- FTSE 100 closes at 7,542 points
- Philly Fed, jobless claims better than expected
- Equity markets to remain volatile in Q3 - JP Morgan
4.50pm: Gains for Footsie
The FTSE 100 index ended higher on Thursday, rallying from earlier falls in the afternoon as US stocks mostly recovered following falls in the previous session after mixed minutes from last month’s Federal Reserve rate-setting meeting.
At the close, the UK blue-chip index was 26.10 points, or 0.4% firmer at 7,541.85, fractionally below the session peak of 7,541.89 and well above the day’s low of 7,493.66.
On Wall Street, around London’s close, the Dow Jones Industrial Average was just 13 points, or 0.01% lower at 33,966, while the broader S&P 500 index added 0.3% and the tech-laden Nasdaq Composite gained 0.4%.
FTSE 100 headed to close in positive territory, recouping early losses, after encouraging US economic data today with both jobless claims figures and the Philly Fed index coming in better than expected.
Joshua Mahony, senior market analyst at online trading platform IG noted that the Philly Fed manufacturing survey lifted the dollar to three-week high.
“The dollar index has broken to a three-week high today, with fears of a potential topping out in equities tallying up with signs of US outperformance over Europe. First inflation, then retail sales, and now we have seen improvement in the jobless claims and the Philly Fed manufacturing survey for the US. While a recession is widely anticipated, there are signs that European nations will suffer greater consequences as energy prices signal the potential for a greater contraction if the breakdown in relations with Russia remains in place. Unfortunately, European contraction looks set to come alongside sharp increases in rates, with the ECB’s Schnabel coming out in favour of another hefty interest rate rise despite recession risks.”
Mahoney added: “Oil & gas stocks have enjoyed a welcome boost today, following a period of weakness in crude prices that took Brent into a fresh five-month low. Yesterday’s surprise 7.1 million barrel contraction in US inventories helped undermine the bearish breakdown taking shape for crude, lifting hopes that a tightening supply-demand dynamic will push prices upwards once again. However, with an economic slowdown seemingly a foregone conclusion for many of the world’s top crude consumers, it looks likely that this rebound will soon be sold into on the premise of lower demand.”
3.45pm: Close to session highs
At 3.45pm the lead index was trading up 18.17 points, close to session highs, at 7,533.92.
Michael Hewson, chief market analyst at CMC Markets UK said: “It’s been a disjointed session for European markets today. We’ve seen a modest drift higher largely due to the recovery of US markets off their intraday lows from yesterday, which has helped add some support for prices.”
“The FTSE 100 has been helped by a resilient oil and gas sector, with a rebound in oil prices helping to underpin the broader index, led by BP and Shell.”
“On the downside we’re seeing a drag from a whole host of companies going ex-dividend including Abrdn, M&G, Aviva and HSBC.”
“US markets opened slightly lower today after weekly jobless claims slowed to 250k last week, and the latest Philadelphia Fed business survey saw a modest rebound in August.”
“Existing home sales fell for the 6th month in a row in July, by -5.9% in a sign that while the US consumer is showing some resilience the appetite for moving house just isn’t there.”
2.45pm: London moves into positive territory
Blue chip stocks remained in positive territory after encouarging US data with both jobless claims and the August Philly Fed index coming in better than expected.
At 2.45pm the FTSE 100 was trading 7.97 points higher at 7,523.72 while the FTSE 250 was 30.77 points higher at 20,057.81.
US stocks opened flat as new employment data from the Labor Department has signalled that the American labor market remains tight amid climbing interest rates and decades-high inflation.
For the week ended August 13, initial jobless claims came in at 250,000, below the consensus analyst expectation of 265,000. Claims fell by 2,000 from the previous week.
Just after the open, the three major indexes were steady, with the Dow Jones Industrial Average at 33,976 points, the S&P 500 at 4,277 points, and the Nasdaq Composite at 12,926 points.
Kohl Corporation had tumbled about 9% at the open after the retailer slashed its full-year earnings and sales guidance for the second quarter in a row, while Cisco Systems (NASDAQ:CSCO) (Cisco Systems (NASDAQ:CSCO)) Inc popped about 6% after the IT and networking brand posted a fiscal 4Q earnings beat after the bell on Wednesday.
2.20pm FTSE 100 kicks higher
Shares in London kicked higher following a better than expected reading on August’s Philly Fed index which rose to 6.2 from -12.3 and above the consensus of -5.
