- FTSE 100 closes down 68 points
- US stocks turn mixed after early gains
- Rail strikes bite again; airlines could be next
4.50pm: Footsie flops
The FTSE 100 index ended lower on Thursday with the mood staying cautious amid weak PMI data, higher interest rates and recession worries, while another UK rail strike took its toll as more transport unions prepare for industrial action.
At the close, the UK blue-chip index was 68.77 points, or 1.0% lower at 7,020.45, just above the session low of 7,014.19, and well below the morning peak of 7,115.80.
Michael Hewson, chief market analyst at CMC Markets UK commented: "After yesterday’s falls European markets were already looking vulnerable over rising concerns about a global slowdown. These fears have been further exacerbated after the latest flash PMIs from Germany and France pointed to further economic weakness in June, raising the prospect that both economies could well be sliding into recession."
He added: "The FTSE 100 has also slipped back on similar concerns about the global economic outlook with the worst-performing sector being real estate, as well as basic resources."
"The slide in yields, along with concerns about a UK economic slowdown is hurting financials with Barclays, NatWest and Lloyds Banking Group all sliding back. Anyone thinking of looking to go abroad to escape the bleak economic landscape now has the prospect of further strikes to contend with after British Airways staff became the latest to vote to go out on strike, following in the footsteps of easyJet staff in Spain and Ryanair earlier this month," Hewson said.
US stocks managed to rally in their morning trading, however, as investors focused on Federal Reserve chair Jerome Powell’s second day of Congressional testimony, although the gains were soon eroded and the market turned mixed.
In New York, around London’s close, the Dow Jones Industrial Average was off 9 points, or 0.03% at 30,473, while the broader S&P 500 index gained 0.3% and the tech-laden Nasdaq Composite added 1.0%.
CMC's Hewson noted: "US markets started the day on the front foot despite a pretty poor set of manufacturing and services PMI numbers for June, which showed sharp falls from the levels in May, tipping both back to levels last seen in 2020."
3.30pm: Choppy week in financial markets
Craig Erlam, Senior Market Analyst at OANDA reflects on today's market movements.
"It's been a rather choppy week in financial markets and we're seeing that reflected again on Thursday, with European stocks back in negative territory after recovering losses earlier."
"Equity markets have fallen heavily over the last couple of weeks as aggressive tightening and heightened recession fears weigh heavily on risk appetite. They may now be establishing a temporary bottom as yields ease off their highs but don't get too excited."
"The outlook is highly uncertain, and economic risks are heavily tilted to the downside, making any significant stock market recovery challenging."
"Slowly but surely, central banks are coming around to the idea that recessions may be the price to pay for price stability. Some are better placed than others to weather the storm but even they may ultimately get swept up in it eventually."
3.00pm: BA to strike at Heathrow this summer
British Airways workers have voted to strike during the school summer holidays in a move set to cause more travel chaos.
The GMB trade union balloted its BA members working at Heathrow Airport on Thursday morning - announcing shortly after that 95% of workers had voted to strike this summer.
2.50pm: Offshore energy industry hits back
Rishi Sunak has been told by the UK’s offshore oil industry that his new windfall tax will hit investment.
Sunak met oil and gas chiefs in Aberdeen today, a month after imposing a levy on the earnings of energy companies as the cost-of-living crisis continues to spiral.
Deirdre Michie, chief executive of Offshore Energies UK, said the new tax would undermine the industry.
“The Energy Profits Levy is an unexpected new tax that changes the basis for investments,” Michie said.
“We had a candid and constructive meeting with the chancellor to discuss these issues and our industry leaders were clear about their concerns, especially the impact on investor confidence.”
“Both sides have committed to further discussions.”
2.15pm: US jobless claims falls, but still ahead of consenus
229,000 people in the US filed for unemployment claims last week, slightly above the consensus of 226,000, but still below the previous week of 231,000.
Image: Pantheon Macroeconomics
1.55pm: Heathrow strikes could be next
More strikes that affect travel plans could be on the way this summer, this time at Heathrow airport as 700 members of check-in and ground staff vote on whether to take action.
Unions GMB and Unite are running the ballot, with the result of the vote expected this afternoon, although the Unite ballot closes on Monday.
A spokesperson for GMB said if the strike action went ahead, it would be “likely during school holidays.”
1.25pm: Nike makes permanent exit from Russia
After initially suspending operations a few months ago, Nike has officially ended all business in Russia, making a full exit as the Kremlins war with Ukraine rages on.
U.S. sportswear maker Nike is making a full exit from Russia, three months after suspending its operations there, the company said in an emailed statement Thursday. https://t.co/60jJxliaIU
— Kevin Rothrock (@KevinRothrock) June 23, 2022
12.50pm: US preview
US markets were expected to open mixed on Thursday as US Federal Reserve chairman Jerome Powell prepares for a second day of testimony before Congress, having already warned about the likelihood of recession on Wednesday.
