- FTSE 100 closes 10 points lower
- Marks & Spencer falls after update
- ITV hit by falling ad revenues
4.45pm: FTSE closes in the red
The FTSE 100 finished a little lower on Wednesday while other indices struggled
At the close, the FTSE had lost 10 points to finish at 7,296.
A "quietly cautious" atmosphere prevalied in the markets at US midterm election results continued to flow in, said IG's Chris Beauchamp.
“With the elections in the US still not providing a clear direction for investors, a quietly cautious atmosphere prevails in stocks," Beauchamp wrote.
"In London the risers and fallers are relatively evenly-balanced, keeping the FTSE 100 close to its recent highs, but with the all-important US inflation reading still to come this week most traders are opting not to push their luck too far."
3.58pm: FTSE 100 lower but off worst levels
Leading shares remain in the red heading into the close, as investors try to assess the repercussions of a worse than expected Republican performance in the US midterms and ahead of key inflation data due tomorrow.
The FTSE 100 is down 19.21 points or 0.26% at 7286.93, having earlier fallen to 7263.
Informa PLC (LSE:INF) is down 3.71% to 550.8p on worries that any delay to China reopening its economy could hit its events business.
UBS cut its price target from 700p to 654p but kept its buy rating. However it said: "We accept that if China does not re-open and there are consensus downgrades, it could be difficult for shares to perform near term."
Ocado Group PLC (LSE:OCDO) is 3.71% lower after its partner Marks and Spencer Group PLC (LSE:MKS) revealed a loss for the joint business.
Vodafone Group PLC (LSE:VOD) has fallen 2.03% as it sold a major stake in its wireless infrastructure company Vantage Towers to private equity firms KKR and Global Infrastructure Partners (GIP) that will net the UK mobile firm a minimum of €3.2bn.
But Associated British Foods PLC (LSE:ABF) added 3.57% on further consideration of this week's update, while Smiths Group (LSE:SMIN) rose 3.45% following its latest results and Haleon PLC (LSE:HLN, NYSE:HLN) was 2.62% higher ahead of figures tomorrow.
3.00pm: Midterms could lead to another debt ceiling crisis
More on the prospects after the US elections, where the Republicans are on course to win control of the House of Representatives but the outcome is far closer than expected.
Andrew Hunter at Capital Economics said: "Despite rampant inflation and President Joe Biden’s low approval rating, the Democrats have avoided the heavy defeat that many anticipated. Although the Republicans are still expected to win control of the House, they look set for a majority of five seats or fewer, leaving presumptive Speaker Kevin McCarthy beholden to Marjorie Taylor Greene and other members of the Freedom Caucus...
"The race for the Senate stands on a knife-edge, with each party on 48 seats and the remaining four races potentially unlikely to be called for days. As happened in 2020, overall control of the Senate will probably not be decided until a likely run-off election in Georgia on 6th December.
"Regardless of which way that race goes, a narrow Republican victory in the House would spell the end for President Joe Biden’s domestic agenda, and the potential for further big shifts in fiscal policy. It would also raise the risks of another crisis over the Federal debt ceiling next summer although, for that reason, the Democrats are likely to try and raise the ceiling themselves during the lame duck session.
[With] a resounding re-election victory for Republican Governor of Florida Ron DeSantis [seen as Donald Trump's main challenger]... there may now be a higher chance of a Republican victory in 2024 – potentially heralding the return of market-friendly tax cutting policies, but without the chaos that characterised much of Trump’s first term."
2.45pm: US markets down after midterms
US stocks fell at the open after three days of gains as investors await the results of yesterday’s midterm elections and look ahead to key US inflation data due on Thursday.
Just after the market opened, the Dow Jones Industrial Average had shed 241 points or 0.7% at 32,920 points, the S&P 500 was down 32 points or 0.8% at 3,796 points, and the Nasdaq Composite had lost 112 points or 1% at 10,504 points.
Forex.com market analyst Fiona Cincotta said the midterm elections had not been the walk in the park that the Republicans might have expected, and President Joe Biden appears to have avoided a worst-case scenario.
“Still, the Republicans are set to win the House of Representatives, and the Senate is still too close to call,” she said. “The uncertainty is cresting a slight risk-off mood, although this could also be nerves ahead of tomorrow’s inflation data.”
Also weighing down market sentiment was disappointing data from China, where inflation has eased from a 29-month high to 2.1% and the producer price index fell for the first time in almost two years.
