• FTSE 100 closes below 7,000
  • Travel stocks risers but miners fall
  • US stocks seeing red too

5.20pm: FTSE closes in red

The FTSE 100 index closed in the red on Friday, and below 7,000, having been positive briefly early on as traders took flight from risk.

Britain’s blue-chip benchmark finished down over 63 points, or 0.91%, at 6,963. The session peak was 7,092, while the low was 6,941.

Over the week as a whole, the index dropped 0.93%.

“It’s not completely clear what appears to have triggered the change of sentiment, however a bond market selloff hasn’t helped, which has sent UK 5-year gilt yields to their highest levels since March 2020, and 10-year yields to a four-month high,” said Michael Hewson, chief market analyst at CMC Markets, in a note.

“It could be the recent headlines around new fiscal rules from the Chancellor of the Exchequer is exerting upward pressure on short term UK borrowing costs,” he suggested.

Meanwhile, Chris Beauchamp, Chief Market Analyst at online trading group IG, said: “Although still fairly measured at present, this current selloff has the potential to be one of the most dramatic pullbacks we have seen all year, as inflation, stagflation, slowdown and virus risks all combine to knock back European and US markets.”

On Wall Street, the Dow Jones Industrial Average dropped over 172 points, the S&P 500 fell over 32 points and the Nasdaq declined over 139 points.

Top laggard on Footsie was Anglo American PLC (LSE:AAL), which dropped over 8% at 2,591p on the day.

4.05pm: FTSE drops 1%

The FTSE 100 has dropped 1%, below the 7,000 mark for the first time since July, with the optimism seen at the start of the day now a distant memory, wiped out by Wall Street having one of its rare (these days) gloomy days.

Most European stock benchmarks are in the red too, along with those in the US, led by the tech stocks of the Nasdaq. The good ol’ FTSE 250 is still above water, but has lost most of its earlier gains.

The main fallers on the Footsie are:

3.12pm: It’s a down day

Stock markets have decided today is going to be a down day, or what professionals call a risk-off session, with the FTSE sent tumbling as Wall Street’s main indices have slip-slided lower since the opening bell.

As mentioned below, the phenomenon of ‘quadruple witching’ (when stock index futures, stock index options, stock options, and single stock futures all end simultaneously) is making traders twitchy, to say the least.

The Dow Jones is down 0.5% and the broader S&P 500 and tech-heavy Nasdaq are both down 0.7%.

All but two of the tech giants – Amazon.com and Tesla – are in the red, with Apple and Microsoft both down over 1%.

Investors are starting to look ahead to next week’s big US Federal Reserve meeting.

“Choppy price action continued for stocks as we headed towards the end of the week. After a stronger start on Friday, European indices turned lower and caused US futures to weaken, before bouncing off their lows ahead of the US open,” said Fawad Razaqzada, market analyst with ThinkMarkets.

“This comes on the back of similar indecisive several days, as investors weighed the risks of surging inflation undoing the recent strong economic recovery, against ongoing central bank support. Will there be more turns and twists later on Friday or early next week?”

2.28pm: Flattering to deceive it seems

Shares in London and most of Europe, plus stock futures in New York seems to have recovered from their little wobble and are feeling a bit better.

Travel stocks, retailers and consumer spending names like Ladbrokes owner Entain and Betfair owner Flutter are driving the Footsie to a 10-point gain to 7038, also helped by earlier fallers, such as utilities, paring their losses.

The FTSE 250 is a source of more interest for investors, perhaps, with risers led by airport concessions operator SSP Group, Wagamama owner Restaurant Group1, travel groups TUI and easyJet, pub owners J D Wetherspoon and Mitchells & Butlers (LSE:MAB), online gaming group Playtech and drug developer Indivior.

European markets are trying to hold their necks above water for the weekly finish, says Neil Wilson at Markets.com, not helped in London by the FTSE’s heavy weighting to miners who are “having a shocker” after the tumble in iron ore prices overnight.

“US futures are indicating a slightly weaker open for Wall St as the risk-on sentiment that greeted the European open fades somewhat, though just seeing some bid coming through in the futures ahead of the open in the last hour.”

He said ‘quadruple witching’ is the issue, as it’s the time when stock index futures, stock index options, stock options, and single stock futures all expire simultaneously.

“Quad witching for stocks could create volatility, but so far VIXX futures are not moving away from 20. Apart from Thursday’s textbook bounce off the 50day line stocks have been selling off since the last [US non-farm payrolls] jobs report – but there is such a consensus around a selloff that it’s just too easy to call it.”

Wilson added that Delta variant concerns have declined, with US consumers seeming to be out and about spending dollars again, “there is this looming spectre of the debt ceiling default risk sometime in October.

“Republicans are telling Democrats they will have to fix it themselves. Mitch McConnell told Treasury Secretary Janet Yellen that the Democrats will have to raise the US debt ceiling on their own. This could be a slight overhang though markets tend to look through it as it is always sorted in the end – though the last big standoff saw the US credit rating downgraded.”

The FTSE is up eight points or 0.1% at 7035.