Powell also said that it would be difficult to achieve a soft landing for the economy, signaling that inflation will stay elevated for the foreseeable future and denting the wider economy.
Futures for the Dow Jones Industrial Average fell 0.4% in pre-market trading, while those for the broader S&P 500 index rose 0.3%, and contracts for the Nasdaq-100 were up 0.3%.
“Market optimism couldn’t survive Jerome Powell’s testimony yesterday, as he said that a recession is possible and that a soft landing is ‘very challenging’ under the current circumstances,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“More worryingly, Powell mentioned another risk: the risk of the Federal Reserve not managing to restore price stability and allowing inflation to get entrenched in the economy,” she added.
The gloomy outlook for the world’s biggest economy took a toll on share prices as investors shied away from taking on new positions.
With Powell testifying again today, investors will be hoping that most of the negative pricing is out of the way by now but there are growing fears that the Fed is losing the battle against inflation and that its aggressive rate hikes will instead crimp economic growth and dent corporate bottom lines.
As Powell appears before Congress, his words will be up for scrutiny, suggesting that stock markets are in for another choppy session.
In energy markets, WTI crude oil futures lost 0.7% to $105.42 a barrel and Brent crude futures shed 0.6 % to $111.07, amid concerns that global economic growth may falter.
12.15pm: Another record for fuel prices
Fuel prices hit another record yesterday, despite a drop in a wholesale petrol prices last week, according to the latest figures.
The average price rose to 189.84p per litre, while diesel 198p, data from RAC Fuel Watch showed.
Simon Williams, a spokesperson for the RAC said, “It seems as though we are just days away from the frightening prospect of the price of diesel averaging £2 a litre across the UK taking the cost of a full tank to a staggering £110. For drivers who still think in gallons this would be £9 a gallon.”
“We’re surprised and disappointed to see the price of unleaded continuing to rise as the cost on the wholesale market tells a very different story.”
“Over the course of last week delivered wholesale petrol averaged 148p a litre which should lead to a price of around 186p after factoring in 7p-a-litre retailer margin and VAT at 20%.”
11.49am: Government gets an extra £100mln in inheritance tax
An extra £100mln of cash was taken from the clutches of dead Britons from April to May, according to today’s latest data from HMRC, with the government’s inheritance tax receipts reaching £1.1bn up from £1bn a year ago.
At the same time, total HMRC receipts amounted to £121.9bn, up £14.8bn versus the same period last year.
Of that, receipts from income tax, capital gains and national insurance were £9.7bn higher compared to last year, totalling £69.1bn.
It comes as the Treasury’s borrowing costs are soaring because of index-linked bonds, a glut of which were issued during quantitative easing, which are now paying out to investors hand over fist as the rate of inflation has risen to a 40-year high.
11.15am: Deal between RMT and Network Rail may be close
A deal between Network Rail and the RMT Union may be edging closer as the second of two planned rail strikes take place today.
Negotiations over jobs, pay and conditions had broken down yesterday between the trade union and rail employers, but the conciliatory language from Network Rail this morning suggests a deal may be close.
Tim Shoveller, a member of Network Rail’s negotiation team told the BBC this morning “We think we’ve got a package of no compulsory redundancies and some other long sought after things that the union and our employees have been after.”
“We want to move forward with that package but we can only do that once we are that the productivity to pay for it is in place.”
Shoveller also confirmed that the company is preparing to up its 3% pay rise, but not to the 7.1% agreed yesterday by Merseyrail.
10.45am: Consumer spending down
Consumer spending and the number of adverts decreased last week, new data from the Office for National Statistics showed.
Spending on debit and credit cards fell in all categories except ‘work-related’ expenses.
The latest figures suggest that growth is slowing.
UK spending on debit and credit cards decreased to 100% of its February 2020 average in the week to 16 June 2022.
There were falls in:
⬇️ Staple spending
⬇️ Social spending
⬇️ Delayable spending
⬆️ Work-related spending (which includes spending on road fuel) increased. pic.twitter.com/vagyxrmpWa
— Office for National Statistics (ONS) (@ONS) June 23, 2022
10.15am: Flash PMI data
UK flash PMI data showed that business expectations slumped to the weakest level since May 2020, with new order growth losing considerable momentum in June.
Flash UK PMI Composite Output Index at 53.1 and Flash UK Services PMI Business Activity Index at 53.4 remain unchanged from the previous month.
However, UK Manufacturing Output Index hit a 16-month low at 51.2, while UK Manufacturing PMI hit a 23-month low of 53.4.
Service providers continued to outperform manufacturers, boosted by a sustained recovery in events and face-to-face consumer spending.
Despite this, many survey respondents continued to cite growth headwinds associated with the cost-of-living crisis and economic uncertainty.
