- FTSE 100 drops 26 points
- US markets mixed at midday
5:09pm: European markets bookend week with losses
The FTSE 100 ended Friday 26 points lower or 0.38% to close at 7,051. The decline follows a mid-week bump the Footsie experienced after slipping to a two-month low on Monday.
4:21pm: Markets pretty much as they were
There are some notable share movements around, including Cineworld (LSE:CINE) hitting a two-month high earlier on the back of healthy ticket sales for the new James Bond film.
After tickets for No Time to Die were released last Friday, sales have been “by far and away the highest” since pre-pandemic levels, according to the Hollywood Reporter.
They have been refuelled by the easing of some international restrictions, “even though the challenge of recouping lost income is only just beginning”, say analysts at Interactive Investor.
“Even so, the market adage that it is often better to travel than arrive is currently providing some relief to the beleaguered tourism sector,” they added, also noting the double-digit gain by BA owner IAG this week.
One of the big fallers today is Boohoo rival In The Style Group (AIM:ITS) despite reporting strong sales growth, as it warned profits will be hit by higher freight costs and more people returning items.
The online womenswear specialist said it had seen the anticipated shift in demand towards occasionwear, but this typically carries a higher rate of returns than the leisurewear categories that had dominated sales during the previous year.
Looking back at the whole week, market analyst Craig Erlam at Oanda said with so much happening this week, with the days littered with central bank meetings and other developments, there has been so much to take in that it might take traders and investors until next week to process it all, making the last week of the month even more interesting.
After Evergrande caused a stir at the start and end of the week, Erlam said, “Buy-the-dip is alive and well it seems because the end result is that Evergrande remains at risk, central banks will soon be tightening and are increasingly concerned that inflation may not be quite as transitory as previously thought.
“Which begs the question, what exactly was the undesirable outcome for investors this week? It certainly makes the next few weeks interesting.”
For a look at some of the financial diary stories for the coming week, you could do worse than read our week ahead preview, which ranges from utilities to fast-fashion, with Moonpig, SSP and JD Wetherspoons too.
3pm: Cruises and lorries
It’s not quite a clean sweep of red around European and US stock markets but close to it, with Wall Street joining in the sell-off at the end of the week.
The tech giants of the Nasdaq are leading the decline in New York, down 0.7% as all of the ten largest companies are on the back foot, while the S&P 500 is down 0.1% and the Dow Jones is just below flat.
Pressure was coming from the bond markets, where the US 10-year Treasury rose to 1.450%, though this is only its highest since July.
Shares of Carnival PLC and Corp are up on both sides of the Atlantic however, even though the cruise operator unveiled a larger loss of US$2.8bn than expected.
Carnival said cruises were cash flow positive in the third quarter and that it expects this to continue, with an average cash burn of US$510mln beating previous guidance.
London’s FTSE 100 and 250 have trimmed their losses, possibly helped by a report in the FT that the government is looking at a package of measures to address the truck driver crisis, including the option of issuing temporary visas to foreign lorry drivers.
Boris Johnson has ordered a relaxation of the short-term visa scheme, normally used for seasonal agricultural workers, to allow several thousand lorry drivers and food processing workers to be employed in the pre-Christmas run-up.
The PM was reported to be “completely fed up with bad headlines” around the issue and now “doesn’t care about visa limits any more”, according to a Downing Street source quoted by the paper.
1.25pm: Bitcoin plunge
While stock markets are wallowing underwater, Bitcoin and other digital currencies have made a bigger splash after being given a push by China, which dropped yet another of its regulatory bombshells.
The latest crackdown came from the People’s Bank of China saying all crypto-related transactions are illegal in the country.
Services offering trading, order matching, token issuance and derivatives for virtual currencies are strictly prohibited, the central bank said, while overseas crypto exchanges providing services in mainland China are also illegal.
The Chinese government will “resolutely clamp down on virtual currency speculation, and related financial activities and misbehaviour in order to safeguard people’s properties and maintain economic, financial and social order,” the PBOC added.
Bitcoin has plunged % at US$41,437, not a particularly big move in crypto terms, to be fair.
I see crypto bros have labelled China’s decision to ban crypto transactions “FUD”.
Next up, “China’s ban is bullish for bitcoin”.
