- FTSE 100 closes nearly 35 points higher
- Records fourth consecutive week of gains
- US stocks hold firm after July CPI undershoot
- UK Q2 GDP falls, UK trade deficit widens
4.50pm: Footsie posts Friday gains
The FTSE 100 index ended higher on Friday, capping another positive week overall, mostly tracking advances by US stocks which were again boosted by Wednesday's weaker-than-expected US inflation numbers.
At the close, the UK blue-chip index was up 34.98 points, or 0.5% at 7,500.89, below the session peak of 7,516.83, but well above the day’s low of 7,464.12.
On Wall Street, around London’s close, the Dow Jones Industrial Average was 186 points, or 0.6% higher at 33,524, while the broader S&P 500 index added 0.8% and the tech-laden Nasdaq Composite gained 1.2%.
Chris Beauchamp, chief market analyst at online trading platform IG commented: “The week is rounding out with further upside for equities, as the general positive feeling in the wake of this week’s inflation data continues. We are now firmly into the quiet period of August, and while there is plenty of UK economic data next week major earnings are thin on the ground. But the drift higher seems set to carry on, especially since the market is apparently content to ignore any warnings about further US interest rate hikes, having been calmed by the downtick in US CPI and PPI this week.”
He added: “’Never short a dull market’ is a well-worn phrase, but it has plenty of truth to it. As the Volatility Index continues to fall, more investors will be happy to dip back into the market. Fresh falls in oil prices will also bolster the idea that inflation will keep edging down in the months to come.”
3.40pm: Fourth week of gains
The FTSE 100 looked set to end the week in positive fashion and post a fourth week of gains in a row with blue chip stocks taking heart from further advances in the US this afternoon.
At 3.45pm the lead index was trading up 30.32 points at 7,496.23, while the broader FTSE 250 was up 82.10 points at 20,327.53.
Michael Hewson chief market analyst at CMC Markets UK said: “It’s been another positive week for markets in Europe with the DAX briefly rising to a two-month high before slipping back.”
“The FTSE100 also hit a two month high earlier this week as it also closes higher for the fourth week in succession."
“Despite the slow drip feed of negative headlines of rising gas prices, and the supply chain challenges thrown up by the heatwave in Europe there’s been little appetite to drive stocks lower.”
“The news that the Rhine River had fallen to a critical 40cm depth level which would require it be closed to freight barely registered a response.”
“This is probably because smaller barges can still operate at a lower minimum depth level of 30cm.”
“The resilience of US markets may be helping here as receding inflation is tempering expectations that the Federal Reserve will be as aggressive as originally supposed when it comes to raising rates.”
2.45pm: Shares in London remain positive as US opens higher
FTSE 100 remained in positive territory, mid-afternoon, supported by further gains in the US today.
At 2.45pm the lead index was trading 21.77 points higher at 7,487.68, well off earlier highs, while the FTSE 250 was 63.94 points to the good at 20,309.37.
US stocks opened higher on Friday on track to finish the week in positive territory off the back of better-than-expected inflation data.
Just after the open, the Dow Jones Industrial Average had added 132 points at 33,468 points, while the S&P 500 was up 21 points at 4,229 points and the Nasdaq Composite gained 75 points at 12,855 points.
In terms of major movers, gene sequencing company Illumina Inc (NASDAQ:ILMN) (Illumina Inc (NASDAQ:ILMN)) was down about 12% after posting earnings that fell short of analyst expectations and slashing its earnings guidance for the full year.
SmileDirectClub Inc was up about 10% at the open as the stock rallied after plunging earlier in the week off the back of its 2Q earnings released after the bell on Tuesday.
2.00pm: Jadestone hit by Montana shut down
AIM-Listed Jadestone Energy PLC saw its shares slump 9% to 91p on Friday after the Asia-Pacific oil and gas producer said its operations in Montara are now being shut in following the "small leak of oil" reported from a crude oil tank on the Montara Venture FPSO vessel in June.
It currently expected the inspection and repair activities to result in production being shut-in for the rest of August and possibly through September and anticipates incremental costs of between $2mln and $4mln.
As a result of the Montara shut-in, Jadestone said it now expected 2022 production to average between 13,000 and 14,000 barrels of oil equivalent per day, down from the 15,500 barrels it flagged in late June, which was itself at the lower end of its previous guidance range.