“In most countries, falling inflation would be well received; however, in China, this is down to falling demand amid COVID lockdowns and slowing global growth, neither of which are for cheering,” Cincotta said.
In terms of major movers, Facebook’s parent company Meta Platforms Inc (NASDAQ:FB) (Meta Platforms Inc (NASDAQ:FB)) shares jumped by 5.5% at the open on the news that the tech giant would be slashing its workforce by 13%, representing about 11,000 jobs, amid higher costs and ad revenue declines.
The Walt Disney Company (NYSE:DIS) (The Walt Disney Company (NYSE:DIS)), on the other hand, tumbled about 11.4% after posting a quarterly earnings miss on both the top and bottom line, including larger-than-expected losses attributed to its push into streaming video.
Back in the UK, the FTSE 100 is now down 16.53 points or 0.23% at 7289.61.
2.24pm: Flutter reports higher interest charge
Flutter Entertainment PLC (LSE:FLTR) has fallen after its latest update.
The world's biggest online betting business raised full year revenue guidance for its fast-growing US operation while overall group profits are seen in line with forecasts with no signs of a slowdown in business.
But it reported a £280mln interest charge is expected in 2023, reflecting an increase in the cost of debt from 4.1% in quarter four to 5.6% in 2023..
Broker Peel Hunt said: “We estimate that this implies a 10% downgrade to the full year 2023 consensus for pre-tax profits and EPS. Given the movement in reference rates, this should have been expected but may take the edge off the recent rally.”
Indeed it has. The company's shares are down 2.42% while rival 888 Holdings PLC (LSE:888) is off 3.78%.
1.05pm: Facebook owner Meta sees shares climb as it slashes jobs
Facebook owner Meta Platforms Inc (NASDAQ:FB) has confirmed earlier reports of planned job cuts.
The company is axing more than 11,000 staff or around 13% of the workforce.
Founder and chief executive Mark Zuckerberg said he had expected the move online which took place during the pandemic to be a permanent fixture, and he significantly increased investment accordingly.
But with rising inflation, the economic downturn and increased competition, ad revenues were much lower than he expected.
In a mea culpa letter to employees he said: "This did not play out the way I expected... I got this wrong and I take responsibility for that."
But proving the market takes a hard hearted view of such events, the news of the job losses - the first in the company's 18 year history - has been greeted by a 5.7% rise in its shares in pre-market trading.
Victoria Scholar, head of investment at interactive investor said: “Shares in Meta are trading higher..after Facebook’s parent company confirmed speculation that it is planning to slash the size of its workforce in an attempt to rein in costs amid this year’s share price plummet. Meta is cutting staff by over 11,000 this year as it grapples with softening ad revenues and cost inflation.
"It follows Meta’s extremely disappointing quarterly earnings report last month which sent shares down 20% after it forecast a weak Christmas quarter and higher costs next year.
"Meta is the latest company in the tech sector to announce major layoffs, following similar moves from Twitter, Microsoft, Netflix and Amazon lately. Within Big Tech, Meta is the standout underperformer this year, shedding more than 70% of its stock market value.
"Meta has also been facing criticism for betting too heavily on the Metaverse, a gamble that so far has not paid off. Its Reality Labs division, which hosts its VR headsets has lost over $9 billion during the first three quarters of the year."
But Zuckerberg told staff: "We've shifted more of our resources onto a smaller number of high priority growth areas - like our AI discovery engine, our ads and business platforms, and our long-term vision for the metaverse."
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "The focus will now be on the monumental task Meta faces to claw back revenue. It faces an uphill battle in its attempt to attract younger audiences who are now dancing to the Pied Piper tunes of TikTok, or setting up groups and channels on Discord and Telegram.
"At the same time Meta funds are being poured down into the dark plumbing of the metaverse, and it’s highly unclear when revenues will emerge from this expensive venture.
"He may have taken responsibility for the current situation, but he is still using the same language of shifting resources to high priority growth areas, and the metaverse still features on that list.‘’
12.05pm: US markets await election results
US stocks are expected to open lower on Wednesday, giving up some of their recent gains, as investors focus on the results emerging from the US congressional midterm elections.
Futures for the Dow Jones Industrial Average were 0.3% lower in pre-market trading, while those for the S&P 500 were down 0.2%, and contracts for the Nasdaq-100 shed 0.2%.
As the results are still coming in, it remains to be seen which party will gain control of the Senate and House of Representatives. Expectations of a runaway win for the Republicans are not materializing but many watchers are still betting on split results.
