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FTSE 100 closes higher as US stocks bounce back following holiday break

Last updated: 16:50 21 Jun 2022 BST, First published: 06:48 21 Jun 2022 BST

London
  • FTSE 100 ends 30 points higher
  • US stocks rally after Juneteenth break
  • UK grocery inflation soars and manufacturing slows

4.50pm: Footsie firmer again

The FTSE 100 index closed higher on Tuesday as US blue-chips returned from a long holiday weekend in positive fashion following last week’s sell-off, although the underlying mood remains cautious amid recession worries after data showed UK grocery inflation soaring and manufacturing slowing.

The UK blue-chip index ended 30.24 points, or 0.4% higher at 7,152.05, below the session peak of 7,193.90 but above the session low of 7,119.25.

In New York, around London’s close, the Dow Jones Industrial Average was 532 points, or 1.8% higher at 30,420, while the broader S&P 500 index added 2.4% and the tech-laden Nasdaq Composite gained 3.0%.

Chris Beauchamp, chief market analyst at online trading platform IG commented: “European markets had made gains yesterday while the US was on holiday but there is always lingering doubt that such moves can survive the return of Wall Street traders. Those fears have been nullified with the strong form displayed across the American indices this afternoon. An absence of any more big-name rate increases this week will have helped sentiment to stabilise, and in any case markets had reached a washout low last week that seemed to promise at least a short-term bounce.”

Beauchamp added: “Stocks are in a ‘buy everything’ mode, which is always a good way to start, but the real question is whether this bounce can run to longer than a week or so, which is all the last one managed. It is up for debate whether stocks, once the initial energy has been expended, can turn this into something of at least a month. Even then it seems unlikely that inflation and growth concerns will have really subsided enough for a longer-term move higher."

3.55pm: Miners help support market

Leading shares remain in positive territory heading into the close, with investors shrugging off continuing concerns about the economy, as well as the disruption caused by the start of this week's rail strikes.

Despite surveys showing the rising cost of supermarket shopping and a slowdown in UK manufacturing, the FTSE 100 is still up 29.3 points or 0.41% at 7151.11.

Mining shares have recovered from recent weakness, with Antofagasta PLC (LSE:ANTO) adding 3.72% and Rio Tinto PLC (LSE:RIO) rising 2.81%.

Packaging group DS Smith PLC (LSE:SMDS) is up 3.4% after well-received results.

Less well received was the £578mln or 795p a share fundraising from Ocado Group PLC (LSE:OCDO). The online retailer's shares are down 3.37% at 848p.

The disruption to the hospitality industry from the transport strikes has seen Premier Inn owner Whitbread PLC (LSE:WTB) fall 1.43% while the continuing chaos at Britain's airports has left International Consolidated Airlines Group SA (LSE:IAG) 1.38% lower.

The airline sector has also been undermined by news that Spanish cabin crew at easyJet PLC (LSE:EZJ), down 6.48%, plan to strike in July.

Michael Hewson, chief market analyst at CMC Markets UK, said: "It’s gearing up to be another positive session for European markets, with a modest rebound in copper prices and other metals prices helping to lift the basic resources sector.

"The gains have been rather tepid in nature and are still some ways short of reversing the losses we saw last Thursday,"

3.03pm: Wall Street on the front foot

US stocks opened higher on Tuesday with market activity expected to pick up following the long weekend as bargain hunters strike after last week’s steep losses.

Just after the open, the Dow Jones Industrial Average had gained 435 points at 30,324 points.

The S&P 500 had gained 65 points at 3,740 points and the Nasdaq Composite was up 192 points at 10,989 points.

2.20pm: Weak Chicago Fed index

A weaker than expected economic indicator from the US, where there is growing talk of a possible recession.

The Chicago Fed activity index was virutally flat in May, down from the previous month and below forecasts of a similar rise to April.

US markets remain positive however ahead of the open.

And the FTSE 100, while off its best, is still in the green, up 37.30 points or 0.52% at 7159.11.

Craig Erlam, senior market analyst at Oanda, said: "European stocks are making small gains again on Tuesday, benefiting from the relatively calm start to the week.

"The US returns following the bank holiday weekend which could see activity pick up, with particular focus on what the various central bankers have to say. Jerome Powell's testimony in Congress on Wednesday and Thursday will naturally be the highlight but in this rapidly changing environment, all views will have the potential to get things moving.

"There's no doubt that the next few days have far more on the calendar so investors may take the opportunity to breathe and take stock of the situation. It's been a turbulent couple of weeks and the rest of the summer is likely to bring more of the same so these periods of reflection are welcome.

