- FTSE 100 closes up nearly 50 points
- US benchmarks mixed
- IHG to cease operations in Russia
4.50pm: FTSE closes in positive territory
FTSE 100 closed Monday in positive territory as traders turn cautiously optimistic and await potential catalysts later in the week.
Britain's blue-chip benchmark finished ahead by nearly 50 points, or 0.69%, at 7,258.
"A mixed start to the new trading week, one in which the bulk of the big market-moving events are due from Wednesday onwards," said Craig Erlam, analyst at Forex group Oanda.
"It's been a strange couple of weeks in the markets following the most recent sell-off. Investors are looking at current levels with keen interest but continue to question whether we've seen peak inflation and as a result, interest rate expectations and economic doom and gloom," he added.
"There's perhaps some cautious optimism that the worst of the sell-off is behind us, although how often have people asked that question in recent months?
"And it's not just a case of whether inflation has peaked, it's whether it will decelerate in a manner that doesn't require greater assistance from central banks which could push economies either into or deeper into recession."
3.50pm: FTSE higher
Better late than never. Holiday Inn and Crowne Plaza holiday chains owner InterContinental Hotels Group PLC has announced it is stopping all operations in Russia.
“We remain deeply troubled by the war in Ukraine and the humanitarian crisis it has caused,” the FTSE 100 company said in a statement.
“Following the outbreak of the war, we announced the suspension of future investments, development activity and new hotel openings in Russia and that we did not intend to resume any investment or development activity in the foreseeable future. We also closed our corporate office in Moscow. These steps followed significant donations to our humanitarian charity partners and a commitment to work with hotel owners in other countries to shelter refugees.
IHG has decided to entirely exit from Russia. https://t.co/2RvTZ0wDBo
— LoyaltyLobby (@LoyaltyLobby) June 27, 2022
“We are now in the process of ceasing all operations in Russia consistent with evolving UK, US and EU sanction regimes and the ongoing and increasing challenges of operating there,” a spokesperson for the company said.
The company said in April that IHG-branded hotels in Russia “operate under complex long-term management or franchise agreements with independent third-party companies that own the hotels” and that it was continuing to evaluate these contracts.
“This is a complicated process and will take some time,” the company advised – accurately, as it turns out.
Shares in IHG were trading 0.7% higher at 4,436p in late afternoon trading.
The FTSE 100 was clinging on to meagre gains entering the last 45 minutes of trading, up 29 points (0.4%) at 7,238.
2.50pm: US indices go off-piste
This was not in the script; US indices have opened lower as Friday’s feelgood factor fades.
The Dow Jones industrial average was down 78 points (0.3%) at 31,423 and the S&P 500 was 14 points (0.4%) weaker at 3,898. The Nasdaq Composite, which had a sparkling end to last week, is the worst performer of the three, sliding 59 points (0.5%) to 11,549.
It’s unlikely that May’s US durable goods orders data was responsible for the disappointing opening as orders rose 0.7%, compared to a consensus forecast of 0.1%.
Orders excluding transport also rose 0.7%, compared to a consensus forecast of 0.3%.
“Revisions were small, so the upside surprise is real, and welcome. The gains in orders for autos and aircraft were smaller than we expected, but the core was solid and better than implied by surveys and the recent industrial production data,” said Ian Shepherdson at Pantheon Macroeconomics.
“Business surveys strongly suggest that the surge in energy prices and the uncertainty triggered by the war in Ukraine have dampened capex plans, and higher rates will increasingly impede investment too over the next few months. We would be surprised by an outright decline, though, given that firms are still cash-rich, in aggregate, the labour market is still very tight, and the backlog of capex - especially replacement - from the previous cycle is still enormous,” he added.
In London, the FTSE 100 has given up some more of the morning’s gains and is now just 24 points firmer (0.3%) at 7,232.
Outside of the FTSE 350, Caretech Holdings PLC leapt 21% to 740p after independent directors backed a bid from the company’s founders worth 750p a share.
“CareTech has been in play since March after the CEO and chairman declared an intention to bid for the group. A rival approach was then made by DBAY at a higher price and the CareTech directors have now come back and matched this proposal with a firm bid. It comes at the eleventh hour, given that DBAY has until 5pm tonight to make an actual offer rather than simply a proposal,” explained Russ Mould, the investment director at AJ Bell.
1.30pm: A bit of calm after Friday's frenzy
US stocks were expected to start the week higher on Monday, holding on to gains from last Friday’s rally driven in part by weaker energy prices and softening expectations for aggressive interest rate hikes in the coming months as weaker economic data point to slowing economic activities.
