FTSE 100 ends back below 7,200 as GDP boost offset by mixed US data and weakness on Wall Street

  • FTSE 100 closes 26 points lower
  • US blue-chips weak after mixed data
  • US PPI rises; jobless claims fall

5.00pm: Footsie beats a retreat

The FTSE 100 index closed lower on Thursday as although the UK continues to grow the NIESR highlighted a potential slowing after the reopening boost, while US blue-chips fell as PPI data reawakened inflation fears although jobless claims fell again.

At the close, the UK blue-chip index was down 26.91 points, or 0.4% at 7,193.23, just above the session low of 7,182.92 and well below the day’s peak of 7,220.70.

Joshua Mahony, senior market analyst at IG, a global leader in online trading noted: “UK stocks lost ground despite an encouraging 4.6% growth rate for the second quarter of 2021. The reopening efforts undertaken in the UK have undoubtedly provided the basis for a rapid economic fight back, with the UK hoping to live up to the IMF expectations that they will outperform many European peers this year.

“Nonetheless, the forward-looking NIESR GDP estimate does highlight the risk that growth begins to taper off from here, with the decline from 4.8% to 3.9% signalling that the recovery may not prove long-lasting in nature. While the US has the benefit of a free-spending Joe Biden at the helm, the UK recovery will be based on the hope that Rishi Sunak and the Bank of England remain highly supportive throughout 2021.”

Around London’s close, the Dow Jones Industrials Average was 49 points, or 0.1% lower at 35,435, but the broader S&P 500 index and the tech-laden Nasdaq Composite both recovered from opening falls, adding 0.1% and 0.2%, respectively.

IG’s Mahoney said: “A second batch of US inflation data in as many days has provided a more cautious approach for US markets today. Yesterday saw a monthly core CPI figure of 0.3%, with the recent boom in used car prices apparently over. However, today’s PPI inflation report highlighted how factory prices continue to rise thanks largely to rising energy prices.

“Undoubtedly, both CPI and PPI readings have highlighted the importance of energy prices, with Joe Biden’s call for OPEC to ramp up production seemingly falling on deaf ears. For traders, the concern over rising inflation comes in relation to monetary policy, with the Fed likely to remain concerned that the prolonged period of elevated prices could necessitate a swift tapering strategy.

“However, Biden and Yellen will also worry about the impact rising inflation will have upon the economic recovery, with the spending capability of an everyday consumer undoubtedly impacted by a 50% rise in gasoline prices over the past year.”

3.40pm: Most UK businesses now trading but end of furlough looms

The Footsie was firmly in the red as it was nearing the end of the day, down 31 points to 7,188.

As of early August, 89% of UK businesses were trading compared to only 71% in January.

Across the workforce, 4% were on furlough down from 20% in January, according to the Office for National Statistics.

However, one in 50 businesses expect to make people redundant during the next three months and the phasing out of furlough was the third most common reason for planned redundancies.

“Not all businesses or industries are equal, and some service industries are finding it particularly difficult to bring staff back. 11% of the workforce in arts, education and recreation businesses are still furloughed. Other service industries with high levels of furlough include hairdressing and beauty, laundry and dry cleaning, and funeral services,” said Sarah Coles, personal finance analyst at Hargreaves Lansdown.

“Meanwhile, costs are becoming more of a headache, and a quarter of businesses say the price of materials, goods or services has been rising more than normal for the past two weeks. Many feel unable to pass those extra costs on to consumers, and only 8% had increased the price of goods or services sold. It makes life increasingly difficult, especially for those businesses whose turnover hasn’t returned to normal levels yet.”

“In some cases, the furlough scheme has been a lifeline, but the end of the scheme is sneaking up on us, and when it’s withdrawn altogether at the end of September, it could pull the rug out from underneath those who rely on it.”

3pm: US indices open in the red

The FTSE 100 slid further in the afternoon after the US indices opened in the red.

London’s main index was down 30 points to 7,189, while its peers S&P 500 and Dow Jones Industrial Average shed 10 points to 4,437 and 98 points to 35,386 respectively. The Nasdaq was also well underwater, down 65 points to 14,699.

