- FTSE closes near flat
- More airport chaos
- Tough week ahead
4.55pm: FTSE closes little changed
FTSE 100 closed near flat on Monday, while other European indices were hit harder as the UK index was propped up by defensive stocks.
Britain's blue-chip benchmark finished the day up 0.35 points, or 0.0049%, at 7,169.59.
"Concerns over new covid restrictions in China, as well as surging natural gas prices have weighed on European markets today," said Michael Hewson, chief market analyst at CMC Markets.
"These fears over an extended economic slump in China have also weighed on copper and oil prices," he added.
Shares in energy giants SSE, British Gas owner Centrica and National Grid were boosted on news that the UK government would not extend its windfall tax plans to electricity or infrastructure companies
3.31pm: Uber down
Shares in Uber dropped 5% in early trading, following the leaking of files which showed the ethically questionable practices that fuelled the company’s success.
Uber’s shares have fallen as low as US$21.20, down from US$22.34 on Friday night, following the disclosure of the Uber Files to the Guardian, knocking over US$2bn off the company’s market capitalisation.
The leak of more than 124,000 documents showed how the company had flouted laws, duped police, exploited violence against drivers and secretly lobbied governments during its aggressive global expansion.
2.56pm: Twitter down
The markets reacted to news of Elon Musk pulling the plug on his proposed Twitter takeover with shares falling 7% to US$34.06.
Some commentators on Wall Street have forecasted however that the price could go as low as US$24.
MKM Partners, an equity trading and research firm said the Twitter stock would likely find support around US$24 to US$26 per share.
Jefferies set a target price of US$40, slightly more ambitious, although analysts at the firm added that it would not be surprised to see the stock hit as low as US$23.50 should a deal not go through.
Truist Securities said similar regarding the deal, or lack of it, although it had set a target price of US$50.
2.34pm: Russia cuts off Germany
Anxiety is gripping mainland Europe as Russia turned off its biggest pipeline carrying gas into Germany.
Nord Stream 1 pipeline has been turned off for annual maintenance for the next 10 days, but Berline fears it may never be turned on again.
The pipeline transports 55bn cubic metres a year of gas into Germany from under the Baltic Sea
CHART OF THE DAY: And Germany counts the days.
Nord Stream 1 pipeline has stopped shipping Russian gas into Germany (just a residual amount still flowing now). It's annual maintenance, scheduled from July 11 to July 21.
Berlin fears the pipeline may never return into service. pic.twitter.com/HCdagmIbGs
— Javier Blas (@JavierBlas) July 11, 2022
2.13pm: Uber scandal
More on Uber.
As part of the leaked documents, it is alleged the US company hired a political operative with links to Russian oligarchs to buy influence in the country.
This is despite known concerns that the lobbyist would look to bribe political officials to “grease the skids.”
The deal was part of several from Uber with billionaires and court officials aligned with Putin in order to secure a place in the Russian Market.
Uber’s previously unknown lobbying campaign in Russia is laid bare in the Uber files, a leak of more than 124,000 documents.
They reveal how in 2015-16 Uber tried to secure influence at the highest levels of the Russian state by approaching oligarchs said to have close ties to the Kremlin and encouraging them to invest in the company.
However, Uber’s working with Vladimir Senin, an influential lobbyist, could amount to breaching US anti-bribery laws.
1.44pm: Pound falls
The pound fell today as market uncertainty continues to linger following Boris Johnson’s resignation and the gloomy economic outlook.
Sterling fell by half a cent against the US dollar to 1.1945 as the Tory party leadership contest heats up, with several candidates pledging tax cuts.
The pound had risen on Friday, a day after Johnson’s resignation, although he will remain in the hot seat on a temporary basis.
“We know last week the pound against the dollar did just pop higher when Boris Johnson finally handed in his resignation. That was a relief rally that we were seeing,” said Fiona Cincotta, market analyst for CityIndex.
“However, the pound is coming down today and there is going to be this period of political limbo where we are not going to see any political decisions taken and that, at this time, when the economy and the economic outlook is quite dire, is a bit concerning for the pound.”
1.07pm: US preview
US stocks were expected to open lower on Monday as the earnings season unfolds, bringing into sharp focus the outlook for corporate America amid rising interest rates and high inflation.
Trading is expected to remain choppy as investors consider the likelihood of a recession in the world’s biggest economy although there could be bright spots on the earnings front to bring out bargain hunters.
Futures for the Dow Jones Industrial Average were trading 0.4% lower pre-market, while those for the broader S&P 500 index were down 0.6% and futures for the tech-laden Nasdaq-100 lost 0.7%.
The earnings season kicks off this week, giving a concrete insight on how well US companies are dealing with rising inflation and a stronger US dollar, said Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank.