12.57pm: FTSE slips into something red

The FTSE 100 is wallowing the red now, with the positive start to proceedings having turned to dust, with the index down six points at 7021.

An expected lower start for Wall Street is a key reason behind this, with futures markets indicating New York traders will be waking on the wrong side of bed ahead of the weekend.

The Dow Jones, S&P 500 and Nasdaq are all seen dropping around 0.2% at the opening bell, following what was a lacklustre session overnight, where only the tech-led Nasdaq finished in the green.

Jacks and Jills on Wall Street are in a dull mood as they await today’s quarterly futures and options expiries, while also being wary of next week’s Federal Reserve policy meeting.

With the Federal Open Market Committee (FOMC) get-together on Wednesday, last night’s strong US retail sales data brought forward some Fed expectations.

Bears are seeming taking control of proceedings once more, said this market analyst Michael Brown at Caxton FX.

“This kind of price action is concerning, and again provides evidence of how fragile risk sentiment remains at the present time. For the first time in a while, stock market weakness is not being rapidly and relentlessly bought into, leaving me questioning whether the ‘path of least resistance’ continues to point higher.

“That said, today’s quarterly option expiries are an extra factor clouding the outlook, and for now the 50-day moving average remains strong support.”

He said the forex market was also striking a fairly risk averse note, though volatility remains rather muted.

“I think this is largely down to two factors; market participants sitting on the sidelines ahead of next week’s FOMC decision, and a continued lack of external factors to spark an increase in volatility. “

12.28pm: Insolvencies rise

The number of UK companies going to the wall has reached its highest number since the first lockdown in March last year.

Last month 1,348 company insolvencies were recorded by The Insolvency Service show, up from 1,094 in July.

The number includes 1,256 voluntary liquidations, known as CVLs, which is the highest level since January 2019, compared to 35 compulsory liquidations.

“The insolvency figures published today highlight how much tougher the climate is for businesses and individuals than this time last year, and the toll the pandemic has taken on business and personal finances over the last 12 months,” says Colin Haig of insolvency and restructuring trade body R3.

He said the figures comes despite the fact that August should have been one of the better months for businesses since the start of the pandemic, with the lifting of the final restrictions and the continued impact of the vaccine rollout.

“However, with the furlough scheme closing at the end of this month, company directors need to be aware of the signs of business distress and seek advice if any of them appear.”

London’s more domestically focused index, the FTSE 250, is in positive territory, up over 120 points at 23,759, while the more multinational Footsie has now dropped into the red.

11.11am: All gains gone

London’s blue-chip index has seen all its earlier gains erased, with miners and utilities causing the main drag on the FTSE.

Diversified metals diggers Anglo American, Rio Tinto PLC (LSE:RIO) and BHP Group PLC (LSE:BHP) have been bottom of the list since the start, while utilities such as Severn Trent (LSE:SVT) PLC and United Utilities PLC have tumbled from earlier positive positions to add to the downward pressure.

Others in other sectors, including healthcare with Smith & Nephew, finance with London Stock Exchange and paper & packaging with Mondi, have also moved from positive to negative positions.

Mining shares are likely to be under pressure from worries about China’s economy, as weaker steel in production in China has driven a sharp fall in iron ore prices in the past couple of months and an 8% tumble overnight, though the embargo of Australian coal into China has sent metallurgical coal prices much higher.

UBS this morning slapped a ‘sell’ rating on Anglo American and some international rivals and reiterated the same rating on BHP in a note that saw the bank cut its global iron ore price forecasts for 2021-23 by around 10% as analysts now expect the market to be in surplus from the second half of the year, with the price seen falling below $100 per tonne by the end of 2021 and averaging $89/t in 2022 compared to the market’s expectations of nearer $132/t.

Looking at the Footsie’s top risers, which are still led by IAG and joined by Rolls-Royce, this comes as Britain’s much-derided coronavirus ‘traffic light’ travel system is set to be scrapped today, according to reports.

Boris Johnson is expected to announce that there will be no more ‘amber list’ country ratings, while also removing the requirement for PCR tests for those who have been double-jabbed and taking dozens of countries off the ‘red list’, the Times has reported.

The prospects for a big rebound in transatlantic travel now look so much brighter, said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown: “Empty seats on aircraft are set to be snapped up by visitors desperate to see friends and family after so long.

“Rolls-Royce has caught a lift upwards, rising 2.3% as a change in rules would bode better for its core business of making and servicing engines for long-haul aircraft. It desperately needs a slice of good news on this front as it has admitted it will need passenger traffic to climb to at least 80% of pre-pandemic levels in order to meet its longer term targets and keep cashflow in the black.”

9.55am: ‘Consumers doing things rather than buying stuff’

More thoughts are coming in on the surprisingly bad ONS retail sales numbers earlier, which saw the fourth monthly decline in a row.

Monthly volumes fell 0.9%, compared to the 0.5% growth that markets expected, while year-on-year growth declined to zero, from 1.9%, well below the consensus forecast of 2.7%.

