- FTSE 100 off best levels, up 30 points
- Bank of England says FT report on bond sale delay is inaccurate
- BoE's Jon Cunliffe says risk of fresh fire sale in bond market significantly reduced
4:30pm: FTSE finishes Tuesday calmly
The FTSE 100 breathed lightly, calmly up around 21 points or 0.3% at 6,940, as the City of London welcomed a trading day without any discernible new political turmoil.
“Today’s gains have been broad-based as sentiment settles down after the ructions of the last two weeks, with decent gains for the likes of Smurfit Kappa, Rolls Royce and DS Smith,” noted CMC Markets analyst Michael Hewson.
Anglo-Aussie miner Rio Tinto was among the weaker names on an otherwise chilled day, after it warned investors of declining aluminium and bauxite production volumes for its third quarter and flagged further caution due to rising costs and slowing demand in China.
Elsewhere, across the pond, Wall Street indices started strongly helped higher by Goldman Sachs (NYSE:GS) and what the US market has taken to be positive quarterly results.
Looking ahead to the West Coast, eyes will be Netflix which sees its stock 2.25% lower ahead of this evening’s Q3 figures – where attentions will be firmly on subscriber retention, after weaker trading reports in the year to date.
3.45pm: Head of French central bank says UK turmoil a warning to other countries
The head of France’s central bank has warned that the market upheaval in the UK shows the risk that governments will be overwhelmed by a "vicious loop" if they undermine monetary policy.
François Villeroy de Galhau said that the surge in Britain's borrowing costs after the disastrous mini-Budget reinforces the importance of consistency between the government and the central bank measures.
Speaking to the Financial Times, the governor of the Banque de France said: “If you have a monetary policy with an anti-inflationary stance and there are doubts about whether your fiscal policy will fuel inflation, then you really risk nurturing a vicious loop."
3.10pm: European Commission proposes new measures to tackle energy crisis
The European Commission has proposed that EU countries should buy gas collectively as part of a new set of emergency measures to tackle high energy prices and ensure supplies are secure.
The idea is that by aggregating demand, and buying gas jointly, countries should be able to negotiate better prices rather than outbidding each other on the global markets.
But, Europe is not proposing formal gas price caps, as member states have disagreed about what such a cap would look like.
Instead, the Commission wants to bring in a price correction mechanism this winter to prevent excessive prices and price spikes on the main European gas exchange, the Title Transfer Facility (TTF) in the Netherlands.
It says its temporary price correction mechanism would establish a dynamic price limit for gas transactions on the TTF, explaining: "This will help avoid extreme volatility and excessive prices."
And in the longer term, the EC will develop a new pricing benchmark for liquified natural gas in Europe, to provide ‘stable and predictable pricing’ and avoid a repeat of the soaring prices this year.
2.45pm: US markets soar at the open
FTSE 100 held around the 7,000 mark as US stocks extended their gains from yesterday ahead of a big week of corporate earnings.
At 2.45pm the lead index was up 71 points at 6,991.
Just after the market opened, the Dow Jones Industrial Average had added 607 points or 2% at 30,793 points, the S&P 500 was up 83 points or 2.3% at 3,761 points, and the Nasdaq Composite had gained 267 points or 2.5% at 10,947 points.
Forex.com market analyst Fiona Cincotta said today’s rise added to yesterday’s strong rally as upbeat earnings distracted investors from inflation, recession, and hawkish Fed fears.
“Those same recession fears had meant that the bar was low heading into earnings, raising the likelihood of beating estimates,” she said.
2.12pm: BoE's Jon Cunliffe says risk of fresh fire sales in bond market significantly reduced
The deputy governor of the Bank of England, Sir Jon Cunliffe, has said the risk of a fresh ‘fire sale’ breaking out in the UK government debt market has been significantly reduced.
In a letter to parliament’s Treasury Committee, Cunliffe said that liability-driven investment funds were now better prepared to manage shocks like the one triggered by September’s mini-budget
????️ Last week, Chair @MelJStride asked the @bankofengland for information on its further intervention in the UK gilt market.