“The week’s big data release gave the markets a small bump on Wednesday as it took some of the pressure off the central bank even if it doesn’t change its plans around tapering. Inflation being transitory is crucial to tightening of monetary policy being done in a gradual way and the CPI numbers aligned with the Fed’s narrative around price pressures this year,” said Craig Erlam, senior market analyst at OANDA Europe.

“It’s looking a little light on the data front for the rest of the week, with today’s PPI number the only remaining release of any real significance. The data yesterday was encouraging but any signs here that it was a blip could unwind all of yesterday’s good feeling and replace it with anxiety once more. Should the data offer further comfort on the other hand, equities could catch another bid and take further pressure off US yields and the greenback.”

1.20pm: Pret a Manger staff mull strike over pay cuts

The FTSE 100 dove deeper into the red in the early afternoon, losing 17 points to 7,202.

Pret a Manger staff are considering a strike after the sandwich bar chain decided to make permanent what were expected to be temporary pay cuts.

During the pandemic, employees, most of whom are already on minimum wage, that they were told they would not be paid during rest breaks while a service bonus of GBP1 an hour was also axed before being reinstated in April but at only 50p an hour. This will now become the norm.

Pret said the changes were necessary because changes brought about by the pandemic, presumably including the shift towards working from home, had had “a big impact” on business.

12.30pm: US indices set to flat start

US stocks look set for a fairly flat start on Thursday as investors await fresh data on the labour market and more earnings reports having moved higher in recent days helped by data, earnings and the Senate’s approval of a $1 trillion infrastructure bill.

Futures for the blue-chip Dow Jones Industrial Average and the broader S&P 500 were both flat after both indices notched up records on Wednesday. Nasdaq-100 futures edged down 0.2%.

The latest weekly jobless claims data is forecast to show a small decline for the week that ended August 7. Also due for release on Thursday is the US producer-price index for July, which will be closely scrutinized for clues about wholesale inflation.

Concerns about inflation receded on Wednesday after July consumer prices data showed a decline on a monthly basis, dropping to 0.5% last month from 0.9% in June.

A clutch of technology companies are scheduled to report earnings Thursday, with the pick – Airbnb (NASDAQ:ABNB) and Walt Disney – expected after the markets close.

Vaccine makers pushed higher in pre-market trading after reports the US Food and Drug Administration (FDA) is close to approving COVID-19 booster shots.

Meanwhile, the FTSE 100 was little moved at noon, up 9 points to 7,210.

11.50am: TUI sees pent-up demand but bookings a far cry from 2019 levels

The FTSE 100 was treading water at lunchtime, down 6 points to 7,213.

In the FTSE 250, TUI AG (LSE:TUI) was a bright spot although it was only up 1% from a 4% jump in the early morning.

The travel agent booked an extra 1.5mln trips in the last three months and has 4.2mln customers using its services this summer as people rushed to organise their holidays when restrictions eased.

However, total bookings are still 68% below 2019 levels, so it reduced capacity to around 60% of what was available two years ago.

Activity is supported by destinations that are doing well in terms of vaccine rollout and hospitalisation rates, such as the Balearics, Canaries and Greek islands, with demand coming from customers in Germany, Belgium, the Netherlands and Poland.

10.40am: FTSE 100 trims losses

The FTSE 100 trimmed its losses but was still underwater as Rio Tinto PLC (LSE:RIO) tumbled 7% in late morning.

London’s leading index was down 9 points to 7,210.

“The index remains above the 7,200 mark and is in touching distance of yesterday’s post-pandemic highs. Rio Tinto shares slumped heavily as they traded without entitlement to a pretty generous dividend,” said AJ Bell financial analyst Danni Hewson.

“For now there appear few big catalysts to shift the index in either direction amid a lull in major corporate and economic updates – however that’s often when something emerges from leftfield to upset the apple cart.”

9.30am: boohoo to create 5,000 jobs

The FTSE 100 held its losses in mid-morning and was down 17 points to 7,202.

Boohoo Group PLC (AIM:BOO) said it wants to hire 5,000 new people to handle its increased diversification and growing demand for its brands, which range from PrettyLittleThing, NastyGal and TopShop for its younger customers to Karen Millen, Dorothy Perkins and Oasis for the grown-ups, as well as newly acquired Debenhams as a digital department store.

The fast-fashion retailer will spend GBP500mln over the next five years to expand warehouse space and improve its technology.

