- FTSE 100 closes 41 points weaker
- US stocks extend post CPI gains
- US PPI figures enhance inflation outlook
4.50pm: Footsie falters
The FTSE 100 index closed lower on ex-dividend factors and as a weaker dollar weighed on heavyweight commodity stocks, even as US benchmarks continued to advance after the previous session’s below-forecast US CPI inflation reading was enhanced by a lower US PPI number.
At the close, the UK blue-chip index was down 41.20 points, or 0.6% at 7,465.91, just above the day’s low of 7,460.11 and well below the early peak of 7,515.00.
Chris Beauchamp, chief market analyst at online trading platform IG commented: “A swathe of ex-dividends on the FTSE 100 has meant that the index has been left behind as Wall Street moves higher once again. In addition, a continued wave of selling in the US dollar has meant that the risk-on moves have extended into currency markets, boosting sterling and the euro and hobbling European markets. But this temporary weakness in London might prove beneficial for some dip buyers, and with the macro outlook brightening for the time being the FTSE 100’s global stocks should continue to provide attractions for investors.”
On Wall Street, around London’s close, the Dow Jones Industrial Average was ahead 192 points, or 0.6%, at 33,502, while the broader S&P 500 index gained 0.5%, and the tech-laden Nasdaq Composite added 0.3%, building on the strong gains posted on Wednesday.
Beauchamp said: “After so long spent discussing surging prices, investors have been treated to two weaker inflation gauges in two days. A drop in factory-gate prices, which might be viewed as a bit of a leading indicator for CPI, helped to solidify the view that CPI has finished rising for now, taking the pressure off the Fed and others to keep hiking rates so quickly. Stock markets have recovered their forward momentum, and expectations of a fresh turn lower are now weakening by the day.”
3.50pm: Stuck in a rut
FTSE 100 headed to the close stuck near its session lows despite further gains in the US which followed encouraging producer price inflation numbers which came on the back of yesterday’s better-than-expected consumer price inflation figures.
At 3.45pm the lead index was trading 39.86 points lower at 7,467.25 with the FTSE 250 down 8.64 points at 20,289.36.
Michael Hewson chief market analyst at CMC Markets UK said: “After the gains of yesterday, which saw markets in Europe close at two-month highs, today has been much harder going despite the continued resilience of US markets.”
“While US inflation appears to be easing, after today’s PPI numbers followed on from yesterday’s weaker CPI number, falling 0.5% on a monthly basis, the prospect of something similar happening in Europe appears to be harder to envisage, and while broader markets are just about hanging onto gains it’s been hard going.”
“Part of the reason for the underperformance could be that Netherlands natural gas prices for one month delivery, have hit new record highs, moving above their previous highs in March.”
“Even if US inflation does continue to come down in the next few months, there is no guarantee that inflation in the UK and Europe will do the same, given that Europe is much more susceptible to rising energy prices, specifically natural gas.”
“The health care sector appears to be giving a dose of indigestion to the FTSE100, with Haleon and GSK both down heavily after Sanofi and GSK were named in a US lawsuit over the use of Zantac, a drug that was withdrawn from use in 2019, over concerns it caused cancer.”
“Zantac was a drug that was used in treating gastric distress, like heartburn or indigestion. Haleon appears to be being targeted, perhaps unfairly due to having only been recently spun out from GSK.
AstraZeneca shares are lower after confirming the completion of its $1.3bn acquisition of TeneoTwo.”
3.15pm: FTSE stuck near session lows
The FTSE 100 failed to take heart from further gains in the US today and headed towards session lows mid afternoon.
At 3.15pm the blue chip index was 38.31 points lower at 7,468.80 with the FTSE 250 down 32.87 points at 20,265.13.
Markets in the US continued their recent march higher after more encouraging data with producer price inflation numbers coming in below forecast.
Inflationary pressures were at the forefront of a report from the Office for National Statistics (ONS) which suggested employers are taking action to help their employees deal with the cost of living crisis.
Around 5% of businesses with 250 or more employees have offered a one-off cost-of-living payment to their workers in the last three months.
The figures come from the ONS Business Insights report, which also says the rate was just 1% among smaller firms.
It comes despite many businesses struggling with their own rising costs, with 27% saying their main concern is inflation, and 20% saying it is the cost of energy.
2.45pm: London fails to ignite after positive US open
Shares in London came off their lows for the day but remained in negative territory despite more gains in the US today after better than expected producer price inflation figures.
A day after US consumer price inflation saw a better than expected decline month-on-on-month, the latest wholesale inflation producer prices numbers have also pleased the market, with US July PPI falling 0.5% month-on-month, down from the prior month's 1.1% reading
The figures gave investors further encouragement that inflation in the US could have peaked but failed to provide a spark to trading in London where the FTSE 100 was down 31.77 at 7,475.34 shortly after the US open.
