- FTSE 100 closes down over 53 points
- UK’s amber and green travel lists may be scrapped
- US stocks in red
5.15pm: FTSE 100 closes in red
FTSE 100 closed midweek in the drink as traders became concerned on tax rises, the state of the UK’s economic growth trajectory and the pandemic.
Britain’s blue-chip benchmark closed down over 53 points, or 0.75%, at 7,095, below the high of 7,140 and off the low of 7,061.
Midcap FTSE 250 was also in the red, plunging over 248 points, at 23,848.
“UK stocks are reflecting some concerns about economic growth this afternoon too, as the market frets that the rise in National Insurance will hit consumer spending, and activity in areas like the housing market,” said Chris Beauchamp, chief market analyst at online trading group IG, in a note.
“Housebuilders, banks and REITs are sitting at the bottom of the FTSE 100, although the declines are more contained than those on the continent, where indices have fallen much further into the red.”
4.05pm: FTSE faltering
The Footsie is again faltering as it approaches the last fence, as it did yesterday, now down 50 points or 0.7% to just under 7100.
This is despite help from a softer pound, which is down 0.3% at $1.3735 after strengthening in the past couple of weeks.
“It’s been a uniformly negative day for European stocks,” says market analyst Michael Hewson at CMC Markets, “as concerns over slowing economic activity weigh on sentiment against a backdrop of rising prices and chatter that central banks are looking at paring back the amount of stimulus in the weeks and months ahead.
Like many of his peers, Hewson is intrigued about what tomorrow’s European Central Bank policy meeting could bring.
This interest was piqued by comments released earlier today from Austrian governing council member Robert Holzmann who warned that the central bank might normalise policy sooner than markets expect.
“The timing is especially curious given that normally there is a blackout period of about a week before important policy decisions,” says Hewson. “I’m guessing that he didn’t get that memo on that one.”
London’s blue chip index does not seem to be getting much help from surging energy prices, with US natural gas prices trading up at seven-year highs in New York, and oil prices rebounding after three days of losses.
The main UK fallers are housebuilders and property developers, with Persimmon PLC (LSE:PSN), Taylor Wimpey (LSE:TW.) PLC, Land Securities Group PLC (LSE:LAND) and Barratt Developments Plc (LSE:BDEV) bottom of the list, with Berkeley Group Holdings PLC and British Land PLC also in the fallers list.
Still, things are worse for Germany’s DAX, which is down 1.4% to its lowest levels in over a month, while over in New York, all three major indices are now firmly in the red, led by a 0.8% decline for the tech-powered Nasdaq.
3pm: Tech drag
Blue-chip stocks on both sides of the Atlantic are mostly in the red, though the Dow Jones and S&P 500 are pretty much flat.
With most of the US tech giants starting lower, the Nasdaq was the main source of pain Stateside, retreating 0.2% after notching another record high yesterday.
This was despite US job opening data coming in better than expected.
Job openings hit 10.9mln at the end of July, according to the US Bureau of Labor Statistics’ latest Job Openings and Labor Turnover Summary (JOLTS) report, versus the Street consensus of 10mln.
“Hires and total separations were little changed at 6.7 million and 5.8 million, respectively,” the report said. “Within separations, the quits rate was unchanged at 2.7% while the layoffs and discharges rate was little changed at 1.0%.”
Back in London, the FTSE 100 continued to limp on, down 34 points at 7115.
With investors having enjoyed a decent run, “attention is turning from the post-lockdown spending splurge to how corporate earnings might fare next year,” says analyst Russ Mould at AJ Bell.
“There is a sense that some of the market forecasts have been too optimistic and so there could be some share price disappointment unless we see GDP figures pick up and the COVID delta variant stops causing so much trouble.”
There was also a forward look from strategists at Credit Suisse (NYSE:CS.), who said higher bond yields are being driven by higher US inflation expectations, industrial production is accelerating despite PMI data falling, ‘value’ stocks are outperforming in Europe and the US dollar “looks close to the end of a bear-market rally”.
With these factors combined, their favoured stocks are in Continental Europe and emerging markets.
European stocks benefit from less of a labour backlog or wage problems than other regions, the CS team said, while excess liquidity is the highest of any region and valuations are “attractive”.
“Strategically, Europe is well positioned because: it has structurally easier fiscal and monetary policy; the Eurosceptic parties’ popularity has fallen sharply; and Europe is dominant in green/sustainable companies (8% of market cap).”
The analysts are also positive on the UK, where the performance is seen as more closely tied to the ‘value’ investing thesis than any other region.
