- FTSE 100 closes up 45 points
- Manufacturers expect fall in output in coming months
- Travel shares weaken
4.45pm: FTSE 100 closes higher
The main UK index finished higher on Wednesday despite tensions escalating between Russia and the West, and as traders looked ahead to the decision on US interest rates.
At the close, the FTSE 100 had gained 45 points, or 0.6%, to finish at 7,238.
The prospect of another bumper Fed rate hike hardly did much to deter investors, IG's Chris Beauchamp said.
"(Stocks) have clawed back some of yesterday’s losses. But the rebounds of late have been weak, and are usually quickly undone by fresh declines. While today’s 75bps move might be a done deal, there is a very high chance that Powell will deliver another stinging rebuke to markets as he lays out the Fed’s plan to fight inflation even as the employment picture worsens.”
3.47pm: Footsie shrugs off host of worries to remain positive
Leading shares remain in the green although off their best levels as we head into the close despite continuing concerns over the cost of living and further tensions in Ukraine.
Ahead of key interest rate decisions from the US Federal Reserve later and the Bank of England tomorrow, not to mention the UK mini-budget on Friday, the FTSE 100 is up 42.71 points or 0.59% at 7235.37.
Earlier it reached the day's high so far of 7258.
BAE Systems PLC (LSE:BA.) is among the risers, up 3.94% as defence companies came into the spotlight following Russian president Putin's speech earlier, in which he announced the partial mobilisation of forces in Russia.
A rise in the oil price following Putin's comments has helped lift Shell PLC (LSE:SHEL, NYSE:SHEL) by 1.54%.
But travel companies are out of favour, on concerns that consumers will be less keen to fly if war in Europe escalates further. British Airways owner International Consolidated Airlines Group SA (LSE:IAG) is down 3.82%.
Closer to home, housebuilders are on the rise on reports that the UK government plans to cut stamp duty, with Persimmon PLC (LSE:PSN) putting on 4.64% and Taylor Wimpey PLC (LSE:TW.) adding 3.35%.
Elsewhere Flutter Entertainment PLC (LSE:FLTR) has fallen 2.13% after a downgrade by Citi.
Banks are lower on reports the UK government may scrap the interest paid to them on certain commercial deposits held at the Bank of England.
NatWest Group PLC (LSE:NWG) is down 2.38% while Barclays PLC (LSE:BARC) has lost 2.25%.
2.47pm: Wall Street opens higher
The major US indices opened higher as investors await today’s US Federal Reserve interest rate announcement.
At the opening, the Dow Jones Industrial Average was up over 100 points, by 0.5% to 30,861, the S&P 500 was up by 0.5% at 3,874, while the Nasdaq Composite was up by 0.3% at 11,453.
The US central bank looks likely to deliver its third consecutive 0.75 percentage point rate hike to subdue high inflation.
2.10pm: French billionaire buys Vodafone stake
Shares in Vodafone Group PLC (LSE:VOD) have climbed 2.18% on news that a French billionaire has bought a stake in the mobile phone group.
Xavier Niel's investment vehicle Atlas Investissement has snapped up 2.5% and in a statement, Atlas said it was supportive of Vodafone’s intention to pursue consolidation opportunities in selected geographies, as well as its efforts in infrastructure separation.
It added that there were "opportunities to accelerate both the streamlining of Vodafone's footprint and the separation of its infrastructure assets, further reduce costs, improve profitability, accelerate broadband development in Germany and other geographies and enhance focus on innovation."
Niel has investments in the telecoms sector in nine countries in Europe with nearly 50 million active subscribers combined and more than €10bn of revenues. He is the owner of iliad, a telecoms provider present in France, Italy and Poland as well as NJJ Holding, an investor in telecoms assets including Switzerland and Ireland.
Another French billionaire Patrick Drahi recently built up an 18% state in BT Group PLC (LSE:BT.A).
Overall the FTSE 100 has come off its best but is still up 40.31 points or 0.56% at 7232.97.
12.47pm: BAE Systems heads Footsie risers after Putin comments
BAE Systems PLC (LSE:BA.) continues to lead the way in the blue chip index, up 5.3% in the wake of the speech by Russia's President Putin.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: ‘’Fears have ratcheted up that there will be a sharp escalation of the war in Ukraine, after the mobilisation of 300 thousand reservists...
