- FTSE 100 closed 105 points higher
- UK rail strike going ahead this week as talks fail
- US markets closed on Monday for public holiday
4.50pm: Monday sees gains
The FTSE 100 index ended higher on Monday helped by strength in financial issues which were recovering after the hefty falls made last week as central banks globally hiked interest rates, raising worries over economic recovery.
At the close, the UK blue-chip index was 105.56 points, or 1.5% higher at 7,121.81, not far below the session peak of 7,129.64 and well above the early session low of 7,016.15.
US markets were closed on Monday for the Juneteenth public holiday.
Craig Erlam, senior market analyst, UK & EMEA, at OANDA commented: “There has undoubtedly been a shift in the market mindset over the last week and a half that has weighed heavily on risk assets. The prospect of a recession is being considered far more broadly and what's more, central banks are increasingly resisting the urge to push back against it.
“It seems inflation has gone from being the primary concern to the only one. Sacrificing the economy in pursuit of price stability appears to have become the objective through a lack of alternatives. The hope now is that any recession will be mild and brief but the situation is evolving so rapidly, that it's hard to know with any real certainty.”
Erlam added: “There may be additional sensitivity in the markets to central bank speak and economic data under the circumstances. At these levels, investors are looking for any clues that inflation is abating which could allow for a welcome relief rally in stock markets.
“In the absence of that, they're not likely to be comforted by what they hear. There's no shortage of central bank appearances at the moment which could make for another week of frayed nerves. Naturally, the headline will be Fed Chair Jerome Powell and his two-day appearance in Congress to testify on the semi-annual monetary policy report.”
3.50pm Rail strike misery on
The rail strikes on Tuesday, Thursday and Saturday this week will officially be going ahead following failed negotiations.
Network Rail and RMT trade union have been discussing a potential solution to the dispute over pay, jobs and conditions.
However, Network Rail’s offer of a 5% pay hike to its workers was not enough to satisfy the union and call off the strikes, which are expected to cause havoc for workers around the country.
These strikes will also take place on the London Underground on Tuesday, with further delays and disruption on the tube expected for the remainder of the week.
According to a treasury minister, it will be the largest rail strike in 30 years in England, Scotland and Wales.
Meanwhile, there has been more chaos in the travel sector, this time in the aviation industry.
Heathrow airport requested that airlines cancel 10% of their flights on Monday as a baggage backlog piled up.
By midday, almost one-and-a-half dozen airlines had already cancelled flights.
EasyJet PLC said it will cancel a further 7% of its 160,000 flights between July and September.
This followed on from Gatwick airport revealing it would slash the number of flights during the peak summer season on staff shortages.
Tens of thousands of passengers have already been impacted by cancellations and delays, with many left stranded overseas during the half-term holidays.
3.02pm: Rail offer workers 5% pay rise
Rail bosses have offered union workers a 5% pay rise to settle the dispute and prevent trains from striking on Tuesday, Thursday and Saturday.
Although even if the strikes were to be called off, it would be too late notice to entirely avoid chaos as a reduced timetable has already been implemented.
Network Rail and RMT trade union negotiators have been discussing a solution since Monday morning to try and reduce disruption.
Network Rail had already offered workers a 2% hike with “no strings attached,” with a further 1% later in the year depending on whether specific efficiency targets were met.
The strikes were sparked by rail staff who were not satisfied with their stagnating pay and potential job losses. They will also take place across the London Underground on Tuesday.
If you have logged in to find out how US markets are doing today, the answer is that they are closed.
Trading has been suspended in observance of the Juneteenth holiday, which commemorates the end of slavery in America.
In London, things are progressing very nicely without the lead of US markets, with the FTSE 100 up 105 points (1.5%) at 7,121.
Banks are leading the advance in London, possibly because they are the only businesses that do better when interest rates go up.
HSBC Holdings PLC, up 6.1%, is the Footsie’s best performer while sector peers Standard Chartered PLC and Lloyds Banking Group PLC, up 4.2% and 3.8% respectively, are also feeling the love.
2.25pm: A weekend to forget for Bitcoin
Definitely not feeling the love are cryptocurrencies.