“Valuations are extreme. Fiscal fundamentals are the best outside of Germany in the G7. The UK (along with Spain) has the highest catch-up potential in terms of GDP. The issue is likely sterling strength; therefore, we would be more overweight unhedged.
2.05pm: Stocks still in the red
The FTSE is not getting any closer to erasing its losses this afternoon, ahead of the US open, with the UK benchmark down 34 points or 0.5% at 7,115.
Delta and the trend towards governments and central banks withdrawing support are among factors hurting sentiment, says Fawad Razaqzada, market analyst at ThinkMarkets.
“There isn’t one specific factor providing a drag on risk sentiment at the moment, so things could improve unexpectedly as we head into the second half of the week – just as the drop happed unexpectedly for many risk assets on Tuesday.
“Among some of the factors weighing on sentiment, the persistence of the Delta variant of Covid is still a big risk facing the global economy.
“With various government stimulus measures slowly coming to an end around the world, the fear is that if the virus persists longer then it could hurt the recovery and cause further disruption to supply chains, thereby lead to higher inflation.
“Indeed, in the US, around 8.9m jobless people lost unemployment benefits on Monday as two government programs expired – one that provided aid to self-employed and gig workers, and another for those who have been unemployed more than six months.
“The $300 weekly supplemental unemployment benefit also ran out. We could see consumer spending fall as a result in the weeks ahead.”
1pm: US stocks still under pressure
London’s blue chips are still in the red but are continuing to pare losses, now down around 25 points at 7124, even though US stocks are expected to extend recent falls.
Wall Street’s nervousness comes amid investor uncertainty about when the Federal Reserve may start tapering bond purchases as economic recovery looks to be stuttering in the face of increases in coronavirus (COVID-19) cases.
Futures for the Dow Jones and the broader S&P 500 index were both down around 0.1%, while those for the tech-powered Nasdaq were relatively flat.
Stocks have come under pressure following a much weaker-than-expected August US jobs report last Friday and investors are awaiting fresh cues from the Fed about how signs of a slowing economy and high inflation levels may influence their plans to adjust monetary stimulus measures.
The US central bank is due to release its latest Beige Book report at 2.00pm ET, which should give more clues as to the current state of the US economy.
On the corporate front, biopharma group Kadmon Holdings shares soared higher after it agreed to be acquired by Paris-based healthcare firm Sanofi for $1.9 billion.
Elsewhere, Bitcoin fell again after its double-digit plunge yesterday as moves by El Salvador to make the cryptocurrency legal tender caused some wobbles, not helped by reports that US regulators may sue major crypto exchange Coinbase.
Neil Wilson, chief market analyst at Markets.com, commented: “It’s almost as if the inherent volatility in Bitcoin makes it really bad at being a currency that people use to spend and save. After hitting a fresh high above $52,000 overnight, prices dropped to under $44,000 before finding some stability around the $45,000 area. Not a good start to its life in the mainstream. It simply underscores the fact that it is not a good means of payment or reliable store of value. The El Salvadoran government apparently bought more Bitcoin on the dip.”
Wilson added: “Cathie Wood of Ark was talking on Bitcoin – responding to comments by investor John Paulson. She wheeled out the Bitcoin-bro case that it’s not just digital gold, it’s new global monetary system. She said it’s not subject to the whims of policymakers – in fact it’s a hedge against the whims of policymakers. That may be or may not be, investors should be extremely cautious. The impoverished people of El Salvador don’t have much choice.”
12pm: B&M tops risers after surprise trading update
The Footsie pared more losses at noon but was still down 35 points to 7,114.
The discounter hiked its profit guidance in an unscheduled trading update after UK profit margins in the half-year ending 25 September have been stronger than anticipated.
Revenues, instead, have been broadly in line with market expectations.
“Performance of general merchandise and seasonal categories has been particularly encouraging. Sell-through rates in those categories have been high and accordingly end of season markdowns have been limited,” the retailer said.
Ahead of the ‘Golden Quarter’ in the run-up to Christmas, B&M said it is “well-positioned” but trading patterns and strength of customer demand “remain highly uncertain” for the rest of the financial year.
11am: Airlines fly over plans to end UK traffic light system for international travel
The FTSE 100 trimmed its losses in the late morning, dropping 66 points to 7,082.
Meanwhile, airlines cheered reports that the traffic light system may come to an end.
A new system based around the vaccination status of travellers rather than the status of a country being visited is under consideration by ministers, according to The Telegraph.
It will mean the end of the widely criticised green and amber categories but those visiting countries classified as red or the highest risk will still have to quarantine in government-run hotels on returning to the UK.
For people who have already received two doses of a vaccine and visiting what are now classified as green or amber countries, the process is likely to remain largely unchanged.
