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FTSE 100 finishes well in the red as global recession fears ramp up

Last updated: 16:45 29 Sep 2022 BST, First published: 07:00 29 Sep 2022 BST

bank of england
  • FTSE 100 loses 124 points
  • Housing shares under pressure
  • Next cuts profit guidance

4.45pm: Slight recovery at the close

The FTSE 100 recovered ever-so-slightly by the closing bell, but still finished well in the red as markets across the pond slumped as well.

After a tumultuous day, the UK's premier index finished 1.8% lower at 6,882 points.

Meanwhile, US markets were still bleeding by the midday trading point, with all three major indexes suffering big losses.

4.09pm: Office for Budget Responsibility forecasts could be ready by end of October - MP

The chair of the Treasury Select Committee Mel Stride has said that the OBR's economic forecasts can be published by the end of October.

So he is calling for the chancellor to bring forward his planned statement from November 23 to the same time.

3.45pm: Shares down, gilt prices down, pound up

Leading shares are not far off their lows of the day heading into the close.

The FTSE 100 has fallen 163.14 points or 2.33% to 6842.25 on renewed concerns about the economy and the implications for financial markets of Kwasi Kwarteng's badly received mini-budget.

Things have not been helped by an opening fall on Wall Street, with the Dow Jones Industrial Average down 2%.

Gilt yields are ticking up again despite the Bank of England unveiling a £65bn plan yesterday to buy bonds in the market, after falling prices put pressure on the UK's pension funds.

The 10 year yield is up 13 basis points at 4.15% while the 30 year is up 3 points at 3.965%.

But the pound has picked up from recent lows - it hit a record low against the dollar on Monday - and is now up 1.2% at US$1.0965.

Among the share price fallers, housing stocks are being hit by worries about the market as more than 40% of mortgage products are pulled in the wake of Kwarteng's statement.

Barratt Developments PLC (LSE:BDEV) is down 12.98%, Rightmove PLC (LSE:RMV) - which has also gone ex-dividend - is off 7.95% and Taylor Wimpey PLC (LSE:TW.) has lost 7.37%.

Next PLC (LSE:NXT) is also a big faller, down 11.59% as it cut its full year price guidance.

Risers are not much to write home about, with Anglo American PLC (LSE:AAL) leading the way even though it is up just 0.9%.

3.27pm: Diary note for government ministers

No one seemed to know where Liz Truss was over the past few days as market turmoil raged.

But if she disappears again over the weekend, at least on Saturday it will be possible to narrow her location down a little, because there are a number of places which can be immediately ruled out.

And those are the sites around the country where Enough is Enough is holding a national day of action .

The campaign, which is fighting against the cost of living crisis, said events will be held in more than 50 cities, towns and villages..

Comedians, actors, poets and stars from Coronation Street and Hairy Biker Si King will be among the thousands taking to the streets to back the campaign.

2.55pm: Cuts to UK government capital spending on the cards?

Everyone knows that the government will have to make hefty cuts somewhere to pay for the giveaways in the mini-budget.

Concern about funding the proposals is a major factor in the current market turmoil.

Cutting Whitehall costs and day to day public spending have been mooted, but now there is talk that government capital spending could be on the chopping block.

2.48pm: Wall Street rally fizzles out

US stocks were unable to sustain yesterday’s rally at the open amid continued concerns around the economic outlook, including rising recession fears. 

Shortly after the market opened, the Dow Jones Industrial Average had dipped 233 points or 0.8% at 29,451 points, the S&P 500 was down by 39 points or 1% at 3,680 points, and the Nasdaq Composite had slid by 157 points or 1.4% at 10,895 points.

After reporting another batch of disappointing quarterly results before the bell, including a net loss of $366.2 million or $4.59 per share, embattled home goods company and meme stock Bed, Bath & Beyond Inc had slipped by 2.2%.

Apple Inc (NASDAQ:AAPL) shares were down 2.3% after the Bank of America downgraded the stock from ‘Buy’ to ‘Neutral,’ citing the expected fall in discretionary spending.

