FTSE 100 endw the week higher after crowd-pleasing speech from Jerome Powell

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  • FTSE 100 rises 23 points
  • Powell’s speech galvanises US stocks
  • Just Eat hit by New York decision on commissions

5pm: Powell’s Jackson Hole speech lifts FTSE


The FTSE 100 index reversed earlier losses to close higher on Friday as markets welcomed US Federal Reserve chair Jerome Powell’s speech at the Jackson Hole meeting of central bankers and policymakers in the US.


At the close, the UK blue-chip index was 23 points, or 0.32% higher at 7,148, above the session low of 7,109 but below the peak of 7,158.


The more UK plc focused FTSE 250 added 107 points, or 0.45% to 24,060.


CMC Markets said Powell’s message helped deliver the FTSE 100 to a positive week, with basic resources companies including Anglo American, BHP and BP leading the gainers on the back of firmer commodity prices.


“The clear delineation between the Fed’s inflation mandate and its employment mandate, has reassured markets,” Michael Hewson, chief market analyst at CMC Markets UK, said.


“Additionally, the reinforcement of the message that tapering is not tightening, and merely a reflection of the improvement in the economy has helped reassure markets that the central bank is not going to be hasty in removing accommodation.


On Wall Street by London’s close, the Dow Jones Industrials Average was 216 points, or 0.61% higher at 35,429, with the broader S&P 500 index ahead 0.76%, while the tech-laden Nasdaq Composite gained 1.1%.


3:37pm: FTSE 100 follows US higher


US stocks made good headway in the first hour of trading, with the Dow Jones average up 236 points (0.7%) at 35,449 and the S&P 500 32 points (0.7%) heavier at 4,502.


In his big speech at the Jackson Hole central bankers’ symposium, Jerome Powell, the chair of the Fed was a bit cagey on when the US central bank will start paring back quantitative easing (i.e. bond purchases).


“We finally heard from the Fed Chairman and the markets loved it, even though he said, what many had expected, that tapering bond purchases could begin before the end of the year,” opined Fawad Razaqzada at ThinkMarkets.


“He confirmed that it ‘could’ be appropriate to begin tapering this year, but reiterated that it doesn’t carry direct rate-hike timing signal. This was interpreted by the market as the Fed Chair offering no fresh news and people who had betted on him providing some clear tapering timeline were left disappointed,” Razaqzada said.


“On inflation, Powell added that: ‘Longer-term inflation expectations have moved much less than actual inflation or near-term expectations, suggesting that households, businesses, and market participants also believe that current high inflation readings are likely to prove transitory’


“This was a further sign that the Fed will taper QE very gradually and rates won’t rise any time soon,” the ThinkMarkets analyst said.


In London, the FTSE 100 was up just 11 points (0.2%) at 7,136, with the prospect of starting the bank holiday weekend early proving a bigger attraction than Mr Powell and his Jackson Hole pronouncements.


Just Eat Takeaway.com NV (LSE:JET, NASDAQ:GRUB), down 6.5% at 6,476p, was a drag on the index after New York’s City Council gave the green light to legislation that will put a cap on the commissions delivery apps can charge restaurants.


2pm: British Airways fears high staff costs when furlough ends


The FTSE 100 halved its losses and shed 8 points to 7,116 in the early afternoon.


British Airways has warned staff that wage costs will be a “serious” problem when the furlough scheme comes to an end next month.


The airline said it’s likely to be a temporary problem but one “we need to manage”.


“We’re going to have to be as flexible as possible when it comes to the way we work, to help mitigate the situation over the coming months,” it said in a memo seen by the BBC.


“We are in discussions with your trade union representatives, who are as keen as we are to find a way through the winter season and into growth next year.”


The news comes as the flag carrier is considering shifting all its short-haul operations into a new low-cost subsidiary based at Gatwick Airport to compete with its competitors offering budget tickets.


Its owner International Consolidated Airlines Group (LSE:IAG) SA was flat at 162.12p.


12.55pm: US stocks set to rally


The FTSE 100 dipped further at lunchtime, dropping 15 points to 7,109.


US stocks look set to rally at the start on Friday, recovering some of the previous session’s declines as investors await Federal Reserve chairman Jerome Powell’s keynote speech at the central bank’s Jackson Hole symposium.