???? Read the full response from Sir Jon Cunliffe, Deputy Governor for Financial Stability ????https://t.co/4Dp6hZRzOn https://t.co/9FQIQfw0yH
— Treasury Committee (@CommonsTreasury) October 18, 2022
He wrote: “Taken as a whole, LDI funds are now significantly better prepared to manage shocks of this nature in the future” adding “as such, the risk of LDI fund behaviour triggering ‘fire sale’ dynamics in the gilt market and self-reinforcing falls in gilt prices has been significantly reduced.”
Cunliffe also pointed out that “The five largest daily moves in the 30 year inflation-linked gilt, in data that dates back to 2000, have all been since the 23 September."
He also suggested that financial markets may remain volatile in the coming weeks.
1.00pm: Investor sentiment close to maximum bearishness, Bank of America survey
Investors raised cash levels further in October as sentiment towards the economic outlook remained close to max bearishness, the latest global fund manager survey (FMS) by Bank of America (BoA) showed on Tuesday, although expectations of a policy pivot grew.
"FMS screams macro capitulation, investor capitulation, start of policy capitulation," BofA said in the survey.
The share of investors anticipating lower short-term rates in the next 12 months doubled to 28% in October from 14% in September and versus only 5% in March, it said.
BofA polled 371 panelists overseeing $1.1 trillion in assets between October 7 and October 13.
Is the market low in?
BofA's latest global fund manager survey "screams macro capitulation, investor capitulation, start of policy capitulation"
Cash levels 6.3%, highest since 2001, investors 3 sd UW equities - "tasty morsels for another bear rally" (if UST yields stay <4%) pic.twitter.com/6OCKXhOe1F
— Jamie McGeever (@ReutersJamie) October 18, 2022
12.35pm: Buyers remorse
A new YouGov survey, conducted between 14-16 October, reveals that just 10% of Britons have a favourable impression of prime minister, Liz Truss, down from 15% in a previous survey on 11-12 October.
Also in a sign of buyers’ remorse and less than two months after being elected leader of the Conservative Party, a majority of Tory members now believe she should resign.
A YouGov survey of 530 members found 55% want her to go while 38% want her to stay.
SNAP POLL: A majority of Conservative party members want Liz Truss to resign
All members
Resign: 55%
Stay: 38%
Truss voters
Resign: 39%
— YouGov (@YouGov) October 18, 2022
In the UK as a whole, four out of five British adults (80%) now view Truss unfavourably with 62% who see her very unfavourably.
The prime minister’s net favourability score now stands at -70, a 14 point drop since last week
Liz Truss's net favourability rating has fallen to -70
Favourable: 10% (-5 from 11-12 Oct)
Unfavourable: 80% (+9)https://t.co/ZJ7P5Or91I pic.twitter.com/ih99Faagay
— YouGov (@YouGov) October 18, 2022
The popularity of Truss among Conservative voters also continues to plummet, with just one in five (20%) having a favourable view of their party’s leader and 71% having an unfavourable view.
Her current net favourability score of -51 is down 26 points since last week.
12.05pm: US markets expected to open higher
Equity markets in London are expected to get a further boost from the US this afternoon with US stocks expected to open higher again, extending the gains seen on Monday as the corporate earnings season continues to unfold.
Bank of America’s strong results, released on Monday, helped shore up share prices and some of that feel-good sentiment is expected to spill over into Tuesday’s trading.
That said, much of the prevailing concerns about rising interest rates and elevated inflation remain intact and market activity is expected to stay volatile.
Futures for the Dow Jones Industrial Average were up 1.0% in pre-market trading, while those for the S&P 500 were 1.2% higher, and contracts for the Nasdaq-100 added 1.5%.
James Hughes chief market analyst at scopemarkets.com, noted that there is a slew of corporate earnings for markets to contend with today, among them Goldman Sachs (NYSE:GS), Lockheed Martin (NYSE:LMT) and Johnson & Johnson (NYSE:JNJ) all before the bell.
