FTSE 100 closes at session low, dropping back with US blue chips; oil prices hold firm

  • FTSE 100 index sheds nearly 16 points
  • Dow Jones wobbles, but other US indices edge higher
  • Oil close to 3-year highs

The FTSE 100 index finished solidly lower on Wednesday, giving back earlier gains in the afternoon as US markets struggled to make headway, although another drop in crude inventories boosted oil prices.

At the close, the UK blue-chip index was 15.95 points weaker at 7,074.06, the session low and well below the day’s peak of 7,12940.

On Wall Street by London’s close, the Dow Jones Industrials Average was 27.85 points, or 0.05% lower at 33,917, although the broader S&P 500 index edged up by 0.05% and the tech-laden Nasdaq Composite added 0.2%.

Chris Beauchamp, chief market analyst at IG a global leader in online trading commented: “The rebound in risk appetite continues to fizzle out, with equity indices mostly unimpressed by the ongoing high PMI readings that signal a continued economic rebound.

“Good data is still perhaps to be viewed as bad news, since it pushes central banks towards gradually tightening policy, while the swings and roundabouts of Fed pronouncements over the past week have left markets dazed and confused.

“While the Dow continues to lag, the S&P 500 sits close to a record high, but without the momentum to carry it much higher, while European markets have seen more marked losses that have put Monday’s gains at risk of being given back entirely.”

However, Beauchamp noted: “At least oil can still be relied on, as yet another drop in US crude stockpiles pushes Brent and WTI to new multi-year highs. Predictions of the demise of oil, and of oil demand, have been wildly premature, and rebounding economies seemingly cannot get enough of the commodity.

“This should continue to provide a foundation for further crude oil gains this year, although a correction of some sort is wildly overdue.”

3.50pm: Shell leads the way higher

With Wall Street off its best levels – the Dow Jones Industrial Average has now dipped into the red – the UK market is also starting to flag.

The FTSE 100 is up just 14.74 points or 0.21% at 7104.75, having earlier climbed as high as 7129.

Commodity companies are providing support with metal prices higher and Brent crude up 1.42% at $75.87 a barrel.

Oil has now reached its highest level since October 2018 on growing demand as global economies continue to recover from the worst of the pandemic.

So Royal Dutch Shell PLC (LON:RDSA) has risen 2.56%, while BP PLC (LON:BP.) is 1.81% better.

Among the miners Glencore PLC (LON:GLEN) is up 2.15% while BHP PLC (LON:BHP) has climbed 2.01%.

GlaxoSmithKline PLC (LON:GSK) has slipped back a little, but is still up 1.03% in the wake of the company’s strategy presentation.

Housebuilders are still in the doldrums, with Taylor Wimpey PLC (LON:TW.) down 1.83% and Barratt Developments PLC (LON:BDEV) 1.38% lower.

Michael Hewson, chief market analyst at CMC Markets UK, said: “European markets have struggled today sliding back, after the gains of the last two days, however the FTSE 100 is defying that convention rising for the third day in a row, helped by the likes of basic resource stocks with BP and Royal Dutch Shell near the top of the index as brent crude prices top $75 a barrel.

“Glencore, Anglo American and Antofagasta are also gaining, helped by a rebound in industrial metals prices with copper prices also up for the third day in succession.”

3.20pm: US economy grows in June, but signs of inflation

Further signs of a strong US economy in June, albeit down from its peak earlier in the year.

And also signs of inflation which may worry the Federal Reserve no matter how much it maintains such pricing pressures are transitory.

The main growth has come from the manufacturing sector according to the latest IHS Markit survey, with its PMI hitting a series record. The service and composite PMIs both slipped back.

Chris Williamson, chief business economist at IHS Markit, said: “The early PMI indicators point to further impressive growth of the US economy in June, rounding off an unprecedented growth spurt over the second quarter as a whole.

“While both output growth and inflows of new orders have come off their peaks in both manufacturing and services, this is as much due to capacity constraints limiting firms’ abilities to cope with demand rather than any cooling of the economy.

“Although price gauges have also slipped from May’s all-time highs, it’s clear that the economy continues to run very hot. Prices charged for goods and services are still rising very sharply, record supply shortages are getting worse rather than better, firms are fighting to fill vacancies and manufacturers’ warehouse stocks are being depleted at a worrying rate as firms struggle to meet demand.

