FTSE 100 closes lower with Wall Street mixed despite better than expected US inflation figures

  • FTSE 100 closes down
  • US indices mixed
  • US inflation data eases fears around Fed tapering

5pm: FTSE 100 ends down, US stocks mixed midday

The FTSE 100 index ended lower despite declining US inflation that have helped ease fears around Fed tapering. However, with expectations of persistently elevated prices, IG said the market rally appears to have lost its legs already. In the UK, mining stocks have lagged as commodity prices weaken.

At the close, the UK blue-chip index was 34 points, or 0.48% lower at 7,034, above the session low of 7,020 but well below the opening peak of 7,068.

The more UK plc focused FTSE 250 shed 88 points, or 0.37% to 26,687.

“The release of US inflation data provided some respite for the Federal Reserve today, with monthly inflation falling to the joint lowest level this year,” said Joshua Mahony, senior market analyst at IG.

“The big question today is whether the decline in both core and headline inflation marks the beginning of the end for ‘transitory’ above-target pricing as alluded to by the Fed.

“The sky-high PPI figures do continue to highlight underlying inflation across factory inputs, yet we are starting to see the impact lessen for consumers.”

JD Sports Fashion PLC (LSE:JD.) (LSE:JD.) bucked the trend after releasing results. Its shares close at a record, up 9.72% at 1151p.

On Wall Street by London’s close, the Dow Jones Industrials Average was 157 points, or 0.45% lower at 34,712, with the broader S&P 500 index down 0.08%, while the tech-laden Nasdaq Composite gained 0.3%.

3.54pm:Commodity companies undermine market

Leading shares are near the day’s lows as worries about inflation persist despite the weaker than expected US reading.

With oil prices at six week highs, there are still plenty of pressures in the system to give investors cause for concern.

And the figures also showed that producer price rises were not necessarily being passed on to consumers, which could put pressure on company margins.

Added to that, new cases of COVID-19 in China have also unsettled the markets.

So heading towards the close the FTSE 100 is down 46.12 points or 0.65% at 7022.31 having earlier fallen to 7020.

Wall Street is also wobbling, with the Dow Jones Industrial Average down 212 points or 0.61% and the S&P 500 0.34% lower. The Nasdaq Composite has also dipped into the red, down 0.2%.

Concerns about a slowdown in the global recovery if cases pick up in Asia has seen commodity companies among the main fallers in London.

Evraz PLC (LSE:EVR) is down 3.63%, Anglo American PLC (LSE:AAL) has fallen 3.41% while BHP has lost 2.81%.

British Airways owner International Consolidated Airlines PLC is also among the big losers, down 4.19% on continued uncertainty over the relaxation of UK travel rules.

But JD Sports Fashion PLC (LSE:JD.) continues to provide some support after its well received results. Its shares in line for a record close, up 8.63% at 1139.5p.

3.13pm: Inflation boost fades

The boost from the weaker than expected inflation figures did not last long, with the US market going into reverse after early gains.

The Dow Jones Industrial Average is now down 77.61 points or 0.22% while the S&P 500 is down 0.12%. The Nasdaq Composite is the outlier, up 0.05%.

The reversal has seen the FTSE 100 slip lower, down 24.92 points or 0.35% at 7043.51.

Analysts at FxPro pointed out that despite the dip in inflation, energy prices were still rising. They said: “It is too early to dismiss fears of rising prices and claim that the Fed was right to point out the transitory nature of inflation…

“It should not be overlooked that the rate of price increases remains one of the highest in 30 years and continues its month-to-month increase. The jump in oil and gas prices in recent days promises to keep some of the pressure on consumer prices.”

2.50pm: Investors welcome US data

US markets have opened on the front foot after the weaker than expected inflation numbers.

The Dow Jones Industrial Average is up 83.64 points or 0.24% at 34,953.27 while the S&P 500 is 0.21% better and the Nasdaq Composite has risen 0.32%.

Among the influences on the consumer price index, used cars and trucks fell 1.5%, the first decline after five consecutive months of increases.

Meanwhile in the UK the FTSE 100 is now down 14.72 points or 0.21% at 7053.71.

1.49pm: US markets indicated higher

US inflation has come in softer than expected in August, easing some of the fears that the Federal Reserve might need to start tapering its support for the economy in the short term.

The monthly figure showed a 0.3% rise, below the expected 0.4% increase, while the year on year figure was 5.3%, down from 5.4% a month ago.