"There are growing expectations that there will be heightened demand for military hardware to counter Russia’s aggression, with NATO member countries having already pledged significant increases in spending on defence."
Overall the FTSE 100 continues to rise, up 61.36 points or 0.85% at 7254.02.
11.53am: Wall Street set for cautious but positive start
US stocks are expected to open modestly higher ahead of the latest Federal Reserve interest rate verdict, which is expected to confirm widely held expectations of a 75 basis point rate hike.
Futures for the Dow Jones Industrial Average were up 0.3% in pre-market trading, while those for the S&P 500 gained 0.2%, and contracts for the Nasdaq-100 were 0.1% higher.
While investors widely expect a 75 basis point interest rate hike, there are still some residual fears of a bigger 100 basis point increase and that is likely to keep trading cautious.
“Activity on Fed funds futures still assesses less than 20% probability for a 100-basis point hike from the Fed today. And more importantly, the FOMC doesn’t have a modern history of making abrupt moves,” noted Ipek Ozkardeskaya, senior analyst at Swissquote bank.
Given the expectation that the Fed will deliver a 75bp hike today, confirmation of those expectations may well trigger a relief rally in both equities and bonds, she said.
Still, appetite for risk is poor ahead of the rate verdict, especially after Sweden’s central bank delivered a surprise 100 basis point rate increase yesterday, its most aggressive move in three decades, Ozkardeskaya noted.
US rate-setters have the tough task of having to dampen inflation which remains stubbornly around four-decade highs while also achieving a so-called soft landing for the wider economy. Investors fear that aggressive interest rate increases against the background of elevated inflation will push the world’s largest economy into a prolonged recession.
A 75-basis point hike today will mark the third such move in as many meetings and it remains to be seen if the rate increases are having their desired effect in taming inflation.
The outlook for share prices will also depend on the Federal Reserve's statement accompanying its rate decision and the news conference after the event. Any sign of continued hawkishness will weigh on equities. Conversely, any indication that price pressures are responding to the hefty recent rate hikes will bring out bargain hunters.
“We certainly have a couple of tense hours before the Fed decision falls,” said Ozkardeskaya.
Back in the UK, the FTSE 100 remains in positive territory despite all the many and varied concerns for investors, including rate rises, the cost of living crisis, high government borrowing and increased tensions in Ukraine.
The blue chip index is currently up 51.64 points or 0.72% at 7244.3, close to its high of the day.
11.20am: Increasingly challenging outlook for manufacturing sector, says CBI
UK manufacturers saw a slight fall in output in the three months to September, but expect a much sharper decline in the next three months.
According to the latest CBI/Accenture UK industrial trends survey, a balance of -4% reported a fall in output, better than the -7% figure for the three months to August.
But for the next three months, the balance is -17, the weakest expectation for output growth since the three months to January 2021.
The survey found that total order books were seen as broadly normal in September, while stocks were more than adequate for the first time since April 2021.
But in a further sign of inflationary pressures, manufacturers continue to expect a rapid increase in average selling prices in the coming quarter (+59% from +57% last month).
Anna Leach, CBI Deputy chief economist, said: “It is clear that the downturn, which originated in consumer-facing services, has spread to manufacturing, with output falling for the second month running. When adding an uncertain demand environment to ongoing input and labour shortages, and a cost-of-doing-business crisis, the outlook looks increasingly challenging for the sector.
“If the country is going to fulfil the government’s ambitious plans to supercharge economic growth, businesses need the confidence and the capital to invest. The announcement of support on energy bills is a good first step, and the CBI looks forward to working in lockstep with the government going forward.”
The September CBI/@AccentureUK Industrial Trends Survey found that output in the three months to September fell at a broadly similar rate as in the three months to August. Output is expected to fall at a faster pace in the next three months. #ITS pic.twitter.com/2rOU1JZMAA
— CBI Economics (@CBI_Economics) September 21, 2022
10.11am: Travel companies fall
As tensions increase in the Ukraine conflict following President Putin's speech, travel companies have come under pressure on concerns that consumers may be put off flying again.
