- FTSE 100 closes up around 13 points
- British Land hit by downgrade
- Retail sales fall - BRC
4.45pm: FTSE closes ahead
FTSE 100 closed ahead on Tuesday as traders decided to shake off the potential recession blues albeit for now.
Britain's top share index finished the day ahead by around 13 points, or 0.18%, at 7,209.
"It’s been another challenging day for markets in Europe with concerns over a global economic slowdown once again driving sentiment, which in turn appears to be driving a move into bonds, pushing yields lower," said Michael Hewson, chief market analyst at CMC Markets, in a note.
"Despite these concerns, after an initially weak start to the day, we’ve spent the afternoon session pulling off the lows, with the DAX, CAC40 and FTSE100 all looking to close the day in positive territory."
3.40pm: Financial firms and utilities support market
Leading shares are virtually flat as we head into the close, despite the continuing fears of recession and rising inflation.
The leading index has edged into positive territory - just - after spending most of the day in the red, and is now up 6.91 points at 7203.5.
News that PepsiCo (NASDAQ:PEP) beat expectations at the start of the US reporting season is helping sentiment.
Financial shares are providing some support, with St James's Place PLC (LSE:STJ) up 2.76%, Intermediate Capital Group (LSE:ICP) 2.46% better and insurer Admiral Group Plc (LSE:ADM) adding 2.33%.
Utilities are also higher, with Centrica PLC (LSE:CNA) climbing 2.51% and SSE PLC (LSE:SSE) up 2.18%.
But property companies are among the fallers after some negative broker comments on the sector, with Land Securities Group PLC (LSE:LAND) 2.43% lower and British Land Company PLC (LSE:BLND) down 2.07%.
And with oil on the slide, BP PLC (LSE:BP.) has fallen 2.07% and Shell PLC (LSE:SHEL, NYSE:SHEL) 1.71%.
Brent is now down 6.71% at US$99.91 a barrel while West Texas Intermediate is off 6.97% at US$96.83.
2.41pm: Wall Street cautious on economic fears but Pepsi beats forecasts
US stocks have made a mixed start as the prospect of a recession continued to weigh on investor sentiment ahead of key earnings and inflation data due this week.
At the open, the Dow Jones Industrial Average had dipped 47 points at 31,127 points, while the S&P 500 was steady at 3,858 points.
The tech-heavy Nasdaq Composite, which shed more than 2.2% yesterday, had added 62 points at 11,435 points.
Earnings season has kicked off with the release of PepsiCo (NASDAQ:PEP) (PepsiCo (NASDAQ:PEP)) Inc’s latest results where the company reported revenue and profit exceeding the consensus analyst expectations. The food and beverage business said it expects to grow its revenue by 10% this year as consumer demand for its brands – including Mountain Dew, Fritos, and Quaker Oats – remains strong amid high inflation.
Shares of Pepsi were steady following the release of its results at about $170.80.
Shares of electric vehicle maker Canoo Inc had surged a whopping 107% at the open after the news that retail giant Walmart Inc (NYSE:WMT) (Walmart Inc (NYSE:WMT)) plans to electrify its delivery fleet with Canoo EVs. Per the deal, Walmart will purchase 4,500 EVs, and has the option to purchase up to 10,000 units.
Twitter Inc (NYSE:TWTR) (Twitter Inc (NYSE:TWTR)) opened higher, up about 1% at $33 per share, after dropping 11.3% yesterday following the news that Tesla Inc (NASDAQ:TSLA) (Tesla Inc (NASDAQ:TSLA)) CEO Elon Musk was reneging on his $44 billion deal to purchase the social media company.
2.20pm: Crude on the slide
Oil is down sharply as recession fears grow.
Brent crude is 3.96% lower at US$102.86 a barrel, while West Texas Intermediate is off 4.23% at US$99.69.
Craig Erlam, senior market analyst at Oanda, said: "Oil is falling quite heavily today, off more than 4% and pushing WTI back below $100 a barrel. Recession fears are strengthing the bearish case for crude and we're seeing those materialise after previously reaching very high levels.
"That said, the market remains extremely tight and [an] OPEC report today highlighted that fact, with demand next year seen exceeding supply by a million barrels per day. That should limit the downside we see as a worsening growth outlook is priced in.
"Of course, President Biden will be hoping to change that dynamic during his visit to Saudi Arabia this weekend."