The news has given a boost to Wall Street.

The Dow Jones Industrial Average is now expected to climb by 122 points or 0.35%, with the S&P 500 showing a 0.36% gain and the Nasdaq Composite indicated 0.34% higher.

In the UK the FTSE 100 has pared its losses and is now down just 6.13 points at 7062.3.

12.39pm: Pound encouraged by UK employment figures

Sterling has rallied after the positive UK jobs data, up 0.19% at $1.3863.

Craig Erlam at OANDA said: “The pound has been given a small boost by the UK employment data on Tuesday. The numbers were largely in line with expectations but with the unemployment rate continuing to fall and the number of payroll employees back at pre-pandemic levels, there’s plenty to be optimistic about.

“Of course, we can’t ignore the favourable impact of the furlough scheme on the data. With it coming to a close at the end of this month, the true impact of the pandemic on UK employment will be much better understood, with a rise in unemployment and underemployment inevitable.

“Still, the data is encouraging, albeit not so much that it puts any real pressure on the Bank of England to raise interest rates. The central bank can continue to be patient on that front, at least for now with the end of the year bringing the threat of another surge in COVID-19 cases and possible restrictions.”

12.16pm: US consumer price index in focus

US markets are expected to open fairly flat after the key indices moved higher on Monday for the first time in six sessions.

The Dow Jones Industrial Average is set to edge up 0.08% or 19 points while the S&P 500 is showing a similar 0.08% gain and the tech heavy Nasdaq Composite is unchanged.

A key factor will be the latest inflation numbers, which will be scrutinised to see what they indicate about any policy tightening by the US Federal Reserve.

Consumer prices are expected to have risen 5.4% year on year in August, unchanged from the previous figure, and by 0.4% month on month, a slight decline.

Michael Hewson, chief market analyst at CMC Markets UK, said: “This afternoon’s US CPI numbers could make for uncomfortable reading for US policymakers next week, especially if it follows the trend of US factory gate prices for August.

“In July there was some relief that US CPI remained steady at 5.4%, raising the possibility that we may have seen a peak. More encouragingly, core CPI slipped back from 4.5% in June to 4.3% in July, however even if central bankers seem sanguine about rising prices, US consumers definitely aren’t if the New York Fed’s latest survey of inflation expectations are anything to go by. Consumer expectations for inflation over the next three years are at a heady 4%, while for one year they are 5.2%.

“The biggest worry aside from the surges we are seeing in energy prices, which is worrying enough, has been the continued rise in [producer prices] last week to 8.3%, from 7.8%, which suggests that we may have only seen a pause in the upward trajectory in prices..

“Despite the rise in PPI over the last three months, expectations are for headline CPI to come in unchanged… which seems a touch optimistic.”

Elsewhere Apple Inc (NASDAQ:AAPL) shares have edged up 0.2% in pre-trading despite a new hack on its products, and ahead of its latest product event which is expected to highlight new versions of the iPhone, airpods and watch.

Back in the UK, the FTSE 100 remains in the red, down 23 points or 0.33% at 7045.43.

11.15am: Market suffers mid-month weakness

The weather is fairly gloomy at the moment and so is the leading index.

The FTSE 100 is currently down 21.25 points or 0.3% at 7047.18.

Worries about China’s growth as COVID-19 cases grow and its various company clampdowns continue have hit the mining and luxury goods sector, while investors are also cautious ahead of the latest US inflation numbers.

Chris Beauchamp, chief market analyst at IG, said: “Early trading this morning seemed to promise a positive day ahead for stock markets, after Monday’s session resolved overall into a move higher. But that optimism has dimmed as the session goes on, and indices are struggling to make headway.

“2021 has been consistent in its trends, and mid-month weakness is an established fact, so in one sense we should not be surprised to see stocks make heavy going of it.

“Of course, with US CPI on the calendar today some hesitation is not very surprising either. We can expect today’s numbers to be rapidly deployed in the service of the arguments for and against Fed tapering, although as noted before we are really debating when, not whether, they will cut back asset purchases.

“Concerns about China growth are always a good bet as to why luxury stocks are down, and with Burberry leading the fallers in London and French luxury stocks weighing on the CAC it is clear that the market is still concerned about how China’s new direction will hit demand.”

10.14am: Leading shares remain under pressure

Worries about COVID-19 continue to trouble investors, with the mining and luxury goods sectors under pressure.

