- FTSE 100 closes higher
- Market shrugs off US durable goods to focus on Jackson Hole
- US stocks up with tech gains muted
5pm: FTSE closes higher
The FTSE 100 index ended higher on Wednesday with a strong US durable goods order failing to provide much direction.
At the close, the UK blue-chip index was 24 points, or 0.34% higher at 7,150, above the session low of 7,121 and a touch below the peak of 7,152.
The more UK plc focused FTSE 250 added 100 points, or 0.42% to 23,986, a new closing high.
“In one sense, the rise in orders provides a positive narrative for the US economy, and hence for US stocks, but inevitably the data has been fed into pre-Jackson Hole movements, with some no doubt expecting the continued strength of the US economy to lead to a more hawkish view at this week’s vital symposium,” Chris Beauchamp, chief market analyst at IG said.
“But it is too easy in these quiet August days to ascribe a narrative to movements that are broadly about window-dressing and position-trimming, rather than any attempt to guess the tone and direction of Powell’s speech this week.”
On Wall Street by London’s close, the Dow Jones Industrials Average was 108 points, or 0.31% higher at 35,474, with the broader S&P 500 index ahead 0.27%. while the tech-laden Nasdaq Composite gained 0.09%.
3.58pm: Banking shares support market
It has been mostly a waiting game for much of the day, as investors hold their fire ahead of the Jackson Hole meeting of central bankers later this week.
The holiday feeling has not helped get the adrenalin rushing either.
So the FTSE 100 has moved within a range of just 30 points so far and is currently up 18.27 points or 0.26% at 7144.05.
There is more excitement in the FTSE 250, which reached a new peak of 24,058 and is currently up 0.5% at 24,005.67.
Its rise has been helped by Wood Group PLC, up 7.59% on further consideration of Tuesday’s results, and Marks and Spencer PLC, up 5.68% after it also received a push from Deutsche.
Meanwhile the US markets are now all marginally in positive territory. The Dow Jones Industrial Average is up 0.21%, the S&P 500 is 0.13% better and the Nasdaq Composite has edged up 0.014%.
2.50pm: US markets uncertain ahead of central bank meeting
Wall Street has turned in a more mixed performance than expected at the open.
The S&P 500 has ticked up 0.02% and the Nasdaq Composite has climbed 0.21%, the former hitting a new peak despite the marginal movements.
But the Dow Jones Industrial Average has dipped 0.12% despite forecasts of a slight increase.
In the UK, the FTSE 100 is up 18.53 points or 0.26% at 7144.31.
2.08pm: US durable goods dip but beat forecasts
Over in the US, and the durable goods orders came in better than expected.
The July figure showed a 0.1% fall compared to expectations of a drop of 0.3% to 0.5%.
US Durable Goods Orders Jul P: -0.1% (est -0.3%; prevR 0.8%; prev 0.9%)
US Durable Goods Ex-Transportation Jul P: 0.7% (est 0.5%; prevR 0.6%; prev 0.5%)
— LiveSquawk (@LiveSquawk) August 25, 2021
This follows two months of rises, although the June figure was revised down from a gain of 0.9% to 0.8%.
The July dip came as aircraft orders dropped sharply, and without transportation in the figures, they showed a 0.7% increase.
New orders for durable goods edged 0.1%, pulling back from a record $257.6 billion in June to $257.2 billion in July. Nondefense aircraft & parts orders, which can be highly volatile from month to month, plummeted 48.9% in July, dragging down transportation equip. sales by 2.2%. pic.twitter.com/hbwxhRb8nU
— Chad Moutray (@chadmoutray) August 25, 2021
This has done little to impact Wall Street, with all three main indices expected to show marginal gains, albeit slightly less than before figures came out.
12.44pm: Activist raises stake in Aviva
Cevian revealed a 4.95% shareholding in June and said it wanted Aviva to return GBP5bn of excess capital to shareholders.
Earlier this month the insurer said it would return cash, but indicated a figure closer to GBP4bn. Cevian said that was “a good start” but was not enough “to address the overcapitalisation” of the company.
Aviva shares are up 0.5p at 419.9p.
12.23pm: Investors hold fire ahead of central bank get-together
US stocks are expected to just tick higher on Wednesday, consolidating around record levels with the S&P 500 index having notched up its 50th record close of 2021 and the Nasdaq Composite closing above the 15,000 level for the first time on Tuesday.
Futures for both the Dow Jones Industrial Average and the S&P 500 ticked up by less than 0.1%, while the tech-laden Nasdaq-100 futures edged up 0.1%.
Investors are awaiting fresh insights from Federal Reserve chairman Jerome Powell to be delivered virtually at the central bank’s Jackson Hole symposium on Friday. The market is undecided over whether the Fed will proceed with tapering its bond purchases in coming months given an uptick in coronavirus (COVID-19) Delta variant cases and some signs that the economic recovery is slowing.
Recent regulatory approval for Pfizer (NYSE:PFE) and BioNTech’s COVID-19 vaccine has spurred some businesses to impose vaccination mandates, potentially boosting the pace of the US rollout. However, there are concerns over the duration of the efficacy COVID-19 vaccines which could also cause the global economic recovery to falter.