After soaring more than 9% yesterday thanks to a double upgrade by Wall Street analysts citing the platform’s ad tier potential, Netflix Inc (NASDAQ:NFLX) was down about 1.3% at the open.

Travel stocks were also under pressure following cancellations caused by Hurricane Ian, which made landfall in Florida yesterday afternoon causing floods and power outages, with American Airlines Group (NASDAQ:AAL) Inc down 2.4%, Delta Air Lines (NYSE:DAL) 2.5%, and Carnival Corporation (NYSE:CCL)  3.2%.

Forex.com market analyst Fiona Cincotta noted that US stocks were headed back towards the year-to-date lows after gains in the previous session.

“Higher US treasury yields, inflation, and rising recession fears are back in the driving seat,” she wrote in a note. “Federal Reserve officials have been clear that interest rates need to keep rising and will stay higher for longer than previously thought, raising the risk of recession.”

Meanwhile, the initial weekly jobless claims of 193,000 was the lowest since April, highlighting the continued tightness in the US labor market.

Back in the UK the FTSE 100 is heading back towards the day's lows, down 136.62 points or 1.95% to 6868.77.

But the pound has perked up and is now 1.18% higher against the dollar at US$1.0963.

In the gilt market, the 30 year yield is up marginally but the 10 year is 13 basis points higher at 4.147.

2.38pm: German inflation in sharp jump

Elsewhere there are growing inflationary pressures in Germany.

2.04pm: Truss radio interviews

Meanwhile, if you really want to listen to all of the local radio interviews done this morning by Liz Truss, the BBC has put them all together.

Be brave.

1.55pm: Bank purchases will be unwound smoothly, says deputy governor

Bank of England deputy governor Dave Ramsden has said its £65bn of emergency bond purchases announced yesterday would be unwound in a smooth and orderly fashion.

And he added the Bank was on alert for further signs of strain, following the pressure on pension funds from the fall in gilt prices.

Speaking remotely to a "Future of Central Banking" conference in Vilnius, his comments are the first since the Bank began its operations yesterday afternoon.

Refering to "the financial market developments we have seen this week in the UK which have meant that I haven’t been able to join you in Vilnius" he expained the Bank's reasoning further.

He said: "Pressures were observed in parts of the financial system, including challenging liquidity conditions across some markets. This has naturally put us, along with other central banks and supervisors on alert for further signs of strain and the attendant risks of dysfunction.

"UK financial assets saw significant repricing since the start of this week, particularly affecting long-dated UK government debt. Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy.

"On 28 September, yesterday, the Bank’s Financial Policy Committee, which I’m a member of, noted the risks to UK financial stability from dysfunction in the gilt market. It recommended that action be taken and welcomed the Bank’s plans for temporary and targeted purchases in the gilt market on financial stability grounds at an urgent pace. These operations have started, with the first one carried out yesterday afternoon.

"These purchases will be strictly time limited until 14 October. They are intended to tackle a specific problem in the long-dated government bond market. The purchases will be unwound in a smooth and orderly fashion once risks to market functioning are judged to have subsided."

1.45pm: US economy dips in second quarter

Over in the US, the economy performed much as expected in the second quarter, according to the latest update, while jobless claims were better than forecast.

US GDP dipped 0.6%, in line with both the previous quarter and analyst predictions

The GDP price index was slightly ahead of expectations at 9%, up from 8.9%.

Meanwhile initial weekly jobless claims fell from 209,000 - itself revised down by 4,000 - to 193,000. Analysts had anticipated a figure of 215,000.

12.36pm: More mortgage products taken off market

More evidence of the growing problems in the mortgage markets, with a substantial number of deals now taken off the market.

Courtesy of Sky's Scott Beasley and data from Moneyfacts:

11.52am: Wall Street set to slip after gains

US stocks are expected to open lower as yesterday’s rally, sparked by a recovery in bond prices, looks set to fizzle out amid prevailing concerns about the gloomy prospects for the global economy.

Futures for the Dow Jones Industrial Average were down 0.6% in pre-market trading, while those for the S&P 500 shed 0.7%, and contracts for the Nasdaq-100 were 0.9% lower.