In a blow to Republican hopes, Democrat John Fetterman defeated Republican Mehmet Oz for the key Senate seat in Pennsylvania but as things stand Republicans are leading the race for the control of the House of Representatives.
How the outcome of the midterms will play out for the economy and the path for interest rates remains to be seen. US rate-setters have delivered four consecutive interest rate hikes of 75 basis points this year as inflation remains stubbornly close to 40-year highs. Investors fear the higher interest rates will choke economic growth.
On the economic data front, the focus will be on US inflation data on Thursday. The headline figure is expected to have eased to 8.0% in October while core inflation is seen easing to 6.5%.
A higher-than-expected outcome may end up weighing on stocks as it would strengthen the case for aggressive interest rate hikes.
11.36am: FTSE 250 outperformed by blue chip index
The weaker pound is helping the leading index, given it is full of overseas earners whose earnings are boosted by a fall in sterling.
The FTSE 100 is now down just 12.15 points or 0.17% at 7293.99.
But the more domestically focused mid cap FTSE 250 is underperforming, down 0.58% at 18,589, hit by a host of poorly received trading update.
Leading the way lower is pubs group JD Wetherspoon PLC (LSE:JDW), down 7.99% after it said like-for-like sales in the first 14 weeks of the financial year were in line with expectations,but warned that October had been a slower month.
It also plans to sell another 39 pubs.
Derren Nathan, head of equity research at Hargreaves Lansdown, said: "Generally sales are holding up at JD Wetherspoon, but we will need to hold our breath to find out if the more recent slowdown is a blip or a trend, as customers feel their wallets ever more squeezed. The World Cup may provide some relief, but JD Wetherspoon is not a sports led outlet.
"With an acceleration in pub disposals and efforts to make a dent its debt levels, it feels like the pub chain is battening down the hatches, and that may well be a sensible move as we enter a period of increasing economic uncertainty.”
Rival Mitchells & Butlers PLC (LSE:MAB) is down 4.56% in the wake of the news.
Bus and train operator FirstGroup PLC (LSE:FGP) is down 7.39% after its update. The company has been in the news recently for all the wrong reasons given the shocking performance of its Avanti West Coast joint venture.
Broadcaster ITV PLC (LSE:ITV) has fallen 5.93% on worries about advertising revenues after a 2% fall in the first nine months.
10.40am: Footsie off worst levels but Ocado under pressure
Leading shares remain in the red but are off their worst levels.
The FTSE 100 is currently down 21.12 points or 0.29% at 7285.02 after earlier falling as low as 7263.
Intermediate Capital Group (LSE:ICP) leads the fallers, down 2.64% while Ocado Group PLC (LSE:OCDO) is off 2.56% after results from partner Marks and Spencer PLC.
The Marks' figures showed the Ocado side of the business recording a £0.7m loss, compared to a profit of £28.1m a year ago.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "[The] partnership with Ocado Retail is also under pressure... as the demand for home delivery groceries wanes, at a time when capacity had increased."
Aviva PLC (LSE:AV.) is down 2.05% after its results but an update from Smiths Group (LSE:SMIN) received a better reception and its shares have risen 3.74%.
The engineering group reported first quarter revenue growth of 13.2% and chief executive Paul Keel said: "We are pleased with our strong start to the fiscal year, building on a successful FY22 and maintain guidance of 4-4.5% organic revenue growth with moderate margin improvement for FY23."
10.15am: Markets uncertain over midterms
Back with the US midterm elections, and Nikko Asset Management's chief global strategist John Vail said: “Republicans will likely be disappointed with the result in aggregate, but as long as they win the House, there will be a political stalemate regarding most economic matters, which basically matches consensus, so markets probably should not react too much.
"There is some danger that with a slim majority in the House, its leadership will be beholden to the Trump camp, which could cause some fireworks in markets, especially regarding the threat to prevent an increase in the debt limit.
"However, the last time the GOP tried this, it backfired on them and the difficulties the Democrats experienced in curtailing their most progressive members during the last two years might serve as a warning to all Republicans to be more cohesive. The political environment is going to get very confrontational and if it becomes extreme, markets will likely react negatively.”
Earlier dollar weakness seems to have reversed, with the pound down 0.77% at US$1.1461.
Sterling is also lower against the euro, off 0.74% at €1.1374.
9.30pm: US interest rates could start coming down next year - UBS
Part of the reason the Republicans were expected to do well in the US midterm elections is voters' concerns about the economy, with slow growth but ever higher interest rates as the Federal Reserve tries to clamp down on inflation.