British Airways owner International Consolidated Airlines Group SA (LSE:IAG) is down 2.71%, Wizz Air Holdings PLC (AIM:WIZZ) is off 3.54%, easyJet PLC (LSE:EZJ) is down 3.4% and TUI AG (LSE:TUI) has lost 3.31%.
But defence group BAE Systems PLC (LSE:BA.) continues to be in demand, up 5.62% and the top riser in the leading index.
Housebuilders remain strong on the prospect of a cut in stamp duty, with Persimmon PLC (LSE:PSN) putting on 4.38% and, in the mid-cap index, Redrow PLC (LSE:RDW) rising 3.8% and Bellway PLC (LSE:BWY) 3.5% better.
Not everyone is convinced such a move is a good idea.
Joshua Gerstler, chartered financial planner at The Orchard Practice, said: "I hope Liz Truss does not fall into the trap of thinking reducing Stamp Duty is the holy grail. Reducing the tax on buying a property will give a short-term boost to the property market but in the long run it is a bad policy that artificially inflates house prices and merely exacerbates the problem."
Aman Aneja, mortgage expert at Solihull-based AA Mortgage Services, said: "A stamp duty cut is not what we’d be proposing as there are higher priorities to be dealt with at this time, specifically how to keep people's houses warm this winter. All eyes should be on the cost of living crisis, not the property market."
But Robert Payne, director at UK-wide mortgage broker Langley House Mortgages, said: "With interest rates as high as they are and the cost of living looming ominously over the winter ahead, consumer confidence is bound to be impacted and we are already seeing much less demand for new properties coming to the market. A stamp duty cut could offset some of the buyer hesitation and be just what is needed to maintain a healthy balance of supply and demand."
9.15am: UK to cap non-domestic energy prices
The UK government has announced plans to help businesses and other non domestic energy users with their bills amid escalating costs.
Electricity prices will be capped at £211 per megawatt hour with gas capped at £75, for businesses, charities and public sector bodies.
The new Energy Bill Relief Scheme will cut energy prices for businesses, charities and public-sector organisations such as schools and hospitals.
The scheme will run for 6 months covering energy used from 1 October 2022 to 31 March 2023.
Find out more ????
— Dept for BEIS (@beisgovuk) September 21, 2022
Walid Koudmani, chief market analyst at financial brokerage XTB said: "The cap on wholesale energy prices was desperately needed for businesses with the high street especially facing a cold and dark winter ahead. In this sense, it will give businesses some much needed relief.
"There are two immediate question marks however. First, how much will it cost and what is the impact on UK borrowing? Remember this comes on top of the announced £150bn package for households in the next two years.
"With the treasury refusing to publicise the latest OBR forecasts in this week's mini budget, it's no wonder that investors are selling the pound yet again this morning. Secondly, is six months really enough? I can foresee that being extended but nevertheless, this is a good first step."
9.03am: Oil price on the rise
With the escalating tensions in Ukraine, the oil price is moving higher again.
Brent crude is 2.87% better at US$93.22 a barrel while West Texas Intermediate is up 2.97% to US$86.43.
So BP PLC (LSE:BP.) has climbed 2.28% and Shell PLC (LSE:SHEL, NYSE:SHEL) has added 2.37%.
Elsewhere Flutter Entertainment PLC (LSE:FLTR) has fallen 2.38% after a downgrade by Citi from buy to neutral, while rival Entain PLC (LSE:ENT) is off 1.54%.
But overall the market is taking all the various negatives in its stride, with the FTSE 100 up 29.86 points or 0.42% at 7222.52.
The same cannot be said of European markets, in the wake of President Putin's comments, with Germany's DAX 30 down 0.58% and France's CAC 40 0.52% lower.
Victoria Scholar, head of investment at interactive investor said, “Nervousness towards a potential reescalation of military tensions in Ukraine combined with rising interest rates from the Federal Reserve have rattled European markets this morning..
"Russian President Vladimir Putin is mobilising more troops for Ukraine and said the West wants to destroy Russia ahead of announced referendum plans on Ukraine joining Russia in the coming days. His speech sent the Russian rouble lower and oil prices sharply higher amid escalating tensions after a partially successful counterattack by Ukraine."