Trading is expected to be volatile with investors spooked by sharp fluctuations in the currency and bond markets, mainly driven by the British pound’s steep falls after the government’s mini-budget last week.

The UK central bank’s intervention in the sovereign bond market on Wednesday helped shore up bond prices and the British currency, in turn helping 10-year US Treasury yields pull back after surging past 4% for the first time since 2008.

The pound and British government bonds are back under pressure this morning after the country’s new prime minister’s underwhelming reassurances about plans to cut taxes and markets are starting to look unsettled once again.

“The surprise intervention from the BoE (Bank of England) gave an energy boost to the markets yesterday, proving once again how the markets are addicted to the central bank money, and how they are depressed without it,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

“There is still a chance that the BoE’s bond-buying is not enough, and that we see a surprise rate hike before the November 3 meeting. But at this point, the BoE can no longer let the British sovereigns, and the pound sink further,” she added.

The S&P500 index gained almost 2% yesterday to rise above the 3,700 level, while Nasdaq jumped more than 2%.

“Will the enthusiasm last? Not so sure. Yesterday’s price action was a sugar rush, triggered by the BoE intervention. Enthusiasm will likely fall as the level of blood sugar falls across the financial markets,” Ozkardeskaya warned.

Separately, floods and power outages in Florida caused by Hurricane Ian are also adding to investor concerns.

US stocks have been under pressure since the middle of last week after the Federal Reserve delivered its third straight 75 basis point interest rate increase and signaled that it will continue raising rates to tackle runaway inflation.

On the data front, investors will be watching initial jobless claims figures for signs of whether the labor market is softening, Quarterly earnings from the likes of Nike Inc (NYSE:NKE) (Nike Inc (NYSE:NKE)), will also be in focus.

11.45am: Commodity companies provide some positive impetus

Mining shares are providing some support for the leading index, which is off its worst levels.

Anglo American PLC (LSE:AAL) has added 1.89%, Glencore PLC (LSE:GLEN) is up 1.72%, Rio Tinto PLC (LSE:RIO) has risen 1.31%, Fresnillo PLC (LSE:FRES) has climbed 0.67% and Antofagasta PLC (LSE:ANTO) is up 0.59%.

With the situation in Ukraine continuing to cause concern, most recently after the Russia-instigated referenda in a number of regions, defence company BAE Systems PLC (LSE:BA.) is currently the biggest riser, up 2.05%.

But the main fallers remain Barratt Developments PLC (LSE:BDEV), down 12.54%, and Next PLC (LSE:NXT), off 9.05% as it cut its profit guidance for the year.

Overall the FTSE 100 has fallen 65.97 points or 0.4% to 6939.42, but this is a vast improvement on the day's low of 6842.

The pound meanwhile has now edged into positive territory against the dollar, up 0.11% at US$1.0846.

In the gilt market, 30 year yields have dipped a basis point to 3.916% but the 10 year yield is up 15 basis points at 4.164.

10.47am: European economic confidence shows steep decline

Over in Europe, businessconfidence has fallen sharply, and by more than expected.

In the eurozone, the economic sentiment indicator for September dropped 3.6 points to 93.7 - the seventh monthly decline in a row - while in the wider EU it fell 3.5 points to 92.6.

Confidence fell in all sectors, but selling price expectations rose, suggesting further increases in inflation.

However there was better inflation news from Spain, where it fell from 10.5% to 9% in September as some of the base effects of energy price rises a year ago came out of the figures.

10.02am: Gilts exposure worries hit financial companies

The panic over pension companies amid soaring gilt yields - which led to the Bank of England's planned £65bn intervention in the market - continues to unsettle the financial sector.

Legal & General Group PLC (LSE:LGEN) has lost 3.45%, Phoenix Group Holdings PLC (LSE:PHNX) is down 3.23%, insurer Prudential PLC (LSE:PRU) is off 3.1% and Aviva PLC (LSE:AV.) has fallen 3.03%.