The falls have hit oil company shares, with BP PLC (LSE:BP.) down 1.87% and Shell PLC (LSE:SHEL, NYSE:SHEL) 1.43% lower.
Overall the FTSE 100 remains much where it was, and is currently down 26.17 points or 0.36% at 7170.42.
12.57pm: Aston Martin leads mid-cap index lower
In the UK markets, the more domestically focused mid-cap index is having a harder time of it than the FTSE 100.
The blue chip index is down 34.46 points or 0.48% at 7162.13 as economic woes grow.
However the FTSE 250 has fallen 0.54% or 101.04 points to 18,735.94 on concerns as political concerns add to the economic ones.
The fallers are a mixed bunch.
Aston Martin Lagonda Global Holdings PLC (LSE:AML) has reversed 5.26% to 439.5p as analysts at Oddo BHF slash their price target from 1000p to 420p.
With the property sector in the spotlight - and not in a good way - Hammerson PLC (LSE:HMSO) is down 4.41%, while worries about holiday disruption have left TUI AG (LSE:TUI) 3.25% lower.
11.58am: Pessimism on Wall Street
US stocks are expected to open lower as investors brace for the prospect of a recession in the world’s biggest economy.
Investors are also nervously eyeing the unfolding US earnings season and Wednesday’s US inflation data. These factors are expected to keep trading choppy.
Futures for the Dow Jones Industrial Average were trading 0.7% lower pre-market, while those for the broader S&P 500 index were down 0.8% and futures for the tech-laden Nasdaq-100 lost 0.6%.
“US markets had a negative session [on Monday] with the Nasdaq-100 seeing the heaviest declines, with the main focus on tomorrow’s US CPI numbers for June, as investors wrestle with the inflation versus the recession narrative,” said Michael Hewson, chief market analyst at CMC Markets UK.
Runaway inflation and a series of aggressive interest rate hikes by the Federal Open Market Committee are seen as twin threats to US economic growth. While recent data showed that the labour market remains strong, there are already indications that measures of consumer confidence are starting to falter.
“US bond yields fell back, reversing a lot of their Friday gains, with the US 10-year yield falling back below 3%, in a move that gives a fair indication of the skittish nature of current sentiment,” said Hewson.
US inflation data on Wednesday will be closely watched. The big question is whether inflation has peaked. Consensus expectations point to an 8.8% rise in June following an 8.6% increase in the previous month. If the headline figure comes in higher than predicted, investors are likely to take on bets that the US Fed will hike interest rates even more aggressively than previously expected.
As things stand, many predict that the Fed will raise rates by 75 basis points at its next rate-setting meeting but some fear that an even bigger increase may materialize as rate-setters fight to rein in inflation which is at a multi-decade high.
On the earnings front, PepsiCo (NASDAQ:PEP) is due to announce its earnings today, Delta Air on Wednesday, and JP Morgan and Morgan Stanley (NYSE:MS) (Morgan Stanley (NYSE:MS)) on Thursday, while Wells Fargo, Citigroup, and PNC Financial will report on Friday.
In energy markets, WTI crude oil futures were down 2.3% at $101.67 a barrel, while Brent crude futures were 2.1% lower at $104.85.
11.32am: Utilities provide some support for the market
Back in the UK, and leading shares are still lower, but off their worst levels.
The FTSE 100 is down 24.35 points or 0.34% at 7172.24, having earlier fallen as low as 7148.
Utilities, always seen as a haven in troubled times, are providing some support.
British Gas owner Centrica PLC (LSE:CNA) has climbed 1.9%, SSE PLC (LSE:SSE) is up 1.86%, United Utilities Group PLC (LSE:UU.) has added 1.2% and Severn Trent PLC (LSE:SVT) is 1.14% better.
10.36am: Weak German survey pushes single currency to 20 year low against dollar
There it goes. The euro has fallen below a dollar.
$EUR PARITY BREACHED!! 0.9999
— Newsquawk (@Newsquawk) July 12, 2022
Wondering if there's anyone not watching EURUSD right now
— Michael Brown (@MrMBrown) July 12, 2022
10.06am: German investor confidence at lowest since 2011
German investor confidence has slumped in June, as the country faces rising inflation, an economic slowdown and the prospect of Russian gas supplies being shut off amid the war in Ukraine.
The survey by the ZEW thinktank showed the economic sentiment indicator fell from -28 in May to -53.8, its lowest for 11 years.