In the first quarter of the year, the AIM-listed giant saw sales jump 32%, some 91% ahead of the same period two years before, despite widespread criticism on how it treats its workers.

Shares were up 1.5% to 269.9p on Thursday morning.

8.30am: FTSE 100 starts its day on the back foot

It was hard to gauge the mood in the City early on with the FTSE 100 kicking off in negative territory when the early predictions had been for a positive start.

There was little to unsettle the livestock in the latest economic data.

Gross domestic product grew by 4.8% between April and June as the economy progressively emerged from lockdown and pubs and restaurants opened.

While the figure was a slither below the 5% predicted by the Bank of England last week, it was in line or even marginally ahead of consensus.

Indeed, the commentary around the latest GDP print was largely upbeat.

“These figures knock fears over the impact of the delta variant on the head. Consumers are continuing to spend, regardless,” said Steve Clayton, a fund manager at Hargreaves Lansdown.

Topping the Footsie leader board early on was Aviva (LON:AV.), which rose 2.3% after announcing plans for to return GBP4bn to shareholders.

The losers were led by Rio Tinto (LON:RIO), down 6.6%, after it began trading without entitlement to a fairly hefty dividend payment.

Dropping down to the mid-caps, Cineworld (LON:CINE) led the field after a better-than-expected performance in its financial fourth quarter, saying it also exploring a potential US listing.

“Cineworld is dependent on blockbuster films enticing customers back to the cinema. It must also pivot to new revenue streams: less Hollywood, more arthouse and alternative content,” said Harry Barnick, analyst at Third Bridge.

6.50 am: Footsie called higher

The FTSE 100 is set to start Thursday’s trading in positive territory following yesterday’s upbeat trading.

CFD firm IG Markets sees the blue-chip benchmark up around 9 points, making the price of 7,193 to 7,196 with just over an hour to go until the open.

Equity markets are being supported by last night’s inflation data in the United States, where core CPI cooled from recent months with the rate of inflation seen slowing from the rampant levels seen in recent months – keeping with Federal Reserve expectations. Today, comes US PPI followed by weekly jobless stats.

In the UK, significantly, will be the second quarter GDP print which will be somewhat instructive in regards to Britain’s ongoing economic recovery coming out of pandemic.

“While there are some who say that today’s numbers are very much rear-view mirror stuff, the GDP numbers will still represent the foundation for the recovery from the Q1 slump and lockdown, and as such is an important base for the levelling off of growth that we can expect to see in Q3 and the rest of the year,” said Michael Hewson, analyst at CMC Markets.

“There will inevitably be bumps along the way when we get to see the Q3 numbers three months from now, with the various supply chain and “pingdemic” disruptions, but how well the economy has rebounded in Q2 will determine how solid the foundations are for the second half of this year.

“It will also offer important clues as to the possible direction of monetary policy over the course of the next few months.”

Last night on Wall Street, the Dow Jones climbed 220 points or 0.6% to close at 35,484 whilst the S&P 500 nudged 0.25% higher to end the session at 4,447.

The Nasdaq meanwhile slipped 0.16% lower to 14,765. Elsewhere, the small-cap Russell 2000 index moved up 0.49% to 2,250.

In Asia, the major indices were in red. Japan’s Nikkei edged just a sliver lower, to trade at 28,046.

Hong Kong’s Hang Seng dropped 0.53% to 26,518 and the Shanghai Composite dipped 0.2% to 3,525.

Around the markets

The pound: US$1.13869, up 0.01%

Gold: US$1,752, down 0.01%

Silver: US$23.46, down 0.32%

Brent crude: US$71.43 up 1.1%

WTI crude: US$69.28, up 1.4%

Bitcoin: US$45,115, down 1.46%

Ethereum: US$3,132, down 1.7%

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were lower on Thursday as South Korea reported a new daily record of more than 2,200 COVID-19 cases on Wednesday.

Melbourne extended its lockdown by another week as Australia struggles to contain the highly infectious delta variant.

The Shanghai Composite in China fell 0.23% and Hong Kong’s Hang Seng index dipped 0.57%

In Japan, the Nikkei 225 dropped 0.12% while South Korea’s Kospi declined 0.48%.

Shares in Australia fell, with the S&P/ASX 200 trading 0.13% lower.



Please enter your comment!
Please enter your name here