In the US just after the open, the Dow Jones Industrial Average had gained about 212 points at 33,522 points, while the S&P 500 was up 26 points at 4,236 points and the Nasdaq Composite was up 88 points at 12,943 points.
The Walt Disney Company (NYSE:DIS) (The Walt Disney Company (NYSE:DIS)) had jumped about 8% after the company posted an earnings beat and streaming subscriber growth placing it just above its rival Netflix.
OANDA senior market analyst Craig Erlam said investors were certainly in a more upbeat mood as the relief from the US inflation data rippled through the market.
“Positive surprises have been hard to come by on the inflation front this year and yesterday's report was very much welcomed with open arms,” he said. “While we shouldn't get too carried away by the data, with headline inflation still running at 8.5% and core 5.9%, it's certainly a start and one we've waited a long time for.”
He noted that Fed policymakers remained keen to stress that the tightening cycle was far from done and a policy u-turn early next year was highly likely.“Once again, the markets are at odds with the Fed's assessment on the outlook for interest rates but this time in such a way that could undermine its efforts so you can understand their concerns,” Erlam said. “That said, the inflation report has further fueled the optimism already apparent in the markets and could set the tone for the rest of the summer.”
2.10pm: Shares in London little changed after positive US PPI figures
London shares moved lower in early afternoon trading despite more encouraging US data and hopes for further gains in the US.
At 2.11pm the lead index was trading 37.93 points lower at 7,469.34, close to its worst levels for the day.
A day after US consumer price inflation saw a better than expected decline month-on-on-month, the latest wholesale inflation producer prices numbers have also pleased the market, with US July PPI falling 0.5% month-on-month, down from the prior month's 1.1% reading
Alex Livingstone, Head of Trading - FX & ETFs at Titan Asset Management, commented: “The move lower reassures trader’s confidence in yesterday’s lower than expected CPI reading at 8.5%, as investors look for signs of peaking inflation. However, the chances of a Fed pivot on tightening policy look slim as inflation still remains over four times their 2% target, with the Fed still having a long tightening path ahead of them. The soft inflation prints have allowed the US Dollar to weaken slightly, but the modest bounce in the Asian trading session proves investors still aren’t convinced the US Dollar has lost its crown or that these readings are the final green light needed to reallocate away from the US just yet.”
Other data released on Thursday showed US initial jobless claims increase to a seasonally adjusted 262,000 last week from a revised 248,000 the previous week, the Labor Department said.
Last week’s total was slightly above the prior 2022 peak set in July of 261,000 and was above the 2019 weekly average of 218,000. The four-week moving average for initial claims, which smooths out weekly volatility, rose by 4,500 to 252,000.
US stock futures continued to edge higher even after the strong gains which came following the CPI number relief on Wednesday.
12.00pm: FTSE lower despite hopes for a positive open in the US
Shares in London remained lower late morning despite expectations of further gains in the US today hit by a number of index heavyweights going ex-dividend and as the weak dollar weighed on certain currency sensitive stocks.
At 11.45am the blue chip index was trading 18.78 points lower at 7,488.43 while the FTSE 250 was down 42.54 at 20,255.46.
US stocks were expected to open higher on Thursday after the headline US inflation rate softened in July, suggesting that price pressures may be starting to ease.
Investors hope that Wednesday's CPI data means that inflation has already hit its peak and US rate-setters will scale back future interest rate hikes.
Futures for the Dow Jones Industrial Average were trading 0.4% higher pre-market, while those for the broader S&P 500 index were up 0.3%, and contracts for the tech-laden Nasdaq-100 added 0.2%.
Notably, the Nasdaq composite index has clawed its way back into bull market territory, defined as a 20% rise from recent lows.
“The slower-than-expected inflation figure revived the hope that last month’s 9.1% was maybe a peak, and we could see a potential reversal in inflation trend. And if that’s the case, the Federal Reserve could slow down its rate hikes, or opt for smaller hikes,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
The US CPI stayed close to four-decade highs in July but was lower than expected at 8.5% year-over-year. Analysts had been expecting a reading of 8.7%, down from the 9.1% recorded in June.
While the data has brought some cheer to equity markets and driven down bond yields, it is too soon to say that US rate-setters have succeeded in dampening price pressures.
“Two FOMC members warned, right after the data, that the war against inflation is not won just yet. It’s of course great to see the latest inflation print come lower-than-expected, but first, one data point doesn’t make a trend, and we had a similar surprise earlier this year, but then inflation spiked to fresh multi-decade highs the following month,” said Ozkardeskaya.
It is also worth noting that the softening in the headline number for July was driven by lower energy prices, she noted, adding that food prices have continued to rise.Still, the feel-good vibes from the data continue to be felt and activity on the Fed Fund Futures suggests a scaling back in rate hike expectations 50 basis points at the next rate-setting meeting from 75 basis points previously, she added.