Analysts had been expecting a decline to around -40.5.
German ZEW Survey Expectations Jul: -53.8 (est -40.5; Prev -28.0)
- German ZEW Survey Current Situation Jul: -45.8 (est -34.5; prev -27.6)
— LiveSquawk (@LiveSquawk) July 12, 2022
⚠️ ZEW below Covid '20 levels tells us that financial market professionals think that Europe is on the brink of a GFC-like of Sovereign Debt-like crisis......
Caveat: Remember this is a survey of analysts, not businesses - so it's as much of a positioning/sentiment gauge$EUR pic.twitter.com/WPmv3CrnPS
— Viraj Patel (@VPatelFX) July 12, 2022
Unsurprisingly this has done little to support the flagging euro in its move towards parity with the dollar, quite the reverse.
The single currency is now down 0.4275% at US$1.0003.
Not that this has helped sterling either, which faces not only the general economic gloom but also the political uncertainty of the uninspiring contest to become prime minister.
Against the euro, the pound is off 0.1858% at €1.18200. And against the dollar it is down 0.6651% at US$1.1820.
9.45am: Retailers dip as shop sales fall
UK retailers are in the doldrums after the weak British Retail Consortium survey.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "Signs that British shoppers are dramatically tightening their belts show how the cost-of-living crisis has taken a swipe at their financial resilience. With lockdown savings rapidly evaporating, purses are being opened less frequently, and total sales are down 1% in June according to the British Retail Consortium.
"Discretionary purchases are falling fast, with non-food retail sales dropping by 3% in the three months to June. Faced with squeezed household budgets, items people want, rather than need are dropping off shopping lists. Holiday purchases and a splurge for the Jubilee did provide some cheer, but with food inflation set to reach 15% this summer the more frugal trend that’s emerging is likely to continue. Amid expectations that homewear and fashion aisles will be quieter in big stores, retailers have come under pressure in early trade."
Marks and Spencer Group PLC (LSE:MKS) is down 2.04%, Tesco PLC (LSE:TSCO) is off 0.73% and J Sainsbury PLC (LSE:SBRY) has sliped 0.56%.
9.09am: Euro slide continues
Ahead of the latest German consumer confidence reading, the euro continues to decline.
It is now down 0.3733% at US$1.0009.
Neil Wilson at Markets.com believes the European Cental Bank should act now to try and stem the slide.
He said: "The euro neared parity with the dollar for the first time since 2002. It’s been on the slide for months but the euro took a fresh low as fears mount Russia could cut off gas supplies to Europe this winter.
"French Economy and Finance Minister Bruno Le Maire warned over the weekend that there is a strong chance Moscow pulls the plug. This is further stoking recession fears in the bloc and the currency just cannot catch a bid. At this level there is a lot of interest so expect a robust defence before it eventually goes and then it gets messy.
"At some point the bears are just going to drive this right through the parity level and be done with it. When does the ECB act – fragmentation risks or not, the ECB is fiddling while the currency burns, causing worse inflation and more misery for the population.
"Time for an emergency inter-meeting hike to show they are serious – the market just doesn’t believe in the ECB any more. Inflation above 8% and interest rates remain negative….it’s madness."
8.37am: Mining companies subside
Mining shares are among the leading fallers, with any significant economic slowdown set to hit demand for commodities.
More immediately the continuing lockdowns in China are likely to have an impact on the sector.
So Antofagasta PLC (LSE:ANTO) has fallen 2.95%, Anglo American PLC (LSE:AAL) is down 2.59% and Rio Tinto PLC (LSE:RIO) is off 2.04%.
Anglo as it happens has just announced the opening of a new copper mine in Peru against a backdrop of plunging metal prices.
But the biggest decline so far is at British Land Company PLC (LSE:BLND), down 2.96% at 449.1p.
The fall comes as analysts at RBC cut their recommendation from sector perform to underperform, and their price target from 475p to 375p.
Jeffries also reduced its own price target, from 485p to 459p.
Overall the FTSE 100 is now down 45.88 points or 0.64% at 7150.71.
8.29am: Euro under pressure against the greenback
In the currency markets, the euro is close to parity with the US dollar for the first time in two decades.
It has dropped 0.34% to US$1.0011, having been as high at US$1.1300 at the start of the year
Investors are concerned about slowing growth in the eurozone, not to mention the prospect of Russia turning off the gas taps and the European Central Bank lagging peers in terms of interest rate rises.
