- FTSE 100 closes nearly 12 pts down
- Burberry falls on Asia economy worries
- Philip Morris buys 22% of target Vectura
5pm: FTSE 100 closes lower
FTSE 100 closed the midweek session lower as the mood was muted on both sides of the Atlantic ahead of the publication of the US central bank minutes.
Britain’s blue-chip index closed nearly 12 points lower, or 0.16%, at 7,169. Conversely, the more UK-focused index FTSE 250 added around 142 points at 23,836.
Over on Wall Street, the Dow Jones Industrial Average shed around 33 points at 35,310, the S&P 500 shed around five points at 4,443. The Nasdaq lost nearly eight points at 14,647.
Craig Erlam, market analyst at Oanda, noted that it had been a day of “caution” in the markets.
“Given how much Fed commentary we’ve had over the last couple of weeks, I struggle to see the minutes offering much of value for the markets. Even the most dovish members of the Fed have come around to the idea of tapering this year, with Neel Kashkari even accepting it’s coming either the end of this year or early next,” he said.
Looking at UK economic data, he also noted: “The UK inflation data fell short of expectations on Wednesday, rising only 2% y/y, compared with forecasts of 2.3% and down from 2.5%. Despite what the headline number suggests, this is not a sign of price pressures in the UK normalising, rather a temporary blip that will reverse course in the coming months.”
3.59pm: Builders rise after UK housing figures
Leading shares continue to hover in negative territory ahead of the minutes of the latest Federal Reserve meeting, with investors keen for clues as to when the central bank might start tapering its bond buying programme.
The FTSE 100 is down 24.31 points or 0.34% at 7156.8 despite a lower than expected UK inflation rate. The more domestically focused FTSE 250 has edged up 0.5%.
Miners are dominating the fallers in the blue chip index.
BHP PLC is down 6.64% after unveiling plans to move its primary share listing to Australia.
Michael Hewson, chief market analyst at CMC Markets UK, said: “The biggest drag on the FTSE100 today has been BHP Group as its decision to scrap its London dual listing has relegated it to the bottom of the index, prompting any index trackers to start the process of offloading some of their holdings. The rest of the sector is also lower on the back of weaker copper prices which appear to be heading back towards their June lows.”
Burberry PLC has lost 3.95% on concerns about the economy in its key Asian market.
Hewson added: “Comments from Chinese state media that suggested that China was looking at forms of wealth distribution also weighed on sentiment.”
Housing companies have been buoyed by the strongest price growth for 17 years according to the Land Registry’s update for June.
3.34pm: Wise move
The business has filed a registration statement for an American Depositary Receipt programme, with a view to trading on the over-the-counter market from 8 September.
One ADR will represent one underlying ordinary share.
Wise shares are up 1.46% at 1004.5p.
2.56pm: Target declines after results
Following the US housing starts decline and ahead of the latest Federal Reserve minutess, Wall Street has opened lower, as expected.
The Dow Jones Industrial Average is down 100.65 points or 0.28% while the S&P 500 has lost 0.18% and the Nasdaq Composite 0.11%.
In a tale of two retailers, Target has fallen 1.45% and Lowe’s jumped 8.12% following their latest figures.
(To be fair, Target shares have climbed around 44% so far this year so a bit of profit taking is not unusual).
Back in the UK, the FTSE 100 is down 33.72 points or 0.47% at 7147.39.
2.05pm: US housing starts hit four month low
US housing starts have come in slightly worse than expected, helping Wall Street futures edge lower.
They fell 7% to a four month low in July , not helped by a continuing shortage of lumber and workers.
But building permits climbed 2.6% due to a pickup in applications for multifamily dwellings.
US Housing Starts Jul: 1534K (est 1600K; prevR 1650K; prev 1643K)
US Housing Starts (M/M) Jul: -7.0% (est -2.6%; prevR 3.5%; prev 6.3%)
— LiveSquawk (@LiveSquawk) August 18, 2021
1) Housing starts down, permits up, showing more homes want to be built, but getting them built with constraints on land, labor and lumber is tough. We’re still well-above trend, but below what’s needed to satisfy demand and cool hot home price increases. pic.twitter.com/qYhqFuDOPL
— Robert Frick (@RobertFrickNFCU) August 18, 2021
On Wall Street, the Dow Jones Industrial Average is now indicated 0.28% lower, the S&P 500 down 0.2% and the Nasdaq Composite 0.15% lower.
In the UK, the FTSE 100 is down 24.58 points or 0.34% at 7156.53.
12.20pm: US housing starts and Fed on investors’ minds
Wall Street is set for a mixed open, following the previous session’s retreat from recent record highs, as investors await the release of minutes from the Federal Reserve’s July policy meeting.
