FTSE 100 ends barely in the green following worst week since mid-August

  • FTSE 100 falls flat
  • UK GDP weaker than expected
  • Wall Street tumbles into red

5:05pm: FTSE 100 pulls ahead late Friday, US markets slip lower at lunch

A slowing sentiment around recovery from investors weighed heavily on the FTSE 100 this week, as the index registered its poorest showing since August 19.

Friday afternoon saw the market close up almost 5 points or 0.07% to 7,029. While positivity around economic recovery has weakened there has been some areas displaying promise.

“Elsewhere, mining stocks have provided one area of optimism in UK markets, with rising PPI highlighting the ongoing push higher for commodities,” Joshua Mahony, Senior Market Analyst at IG wrote in Friday afternoon note.

He added: “A squeeze in labour and shipping provides expectations that we will continue to see demand outstrip supply for many key commodities. Natural gas has been one key commodity on the rise of late, with many concerned that we will see further upside once summer passes and demand picks up steam.”

4:15pm: Markets swing into the red

Markets have suddenly lost their mojo, with the Footsie earlier gains evaporating into thin air and Wall Streets indices all tumbling into the red.

The FTSE dived into negative territory but has clambered back up 2 points to 7027, which would put it on course for a 1.5% decline over the week.

New York’s Dow Jones is down 0.45% and the S&P 500 down 0.2%, with the Nasdaq flat.

Reports are emerging that the White House is weighing a new investigation into Chinese subsidies.

2.55pm: US stocks start higher

Wall Street stocks have joined the upbeat session, with all the major indices in positive territory, led by the tech-powered Nasdaq and the small caps of the Russell 2000.

The Nasdaq Composite is up 0.6%, with all the big tech top 10 in the green, led by ASML Holding, Nvidia and Facebook, while the Russell is up 0.5%, the S&P 500 inching up 0.2% and the Dow Jones slightly above the flat line at 34,900.

Following the UK government’s surprise dividend tax hike this week, US investors are now also looking at a potential tax on shareholders returns, with a Democrat proposal for a 2% tax on the amount spent by a publicly-traded company on stock buybacks.

“Stock buybacks are currently heavily favored by the tax code, despite their skewed benefits for the very top and potential for insider game-playing. Our bill simply ends this preferential treatment and encourages mega-corporations to invest in their workers,” said one of the two senators proposing the bill.

Back in London, the FTSE seems to be disconcerted rather than encouraged by the buoyant US open, now at 7,037, a rise of 13 points or under 0.2% for the day.

BA owner IAG is now the biggest faller, down 4%, while REITs British Land and Land Sec, as well as telecos BT and Vodafone have joined them in the blue chip basement.

1.40pm: US inflation, UK covid cases, Russian twist

The UK’s major share indices are trundling along sideways, between 0.2% or 0.3%, having climbed slightly higher early in the session.

Wall Street futures are perking up further too.

US factory gate inflation numbers increased in August, according to a fresh update from the Labor Department, which economists said means high inflation is likely to drag on.

The US producer price index was up 0.7%, higher than the 0.6% expected and following two monthly increases of 1%.

Back in the UK, Covid-19 cases are up again, new ONS data shows, with a 7% increase in the week to 3 September on the back of Scottish school reopenings.

The 950,500 infections is only around a thousand short of the peaks in July as Scotland saw its highest number of cases in the whole pandemic.

Not long ago, Russia’s central bank (CBR) continued its tightening with a 25 basis point interest rate hike, to 6.75% at today’s meeting.

The CBR also suggested that there may one more 25bp rate hike in this cycle. Inflation rose to a new five-year high of 6.7% in August and the accompanying press statement maintained the line that the balance of risks remains significantly skewed towards inflationary risks.

Here’s Capital Economics: “At the CBR’s last meeting in July the central bank softened its guidance about the extent of future interest rate hikes and tweaked its language again today, saying that it will hold open “the prospect of further key rate rises at its upcoming meetings”. Based on this, we suspect that there will be just one more 25bp rate hike, to 7.00%, in October.”

12.15pm: US to join rebound

Stocks in New York look set to join those in London by ending what has been a choppy week in front-foot mode.

Muted gains on Wall Street are expected, according to futures markets, supported by higher commodity prices amid signs of an easing in tensions between the US and China.

The Dow Jones and S&P 500 index are both seen rising 0.3%, slightly more that the Nasdaq.

Following US President Joe Biden’s call to his Chinese counterpart, as mentioned below, has raised hopes of a potential reduction in tariffs between the US and China.

