- FTSE 100 ends 25 points higher, just below a new one-year high
- US stocks inch back after reaching record highs at open
- Summer lull underway as earnings data deluge slows
5.00pm: No fear on Friday the 13th
The FTSE 100 index ended with solid gains on Friday, recapturing the 7,200 level once more after a week moving around that psychologically-key level, helped by a fresh record push on Wall Street, although that was stalling by London’s close.
At the bell, the UK blue-chip index was ahead 25.48 points, or 0.4% at 7,218.71, albeit below the day’s new one-year high of 7,224.46 but above the session low of 7,193.13.
On Wall Street, around London’s close, the Dow Jones Industrials Average was 35 points, or 0.1% firmer at 35,535, while the broader S&P 500 also added 0.1%, both having reached new highs at the open. However, the tech-laden Nasdaq Composite was 0.03% lower.
Chris Beauchamp, chief market analyst at IG, a global leader in online trading commented: “Fresh records for the Dow and S&P 500 in the opening minutes of trading this afternoon have confirmed the bullish trend of the past few days, with US indices undeterred by a drop in consumer confidence to levels not seen in almost a decade.
“It has been a volume-light week for equity markets despite the excitement surrounding all the US price data we’ve received this week, but the bulls have come out on top once again, shrugging off fears of a Friday the 13th-related hiccup.
“Despite the rise in Delta-variant case numbers, the rebound in earnings on both sides of the Atlantic continues to provide a reason to invest in stocks, record highs for major indices on the two continents being taken as a sign of strength and not irrational exuberance.”
Beauchamp added: “While the FTSE 100 has made headway today, briefly touching its highest level since February 2020, it continues to lag behind on a longer-term view, a victim perhaps of ongoing concerns that the UK’s recovery is still far from complete, and also of being overlooked as fund managers concentrate on the wider variety of investments available in the US and combined European geographies.
“Those hoping for a pause on any discussion of inflation next week will be disappointed, thanks to CPI numbers from the UK, which will no doubt bring the BoE’s policy back into focus, and also the latest set of Fed minutes, which provide something with which to tide the market over while it awaits the Jackson Hole meeting.
“Post-US CPI dollar weakness has entered high gear this afternoon, as the dollar index drops back from the 93 level for the third time this year, helping to give gold a further lift as it recovers from Monday’s volatility and providing some measure of support for an oil price that is struggling to recover the bullish momentum it lost in June and July.”
3.45pm: Slowing into the weekend
Global stock markets have lost a little of their mojo in the past hour, with the FTSE 100 unable to hold onto all its earlier ground and US stocks only inching northwards on the opening bell.
Wall Street is on course to end the week near record highs, though the Dow Jones Industrial Average had deflated back to the flatline after an hour of trading, while the S&P 500 and Nasdaq Composite were both up less than 1%.
Market analyst Craig Erlam at Oanda said Friday trading was “likely to be rather uneventful” as we make our way into the weekend.
“They’ve been quietly putting together a great run over the last few weeks which has seen them not only deliver strong gains, but hit new records on a daily basis. Good earnings and a strong vaccine program that has enabled looser restrictions, while reducing the threat of them being strictly reimposed later in the year are driving the gains.”
He said going into a quieter period could lead to some profit-taking in the coming weeks.
“The next couple of weeks could be all about delta and how well China, in particular, and others deal with the spread. China has shown its zero Covid approach has worked before and is not changing course, despite other countries taking a more relaxed approach thanks to the vaccines.”
China today closed a terminal at the Ningbo-Zhoushan port – one of the busiest in the world – after a single positive case.
Erlam said this showed how seriously Beijing is taking all measures to contain breakouts.
“What that means for the rest of the world is more supply disruptions in the months ahead, which could means more bottlenecks and higher costs.
“But as central banks have shown, these are short-term problems with short-term price implications and while they may exacerbate headline inflation data further, they are willing to look beyond them. Although I’m sure from a markets perspective, it will add another layer of uncertainty and unease.”
This comes as fund manager Eugene Barbaneagra told Proactive that overhyped growth stocks in markets across the world are heading for a reversal akin to the ‘dotcom’ market crash of the early 2000s – read more here.
In crypto news, Bitcoin is having another run at the $47,000 level today after a shallow pullback.
“The rally is looking perfectly healthy regardless of whether we see a breakout or a pullback,” says Erlam.
Elsewhere Cardano, the world’s fourth-largest crypto by market cap, is trading around a three-month high as rumours swirled that the network could be on the verge of enabling smart contract functionality (read more on Cardano here).
2.17pm: Wall Street futures mixed
Stocks worldwide are continuing on the front foot, though Wall Street looks set for a mixed start, with Nasdaq futures pointing to a flat open but the Dow Jones poised for a fourth straight record high.
The FTSE is up 27 points at 7220, while the FTSE 250 is pushing new record highs, up 90 points to above 23,836.