12.35pm: FTSE falls off highs, mining stocks weigh
FTSE 100 slipped back towards opening levels in early afternoon trading as mining stocks headed lower.
By 12.34pm the blue chip index was trading 9.89 points higher (0.13%) at 7,475.80 after being well above 7,500 earlier.
Mining stocks such as Antofagasta plc (down 2.27%), Anglo American (down 1.8%) and Fresnillo (down 1.8%) were all lower.
Shares in betting and gaming company, 888 Holdings PLC (LSE:888) (888 Holdings PLC (LSE:888)), was another weak feature in the market, top of the FTSE 250 fallers, with shares down 13.25% to 138.55p as analysts lowered profit forecasts after first half profits came in below expectations.
The group reported a 13% fall in revenues to £332.1mln hit by a 25% decline in the UK and a 66% drop in pre-tax profits to £14.4mln.
It added it had made excellent progress in integrating the international business of William Hill,
Peel Hunt said it would lower its full year 2022 adjusted pro forma EBITDA forecast to £310mln from £332mln and its full year 2023 estimate to £387mln from £412mln adding first half 2022 adjusted pro forma EBITDA of £142mln was lower than its £160mln-£170mln forecast, mainly as the result of a margin shortfall
11.45am: FTSE 100 positive but off highs
TSE 100 remained in positive territory late morning although off earlier highs for the session shrugging off weak, but better than expected, UK second quarter GDP numbers.
By 11.45am the blue chip index was trading 24.45 (0.33%) points higher at 7,490.36.
Further support should come from the US this afternoon with US stocks seen pushing higher again, looking to finish positively a week in which data showed US inflation seems to have already hit its peak fueling hopes Fed rate-setters may scale back future interest rate hikes.
Futures for the Dow Jones Industrial Average were trading 0.5% higher pre-market, while those for the broader S&P 500 index and the tech-laden Nasdaq-100 both added 0.6%.
The benchmark indexes had ended mixed on Thursday as investors took profits on some of the previous session's strong gains which followed the below-forecast US CPI data for July.
Craig Erlam, senior market analyst, UK & EMEA, OANDA commented: "It's been another very good week for equity markets, extending the run to four weeks in many cases as investors become more optimistic about the economic outlook. This week has been all about the inflation data and, frankly, it could be the dominant force in the markets now right up until the Jackson Hole symposium. The fact that inflation not only decelerated in the US but at a faster pace than the consensus forecasts was a double win and risk assets are feeling the benefit.
"Of course, it doesn't take much of a dive into the data to see that fuel prices are having a considerable impact, favourably for once. This isn't something that's going to sway the Fed at all even if it will ease the burden on the economy a little. The Fed will need to see broader signs of inflationary pressures softening to ease off the brake into year-end."
Erlam added: "It is worth highlighting also the apparent disconnect between the equity and bond markets. Equity markets give the impression that all is not as bad as it seemed - the Dow is less than 10% from its all-time highs - while the bond market has recession signals flashing red. The 2-10 inversion is not only apparent but this week it's the most inverted it's been in more than 20 years. How long can investors ignore that?"
Among economic data due on Friday, US import prices and the University of Michigan consumer sentiment survey are set to be released.
On the corporate front, shares of electric vehicle maker Rivian were lower pre-market after its earnings beat top and bottom-line estimates but the firm trimmed its full-year guidance.
11.15am: UK trade deficit widens
The UK trade deficit widened to £11.4bn in June, from £9.1bn in May, exceeding the consensus forecast of £10.2bn primarily due to the lost working day for the Queen’s Jubilee.
The value of goods exports fell by 8.0% month-to-month, dwarfing the 1.0% decline in goods imports.
Samuel Tombs, chief UK economist, at Pantheon Macroeconomics described the numbers as "grim."
He said "All told, the trade data are grim, and will worsen further over the coming months, leaving sterling even more vulnerable than usual to any reduction in the willingness of overseas investors to supply the finance needed to sustain this excessive consumption.” .
The effect of the lost working day repeated a pattern seen in June 2002 and June 2012, when the number of working days also was lower than usual, Tombs said.
But he added “even in May, however, the deficit was massive, primarily due to the surge in energy prices.”
“The trade in oil deficit increased to £2.2bn in June, from £0.7bn in May and an average of £0.1bn in 2021, while the trade in fuels deficit increased to £5.1bn from £3.7bn in May and a 2021 average of £1.7bn.”