But economists at UBS believe with the US economy heading for a hard landing, the Fed will have to reverse its policy of raising rates next year.
They say: "A soft landing for the US economy now looks like an upside risk. Household spending has been weak. Households are running down savings. Credit card balances are rising. Goods spending remains very elevated. House prices are falling. On top of this, interest rates have moved higher at an historically rapid pace. The full effects of monetary policy tightening remain to be seen. Plus, we estimate fiscal policy is still a drag in 2023. We think undoing the imbalances under the strain of higher interest rates should be sufficient to push the US into contraction in 2023, after the current momentum wanes."
And so rates could start coming down.
They say: "As a result of the economic weakness we see unfolding in 2023, we think the Fed would respond. Before that, with inflation still surprising them to the upside, we expect the FOMC to move the target range for the federal funds rate to roughly 5% in early 2023.
"However, after seeing outright job losses, we expect the FOMC to react and to take out at least some of the restrictive policy.
"In our projection the FOMC starts cutting interest rates in Q3 of 2023. Overall, we expect the FOMC to lower the target range for the federal funds rate to 3.0% to 3.25% at the end of 2023, and to 1.0% to 1.25% in early 2024."
9.10am: US data and China concerns help push oil lower
Oil prices are lower again after US industry data showed stockpiles rose more than expected last week, and hopes that China would fully ease its pandemic restrictions continued to fade.
The country has lifted its lockdown in Zhengzhou, where iPhone production is located, but has extended the lockdown in its fourth largest city Guangzhou..
So Brent crude is down 0.21% at US$95.16 a barrel while West Texas Intermediate, the US benchmark, is 0.35% lower at US$88.59.
Craig Erlam at Oanda said: "Oil prices are a little lower again on Wednesday after falling around 3% a day earlier. This came following a strong move in recent weeks in which crude prices rallied around 20% on the back of the OPEC+ output cut and the prospect of less restrictive COVID-19 measures in China, which have not been confirmed.
"The API inventory data came late in the day on Tuesday after the bulk of the losses had already occurred. If the large inventory build is confirmed by EIA today, it will be interesting to see if it generates a bigger reaction in the markets, with Brent now trading back in the middle of the US$90-100 range."
8.45am: Builders a bit better after Taylor Wimpey update
Housebuilders subsided on Tuesday after a disappointing statement from Persimmon PLC (LSE:PSN), but there are signs of recovery today.
Persimmon is up 1.04%, Barratt Developments PLC (LSE:BDEV) is 0.98% better while Taylor Wimpey PLC (LSE:TW.) has added 0.77% despite a cautious trading update today.
Matt Britzman, equity analyst at Hargreaves Lansdown, said: “Taylor Wimpey follows in the footsteps of rival Persimmon in issuing a trading statement riddled with cautious statements about the state of the UK housing market and buyers who are struggling to keep pace with rising mortgage rates and lower real incomes. Cancellation rates are on the rise and whilst Taylor Wimpey haven’t released any specifics on prices, data suggests prices are starting to come under real pressure, with prices falling 0.9% in October.
"Taylor Wimpey, in fairness, is in a strong position financially to weather the inevitable storm. A prudent slowdown in land buying over the last few months looks to have been a good move, the landbank’s already at a decent size giving flexibility to pick and choose profitable projects. The balance sheet also looks strong, with net cash at the end of year expected to come in around £800m giving breathing room to hunker down.
"We didn’t get any specifics today on the outlook for shareholder returns, following Persimmon’s switch up to its returns policy yesterday, but it’s hard to see a yield shy of 10% continuing for long without needing to raid the cash hoard.”
8.28am: ITV under pressure
Matt Hancock appearing on I'm a Celebrity... is doing little for the ITV PLC (LSE:ITV) share price at the moment.
The broadcaster is down 5.63% as it reported a 6% rise in nine month underlying revenue to £2.5bn.
This increase was driven by the studios business, with advertising revenues from the media and entertainment business down 2%.
And the company warned inflation would hit its costs next year, although it said it was on track to meet its medium term targets.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “ITV has put in a resilient showing over the first nine months of the year. The shining light comes from the Studios business, where the group’s content-creation powerhouse is growing ahead of the wider sector. This industry is facing structural tailwinds, and these are unlikely to dissipate anytime soon. There are questions swirling about a potential breakup of ITV into its two separate parts, but doing this would leave the more troubling area of the business highly exposed.
"The Media & Entertainment division is facing ongoing declines in advertising revenue. Traditional broadcast advertising spots are simply never going to regain their popularity.