10.40am: FTSE dips hit by weak dollar and ex-div stocks
FTSE 100 remained slightly lower mid-morning, failing to join in the after glow from the US CPI figures, with a number of index heavyweights going ex-dividend and as the weak dollar weighed on currency sensitive stocks.
At 10.40am the FTSE 100 was 19 points lower at 7,487.46.
“The pleasant surprise on inflation figures across the pond gave US stocks a welcome lift and this positive sentiment extended to Europe on Thursday, except the UK,” said Danni Hewson, financial analyst at AJ Bell.
“The FTSE 100 was flat at the market open, with dollar weakness weighing on the large number of UK stocks which earn revenue in that currency.”
“A stronger pound against the dollar creates a headwind for the big dollar earners on the UK market, and there are plenty of them, including miners and oil producers.”
“Also weighing on the market were several big names trading without the rights to their latest dividends, including Barclays, Shell, Rio Tinto and AstraZeneca.”
Shares in Haleon PLC (LSE:HLN, NYSE:HLN) (down 9.30%) and GSK PLC (LSE:GSK, NYSE:GSK) (down 3.92%) topped the FTSE 100 fallers.
Hewson commented: “GSK’s demerger hasn’t quite produced the success story it expected.”
“The demerged entity, consumer goods seller Haleon, continues to slip in price, falling another 6% on Thursday.”
“This might be down to GSK investors ditching the Haleon shares they were given for free as they are only interested in pharmaceuticals, rather than the latter’s toothpaste and headache pills.”
“Or it could be investors nervous at Haleon’s growth prospects in a world where cash-strapped consumers can easily shun big name, expensive brands in favour of cheaper, supermarket own-brand products.
”“But perhaps the key reason for share price weakness in Haleon and GSK itself might be market worries over lawsuits concerning Zantac, a heartburn drug made by GSK and withdrawn in 2019 over fears it was contaminated with a chemical linked to cancer.”
9.25am: Housing market remains weak in July - RICS
House prices continue to rise although housing market activity is declining sharply, according to the latest survey from The Royal Institution of Chartered Surveyors (RICS).
The net balance of surveyors reporting that house prices have risen over the last three months fell to +63 in July, from +65 in June, but exceeded the consensus, +60.
However, new buyer enquiries balance edged up to -25 in July, from -27 in June, but remained well below its average level in the 2010s, +1.
But the impact of the fall in demand on house prices, however, is being cushioned by the scarcity of homes for sale.
Samuel Tombs, chief UK economist, at Pantheon Macroeconomics said: “Housing market activity is declining rapidly, driven by the surge in mortgage rates and the collapse in consumers’ confidence.”
He pointed out that “The weakness of the new buyer enquiries balance is supported by other surveys, such as the BSA’s Property Tracker survey, which showed in quarter two that the net balance of households thinking now is a good time to buy a home was the lowest since Q3 2008.”
“The slump in demand is hardly surprising in light of the surge in mortgage rates.”
“The low level of redundancies suggests that forced sales will not rise imminently.”
“Accordingly, we continue to think that house prices will drop by only 2% in the second half of this year, and then will start to recover in 2023, as our forecasts for fewer further increases in Bank Rate than markets expect implies mortgage rates have some scope to fall from their current levels” Tombs said.
9.00am: Subdued start in London, ex-dividend stocks weigh
Trading in London got off to a cautious start with falls in healthcare stocks and mining group, Rio Tinto, limiting the gains seen in other global markets following the better than expected US CPI numbers yesterday.
Rio Tinto was one a number of index heavyeights to go ex-dividend today, together with oil majors BP and Shell amongst others.
By 9.00am the FTSE 100 was trading down 0.58 points at 7,506.53 although the FTSE 250 index was 54.61 points to the good at 20,352.61.
Corporate news gave the lead index some support with well received numbers from Entain PLC (LSE:ENT), Coca-Cola and M&G PLC (LSE:MNG).
Entain topped the FTSE 100 risers gaining 3.86% to 1,359.75p after announcing the €600mln acquisition of Croatian bookmaker, SuperSport, alongside first half results.
Analysts at Peel Hunt said first half EBITDA of £471mln was ahead of its £454mln forecast while the group’s full year guidance was consistent with its expectations.
The broker welcomed the SuperSport deal and thinks once the US business, BetMGM, moves into profit Entain will deliver steady, cash generative growth.
Peel Hunt has 2000p price target for Entain.
Shares in investment manager M&G rose 2% to 221.65p after reporting that improved fund flows in the six months ended 30 June had underpinned a "resilient" operational and financial performance.
M&G PLC (LSE:MNG) said interim operating capital generation was up 40% year-on-year at £433.0mln, while its shareholder solvency II rating remained very strong at 214%.