“While the second quarter will likely represent a peaking in the pace of economic growth, a concomitant peaking of inflation is far less assured.”

Not words the Fed wants to hear.

The Dow Jones Industrial Average has eased back a little and is now up 0.04%, the S&P 500 is 0.19% better while the Nasdaq Composite is at a new peak up 0.36%.

Microsoft is up 0.24% after hitting a US$2trn valuation for the first time. It is the second public company after Apple to reach this milestone.

Meanwhile the FTSE 100 is up 23.42 points or 0.33% at 7113.43.

2.42pm: Wall Street rises at the opening bell

The main indices on Wall Street opened in the green on Wednesday morning as fears of inflation began to ease across global markets.

In the first minutes of trading, the Dow Jones Industrial Average was up 0.1% at 33,980 while the S&P 500 climbed 0.09% to 4,250 and the Nasdaq rose 0.23% to 14,286.

Meanwhile, over in the crypto markets, Bitcoin was continuing its rebound after yesterday’s brief slide below US$30,000, rising 16.6% in the last 24 hours to US$34,594.

Back in London, the FTSE 100 had lost a bit of ground but was still up 30 points at 7,118 at around 2.40pm.

2.17pm: Glaxo climbs after strategy day

Ahead of the Wall Street open, leading UK shares have picked up the pace again.

The FTSE 100 is currently near its high for the day, up 35.3 points or 0.5% at 7125.31.

GlaxoSmithKline PLC (LON:GSK) is the biggest riser, up 3.05% to 1437.4p as investors react to the strategy update from chief executive Emma Walmsley.

Oil and mining shares continue to support the market, but housebuilders remain a drag.

12.35pm: Investors take heart from Fed chief’s comments

Wall Street is set for a positive start after Federal Reserve chair Jerome Powell played down fears of inflation, easing concerns about the central bank tapering its support programme and planning interest rate rises.

The Dow Jones Industrial Average is expected to open 0.2% or 69 points higher, while the S&P 500 is forecast to climb 0.5%. The Nasdaq Composite, which hit a new record on Tuesday, is indicated 0.8% higher.

Sophie Griffiths, market analyst at Oanda, said: ” Comments from the Fed’s head honcho appear to be calming the rattled market stateside. Moreover, the downplaying of the risk of an early move to tighten monetary policy has lifted sentiment, with the tech-heavy Nasdaq the clear winner.”

Later comes the latest snapshot of the US economy with the purchasing manager reports for June.

Among the movers in premarket trading, phamaceutical group Biogen is 1.5% better after the US Food and Drug Administration approved its alzheimer’s drug.

Back in the UK, the FTSE 100 is off its best levels but still up 14.8 points or 0.21% at 7104.81.

12.14pm: Berkeley drops after forecasting flat profits

Housebuilders are among the day’s fallers.

Berkeley Group PLC is down 1.55% to 4568p after it said profits had edged up 3% to GBP518mln but it expected them to remain at that level for the next two years.

AJ Bell investment director Russ Mould said: “Berkeley is being as good as its word when it comes to returning cash to its shareholders, popping a further GBP334mln into their pockets and promising more to come, but the shares are not responding,

“This may be the result of an unchanged profit outlook, uncertainty over the future of housing in major metropolitan areas in the wake of the pandemic and also Berkeley’s valuation, as the shares already trade close to the two times multiple of (historic) book value which is often seen as the ceiling for housebuilding stocks.”

Persimmon PLC (LON:PSN) is 1.45% lower at 2983p after it agreed with the Competition and Markets Authority to abandon ‘doubling ground rent’ leases and reimburse buyers of houses with them. (Insurer Aviva also came to a deal with the CMA.)

Among the FTSE 250 housebuilders, Beazley PLC (LON:BEZ) is down 3.2% at 330p and Crest Nicholson Holdings PLC (LON:CRST) has fallen 1.78% to 431p.

Meanwhile the FTSE 100 is up 18.91 points or 0.27% at 7108.92 while the FTSE 250 is virtually flat, up just 0.02% at 22,684.

11.45am: Glaxo edges higher

Shares in GlaxoSmithKline PLC (LON:GSK) have edged up 12.4p or 0.89% to 1407p.