Two key data are due to be released before the market opens - US durable goods orders and pending home sales for May – which may help to keep the momentum going, as are expectations for a continued rebalancing of portfolios ahead of the quarter-end.
Futures for the Dow Jones Industrial Average rose 0.3% in pre-market trading, while those for the broader S&P 500 index added 0.4%, and contracts for the Nasdaq-100 were up 0.6%.
“A part of last week’s rally is explained by high volatility, and perhaps a quarterly rebalancing of portfolios, where investors bought more equities to keep the proportion of equities stable as the sharp decline in equity prices lead to a relatively underweight equities in portfolios,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, recapping the rally seen in major indices last Friday.
“But the size of the rebound remains worrying as a 3%-4% jump in stocks is a sign that the market’s volatility remains high, conditions are choppy, and gains may not last long,” she added.
Developments over the weekend in Ukraine, where Russian forces bombed Kyiv, have heightened investors’ concerns as G7 nations are reportedly nearing a new agreement to cap the price of Russian oil, which could push oil prices higher and worsen the inflation situation.
“The (Russia-Ukraine) tensions have caused the current chaos in the global stock market, and it is one of the major reasons for the soaring inflation,” said Naeem Aslam, chief market analyst at avatrade.com.
“In addition, many do believe that the worse is still to come, and this is because the soft commodity crisis hasn’t reached its peak level, and we have not seen a real panic among governments and consumers about the shortage of the grain supply,” Aslam said, adding that he sees this scenario happening soon.
In energy markets, WTI crude oil futures gained 0.1% to US$107.75 a barrel and Brent crude futures were up 0.4 % at US$113.61.
Aslam said the path of least resistance for oil prices is “very much skewed to the upside in the short term” due to a lack of supply to meet demand.
“Any sell-off in the oil prices remains an opportunity for many traders who are always standing ready to bag bargains,” he added.
The FTSE 100 was either still up 45 points (0.6%) at 7,254, or my information provider's website has frozen.
12.50pm: Gold hardens as G7 countries mull ban of Russian imports of the yellow metal
So, it’s all tickety-boo in equity markets, which should mean investors are baling out of gold and into something a bit more sexy, right?
Not so. The most actively traded contract on the futures market is up US$6.70 (0.4%) at US1,837.00 an ounce.
“The price of gold will be monitored closely by market participants today after it was revealed that some G7 nations plan to ban new imports of the metal from Russia. This is of course due to Russia’s ongoing invasion of Ukraine and part of a growing list of sanctions imposed on it by western governments. The question is, does it matter? Of course, it does for gold producers in Russia – more on this later - but in terms of its impact on the global prices of gold, that’s going to be negligible,” suggested Fawad Razaqzada of City Index.
“Russia might be the world’s second-biggest bullion miner, there are plenty of countries that could step in to meet any shortfall in physical gold supply. In fact, the industry has already taken steps to restrict Russian gold imports, making the G7 announcement just a formality,” he noted.
At this point, he handed over to this colleague, Joshua Warner, for some commentary on Polymetal International PLC (LSE:POLY) and Petropavlovsk Inc in reaction to the imports ban of Russian gold.
“Although a ban on Russian gold imports is being regarded as largely symbolic, the news has provided a fresh blow to London-listed gold miners operating in the country such as Polymetal International and Petropavlovsk, which have already seen their valuations collapse since Russia invaded Ukraine in February,” Warner wrote.
“The damage at Petropavlovsk has already been done considering the company has succumbed to its debt after Western sanctions prevented it from making repayments to its Russian lender, which also happens to be its main customer. That has prompted it to consider all options, including the sale of all its projects, but it has already warned that it is ‘highly unlikely’ that anything will be returned to investors due to the size of its debt pile; however, there is still interest in the stock, demonstrated by the volatility seen in the share price today.
“Meanwhile, Polymetal has faced disruption but said just last week that sanctions have not had ‘a direct material impact on the business’. That hasn’t prevented the stock from losing over 75% in value since the start of the conflict and it is unlikely to recover so long as the war continues. However, its operations in Kazakhstan, which produce over 550,000 ounces of gold each year, provide some diversity and reports suggest it could be looking to spin these out into a separate company,” Warner added.
As it happens, Polymetal is up 1.5% at 202.9p but the much smaller Petropavlovsk is down 11% at 1.02p.
