FTSE 100 rebounds 1%, while UK housing market revives but borrowing higher than forecast

  • FTSE 100 closes ahead
  • Kingfisher hit by profit taking
  • US shares positive at mid-session

5.10pm: FTSE closes 1.12% higher

FTSE 100 index closed higher on Tuesday and creeping back to the 7,000 level as M&A activity appeared to be “alive and well”.

The UK’s index of leading shares closed up around 77 points, or 1.12%, at 6,980.

FTSE 250 also went higher, adding over 209 points, at 23,611.

“M&A is certainly alive and well it seems judging by today’s announcements, as Entain shoots to the top of the FTSE 100 and travel groups National Express and Stagecoach make strong gains as well among the mid-caps,” said Chris Beauchamp, chief market analyst at online trading company IG.

“Coupled with the mystery bid for easyJet it seems that there are plenty of people around the globe who think any worries about a slowing global economy are overdone, and that there is more good news to come on the economic front that can lift both earnings and stocks,” he added.

On Wall Street, the Dow Jones added over 223 points; the S&P 500 gained over 25 points and the Nasdaq advanced 119 points.

3.52pm: Takeover move helps lift UK market

After a morose Monday for share prices, as investors fretted about the possible collapse of Chinese property developer Evergrande, the continuing energy crisis, and the prospects for this week’s Federal Reserve meeting, things have improved today.

All those concerns are still there, but it appears enough people think there are bargains to be had at this level.

US group Draftkings is clearly one of them. A report by CNBC said the sports betting specialist was planning a US$20bn or 2500p a share bid for Ladbrokes owner Entain PLC (LSE:ENT).

Following a jump in the Entain share price, the UK company said in a statement: “The board of Entain confirms that it has received a proposal from DraftKings to acquire Entain, the consideration for which would include a combination of DraftKings stock and cash.

“There can be no certainty that any offer will be made for the company, nor as to the terms on which any such offer may be made.”

In the market Entain is now up 15.06% to 2204p.

Rivals have also been lifted by the takeover news as investors look for the next target.

888 Holdings (LSE:888) PLC is up 6.74% while Flutter Entertainment PLC (LSE:FLTR) has climbed 2.88%.

Another riser is billionaire Bill Ackman’s Pershing Square Holdings Ltd, up4.62%. The hedge fund has 10% of Universal Music Group, whose shares surged by more than a third in its stock market debut in Amsterdam.

The bid speculation and the Pershing move have helped the FTSE 100 climb 79.88 points or 1.16% to 6983.79.

A recovery in commodity stocks has helped, with Royal Dutch Shell PLC (LSE:RDSB) seeing its B shares climb by 3.42%.

Easing restrictions on international travel continued to help British Airways owner International Consolidated Airlines PLC, up 3.12%.

Meanwhile BT PLC has added 3.86% on fresh reports that the DAZN streaming platform is closing in on a deal to acquire BT Sports.

But following their latest updates B&Q owner Kingfisher PLC (LSE:KGF) is down 4.89% and Compass PLC 1.82% lower.

In the US the Dow Jones Industrial Average is well off its best levels but is still up 62 points or 0.19%.

Michael Hewson at CMC Markets said: “After yesterday’s big falls European markets have undergone a decent rebound today, as concerns over Evergrande’s fate get shifted to this week’s bond payments, and whether Chinese authorities will be able to manage any resulting fallout once the deadline has passed. There appears to be an acceptance that an Evergrande failure is more a matter of when and not if, and the real question is how any fallout is managed.

“We’ve seen the FTSE100 retest the 7,000 level and seen similarly strong rebounds in the likes of the DAX and CAC40.”

2.57pm: Betting group soars

Some bid excitement as Entain PLC (LSE:ENT) shares jump 22.53% to 2347p.

The moves follows a report from CNBC that US sports betting group Draftkings has made a US$20bn (GBP14.6bn) offer for the FTSE 100 company, whose brands include Ladbrokes, Coral and Sportingbet.

Entain rejected an $11bn bid from MGM Resorts earlier this year.

With today’s jump Entain is currently worth around GBP13.5bn.

2.45pm: US markets higher ahead of Fed

US markets have indeed rebounded, despite the continuing concerns about the fate of beleaguered Chinese property developer Evergrande and some mixed signals from the US economy as the Federal Reserve meets.

The Dow Jones Industrial Average is up 206.19 points or 0.61% in early trading while the S&P 500 has added .46% and the Nasdaq Composite is ahead 0.54%.

The news has helped support the FTSE 100, which is now up 1.23% or 84.90 points at 6988.81.