But, he said: “It’s numbers from Netflix after the close that may be under the greatest scrutiny. A sharp decline in subscribers will underline how the current inflationary climate is weighing on consumers, potentially heaping further pressure on the Fed."
On the data front on Tuesday, the focus will be on industrial and manufacturing production numbers due out later today.
11.39am: Pain for homeowners keeps increasing
Data from Moneyfacts show that both the average two- and five-year fixed rates for mortgages have gone up since yesterday, despite the new chancellor Jeremy Hunt ditching most of the mini-budget.
A 2-year fixed rate mortgage now costs 6.53% on average, up from 6.47% yesterday. The average interest on a 5-year fixed-term property loan has increased from 6.29% to 6.36%.
The availability of mortgage products also shrunk to 3013, meaning 91 mortgage options disappeared over night.
11.21am: Strike action threatens supplies to pubs and restaurants
Pubs and clubs are facing the prospect of beer shortages while fast food firms including Burger King, KFC and Pizza Hut are also under threat of disruption from strike action.
The GMB union has announced it is planning a vote on industrial action among its near-600 members at Best Food Logistics, which delivers fresh produce to some leading fast food outlets and dining firms, which also include Wagamama and Zizzi.
The union said that 93% of staff had rejected a 6% pay offer as it was significantly below the rate of inflation and amounted to a real terms pay cut this year and into next.
This was followed by news from the Unite union which said around 1,000 of its members at logistics firm GXO would walk out for five days from 31 October as part of a pay dispute.
The union said the strikes by delivery drivers would hit supplies to pubs and venues supplied by major breweries, including Heineken, Stonegate, Admiral Taverns and Shepherd Neame (AQSE:SHEP).
11.00am: Pound drops after BoE statement
Sterling slipped back following the Bank of England's statement that the report in the Financial Times regarding a delay to its bond selling plans was "inaccurate."
— Bloomberg UK (@BloombergUK) October 18, 2022
Equities have also fallen from their earlier highs with the FTSE 100 now up 37 points at 6,957 after earlier topping 7,000.
Bond yields also spiked higher following the news.
10.20am: Bank of England says FT report on bond sale delay "inaccurate"
The Bank of England has said a report in the Financial Times that it plans to delay the sale of some of its UK government bonds is ‘inaccurate’ sending bond prices lower and yields higher.
The Financial Times reported that the Bank was expected to pause the start of unwinding its quantitative easing (QE) programme, because gilts markets were “very distressed.”
But in a brief statement, a spokesperson for the central bank said: “This morning’s FT report that the BoE has decided to delay MPC gilt sales (‘QT’) is inaccurate."
Well..a fairly concise statement from Bank of England on reports it was going to delay bond selling. "This morning's FT report that the BoE has decided to delay MPC gilt sales ('QT') is inaccurate."
What will markets make of that?!
— Ashley Armstrong (@AArmstrong_says) October 18, 2022
9.57am: China delays publication of growth figures
China has delayed the release of its latest economic growth figures, which were due to be published as the Communist Party's leadership gathers.
President Xi Jinping is expected to be confirmed for a historic third-term at this week's party congress in Beijing.
The National Bureau of Statistics (NBS) did not give a reason for the delay.
The decision has been described as "very rare" by experts and is seen by some as a sign of further weakness in the world's second largest economy.
9.41am: WPP receives boost from France
Shares In advertising giant WPP PLC are near the top of the FTSE 100 risers today benefiting from positive numbers from its Paris-listed peer Publicis which reported third quarter results today.
In the third quarter of 2022, Publicis said revenues increased 24% to EUR3.24 billion from EUR2.62 billion and it now expects full-year organic growth of 8.5%, lifted from previous guidance for an increase of 6% to 7%.
In London, WPP shares were up 35p, or 4.64%, at 788.70p.
FTSE 100 has extended its gains as well, pushing back above 7,000, up 87 points at 7,008.
