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FTSE 100 fails to hold onto gains, finishes week in the red

Last updated: 16:45 28 Oct 2022 BST, First published: 07:10 28 Oct 2022 BST

markets
  • FTSE 100 loses 26 points on the day
  • NatWest shares tumble as profits miss, provisions rise
  • US markets push higher after encouraging US data

4.45pm: FTSE closes in the red

The FTSE 100 failed to hold onto any gains at the end of the day, finishing 0.4% lower at 7,048.

The index underperformed with banks leading the way lower after some disappointing numbers from NatWest Group, CMC's Michael Hewson noted.

"NatWest shares are down heavily after reporting lower than expected Q3 profits of £187m, a sharp drop from the £1bn profit in Q2. The main reason for the profits slide was a loss of €652m on the discontinued Ulster Bank operations and the reclassification of the mortgage book, so is very much a one-off," Hewson wrote in a note.

"It is notable that NatWest has taken more aggressive action with respect to impairments."

3.45pm: FTSE falls back, fails to follow US higher

The FTSE 100 fell back again heading towards the close despite a bright start on Wall Street.

By 3.45pm the lead index was down 33 points at 7,040 while the FTSE 250 fell 166 points to 17,916.

US markets confounded expectations of early falls by storming ahead once more with the Dow Jones Industrial Average up over 500 points.

Markets took encouragement from encouraging US economic data which showed consumers were spending more but inflationary pressures were not rising.

The Labour Department also reported that private industry wage growth slowed in the third quarter adding to hopes that inflationary pressures were easing.

In London, the FTSE 100 had earlier dipped below 7,000 as weak results and rising bad debts sent NatWest Group PLC (LSE:NWG)’s shares lower by 9% and dragged other banks down with it with Barclays PLC (LSE:BARC) down 3.1% and Lloyds Banking Group PLC (LSE:LLOY) down 3.5%.

On the upside shares in GSK PLC (LSE:GSK, NYSE:GSK) bucked the weaker market trend and rose 2% after the European Medicines Agency (EMA) accepted marketing authorisation applications for RSV and HIV.

The pharmaceuticals giant said the EMA had validated the application for its respiratory syncytial virus (RSV) older adult vaccine candidate under accelerated assessment.

It also validated an application for cabotegravir long-acting injectable for the prevention of HIV, submitted by ViiV Healthcare.

2.45pm: FTSE 100 back to opening levels as Dow moves higher

The FTSE 100 moved back towards opening levels, recouping the earlier hefty losses, as the Dow Jones made a better than expected start to the day.

At 2.40pm the lead index was down just 3 points at 7,071 after being below 7,000 earlier in the session, although the FTSE 250 remained weak, down 127 points at 17,954.

US stocks rose at the open despite weak earnings from key tech companies by the likes of Amazon, Microsoft and Meta weighing on investor confidence for much of this week.

Just after the market opened, the Dow Jones Industrial Average had added 281 points or 0.9% at 32,314, the S&P 500 had gained 19 points or 0.5% at 3,827 points, and the tech-laded Nasdaq Composite was up 49 points or 0.5% at 10,841 points..

2.20pm: Oil prices fall as China

Oil prices fell on Friday after China widened its COVID-19 curbs, though benchmarks were still set to post a weekly gain on supply concerns and surprisingly positive economic data.

Brent crude futures dropped 0.98% to $94.15 a a barrel, having climbed by 1.3% in the previous session, while US West Texas Intermediate fell 1.24% to $87.56.

1.35pm: US PCE numbers broadly in line

A closely watched inflationary indicator by the Federal Reserve has come in slightly below forecast.

September’s core personal consumer expenditure (PCE) rose 5.1% year-on-year against expectations for a 5.2% increase offering hope that inflationary pressures may have peaked.

The monthly rise in PCE of 0.6% was slightly above the 0.5% expected.

US personal spending rose 0.6% in September above forecasts of 0.4% growth.

 

 

1.00pm: Centrica rises after reopening natural gas facility

Centrica PLC (LSE:CNA) was the best performer in the FTSE 100 today with shares gaining 6.3%.

The company, which owns British Gas, said today it has reopened its Rough natural gas storage facility off the east coast of England after completing "significant engineering upgrades" over the summer.

The group said the facility is operational for winter and will increase the UK's storage capacity by 50% despite it operating at just 20% of its previous capacity.

READ: British Gas owner Centrica reopens Rough gas facility, boosting UK's energy storage

12.42pm: Insolvencies fall in quarter three but still total 28,000

Almost 28,000 personal insolvencies were recorded over the past three months as Britons come under pressure from the soaring cost-of-living, according to official figures.