1.58pm: US housing starts rise

And mixed signs from the US economy, as the Federal Reserve begins its latest meeting to determine the path forward for its economic support programme.

The US housing market improved more than expected in August, with starts up 3.9% compared to expectations of a 1% increase.

Meanwhile the Philadelphia Fed non-manufacturing survey showed the index for current general activity declined for the third consecutive month, falling from 37.2 in August to 21.9 in September, its lowest reading since April.

The Philly Fed said: “Responses to the September Nonmanufacturing Business Outlook Survey suggest continued growth in business activity in the region. However, the indicators for firm-level general activity, new orders, and sales/revenues all declined from last month. The survey’s indexes for full-time and part-time employment rose. Overall, the respondents continued to expect improvement in conditions over the next six months, but both future activity indexes fell.”

And the currrent account balance improved pretty much in line with expectations:

12.31pm: US markets expected to open higher

Wall Street is set to recover some of Monday’s hefty losses when US markets reopen for business, but concerns remain.

After suffering its worst day in nine weeks with a 1.78% decline, the Dow Jones Industrial Average is forecast to rise 0.92% or 316 points. The S&P 500 is expected to gain 0.83% while the tech-heavy Nasdaq Composite is indicated 0.76% higher.

This week’s slump came as fears grew over the fate of struggling Chinese property developer Evergrande and the possible knock on effect of any collapse of the business on China and beyond. China’s continuing clampdown on various sectors including tech also remains a worry for investors.

Citigroup global macro strategist Matt King said: “Evergrande is not the cause of recent market weakness, but is rather both a symptom and a catalyst. It is not only a few highly leveraged borrowers which are vulnerable to a tightening of the credit screws in China, but any number of asset and commodity prices which had been riding the wave of global liquidity. And while the flow of ongoing QE and credit creation remains large, the deltas are all turning negative. The likelihood of further disappointment in economic data, earnings and even fund flows seems to be growing rapidly.”

Apart from Evergrande and the surging price of energy, there is also the small matter of the latest US Federal Reserve meeting which begins the first of its two days shortly. Analyst have been expected the Fed to give more signals about tapering the support it has been giving to the US economy.

But the latest China crisis and a potential US government shutdown and battle over the debt ceiling mean the central bank might be less hawkish than had previously been anticipated.

The FTSE 100 is still well in positive territory although slightly off its best at 6982.92, up 79.01 or 1.14%.

11.34am: UK order books rise but output growth slows

Mixed signals from the UK manufacturing industry.

Total order books in September rose to their highest on record (since 1977), according to the latest monthly CBI Industrial Trends Survey.

Export order books also improved to their strongest since March 2019.

But output growth in the three months for September slowed for the second month in a row, despite remaining firm by historical standards.

Stock adequacy picked up slightly, but still remained close to last month’s record low and considerably below average.

Meanwhile, expectations for output price growth in the coming quarter remain strong.

Anna Leach, CBI Deputy Chief Economist, said: “Today’s survey highlights how amidst a variety of supply challenges, companies are beginning to struggle to meet high demand. Despite close to half of manufacturers surveyed reporting order books above normal, output growth has slowed sharply, albeit remaining relatively robust. As well as skill and labour shortages, sharply increasing material costs and shortages of key components, producers now face rocketing energy prices.”

The rise in commodity prices has prompted the OECD to raise its inflation forecasts in its latest economic outlook.

It has lifted its prediction for inflation across the G20 this year from 3.5% to 3.7%.

For the UK it expects inflation of 2.3% this year – up from its May forecast of 1.3% – and 3.1% next. These are both of course above the Bank of England‘s target of 2%.

As for the economy, it has trimmed its forecasts for growth.

World GDP is now expected to rise 5.7%, down from the 5.8% forecast in May.

It has cut its GDP growth forecast for the UK from 7.2% to 6.7% this year and from 5.5% to 5.2% next.

All this has had no impact on the FTSE 100, which is up 80.63 points or 1.17% at 6984.54, edging ever closer to the 7000 level.

10.55am: British Gas owner Centrica in demand

It’s an ill wind…

Or in the case of Centrica PLC (LSE:CNA), not wind but gas of course.

Amid the energy crisis the company’s shares are up 1.09% at 54p as Citigroup tipped them as a buy.

Looking at the current problems in the sector Citi utilities analyst Jenny Ping said: “We have been flagging the challenged retail sector for some time, with many of the suppliers making losses and the industry structure unsustainable.

“The recent rapid rise in commodity prices is pushing the sector over the edge with suppliers going into administration and more are set to follow.