On the data front, durable goods figures for July are due at 8.30am ET which will indicate the current demand for the likes of cars and domestic appliances. Economists expect new orders for products meant to last at least three years will decrease by 0.5%, seasonally adjusted, from June.
On the earnings front, Salesforce.com is among the companies scheduled to report after the market close on Wednesday.
Back in the UK the FTSE 100 is now up 10.41 points or 0.15% at 7136.19.
11.47am: Clothing companies boosted by Deutsche recommendations
In a report looking at the European clothing market, it began coverage of the company with a buy recommendation and 5400p price target.
In the market ASOS has added 72p or 1.79% to 4099p.
Deutsche analysts said: “[We prefer] growth companies which have adapted to changing consumer habits. We prefer online versus offline, marketplace versus mono-brand retail and believe platform monetisation is key for profit growth.”
Back with the FTSE 100, and it is drifting along quite happily, up 14.12 points or 0.2% at 7139.9.
The 250 is hovering near its highs for the day, up 0.62% at 24,033.15.
10.53am: Utilities and Sainsbury among blue chip fallers
Among the day’s FTSE 100 fallers, J Sainsbury PLC (LSE:SBRY) continues to lose a little of the gains it made on Monday, when its shares soared 15% adding GBP1bn to its value on talk of a possible private equity bid.
Now it is down 1.18%, the biggest decline in the leading index.
And although it is not a particularly risk-on day – too quiet for that – defensive stocks are out of favour, particularly utilities.
But overall the leading index is still in the green, up 12.89 points or 0.18% at 7138.67.
Meanwhile the FTSE 250 has reached another new peak of 24,021, up around 0.55%.
9.48am: New milestone for mid-caps
The domestically focused FTSE 250 has again hit a record high.
It has climbed 0.43% to 23,991, helped by positive performances from recovery stocks. Cineworld PLC is up 2.15% while property company Shaftsbury PLC is 2.11% better after this week’s update showing a revival in London’s West End.
Rank PLC has climbed 2.9%. The bingo hall and casino operator is in line for a windfall of around GBP80mln as a refund on VAT paid on gambling machines. Judges last month ruled in favour of the company, and now the UK tax authorities have decided not to appeal the tribunal ruling.
The latter two are helping support the leading index, which is up 7.85 points or 0.11% at 7133.63. A dip in the pound is another positive factor.
AJ Bell financial analyst Danni Hewson said: “Weaker sterling boosts the relative value of the overseas earnings which dominate the FTSE 100, though the more domestic FTSE 250 was also moving higher too, reaching a new record level early on.”
9.31am: German business confidence dips
Germany’s IFO business climate indicator dropped for the second month in a row in August to 99.4, below expectations.
German IFO Expectations Aug; 97.5 (est 100.0; prevR 101.0; prev 101.2)
German IFO Current Assessment Aug: 101.4 (est 100.8; prev 100.4)
German IFO Business Climate Aug: 99.4 (est 100.4; prevR 100.7; prev 100.8)
— LiveSquawk (@LiveSquawk) August 25, 2021
Commenting on the economy’s current loss of momentum, Carsten Brzeski at ING said: “There are several possible explanations….Just think of the floods, fears of the Delta variant, political and policy uncertainty or supply chain frictions.
“However, the easiest explanation is probably simply the fact that optimism overshot in the spring and that some kind of realism has returned.
“Remember that the surge in sentiment indicators in June was not entirely matched by strong hard data…
“Consequently a levelling off of leading indicators, still at relatively high levels, is not yet a reason to be overly concerned.
“However, a leveling off of GDP growth rates in the second half of this year would imply that the German economy will not return to pre-crisis levels this year but only in early 2022.”
Germany’s DAX has hardly reacted to the news, up just 0.05%.
Meanwhile back in the UK the FTSE 100 is currently holding on to its early gains, slight though they may be. It is ahed by 9.18 points or 0.13% at 7134.96.
Neil Wilson at Markets.com said: “It’s a pretty flat though mildly positive start to trade in Europe again after a decent handover from Asia, whilst Wall Street again registered fresh all-time highs. The S&P 500 hit a record closing high, advancing 0.15% for a fourth-straight day of gains, led again by a strong showing for energy stocks as oil rallied for a second day, whilst reopening stocks also did well.”
8.37am: Strange changes for leading index
There will probably never be a FTSE 100 appearance as short lived as Thungela Resources which – for technical reasons – lasted a week in the leading index after being spun off from Anglo American PLC (LSE:AAL).
But two companies which are predicted to join the blue chip index at the next quarterly reshuffle on 1 September could also soon exit.
FTSE Russell, which compiles the index, reckons that on current prices both Morrison (Wm) Supermarkets PLC and Meggitt PLC (LSE:MGGT) are set to join at the expense of ITV PLC (LSE:ITV) and Weir Group (LSE:WEIR) PLC.
But both are the subject of takeovers and therefore may not last long.