Copper prices, which are sensitive to relations between the world’s two largest economies, are up 1.5%, while oil prices have also recovered some lost ground after retreating on news earlier this week that China plans to release crude from strategic reserves to ease strains on refiners. Aluminium prices, which have been elevated all week after the coup in Guinea, have nudged new 13-year highs, stoked by supply concerns from China trimming energy use.

In spite of falls throughout this week, US stocks remain close to record highs on the prospect that the Federal Reserve may soon start to taper its coronavirus (COVID-19) crisis stimulus measures but not hike interest rates amid signs that the spread of the Delta variant of the virus has induced a fresh slowdown in the US economic recovery.

Investors will have the latest US producer price wholesale inflation data to digest on Friday with some Fed-speak from Loretta Mester of the Cleveland Fed.

In other US news, DoorDash Inc, GrubHub Inc (NYSE:GRUB) (owned by Just Eat Takeaway) and Uber Technologies Inc (NYSE:UBER)’s Eats arm are all suing New York City over a new law that caps the amount of commissions the delivery apps can charge restaurants to use their services.

Elsewhere, Amazon.com Inc, the company where warehouse employees on zero hours contracts are forced to pee in bottles, is reported to be offering to pay college tuition for front-line staff in the US in order to recruit and retain employees.

Back on this side of the Atlantic, the FTSE is up 24 points at 7048.

Based on that bolstered copper price, Antofagasta remains the top riser, while travel names TUI (LSE:TUI), IAG (LSE:IAG) and easyJet (LSE:EZJ) are bottom of the list.

11.25am: Bitcoin becalmed despite growing support

Stock markets are mostly positive as we head towards the end of the working week, with a relatively quiet day in terms of company news – and many traders disappointed by news that England’s test match against India has been scrapped.

The Footsie is up 22 points or 0.3% at 7047.

In crypto markets there is some news though Bitcoin has lost momentum after the volatility earlier this week, plummeting from near $53,000 to $46,270.

This comes as a survey finds that nearly a third of Americans would back the use of Bitcoin as legal tender in the US.

A total of 27% of those polled by YouGov support the idea of using Bitcoin as payment for goods and services, with 11% in ‘strong’ support. 34% responded in the ‘don’t know’ bracket, while 39% oppose the idea.

A large number (44%) of those respondents between the ages of 25 and 34 are in favour and 36% of those between 18 and 24 also in support, while 54% of people over 55 were against.

This came after El Salvador made Bitcoin an official currency earlier this week.

Market analyst Jeffrey Halley at Oanda noted that the Bitcoin sell-off occurred as soon as the move became official in El Salvador.

“Coincidence? Possibly. I suspect heavy long-positioning and nerves once it dropped back through $50,000.00 are better reasons,” Halley said.

“In the spirit of tradeable versus investible assets, though (there is a huge difference), I do not think Bitcoin is out for the count yet.

“Bitcoin managed to close above its 200-DMA at $45,930.00 on a daily basis this week, despite the multi-day waves of selling. That suggests it still has the potential to rally above $50,000.00 once again. However, failure of support at $44,000.00 is likely to unleash another wave of panic selling and angrier El Salvadoreans.”

Meanwhile, In the UK, people will soon be able to buy cryptocurrencies via the Post Office, according to reports overnight.

From next week, the Post Office’s EasyID app, which has over 10 million users, will offer access to Swarm Markets, an exchange specialising in digital tokens, the Telegraph newspaper says.

10.15am: Pound rebound

The big miss on UK GDP has not stopped the pound from rising this morning, with the usual weight this exerts on the FTSE 100.

Sterling is up 0.3% versus the US dollar to $1.387, around its highest levels of the past month.

The rises for the FTSE 100 and 250 may reflect a reaction to last night’s conversation between US President Joe Biden and Chinese President Xi Jinping.

A White House statement said the “two leaders discussed the responsibility of both nations to ensure competition does not veer into conflict”.

Russ Mould, investment director at AJ Bell, said: “The fact the two parties are engaging is a positive and perhaps long overdue, given this was only Biden’s second call with Xi since coming into power.

“Markets will want to see a rebuilding of relationships between the two nations after Donald Trump caused so much damage during his tenure.

“The latest engagement between the leaders certainly helped to lift Asian markets, with the Hang Seng rising 1.4% and the Nikkei up 1.3%. Investors are clearly hoping that better relationships between the US and China will be good for trade.

“Add in the fact that the European Central Bank didn’t spook investors too much with its latest policy update – reassurance that it will only slowly withdraw stimulus measures – meant that markets are ending the week on a much brighter note.