In these cases, travellers will require pre-departure tests and a PCR test within two days of returning to the UK.
easyJet plc and added 3% to 800.4p and EUR 16.36respectively, Wizz Air Holdings (AIM:WIZZ) plc was up 2% to 5,032p and British Airways owner International Consolidated Airlines Group (LSE:IAG) SA edged 1% higher to 156.55p.
9.50am: Rents outside London rise at fastest rate in 13 years
The FTSE 100 extended its losses in mid-morning, slumping 78 points to 7,071.
Rents outside London have grown at the fastest rate in 13 years, up 5% since August 2020 compared to a 2.2% rise in the year to January 2021.
Monthly rents outside London are averaging GBP790, up from GBP752 a year ago. It means renters are paying an average of GBP456 more a year, according to data compiled by property platform Zoopla (LSE:ZPLA).
This is because renters are coming back to live in cities after lockdown ended, to be closer to offices and leisure locations, however the current supply of homes can’t meet the high demand.
There are also seasonal factors at play, such as university students looking for accommodation ahead of the new academic year, graduates starting jobs and families moving before the school term starts.
“The recovery in the rental market has, in many ways, mirrored the boom in the sales market, with people looking for homes that accommodate a different set of needs shaped by their lockdown experience,” said Kate Eales, head of regional residential agency at Strutt & Parker.
“Lack of stock and high demand are inevitably driving price growth. This stock depletion is a result in part of many accidental landlords having now sold their properties – benefiting from the soaring demand in the sales market.”
8.45am: FTSE 100 knocked by economic growth concerns
Fears over the global recovery from the pandemic sparked by the Covid delta variant put the skids under the FTSE 100.
Asia’s main markets were rattled too, while on Wall Street after the close Tuesday there was a divergence in opinion and sentiment.
For while the Dow Jones Industrial Average and S&P 500 index of old economy stocks ended firmly in the red (the Dow was off almost 270 points), the tech-heavy Nasdaq avoided the buffeting.
“Big tech shares continued their relentless growth amid fears of faltering growth in the world’s largest economy,” said Richard Hunter, head of markets at Interactive Investor.
“Relatively unaffected by the vagaries of the return to normality due to the delta variant, consumers continue to use technology regardless.
“As such, big tech stocks are edging towards becoming the ‘new defensives’, as uncertainty abounds elsewhere. In addition, investors switched once more from value to growth, propelling the Nasdaq to a fresh record closing high, and ahead by 19.3% in the year to date.”
Back here in London, the lure of a special dividend and a surge in online sales attracted investors to soft furnishings specialist Dunelm (LON:DNLM) early on as its shares flew 7.1% higher.
6.50 am: Footsie called lower
The FTSE 100 is expected to open in the red amid concerns over the faltering pace of economic growth.
London’s leading index is expected to open 25 points below at 7,124.
Various downgrades to US growth prospects, with Goldman Sachs (NYSE:GS) downgrading its economic outlook for the US economy appears to have prompted a reassessment of where markets might go next, in the face of a possible paring back of stimulus measures in the coming months.
Against these concerns of a weaker outlook, the August jobs report has also served to crystallise concerns, that after a decent summer, the economic recovery is rolling over, at around the same time central banks are starting to look at reducing some of their emergency stimulus measures.
“With Fridays disappointing August payrolls report still fresh in the memory, today’s JOLTS report for July will be a timely reminder that the jobs market still has a long way to go before normalising. It’s also important to note the lag the JOLTS report has, with expectations that we could still see vacancies slip back from the 10mln number we saw in June, due to the huge number of job gains in the July report of over 1mln new jobs,” said Michael Hewson at CMC Markets.
“The Fed’s Beige Book of economic conditions is also set to give investors a snapshot of the US economy, and where it is in relation to the previous survey. In July it said that the economy had strengthened showing moderate to robust growth, which was a significant upgrade to the previous report in May. On the downside there was an acknowledgment that supply disruptions were becoming more widespread, with shortages of labour and raw materials, causing problems.”
6.50am: Early Markets – Asia / Australia
Stocks in the Asia-Pacific region were mixed on Wednesday as Japan’s GDP grew 1.9% on an annualised basis in the April to June quarter, higher than the initial estimate for a 1.3% rise.
China’s Shanghai Composite fell 0.20% and Hong Kong’s Hang Seng index dipped 0.08%
In Japan, the Nikkei 225 surged 0.83% while South Korea’s Kospi slipped 0.73%.
Australia’s S&P/ASX200 is lower today, dropping 27.6 points or 0.37% to 7,502 in the last hour of trading.