Futures for the blue-chip Dow Jones Industrial Average, the broaderS&P 500 index, and the tech-heavy Nasdaq-100 all ticked 0.3% higher, with the major indexes still close to recent all-time highs.


Powell is due to address the symposium in Wyoming at 10.00am ET and his remarks will be streamed online. Investors will be seeking clues as to when the Fed will scale back its $120 billion in monthly asset purchases and consider raising interest rates. Minutes from the Fed’s late July policy gathering showed that many of the officials thought asset buying could start to slow down by the end of this year.


Craig Erlam, senior market analyst at OANDA Europe commented: “There’s been a lot of caution in the markets this week, investors perched on the fence and waiting patiently for the latest thoughts of Fed Chair Jerome Powell. Jackson Hole always gets a lot of attention, something we probably have former Fed Chairman Ben Bernanke to thank for, given his many mic drop moments in the aftermath of the global financial crisis.


“The event always seems to land at an important time for monetary policy so the collection of central bankers and a keynote speech from the Chair naturally attracts a lot of attention. It’s a perfect opportunity to lay the groundwork for a big policy shift a few weeks later and at one stage, it appeared that Powell may use this platform for just that purpose.


“But a lot has changed in the last few weeks. The data is showing softness, particularly in the surveys where delta nerves are weighing on expectations as cases surge and fatalities continue to rise at a worrying rate. The economy has bounced back strongly but the committee may not be as aligned on tapering as they seemed after the jobs report.”


Erlam added: “While we may have heard some very hawkish views from James Bullard, Robert Kaplan and Esther George on Thursday that triggered some risk aversion in the markets, there are two things all of these have in common. They all typically land towards the more hawkish end of the scale of Fed policymakers and none are voters on the FOMC this year.


“So the comments from Jerome Powell today may not necessarily align with their views. Don’t get me wrong, tapering won’t be put off for long and a December start may well be on the cards. But Powell may well refrain from saying too much today and instead give the Fed a few more weeks to assess the data ahead of the September meeting.


“Whether investors would welcome the Chair joining the rest of us on the fence and view it as a positive for the markets, we’ll see. It leaves plenty open to interpretation. The data over the next few weeks may improve, the Covid trend may reverse itself and provide more comfort for policymakers.


“One thing looks clear, any suggestion that the Fed is happy to proceed with a taper in September may get a nasty reaction in the markets. The Fed could offset this with a commitment to reduce asset purchases at a more gradual pace in order to alleviate concerns. I’m just not sure if that would be enough to alleviate concerns and Powell may not view it as a risk worth taking.”


On the data front, the US Commerce Department is due to release measures of consumer spending and the Fed’s preferred inflation gauge at 8.30am ET.


11.50am: Lloyds Banking lower as contactless limit to be bumped up to GBP100


The Footsie yo-yoed back in the red and was down 3 points to 7,121 at noon.


Spending limits on contactless cards are to rise to GBP100 from GBP45 on 15 October as the use of cash for transactions continues to decline.


The limit was raised from GBP30 at the start of the pandemic but with two-thirds of debit card transactions now made with contactless cards and increasing numbers of outlets refusing to take cash, the government said the time was right to raise it again.


Lloyds Banking Group PLC (LSE:LLOY) shed 1% to 43.7p on the news.


10.45am: 12-year-old student makes GBP290,000 after selling whale-themed NFTs


The FTSE 100 trimmed its gains in late morning and was up only 2 points to 7,127.


A 12-year-old London student has made a fortune during the summer holidays after selling whale-themed non-fungible tokens (NFTs).


Benyamin Ahmed amassed around the equivalent of GBP290,000 in Ethereum, which he keeps in a crypto account since he’s never had a traditional bank account, the BBC reported.


He makes videos of his hobby, which he got into after learning coding at a very young age when he was encouraged by his father.


“My advice to other children that maybe want to get into this space is don’t force yourself to do coding, maybe because you get peer pressured – just as if you like cooking, do cooking, if you like dancing, do dances, just do it to the best of your ability,” Ahmed said.


9.20am: Dire picture for UK department stores


The FTSE 100 turned green in mid-morning and was up 11 points to 7,136.