"The great gilt calamity of 2022 continues to inflict pain on investors as pension companies took a tumble on the UK market, dragging the FTSE 100 down with them,” said Russ Mould, investment director at AJ Bell.

“Legal & General and Phoenix Group slid as investors worried about their investment exposure to gilts, following yesterday’s panic over soaring government bond yields."

Overall the FTSE 100 has come off its worst levels but is still deep in the red, down 112.67 points or 1.61% at 6892.72. Gilt yields also remain higher, albeit marginally at this point.

9.09am: Market reacts to Truss interviews

In her round of radio inteviews, the prime minister seems determined to claim the mini-budget was mainly about the energy package and blame the current turmoil on outside factors such as Russia's invasion of Ukraine.

But the market seems to be getting worse during the course of her various comments.

The FTSE 100 is now down 145.6 points or 2.08%, while the pound is now down 0.52% at US$1.0778.

Ten year gilt yields are up 16 basis points at 4.157% (yields increase as the price of bonds falls).

The 30 year is up 9 basis points at 4.02%. 

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "High government bond yields matter to millions of voters not just because it means the cost of government debt is going up, which will have to come out of available budgets. High yields have big implications for mortgage rates because they send so called swaps rates soaring which are used by lenders to price mortgage offers. The risk is still looming that if mortgage rates become increasingly unaffordable, then there could be a severe correction in the housing market, causing a fresh maelstrom of problems for struggling homeowners and a worsening outlook for house builders.’’

So it is no surprise that property related shares remain among the biggest fallers in the leading index.

Barratt Developments PLC (LSE:BDEV) is now down 10.93%,  Rightmove PLC (LSE:RMV) is off 5.5% and Taylor Wimpey PLC (LSE:TW.) is 5.45% lower.

The first two have also seen their shares go ex-dividend.

8.33am: Truss breaks her long silence

Prime minister Liz Truss, who has maintained radio silence during the recent turmoil, has said she is sticking to her economic plans because it is the right thing to do.

Despite the pound reaching an historic low against the dollar, the gilt market slumping to the point where the Bank of England has to intervene, and criticism from a host of organisations including the IMF and Moody's.

Appropriately chosing radio to break her silence, she is touring local stations at the moment.

As she speaks, the pound is down 0.43% at US$1.0787 while the FTSE 100 has fallen further, down 135.01 points or 1.93% at 6870.38.

Gilt yields are also edging higher again.

Victoria Scholar, head of investment at interactive investor, said: "There is a tug-of-war taking place between the Bank of England’s monetary tightening and the government’s fiscal stimulus with the former looking to bring inflation back towards 2% while the latter is looking to boost demand and economic growth as the two sides clash with each other.

"The pound is under pressure once again, down by around 1%, languishing near lows not seen since 1985, while the FTSE 100 is more than giving back yesterday’s gains. UK gilt yields are trading higher across the curve this morning with bond prices lower reversing some of yesterday’s bond market rally following the central bank intervention.”

8.22am: Housebuilders subside on rate rise fears

Housebuilders are among the fallers, with the prospect of further hefty interest rate rises leading to a slump in the market.

Barratt Developments PLC (LSE:BDEV) is down 7.9% - not helped by the fact its shares have gone ex-dividend - while Taylor Wimpey PLC (LSE:TW.) is off 2.07%.

The downbeat news from Next PLC (LSE:NXT) has seen Primark owner Associated British Foods PLC (LSE:ABF) lose 2.52%.

Also lower as they go ex-div are British American Tobacco PLC (LSE:BATS), down 2.74%, and Smurfit Kappa Group plc (LSE:SKG), 2.05% lower.

8.14am: Footsie falls at the first hurdle

Leading shares are heading south at the open, confounding expectations of another increase.

With continuing concerns about the economy following chancellor Kwasi Kwarteng's mini-budget last Friday (is it really not a week yet since that?) and further tensions around Ukraine, the FTSE 100 has dropped 88.11 points or 1.26% to 6917.28.

Markets were stunned yesterday by the Bank of England's intervention in the gilt market, turning from seller to buyer in an attempt to ease pressures on pension funds which faced being forced sellers to meet margin commintments.