“The S&P profit estimates have been pushing higher this year, despite a major dive in stock prices. Either the analysts are well behind the curve, and the earnings will come as confirmation that inflation, and the strong US dollar are having an ugly impact on profits. Or they are right, the US company profits are resilient to economic shocks, as the jobs market is,” she noted.
12.36pm: Electricity providers boosted
Shares in electricity providers SSE, Habour Energy and Centrica all jumped after a spokesperson for Boris Johnson confirmed the PM would not be extending the windfall tax onto electricity generators.
“We would not seek to make any new policies or major fiscal decisions. So there are no plans to do that,” the spokesperson said.
“We will continue to evaluate the scale of the profits and consider appropriate steps but there’s no plans to introduce or extend that to that group.”
SSE jumped 3.4% to 1,749, to the top of London’s blue chip index’s largest risers.
Harbour Energy and Centrica followed swiftly behind, up 3.16% and 3.1% respectively.
Drax also climbed 6.3% to the top of the FTSE 250 in terms of upwards share price movement.
12pm: Barristers on strike
The UK’s summer of strike shows no signs of slowing down, with barristers walking out for the third week running.
Criminal cases up and down the country face four-day disruption as lawyers in London, Birmingham, Preston and Plymouth walked out.
The dispute concerns current conditions and government set fees for legal aid advocacy work.
At the end of June, the Ministry of Justice said barristers would receive a 15% pay increase, which equates to roughly £7,000 per year for criminal lawyers.
However, the Criminal Bar Association asked for 25%, and is angry at the delay, with the rise coming into effect in September.
11.32am: Euro/Dollar
We may soon see a Euro that equals a dollar, according to Fawad Razaqzada, an analyst at City Index and FOREX.com.
Source: City Index
"Inflation has caused havoc across financial markets, and all the attention will turn to the US on Wednesday as the government releases the June CPI estimate," said Razaqzada.
"If annual CPI accelerates to more than 8.8% expected, this will likely trigger fresh gains for the dollar, given there’s been some talk of peak inflation."
"In May, annual CPI had come in at 8.6%, which marked a sharp acceleration from 8.3% the month before."
"While a drop to 1.0000 looks very likely, it is possible that we may see some short-side profit-taking ahead of the publication of US CPI on Wednesday."
"But the fact that there has been no follow-through despite the hammer candle we saw on Friday, this suggests that price remains under heavy pressure. Friday’s low was around 1.0072."
"A move below this level looks very likely today, given that there will be some stops resting there from early and trapped longs. As this level is very close to parity, a run on those stops could trigger a sharp continuation to and potentially below parity."
11.22am: Labour market is slowing
Despite strong US jobs number reported on Friday, the markets tell us that demand for labour is slowing, with S&P 500 Human Resources and Employment Services index considerably below job openings.
Despite the June US payrolls strength, the stock market is telling us that demand for labor is slowing. pic.twitter.com/zK8kh028LG
— (((The Daily Shot))) (@SoberLook) July 11, 2022
11.11am: Change in spending habits
A report from the Office of National Statistics highlighted how consumer spending has changed since COVID restrictions ended.
Generally, the public is buying less food, putting off delayable spending and is less like to spend money going out.
However, spending on hobbies and home improvements has gone up, with people sticking with online shopping.
Shopping and spending habits may be “incredibly positive” for the consumer, according to Sarah Coles, a personal finance analyst at Hargreaves Lansdown.
“We’re taking the hard decisions in order to cut back spending rather than falling into borrowing habits that will come back to bite us later.”
However, that spells bad news for retailers.
“For any business relying on us filling our baskets and wardrobes on a regular basis, it’s a far more worrying sign that demand is dwindling.”
“There’s every chance that the sombre tone of retailers’ results is unlikely to get much cheerier in the near future.”
10.36am: More airport chaos
More chaos at the airports as Heathrow confirmed another 60 flights had been cancelled today.
British Airways, Virgin Atlantic and Air France were among the airlines affected, with the airport warning more could be forced to scrap flights.
“We are expecting higher passenger numbers in Terminals 3 and 5 today than the airport currently has capacity to serve, and so to maintain a safe operation we have asked some airlines in Terminals 3 and 5 to remove a combined total of 61 flights from the schedule,” an airport spokesperson said.
“We apologise for the impact to travel plans and we are working closely with airlines to get affected passengers rebooked on to other flights.”
9.55am: Nervous week ahead
“Scorching inflation and a global slowdown” will keep investors on the lookout this week, according to Susannah Streeter, investment and markets analyst at Hargreaves Lansdown.
“The central worry affecting stock markets right now is that as central banks around the world take more aggressive steps to dampen down inflation, it will cause demand to fall rapidly pushing economies into reverse.”
“With the American labour market looking so buoyant right now, expectations have risen that the US Federal Reserve will try and deflate red hot prices by hiking interest rates by 0.75% at the next meeting and keep the pressure on in the months to come.”