AJ Bell investment directodr Russ Mould said: “If mining stocks are bellwether for the global economy, then investors need to sit up and take notice that the sector has been one of the worst performers in the past month.

“Metals and minerals producers were principally to blame for the FTSE 100 falling… in part caused by concerns about Covid spreading across Asia again and how that might affect commodities demand. That worry was also behind share price weakness in luxury goods companies…

“The luxury goods sector enjoyed a strong run earlier this year as investors speculated that the wealthier got even richer during the pandemic as they were trapped at home, with no fancy trips or outings. As restrictions eased, luxury goods companies were expected to see a big surge in sales as wealthier individuals splashed their cash.”

But any signs of the pandemic hitting the economy again could soon seen that idea head south.

So Burberry PLC is among the FTSE 100 fallers, down 2.85% at 1821p.

As for the miners, Anglo American PLC (LSE:AAL) has fallen 1.96% and Rio Tinto PLC (LSE:RIO) 1.74%.

But the 7.87% rise in JD Sports Fashion PLC (LSE:JD.) continues to provide some support, and the FTSE 100 is off 16.84% or 0.24% at 7051.59.

9.16am: JD Sports surges after strong profit growth

Helping to limit the damage on the leading index is a strong performance from JD Sports Fashion PLC (LSE:JD.).

The company’s shares are up 7.25% to a record 1125p after it reported a jump in first half profits from GBP41.5mln to GBP364.6mln, helped by a strong performance in the US.

Richard Hunter, head of markets at interactive investor, said: “The US remains the powerhouse of growth for JD. Government support in the form of cheques to individuals and a relative lack of lockdown restrictions were driving factors, but the group’s increasing presence under various trade banners is also underpinning progress…

“In the UK, meanwhile, the corresponding pre-tax number of GBP171mln compares to GBP52mln a year before. The strength of JD’s online capability came into its own during the last lockdown in the first quarter, with a strong retention of sales achieved despite store closures. This was then complemented by the release of some pent-up demand in stores as restrictions were lifted.

“However, JD retains a cautionary stance. Apart from the fact that the stimulus in the US will not be repeated, the company is mindful of the possibility of further restrictions being imposed on the back of the Delta variant. In addition, the supply chain challenges which are currently affecting so many industries are also in play, with the previously frictionless trade with the European Union now subject to delays and restructuring. At the same time, even where stores have reopened, levels of footfall have not returned to previous levels given the limitations following the “pingdemic”, where shoppers have either been forced to isolate or have chosen not to venture to the high street just yet…

“Even so, the group continues its relentless progress, as evidenced by a share price rise of 33% over the last year, as compared to a gain of 17% for the wider FTSE100. Over the last three years the price has more than doubled, adding 110% with no discernible lessening of support from investors. Indeed, the market consensus of the shares as a strong buy reflects rosy prospects for the future, especially with JD’s burgeoning US success.”

Overall, the FTSE 100 is off its worst levels, now down 16.67 points or 0.24% at 7051.76.

8.32am: Miners among losers as leading shares fall

Leading shares have defied expectations by falling back at the open instead of edging higher.

The FTSE 100 has fallen 22.95 points or 0.32% to 7045.48 in early trading.

The more positive aspects of the UK jobs figures are being overlooked, with skills shortages still unsettling businesses.

There are also concerns about new signs of pandemic problems in China.

Jim Reid at Deutsche Bank (NYSE:DB) said: “China is experiencing a renewed cluster of cases just a month after it brought the broadest outbreak in the country since the virus first emerged in Wuhan under control. The latest outbreak, which has yet to escape the Fujian province, includes 103 cases in three cities thus far. In order to tame the spread, China has imposed a very strict lockdown for 4.5 million people in the costal city of Xiamen where residents are not allowed to leave for anything other than exceptional circumstances.”

Concerns about any setback in the global recovery mean mining companies are among the fallers, with Glencore PLC (LSE:GLEN) 1.71% lower, BHP PLC down 1.27% and Rio Tinto PLC (LSE:RIO) 1% lower.

But the biggest loser so far is online grocer Ocado PLC, down 5.86% as its third quarter results showed the costs of a fire at its Erith fulfilment centre in mid-August when three robots collided.

It said around GBP35mln of revenues were lost and the fire will leave it with a GBP10mln loss.