9.15am: All calm on the bond markets
Whisper it quietly but all is calm on the bond markets – so far anyway.
The prices of both short and long-dated sovereign debt are little changed this morning, meaning UK borrowing costs are flat too.
These gilts all rallied dramatically on Monday after chancellor Hunt ditched most of the mini-budget, and cut the length of the energy price freeze.
This morning, the yield (or interest rate) on 10-year UK bonds has dipped slightly to 3.96%, from 3.98% on Monday night, after tumbling from over 4.3% at the end of last week.
That means it still costs more to borrow than before the mini-budget (when the 10-year bond had a yield of 3.3%), but less than last week when it surged over 4.5%.
Long-dated bonds, where prices had plunged during the crisis in the pensions sector, are calm too.
Famous last words but today could well be the first calm-ish day in UK govt bond markets for a while. Most maturities have opened in a similar place to where they closed last night. Yesterday's harsh fiscal medicine seems to have had some impact. Here's the 30yr yield: pic.twitter.com/ldf7lCpaub
— Ed Conway (@EdConwaySky) October 18, 2022
9.00am: FTSE 100 makes strong progress, bond yields down slightly
Equity markets made strong progress on Tuesday as investors continued to view yesterday’s fiscal moves by the new chancellor, Jeremy Hunt, positively.
At 9.00am the FTSE 100 was up 71 points at 6,991, while the FTSE 250 advanced 134 points to 17,637.
Analysts at Liberum said the measures were a “major positive to calm markets down” and it thinks a short-term rally in stock markets is likely, particularly in sectors like homebuilders, real estate and utilities, though it will probably be limited in duration.
The bond markets were certainly a calmer place with gilt yields down a touch after yesterday’s strong moves, while on the currency markets sterling gave up some of yesterday’s strong gains, down 0.22% against the US dollar.
On the equity markets Rio Tinto PLC (LSE:RIO) recovered initial losses to trade little changed after it slightly toned down its annual guidance and warned of "downside risks to demand" for commodities.
The mining group said it now expects 2022 Pilbara iron ore shipments to be at the bottom end of a 320mln to 335mln tonnes range.
Looking ahead, the company said commodity prices continued to weaken during the third quarter amid a global economic growth slowdown with China's economy "challenged" by virus curbs recently.
Rio also pointed to signs of a slowdown in the US economy.
Better news from Ibstock PLC (LSE:IBST) with shares up 5.41% to 160.20p as it said it expects to perform above its previous expectations for the full year after strong demand and effective cost management delivered positive quarterly trading figures.
For the three months to 30 September, Ibstock said trading was "ahead of our expectations" thanks to "robust demand patterns."
The Leicester-based manufacturer of clay bricks and concrete products said that sales volumes in its clay division were "marginally above" the same period last year, while volumes of concrete sales were "broadly similar."
"Our strong trading in the first half of the year continued through the third quarter, supported by robust demand across our end markets,” Ibstock’s chief executive officer Joe Hudson said in a statement.
8.12am: FTSE 100 makes a bright start
FTSE 100 made a bullish start to trading on Tuesday lifted by strong gains in US and Asian markets and as investors continue to reflect on yesterday’s fiscal moves by the new chancellor, Jeremy Hunt.
At 8.15am the FTSE 100 was up 62 points to 6,982 and the broader FTSE 250 gained 128 points to 17,631.
The pound was slightly weaker in early trading, after strong gains yesterday, with sterling down 0.18% against the US dollar at $1.1334.
Price comparison website Moneysupermarket.com (LSE:MONY) saw its shares rise 4.23% to 207p after forecasting its annual core earnings would be at the upper end of expectations after third-quarter trading came in ahead of expectations, driven by customers switching financial products.
Revenue for the three months to September 30 rose 33% to £102mln. Sales in the company's money channel were up 42% "with particularly attractive products available in banking."
