- FTSE 100 closes 75 points higher
- US stocks ahead at start of new week
- Boris Johnson expected to survive vote
4.50pm: Footsie ends back above 7,600
The FTSE 100 index returned from the four-day Platinum Jubilee holidays in a positive mood, reaching back above the 7,600 level, helped in the afternoon by early gains on Wall Street as investors weighed up last Friday’s stronger than expected US jobs data and looked ahead to US inflation numbers at the end of this week.
At the close, the UK blue-chip index was 75.27 points, or 1% higher at 7,608.22, below the session peak of 7,646.66 but well above the day's early low of 7,532.84.
In New York, around London’s close, the Dow Jones Industrial Average was 163 points, or 0.5% higher at 33,063, while the broader S&P 500 index gained 0.9%, and the Nasdaq Composite jumped 1.0%.
Chris Beauchamp, chief market analyst at online trading platform IG commented: “It looks like investors are having another go at extending the rally in equity markets on both sides of the Atlantic. Such renewed strength after what was ultimately an indecisive end to May will provide some comfort for investors, but with oil surging again the spectre of inflation and rate hikes is never far away. Even with the ECB likely to be more hawkish this week, however, there seems space for a further squeeze to the upside for a while yet.”
With UK prime minister Boris Johnson due to face a vote of confidence in the House of Commons this evening, Beauchamp added: “As the afternoon goes on, it seems that the steady flow of statements of confidence in Boris Johnson has dried up for now. But the market view remains that the PM will survive the vote, at least for now, removing at least one major headache for sterling. That this still leaves the slowing economy and the Brexit-related export decline will be of little comfort for traders.”
3.55pm: Household savings peaking
UK household savings as a proportion of household resources rose substantially during the pandemic, peaking at a record-high 23.9% in the second quarter of 2020.
Approximately three-quarters of this increase was attributed to forced saving, accounting for over £140bn or 10% of annual household disposable income, according to Interactive Investor.
The unprecedented hike coincided with government-imposed lockdowns, which restricted social contact and economic activity.
Myron Jobson, senior personal finance analyst at Interactive Investor, said: “The assorted covid lockdowns and social restrictions forced us into frugality, with household savings as a proportion of household resources hitting a record high at the height of the pandemic disruption.
“The escalating cost of living crisis means that those who were fortunate enough to become accidental savers won’t be able to spend their bumper savings how they would have envisaged once Covid restrictions were lifted.
“The need to build and maintain a cash buffer has become increasingly important amid the worst fall in living standards in a generation.”
3.25pm: US advance on open
As expected, US stocks mirrored broader global markets and opened higher on Monday as China lifted more Covid-19 restrictions.
Nasdaq, the tech-heavy index, advanced the most amongst the leading American indices, up 1.6%, or 196 points, to 12,209.
The S&P 500 wasn’t far behind after an hour of trading, having gained 1.3%, or 54 points, to 4,163.
Meanwhile, the Dow Jones Industrial Average rose 1.0% to 33,220.
Although it must be noted the Dow has the highest value, so a 1% hike is still relatively high.
2.40pm: Sunak discusses £15bn support package
After the extended weekend, the London stock market is playing catch-up while also assimilating the possible impact of Boris Johnson getting the old tin-tack.
The FTSE 100 was up 98 points at 7,631, some 16 points below its intra-day high.
The chancellor of the exchequer, Rish Sunak, is appearing before the Treasury Committee in parliament to talk about his recently announced £15bn support package.
Sunak said he expects the package will have a minimal effect on inflation, despite the less well-off having more money in their pocket.
The finance minister explained that inflation is caused by companies putting up prices, which might come as a surprise to the Bank of England governor, Andrew Bailey, who seems to think it comes from rising pay.
Sunak conceded that while the package was targeted at the poorer sections of society, it would also benefit asset-rich people, such as those who own two homes (receiving an estimated £620mln in bungs) or even three homes (£73mln).
As an owner of multiple properties himself, Sunak said he would be donating his rebate to charity.
1.40pm: New car registrations plunge
New car registrations plummeted by 20.6% in May as ongoing supply chain shortages continued to damage the automobile industry.