Richard Hunter, head of markets at interactive investor, said “The impending FTSE100 reshuffle is shaping up to be an unusual situation, with two companies currently in the driving seat for inclusion in the index likely to be short-lived promotions.
“William Morrison Supermarkets and Meggitt have both seen their share prices soar due to takeover situations and at current prices would both be promoted. Morrisons have been the subject of a bidding war which has seen its price rise by 62% over the last three months, with private equity firm Clayton, Dubilier & Rice in pole position to win the race for Morrisons and therefore see the shares delisted. Similarly, aerospace company Meggitt shares have risen by 71% over the last three months after approaches from both Parker-Hannifin and TransDigm Group. Whichever company ends up with control of Meggitt would result in the shares being removed from the premier index.
“At current share prices, the two stocks making way for Morrisons and Meggitt would be ITV and Weir Group (LSE:WEIR). ITV shares have dropped by 11% over the last three months and removal from the index would follow a previous relegation in September 2020, followed by promotion back into the index in June. Engineer Weir Group (LSE:WEIR) have also suffered a dip of 11% over the last three months and relegation would also represent a short stay in the premier index, having been promoted in March.”
FTSE Russell has now decided its nationality has been reassigned from the UK to the Netherlands, which makes it ineligible for the FTSE UK indices. Dechra Pharmaceuticals is set to take its place.
Hunter said: “In another unusual development, FTSE Russell have concluded that the shares of Just Eat Takeaway will be removed from the FTSE100, having reassigned the company’s nationality from the UK to the Netherlands. This in turn would lead to the promotion of veterinary pharmaceutical business Dechra Pharmaceuticals, not currently eligible for inclusion at 96th in the table of largest companies (normally a company needs to be above 90th to qualify) but as the next highest ranking FTSE250 company, they would be promoted to replace Just Eat.”
Just Eat shares do not seem to mind and are up 0.66%.
UK nationality or not, the company has just announced it will create 1,500 jobs in Sunderland.
8.20am: FTSE defies downbeat predictions
A combination of holiday time and investors keeping their powder dry ahead of the latest Federal Reserve pronouncements at this week’s Jackson Hole get-together has meant a subdued opening for the UK market.
Still, the FTSE 100 has confounded expectations by heading higher, edging up 8.84 points or 0.12% to 7134.62.
British Airways owner International Consolidated Airlines PLC is among the risers on optimism on the reopening of travel, especially with the US approval of the Pfizer (NYSE:PFE) vaccine. The airline, up 0.57%, may also benefit from Ryanair pulling out of routes from Belfast.
Just Eat Takeaway.com NV (LSE:JET, NASDAQ:GRUB) is 0.17% better despite the prospect of being kicked out of the FTSE 100 (more on that later), while the rise in the oil price this week has helped lift Royal Dutch Shell (NYSE:RDS.A) PLC by 0.11%.
On a day light on economic news, there may be some interest in the latest German business confidence figures.
Michael Hewson at CMC Markets said: “For most of this year German business confidence has been rising with both manufacturing output as well as services activity showing much more resilience than was the case at the end of last year.
“In June, IFO business activity hit its highest levels in two years, however recent events across Western Europe with respect to the floods saw a slowdown in economic activity in the most recent July numbers.
“The tragic events, along with various factory shutdowns due to component shortages could see further declines in the coming months, while uncertainty over the upcoming German election could also see business start to become more pessimistic about the overall outlook. Expectations are for a modest decline in expectations and business climate outlooks.”
Over the pond come the latest US durable goods numbers.
7.20am: Lower start forecast
The FTSE 100 is expected to open 14 points lower at 7,110 after two days of modest gains.
US indices have been more buoyant, with the Nasdaq and S&P500 reaching new all-time highs, as markets attention increasingly focuses on this week’s virtual symposium at Jackson Hole.
“While its not surprising that the focus is very much on Fed chair Jay Powell’s speech and a possible framework for a tapering of asset purchases by the end of the year, recent events could well see this pushed out to the September Fed meeting,” said Michael Hewson at CMC Markets.
“The last-minute decision to hold this week’s meeting virtually appears to be a tacit admission by the Federal Reserve that the surge in the delta variant is still a clear and present danger to the US recovery, and while cases may well be starting to top out now, that may well reverse when the schools go back next month.”
“Some of this week’s recovery appears to have also been attributed to the regulatory approval of vaccines making it easier to oblige or compel people to have the jab, and thus make a return to some semblance of normal that much easier. In all honesty this seems to be a bit of a stretch, given that for a lot of vaccine hesitant people, it’s not really about that. That’s even before we stop to consider the other challenges in a return to normal, however for now investors don’t seem that bothered.”
6.50am: Early Markets – Asia / Australia
Stocks in the Asia-Pacific region were mostly higher on Wednesday after the S&P 500 and Nasdaq stateside reached record highs overnight.
Australia’s S&P/ASX 200 was as high as 0.5% to 7,542.4 early but has retraced to a 0.2% gain at 7,516.
The Shanghai Composite in China gained 0.44% while Hong Kong’s Hang Seng index dipped 0.08%
In Japan, the Nikkei 225 rose 0.0% and South Korea’s Kospi lifted 0.1%.