Futures for the Dow Jones Industrial Average were 0.16% lower, while S&P 500 shed 0.03%. The tech-heavy Nasdaq was the exception, indicated 0.16% higher.
The notes from the latest Fed meeting will offer more indications of when the US central bank may begin scaling back easy-money policies that were adopted at the start of the pandemic after some recent benign economic data.
Before that come US housing starts figures, which are forecast to show that new-home construction cooled in July. Builders have ramped up activity in response to robust demand, but have run up against rising prices for materials and difficulty attracting enough workers.
Before that retailer Target has beaten expectations with its second quarter results, but its shares are still down 1.83% in pre-market trading.
But another retailer Lowe’s is up 2.88% following its figures.
Back in the UK, the FTSE 100 is off its worst levels but is still down 20.88 points or 0.29% at 7160.23.
11.33am: Mining shares subside
These latest housing figures have perked up property shares.
This has done little to help the FTSE 100, however, which remains in negative territory and is now 33.04 points or 0.46% lower at 7148.07.
Miners are leading the way lower, with BHP PLC down 4.39% as it prepares to move its primary listing to Australia, Rio Tinto PLC (LSE:RIO) is 1.84% lower, Antofagasta PLC (LSE:ANTO) has fallen 1.79% while Anglo American has dropped 1.41%.
10.27am: House prices surge
Britain’s housing boom continues as buyers snapped up properties ahead of the phasing out of the stamp duty holiday.
The latest official figures from the Land Registry – albeit rather belated compared to building society surveys and the like – show a 13.2% surge in prices in the year to June, up from 9.8% in May.
This is the strongest annual growth since November 2004.
Average prices increased by 4.5% between May and June this year to GBP265,668, compared with an increase of 1.4% during the same period in 2020.
House price growth was strongest in the North West where prices increased by 18.6% in the year to June 2021. The lowest annual growth was in London, where prices increased by 6.3% in the year to June 2021.
George Franks of estate agents Radstock Property said: “Price growth [is] a result of the stamp duty holiday, an egregious lack of homes for sale, ridiculously cheap mortgages and the new homeworking culture, which has triggered a rush of transactions.”
Since June the pace has slackened however.
Lucy Pendleton at estate agents James Pendleton said: “As soon as July arrived we entered a very different market, and some of this exuberance will have to unwind. London is probably most protected from that eventuality. Prices are still approximately double the national average in London but the capital hasn’t had its running shoes on like the rest of the country.”
10.14am: Philip Morris snaps up 22% of target Vectura
US tobacco giant Philip Morris International has tightened its grip on bid target Vectura PLC, the UK asthma inhaler manufacturer.
The GBP1.1bn deal is controversial, and health experts have urged shareholders not to back the bid.
But some seem to have ignored those concerns, with Philip Morris announcing it has bought 22.61% of Vectura in the market at the offer price of 165p.
It is also on the look out to buy more.
Vectura shares are up 0.43% at 164.7p.
9.42am: Leading shares continue to decline
Despite some optimistic noises there are concerns about the availability of labour as well as rising raw material costs, and this has helped send its shares 2.96% lower.
Elsewhere, BHP PLC helped lift the leading index on Tuesday and now it is helping pull it lower.
In amongst a number of announcements it indicated it would move its primary listing to Australia, which has led to some selling in the UK and its shares are down 2.57%.
AJ Bell investment director Russ Mould said: “Mining firm BHP proved to be a drag on the index after confirmation yesterday that its corporate restructuring would mean an exit from the FTSE 100 as the primary listing for the shares goes to Australia.
“This move will mean products which track the FTSE 100 and funds with investment policies barring them from buying shares with their main listing overseas will have to exit their shareholding.”
Overall the leading index is now down 30 points or 0.42% at 7151.11, close to its low for the day.
9.17am: Markets await Fed minutes
The minutes from the latest Federal Reserve meeting are due later, and they will be scoured for any suggestions that the central bank plans to ease off its financial support programme.
Fed chief Jerome Powell gave few clues at a pubic meeting on Tuesday, but there have been various comments from other officials since the last get together suggesting the Fed is considering tapering its US$120bn a month bond buying.
Michael Hewson, chief market analyst at CMC Markets UK, said: “Powell did admit that discussions had begun on the mechanics of scaling back bond purchases when the time came, so these discussions might be illuminating..
“It is clear from recent comments from the likes of permanent board members Christopher Waller, as well as vice chair Richard Clarida that the Fed is now much nearer to tapering now than it has been for some time and that it could come as soon as October, jobs data permitting.”
Ahead of this, US markets look like drifting lower at the open.
And the early enthusiasm on the UK market has now waned, with the FTSE 100 dipping 15.81 points or 0.22% to 7165.3 on further consideration of the inflation figures.