“Forecasts that this will squeeze out growth in the economy are coming thick and fast, and that’s reflected in the bond markets which are now pricing in a sharp deceleration of inflation over the next few years.”
9.32am: Twitter threatens legal action
News broke over the weekend that Elon Musk backed out of his Twitter deal.
In response, the social media company is reportedly planning legal action to force the Tesla chief executive to follow through on his proposed US$44bn takeover.
This all seems like the first stages of a feud that will get nasty between the two, and as much as Musk will argue the issue stems around the number of bots, analysts are certain he was simply manoeuvring for a cheaper deal.
“It’s most likely the valuation,” according to Neil Wilson, analyst at Markets.com
“The Nasdaq has plunged since the deal was inked, so Twitter is by any normal model worth a lot less than US$44bn today.”
Wilson also argues that perhaps the idea was to offload Tesla stock, which Musk did, with little to no fuss, using the attempted acquisition of Twitter as a smokescreen.
Back in April, Wilson said the deal could be “a smokescreen to offload a tonne of Tesla stock without a backlash, finding some other reason down the line to walk away … Last year he faked a Twitter poll to offload lots … fits the pattern of behaviour.”
9.09am: Oil down
The price of Brent Crude has fallen a further US$2 to US$104.80 per barrel.
Although ahead of last week's low, where it was trading around US$100, it is still well below the highs of March of around US$127, just after the start of war in Ukraine.
⚠️ BRENT CRUDE FUTURES FALL MORE THAN $2 TO $104.80 A BARREL
- Reuters via https://t.co/6vj5FWMV9H pic.twitter.com/ne9XiMBNXq
— PiQ (@PriapusIQ) July 11, 2022
"The bearish market remains vulnerable to supply side news. Therefore, I am cautiously neutral, to negative on oil, and believe that in the absence of an unexpected supply shock, we could see the barrel of US crude retreat toward the US$85 mark," according to Ipek Ozkardeskaya, a senior analyst at Swiss Quote.
9.01am: Quick snapshot
Wizz Air said it expects a return to profit in the next quarter despite a “challenging macro and operational background.” The airline said revenue per available seat kilometre will continue to improve on the back of higher fares and growing load factors.
Klarna is expected to announce it secured funding from existing investors and new backers which could include Canada's largest pension fund. At US$800m, the size of the funding round is larger than previously anticipated.
Uber is at the centre of a major scandal after documents were leaked. It is alleged Uber lobbied officials to drop investigations, used a "kill switch'' to thwart law enforcement and considered exploiting violence against its drivers to gain public sympathy.
Among the small caps, Thor Mining completed its drilling programme at its Ragged Range gold and nickel project in Pilbara. The drilling samples have been sent to a lab in South Australia, with assay results expected to return by September.
OptiBiotix struck a commercial deal with one of the world leaders in flavourings and ingredients. Its deal with Firmenich will see the two companies develop new products containing OptiBiotix's SweetBiotix low-calorie alternative to sugar.
Induction Healthcare said it signed an agreement System C Healthcare, which will sell Induction’s Zesty engagement platform. Zesty allows people to manage their hospital appointments, as well as view their letters and clinical records.
8.26am: FTSE opens lower
London’s blue-chip index lost 74 points as it opened for the start of the week, down to 7,122 points.
Miner’s lead the way as the index’s largest fallers, with Anglo American, Antofagasta, Glencore and Rio Tinto all down.
All four miners mentioned above were hit with target price cuts on Friday.
6.45am: FTSE preview
The FTSE 100 looks set to open sharply lower amid worries the US may be set to pull the trigger on a super-sized interest rate hike to quell rising prices.
The spectre of America’s inflation report also cast a shadow over Asia’s main markets earlier.
The suspicion is a further jump in the headline rate will force the Fed to juice borrowing costs by a further 0.75% at the next meeting later this month, followed by a second three-quarter point hike in September.
“This would double the Fed funds rate in the space of two months from its current 1.5%, and in all likelihood force central banks elsewhere to react in a similar fashion to mitigate the inflationary impulse that the Fed’s actions would send out into the wider global economy,” said Michael Hewson of CMC Markets.
A Reuters poll suggests the US headline rate of inflation will have edged up to 8.7% in June from 8.6% the month earlier.
Keenly eyed for recessionary signs this week will be the US earnings season with JP Morgan, Morgan Stanley (NYSE:MS), Citigroup and Wells Fargo getting the parade underway.
Here in the UK, the action is expected to be a little tamer with updates from builder Barrett, fashion giant Burberry and credit checker Experian (LSE:EXPN).
Around the markets
- Pound US$1.1986 (-0.39%)
- Bitcoin US$20,542.10 (-1.47%)
- Gold US$1,740.20 (-0.12%)
- Brent crude US$106.32 (-0.98%)