“Futures prices suggest that the monthly trade deficit in natural gas, contained within the fuels component, will increase to about £7bn by the end of this year, from £1.3bn in June.”
10.45am: UBS downgrades hurt Kingfisher and Dunelm
Shares in Kingfisher PLC (LSE:KGF) and Dunelm Group PLC (LSE:DNLM) came under pressure on Friday following rating downgrades by UBS.
Kingfisher shares were down 2.15% to 250.30p and Dunelm was 2..44% lower at 821p as the broker cut its rating on Kingfisher to sell from hold and Dunelm to neutral from buy.
The broker cut its price target for Kingfisher to 203p implying 21% downside from the current share price, and for Dunelm to 850p.
For Kingfisher, the broker said the downgrade reflected weak industry data and comments from peer groups in the sector, such as Wickes.
UBS said it expects competition to intensify in an already tough market and it sees Screwfix underperforming Toolstation in the medium term adding its analysis suggests a 71% downside to base case EPS.
“Whilst we like Kingfisher's turnaround potential, against the current backdrop, we think the downside potential will be a drag on valuation, given no catalysts for a re-rating in the next 12 months” UBS concluded.
UBS cut pre-tax profit forecasts for 2022 to £719mln from £760mln and for 2023 to £516mln from £783mln.
For Dunelm UBS said it likes the growth story but is cautious in the near term reflecting weakening industry data.
The broker believes that Dunelm can continue to gain share in the medium term and grow its online business but are cautious in the near term as industry data has been weak for Home Accessories and House Textiles with consumer credit card transaction volumes falling below pre-pandemic levels and value spend tracking lower year on year for Furniture.
Analysis of Dunelm's categories suggests that pricing has held up during recessionary periods, while retail sales declined ahead of other categories but UBS said recent data points suggest that data has started to turn negative, with Barclaycard data showing that Furniture stores volumes have declined to below 2019 levels.
UBS also cut revenue forecasts by 10-17% for 2023 and 2024.
9.40am: London extends gains mid-morning
FTSE 100 extended gains on relief that second quarter UK GDP figures came in better than expected despite showing a fall between April and June.
At 9.40am the lead index was trading trading at its best levels for the day, 45.58 points higher at 7,511.40 with the broader FTSE 250 index up 17.34 points at 20,262.77.
Flutter Entertainment PLC (LSE:FLTR) topped the FTSE 100 risers on Friday following half-year results today reporting adjusted EBITDA of £476mln in the six months to June 30th in line with expectations although down 21% year on year.
Revenues rose 11% to £3,388mln driven by recreational player growth with average monthly players 14% higher at 8.7mln.
The group said the second half has started in line with expectations with no discernible signs of a consumer slow down currently, although it is closely monitoring key spend indicators given the uncertain macro economic outlook.
Assuming normalised sports results, the company anticipates full year EBITDA to be in line with market expectations.
Analysts at Shore Capital described the results as “very encouraging” and “slightly better than forecast.”
Richard Hunter, Head of Markets at interactive investor, commented “Flutter is keeping a sharp eye on the future, and the performance of its US business will be a key driver in achieving its ambitions.”
“The US unit, propelled in particular by its FanDuel operation, has had another successful period with market share rising to 51% and with market leading positions in the vast majority of the states in which it operates.”
“While the unit was loss-making for the half-year, the US turned profitable in the second quarter, underpinning Flutter’s hopes of full profitability for 2023.”
“With the US now accounting for almost a third of group revenues, continued investment is being made in the region and while this is impacting profits in the short-term, the outlook for net revenues has been increased to £2.3bn to £2.5bn for the year.”
“The international business generally is where the real opportunities lie, and the strategy of short-term pain for long-term gain is beginning to show signs of success.”
Hunter noted “The shares have fallen by 34% over the last year, as compared to a gain of 4% for the wider FTSE100, although over a three-year period the price remains ahead by 44%.”
“In the meantime, with an international presence bolstered by a soon to be profitable US unit, hopes remain high and the market consensus of the shares as a strong buy incorporates the longer-term view.”
9.00am: London makes a bright start
FTSE 100 was slightly higher in early trading following weak, but slightly better than expected UK second quarter GDP figures.