“Bitcoin plummeted over the weekend below the ATH [all-time high*] reached in 2017, at around US$19,600. Coinglass, a trading and information platform, shows that there were US$600 million in liquidations as Bitcoin dropped to a low of US$17,600 approximately. Bitcoin suffered around US$300 million in liquidations whilst Ethereum endured US$200 million,” said Marcus Sotiriou at Global Block.
* Sotiriou doing his bit to put right the criminal lack of three-letter acronyms in the cryptocurrency world, there.
“Despite this downward price action, Bitcoin closed the week strong above $20,000 and some on-chain metrics suggest a macro bottom, or temporary bottom, could be close,” he added.
FWIW**, Bitcoin is up 6.9% today at US$20,555 and Ethereum jumped 9.4% to US$1,124.
** FWIW = for what it’s worth; four-letter acronyms are OK.
“From the industry perspective, as the money pours out of the crypto industry, we see some industry giants having trouble to keep their business together, and that adds another level of sector-specific stress,” said Ipek Ozkardeskaya at Swissquote Bank.
“Over the past couple of weeks, we saw the Terra, which was supposed to be a stable coin collapse to zero. Last week, Celsius, which is one of the biggest crypto lenders suspended withdrawals and even account to account transfers to prevent people from a virtual bank. On Friday, Babel finance froze withdrawals and redemptions hinting that if the crypto meltdown continues, we could see more of the crypto institutions take similar measures and, again on Friday, Three Arrows Capital, said it considers asset sales, and bailout following heavy losses it incurred during this year’s selloff,” she added.
The word Ponzi is not an acronym, by the way.
Celsius warns that stabilizing liquidity "will take time" as lead investor proposes recovery plan
#Celsius #investor #lead #liquidity #plan #Proposes #recovery #stabilizing #time #warnshttps://t.co/1SuZNjJkta
— kreadotcoin | crpyto news (@kreadotcoin) June 20, 2022
1.50pm: Harbour Energy urges £5bn windfall tax rethink
UK’s biggest oil and gas producer Harbour Energy PLC wrote to Rishi Sunak asking him to rethink the £5bn windfall tax.
Its chief executive Linda Cook insisted to the Chancellor the Energy Profits Levy (EPL) would disproportionately impact independent companies in the industry instead of majors like Shell PLC and BP PLC.
“The four largest independent UK producers, including Harbour, are forecast to deliver over 440,000 barrels of oil equivalent a day this year,” Cook said, before adding: “We should all be concerned about the disproportionate impact the EPL – as currently proposed – has on these smaller companies.”
It was announced in May that a 25% tax on profits of North Sea oil and gas companies would be implemented to alleviate the cost-of-living crisis.
Cook predicted it will cost the largest independent producers over £2.5bn by 2025.
1.05pm: M&S hires former Tesco exec
An ex-Tesco PLC executive has been hired as head of food at Marks and Spencer (M&S) Group PLC.
Alex Freudmann, who worked for Australian grocery retailers since he left Britain’s largest supermarket in 2009, will replace Stuart Machin – the recently appointed chief executive.
Freudmann’s appointment means the M&S leadership team has been completed under Machin and his co-CEO Katie Bickerstaffe.
He will begin his new role in November, taking a place on the supermarket’s executive committee.
Meanwhile, Machin insisted that the new boss of food – M&S’s best performing category in recent years – would bring "experience and passion" to the company.
Its shares rose 2.0% to 141p on the news.
12.30 BoE stops mortgage market affordability test
The Bank of England said Monday its Financial Policy Committee would be withdrawing the mortgage market affordability test from 1 August.
It was introduced in 2014 to specify a stress interest rate for lenders when assessing potential borrowers’ mortgage repayment ability.
“The recommendations were introduced to guard against a loosening in mortgage underwriting standards and a material increase in household indebtedness that could in turn amplify an economic downturn and so increase financial stability risks,” the bank commented.
The average asking price for a mortgage across Britain was £368,614 in June, which was the fifth month in a row it reached a record high, according to data from Rightmove.