"With that in mind, these small recoveries in stock markets shouldn't provide any comfort. Everyone is hunting for the bottom but there's a huge cloud of uncertainty over the outlook and the data isn't yet showing any encouraging signs. Recession is increasingly becoming the base case and so equities are vulnerable to further losses."

12.47pm: Rail strikes to cause more grief for hospitality sector

Hospitality shares are edging lower on concerns about the effect of the current rail strikes on the sector.

The chief executive of UKHospitality, Kate Nicholls, told Radio 4 earlier than the disputes could cost restaurants, pubs and other businesses around £500mln in lost revenue.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: ‘’The rail strike risks turning ongoing operational headaches into a fully blown migraine for the hospitality industry. Restaurants, bars and hotels were already struggling under the strain of sky-high energy prices, supply chain disruption and the ongoing labour crunch, and now the mass walkouts are set to cause fresh financial pain.

"As the transport network seizes up, bookings are expected to plummet as the lucrative lunchtime crowd stay at home, and night-time revellers cancel reservations whilst fearful they won’t be able to get home at the end of the night...

"Many pubs, venues and restaurants are shutting up shop early this week because staff are unable to get into work. Workers were already feeling overstretched with the accommodation and food services industry reporting the largest number of businesses experiencing labour shortages, with 35% firms saying it was a problem in mid-June.

"Hospitality bosses are also fretting about the soaring electricity gas and fuel bills with almost half of firms (47%) saying energy costs were a concern, up from 29% in May. To add to cacophony of problems, sourcing key products is still a real issue for many companies, with more than a fifth (21.7%) of firms still having to deal with supply chain disruption."

In a positive market, the sector has been slipping back.

Intercontinental Hotels Group PLC (LSE:IHG) is down 0.88%, pubs group Mitchells & Butlers PLC (LSE:MAB) is off 0.8%, Wagamama owner Restaurant Group PLC (LSE:RTN) has fallen 0.35% and Premier Inn owner Whitbread PLC (LSE:WTB) had dipped 0.15%.

Overall the FTSE 100 remains positive, up 51.08 points or 0.72% at 7172.89.

11.59am: Wall Street set for positive start after holiday break

US markets were expected to open broadly higher after the long holiday weekend with bargain hunters expected to be making the most out of the recent steep falls in equities.

While prevailing concerns about the likelihood of a recession against a backdrop of higher interest rates have not been displaced, the tumult brought on by weeks of falls has opened up buying opportunities.

Futures for the Dow Jones Industrial Average gained 1.6% in pre-market trading, while those for the broader S&P 500 index added 1.8%, and contracts for the Nasdaq-100 were up 1.8%.

US markets were closed yesterday for Juneteenth, a federal holiday marking the emancipation of African American slaves.

Naeem Aslam, chief market analyst at avatrade.com, said: “There is no doubt that the equity markets on both sides of the world have been massively oversold, bargain hunters have been preparing their lists for a while, and now they are out shopping."

But as recent history has proved, it remains to be seen if the bargain-hunting will last and trading is expected to remain cautious. After all, the backdrop of rising prices and aggressive interest rate hikes has not changed. Last week, all three major US indexes closed at their lowest levels since 2020 after the Federal Reserve lifted interest rates by 75 basis points.

Aslam noted that buying could fizzle out as the fundamentals that pushed the markets lower have not shifted: “And Fed officials in the US are only adding more noise. For instance, James Bullard said yesterday that the US economy isn’t going to shrink, and it will expand more aggressively than the market expectations.

“In addition to this, there are still no signs that can flag when inflation in the US will reach its peak, and this is even more worrying for investors and traders,” he added.

In data due out today US existing home sales will be in focus with the headline figure expected to show that property sales are easing.

On energy markets, WTI crude oil futures gained 2.5% to $110.64 a barrel and Brent crude futures added 2.6% to $116.06.

Back in the strike-hit UK, the FTSE 100 is currently up 47.29 points or 0.66% at 7169.1.

11.40am: UK manufacturers reports slowing growth in June

More signs of a slowdown at the UK's factories.

UK manufacturing output slowed in the three months to June, according to the latest CBI Industrial Trends survey.

A balance of +25% of manufacturers reported growth, down from +30% in May.

Total order books and export order books also softened, while output growth was expected to slow further in the quarter ahead.

But in a positive sign amid soaring inflation, expectations for domestic price growth fell back to a nine-month low from +75% in May to +58%.

Anna Leach, CBI deputy chief economist, said: “While manufacturing output is still being supported by a backlog of orders, growth appears to be softening. Stocks of finished goods are now seen as broadly adequate and we may be seeing the first signs that weaker activity is beginning to slow the pace of price increases in the sector.