Strategist Jim Reid at Deutsche Bank said: "Markets [are facing up] to the prospect of what a full cut-off of Russian gas would mean for the European economy. Speaking to [Deutsche economist] Peter Sidorov yesterday, he tells me that the ambiguity over gas may linger as even if Russia did need this turbine part to restore stronger gas flows, the technical logistics may mean it would take an extra week or two to integrate into the pipeline. So the uncertainty may linger until early August.
"Another factor behind the Euro’s decline recently has been the growing divergence in interest rates between the Fed (who’ve already hiked by 150bps this year) and the ECB (who haven’t even begun yet and with worries as to how far they will get).
"If the upcoming moves this month are in line with our economists’ (and market) expectations, then that divergence will only grow as the Fed hikes by 75bps for a second consecutive meeting, while the ECB commences the hiking cycle with a much smaller 25bps move."
8.16am: Downbeat start as economic woes continue
Leading shares have made a downbeat start as traders focus on the negative, which includes the prospect of an economic slowdown amid soaring inflation, continuing pandemic problems in China and Russia potentially cutting off gas supplies to Europe.
The US reporting season is also getting underway, with PepsiCo (NASDAQ:PEP) among the first to report, with investors keen to know how rising costs have affected corporate profits.
Earlier came more signs of a slowdown in the UK economy, with another fall in shop sales according to the latest health check from the British Retail Consortium.
The BRC-KPMG survey showed June sales down 1% year on year after a 1.1% drop in May, with consumers keeping their hands in their pockets in the face of soaring inflation, and even the long jubilee weekend proving to be of little help.
Indeed this is the third monthly drop in a row.
Paul Martin, UK Head of Retail at KPMG, said: “As the cost-of-living crisis continues to deepen, retailers face walking a fine line between protecting margins and further denting consumer confidence by passing on price rises whilst negotiating with their suppliers to share the cost increases”.
Michael Hewson, chief market analyst at CMC Markets UK, said: "As a leading indicator for next week's retail sales numbers for June it doesn’t paint an encouraging picture."
With all this, the FTSE 100 has lost 28.26 points or 0.39% to 7168.33 in early trading.
6.45am: Bearish concerns set to hold Footsie back
The FTSE 100 is seen on the back foot ahead of Tuesday’s open as a catalogue of bearish factors lingered in the thoughts of traders.
Worries over China’s slowdown and COVID-19 situation followed by fears that Russia will keep the Nord Stream 1 gas pipeline offline after its planned 10-day maintenance shutdown, and, nervous anticipation for Wednesday’s US inflation data.
In London, CFD firm IG Markets sees the FTSE 100 down around 32 points making the price 7,154 to 7,156 with just over an hour to go until the open.
A softer pound was also in focus in London.
“Rising concerns that the UK economy has slowed sharply in Q2 have been weighing on the pound along with uncertainty about how committed the Bank of England is in getting on top of current levels of inflation is acting as a drag,” said Michael Hewson, analyst at CMC Markets.
“Yesterday’s comments from Bank of England governor Andrew Bailey highlight the extent of this distrust after he said he expected inflation to fall back sharply in 2023. Given that the Bank of England’s recent predictions around inflation have been about as useful as a chocolate teapot, that's quite a claim, given that the MPC thinks it will be 2% higher at 11% by the autumn.”
It comes after another down-day for US equities. The Dow Jones closed Monday’s session down 164 points or 0.52% to 31,173.
The S&P 500 lost 1.15% to end Monday at 3,854 whilst the Nasdaq fell further, losing 262 points of 2.26%. US small cap index Russell 2000 meanwhile lost 2.11% to 1,732.
In Asia, Japan’s Nikkei was down 484 points or 1.8% at 26,331 whilst Hong Kong’s Hang Seng was 0.97% lower at 20,916. The Shanghai Composite was 0.57% softer at 3,294.
Around the markets
The pound: US$1.1862, down 0.23%
Gold: US$1,727 per ounce, down 2.11%
Silver: US$18.99 per ounce, down 0.98%
Brent Crude: US$105 per barrel, down 1.6%
WTI Crude: US$102 per barrel down 2.6%
Bitcoin: US$20,039, up 0.2%
Ethereum: US$1,092, up 0.24%