Gemma Harle, Quilter Financial Planning managing director, said: “While it is potentially bad timing for the announcement, the change in the affordability rules may not be as significant as it sounds as the loan-to-income (LTI) ‘flow limit’ will not be withdrawn, which has much greater impact on people’s ability to borrow.
“One of the main drivers behind ‘generation rent’ is the fact that house prices have massively outstripped wage growth. Due to high house prices, first-time buyers also need very sizable deposits and in the current fiscal environment saving this type of money will be very difficult due to increasing rents and the cost of living.
11.53am: Russia and China grow closer
Russia has become China’s largest supplier of oil after the former offered discounted crude amid sanctions from the West following the war in Ukraine.
Saudi Arabia was replaced by Putin’s state, with Russian oil imports to China up 55% in May compared with the prior year.
In February, the two countries disclosed to the world that their friendship had “no limits.”
China’s surge in demand for Russian oil rocketed despite its recent slowing economy and ongoing Covid concerns.
Sinopec and state-run Zhenhua Oil were amongst the most notable Chinese companies to hike their purchases of Russian crude in recent months.
11.20am: Housebuilders slump
Housebuilders are proving to be party-poopers this morning, as rising interest rates appears to be slowing house price growth.
The FTSE 100 was up 42 points (0.6%) at 7,058, despite the likes of Barratt Developments PLC, Persimmon PLC, Berkeley Group Holdings PLC and Taylor Wimpey PLC from the housebuilding sector all sporting losses of more than 3%.
Fellow travellers Howden Joinery Group PLC, Ashtead Group PLC and CRH PLC also took a biffing; the kitchen designer, tool hire firm and building materials supplier were down 3.0%, 2.8% and 2.8% respectively.
House prices hit fifth record high of 2022 but pace slowing: Rightmovehttps://t.co/9WJ2XiUUZJ
— Mortgage Strategy (@MortgageStrat) June 20, 2022
Primark owner Associated British Foods PLC was 0.1% lower after an initially positive response to a trading update.
“Inflationary concerns were noticeably absent from Primark owner Associated British Foods’ third-quarter results. The group’s pushing ahead with its digital expansion, trialling a new click-and-collect service in the UK and management sees full-year operating margins recovering to around 10% as expected. This was a departure from the cautious note that CEO George Weston struck at the half-year when he warned about the impact of inflationary headwinds on margins,” said Laura Hoy at Hargreaves Lansdown.
“Management said it would be forced to raise prices on its autumn and winter collections back in April but bikinis and flip flops are still at the top of the shopping list for holiday-obsessed consumers right now. So the impact of these price hikes on volumes is yet to be determined. The group’s in a good position as we head into tougher economic conditions, with its lower-priced items more appealing to cash-strapped consumers, but a slowdown in consumer spending is sure to hit the entirety of the sector,” she added.
Primark finally goes online in new click-and-collect trial - https://t.co/jojYBTqsdq -The retailer will trial click-and-collect at stores after long resisting selling on the internet.
— In-Site (@In_site_updates) June 20, 2022
10.55am: It's better to travel than to arrive - either is looking tricky this week
Travel chaos has continued to strike misery for expected holiday-goers and workers across the UK.
EasyJet PLC said it will cancel a further 7% of its 160,000 flights between July and September.
This followed on from Gatwick airport revealing it would slash the number of flights during peak summer season on staff shortages.
Tens of thousands of passengers have already been impacted by cancellations and delays, with many left stranded overseas during the half-term holidays.
Meanwhile, the largest rail strike in 30 years will begin tomorrow in England, Scotland and Wales, according to a treasury minister.
The strikes, which will be on Tuesday, Thursday and Saturday, were sparked by rail staff who were not satisfied with their stagnating pay and potential job losses. They will also take place across the London Underground on Tuesday.
Transport for London warned disruption will continue on non-strike days on fewer staff, with travellers advised to only travel if absolutely necessary.
EasyJet shares sunk 3.1% to 423.6p on Monday morning.
9.31am: Crypto reverses weekend's losses
While equity markets were switched off over the weekend, it was carnage for cryptocurrencies.