At 2.20pm the FTSE 100 was back in positive territory, up 14.89 points, at 7,530.64, while the broader FTSE 250 was up 41 points at 20,068.04.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said there was “no recession in these data.”
He added “so much for the massive plunge in the Empire State index. The Philly survey improved across the board, with new orders up a startling 19.7 points, though the index remains well below the trend prevailing before the invasion of Ukraine and China’s spring lockdowns.”
“Overall, the key subindexes are consistent with the national ISM manufacturing index rising slightly in August, to about 54 from 52.8 in July.”
On the jobless claims figures he said “Jobless claims have been distorted since early July by seasonal adjustment difficulties triggered by the annual automakers’ retooling shutdowns, but as the problems fade it appears that the trend in claims has risen to about 250K, from just over 230K in June.”
“In short, any loosening in the labour market is marginal; these numbers are not consistent with the idea that the US economy is in or is near recession.”
1.35pm: FTSE hovers around opening levels
FTSE 100 remained around opening levels heading into the afternoon and ahead of the restart in the US where markets are seen opening slightly higher.
At 1.35pm the blue chip index was up 4.28 points at 7,520.03.
Zytronic (AIM:ZYT) warned today that order levels in the second half had been lower than expected due to continued global economic disruptions, the availability and cost of both raw materials and electronic components.
The touch sensors manufacturer said as a result revenues for the full year are likely to be in the region of 5% higher than the £11.7mln reported for 2021 although it still expects profits to be ahead year on year.
The Group said it anticipates maintaining a healthy cash balance at the year-end of approximately £6.0mln adding “management remains confident in the positioning, ongoing recovery, and longer-term growth prospects for the group.”
12.40pm: Volatile times ahead - JP Morgan
Strategists at JP Morgan expect equity markets to remain very volatile in quarter three pointing out that the recent rebounds in markets are in sharp contrast to the downgrades in earnings expectations.
Khuram Chaudhry pointed out "global consensus earnings per share (EPS) revisions are falling sharply.”
“Equity markets have rebounded sharply over recent weeks, retracing approximately half the fall in year to date prices (January to June), but consensus EPS revisions are still experiencing an accelerating pace of EPS downgrades (-15%).”
Chaudhry questioned “have equity markets ‘truly’ bottomed?”
To answer this question, he looked at some of the key macro drivers of the profit cycle, and investigated the historical average drawdowns for both sector prices and forward EPS expectations.
"Neither datasets suggest conditions for a market bottom are present” he said adding "we therefore continue to believe quarter three is likely to be a very volatile period for equities, and believe EPS expectations need to trough for a substantial recovery in cyclical and high risk parts of the market."
11.50am: Back to where we started
Shares in London came off their lows for the day following in line Eurozone inflation figures and on hopes that US markets would recover some of the ground lost yesterday.
Headline inflation in the Eurozone advanced to 8.9% year-over-year in July, from 8.6% in June, matching the first estimate and consensus while core inflation climbed to 4.0%, from 3.7% in June, also in line with the consensus and first estimate.
At 11.50am the FTSE 100 had recouped early losses to trade at parity, up 0.53 points at 7,516.28, while the broader FTSE 250 was 48.15 points higher at 20,075.19.
US stocks were expected to open flat on Thursday after the minutes from the US Federal Reserve's last rate-setting meeting, released yesterday, signalled that more interest rate hikes are in the pipeline in the fight against decades-high inflation.
Futures for the Dow Jones Industrial Average were trading 0.1% higher pre-market, while those for the broader S&P 500 index were up 0.1%, and contracts for the tech-laden Nasdaq-100 were also 0.1% higher.
“The biggest take was that the Fed will continue tightening its policy until it sees that inflation is ‘firmly on path back to 2%’,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“The dovish point was that some Fed members feared that the tightening conditions could have a larger than anticipated effect on the economy, and slow the economy more than expected, and more than needed – which probably gave an early boost to the stock markets right after the Fed minutes were released.”
That did not last long, and initial gains reversed as investors quickly realized that there was no mention of cutting rates in the foreseeable future, she noted.