The FTSE 100 was up 45 points (0.6%) at 7,254, having hardly moved at all during the lunchtime session.
11.55am: Petrol prices hit new high in the UK
If last week was a relief rally then the London equity market continued to feel relieved on Monday morning.
The FTSE 100 was up 46 points (0.6%) at 7,255, largely thanks to the strength of commodity plays.
“Equities rebounded somewhat at the back end of last week in what was mostly a relief rally. Far from being considered a full recovery, last week illustrates how high market volatility is and how fragile sentiment remains,” said George Lagarias, the chief economist at Mazars.
George has clearly been steering clear of the punch bowl.
“At current levels, risk assets are pricing in aggressive quantitative tightening well into January 2024 and possibly an economic slowdown. What they are not pricing in, is a full-blown global economic recession and the rising possibility of systemic events as liquidity is withdrawn and economic pressures mount. It’s not what we have seen but what we have yet to see, that keeps sentiment low,” he warned.
“Investors will probably spend the next few months looking at the potential emergence of systemic risks. Only when, and if, that danger has been removed will markets begin to see sustainable recovery," cheerful George added.
While trimming VAT or further cutting fuel duty could deliver short-term respite for car-dependent families, making petrol cheaper would be regressive, run contrary to the UK’s net zero ambitions, and accelerate tricky decisions for the Treasury.
— Resolution Foundation (@resfoundation) June 27, 2022
Meanwhile, petrol prices have hit a new high in the UK, prompting the AA – the Automobile Association, as was – for another cut in duty levels.
The fact that hardly anyone noticed the last cut in duty – it was 5p a litre – probably banjaxes the idea as the government is not in the mood to give away cash and get no credit for it. Perhaps the mooted return to imperial measures and selling petrol in gallons might temporarily confuse angry car drivers although as 10p per litre rise becomes a 45.5p per gallon increase, perhaps that would not be such a good idea.
Fuel firms accused of ‘rocket and feather pricing’ as petrol hits new high https://t.co/Cs0uQPhsEC
— Alan Hughes (@AlanHug67725461) June 27, 2022
At this rate, people will stop investing in fine wines and start keeping a few barrels of high octane petrol in the cellar*.
(* Don’t try this at home, people)
10.40am: FTSE 250 powers on
The FTSE 100 has given up some of its early gains but the mid-cap FTSE 250 has kept the good times rolling.
London's index of heavyweight shares was up 48 points (0.7%) at 7,255 while the FTSE 250 was up 209 points (1.1%) at 19,332.
The FTSE 250’s charge is being led by Carnival PLC (LSE:CCL), which is up 4.2% at 788.2p after Friday’s afternoon’s business update.
The cruises operator posted a net loss of US$1.8bn for the second quarter of its financial year but revenue increased by nearly 50% quarter-on-quarter.
Packaged tours operator TUI AG (LSE:TUI) is up 3.8% at 151.55p in sympathy.
Bid stock Biffa PLC (LSE:BIFF) was the worst mid-cap performer, sliding 1.7% to 400p after it said its full-year results would be delayed. The waste management group received a proposed takeover bid from private-equity firm Energy Capital Partners (ECP) at a price of 445p per share in cash earlier this month.
Another mid-cap, PZ Cussons (LSE:PZC) PLC, headed 2.1% higher to 201.5p after it said it had a cunning plan to mitigate cost inflation. Chief executive Jonathan Myers warned of the cost-of-living pressures facing customers and increased costs in its supply chain but the market focused on the bit of the trading statement where the hygiene products maker said it expects earnings to be in line with inflation.
PZ Cussons (LSE:PZC), which enjoyed strong sales during the pandemic driven by its Carex brand of soap and sanitiser, has said trading in Q4 was in line with expectations& it expects to achieve revenue for the year of approx. £590m, up 3pc compared to last year on a like for like basis.
— Mehrdad Yousefi (@MY21_Oracle) June 27, 2022
9.40am: SMT rallies after storming session on Friday for tech stocks
Scottish Mortgage Investment Trust PLC (LSE:SMT) led the UK market higher after a stonking performance by the tech-heavy Nasdaq on Friday.
The FTSE 100 was up 73 points (1.0%) at 7,282, which pales into comparison with the Nasdaq Composite’s 3.3% leap on Friday and for that matter the S&P 500’s 3.1% jump but let’s not quibble.