The Insolvency Service confirmed on Friday that it has also seen a rise in registrations from people seeking breathing space from debts.

The new data showed that 27,927 individual insolvencies were recorded over the three months to September, a 5% fall compared to the second quarter, but 2% higher than the same period last year.

Samantha Keen, UK turnaround and restructuring strategy partner at EY-Parthenon  said: ““The year-on-year increase in insolvencies in Q3 2022 is unsurprising given the challenging trading conditions and market volatility facing many businesses.”

“This rise in insolvencies has, once again, largely been due to a significant year-on-year increase in the number of Creditors’ Voluntary Liquidations (CVLs) which accounted for 86% of all insolvencies in Q3.”

“As companies navigate multiple headwinds including inflation, rising costs and labour challenges, many are now also dealing with falling consumer demand. This is set to worsen with the UK economy likely to be in recession until the middle of 2023, according to the latest EY ITEM Club Autumn Forecast.”

11.55am: FTSE 100 off session lows with US seen making weak start

Heading to midday and the FTSE 100 has pulled away from its earlier lows with investors now looking back across the pond to see how US markets fare following another disappointment from the big tech sector with Amazon lowering fourth quarter guidance.

At 11.55am London’s blue-chip index was  down 32 points at 7,041, after earlier going below 7,000, while the FTSE 250 is down 189 points at 17,893.

US stocks were expected to open lower on Friday with futures for the Dow Jones Industrial Average 0.2% lower in pre-market trading, while those for the S&P 500 were down 0.7%, and contracts for the Nasdaq-100 shed 1.0%.

“An ugly week of Big Tech earnings is coming to an end, having wiped out hopes of seeing earnings boost gains across the stock markets,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

After Facebook owner Meta plunged more than 24% and the Nasdaq 100 lost almost 2% on Thursday, today is not expected to be much better as Apple and Amazon fell in after-hours trading, she noted.

Amazon’s guidance of a worrying holiday season, with revenue seen falling short of expectations, spooked investors. Apple, meanwhile, was dented by expectations that iPhone sales may disappoint.

“In summary, the US Big Tech rather killed joy this week, so all eyes are on Big Oil to reverse the mood,” said Ozkardeskaya.

Oil giants Exxon Mobil and Chevron are due to release earnings today. Both companies are expected to announce strong earnings but with expectations running so high there are chances of disappointments.

Additionally, US president Joe Biden is pressuring oil companies not to use their stunning profits to buy back stocks, or shell out dividends, but to use profits to increase supply and bring oil prices lower, said Ozkardeskaya.

11.27am: FTSE 100 off lows, £50bn of tax rises and spending cuts on the way

Shares have come off their earlier lows but the FTSE 100 is still down 41 points while the pound has fallen 0.25% against the US dollar to $1.153.

Rishi Sunak could dish out tax hikes and spending cuts totalling up to £50bn as he looks to build up a financial buffer while plugging a hole in Britain's budget, according to Bloomberg.

The prime minister and chancellor Jeremy Hunt want extra headroom above the £35bn fiscal hole so that the package has credibility with the markets,  a report said.

10.47am: GSK rises after EMA approves RSV and HIV applications

Shares in GSK bucked the weaker market trend and rose 1.74% after the European Medicines Agency (EMA) accepted marketing authorisation applications for RSV and HIV.

The pharmaceuticals giant said the EMA had validated the application for its respiratory syncytial virus (RSV) older adult vaccine candidate under accelerated assessment.

It also validated an application for cabotegravir long-acting injectable for the prevention of HIV, submitted by ViiV Healthcare.

For the RSV vaccine, the company said a European regulatory decision was expected in the third quarter of 2023.

10.00am: German GDP surprises on the upside

The euro area's largest economy defied market expectations for a contraction over the three months to September according to figures from Destatis.

 German gross domestic product expanded at a quarter-on-quarter pace of 0.3% during the third quarter, confounding expectations for a 0.2% fall, taking the annual increase to 1.2%.

Destatis did however point out that "due to the continuing Covid-19 crisis and the impact of the war in Ukraine, these results are subject to larger uncertainties than usual."

Claus Vistesen, chief eurozone cconomist, at Pantheon Macroeconomics described the numbers as “surprisingly solid.”

He said “The Eurozone’s largest economy defied the widely held expectation, including by us, that it entered a recession in the second half of the year.”

He noted the statement said the economic performance in the third quarter of 2022 was mainly based on private consumption expenditure and he suggested a leap in auto sales could explain this.