“Manufacturers continue to report a range of challenges, including significant cost pressures, shipping delays, shortages of key inputs, and, not least, recruitment difficulties. Skills shortages remain widespread and are a key constraint on growth. All of these trends are weighing on confidence.

“Companies are pursuing a range of strategies to cope with these operational difficulties, but they can only do so much and government must act now to prevent a deeper and more prolonged slowdown. Creating a permanent investment incentive and tackling skills shortages by introducing immediate flexibility to the apprenticeship levy would be strong first steps for boosting confidence.”

11.04am: Rate rise talk supports sterling

The pound is heading higher against the dollar as another member of the Bank of England's monetary policy committee talked up the prospect of further interest rate rises.

Huw Pill told the Institute of Chartered Accountants: "We will do what we need to do to get inflation back to target.

"And at least in my view, that will require further tightening of monetary policy over the coming months."

Last week the Bank raised rates by 0.25 percentage points to 1.25% but three members of the nine-strong committee voted for a bigger rise to 1.5%.

One of those, Catherine Mann, said on Monday that rates should rise more quickly to support the pound and head off imported inflation due to a weak currency.

Meanwhile think-tank NIER said its latest survey showed the market expected rates to rise further.

Dr Corrado Macchiarelli, research manager for global macroeconomics, said: “UK short-term interest rate expectations are continuing to rise, reaching their highest level since the pandemic.”

Against the greenback, sterling is currently up 0.41% at US$12302 although it is virtually flat against the euro at €1.164.

Back with the FTSE 100, and the leading index is near the day's high, up 59.01 points or 0.83% at 7180.82.

9.59am: easyJet set to buy more Airbus planes

easyJet PLC (LSE:EZJ) may be cancelling flights left right and centre amid the continuing chaos at Britain's airports, but that has not stopped it ordering new planes.

The budget airline has announced a deal with Airbus for 56 A320neo family aircraft for delivery between 2026 and 2029.

It also plans proposes to convert 18 A320neo aircraft planned for delivery between 2024 and 2027 to 18 A321neo aircraft deliveries.

Russ Mould, investment director at AJ Bell, said: "A chaotic time at UK airports may have prompted easyJet to make plans to cancel more flights throughout the summer, yet that hasn’t dampened its appetite to be a much bigger player longer term. It is buying another 56 planes and converting 18 existing orders to different types of aircraft.

“These planes will replace older aircraft and will be more fuel efficient, which is important as airlines are under increasing pressure to further cut costs. They will also enable more bums on seats. There is strategic logic to the deal, but easyJet must first obtain approval from shareholders who might be feeling angry at how its share price performance has been weak this year."

Its shares are down 27% so far this year, but are virtually flat today at 443.76p.

9.25am: Recovery in mining companies helps lift leading index

Mining shares are among the risers as the sector recovers from recent falls which were prompted by concerns about a slowdown in global growth.

Antofagasta PLC (LSE:ANTO) has added 3.1%, Glencore PLC (LSE:GLEN) is up 2.26% and Rio Tinto PLC (LSE:RIO) has risen 2.11%.

That has helped push the FTSE 100 higher, with the leading index now up 39.02 points or 0.55% at 7160.83.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "The FTSE 100 has opened higher, but gains may be capped with the risks of inflationary pressures moving centre stage again. A mass walkout of rail workers in the UK, which is set to cause chaos across the transport network, is indicative of the problems mounting up for the UK economy as the cost-of-living crisis escalates.

"It’s easy to see why workers are desperate to see wage rises to help make ends meet, but this comes with the risk of adding to the inflationary spiral at a time when policymakers are focused on dampening demand in the economy.  If public sector pay rises to anywhere close to the rate of inflation, this could end up being a counterweight to the Bank of England’s efforts to try and drag down inflation. The huge strike is a precursor to another worrying snapshot expected of red-hot consumer prices, with the CPI measure of inflation released on Wednesday set to creep up again."

Elsewhere packaging group DS Smith PLC (LSE:SMDS) is up 1.42% after reporting a slightly better than expected 29% rise in full year operating profits.

The company continues to benefit from the boom in online shopping, and managed to increase its prices to offset rising costs.

8.30am: Shoppers turn to value brands as inflation surges again

Grocery price inflation reached 8.3% over the past four weeks, up 1.3 percentage points on May and hitting its highest level in 13 years.

The latest Kantar survey showed shoppers are now paying an extra £380 a year for their supermarket shop - £100 more than the figure reported in April.

But as costs soar, consumers are turning to own label brands to save money, with a 12% rise in sales of value lines.