The 0.1% fall in UK GDP reported by the Office for National Statistics between April and June was slightly better than analyst forecasts for a 0.3% decline.
By 9.00am the blue chip index was trading 12.89 points higher at 7,478.80 although the FTSE 250 fell back 13.33 points to 20,232.10.
Commenting after the GDP figures the EY Item Club said it still doesn’t expect a recession in the UK but cautioned that judgement will be influenced by the size of any further government support.
It said the extra Jubilee bank holiday was probably the main reason behind a 0.6% month-on-month (m/m) fall in GDP in June which contributed to the economy shrinking by 0.1% in quarter two.
Output is expected to rebound in July and quarter three, with their full quota of working days, but weak growth or stagnation is likely further ahead, it added.
The recent rise in gas prices points to a further rise in energy bills in the autumn, the Bank of England is set to continue raising interest rates and the UK will be affected by a slowdown in the global economy.
Martin Beck, chief economic advisor to the EY ITEM Club, says: “The EY ITEM Club is not yet forecasting a recession given the supports the economy still has, such as low unemployment and healthy household balance sheets.
“However, that judgement is looking increasingly tentative, and much will depend on any further government support.”
Flutter Entertainment PLC (LSE:FLTR) topped the FTSE 100 risers on Friday following half-year results today reporting adjusted EBITDA of £476mln in the six months to June 30th in line with expectations although down 21% year on year.
Revenues rose 11% to £3,388mln driven by recreational player growth with average monthly players 14% higher at 8.7mln.
The group said the second half has started in line with expectations with no discernible signs of a consumer slow down currently, although it is closely monitoring key spend indicators given the uncertain macro economic outlook.
Assuming normalised sports results, the company anticipates full year EBITDA to be in line with market expectations.
Analysts at Shore Capital described the results as “very encouraging” and “slightly better than forecast.”FTSE 100 pushed higher as trading began on Friday following slightly better than expected UK GDP figures, despite a fall in the second quarter, and as pharmaceutical stocks recovered some of the declines they suffered yesterday.
8.15am: FTSE 100 opens higher
At 8.15am the blue chip index was trading 20.99 points higher at 7,486.90 with the FTSE 250 down 5.58 points at 20,239.85.
The 0.1% fall in UK GDP reported by the Office for National Statistics between April and June was slightly better than analyst forecasts for a 0.3% decline.
Commenting on the second quarter GDP release, Victoria Scholar, head of investment at interactive investor said: “UK second quarter GDP came in at -0.1%, beating expectations for a bigger decline of -0.3% but still representing a contraction and marks a slowdown from the first quarter when the economy grew by 0.7%”
“Quarterly GDP is now 0.6% above its pre-pandemic level and 2.9% higher than the second quarter last year.”
“Services output shrank by 0.4% reflecting a reduction in Covid related activities such as the test and trace and vaccine programmes, while production and construction both increased.”
“The cost-of-living crisis is starting to bite as individuals and households cut back on discretionary spending in order to afford essentials like fuel, energy bills and food.”
“However consumer-facing services performed well during the quarter thanks to the release of pent-up demand for travel, accommodation, food, arts and entertainment.”
“The more volatile monthly GDP figure for June saw the UK economy shrink by -0.6%, beating expectations for a drop of -1.3.”
“This follows an expansion of 0.4% in May and a contraction in April. Services fell by -0.5% in June, which topped forecasts for -1.1% but was the main driver of the fall.”
“The Platinum Jubilee resulted in two fewer working days in June and an additional working day in May which dampened the latest monthly figure but did not have a meaningful impact on the quarterly result.”
“Although the UK economy contracted both in June and in the second quarter, both readings came in better than economists were expecting, suggesting that the Bank of England can lean towards more hawkish policy with further interest rate hikes this year to combat inflation without worrying as much about the economy.”
Shares in GSK PLC (LSE:GSK, NYSE:GSK) bounced 4.66%, following hefty falls yesterday, after the pharmaceuticals giant moved to address concerns regarding possible litigation relating to Zantac in the US.
The pharmaceuticals giant said GSK, the US Food and Drug Administration and the European Medicines Agency have all independently concluded that there is no evidence of a causal association between ranitidine therapy and the development of cancer in patients.
GSK said plaintiff litigation is inconsistent with the scientific consensus and will vigorously defend all claims.