Vistesen said he still thinks “GDP growth will come off, eventually, pulling the economy into a technical recession. “

The news helped the FTSE 100 push up from its session lows, now down 43 points at 7,031, after briefly going below 7,000 earlier.

9.40am: Glencore slips as disruptions hit third quarter performance

Mining stocks were a weak feature on the FTSE 100 after Glencore PLC posted reductions in its output of several industrial and precious metals over the first nine months of 2022.

The mining group explained the falls were due to factors ranging from the war in Ukraine to strikes in Canada and Norway and poor weather in New South Wales.

In comparison to 2021, the company said that copper production had diminished 14% year-to-date to reach 770.5kt, alongside an 18% reduction in zinc output to 699.6kt.

The latter was the result of "emerging supply-chain issues in Kazhakstan."

Glencore also lowered its guidance for zinc output by 65kt and for lead production by 21% to 136.9kt.

Output of gold fell by 15% to 593kt and that of silver by 25% to 17,88kt, the group said.

On the upside production of cobalt rose by 41% to 33.1kt, coal by 7% to 81.9mt and oil by 16% to 4.82m barrels of oil equivalent.

But Glencore cut coal production guidance for 2022 by 11mt due to the flooding in NSW and delays in restoring operations.

Glencore also cautioned that the La Niña weather phenomenon was expected to further disrupt coal operations in the fourth quarter.

Shares in Glencore fell 3.25% dragging others in the sector lower such as Rio Tinto PLC (LSE:RIO) (down 3.2%) and Anglo American (down 2.7%).

9.05am: FTSE 100 slides; NatWest results miss forecasts

FTSE 100 headed back towards the 7,000 mark in early trading as a batch of disappointing earnings from across the globe pushed equities lower.

At 9.00am London’s blue-chip index was down 61 points at 7,013 while the FTSE 250 was 233 points lower at 17,848.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: "Disappointing results from Amazon and Apple have piled further pressure on the tech-laden Nasdaq composite, which shed 178 points in the last trading session.”

“The wider concerns from last night’s results point to a weakening economy, which although we’ve been warned about, still have the ability to spook the market when we see the tangible effects.”

Those fears over slowing global economic growth were seen in the latest results from high street lender, NatWest Group PLC (LSE:NWG).

Shares in the high street lender slumped 8% after third quarter profits missed City expectations, it raised bad debt provisions and took a hit from its discontinued Ulster Bank operation.

Michael Hewson chief market analyst at CMC Markets UK said: “Today’s quarter three  numbers are a reminder if any were needed of how vulnerable banks are to the economic winds blowing through the economy.”

He said the bank has taken “aggressive” action when it comes to impairments with the quarter seeing a big jump to £247mln from the £26mln seen at the six month stage.

Mining stocks were a weak feature after Glencore PLC (LSE:GLEN) said on Friday it had trimmed annual guidance for some of its commodities after a disappointing third-quarter performance dominated by supply chain disruptions in Kazakhstan, extreme weather in Australia, and strikes in Canada and Norway.

Shares fell 3.4% and dragged others in the sector lower, such as Anglo American (down 3.3%) and Rio Tinto PLC (LSE:RIO) (down 3.1%).

"Glencore expects a significantly reduced, but still above average H2 marketing result... This will likely be taken as a slight disappointment by the market," said Tyler Broda at RBC Capital Markets.

Elsewhere, Computacenter PLC fell 3% after it said 2022 was set to be a year of "modest" growth in adjusted pre-tax profit following two "exceptional" years.

8.20am: FTSE 100 opens sharply lower, NatWest tumbles 8%

FTSE 100 reported heavy falls at the open weighed by further disappointing results from Big Tech companies, Amazon and Apple, and as high street lender NatWest Bank Group PLC reported below forecast third quarter numbers.

At 8.15am the lead index was down 58 points to 7,016 while the FTSE 250 slumped 205 points to 17,877.

Shares in NatWest slid 8% after it reported third quarter pre-tax profits of £1.1bn, below City forecasts, although net income of £3.2bn was in line with expectations.

Richard Hunter, head of markets at interactive investor, commented “NatWest has rounded off the banks’ reporting season in mixed fashion, with some enforced financial writedowns blotting the overall copybook.”

He noted the planned withdrawal from the Republic of Ireland through its Ulster Bank subsidiary had led to a charge on the mortgage book of some €420 million together with a provision for bad debts of £242mln.

He added: “Wider market weakness at the open and an unforgiving attitude to banks missing expectations has weighed heavily on the shares in early exchanges, but for the longer term the shares remain the preferred play in the sector, with the market consensus still coming in at a strong buy.”