Under fire chief executive Emma Walmsley is currently presenting the pharma giant’s growth outlook for the next five to ten years and detailing the demerger of its consumer business (follow our live blog on the presentation.)

Meanwhile the FTSE 100 has picked up the pace a little, adding 23.54 points or 0.33% to 7113.55.

10.42am: Phoenix fails to rise

Insurer Phoenix Group Holdings PLC (LON:PHNX) is the day’s biggest faller so far on the FTSE 100.

The business – which owns the Standard Life assurance brand – is down 2.51% at 676.2p after Swiss Re sold a 6.6% stake at 660p a share. The buyers were a range of new and existing institutional shareholders.

The move cuts Swiss Re’s shareholding – which it acquired after selling its ReAssurance businss to Phoenix last summer – in half. It comes ahead of the expiry of a lock-up agreement between the two, but Phoenix agreed to the sale beforehand.

Phoenix added: “MS&AD Insurance Group Holdings, whose lock-up period also expires in July 2021, continues to retain a 14.5% shareholding in Phoenix. MS&AD is committed to its strategic relationship with Phoenix and expects to remain a significant shareholder.”

Overall, the FTSE 100 has drifted off its best levels, up 4.19 points or 0.059% at 7094.2.

10.23am: “Rate rises still feel far off”

Commenting on the UK PMI figures, economist Dean Turne at UBS Global Wealth Management, said: “Although down from their recent peaks, today’s PMI figures signal that the recovery in the economy charges ahead. There were some particularly encouraging signals for hiring, although evidence of price pressures and supply constraints continue to feature in the surveys. Encouragingly, the economy continues to respond positively to the easing of restrictions. The recent delay to the final stage of lifting restrictions shouldn’t hamper the recovery in a meaningful way.

“The attention now turns to the Bank of England‘s MPC meeting later this week. Today’s PMIs are consistent with other data indicating that the economy to continues to recover. Moreover, short-term inflation pressures are evident at a time when price rises are above the BoE’s target. In our view, policymakers will stick with a relatively hawkish stance for the time being, but hawkish talk does not mean rate rises. Despite the strength of the data and near-term inflationary pressures, with the latter likely to fade in due course, interest rate rises still feel far off.”

9.45am: UK employment rises but so do pricing pressures

Ahead of the latest Bank of England interest rate decision on Thursday, more signs of strength in the UK economy in the first snapshot for June.

And of pricing pressures, which could concern the Bank, especially since inflation moved past its 2% target in May.

According to the latest IHS/Markit survey, the manufacturing, services and composite purchasing managers indices fell back from May’s highs but only slightly.

The overall expansion in activity was still among the fastest since the series began in January 1998. Markit said marked increases in output were seen across both the manufacturing and service sectors as the economy continued to reopen following the COVID-19 lockdown earlier in the year.

The headline composite index came in at 61.7 in June compared to the record of 62.9 in May, but still showing one of the strongest monthly improvements in business activity across the private sector since 1998.

Companies responded to rising workloads by taking on extra staff at an unprecedented rate at the end of the second quarter, said the report.

But input and output prices continued to rise, partly due to supply chain disruption.

Chris Williamson, chief business economist at IHS Markit, said: “Businesses are reporting an ongoing surge in demand in June as the economy reopens, led by the hospitality sector, meaning the second quarter looks to have seen economic growth rebound very sharply from the first quarter’s decline.

“There are some signs that the rate of expansion appears to have peaked, as both output and new order growth cooled slightly from May’s record performances, but full order books and a further loosening of virus-fighting restrictions should nevertheless help ensure growth remains strong as we head through the summer.

“However, inflation worries have continued to intensify. Record levels of the survey’s price gauges and the further development of capacity constraints hint strongly that consumer price inflation has much further to rise after already breaching the Bank of England‘s 2% target in May.”

But the FTSE 100 seems to be accentuating the positive and has perked up, adding 16.74 points or 0.24% to 7106.75.

9.14am: Shell and BP lead the way

Soothing comments from US Federal Reserve boss Jerome Powell about inflation and the prospect of interest rate rises seems to have calmed investors’ nerves, at least for the moment.

Powell told Congress: “”We will not raise interest rates pre-emptively because we fear the possible onset of inflation. We will wait for evidence of actual inflation or other imbalances.”