Good morning. Nasdaq futures starting off the week ripping higher again pic.twitter.com/9w9IP4hpIt
— Thomas Thornton (@TommyThornton) June 27, 2022
Scottish Mortgage (SMT) was the main beneficiary of a return to confidence in stocks of companies with disruptive business models – the meat and drink of SMT’s investment strategy.
SMT’s shares were up 4.0% at 762p, showing a clean pair of heels even to miners, which were back in favour big time.
“US indices surged on Friday, helping set a positive pace for Asian stocks as optimism lifts slightly that central banks may finally be getting a handle on inflation. That hope is offsetting continuing concerns that the rapid withdrawal of cheap money and an intensifying cost-of-living crisis could trigger recessions. Miners have started on the front foot, helped by the plans for a potential US$600 billion global infrastructure boost, which was unveiled at the G7 summit. It’s hoped this scheme, seen as a counter to China’s Belt and Road Initiative, will set off a spurt of spending and demand for commodities around the world, triggered by the US$200 billion pledged by the US but there are already some concerns about the watering down of commitments amid escalating costs of some planned projects due to inflationary pressures,” said Susannah Street at Hargreaves Lansdown.
With miners inflating the size of the Footsie’s gain, drugs giant AstraZeneca PLC (LSE:AZN), up 0.5% at 10,834p, was actually underperforming the index despite some good news on drugs clearances.
AstraZeneca and MSD's Lynparza (olaparib) breast cancer drug has been recommended for marketing authorisation in the European Union (EU) as has AstraZeneca and Daiichi Sankyo's Enhertu (trastuzumab deruxtecan) breast cancer drug.
Agbaka News: AstraZeneca-Merck's Lynparza to treat early-stage ...
existing therapies have been recommended for treating patients with some forms of high-risk breast cancers
— Osehobo (@DonOsehobo) June 27, 2022
8.39am: Miners lead the way
The FTSE 100 made a strong start to the opening session of the week as the tentative rebound from the global sell-off continued.
Inflationary worries were pushed to one side after a strong start in Asia earlier that mirrored the performance of Wall Street on Friday.
If the cooling in natural resources prices helped quell fears over the commodity cost portion of the inflationary equation, it’s had a knock-on negative impact on the UK blue-chip index with its weighting towards miners and oilers.
That said, Monday was the bounce-back session for the miners at least. Rio Tinto, Glencore, Anglo American and Antofagasta each posted gains of around 3% in the early exchanges.
Scottish Mortgage Trust, one of the UK’s biggest investors in Silicon Valley, rose 2%, mirroring the jump in the tech-heavy Nasdaq on Friday.
6.50 am: Positive start predicted
The FTSE 100 looks set to open its weekly account in the green after a strong showing for equities in Asia that mirrored the rebound seen on Wall Street last Friday.
The positivity reflected a generally held feeling the central bankers are getting to grips with the worst inflationary cycle in a generation, market watchers said.
However, there was a note of caution from Jeffrey Halley, a senior market analyst at the forex platform OANDA.
“We are already seeing discontent sweeping the UK and Europe and elsewhere as workers strike over pay increases,” he pointed out.
“None of this adds up to a reason to be piling into equity markets in my mind, because even if bond yields from early hikers start topping out with the US, the real world where companies sell their products isn’t looking too special for [the second half].”
Away from the markets, the G7 meeting of the world’s leading economic powers took a unified line on Russia with a pledge of continued support for Ukraine.
Meanwhile, relations between France and the UK also appeared to thaw with prime minister Boris Johnson declaring bilateral talks between the two countries as the start of ‘le bromance’.
Returning to the stock markets, the week ahead looks slow for corporate news with updates from Capita, Bunzl and Moonpig representing the pick of a thin crop.
Around the markets
- Pound US$1.2287 (+0.15%)
- Bitcoin US$21,176.90 (+0.71%)
- Gold US$1,838.60 (+0.45%)
- Brent crude US$112.95 (-0.15%)
6.50am: Early Markets - Asia / Australia
Asian shares surged on Monday even as Russia defaulted on its foreign-currency sovereign debt for the first time in more than 100 years, according to a Bloomberg report.
Bondholders have not yet received payments of about US$100 million after Russia's attempts to pay in ruble were blocked by international sanctions.
The Shanghai Composite in China gained 0.78% while Hong Kong’s Hang Seng index surged 2.30%.
Japan's Nikkei 225 was trading 1.43% higher and South Korea’s Kospi jumped 1.70%.
Australia’s S&P/ASX200 advanced 1.9% in a broad rally that lifted all 11 sectors.