Adjusted pre-tax operating profits fell from £327.0mln to £182.0mln, impacted by current market conditions.
8.30am: Staedy start to trading in London
FTSE 100 opened in cautious fashion on Thursday despite gains in Europe, the US and Asia following the better than expected US inflation numbers yesterday.
At 8.20am the lead index was down 5.68 points at 7,501.43.
Victoria Scholar, Head of Investment, interactive investor says, “After last night’s rally on Wall Street thanks to a better-than-expected US inflation report, European markets have followed suit trading upwards thanks to global risk-on sentiment.”
“Basic resources are underperforming while technology and financials are leading the charge”
“The FTSE 100 is lagging behind, trading just below the flatline while the DAX, CAC and FTSE MIB push higher.”
Coca-Cola HBC AG led the FTSE 100 risers (up 4.5% to 2,117p) as investors warmed to their first half numbers which saw organic revenue growth of 19.4% to €4,209.9mln.
The beverage group was also upbeat about the future forecasting group comparable EBIT in the range of €740mln to €820mln for 2022 with double digit revenue growth seen in its markets excluding Russia and Ukraine.
7.30am: London seen higher at the open
Blue chip stocks are expected to make a positive start to the day on Thursday with global stock markets taking heart from the better than expected US inflation report yesterday.
Spread betting companies are calling the FTSE 100 up around 17 points in early trading.
Michael Hewson chief market analyst at CMC Markets UK noted: “European markets finished at their highest level in two months yesterday after US CPI surprised to the downside, and oil flows in the southern part of the Druzhba pipeline restarted after being closed down at the end of last week.”
“The bigger than expected fall in the headline number, along with the weaker than expected core reading, has prompted the hope that the Federal Reserve may not need to be as aggressive on rate hikes when it meets to raise rates in September.”
“Consequently, rate rise expectations have fallen from 75bps to 50bps, prompting a decline in US 2-year yields, though some of the fall in yields was pared back after Chicago Fed President Charles Evans played down the importance of a single CPI reading.”
“In essence the Federal Reserve is likely to want to see further evidence of an inflation slowdown, and even then, they will also want to see it fall back to half the level it is now.”
“Ultimately any slowdown in inflationary pressures needs to be viewed through a prism of whether we see rate hikes of 50bps or slower, post the September meeting.”
“To that end with recent weakness in prices paid data pointing to a similar slowdown in inflation, todays PPI numbers, which tend to be more forward looking are likely to be as important, if not more so when it comes to what’s coming from the next CPI number, which comes during the Fed blackout period, just before the September meeting.”
“Expectations are for headline PPI to fall back to 10.3%, from 11.3%”
Copper miner, Antofagasta PLC (LSE:ANTO), reported sharp falls in revenue for the first half of 2022 with a 29.6% drop to $2,528mln, while EBITDA slumped 47.5% to $1,238mln reflecting the lower revenues and a 6.9% increase in operating costs mainly due to higher input prices.
Group copper production in the first six months of the year was 268,600 tonnes , 25.7% lower year on year, due to the expected temporary reduction in throughput at Los Pelambres as a result of the drought and the concentrate pipeline incident and expected lower grades at Centinela Concentrates.
Full year copper production for the group is expected to be 640-660,000 tonnes.
Chief executive officer, Iván Arriagada, said: ""We expect the remainder of the year to look very different from the first half - as production improves quarter-on-quarter, we ship and sell the concentrate that was impacted by the concentrate pipeline incident, and the desalination plant at Los Pelambres starts, significantly alleviating the issue of water availability.”
Gaming and betting company, Entain PLC (LSE:ENT), reported a 17% increase in group EBITDA to £471mln in the six months to June 30th, and forecast full year 2022 EBITDA in the range of £925mln to £975mln, in line with market expectations.
Looking ahead Jette Nygaard-Andersen, CEO of Entain, commented: “While we remain vigilant to the consumer backdrop, our geographic and product diversity provides resilience which, together with our proven ability to drive superior returns, gives us confidence that we will continue to deliver benefits for our stakeholders."
7.00am: London seen opening higher
Shares in London are expected to open slightly higher on Thursday following gains in the US and Asia overnight with global markets taking heart from the better than expected US consumer price inflation report.
Spread betting companies are calling the lead index up by around 10 points in early trading.
The Dow finished Wednesday up 535 points, 1.6%, at 33,310, the Nasdaq Composite jumped 361 points, 2.9%, to 12,855 and the S&P 500 improved 88 points, 2.1%, to 4,210.
The S&P 500 hit its highest level since May thanks to a broad rally brought on in part by positive reactions to July's Consumer Price Index data released yesterday.
Thursday brings another jam-packed morning of company news in London, including Ladbrokes owner Entain, fund manager M&G and copper miner Antofagasta, as well as a smattering of property news from Derwen, Savills and RICS housing market data.