Government long dated bonds, held by the funds, had slumped in price following the turmoil after Kwarteng's statement.

The mood has not been helped by news that the Swedish Coast Guard found another leak in undersea gas pipelines running from Russia to Europe.

A big loser is retailer Next PLC (LSE:NXT), down 7.61% as it lowered its full year profit guidance from £860mln to £840mln, still 2.1% up on 2021.

Half year revenues rose 12% while profits climbed 16% to £400.6mln. It said: "August trade was below our expectations and cost of living pressures are set to rise in the coming months. Sales in September have improved, and we may see benefits from recent government measures,"

Charlie Huggins, head of equities at Wealth Club, said: "Next is seen as a bellwether of the UK High Street and today's cut to full year guidance lays bare the challenges being faced. Asos and Boohoo’s trading performance has been nothing short of dire. Even Primark’s recent trading update called out significant margin pressures. In this context, Next’s half year results are more resilient than most. 

"The fact that many retailers are struggling shouldn’t be a surprise. This is arguably the most difficult trading environment since the 2008/09 financial crisis...

"Next looks better positioned than most of its peers to weather the storm, and emerge stronger in light of its high margins, robust cash flows and strong balance sheet. But 2023 could be a very difficult year the way things are shaping up."

Meanwhile Sir Mark Carney, the former Bank of England governor, is the latest to criticise the mini-budget.

In an interview with the BBC he said: "Unfortunately having a partial budget, in these circumstances - tough global economy, tough financial market position, working at cross-purposes with the Bank - has led to quite dramatic moves in financial markets."

He added: "There was an undercutting of some of the institutions the underpin the overall approach - so not having an OBR forecast is much-commented upon and the government, I think, has accepted the need for that but that was important."

7.40am: Sterling faces tough session; Euro falls against the Dollar; USD gains on yen

The Bank of England’s dramatic intervention in the sovereign markets encouraged a modicum of support for the pound and despite shedding a few pips overnight, GBP/USD is at least in a stronger position this morning than it was at the start of the week.

Currently sitting at US$1.08, the four-hour chart shows a slight bear advantage on a spinning-top candlestick, though it could go either way in today’s trading session.

A slight bear advantage is taking hold this Thursday morning – Source: capital.com
A slight bear advantage is taking hold this Thursday morning – Source: capital.com

Not that there’s a huge deal to celebrate for pound holders in the long run, but any sign of stemming the downward spiral to parity should be met with some enthusiasm.

Despite a degree of support, long-term outlook for the pound is still grim – Source: capital.com

Despite a degree of support, long-term outlook for the pound is still grim – Source: capital.com

The Euro is losing some ground against the US Dollar this morning after what turned out to be a net positive Wednesday session.

At just shy of US$0.97, the EUR/USD pair is sitting level with an early-week high.

Germany’s flash inflation figures are due this afternoon, with general consensus pointing to an uptick on soaring energy prices.

The USD remains on top against all major currencies, having added 0.8% against the Canadian dollar and 0.4% against the Japanese yen.

With little on the US economic calendar today, we can expect the Dollar’s position to stand its ground.

7.00am: FTSE 100 set to open higher

FTSE 100 is seen slightly at the open although markets are likely to remain volatile following the £65bn ntervention by the Bank of England yesterday and ongoing concerns about the strength of the UK’s finances.

Spread betting companies are calling the lead index up by around 18 points.

In the US, markets rebounded strongly with the Dow up 547 points, 1.9%, at 29,682, the Nasdaq Composite up 222 points, 2.1%, to 1,052 and the S&P 500 up 71 points, 2%, to 3,719.

The Dow snapped a six-day winning streak, thanks in part to The Home Depot Inc (NYSE:HD), which saw shares gain 5% to $282.24.

Asian markets were also higher with the Nikkei 225 up 1.0% in late trade in Tokyo and the Hang Seng 0.9% to the good.

Interim results from retailer Next PLC (LSE:NXT) before the market open will provide an indication of how UK shoppers are responding to mounting economic pressures.

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