“We calculate a further 20% increase to consumer bills if commodity prices were to remain at current levels and expect the political noise to resume. Despite this, we see limited meaningful intervention that can be imposed

“In our view, incumbent positions with solid balance sheets at Centrica (Buy), E.On (Buy) and EDF (Buy) should help to support their respective UK retail businesses, which allows “free” growth of customer base.

“For Centrica, the current focus on gas prices should also be supportive for the future of Rough storage.”

SSE PLC (LSE:SSE) is also in demand, up 1.01% despite the UK government saying it plans to maintain the energy price cap.

The FTSE 100, meanwhile, is heading even higher, up 81.56 points or 1.18% to 6985.47.

10.17am: Housing transactions jump in August

The virutal ending of the stamp duty holiday at the end of June hit the UK housing market in July but that appears to have been short-lived.

According to the latest HMRC figures, UK residential transactions in August came in at 98,300, 20.8% higher than August 2020 and 32% higher than in July 2021.

Jonathan Hopper, chief executive of Garrington Property Finders, said: “After June’s Stamp Duty-inspired sprint finish and July’s brief pause for breath, the market picked up the pace again in August.

“With the number of completed sales spiking by nearly a third in a month, August saw a thumping return to business as usual. With transactions for the month back to typical pre-pandemic August levels, the post-Stamp Duty holiday hangover was fleeting.

“Buyer demand remains strong, but with the catnip-like effect of the Stamp Duty reduction now gone, the market’s frothiest extremes have settled.

“Estate agents are still busy, but buyers are now being much more considered and less emotional in their approach.

“This is cooling the pace of price growth and leading to increased interest in London properties. While still expensive in absolute terms, prices in the capital have risen much more slowly than those elsewhere since the pandemic hit.

“With London’s prime market now starting to see the return of international buyers, more domestic buyers are sensing a window of opportunity as the turbulence of the past year has improved relative value in the capital.”

10.08am: Commodity companies revival helps support market

Mining shares are among the risers as leading shares continue to hold on to most of the day’s gains.

After being hit hard on Monday, the sector is now helping to support the market.

Antofagasta PLC (LSE:ANTO) has added 2.66% while BHP PLC is 2.48% better.

So the FTSE 100 is currently up 67.74 points or 0.98% at 6971.65. But worries remain.

AJ Bell investment director Russ Mould said: “The miners, scarred by heavy selling on Monday, eked out a recovery while British Airways owner International Consolidated Airlines continued the ascent which begin yesterday afternoon when the US lifted travel restrictions on fully vaccinated UK and EU visitors.

“The major catalyst for market volatility of late, fears about the fall-out from a potential collapse of Chinese property developer Evergrande, haven’t disappeared though.

“Evergrande is due to make a debt repayment on Thursday and this event could be the next major test of investors’ resolve.

“The challenge for the markets is trying to guess how Beijing might react, particularly after its notably strident approach in recent months when it comes to the technology industry. Will it be similarly strict with the property sector?

“Before Thursday there is also the small matter of the latest US Federal Reserve meeting and the question of whether recent events will lead chair Jay Powell and his colleagues to rethink their plans for tapering financial stimulus.”

Among the fallers, Kingfisher PLC (LSE:KGF) continues to suffer from profit taking, with its shares down 4.32%.

And catering group Compass PLC has fallen 1.41%. The company forecast an improvement across all its segments for the fourth quarter, but the Business & Industry arm, which includes conferences, continued to be weak.

9.11am: Borrowing second highest August on record

The UK goverment borrowed more than expected in August after a sharp fall in July.

Ahead of the October budget, borrowing came in a GBP20.5bn, down from GBP10.4bn in July but higher than the forecast figure of GBP15.6bn.

That is the second highest August on record after last year’s GBP26bn.

There was a GBP5.3bn rise in central government receipts, but spending was just GBP1bn less than a year ago.

Public sector net debt was GBP2.2trn at the end of August or around 97.6% of GDP, according to the Office for National Statistics, the highest ratio since the 98.3% recorded in March 1963.

Danni Hewson, AJ Bell financial analyst, said: “August delivered another month when what the government raked in was far less than it spent and although the numbers are going the right way, borrowing figures overshot expectations. Tax receipts were up almost across the board with dips only in alcohol and tobacco duty and capital gains tax, the latter suggesting business is taking advantage of new incentives.

“One of the big successes and one of the biggest costs has been the government’s furlough scheme which is now in its dying days. Spend on the scheme in August was just over a billion pounds, an almost 70% decrease compared to the same time last year as the jobs market bubbled and unemployment was kept in check.

“All the support, all the restrictions have come with a substantial price tag and whilst the deficit might be lower than official forecasts, and the Chancellor might have a touch more wiggle room going into his autumn budget than had been expected, there are concerns.

