- FTSE 100 closes 11 points lower
- US stocks mixed after big falls
- BP and Shell higher as energy prices rise
4.50pm: Caution returns on recession
The FTSE 100 index ended modestly lower on Wednesday, tracking back again as Wall Street failed to rally much after big falls in the previous session amid fears over a global recession following recent data.
In a speech on Wednesday, Federal Reserve chairman Jerome Powell said he was more concerned about the risk of failing to stamp out high inflation than he was about the possibility of raising interest rates too high and pushing the US economy into a recession.
The UK blue-chip index ended down 11.09 points, or 0.2% at 7,312.32, below the session peak of 7,345.45 but above the session low of 7,263.54.
In New York, around London’s close, the Dow Jones Industrial Average was 38 points, or 0.1% higher at 30,985, but the broader S&P 500 index and the tech-laden Nasdaq Composite both shed 0.1%.
Chris Beauchamp, chief market analyst at online trading platform IG said: “It has been one of those closely-fought days between buyers and sellers. There are still those looking for a bounce for oversold markets, but their task has been complicated by yesterday’s gloomy confidence data and the pressure that has piled on markets. It does look like we are still in the first phase of this bear market, where indices are prepared to drop on the slightest bit of bad news, and any rally is short-lived. So far a sustained bounce seems unlikely.”
He added: “Given the skittish nature of investors right now, Powell’s comment about controlling inflation requiring ‘some pain’ was bound to cause more investors to hit the sell button. Given the greater robustness of the US economy, it is not surprising to see European markets in the red following these comments while Wall Street holds its small gains for now.”
3.55pm: Footsie lacks direction after recovering from early fall
Leading shares are drifting around break-even as we head into the close.
With Wall Street marginally in the green too after US Federal Reserve chair Jerome Powell said he saw a pathway back to 2% inflation, the FTSE 100 is currently down just 0.59 points at 7322.82.
Earlier it had fallen as low as 7263.
Oil companies have provided some support as crude prices have moved higher, despite the latest OPEC gathering ending without any market moving news. Thursday's wider meeting of OPEC+is expected to have more significance.
OPEC ministers met online to discuss internal matters, before convening with their allies on Thursday to review oil-production policy.
— Quartile Capital (@quartilecapital) June 29, 2022
The meeting of the wider 23-
nation OPEC+ alliance tomorrow will have more significance - the anticipated ratification of a supply
increase for August that will complete the return of production halted at the outset of the Covid-19 pandemic.
— Quartile Capital (@quartilecapital) June 29, 2022
Brent crude is 1.56% higher at US$119.82 while West Texas Intermediate is up 1.39% at US$113.31.
So BP PLC (LSE:BP.) is 1.98% better and Shell PLC (LSE:SHEL, NYSE:SHEL) has climbed 1.86%.
On a day when the market recovered from earlier falls only to lose impetus, broker notes had an influence.
Downgrades from Bank of America left British Land Company PLC (LSE:BLND) 8.64% lower and Land Securities Group PLC (LSE:LAND) losing 7.17%.
Pearson PLC (LSE:PSON) fell 5.35% after UBS moved from neutral to sell.
But Standard Chartered PLC (LSE:STAN) rose 2.87% to 638.4p as Goldman issued a buy recommendation and raised its price target from 945p to 1030p.
3.35pm: Pathway to lower inflation has become narrower - Fed chair Powell
More from US Federal Reserve chair Jerome Powell at the ECB forum in Portugal.
He warned that time was running out to bring inflation down before it became embedded in the system.
Jay Powell got somewhat worked up (by Powell standards) during his "clock running" talk at the ECB forum. I think it's an important window into his thinking:
"There’s a clock running here, where we have high inflation running now for more than a year."
— Jonathan Levin (@JonathanJLevin) June 29, 2022
But he said he sees a path back to 2% inflation with a strong labour market, although there was "no guarantee that we can do that" and the pathway had become narrower after the events of the last few months.
2.52pm: Wall Street off to an uncertain start
US stocks have made a mixed but slightly better than expected start as the latest quarterly US GDP data showed the American economy is slowing down.
At the open, the Dow Jones Industrial Average was up 53 points at 31,000 and the S&P 500 was steady at 3,823 points, while the Nasdaq Composite had dipped 30 points at 11,152 points.
The moves follow the news that the final first-quarter US GDP figures came in lower than expected, showing a 1.6% annualized quarter-on-quarter decline, compared to a 1.5% drop in the previous quarter.