Most UK department stores have disappeared in the past five years, following the demise of BHS.


Of the 467 stores owned by the country’s largest chains, including Debenhams and House of Fraser, only 79 are left, meaning 83% are gone.


Over two-thirds of these shops are still vacant, according to data compiled by commercial property information firm CoStar Group and shared by the BBC.


“The data undoubtedly highlights the acceleration of change in the retail sector in recent years, which the pandemic has only exacerbated,” said CoStar Group’s head of analytics, Mark Stansfield.


“We are increasingly seeing forward-thinking real estate owners getting ahead of the problem and reshaping what are key assets in our town centres to provide a focal point for regeneration.”


“I think we’ll see many more plans come to light in the coming months. With these store closures come new opportunities.”


8.25am: FTSE 100 rudderless ahead of Powell’s Jackson Hole address


The FTSE 100 made a slow start to the final trading day ahead of the long Bank Holiday weekend with City price-setters keeping their powder dry ahead of Federal Reserve chair Jerome Powell’s comments at the Jackson Hole symposium for central bankers.


As my colleague John Harrington noted in his update earlier, Powell’s address to the remote conference will likely be unremarkable.


It’s hard to imagine he can give a clear signal on interest rate policy and the tapering of monetary support with the US economy currently providing a slew of mixed economic messages and Fed committee itself seemingly unable to find a consensus.


Still, on possibly one of the slowest days of the year – definitely the slowest of the summer – Powell’s comments may provide a ripple of excitement later in the day. Just don’t count on it.


“Investors succumbed to a bout of nervousness ahead of the Jackson Hole symposium after a week of several record highs across markets,” said Richard Hunter, head of markets at Interactive Investor.


“The jury remains out on whether Federal Reserve chairman Powell will specifically address the tapering timetable, especially ahead of next week’s non-farm payroll numbers.


“However, hawkish comments from other Fed members ahead of the event suggested that the time had come for a wind-down of stimulus, which would be announced at the September meeting if not at the symposium.”


On the market, nobody was really willing to chance their arm. John Wood Group (LON:WG.), the oil services group, was an earlier riser after Morgan Stanley (NYSE:MS) upgraded its investment call to ‘overweight’.


Barclays Capital made an identically bullish move on stock in contractor Babcock (LON:BAB), which opened 1.15% higher.


6.50 am: All eyes on Jackson Hole


All eyes will be on Jackson Hole today, even though just about everyone agrees that Federal Reserve chair Jerome Powell is unlikely to give much new away in his centrepiece speech.


Nevertheless, there is a bit of “wait and see” going on, with the FTSE 100 expected to nudge up 5 points to open at 7,130.


US markets had a lacklustre day yesterday with the Dow Jones sliding 192 points to 35,213 and the S&P 500 shedding 26 points to close at 4,470.


In Asia this morning, Hong Kong’s Hang Seng has asked out a 12 point gain at 25,426 but Japan’s Nikkei 225 is off 131 points at 27,612.


Back in London, there is very little scheduled corporate news to help traders stave off the ennui of waiting for Jerome Powell to (probably) say nothing of much import.


“Before Powell’s speech we have the small matter of some more US economic data in the form of personal spending and income as well as the latest core PCE inflation data for July, and the final University of Michigan confidence data which put the wind up markets only a couple of weeks ago after it dropped sharply to 70.2 from 81.2 in July,” reports Michael Hewson at CMC Markets.


Around the markets


  • Sterling: US$1.3697, little changed
  • Gilt: 0.604%, up 49 basis points
  • Gold: US$1,802.30 an ounce, up US$7.10
  • Brent crude: US$70.90, up 72 cents
  • Bitcoin: US$48,998, down 50 cents

6.50am: Early Markets – Asia / Australia


Stocks in the Asia-Pacific region were mixed on Friday as investors remained cautious ahead of the Federal Reserve’s annual Jackson Hole symposium where Fed Chair Jerome Powell will speak.


The Shanghai Composite in China gained 0.38% and Hong Kong’s Hang Seng index rose 0.13%


In Japan, the Nikkei 225 fell 0.46% while South Korea’s Kospi lifted 0.09%.


Australia’s ASX made up some ground in afternoon trading after falling 0.4% in morning trade. The index was last trading 0.07% lower.


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