"Primetime hits like I’m a Celebrity will boost things in the short-term, but these highly popular shows are too few and far between for this to be enough. That puts the onus on the group’s grand digital plans. Again, video on demand and streaming progress has been admirable and no one can dispute ITV’s willingness to grasp the nettle. The question is whether ITV’s digital schemes can build enough scale and popularity, fast enough. In today’s fiercely competitive landscape, there simply may not be enough spare eyeballs to go around.”
Swapping Downing Street for Down Under... welcome your new Campmate, @MattHancock #ImACeleb pic.twitter.com/YM3kf7vUS5
— I'm A Celebrity... (@imacelebrity) November 8, 2022
8.15am: Footsie falters at the open
Leading shares as markets tried to weigh up the news coming from the US mid-term elections.
The Democrats seem to be doing better than expected, although the Republicans are still expected to have a majority in the House of Representatives.
Jim Reid at Deutsche Bank said: "What is clear at this hour.. is that neither major party is running away with the election in a ‘wave’ and it appears that Republicans are still on track to achieve a majority in the House of Representatives, a combo that should put a pin in any new fiscal stimulus for the next few years...
"Overall maybe Democrats slightly outperforming but it's not too far away from expectations. The mix also seems to not be surprising markets too much."
Over in China there has been some weak data, with the producer price index down 1.3% year on year last month, compared to 0.9% growth in September.
The annual inflation rate came in at 2.1% in October, down from September's 29-month high of 2.8% and lower than the expected 2.4%.
The country's economy continues to suffer from the COVID-19 lockdowns as well as a sluggish property market.
Meanwhile the FTSE 100 has opened more or less in line with expectations, down 24.7 points or 0.34% at 7281.44.
Marks and Spencer Group PLC (LSE:MKS) is down 2.01% as the retailer reported a 24% decline in adjusted pretax profit to £205.5mln, repeated that full year results would be below last year's figures and warned that next year, conditions were likely to become more challenging.
The figures were better than expected, said analyst Nick Bubb, while the company said trading in the first four weeks of the second half was in line with forecasts.
7.52am: US Dollar Index softens as midterms roll ahead
Election results continue to pour in at the time of writing, with a divided political landscape the favourite prediction.
Despite some light clawbacks this morning, equities seem to be responding well to the outcome as it develops, at the expense of the US Dollar Index.
DYX is testing lows of 109 last seen all the way in on September 20, though some support is being clocked on the four-hour price chart.
US Dollar Index (DYX) softens throughout election week – Source: capital.com
With the dollar under pressure, other major currencies have caught their breath.
Sterling is currently buying 1.154 US dollars following a strong Tuesday session, sparking hopes of a break above US$1.16.
US mid terms- net positive or net negative for the GBP/USD pair? – capital.com
Following yesterday’s 0.7% dip, EUR/GBP remains rangebound at 87.2p.
The euro has been strong against the greenback lately, having gained over 2.5% across the latest seven-day period, thus breaking above parity.
Euro bulls will be fighting to keep it that way.
European and UK calendars are clear today and while attention will barely be trained on the US economic calendar, the 30-year mortgage rate is worth paying attention to.
source: tradingeconomics.com
Mortgage rates actually retracted recently after shooting above 7% for the first time in 20 years in October due to Federal Reserve tightening.
7.00am: FTSE seen lower
FTSE 100 set to open lower this morning after US markets closed higher but well off best levels for the day ahead of key inflation data tomorrow and as results from the US midterm elections started to come in .
Spread betting companies are calling the lead index down by around 25 points.
Michael Hewson (Chief Market Analyst at CMC Markets UK) said: “US markets also had another good day, finishing higher for the 3rd day in a row, although well off the highs of the day with the gains being relatively modest, despite a fall in treasury yields with the markets trading relatively cautiously ahead of tomorrow’s CPI report.”
“This pullback suggests we will see a lower European open this morning.”
Initial polls were suggesting the Republicans would take control of the House of Congress while the race for the Senate was said to be too close to call.
Ipek Ozkardeskaya senior analyst at Swissquote Bank said: “The results are still coming in. At the time of writing, there is a 50/50 shot at the Senate, and the Republicans have more seats in the House. No surprise.”
“From an investor point of view, a Republican win in both chambers is a good outcome for the stocks. And even a divided government, which we will sure get, is better for the stocks than a Democratic win.“
In London, M&S, Taylor Wimpey, Biffa, and Smith News are among the notable names in the diary for Wednesday.