And to emphasise the skill shortage problem, it said it would spend GBP5mln hiring and paying delivery drivers.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “Ocado is …facing rising labour costs, including having to incentivise to try and plug the gap left by the HGV driver shortages – failure to do so will impact sales performance. Ocado prides itself on being a more premium grocer, if it can’t get enough of the right stock on its virtual shelves, it could reduce revenue more so than for other supermarkets. The increased staff costs could cost up to GBP5mln at the full year, which together with an uncertain trading outlook, means profits could suffer.”

7.55am: Job market recovery continues

The UK jobs market continues to recover, according to the latest employment data from the Office for National Statistics.

The number of payroll employees rose 241,000 to 29.1 million in August 2021, returning to the pre-pandemic levels of February 2020. All regions except London, Scotland and South East are now above pre-pandemic levels.

Job vacancies are at a record as the recovery continues: the number of vacancies in June to August 2021 was 1,034,000, which is the first time vacancies have risen over 1 million since records began, and is now 249,000 above its pre-pandemic January to March 2020 level.

Young people (those aged 16 to 24 years) have been particularly hard hit by the pandemic in terms of emploment, but the last quarter has seen an improvement in the employment rate and a decrease in the unemployment and inactivity rates for young people.

The unemployment rate slipped 0.3 percentage points to 4.6% in the three months to July.

Despite this there has been the well publicised skill shortages in key areas, not least in HGV drivers.

Matthew Percival, CBI Director of People & Skills, said: “As businesses recouped months of lost trade over the summer, the labour market showed positive signs of recovery too as employment and vacancy figures rose.

“However, ongoing supply and labour shortages are impeding further growth. Whilst firms accept a quick-fix overnight isn’t possible there are temporary and immediate measures the government must take to ease some of these pressures.

“In the longer-term, this means increasing investment in reskilling, automation and improved pay and conditions. But these steps take time to have impact, so we need a functional Shortage Occupation List too so that firms can temporarily fill the most significant vacancies.

“Government needs to immediately begin a review of shortages and accept the Migration Advisory Committee’s recommendations from last year to add extra jobs to the list”.

The figures also come ahead of the end of the furlough scheme with unions and employers warning of a spike in redundances as government support ends.

7.00am: Markets expected to edge higher

The FTSE 100 is set for a quietly confident start after a mixed Wall Street session overnight and after fresh unemployment data is released this morning.

London’s blue chip stocks are predicted to rise 5 points at the open, according to spread-betting platforms, adding to the 39 points gained at the start of the week to 7,068.43.

Overnight, while the Dow Jones and S&P 500 gained 0.8% and 0.2%, the tech-led Nasdaq slipped 0.1%.

Market analyst Jeffrey Halley at Oanda said: “Financial markets remained eerily muted overnight, trading mostly sideways and leaving me asking myself, ‘is September the new May?'”

He blamed a lack of tier-1 macro data, leaving Wall Street “in limbo, torn over uncertainty about the Fed taper and its implications to juicy valuations everywhere, the delta-variant, inflation, uninspiring data from China”.

Most eyes appear to be on the US inflation data tonight, Halley added, where the consumer price index is expected to rise 0.4% and core CPI at 0.3% – but if these figures are beaten “I expect the US dollar to spike, US yields to rise, and equities to probably have a bad day at the office”.

First of all traders in London will be looking at UK labour market data, where the headline ILO rate of unemployment is seen retreating to 4.6% from 4.7% for July, average earnings growth easing to 8.2% from 8.8% and monthly claims in August falling by over 70k.

The furlough scheme is still disguising the full effects of the pandemic, even though furloughed employees have now come down to around 1m.

“As the furlough scheme continues to wind down and businesses have to contribute more to the scheme, there is a high probability we could start to see the headline ILO number start to edge higher and converge towards the monthly claim’s numbers, although high vacancy rates could well mitigate some of this risk,” said market analyst Michael Hewson at CMC Markets. “Wages on the other hand should start to move back down again as jobs at the lower end of the pay scale come back.”

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mixed on Tuesday as China Evergrande Group stock plunged more than 10% after the embattled property developer flagged expectations for a “significant continuing decline in contract sales in September.”

China’s Shanghai Composite slipped 0.54% and Hong Kong’s Hang Seng index fell 0.20%

In Japan, the Nikkei 225 gained 0.62% while South Korea’s Kospi surged 1.10%.

Australia’s S&P/ASX 200 was trading 0.22% higher during the last hour of trading, with some of the better performing stocks being Beach Energy (up 6.73%), Woodside Petroleum Ltd (up 6.18%) and AGL Limited (up 5.11%).



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