“There are still the headwinds of inflation, supply chain issues and Covid Delta variant to contend with, but on balance markets are still finding plenty of reasons to keep buying equities.”

The FTSE is up 25 points at 7049, while the 250 has added over 50 points to reach 23,852.

9.20am: Re-gaining ground

London’s blue chips gained more ground as the first hour of Friday’s session progressed, now up 20 points or 0.3% to 7044.

This is despite a GDP print earlier that was the weakest since January, with several commentators mentioning stagflation, including Neil Wilson at Markets.com, who said July was when “the reopening burst bust”.

“The news should in theory be negative for GBP but doesn’t seem to have had much impact so far,” said market analyst Marshall Gittler at BDSwiss.

This is because many economists and analysts point out the UK economy is likely to already be bouncing back.

Economist Kitty Ussher at the Institute of Directors says the final lifting of restrictions on 19 July led to an expansion in the entertainment sector, but this was offset by a correction elsewhere from the partial ending of the stamp duty discount at the end of June.

“Going forwards, we expect the economy to continue its upward trend: the vaccine roll-out has allowed schools to start the new term with less curbs on their activity, there is every reason to think that the autumn will also be strong.

“Any shadows that do exist will now come from where transportation and labour shortages may start to affect businesses’ practical ability to trade or the cost of doing so,” she added.

Meanwhile, according to the weekly Flow Show from Bank of America (NYSE:BAC), the annualized inflow to global stocks in 2021 of $1 trillion is greater than the cumulative inflow of the prior 20 years of $0.8 trillion.

Flows in London are going into Antofagasta, B&M European Value Retail, Rightmove, Weir Group and Auto Trader Group, who lead the FTSE risers.

On the FTSE 250, which is also up 0.2%, investment trusts are dominating the risers on the leaderboard, behind retailer Dunelm Group, namely Liontrust Asset Management (LSE:LIO), Baillie Gifford Japan Trust , JPMorgan Japanese Investment Trust and Scottish American Investment Co.

8.30am: Tentative start in London

The FTSE failed to make the strong rebound predicted ahead of the open. It was a rather tentative start for the blue-chip index, with sentiment dented by the latest GDP reading which showed economic growth effectively stalled in July.

Output grew just 0.1% in the month compared to expectations for 0.6% expansion, with analysts blaming the ‘ping-demic’ for the setback.

“With the wild horses of recruitment difficulties, product shortages and spikes in infection rates running loose, it’s little surprise they dragged back UK economic recovery in July,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

Flat services output for the first time since February was to blame in July, said Paul Dales at Capital Economics, “not all” of which is due to increased consumer caution due to the recent rise in virus cases, as people flooded back to sports events, theme parks and festivals – but retail sales fell by 2.5% month on month and shortages were “probably also to blame”.

The GDP reading is the latest in a series of global readings pointing to a slowdown in activity with the US and China feeling the impact of the rise of the Covid delta variant.

On the market, the early risers were found in the mining sector with Anglo American and Antofagasta up 1.5% and 1.2% respectively.

Asset manager Gresham House (LSE:GHE) rose 2% after it announced a GBP36mln deal to acquire the venture capital trust business of Mobeus Equity Partners.

6.50 am: Rebound predicted

The FTSE 100 was tipped for a strong rebound as Asian markets rallied on the back of a call between US President Joe Biden and China’s President Xi to ease some of the tensions between the countries.

Two hours before opening, spread betters were suggesting FTSE 100 might jump as much 27 points at the open, reversing some of the 73-point fall on Thursday to 7,022 .

Concerns over the spread of the Delta variant and hints that the ECB might rein back its money-printing programmes sparked the decline but the moves by the heads of the US and China to get on better should change the mood suggested commentators.

As well as speaking to the US, Chinese state TV said President Xi also wants better trading relationships with his Asian neighbours and has even sent an olive branch letter to Australia by asking it to support China’s application to join a regional trade body, the CPTPP.

UK news today will focus on a raft of economic updates that will give another insight into how the country is emerging from the Covid pandemic.

GDP is tipped to be up 8.5% year-on-year in July, which most years would be an eye-catching number but might be seen as disappointing as it follows June’s 15.2% gain.

Manufacturing production, which was up 0.2% month-on-month in June, is expected to rise 0.1% in July while industrial production is forecast to improve by 0.3% after June’s 0.5% increase.

Scheduled company news is scarce but as with airline easyJet yesterday, deals and mergers are the currency at present.


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