Bellway PLC (LSE:BWY) was the latest housebuilder to report results reporting a jump in full-year profits along with record revenues and completions, although it did caution that demand was moderating.
In the year to 31 July, underlying pre-tax profit rose 22.5% to £650.4mln, with revenue up 12% to a record £3.54bn and housing completions 10.5% higher at a record 11,198 homes - ahead of the group's target.
On a reported basis, however, pre-tax profit was down 36.5% in the year to £304.2mln, as the net legacy building safety expense surged 568.3% to £346.2mln.
The company did also warn, however, that elevated demand since the start of the pandemic has moderated. In the nine weeks since 1 August, weekly reservations were 191 per week, down 12.4% from the same period a year earlier.
Shares slipped 2.11% to 1,813p.
7.47am: Euro looking upbeat, Sterling gains on the US dollar
The pound enjoy some relief this morning due to a decline in gilt yields following chancellor Jeremy Hunt’s scramble to unwind his short-lived predecessor’s regrettable legacy.
But despite some 20 pips being added to the GBP/USD pair in the early hours, a retreat seems to be forming on the one-hour chart.
Cable is currently changing hands at US$1.135, but we could be in for a volatile trading session as traders look towards tomorrow’s UK inflation data.
Cable is showing volatility in Tuesday’s early session – Source: capital.com
The euro is looking upbeat against the US dollar, at least relative to recent performance, having reached a 12-day high of US$0.985.
The EUR/GBP pair is looking particularly strong and it could be likely to break above the 87p barrier throughout the day’s trading session.
Once again, the Japanese yen fell against the US dollar and is currently changing hands at 149.9.
With the USD/JPY pair at its highest point in decades, speculation of a Bank of Japan intervention continues.
The Australian dollar is changing hands for US$0.63 against the US dollar while the AUD/EUR pair currently sits at €0.64.
7.41am: Average energy bills to top £4,000 from April - Cornwall Insight
The average annual energy bill will rise to more than £4,000 from April after Liz Truss’s U-turn over her policy to ease the cost of living crisis, according to the sector’s leading forecaster.
The price cap for a typical dual-fuel tariff will now be £4,347 in six months’ time if the government does not offer special support, according to the consultancy Cornwall Insight.
The new chancellor, Jeremy Hunt, said on Monday that the energy price guarantee, which caps the unit price of energy and was intended to last for two years from this month, will now be limited to six months.
7.21am: Bank of England to delay bond sale plans - FT
The Bank of England is likely to further delay the 31 October start of its sales of billions of pounds of government bonds to help stabilise the government bond markets after Britain's failed "mini" budget, the Financial Times reported on Tuesday.
Amid turmoil in financial markets, the BoE had already pushed back the start of a scheme to sell some of its £838 billion of government bond holdings, which was originally due to begin on 6 October.
Scoop: The Bank of England is likely to delay the sale of billions of pounds of government bonds to foster greater stability in gilt markets
— roula khalaf (@khalafroula) October 18, 2022
The FT said it had learned that top officials at the BoE had come to the view that a delay was needed after judging the gilts market to be "very distressed" in recent weeks, a view backed by its Financial Policy Committee.
7.00am: FTSE 100 set to open higher
FTSE 100 set to open higher on Tuesday following strong gains in the US and Asia overnight.
Spread betting companies are calling the lead index up by around 55 points.
US markets continued their roller coaster ride, this time upwards, with all three major indices posting major gains by the close boosted by strong results from Bank of America.
The Dow Jones Industrial Average soared 551 points, or 1.86%, to 30,186, the S&P 500 advanced 95 points, or 2.65% to 3,678, and the Nasdaq Composite jumped by 354 points, or 3.43%, to 10,676.
In London, on a quiet corporate day investors will focus on the fall out from yesterday's fiscal moves by the new chancellor, Jeremy Hunt, and speculation about the future about prime minister, Liz Truss.
Markets reacted positively to the news that nearly all of the mini-budget proposals announced by his predecessor, Kwasi Kwarteng, had been scrapped.