BRI Wealth Management CEO Dan Boardman-Weston said the downward revision of 0.1% compared to estimates arose predominantly as a result of lower personal consumption expenditures but slightly higher inventory investment.
“The data is superseded by more recent data points which suggest that the American economy is continuing to slow amid the pressures of high inflation and higher interest rates,” he said.
“It seems increasingly likely that the US economy may enter a recession at some point over the next year but the question on everyone’s minds is how bad might it be? The picture will become increasingly clear as we head into the second half of 2022.”
Back in the UK the FTSE 100 has edged up into positive territory after the US open, and is now up 5.41 points at 7328.82.
2.41pm: US economy falters
More signs of weakness in the US economy.
The latest reading of first quarter GDP shows an annualised fall of 1.6% compared to expectations of a 1.5% drop, in line with the initial estimate.
US GDP Annualised (Q/Q) Q1 T: -1.6% (est -1.5%; prev -1.5%)
- US Personal Consumption Q1 T: 1.8% (est 3.1%; prev 3.1%)
- US GDP Price Index Q1 T: 8.2% (est 8.1%; prev 8.1%)
- US Core PCE (Q/Q) Q1 T: 5.2% (est 5.1%; prev 5.1%)
— LiveSquawk (@LiveSquawk) June 29, 2022
Along with the weak consumer confidence figures on Tuesday, this adds to the concerns about the world's largest economy heading into recession.
Meanwhile US Federal Reserve chair Jerome Powell has said the country's economy can cope with rising rates despite fears this may exacerbate the slowdown.
Fed's Powell: US Economy Is ‘Well Positioned To Handle Tighter Policy’
— LiveSquawk (@LiveSquawk) June 29, 2022
Powell, about recession risks: "The biggest risk to the economy would be to fail to restore price stability."
— Frederik Ducrozet (@fwred) June 29, 2022
Powell was speaking at a panel at the ECB forum in Portugal, as was Bank of England governor Andrew Bailey.
Bailey raised the prospect of the Bank acting more quickly if inflation persisted.
BoE's Bailey: Being Hit By ‘Very Large Real Income Shock’
- Shock `Is Very Substantial', Expected To Hit Demand
- Will Have To Act More Forcefully If Greater Persistence Of Inflation Seen
- Situation Leaves ‘Options On The Table’
- Circumstances In Which We'll Have To Do More
— LiveSquawk (@LiveSquawk) June 29, 2022
12.44pm: Russia's "Nickel King" sanctioned by UK
Nickel and palladium prices have jumped after the UK sanctioned Vladimir Potanin, the latest in its reaction to the Russian invasion of Ukraine.
Potanin is a former Russian deputy prime minister, was its second richest man and owns a third of Norilsk Nickel, the world's largest producer of refined nickel and palladium.
So of course he was known as Russia's "Nickel King" apparently.
Norilsk was set to be supplier of the metal for European electric vehicles.
Potanin sanctioned by UK. Big event, nickel and palladium prices surge. Many people are surprised that he had not yet been sanctioned.
— Timothy Ash (@tashecon) June 29, 2022
Nickel has jumped by as much as 9% and palladium by 5%.
11.50am: Wall Street set for downbeat start
US stocks were expected to open softer after taking a big hit on Tuesday in the wake of a slump in US consumer confidence which once again reminded investors that the world’s largest economy is likely to be heading for a recession.
Futures for the Dow Jones Industrial Average were trading 0.07% lower pre-market, while those for the broader S&P 500 index were down 0.1% and futures for the tech-laden Nasdaq-100 were off 0.3%.
“US and European stock futures are trading lower as traders are concerned about the gloomy economic outlook,” said Naeem Aslam, chief market analyst at avatrade.com, noting that the environment of higher interest rates is expected to threaten economic growth.
“Yesterday, we saw the wheels coming out of the bear market rally in the US and in Europe, and the sell-off became a lot more intense for the Dow Jones stock index, which shed nearly 500 points while the Nasdaq index plunged 2.98%,” he added.
US stocks sank yesterday after the Conference Board Consumer Confidence Index slipped to 98.7 in June from 103.2 in May and came in well below market expectations, signaling that consumers are tightening their belts.
Investors will also be keeping a watchful eye on comments from US Federal Reserve chairman Jerome Powell, the ECB's Christine Lagarde and Bank of England boss Andrew Bailey at the central bankers forum in Portugal.
In energy markets, WTI crude oil futures were up 0.4% at $112.16 a barrel while Brent crude futures were 0.3% higher at $114.19 ahead of OPEC’s latest meeting.