“If anything, the Fed would continue lifting the rates, and keep them steady for a while. One important thing that we should keep from these minutes is that the Fed doesn’t want to rely on slowing energy prices to declare victory over inflation, as they are well aware that energy prices are very volatile, and they could rebound as fast as they fell,” added Ozkardeskaya,
In the wake of the softer-than-predicted headline inflation number last week, investors had scaled back their expectations for future rate hikes. The minutes will now force investors to reconsider those expectations. Data on prices over the coming weeks and months will be closely watched to see whether inflation has indeed peaked.
Looking ahead, data on US home sales are due at 3.00pm ET and initial weekly jobless claims are due at 1.30pm ET today. Any signs of waning consumer confidence and activity will likely feed into worries that the wider economy is indeed slowing down and add to the likelihood that the world's biggest economy may slip into recession.
11.35am: Eurozone inflation in line
Headline inflation in the Eurozone advanced to 8.9% year-over-year in July, from 8.6% in June, matching the first estimate and consensus while core inflation climbed to 4.0%, from 3.7% in June, also in line with the consensus and first estimate.
Growth in energy inflation eased to 39.7% in July from 42.0% in June although inflation in food, alcohol and tobacco rose to 9.8% from 8.9% while the two major core components non-energy goods and services saw inflation rise to 4.5% and 3.4% respectively.
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said “these numbers aren’t pretty for the ECB.”
“We think the central bank will lift its deposit and refinancing rates by 50bp in September, followed by 25bp in October and December.”
“We then see a pause at the start of the 2023 as growth slows. Risks are firmly titled towards more aggressive tightening, more specifically a 50bp hike in October and hikes extending into 2023.”
10.50am: London back above 7.500
The FTSE 100 remained in negative territory but pushed back above 7,500 mid-morning with gains limited by falls in Asia and the US overnight and as a number of index heavyweights went ex-dividend.
At 10.50am the blue chip index was trading down 8.74 points at 7,507.01 with the broader FTSE 250 up 37.51 points at 20,064.55.
Shares in Inspecs Group PLC slipped 8.75% after reporting a fall in EBITDA to $15.1mln in the first half against $16.8mln last year which analysts said was due to currency and higher than expected losses at its Norville operation.
Peel Hunt analyst Charles Hall said he is reducing his full year EBITDA forecasts by 11% to reflect currency movements and higher losses than expected at the Norville unit.
But on a positive note he said “Norville’s performance is improving and is bringing additional opportunities. There continues to be strong underlying momentum in the business, as evidenced by the expansion of the Vietnam facility, new facility in Portugal and opportunities in new product development with major customers.”
However, he reduced his target price for the company from 425p to 395p to reflect the reduced numbers.
10.20am: Made.com slumps on probable equity raise
Shares in Made.com slumped 10.93% after the furniture retailer responded to press speculation by confirming it is considering a potential equity raise in an attempt to strengthen its balance sheet.
“Turns out that selling on-trend but relatively pricey furniture is not a great model in the current economic environment” commented AJ Bell financial analyst Danni Hewson.
“Online furniture retailer Made.com looks like it is being forced to pursue an emergency fundraise, which had been euphemistically hinted at in a statement a month ago when it said it was ‘exploring ways to strengthen its financial position.”
“Investors have seen the shares lose more than 90% of their value and may be reluctant to put good money after bad, although if they want to protect some continuing value in their investment they may have little choice.”
“There is clear evidence that the scale of the pressures on household budgets is preventing people from buying big-ticket items like a new sofa.”
“In different times Made.com might have been a decent proposition, and it has continued to win market share, but now it faces a desperate scramble to reduce costs in order to keep the lights on.”
“Made.com needs to sort out inventory issues – effectively clearing out excess stock by selling at a discount – and hope this doesn’t undermine the brand and make it difficult to sell at full price in the future.”
“The company has to make sure it gets the basics of retail – holding the right amount of stock while still having what customers want, when they want it – spot on in the future as it is likely to have very little margin for error.”
9.45am: FTSE 100 subdued
lue chip stocks remained weaker in London as a number of stocks went ex-dividend and following falls in Asian and US markets overnight.
“After yesterday’s UK inflation figure shock, it’s no wonder investors weren’t feeling too hungry for equities on Thursday. European markets didn’t want to get out of bed, with minimal movements across the main indices,” said Danni Hewson, financial analyst at AJ Bell.
“The FTSE 100 was dragged down by some big names trading without the rights to their next dividend, with the index slipping 0.2% in early trading. Relevant names going ex-dividend included Anglo American, GSK, London Stock Exchange, Aviva, HSBC, M&G, Legal & General and Imperial Brands” Hewson pointed out.