“The pace of economic recovery has been slowing and with conversations about rising gas prices potentially requiring some businesses to operate a short week, that pace could grind to an uncomfortable halt.

“Inflation is not just something that’s making us wince when we get to the supermarket checkout, it’s also taking its toll on the public purse. Interest payments on all that debt shot up in August and September will be even more painful when you factor in the latest RPI figures. And the medicine for inflation, a rate rise from the Bank of England which is widely accepted to be on its way, will perversely also add to debt costs.”

The market seems unworried about the borrowing figures, however, or the Evergrande crisis or indeed the energy and food shortage problems the UK is facing.

The FTSE 100 is now up 70.15 points or 1.02% to 6974.06.

8.42am: Leading shares rebound

The FTSE 100 rebounded from a two-month low as traders reconciled themselves with the threat of inflation and lower growth and began to sniff out the bargain stocks.

Among the top risers was Royal Dutch Shell (NYSE:RDS.A), which advanced 3.3% after the US$9.5bn sale of its Permian Basin assets.

Carrier International Consolidated Airlines Group (LSE:IAG) PLC, up 3.4%, was also flying high after travel restrictions to the US were eased.

Proving the old market adage that it is better to travel than arrive, B&Q DIY group Kingfisher PLC (LSE:KGF) was an early victim of profit-taking following a fairly decent set of interim results. The shares were down 3.8% in the opening exchanges.

“For the most part, tailwinds persist for Kingfisher as the ‘new normal’ continues to evolve,” said Richard Hunter, head of markets at Interactive Investors.

“The group has seen the benefits from the pandemic in different ways of shopping, and the new environment also leaves it well placed.

“Online sales, which rose by 21% over the period and by 216% compared to two years ago, now represent a fifth of group sales and is receiving further investment to consolidate the gains.

“Particularly strong growth in the areas of mobile and click and collect are proving increasingly popular and are slowly becoming entrenched.”

6.50 am: FTSE 100 called higher

The FTSE 100 is set to rebound on Tuesday after it was one of many indices slumping to two-month lows at the start of the week.

Sterling also slid to a three-week low over concerns the UK government might embark on a bailout of its energy sector as rising gas prices push some providers to the wall.

As a weaker pound favours the FTSE, the index’s fall of almost 60 points, or 0.9%, to 6,903.91 could have been worse otherwise – even more so if the news of US travel restriction being lifted had not lifted the sector.

Spread betters are predicting a 40 to 45-point rise at London’s open today.

Over in New York, the main indices all tumbled even more sharply, with the blue chips of the Dow Jones and the small caps of the Russell 3000 both down 1.8%, the S&P 500 falling 1.7% and the tech giants dragging the Nasdaq down 2.2%.

“While most of the factors driving yesterday’s sell-off have been on the radar for a while, concerns over the solvency of Chinese retail estate company Evergrande were the proverbial straw that broke the camel’s back,” said market analyst Michael Hewson at CMC Markets.

READ: Evergrande crisis – which UK companies and commodities have most exposure to China

As Hewson added, the selling of equities led to a flight to the safety of government bonds with US treasuries, UK gilts and German bunds all gaining, sending yields sharply lower.

“The US dollar pushed higher, although its gains were more modest slipping back from one-month highs, ahead of the start of this weeks Fed meeting, which is due to get underway later today, and where the topic of tapering is likely to feature highly, along with speculation of where Fed members see the likely timing of future rate rises, by way of their dot plots.

“The bigger question given the risks emanating from events in China is whether the Fed adopts a less hawkish stance tomorrow in order to buy itself some time until the situation becomes clearer.”

Today’s main corporate items to watch are likely to include contract caterer Compass Group (LSE:CPG) and DIY retailer Kingfisher and funeral director Dignity (LSE:DTY), offering various angles on the economy as we attempt to leave the pandemic behind.

Among the smaller caps, there’s digital training specialist Learning Technologies Group PLC and semiconductor IP specialist Alphawave IP Group PLC (LSE:AWE), which floated in May.

6.50am: Early Markets – Asia / Australia

The liquidity crisis at China Evergrande Group continued weighing on investor sentiment in Asia on Tuesday even after Evergrande’s chairman said the firm will fulfil its responsibilities to property buyers, investors, partners and financial institutions

Japan’s Nikkei 225 slumped 1.67% after the market returned to trade following a holiday on Monday.

In Hong Kong, the Hang Seng index slipped 0.42%.

Markets in mainland China and South Korea remained closed for holidays.

After falling as much as 0.5% in the morning, the Australian stock market has steadied and is now up 0.39% in the last hour of trading.



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