Overall, supermarket sales fell by 1.9% over the past 12 weeks, although this was the best market performance since October last year.

And there was a 0.4% rise in sales over the latest four weeks.

Fraser McKevitt, head of retail and consumer insight at Kantar, comments: “The sector hasn’t been in growth since April 2021 as it measures up against the record sales seen during the pandemic. However, these latest numbers show the market is to an extent returning to pre-COVID norms as we begin comparisons with post-lockdown times.

“The inflation number makes for difficult reading and shoppers will be watching budgets closely as the cost-of-living crisis takes its toll. Based on our latest data, the average annual grocery bill is on course to rise by £380. This is over £100 more than the number we reported in April this year, showing just how sharp price increases have been recently and the impact inflation is having on the sector.”

Online sales fell for the twelfth month in a row, but store footfall rose by 3.4%.

McKevitt said: “As well as the return to pre-COVID-19 habits, this drop could be the result of shoppers looking to cut costs by avoiding delivery charges. The sunnier weather may also be pushing up store footfall, as people decide it’s warm enough to walk or cycle to their local supermarket.”

Still, shoppers celebrated the Jubilee with alcohol sales were up by a third and purchases of ice cream up by 35% over the week compared to the average in 2022

With the trend towards value brands, Lidl was once again the fastest growing grocer, pushing its sales up by 9.5% over the 12 weeks to reach a 6.9% market share. Sales at Aldi rose by 7.9%, moving its share up versus last year by 0.8 percentage points to 9.0%.

These two were the only ones to show any growth, with J Sainsbury PLC (LSE:SBRY) seeing sales down by 3.9% and Tesco PLC (LSE:TSCO) by 1.1%.

Ocado Group PLC (LSE:OCDO) was down 2.3%.

8.11am: Positive start for market

Leading shares have edged higher although quite how many people are at their trading desks given the current transport dispute is open to question.

Estimates are that around 4,500 train services will run compared to around 20,000 which would normally be expected.

Still, it's sunny, the FTSE 100 is up 15.56 points at 7137.37, and it's the summer solstice.

Strategist Jim Reid at Deutsche Bank said: "Welcome to the longest day of the year although most in markets will already say we've had numerous of those already so far this year. Actually if you're outside of London, trying to get in it could be a very, very long day as the UK is today gripped by the first of three alternate day rail strikes. There is a tube strike today thrown in for good measure.

"It does seem industrial relations with the government are on a knife edge across the UK as at least 3 million workers across different professions are considering industrial action at the moment over pay and working conditions. So this could become a much bigger story if tensions are not eased. With inflation this high it's not easy to see how they can be without big pay rises being offered."

Elsewhere Ocado Group PLC (LSE:OCDO) has dropped 4.9% to 834.33p.

After the market closed last night the online retailer announced a surprise fundraising to pay for the expansion of its technology arm.

It has now said it raised £578mln from investors with a placing and retail offer at 795p a share - a hefty discount to the prevailing price. It has also agreed a new £300mln credit facility.

6.50am: Footsie rally expected to continue

The FTSE 100 is set to continue its recovery rally on Tuesday as traders shrug off recession worries and the start of a weeklong travel disruption for Britain.

London’s gauge of blue-chip shares has been tipped for a 22-point rise on spread-betting platforms, adding to the near-106 points gained at the start of the week to 7,121.81.

The UK headlines are dominated by what is predicted to be the biggest rail strike for 30 years, which begins today.

With rail workers being asked to accept a pay rise of 3% while inflation closes on 10%, along with pension cuts and demands for longer working hours, more than 40,000 members of the Rail, Maritime and Transport Workers (RMT) union are due to walk out.

Some newspapers liken the shutdown to pandemic lockdowns, with the hospitality sector worried that the strike could cost firms £1bn in lost revenue.

It could be London’s oil heavyweights that provide the upward momentum this morning, with Brent crude up 1.1% to US$115.34, but the mining sector may drag as major metals stutter on global growth concerns.

“Yesterday’s gains came despite rising concerns over a global economic slowdown, a fear that has been reflected in weakness in base metals prices, with copper prices sliding to one-year lows,” said market analyst Michael Hewson at CMC Markets.

“An increasingly hawkish tone from Federal Reserve officials appears to be prompting concerns about global growth after Fed governor Christopher Waller emphasised a determination on the part of the US central bank to get inflation down in a tone that suggested they’d risk a recession to do so.”

Asian markets are almost all in the green this morning, and US traders returning after the Emancipation Day holiday are expected to be in a positive mood, with futures pointing higher for the major Wall Street indices.

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