8.29am: Rate could rise again shortly
Much of the inflation fall is due to the effect of last year’s price rises at the start of the pandemic dropping out of the comparison.
And given a recent resurgence in prices, some economists believe the rate is likely to rise again in the short term.
James Smith at ING said: “This feels remarkably like the calm before the storm. Indeed much of the surprisingly sharp deceleration from 2.5% to 2% can be put down to things like clothing prices, and to a lesser extent, household goods…
“These are temporary setbacks, and there’s little doubt that headline CPI will go well above 3% later this year – and in fact, the next set of data may confirm we got close in August. It’s not difficult to see inflation coming fairly near to the Bank of England‘s forecast of 4% in around November.”
Back in the market, the FTSE 100 is still ahead, but not by much. It is currently up just 4.77 points at 7185.88.
British Airways owner International Consolidated Airlines PLC is up 0.94%, recovering some of its losses caused by concerns about the spread of the Delta variant.
But after making gains on Tuesday amid a raft of announcements, miner BHP PLC is the leading faller, down 0.95%.
8.11am: UK markets move ahead
Leading shares have opened in positive territory following the better than expected UK inflation numbers.
The FTSE 100 is up 15.13 points or 0.21% at 7196.24.
Meanwhile the mid-cap FTSE 250 has made a similar early gain, up 52.37 points or 0.22% at 23,745.9.
7.53am: Falls in clothing and footwear help limit price rises
UK inflation slowed more sharply than expected in July, according to the latest government figures.
The annual rate for the consumer price index fell to 2% from 2.5% in July, lower than the 2.3% rate expected by the City and now bang on the Bank of England‘s target.
This is the first easing of inflation since February.
The monthly rate was unchanged following a 0.4% rise in June.
Clothing and footwear, and a variety of recreational goods and services made the largest downward contributions.
The biggest upward pressure came from transport, including increased petrol costs and price rises for second-hand cars, compared with falls a year ago.
Jay Mawji, managing director of the global liquidity provider IX Prime, said: “Britain’s brewing inflationary storm has suddenly, unexpectedly, eased.
“The question now is whether this is a temporary lull or a total let-off for the Bank of England.
“With annual CPI now bang on its target of 2%, the Bank is no longer under any pressure to raise interest rates to tame inflation.
“In any case the Bank’s ratesetting Monetary Policy Committee had previously made clear it was willing to tolerate above target inflation while its stimulus measures fired up the UK economy.”
Erez Katz, chief executive of market analysts Neuravest Research, said: “The brakes have been slammed on inflation in the UK. This will support the UK’s economic recovery and could, in large part, be due to widespread easing of supply chain constraints and the passing of an initial spending boom following the nation’s unlocking.
“It’s increasingly looking like the UK won’t necessarily echo the US’s inflationary roar, which is already running at well over twice the pace.2.
6.40am: Leading shares set for bright start
The FTSE 100 is expected to open higher on Wednesday ahead of UK inflation data.
Today’s UK CPI numbers for July are expected to see a slight fall to 2.3%, however the City reckons they could also move higher, probably driven by the delayed economic reopening that was deferred from June.
A lot of retailers are already nudging prices higher, as they look to claw back lost revenue from the various lockdowns, while wages growth is already much higher than the headline CPI number if yesterday’s earnings data is any guide, even when stripping out base effects.
“After yesterday’s better than expected unemployment and wages numbers, today’s UK CPI numbers could heap further pressure on UK policymakers to look at tightening monetary policy in the coming months, as financial markets start to price in the prospect of rate hikes sometime within the next 12 months,” said Michael Hewson at CMC Markets.
“The Bank of England already expects that UK CPI could well head towards 4% by the end of the year, even if most MPC members appear to think it will be temporary in nature, and while today’s numbers aren’t expected to see an increase, that doesn’t mean it won’t happen given what’s happening with factory gate prices, which are still increasing, and are up close to 10%.”
“There are signs of some dissent to this wider transitory view with external member Michael Saunders dissenting on the bond buying component of the recent policy decision, with some signs that Deputy Governor Dave Ramsden might not be too far behind him.”
London’s leading index is called 18 points higher at 7,199.
6.50am: Early Markets – Asia / Australia
Stocks in the Asia-Pacific region were mostly higher on Wednesday as the Reserve Bank of New Zealand kept interest rates unchanged at 0.25% despite expectations of a hike.
The Shanghai Composite in China gained 0.75% and Hong Kong’s Hang Seng index surged 0.84%
In Japan, the Nikkei 225 rose 0.71% while South Korea’s Kospi jumped 0.83%.
Shares in Australia dipped, with the S&P/ASX 200 trading 0.04% lower.