Back in the UK, the FTSE 100 remains in the red, down 39.26 points or 0.54% at 7284.15.
10.42am: Eurozone consumer confidence dips, but by less than forecast
Well, the US consumer confidence figures on Tuesday may have come in worse than expected and rattled global markets.
But the picture was not quite as bad in Europe.
The latest report showed a drop in the eurozone confidence index in June to 104 from 105 previously.
But this was slightly better than the expected fall to 103.
Eurozone Economic Confidence Jun: 104.0 (est 103.0; prev 105.0)
- Eurozone Industrial Confidence Jun: 7.4 (est 4.8; prev 6.3)
- Eurozone Services Confidence Jun: 14.8 (est 12.8; prev 14.0)
- Eurozone Consumer Confidence Jun F: -23.6 (prev -23.6)
— LiveSquawk (@LiveSquawk) June 29, 2022
In the wider EU the index fell 1.7 points to 102.5.
The European Commission said confidence dropped most markedly in the Netherlands (-3.6), but also in Germany (-1.9), Spain (-1.9), Poland (-1.5), France (-1.0) and Italy (-1.0).
10.04am: Analysts boost property firms
Property companies are among the biggest fallers in the leading index after a broker downgrade.
British Land Company PLC (LSE:BLND) has dropped 5.21% to 480.8p as analysts at Bank of America (NYSE:BAC) cut their rating from neutral to underperform and their price target from 560p to 440p.
Likewise Land Securities Group PLC (LSE:LAND) is off 4.1% at 706.4p after the bank moved from buy to neutral with a 720p price target, down from 870p.
Meanwhile National Grid PLC (LSE:NG.) remains higher but off its best after the latest Ofgem investment document. It is now up 0.87%.
But SSE PLC (LSE:SSE) - which called the report's proposals "tough and stretching" - has lost its early gains and is now down 0.63%.
Gambling groups have moved higher ahead of a UK government White Paper on reforming the sector.
The measures will reportedly include online casinos having maximum stakes of between £2 and £5 with a ban on free bets, according to the Times.
Analyst Greg Johnson at Shore Capital said this was a "potentially better outcome than feared for the industry and positive for stocks" but added that the "devil will be in the detail".
Even so Flutter Entertainment PLC (LSE:FLTR) is up 0.71%, Entain PLC (LSE:ENT) has added 0.46% and FTSE 250 firm 888 Holdings PLC (LSE:888) has jumped 5.72%.
9.25am: OPEC meeting in focus
Crude prices are fairly flat after their recent rises, as OPEC begins its latest meeting and investors await details of any G7 plan to put a cap on Russian oil prices.
The wider OPEC+ grouping is set to gather on Thursday.
Brent crude is steady at US$117.99 a barrel while West Texas Intermediate is up 0.16% at US$111.94.
Naeem Aslam, chief market analyst at Avatrade, said: "All eyes will be on the cartel’s supply decision. The cartel has brought most of the oil production back to life since cutting the life out of it when COVID-19 brought the global economy to a standstill....
"By August, OPEC oil production will be back to the pre-COVID-19 level, but sanctions on Russian oil and the absence of Russian oil remain a massive challenge. Traders will be expecting the cartel members to provide a bit more clarity on this front."
Shell PLC (LSE:SHEL, NYSE:SHEL) shares are up 0.83% while BP PLC (LSE:BP.) is 0.81% better.
Elsewhere B&M European Value Retail SA (LSE:BME) has added 0.71% after its latest update.
Retail analyst Nick Bubb said: " As the B&M first quarter update (for the 13 weeks to June 25) comes only a few weeks since the finals/profit warning on May 31, it should be no surprise that there is no change to the revised EBITDA guidance, with the company highlighting that there has been “an improving trend during the quarter” in sales (In the UK core business, B&M’s like for like sales were around 19% down in April, but have been only 1.6% down in the last 8 weeks)."
But Pearson PLC (LSE:PSON) is down 3.83% to 758.4p after analysts at UBS moved from neutral to sell with a 620p price target.
They said: "We think expectations for Higher Education are too positive given trends in US college enrolments.
"While Higher Education is only around 20% of 2021 EBIT, it represents 35% of 2022-25 estimated EBIT growth implied by management guidance.
"Our revised 2023 estimated EBIT is 5% below consensus. [Our model] predicts that the 2022 decline in enrolments will be worse than in 2021, down 7% year on year. As a result, we have cut underlying revenue growth for Pearson's Higher Education division by 400bps to -5% and cut group EBIT by 4% to £411mln (consensus £426mln)."