A massive sell-off hit the sector on Saturday and sent the price of bitcoin below the $18K mark, the lowest level since the end of 2020, while ethereum fell below $900, its weakest in almost a year and a half, and other smaller cryptocurrencies followed their larger peers in beating a hasty retreat.
"All anyone is talking about this morning is the chill winds blowing from the crypto winter," says market analyst Neil Wilson at Markets.com.
"Exchanges all over the place are halting withdrawals amid liquidity problems as investors (bagholders) rush for the exits. Rising interest rates, an acute risk-off mood across markets, a thinning of liquidity is all to blame: in short the end of free money from the Fed means the artificial pump that created these assets is no longer working."
Sunday saw a rebound, says Ipek Ozkardeskaya at Swissquote Bank, "as dip buyers piled in on belief that bitcoin may have cheapened enough to catch an interesting dip, but cryptocurrencies remain at a slippery ground as factors that triggered this weekend’s selloff are still in play. And the level of stress in the market intensifies, both from the macro and industry specific perspectives."
In other company news, easyJet PLC shares are down nearly 3% as the airline released a summer trading update, trimming its passenger traffic guidance and planning price increases as it outlined new measures to address flight caps at Gatwick airport (read more here).
BA owner IAG is on the leaderboard though, despite many of its passengers being hit by the latest flight cancellations, this time due to a Heathrow Airport baggage mountain.
8.23am: More sanguine than expected
Defying predictions of a negative start to the week, the FTSE 100 wiped out all of Friday’s losses as traders took a more sanguine view of the market than had been anticipated.
It’s been a shaky June for the blue-chip index, which has lost 7.5% wiped from the blue-chip index amid the fear of recession, rising prices and a risk-off attitude towards equities.
Monday appeared to be a pause for breath session.
The day’s big gainer, up 23%, was Euromoney Institutional Investor (LSE:ERM) after it received a £1.6bn bid approach from private equity groups Astorg and Epiris.
The UK group said it was in talks with the buyout firms, but cautioned that “there can be no certainty that an offer will be made” (read more here).
Also among the newsmakers was Associated British Foods PLC (LSE:ABF), which was up 1.5% in early trade after a solid trading statement.
Primark, now 44% of the combined ABF business, was the focus of attention, not just for investors, but followers of the retail sector.
The eyes-on-stalks number was the 81% quarterly rise in retail sales, which represented a 4% increase on the pre-pandemic number.
“With the shackles of the pandemic now largely removed, the figures are very promising, with the unit seemingly coming back into fashion,” said Richard Hunter, head of markets at Interactive Investor.
6.50am: Tepid start predicted
The FTSE 100 looks set to open at its lowest level since early March with the spectre of recession continuing to haunt UK equities.
On Friday, US manufacturing data were softer than expected, adding to the welter of red-lit economic indicators – including housing starts and retail spending.
In China earlier iron ore, steel rebar and coal futures were all hit by slowdown fears precipitated by America’s apparent slowdown.
“Even oil prices cracked under the weight of recession noise. A classic case perhaps, of high prices being the best cure for high prices?” noted Jeffrey Halley, Asia analyst for forex trading group OANDA.
Against this backdrop, Asia’s main markets kicked off the new trading week in negative territory, with Europe’s major bourses set to follow suit.
Closer to home, it is expected to be a busy week for scheduled corporate and economic news with updates on inflation and from housebuilder Berkeley, Carnival, the cruise operator, and AB Foods, which owns the Primark chain.
Around the markets
- Pound US$1.2229 (-0.1%)
- Bitcoin US$19,869.60 (-3.3%)
- Gold US$1,844.60 (-0.2%)
- Brent crude US$113.17 (flat)
6.50am: Early Markets - Asia / Australia
Asian shares were mostly lower on Monday as China’s one-year and five-year loan prime rates were both left unchanged.
Japan's Nikkei 225 was trading 0.96% lower while South Korea’s Kospi tumbled 2.45%.
The Shanghai Composite in China rose 0.09% and Hong Kong’s Hang Seng index gained 0.05%.
Australia’s S&P/ASX200 fell for a seventh consecutive session on Monday, dropping 0.6% to 6433.4.