124,394 units were made, which was the second lowest May in 30 years, SMMT said.
The market, which cannot keep up with pent-up demand, was reported to be approximately a third below pre-pandemic levels of 2019.
Semiconductor shortages have been an ongoing concern since the early days of Covid-19 but problems have worsened since a slight recovery in the wake of dealerships reopening post-pandemic.
Mike Hawes, chief executive of the SMMT, said: “In yet another challenging month for the new car market, the industry continues to battle ongoing global parts shortages, with growing battery electric vehicle uptake one of the few bright spots.
“To continue this momentum and drive a robust mass market for these vehicles, we need to ensure every buyer has the confidence to go electric.
“This requires an acceleration in the rollout of accessible charging infrastructure to match the increasing number of plug-in vehicles, as well as incentives for the purchase of new, cleaner and greener cars.”
12.57pm: Boris Johnson tipped to survive
Boris Johnson has been backed to survive the vote of confidence, which will take place between 6.00pm and 8.00pm on Monday.
There are currently 359 conservative members of parliament (MPs), meaning if all were to cast a vote in the ballot 180 would need to back the Prime Minister (PM) for him to stay in power.
The Tory MPs, who will be addressed by Johnson in the House of Commons this afternoon, will vote anonymously in a secret ballot.
If the PM were to win, there would not be another vote of no-confidence for at least a year.
68 Tory MPs have already made public their support of Johnson since the announcement was made on Monday morning.
Bookies reiterated the likelihood of Johnson keeping his job.
William Hill provided odds of 1/4 for a PM win, compared with 11/4 for the loss.
Meanwhile, Star Sports gave similar odds at 2/7 for the win and 5/2 for the shock result.
12.17pm: US stocks to advance
US markets were expected to open higher on Monday, clawing back some of their recent losses as investors digest the US non-farm payrolls report from last Friday and look to US inflation data due out at the end of this trading week.
While higher closes in key Asian stock markets are also expected to lift sentiment, concerns over price pressures and the spectre of rising interest rates are likely to make for volatile trading.
Futures for the Dow Jones Industrial Average gained 0.60% in pre-market trading, while those for the broader S&P 500 index rose 1.0%, and contracts for the Nasdaq-100 were up 1.4%.
“There is no doubt that the US stock market has been through a major roller coaster that pushed the S&P 500 briefly into a bear market territory as it plunged over 20% from its recent high last month," Naeem Aslam, chief market analyst at avatrade.com said. “However, the index bounced back quickly from those lows, and the question for investors and traders is if the current upward momentum in the stock is in a dead cat bounce phase or if this rally will continue.”
For Aslam, the answer would depend on the US CPI reading, due on Friday, with traders expecting the US data to show signs that inflation has peaked.
“What smart money is more focused on is how long it will take for inflation to go back to its normal level or even close enough to the Fed's target of 2%. Until we begin to see a big improvement in the US CPI number, it is immensely difficult to think that bulls are out of the woods,” Aslam argued.
Last Friday, US labour market data showed continued strength with total nonfarm payroll employment rising by 390,000 in May, exceeding consensus estimates. While the strength of the data helped improve sentiment, trimming stock price losses, sentiment remains fragile as investors worry that aggressive rate hikes by the US Fed will weigh heavily on economic growth and dent corporate bottom lines.
Those concerns could become the theme this week too as traders believe that the Fed is increasing interest rates at a time of economic weakness, derailing economic recovery and pushing the world’s biggest economy towards stagflation, said Aslam.
“Remember, the US ADP (jobs) number on Thursday confirmed a horrible reading, and this means that the private sector is in for a rough ride. In addition to this, we have poster children like Elon Musk and Jamie Dimon talking about serious threats of a recession taking place. In this environment, it is extremely difficult for traders to hold and maintain an optimistic view,” added Aslam.
In energy markets, WTI crude oil futures added 0.6% to $119.57 a barrel and Brent crude futures gained 0.6% to $120.42.