Overall the FTSE 100 remains in the red, down 36.99 points or 0.51% at 7286.42.
8.28am: Ofgem issues grid report
Utility companies are providing some support for the market.
As energy regulator Ofgem unveiled a new £20.9bn package to boost grid capacity, National Grid PLC (LSE:NG.) has added 1.87%, SSE PLC (LSE:SSE) is up 0.87% and Drax Group (LSE:DRX) has climbed 1.25%.
The plan is less than the £25.2bn which companies had proposed investing, and National Grid said it would now work through the figures. SSE said the Ofgem draft determination was "tough and stretching."
Water companies, which slipped on Tuesday after a downbeat note on the sector from JP Morgan, has recovered some lost ground.
Pennon Group PLC (LSE:PNN, OTC:PEGRY) has put on 1.39%, Severn Trent PLC (LSE:SVT) is 1.28% better and United Utilities Group PLC (LSE:UU.) is up 0.93%.
8.17am: Market falls amid new signs of inflationary pressures
Leading shares have opened lower, with concerns growing about an economic slowdown as central bankers continue to raise interest rates to try and curb surging inflation.
The FTSE 100 has fallen 35.29 points or 0.48% to 7288.12 in the wake of Tuesday's weak US consumer confidence figures, one cause of this latest market decline.
Investors will be looking out for comments later from three leading central bankers on the last day of the European Central Bank forum in Portugal.
Richard Hunter, head of markets at interactive investor, said: "With a number of central bank leaders speaking later today... investors will be looking to read the room following updates from the Federal Reserve, the Bank of England and the ECB itself on their latest thoughts and proposed actions in tackling the inflationary problem.”
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: "We have a plenty of central bankers speak today at a European Central Bank event, including the Fed Chair Jerome Powell and the Bank of England Governor Andrew Bailey. But all eyes are on Christine Lagarde.
"Investors are craving for more details about the ECB’s mysterious antifragmentation tool, which should give the ECB a green light to get more hawkish on its rate policy, but the euro bulls are increasingly unconvinced that the new tool would magically solve the fragmentation problems."
Earlier came new evidence of inflationary pressures in the UK.
Shop price inflation rose to 3.1% in June, according to the British Retail Consortium.
This was up from 2.8% and marks a 13 year high.
Food inflation hit 5.6%, the highest in a decade.
Helen Dickinson, chief executive of the BRC, said: "Food prices rose sharply, particularly for fresh foods such as cheese, which has been affected by the spiralling costs of fertiliser and animal feed."
6.50am: Footsie set to follow global markets lower
The FTSE 100 is seen on the back foot ahead of Wednesday’s open as US data sparked an equity market freak-out.
CFD firm IG Markets sees London’s blue-chip benchmark down some 50 points, making a price of 7,276 to 7,279 with just over an hour to go until the opening trades on the exchange.
It comes after the latest US economic data proved bearish for global market sentiments.
Investors should probably look elsewhere for a steer, according to analysts at OANDA, which says that American markets have stopped being a source of wisdom.
“The price action overnight confirmed that part of the financial world has as little future insight as anywhere else,” said OANDA analyst Jeffrey Halley.
“Last week, US equity markets rallied on the back of the arcane logic that a US recession would mean a lower terminal Fed funds rates and thus, was bullish for stocks, especially bombed-out tech stocks. That premise was boosted by weak Michigan Consumer Sentiment data last week.
He added: “Overnight, even weaker US Conference Board Consumer Confidence data provoked the opposite reaction, with US stocks plummeting.”
Tuesday saw the Dow Jones slump 491 points or 1.56%, to 30,946, whilst the S&P 500 crumbled 2.01% lower to 3,821.
The Nasdaq gave up more ground, losing 2.98% to 11,181. Whilst the small-cap focussed Russell 2000 was off 1.86% at 1,738.
In Asia, Japan’s Nikkei lost just over 1% to 26,772 and Hong Kong’s Hang Seng fell further, losing 1.84% to 21,999. The Shanghai Composite shed 1.07% to 3,373.
Around the markets
The pound: US$1.2195, up 0.09%
Gold: US$1,821 per ounce, up 0.15%
Silver: US$20.83 per ounce, up 0.05%
Brent crude: US$117 per barrel, up 2%
WTI crude: US$110.93 per barrel, up 1.36%
Bitcoin: US$20,165, down 2.94%
Ethereum: US$1,135, down 4.46%