International Consolidated Airlines Group SA (LSE:IAG) (International Consolidated Airlines Group SA (LSE:IAG)) also reflected the market trend and fell despite the airline group upgrading its full-year profit expectations after reporting higher-than-expected sales for the third quarter with prices increases leading to revenues having “fully recovered” from the pandemic despite capacity remaining lower. 

The British Airways owner revealed operating profits of €1.21bn for the third quarter, a swing from a €452mln loss a year ago and broadly in line with City forecasts.

For the first nine months of the year, IAG's operating profits were €770mln, with profit after tax and exceptional items at €199mln versus a loss of €2.6bn this time last year.

7.53am: Euro dips on dovish speculation, softer US dollar cushions Sterling against losses

As expected, the European Central Bank upped interest rates by 75 bps, bringing the base rate to 2%- the highest since 2009.

Investors had already priced this hike in, but speculation of a dovish pivot likely caused the euro retracement that we saw.

However, “we are very much turning our back on forward guidance,” said ECB president Christine Lagarde, so nothing is set in stone.

Eurozone base rate hits a 14-year high – Source: Trading Economics

Eurozone base rate hits a 14-year high – Source: Trading Economics
Following yesterday’s meeting, the EUR/USD pair from US$1.09, cruised below parity, and settled at US$0.99.

EUR/GBP shed 70 pips to drop to a clean 86p, although some support in this morning’s Asia hours allowed the pair to drag itself up to 86.2p.

A softer US dollar has allowed the pound to gain, though positioning remains volatile – Source: capital.com
A softer US dollar has allowed the pound to gain, though positioning remains volatile – Source: capital.com

The UK received some fairly bleak economic data in the form of a 6% drop in car output, as supply-chain issues and soaring energy costs bottlenecked the sector.

But a softer US dollar has cushioned the GBP/USD pair somewhat, as currently sits at US$1.154.

The Bank of Japan is not budging on its ultra-loose monetary policy, despite revising its inflation forecast up to 2.9% from 2.3%.

As such, the yen remains weak against the US dollar despite some recent clawbacks, with the USD/JPY pair currently changing hands at 146 yen.

7.35am: NatWest profits fall as bad debts rise

British high street lender NatWest Group PLC reportted what it described as a strong set of numbers but profits still fell short of City expectations as bad loan charges from a worsening economic outlook took the shine off income boosted by rising interest rates.

Total income for the quarter was £3,229 mln, up from £2,686mln last year while operating profit before tax was £1,086mln, up from £976 mln in the same period last year but below analysts expectations of around £1.2mln.The CET1 ratio of 14.3% was flat when compared to the second quarter of 2022 as the attributable profit and reduction in RWAs was offset by accruals for foreseeable dividends and pension contributions.

The bank set aside an additional £247mln pounds in the quarter to reflect the deteriorating picture, denting its profits.

NatWest said it still expects to reach its return on equity target - a key measure of profitability - of 14-16% in 2023, but said the route to achieving that would be different as both income and costs rise amid rising interest rates and inflation..

Rose, commented: "At a time of increased economic uncertainty, we are acutely aware of the challenges that people, families and businesses are facing up and down the country."

"Although we are not yet seeing signs of heightened financial distress, we are very conscious of the growing concerns of our customers and we are closely monitoring any changes to their finances or behaviours."

7.00am: FTSE 100 set to fall at the open

FTSE 100 set to nurse some hefty falls at the open following some more disappointing earnings from big tech companies, Amazon and Apple overnight.

Spread betting companies are calling the lead index down by around 50 points.

Amazon shares tumbled as third quarter numbers missed forecasts and as fourth quarter guidance came in well below analyst expectations.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank said: "An ugly week of Big Tech earnings is coming to an end, having wiped out hopes of seeing earnings boost gains across the stock markets."  

"Yesterday, Meta plunged more than 24% and the Nasdaq 100 lost almost 2%"  

"And today won’t be any better, as Apple and Amazon also lost in the afterhours trading." 

"Amazon lost up to 20%! Amazon’s Q3 revenues grew 15% versus last year, that was slightly less than expectations."

"But what really hit investors is the estimation of a holidays season revenue of around $140 to $148 billion, versus around $155 billion penciled in by analysts."

"Apple, on the other hand, lost nearly 3% at its worse, after the bell. The company did better than the revenue and earnings expectations, but the uptick in iPhone sales was worse-than-expected," 

US markets had earlier produced mixed fortunes with strong gains in the DJIA and further heavy falls in the Nasdaq Composite driven by the disappointing tech earnings.

On a quieter day of corporate news investor attention will focus across the pond again later today where PCE core deflator numbers for September are due.

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