11.40am: World's biggest four-day work week trial begins in UK
Four-day work week trials began on Monday, with at least one FTSE 100 company participating, as working from home during the pandemic changed people’s perspective on office life.
Over 3,000 employees from 70 companies will work a shorter week for the same pay until December as the dynamics of working life in Britain may be set to change forever.
The six-month nationwide pilot scheme has been named the largest four-day trial in the world.
Academies from Oxford and Cambridge Universities, Boston College, the Autonomy think tank and the 4 Day Week UK Campaign will determine the impact of a shorter week.
"We'll be analysing how employees respond to having an extra day off, in terms of stress and burnout, job and life satisfaction, health, sleep, energy use, travel and many other aspects of life," Juliet Schor, lead researcher on the pilot and Boston College professor, said.
11.04am: Brent crude hits three-month high
Brent crude jumped to US$120 a barrel following a larger-than-expected hike in prices by Saudi Arabia.
Oil giants BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL) also benefitted, up 2.9% and 1.9% respectively, which contributed to the Footsie Monday morning charge.
Oil prices have surged nearly 60% this year on rebounding demand post-pandemic coupled with the war in Ukraine, which has sparked global surging inflation and reincarnated supply woes.
This comes as petrol and diesel prices at the pump continued to skyrocket and hit new unprecedented levels.
On Sunday, prices leapt to 177.88p a litre for petrol and 185.01p for diesel, meaning a full tank rose by £3 between the start and end of the four day Jubilee weekend, the AA said.
Luke Bosdet, AA, commented: “Shock and awe is the only way to describe what has been happening at the pump during the half-term break.
“Little wonder that nearly half of drivers stayed at home for the Jubilee-extended bank holiday.
“The forces behind the surge have been oil jumping back above US$120 a barrel for the first time since late March, combined with petrol commodity prices being boosted by summer motoring demand.”
10.22am: Aerospace stocks take-off
The FTSE 100 was up 96 points at 7,629, showing no worries that prime minister Boris Johnson is set to face a confidence vote from the parliamentary Conservative party.
“UK Prime Minister Boris Johnson faces a vote of no confidence in his leadership as tensions escalate within the Conservative government. The threshold of 15% of Tory MPs has been surpassed with at least 54 out of 360 lawmakers writing to the chairman of the 1922 Committee, Graham Brady, triggering the vote which will take place at 6-8pm tonight,” reported Victoria Scholar of interactive investor.
“Discontent about partygate, plans to send migrants to Rwanda as well as plans to rewrite the Northern Ireland protocol have diminished his popularity. Although Johnson may survive today’s vote, a no-confidence vote historically speaking tends to mark the start of the end of a prime minister’s time at the helm,” she added.
BREAKING: Boris Johnson to face vote of no confidence - Tory MPs have just been sent this ???????? pic.twitter.com/xe4hza3khl
— Pippa Crerar (@PippaCrerar) June 6, 2022
Strange as it may seem with stories on the news of travel chaos at airports, aerospace-related stocks are among those leading the Footsie higher.
Jet engine developer and manufacturer Rolls-Royce Holdings PLC (LSE:RR.) is up 3.7% at 92.4p while holding company Melrose Industries PLC (LSE:MRO, OTC:MLSPF), which owns automotive and aerospace engineer GKN, is 4.0% firmer at 138.75p. The latter has announced it is to sell ergonomic business Ergotron to private-equity firm The Sterling Group for £520 million in cash.
9.40am: The Partygate ring of confidence
Boris Johnson will face a vote of no-confidence on Monday evening as the ‘Partygate’ scandal continued to steal the headlines despite it first coming to public knowledge last year.
The 54-letter threshold was confirmed to be breached by Sir Graham Brady, the chairman of the 1922 Committee.
Sir Graham said in a statement: “The threshold of 15% of the parliamentary party seeking a vote of confidence in the leader of the Conservative Party has been exceeded.
“In accordance with the rules, a ballot will be held between 1800 and 2000 today.
“The votes will be counted immediately afterwards.”
Sir Keir Starmer, the Labour leader, insisted it is of “national interest” for the vote to be held.