8.28am: Builders and defence in demand
Housebuilders are dominating the risers in the leading index, boosted by reports that the UK government is planning a cut to stamp duty to boost the housing market.
Leaving aside whether this is a good idea or not, investors in the sector will be pleased.
Persimmon PLC (LSE:PSN) has put on 4.53%, Taylor Wimpey PLC (LSE:TW.) is up 3.79%, Berkeley Group Holdings PLC (LSE:BKG) is 3.76% better and Barratt Developments PLC (LSE:BDEV) has climbed 3.26%.
Meanwhile the bellicose comments from Russia's President Putin have helped push up defence company BAE Systems PLC (LSE:BA.) by 4.77%.
8.19am: Footsie surprises at the open
Leading shares have confounded expectations and are on the rise at the open as investors prepare for a US rate rise tonight, a UK one tomorrow and a mini-budget on Friday.
Despite Britain borrowing more than expected in August and worries about the war in Ukraine after a speech from Russian president Putin, the FTSE 100 is up 17.94 points at 7210.6.
A fall in the pound to a new 37 year low has helped the dollar earners in the blue chip index, while Aveva Group (LSE:AVV) is up 2.3% after agreeing a full takeover by France's Schneider Electric
8.02am: Putin speech spooks currency markets, pound drops
Despite the prospect of a hefty UK rate rise tomorrow, the pound has hit a new 37 year low.
Against the dollar it fell as low as US$1.1305 but has recovered slightly to US$1.1338, down 0.358%.
On Friday it hit US$1.1351, which was then the lowest since 1985.
The dollar is benefiting from its status as a haven for investors at times of uncertainty, and markets which are already worried about rising rates and the cost of living have been additionally spooked by a speech by Russian president Putin.
He announced the partial mobilisation of forces in Russia, backed referendums in four Russian-controlled regions in Ukraine and said the West "had crossed all lines" in its "aggressive anti-Russian policy."
7.41am: UK public sector debt hits £11.82bn
UK government borrowing came in higher than expected in August, with rising inflation pushing up the deficit.
Public sector borrowing excluding state owned banks came in at £11.82bn, much higher than the £8.45bn forecast by economists.
Public sector net borrowing excluding public sector banks was £11.8 billion in August 2022.
This was £2.6 billion less than in August 2021 but £6.5 billion more than in pre-COVID August 2019, when it was £5.3 billion https://t.co/42s1SHr9Lq pic.twitter.com/jPtHGoZglI
— Office for National Statistics (ONS) (@ONS) September 21, 2022
Britain spent £8.2bn on interest payments on central government debt, which includes £4.7bn from the impact of higher inflation.
This will put further pressure on the UK goverment as it prepares to unveil more of its energy plans today and a mini-budget on Friday, notably how it will pay for it all.
7.00am: FTSE seen slightly lower at the open
FTSE 100 expected to open slightly lower following falls in the US overnight with attention focused on the Fed’s interest rate call later today.
Spread betting companies are calling London’s blue-chip index down by around 10 points.
US markets endured another dismal session as investors braced themselves for a large interest rate increase tomorrow and as Ford Motor Co. slumped 12.3% after warning of a US$1bn hit from inflationary pressures together with supply chain issues.
At the close the Dow Jones Industrial Average was down 313 points, or 1.01%, to 30,707.08, the S&P 500 fell 44 points, or 1.13%, to 3,856 and the Nasdaq Composite slipped 110 points, or 0.95%, to 11,425.
Michael Hewson, chief market analyst at CMC Markets UK, said: "The main question today is whether we see the Fed move by 75bps today, or by 100bps which some started to call for in the middle of last week, after US core prices turned out to be much stickier than expected.
"This shift in the market thinking probably has more to do with what happened the last time we got a hotter than expected rise in US CPI during a blackout period, which prompted the Fed to shift to a much more aggressive hike by way of leaking to friendly journalists over the weekend in a move that saw the Fed come under heavy criticism. This begs the question as to whether they would go down this route again and hike by 100bps instead of 75bps.
"This still seems an outlier especially as rates are much higher now than they were then, along with the lack of any briefing to the contrary over the weekend."
In the UK, results are due from Alphawave IP Group PLC (LSE:IPO) and Pendragon PLC amomgst others.