinental Hotels Group PLC (LSE:IHG)) and Whitbread PLC (LSE:WTB) not far away.
Barclays PLC (LSE:BARC), Lloyds Banking Group PLC (LSE:LLOY) and NatWest Group PLC (LSE:NWG) were also nearby, up between 1.5% and 1.3%.
Oil giants Shell and BP were above the waterline, having started in the red as oil prices took another rollercoaster ride, with Brent crude lurching lower overnight from the US$123 heights yesterday to US$115 per barrel, before bouncing back up again this morning to US$117.
Vodafone, Royal Mail, National Grid and Scottish Mortgage Investment Trust were among the names in red as their shares went ex-dividend, with 9.31 points being knocked off the index.
Airlines were in focus as criticism ramps up about mass flight cancellations in the UK, said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
"Pent up demand is colliding with a severe labour crunch for the industry as companies struggle to recruit workers for key ground roles in particular, following mass pandemic lay-offs."
The platinum jubilee will give grocers Tesco and Sainsbury a mini boost in sales, she said, as shoppers splash out on food and drink for street parties.
"But the planned celebrations over the extra-long bank holiday weekend are expected to lead to a drop in productivity, as flag waving, parties and BBQs replace hours punching keyboards and on factory floors. The golden jubilee celebrations in 2002 saw production fall by 5.4% and it dipped again in 2012 for the 60th anniversary. So don’t be surprised if a hangover comes in the form of a knock to economic output in June’s GDP snapshot, after all the fun.’’
6.45am: Set for gains
The FTSE 100 is set to start the last day of the especially short working week on the front foot.
CFD firm IG Markets has the London benchmark moving nearly 40 points higher, making a price of 7,616 to 7,619.
Whilst the work week is ending early, the month of June looks set to start positively.
“With US markets closing modestly lower, but well off their lows of the day, European markets look set to open the month higher with a late sell-off in oil prices threatening to act as a drag on the FTSE100, on reports that OPEC might be open to expelling Russia from its oil production deal, paving the way for a possible unilateral supply increase,” said Michael Hewson, analyst at CMC Markets.
“As we get a new month underway, we already know that the economic growth in Europe and the UK is slowing due to rising prices, and supply chain disruptions caused by the Russian invasion of Ukraine and Covid lockdowns in China.”
Swissquote Bank analyst Ipek Ozkardeskaya, meanwhile, added: “US futures hint at a positive start to the month, but the gains are vulnerable to inflation fears, geopolitical tensions, and the positive pressure in energy prices.”
Tuesday’s close on Wall Street saw the Dow Jones give up 222 points or 0.67% to 32,990 while the S&P 500 similarly shed 0.63% to end the session at 4,132.
The Nasdaq closed 0.41% lower, finishing at 12,081. The small-cap Russell 2000 index fell furthest though losing 1.26% to trade at 1,864 by the end of the day.
In Asia this morning, Japan’s Nikkei rose some 187 points or 0.69% to 27,467.
Hong Kong’s Hang Seng remained on the back foot, down 242 points or 1.13% at 21,173.
The Shanghai Composite meanwhile dipped 0.77% to 3,162.
Around the markets
The pound: US$1.2581, down 0.146%
Gold: US$1,832 per ounce, down 0.23%
Silver: US$21.47 per ounce, down 0.28%
Brent crude: US$114.90 per barrel, down 1.87%
WTI crude: US$114.99 per barrel, down 2.01%
Bitcoin: US$31,573, down 0.26%
Ethereum: US$1.931, down 2.51%