Notable, Chris Williamson, chief business economist at S&P Global Market Intelligence said “business confidence has now slumped to a level which in the past has typically signalled an imminent recession.”
9.45am: Quick snapshot
FTSE 100 hit the skids as worries over inflation, debt and the rail strike soured the mood. London’s blue-chip index was down 58 at 7,031 in early trades.
Rishi Sunak is having to pay record amounts of interest on the country’s £2trn debt due to the amount that is linked to inflation. Debt interest payments hit £7.6bn last month, the highest for any May on record, the Office for National Statistics said.
Heathrow has upped its forecast for passengers this year despite the chaos currently afflicting UK’s number one airport. Some 54.4m passengers are now expected in 2022 or 67% of pre-Covid levels.
Some good news for property groups in London as club owner Ministry of Sound will turn a House of Fraser store in west London into flexible offices, a gym and rooftop bar-restaurant. The nightclub group is expected to open its second site at Westfield shopping centre in Shepherd’s Bush in 2024.
Naked Wines shares tanked it warned of tough times ahead. The wine supplier posted a profit in its last financial year after a 9% increase in its subscription base but added at best it would break even this year.
Alpha Financial Markets by contrast hailed a “nothing short of outstanding” previous fiscal year. The financial sector consultant saw revenues surge 61% and confirmed strong trading has continued.
Next Fifteen also said recent trading has continued to be strong, aided by the strength of the US dollar. For the three months to April end, sales soared 68%, while profit before tax remained ahead of management expectations said the marketing group.
9.16am: 888 Holdings slumps
888 Holdings PLC (LSE:888), which is a constituent of the FTSE 250, slumped nearly 5% to 167.8p following its announcement released today over the proposed offering of £1bn of senior secured indebtedness.
Proceeds of the offering will be used to finance or refinance the purchase price of the proposed acquisition by 888 of the international business of William Hill.
As well as that, it will also be used towards the repayment of existing indebtedness of the William Hill business and the payment of fees and expenses in connection with the transaction.
Galliford Try also had some news, telling investors its Highway Business has been appointed to the new Midlands Highway Alliance Plus Medium Schemes Framework.
The framework is valued at £1bn and will run for the next four years, covering 35 local authorities from Oxfordshire in the south to Cumbria in the north.
“Throughout the country we have a strong track record of delivering fruitful, collaborative partnerships with local authorities, and we look forward to working with the MHA+ and its client authorities to making a lasting impact on infrastructure around the country,” said chief executive Bill Hocking.
8.49am: FTSE opens lower
London’s blue-chip index opened lower, matching pre-market expectations, as the index lost 57 points to 7,032 in early trading.
Miners lead the way as some of the index’s largest fallers, with Antofagasta, Glencore and Fresnillo all down more than 1.5%, with copper prices currently down.
Richard Hunter, head of markets at interactive investor, believes the latest comments from the US Federal Reserve did little to reassure investors.
“Markets remain on the back foot as the latest comments from the Federal Reserve did little to assuage investor concerns.
“Indeed, there seems no end in sight in the immediate future for this situation to change. Comments from Fed Reserve Chair Powell made their position clear.”
“Interest rates will continue to rise, and at an accelerated pace, until there is “compelling evidence” that inflation is beginning to wane.”
“This in turn decreases the likelihood of a soft landing for the economy, which the Fed fully recognises.”
“Of course, the central bank is not attempting to induce a recession, but the outcome of its current stance is increasingly likely to provide one.”
6.43am: Pre-market
FTSE 100 was set for a low-key opening on what might turn out to be a quiet day all around with many workers likely to be at home on the second day of rail strikes.
Financial spread betting firms had Footsie opening around 25 points down an hour before the open though Asian markets were improving towards their close, which might spin over into London and change the picture ahead of the opening.
US markets followed London (read more) and closed slightly lower overnight after testimony from Federal Reserve chair Jerome Powell.
Warning that a recession was a real possibility, Powell also indicated that fighting inflation was also critical and that rising prices had to be halted.
“That left markets in somewhat of a no man’s land,” said Jeffrey Halley, senior market analyst at Oanda.
“US equities were clearly dying for any excuse to hit the buy button.
“But while Mr Powell was talking recession possibilities and being “nimble” from FOMC meeting to FOMC meeting, the reality that a recession probably isn’t great for stocks tempered animal spirits.”
Powell speaks again this evening, which might make things a little clearer.
In the UK, the rail strike, inflation and squeezed household incomes are again likely to be dominating the headlines, especially with little scheduled company news.
Indeed, AIM is likely to provide most of the reporting action with three of its larger constituents - Naked Wines, Alpha Financial Markets and Manolete Partners – all updating.
Ex-dividends at Experian (LSE:EXPN), British Land and United Utilities among others are expected to knock around 4.7 points from FTSE 100.