“People are spending more on doing things than they are stuff,” says Neil Wilson, market analyst at Markets.com. “We had 18 months locked up to order patio sets and games consoles. Now is the time to get out and go the pubs, restaurants or whatever it is you like to do.”

Economist Samuel Tombs at Pantheon Macroeconomics says the retail data for August brings “more evidence that the recovery in consumers’ spending has lost considerable momentum”.

He says it “should cause markets to doubt whether the MPC really will be in a position to hike Bank Rate as soon as February”.

Tombs noted that retail sales were still 4.6% above their February 2020 level, and the 1.2% month-to-month decline in food store sales probably was partly a consequence of the renewed rise in the number of people visiting restaurants.

Nonetheless, with non-food store sales dropping 1%, led by a 3.7% decline in department store sales and a 1.2% fall in sales of other stores, he said this reflected weaker demand for some pandemic-related hits.

“So far, households’ spending appears to have been no stronger in September,” he concluded, with recent Bank of England data showing that card transactions were 5.4% below pre-pandemic levels and Google mobility data has shown the number of people visiting retail and recreation locations in down 7.5%.

“The near-term outlook for households’ spending is overcast. Households’ real disposable incomes will decline in Q4 as CPI inflation soars to about 4%, labour income drops in the wake of the closure of the furlough scheme, and the GBP20 per week uplift to Universal Credit is withdrawn,” he said.

Nevertheless, the FTSE 100 is in fairly buoyant mood, up 23 points or 0.3% at 7,050.

Behind airline group IAG on the leaderboard is events group Informa PLC (LSE:INF), gambling groups Entain PLC (LSE:ENT) and Flutter Entertainment, miners Fresnillo, Antofagasta and Polymetal, and banks HSBC and NatWest Group.

HSBC has been lifted by a double-upgrade from Barclays, while NatWest is benefitting from Deutsche Bank (NYSE:DB) hiking its share price target.

8.55am: Positive start is a struggle

The FTSE 100 is looking to end the week in positive territory, but it was a struggle early on.

There was no real cue to be taken from either Wall Street or Asia’s main markets where the picture was mixed.

London traders were digesting the latest retail sales figures, which fell unexpectedly in the UK.

Month-on-month sales including petrol dropped by 0.9% (against predictions of a 0.5% rise), with concerns starting to crystalise that the recovery here at home is stalling.

Quite the opposite could be said of retail sales in the US, which on Thursday revealed it had shrugged off the impact of the Covid delta variant and hurricane Ida to deliver strong monthly growth.

On the market, the travel stocks were well bid in early London trading as the government is expected to make an announcement on easing holiday restrictions later in the day.

British Airways owner IAG led the Footsie with a 4.25% gain. InterContinental Hotels and TUI followed in its slipstream.

The main blue-chip casualty was Anglo American, which was downgraded to ‘equal weight’ by heavyweight bulge bracket bank, Morgan Stanley (NYSE:MS). The shares were off 3.8%.

6.50 am: FTSE called higher

FTSE 100 was tipped to make a bright start even with mixed outcomes overnight in the US and Asia.

A couple of hours before trading, financial spread betting firms were calling the London index to rise around 29 points and adding to yesterday’s ten-point gain at 7,027.

Today will be all about shopping with retail sales in August to give an idea of the mood of the UK consumer.

Similar US data yesterday showed Americans are shopping harder than expected with a rise of 0.70% in August against a predicted fall by the same margin.

In the UK, signs recently have been of some retail fatigue setting in after an initial bounce when lockdown restrictions eased.

July saw a 2.8% drop as restaurants pulled some customers back, while the pingdemic, shortages and the school holidays will have a major bearing on August’s numbers.

Economists expect a recovery for the month compared to July nonetheless and anything else will be a surprise.

Elsewhere, Asian markets were mixed as turmoil from the Evergrande debacle sparked some bargain-basement buying of property stocks in Hong Kong even though Goldman Sachs (NYSE:GS) warned the crisis might spill into China next.

US markets saw modest falls for the Dow Jones and S&P 500, while Nasdaq was flat.

On the UK company front, Lloyds Banking Group PLC (LSE:LLOY) and Natwest Group PLC might be busy early doors after an upgrade from Deutsche Bank (NYSE:DB).

“We expect strong deposit growth; rebounding consumer credit, and rising interest rates to lead to substantial growth in UK net interest income in the next two years which is not captured in consensus nor current valuations.

“We are positive on domestic exposure but our preference is Lloyds where we are 15% above consensus and it trades at 6.6x 2023E P/E with 10% yield,” said the bank

Target prices rise to 60p for Lloyds (from 57p) and to 260p from 230p for NatWest.

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mixed on Friday as China Evergrande Group shares slumped 11.79% as fears over its debt problems continue to weigh on investor sentiment.

China’s Shanghai Composite slipped 0.19% while Hong Kong’s Hang Seng index gained 0.29%

In Japan, the Nikkei 225 rose 0.60% and South Korea’s Kospi lifted 0.14%.

Australia’s S&P/ASX200 has, in the last hour of trading, fell 0.80% to 7,400 and is currently ~3% below its 52-week high.



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