In setting policy he said the Fed would look at a broad range of jobs data, not just the headline unemployment figure.

All of which seems to have helped market sentiment, certainly on Wall Street.

In particular metal prices are moving higher, hence the early gains in mining shares on the UK market.

The moves come despite China announcing it would auction a total of 100,000 tonnes of non-ferrous metals from its stockpiles, in an effort to curb commodity price rises.

Anglo American PLC (LON:AAL) has added 1.49% while BHP Group PLC (LON:BHP) is 1.41% better.

Oil prices are also moving higher, with Brent crude up 0.74% at $75.36 a barrel.

So Royal Dutch Shell PLC (LON:RDSB) has risen 1.9% and BP PLC (LON:BP.) is up 1.55%.

Despite the overall positive mood, the leading index has only just managed to move higher. The FTSE 100 is ahead just 4.27 points at 7094.28.

8.50am: Flat start for UK market

The FTSE 100 made a subdued start to proceedings, largely ignoring the pull of Wall Street and Asia in the early exchanges.

Purchasing manager’s data later will be keenly eyed as a guide to the state of the UK economy as it emerges from Covid strictures, though the Bank of England‘s monthly address on Thursday likely to draw greater interest.

According to the Financial Times, its rate-setters now need to show they can keep a lid on UK inflation.

On the market, all was fairly quiet. The day’s big headlines are likely to be generated by GlaxoSmithKline’s (LON:GSK) later Wednesday.

Chief executive Emma Walmsley is under pressure to show how she will jump-start the drug giant’s sluggish historic performance and has the added pressure of a dissident investor, Elliott Management, on its shareholder register.

In the early exchanges ahead of the meeting, GSK was off 1.2%.

Shares in the builder Berkeley Group (LON:BKG) fell 2.5% in the wake of its prelims.

Richard Hunter, head of markets at Interactive Investor, had this to say: “Berkeley’s heavy exposure to London has been both a blessing and a curse, although the company remains convinced of recovery in the capital.

“The effects of the pandemic on the London market put pressure on its traditional home buyers, where there is a broadly even split of owner-occupiers and (overseas) investors.

“With international travel restrictions muddying the picture, let alone the aftermath of Brexit, this core market for the group has been under pressure.”

On the up were the miners led by Anglo American (LON:AAL), up 2.2%, as they recovered from the recent mini reset.

6.50 am: Subdued start predicted

The FTSE 100 is expected to start Wednesday’s session a touch lower as investors await the latest flash PMI readings from the UK and the US.

Spread-betters IG expect the blue-chip index to open down around 3 points after closing 28 points higher at 7,090 on Tuesday.

The prediction of a slow start followed a positive performance for US markets overnight, with the Dow Jones Industrial Average closing up 0.2% at 33,945 while the S&P 500 climbed 0.51% to 4,246 and the Nasdaq rose 0.79% to 14,253.

Things were looking more mixed in Asia this morning, with Japan’s Nikkei 225 down 0.02% while Hong Kong’s Hang Seng was 1.45% higher.

The flash PMI readings later today will also give investors some food for thought ahead of the Bank of England‘s meeting on Thursday, as well as providing more insight on how the British economy is rebounding as lockdown restrictions ease.

On currency markets, the pound was down 0.16% against the dollar at US$1.392, although the PMI readings could provide some catalysts for movement going forward.

Around the markets:

Sterling: US$1.392, down 0.16%

Brent crude: US$75.26 a barrel, up 0.6%

Gold: US$1,780 an ounce, up 0.16%

Bitcoin: US$33,881, up 3.1%

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mostly higher on Wednesday as members at Bank of Japan’s April monetary policy meeting agreed that stimulus measures could result in a “faster than expected” pace of recovery for Japan and other countries.

The upbeat assessment on the outlook reinforces market expectations that Japan will keep monetary settings unchanged for the time being, in the hope its ultra-loose policy and pandemic-relief programs will sustain recovery.

In Japan, the Nikkei 225 gained 0.06% while South Korea’s Kospi rose 0.37%.

The Shanghai Composite in China lifted 0.26% and Hong Kong’s Hang Seng index surged 1.39%

Shares in Australia dipped, with the S&P/ASX 200 trading 0.59% lower.


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