At 9.45am the FTSE 100 was trading 17.17 points lower at 7,498.58 with the FTSE 250 up 5.25 points at 20,032.29.
Pantheon Resources PLC (AIM:PANR, OTC:PTHRF) pleased the market today with shares up 7/08% to 136.25p after it announced that it has successfully drilled a 5,300ft lateral section in the Alkaid-2 well.
Reservoir quality in the lateral section was reported to be good, although no quantification of this was given.
Analysts at Peel Hunt said “The key data to help de-risk the commerciality of Pantheon’s large discovered in place oil volumes is still to come, in the Alkaid-2 flow test initial rate and decline rate.”
“While helpful, we would like to see some degree of quantification of the improvement in reservoir quality, specifically the average porosity and Permeability in the lateral section, and how this compares to pre-drill expectations (on which the estimated flow rate is based)” the broker added.
But shares in fishing equipment seller, Angling Direct dipped 17.81% to 30p after it warned full year EBITDA would be “materially behind current market expectations” and in a range of between £3mln to £3.4mln.
Adverse fishing conditions caused by the heatwave and its resulting effect on river levels and fish health has impacted trading in the usually busy month of August, the group said.
9.00am: FTSE lower in early trading
FTSE 100 remained lower in early trading as several blue chip stocks traded ex-dividend today and following falls in US and Asian markets overnight.
By 9.00am the lead index was trading down 13.16 points at 7,502.59 although the FTSE 250 made solid early progress up 41.12 points at 20,068.16.
Richard Hunter, Head of Markets at interactive investor, commented: “The muted end to the US trading session and a lacklustre performance across Asian markets left the FTSE100 with little inspiration, with the index opening fractionally lower, reducing its gain in the year to date to 1.5%.”
“The decline was additionally due to a raft of constituents going ex-dividend, including such heavyweights as HSBC and Imperial Brands.”
“In early exchanges, ex-dividend stocks peppered the top of the loser board, while the oil majors and the housebuilders made a brave attempt to advance following share price pressure over recent days.”
AO World surged 13.60% after the online electrical retailer said EBITDA for the full year would be above current market expectations.
Analysts at Shore Capital said the guidance for EBITDA of between £20mln to £30mln was better than current expectations of £17.7mln.
AO World posted a 52% increase in group revenue to £1,557mln in the 12 months to March 31st but slipped into the red with an operating loss of £32mln against £30mln against full year 2021.
It reduced estimates for the closure of its German business to £5mln from £15mln and said trading through the first quarter of full year 2023 has remained broadly in-line with expectations.
8.20am: Ex-divs weigh on FTSE
FTSE 100 opened lower this morning with ex-dividend stocks weighing on the leading index and as investors digested the latest minutes from the US Federal Reserve.
At 8.20am the blue chip index was down 16.35 points at 7,499.40 with the broader FTSE 250 broadly unchanged.
Victoria Scholar, head of investment, interactive investor said, “Negative momentum from a down day on US and Asian markets has carried forward to the European session with markets opening in the red. The FTSE 100 is underperforming, trading below resistance at 7,500 while the DAX and the FTSE MIB are eking out modest gains.”
“US markets closed lower after the Fed’s meeting minutes for July showed that policymakers saw little evidence that inflationary pressures are softening stateside.”
“The FOMC appears to be committed to its rate hiking path with the potential for a 50 or 75 basis point rate hike in September followed by a possible slowdown in the pace of rate increases in the following months.”
Shares in casino operator, Rank PLC, slumped 7.2% in early trading, as analysts highlighted that recent increases in energy prices would prompt cuts to earnings forecasts.
Greg Johnson at Shore Capital said the results were in line with revised guidance but added “the recent hike in energy prices, with spot prices implying around £46m in full year 2023 versus 2022 will likely see us revise our full year 2023 operating profit estimate £75mln to around £50mln to £55mln.”
Marshalls reported revenue growth of 17% to £348.4mln in the six months to June reflecting two months contribution from Marley or growth of 7% on a like for like basis, while profit before tax on a statutory basis was £23.9mln (2021: £38.9mln) reflecting the impact of adjusting items of £20.7mln.