“Sentiment towards risk assets remained supported on both sides of the pond this week, with stocks in Europe doing particularly well,” says Fawad Razaqzada, market analyst with ThinkMarkets.
“For the first time ever, the DAX breached 16,000 on Friday as investors continued to pour into European names, while the ongoing rally on Wall Street showed no signs of abating either.
“Investors have continued to dismiss concerns over delta variant of covid, inflation, as well as valuation worries and other risks. The latest price indicators pointed to further pickup in inflation.”
Although there was mixed US inflation and crude oil prices rebounded despite oil agencies lowering their demand projections, Razaqzada noted that none of these risks have been big enough to cause sentiment to turn sour towards stocks, “even if it means we are now a lot closer to the start of asset purchases reduction by the Federal Reserve”.
Attention is turning towards next week now, where there will be a few big names reporting in the UK, plus official unemployment numbers, which comes after the Institute of Directors today warned that around 44% of UK businesses are experiencing staff shortages.
Given the recent rally for global equities, Razaqzada reckons we will see further follow-through in bullish momentum in the early parts of next week.
“There is the potential for some of the underperforming European equity benchmarks such as the FTSE and Ibex to play catch up with the racier indices such as the DAX and S&P 500. Investor sentiment will remain overall positive for as long as central banks have their backs. The Fed still thinks that price pressures are temporary and that it will not tighten its belt too fast and too tight to cause a slowdown in the recovery. Similarly, the likes of the ECB, BoE and BoJ are all keeping their respective asset purchases programmes at full throttle for now.”
12.03pm: FTSE near pandemic highs
New upwards momentum takes the Footsie close to its 17-month high, or in other words, the highest since before the worries about the coronavirus pandemic first slammed into the market last February.
Up 29 points or 0.4% to 7,222, the index is testing the 7224 high reached earlier in the session.
These highs come as investors continue to hold record levels of equities and pump money into “value trades”, especially stocks in the financial sector and in Europe, according to this week’s Flow Show report from Bank of American Merrill Lynch.
BoAML clients increased their allocation to equities up to a record high of 65%, with cash flowing into financial and basic materials shares during the past week, the weekly statistics showed.
BofA Flow Show:
“week of rotation back to “value”…largest inflows to financials in 10 weeks ($2.6bn), to Europe ($1.5bn) & materials ($0.3bn) in 8 weeks, smallest inflow to tech in 7 weeks ($0.4bn), largest outflow from EM debt funds ($0.3bn) in 7 weeks.”
— Newsquawk (@Newsquawk) August 13, 2021
The US$1.5bn of investment into European stocks being the largest inflow in eight weeks, Merrill calculated, while the financials sector has attracted US$2.6bn of inflows – the sector’s largest flow in ten weeks.
Looking at US stocks, the market is expecting a more muted close to the week, albeit still close to the new record highs hit overnight as investors cheered some benign US data and a blockbuster round of corporate earnings.
Futures for the Dow Jones Industrial Average were up less than 0.1% after hitting a record high in the previous session, while futures for the broader S&P 500 were roughly flat with the index having reached its 47th all-time closing peak of 2021 on Thursday. Futures for the tech-laden Nasdaq-100 were also up less than 0.1%.
Stocks have moved higher in thin summer trading thanks to solid earnings growth from some of the biggest US companies, even as worries over the coronavirus (COVD-19) Delta variant threaten to dull the economic recovery.
One risk is that, after recent benign jobs and inflation data, the Federal Reserve withdraws stimulus measures faster than investors are expecting. The latest data will see the release on Friday of the University of Michigan’s first gauge of consumer sentiment for August, which could show if rising COVID-19 cases have knocked consumer confidence.
Among individual stocks, Walt Disney Co is trading 5.5% higher at US$189 in pre-market trading after beating Street estimates for its third-quarter figures thanks to the reopening of theme parks and stores.
This is “an important turning point”, said Nicholas Hyett, analyst at Hargreaves Lansdown. “Global lockdowns unsurprisingly saw losses rack up in those parts of Disney that rely on packing thousands of guests into theme parks and cinemas all around the world. Fortunately, draconian cuts in production spend kept Disney’s mature, unglamorous, but suddenly vital, broadcast and cable TV arms in the black and that’s carried it through.”
AirBnB Inc is heading the other way as it reported a 300% spike in quarterly revenues but warned about expected volatility from the coronavirus Delta variant.
10.53am: FTSE holds higher
The FTSE is being helped by the pound slipping to its lowest point in almost three weeks against the dollar, at 1.3804.
Weaker sterling helps London’s blue chips as so many of them are multinationals that earn most of their money overseas.
A disappointing week for the pound comes in spite of the strong rebound in the UK economy confirmed in the GDP figures yesterday, though Michael Hewson at CMC Markets pointed out that there were pockets of weakness in the numbers, notably in construction output, as well as the significant weakness in industrial production, with the “lumpy recovery” looking set to continue into the third quarter.