He added: “He has lost the trust I think of the country, I think that is pretty clear on all the evidence that I have seen.
"He has also got no plan for the country and I think those two things mean that it is in the national interest that he goes."
Meanwhile, Chancellor of Exchequer Rishi Sunak has voiced his backing of the Prime Minister.
From the vaccine rollout to our response to Russian aggression, the PM has shown the strong leadership our country needs.
I am backing him today and will continue to back him as we focus on growing the economy, tackling the cost of living and clearing the Covid backlogs.
— Rishi Sunak (@RishiSunak) June 6, 2022
9.08am: Blue-chip risers
Endeavour Mining PLC (LSE:EDV, TSX:EDV, OTCQX:EDVMF) led the blue-chip risers, up 4.3% to 1,882p, as commodities were boosted by the easing of China’s lockdown.
Fellow miners Rio Tinto PLC (LSE:RIO) and Anglo American PLC (LSE:AAL) also jumped by over 3% just over an hour into trading on Monday morning.
Melrose Industries PLC (LSE:MRO, OTC:MLSPF) wasn’t far behind, having risen 3.9% to 138.6p, after it announced it agreed to sell its Ergotron unit to the American Sterling Group for £519mln.
BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL) advanced 2.9% and 2.1% respectively, as Brent Crude Oil reaching US$120 a barrel pushed the energy giants’ prices higher.
Ashtead Group PLC (LSE:AHT) climbed 4.2%, while Prudential PLC (LSE:PRU) leapt 4.1%.
8.10am: Pound spikes on Boris Johnson vote of no-confidence
In what’s been a volatile and unstable few years for the pound on Brexit, the war and economic downturn, its value perked up following rumours of a vote of no confidence for Prime Minister Boris Johnson.
A vote of no-confidence would happen if 54 of the 650 members of parliament were to write letters in to request re-evaluating who runs the country as 'partygate' scandal intensified.
BREAKING: A confidence vote in Boris Johnson is set to be announced this morning, I understand.
Sir Graham Brady is expected to make a statement to camera around 8am confirming that the threshold of 54 letters has been met, I'm told.
— Lucy Fisher (@LOS_Fisher) June 6, 2022
The FTSE 100 seemed to enjoy the murmurs too, with the blue-chip index opening 74 points, or 1.0%, higher at 7,607 on Monday morning.
7.02am: Footsie to leap
FTSE 100 was tipped for healthy gains in early trading as the UK returns to normal after the long Platinum Jubilee weekend.
Financial spread betting firms were pencilling in a rise of more than fifty points for Footsie compared to last Wednesday’s close of 7,532.
Asian markets are setting the tone with recoveries in Hong Kong and Japan after the roller coaster in the US on Friday with the non-farm payroll numbers.
Jeffery Halley at Oanda said: "Asia is having an altogether more orderly start to the week.
"China announced a further easing of curbs in Beijing over the weekend, which is seeing some Asian equity markets and US futures trading in positive territory.
“Other glimmers of relief are that officials in Washington are considering a selective removal of tariffs on Chinese imports to aid the inflation fight.”
Crude prices hit US$120 a barrel on reports over the weekend that Saudi Arabia had raised prices to customers in Europe and Asia.
In the UK, headlines this week are likely to be dominated by the growing possibility of a no-confidence vote on PM Boris Johnson.
On the stock market and economic front, most of the action takes place towards the end of the week.
Results are scheduled this week from BAT, Wizz Air and Aveva (read more) while inflation will dominate the macro picture with UK, Europe and US numbers all out on Thursday and Friday.
6.50am: Early Markets - Asia / Australia
Asian shares were mostly higher on Monday as China’s Caixin Services Purchasing Managers’ Index came in at 41.4, an improvement over April’s reading of 36.2 but still less than 50 which separates growth from contraction.
The Shanghai Composite in China rose 0.92% and Hong Kong’s Hang Seng index surged 1.32%.
Japan's Nikkei 225 was trading 0.59% higher while South Korea’s Kospi gained 0.44%.
Australia’s S&P/ASX200 fell 0.52%, weighed down by losses in the technology sector.