Martyn Coffey, Chief Executive, said: “The board's expectations for the group as a whole remain in line with market expectations for the full year, with the more positive backdrop within Marshalls Building Products and Marley expected to balance the continuation of tougher trading conditions in Marshalls Landscape Products, which has greater exposure to the discretionary element of private housing RM.”
Analysts at Peel Hunt said “Marshalls has delivered another good first-half performance” adding “the business continues to see robust levels of demand in its key end markets of new build residential and commercial/infrastructure, and input cost inflation is still being offset by strong pricing.”
Made.com fell 10% after it said it is considering all options to allow it to strengthen its balance sheet.
Responding to recent press speculation, Made.com said: "As indicated in the quarter two trading update, MADE is considering all options to allow it to strengthen its balance sheet.”
"MADE confirms that these options include a potential equity capital raise. MADE continues to consider its options and a further announcement will be made if and when appropriate."
7.30am: Subdued start seen in London
The FTSE 100 is set to open slightly higher today after US stocks closed off their worst levels for the day on Wednesday following publication of the minutes from the latest Federal Reserve meeting, although ex dividend stocks in London are likely to limit any gains.
Spread betting companies are calling the lead index up by around 8 points.
Ex-dividends are set to reduce the FTSE 100 by 19.21 points including Pershing Square, Imperial Brands, GSK, Anglo American, HSBC Holdings, Hikma Pharmaceuticals, London Stock Exchange, abrdn, Legal & General, Aviva, Prudential, Berkeley Group , M&G, and Entain.
Michael Hewson chief market analyst at CMC Markets UK: said “Last night’s Fed minutes showed that officials on the FOMC were concerned that there was a risk they might overtighten in their attempts to convince markets they were serious about keeping a lid on inflation.”
“That said there was a general consensus that rates might need to stay restrictive for some time to keep prices in check given a lack of confidence that inflation was likely to improve in the short term.”
“The key takeaway from these minutes would appear to show that there is little inclination on the part of anyone on the FOMC to even look at the possibility of rate cuts, and chime with more recent comments from Fed officials which suggest that we could see at least another 1.5% in rate rises by year end, which would push the Fed Funds rate at 3.75-4% by year end.”
In London, a number of results were released this morning.
Rank Group PLC (LSE:RNK) reported underlying operating profit for the full year of £40.4mln, in line with guidance of £40mln provided in June 2022, with the second half adversely impacted by difficult trading conditions in Grosvenor venues, particularly in London.
John O'Reilly, chief executive said: "Whilst we have been seeing improvements in London in recent weeks, the trading environment across the UK is likely to remain difficult in the months ahead with inflationary pressures squeezing consumer discretionary expenditure and cost increases, particularly in energy prices, putting pressure on profit margins.”
Online electrical retailer, AO World PLC (LSE:AO.), posted a 52% increase in group revenue to £1,557mln in the 12 months to June 30th but slipped into the red with an operating loss of £32mln against a £30mln operating profit against full year 2021.
It reduced estimates for the closure of its German business to £5mln from £15mln and said trading through the first quarter of full year 2023 has remained broadly in-line with the Board's expectations with revenues in the approximate range of £1bn to £1.25bn and group adjusted EBITDA for the full year in the range of £20mln to £30mln.
6.55am: FTSE 100 seen firmer
The FTSE 100 is seen opening slightly higher on Thursday as US stocks came off their lows by the end of the session yesterday.
Spread betting companies are calling the lead index up by around 10 points.
The Dow closed Wednesday down 172 points, 0.5%, at 33,980, the Nasdaq Composite slid 164 points, 1.3%, to 12,938 and the S&P 500 dropped 31 points, 0.7%, to 4,274. For the Dow, the losing session snapped a five-day winning streak.
Investors reacted to the minutes from the latest Federal Reserve meeting, as the benchmarks spiked briefly after they were released at 2 pm. The Fed stated that it would likely continue to raise interest rates in order to combat inflationary pressures.
“No surprise to see the market take a breather from the summer rally it’s been riding,” said Chris Larkin, managing director of trading at E-Trade Financial, according to CNBC.”
In London results are due from Rank, Marshalls and AO World.
Ex-dividends to reduce the FTSE 100 by 19.21 points: Pershing Square, Imperial Brands, GSK, Anglo American, HSBC Holdings, Hikma Pharmaceuticals, London Stock Exchange, abrdn, Legal & General, Aviva, Prudential, Berkeley Group , M&G, Entain.