Michael Brown at Caxton FX said the decline today “appears to be a continuation of the modest dollar bull trend that appears to have embedded itself as a result of the market pricing a sooner than expected taper from the Fed”.
In company news, the biggest faller is Best of the Best PLC, which used to be best known for running competitions to win a sports car in airports and shopping malls.
A fortuitous move online resulted in business booming last year but the shares have collapsed 50% to 815p this morning after a profit warning on the back of a reduction in average weekly sales as people enjoy their refound freedoms and spend less time online playing competitions.
Another big faller is McColl’s Retail Group PLC after it raised GBP30mln in a heavily discounted placing to accelerate the roll-out of its store conversions to the Morrisons Daily format, which it says has been going very well and is “a transformational opportunity” amid the growth in the “food-led convenience” subsector.
9.34am: Footsie hits one-year high
London stocks remain in the green as they spring back from yesterday’s ex-dividend hit, with retail investor favourite Rolls-Royce Holdings top of the blue-chip leaderboard.
The Footsie earlier hit its one-year high, just above 7224. It’s lately slipped a bit, with a 22-point gain on the day to 7215.
It’s mid-cap sibling, the FTSE 250, is also on the up, continuing to hover around the new all-time high reached yesterday, up 40 points at 23,786.1.
One of those mid-caps not helping the index is Vectura Group PLC (AIM:VEC) after the board of the respiratory drug specialist seemed to have found the lure of Philip Morris’s cash too much and is recommending shareholders accept the cigarettes maker’s 165p per share offer, rather than the 155p from private equity group Carlyle.
Vectura’s directors, advised by JP Morgan Cazenove and Rothschild, were sent a strongly worded letter from groups including the Royal College of Physicians, Asthma UK and the British Lung Foundation raising ethical concerns about selling out to a tobacco giant.
They warned that the takeover would jeopardise Vectura’s “future commercial viability as a company dedicated to improving respiratory health”.
Elsewhere, says analyst Neil Wilson at Markets.com, “there is not a whole lot going on today and risk remains fairly muted as US 10yr yields hover around 1.34% and FX markets look reasonably calm”.
Exactly 50 years after President Nixon made the decision to close the gold window and end the Bretton Woods system of exchange rate management, gold bugs are enjoying further gains to US$1,760.
Wilson says notes this rise is in the wake of yesterday’s strong producer price inflation print in the US.
8.35am: Positive start
The FTSE 100 opened in positive territory as London’s traders ignored falls earlier in the day across Asia’s main markets.
The mood in the east was dampened by the spread of the Covid delta variant and a threatened regulatory clampdown by China.
In the Square Mile, it is expected to be a slow day. Certainly, corporate news flow has slowed to a mid-summer trickle, while trading volumes are set to be thin.
Against this backdrop, the Footsie opened 25 points higher at 7,217.94, while the FTSE 250 pushed further into record territory as it nudged 39 points higher to 23,786.23.
The morning’s big mover was Avon Protection (LON:AVON), which fell 18% in the early exchanges after the gas mask maker cut its revenue guidance due to supply chain bottlenecks.
Defence contractor Babcock (LON:BAB) sailed 5.5% higher after selling its consultancy business for GBP293mln.
6.50 am: Quiet end to the week predicted
On what is shaping up to be a quiet end of the week, London’s leading equities are set to open modestly firmer.
Spread betting quotes suggest the FTSE 100 will open 12 points heavier at 7,205 after a positive session yesterday on Wall Street.
Stateside, the Dow Jones put on 15 points at 4,461 and the S&P 500 rose 13 points to 4,461.
Asian markets are mixed this morning, with Japan’s Nikkei 22 points better at 28,037 and Hong Kong’s Hang Seng 189 points weaker at 26,329.
“It looks set to be a quiet day on the data front, with the only items of note being July import and export prices, and the latest University of Michigan Consumer Sentiment survey for August, along with the latest consumer inflation expectations surveys,” said CMC’s Michael Hewson.
Even thermal coal miners have to bang the ESG (environmental, social and governance) drum these days; perhaps more so than other companies.
Expect lots of commentary on how the company is very important to the local economy in the interim results.
Around the markets
- Sterling: US$1.3814, up 0.07 cents
- Gilt: 0.603%, up 2.72 basis points
- Gold: US$1,756.50 an ounce, up US$4.70
- Brent crude: US$70.86 a barrel, down 45 cents
- Bitcoin: US$45,262, up US$821
6.50am: Early Markets – Asia / Australia
Stocks in the Asia-Pacific region were mostly lower on Friday with shares of firms related to conglomerate Samsung declining after the firm’s heir was released from prison.
The Shanghai Composite in China fell 0.34% and Hong Kong’s Hang Seng index dipped 0.91%
In Japan, the Nikkei 225 gained 0.07% while South Korea’s Kospi slumped 1.33%.
Shares in Australia rose, with the S&P/ASX 200 trading 0.48% higher.