7.40am: FTSE seen opening slightly higher
FTSE 100 seen making a subdued start to trading on Friday following late falls in the US overnight and as investors digest the news that the UK economy shrank in the second quarter of 2022.
According to the Office for National Statistics UK gross domestic product fell 0.1% between April to June 2022, based on the first estimate.
Futures for the lead index were little changed following the release and small gains of around 4 points are expected when trading starts.
Chirag Shah, CEO and founder of Nucleus Commercial Finance commented: “Today’s figures do little to deter the very real threat of a recession this year nor to ease the worry of UK SMEs.”
“The toxic mix of record-high inflation, limited wage growth and slowing consumer confidence paints a poor picture for the wider economy and puts at risk the hard work of UK plc to get itself out of the Covid cloud.”
"As the Tory leadership race edges further, all eyes will be focussed on who can best solve ongoing economic uncertainties. Political stability is crucial for businesses and their ability to make confident decisions related to investments, so delivery of a bold business agenda from the new Prime Minister will be critical.”
“The challenge is clear. One in five smaller businesses (16%) and more than a quarter of medium sized businesses (27%) identify challenges in securing lending as a key factor in the UK’s ‘investment gap’ compared to EU companies.”
“Going forward, it’s key there are structured solutions with more medium to long term impact in mind, not just short-term fixes.”
Flutter Entertainment reported adjusted EBITDA of £476mln in the six months to June 30th in line with expectations although down 21% year on year.
Revenues rose 11% to £3,388mln driven by recreational player growth with average monthly players 14% higher at 8.7mln.
The group said the second half has started in line with expectations with no discernible signs of a consumer slow down currently, although it is closely monitoring key spend indicators given the uncertain macro economic outlook.
Assuming normalised sports results, the company anticipates full year EBITDA to be in line with market expectations.
GSK PLC (LSE:GSK, NYSE:GSK) moved to address concerns regarding possible litigation relating to Zantac in the US.
The pharmaceuticals giant said GSK, the US Food and Drug Administration and the European Medicines Agency have all independently concluded that there is no evidence of a causal association between ranitidine therapy and the development of cancer in patients.
GSK said plaintiff litigation is inconsistent with the scientific consensus and will vigorously defend all claims.
7.15am: UK ecomony shrank in Q2
The UK economy shrank in the second quarter according to the Office for National Statistics (ONS).
UK gross domestic product (GDP) is estimated to have fallen by 0.1% between April to June 2022, based on the first estimate.
In output terms, services fell by 0.4% in quarter two with the largest negative contribution from human health and social work activities, reflecting a reduction in coronavirus (COVID-19) activities.
There were positive contributions from consumer-facing services, such as other service activities (travel agencies and tour operators did particularly well as COVID-19 restrictions eased on the tourism industry), accommodation and food service activities , and arts, entertainment and recreation activities.
There was a 0.2% decrease in real household consumption in quarter two, offset by a positive contribution from net trade; however, we continue to advise caution because of recent changes in data collection affecting the EU trade flows, the ONS said,
Monthly estimates published today (12 August 2022) show that GDP fell by 0.6% in June 2022, following a downwardly revised 0.4% increase in May; the Platinum Jubilee and the move of the May bank holiday led to an additional working day in May 2022 and two fewer working days in June 2022, although this impacted on monthly GDP, there was little impact on the quarterly estimates.
7.00am: FTSE seen flat at the open
FTSE 100 seen making a subdued start to trading with second quarter UK GDP figures in focus and as US markets fell back from earlier highs.
Spread betting companies are calling the lead index up by around 4 points.
The Dow closed Thursday up 28 points, less than 0.1%, at 33,337, while the Nasdaq dropped 75 points, 0.6%, to 12,780 and the S&P 500 shed 3 points to 4,207.
After a promising open, the major benchmarks all struggled in afternoon trading. Investors initially reacted positively to Producer Price Index data released this morning, which showed that PPI declined 0.5% in July, compared to expectations of a 0.2% increase. That sentiment didn't last, however.
“Investors, while they’re relieved that inflation is declining, it doesn’t change the fact that Federal Reserve will continue to be hiking rates," said Wayne Wicker, chief investment officer at MissionSquare Retirement, according to CNBC. "I’m not quite sure at this juncture that people want to give the all-clear sign, but I do think sentiment is much better than it was, say, 60 days ago."