— (((Frances ‘Cassandra’ Coppola))) ???????????? (@Frances_Coppola) September 24, 2021
“China’s ongoing clampdown continues to weigh on sentiment,” says Fawad Razaqzada, market analyst at ThinkMarkets.
“Although other countries – most notably El Salvador – have warmed to cryptos, the fact that the world’s second-largest economy and most populous state – with about 18.5% share of the world’s population – refusing to play ball cannot be ignored by crypto enthusiasts.”
Yet, he said the adoption of Bitcoin and other digital currencies by a growing number of companies is “helping to keep the downside risks limited”.
The latest of these is Twitter Inc (NYSE:TWTR), which announced that it will allow its users to tip their favourite content creators using Bitcoin by linking their profiles to Strike, the payments application built on the Bitcoin Lightning Network.
After first launching the feature back in May, Twitter said it will now roll it out globally to all Apple iOS users this week, with Android to follow in the coming weeks.
Says Razaqzada: “As more and more companies adopt cryptos and transactions increase, this should help keep the downside risks limited. But China is the major risk that is likely to keep prices under pressure for a while. So, the risks are skewed to the downside for now.
“As such, Bitcoin may fall further in the short-term outlook and head back down to $40K – or lower. The bias would only turn positive once prices break out from the falling wedge pattern to the upside, or create a major reversal pattern at lower levels first.”
The FTSE 100 meanwhile, has taken a leg lower, down 32 points or 0.45% at 7,046.37.
12.19pm: FTSE trying to get flat
The FTSE is swimming back up to the flat line, making it one of the best-performing markets in Europe this morning, down 0.2%. The FTSE 250 is continuing to decline though, now down 183 points or 0.8% to just under 23,500.
This is despite further disappointing data in the recently released CBI distributive trades survey, where the reported sales balance fell to +11 in September from +60 in August. This was well below the consensus forecast of +34.
“The decline in the reported sales balance in September to its average level in the 2010s provides another indication that the recovery in households’ spending has little momentum,” said Samuel Tombs, Pantheon Macroeconomics’ top-rated economist, though he noted that the CBI’s balance is volatile.
Nonetheless, other indicators also point to “a sluggish recovery in consumption,” he said, referring to the earlier GfK confidence data and the recent decline shown by the Bank of England‘s credit and debit card data.
Given this backdrop, Tombs said it “remains difficult to see” households’ spending growing at the rapid rates required for the BoE’s interest rate-setting committee’s GDP forecasts to be met and for the committee therefore to proceed to hike rate early next year.
Talking of the BoE, deputy governor Sam Woods says Britain’s banks are not materially exposed to the Chinese property giant Evergrande, which earlier missed the initial deadline for payments on its dollar bond.
Woods said he does not expect Evergrande, which owes well over US$300bn, to “go badly wrong”, but acknowledged that “the question on everyone’s mind is how will the authorities choose to handle this in China, and could it represent something broader”.
“Obviously at some point that could become something that we need to worry about. My base case is it won’t go badly wrong,” he told Reuters.
12.10pm: Wall Street to start lower
Looking across the Atlantic, US stocks are expected to join the risk-off mood.
Futures markets are pointing to the Dow Jones and S&P 500 falling around 0.3%, with the tech-led Nasdaq dropping 0.5%.
Fed speakers will be in focus today after the central bank decisions in recent days, said market analyst Walid Koudmani at XTB.
“This week saw several central banks announce their rate decisions, with most of them leaving them unchanged and only offering indications of when there could be a potential change in monetary policy. While focus remains on the FED decision and economic projections released this week, today’s speeches by members of the US central bank could have an unexpected impact on markets in the near future.”
Speakers include Fed chairman Jorome Powell and vice chair Richard Clarida.
Koudmani said they could provide further information on the timing of a potential tapering, which as has previously had an impact on US indices, the dollar, gold and other commodities.
With the Evergrande payment news he said “it will be interesting to see if the US central bankers will downplay the situation or if it will be a topic for the Fed to discuss in order to avoid concerns of a chain reaction spilling into other global markets”.
11.14am: Risk off, Daniel-san
From a risk-on session on Wall Street overnight, stock markets are making like Karate Kid today and wiping the risk off.
Wall Street’s rise was an unexpected bullish reaction to the increasing hawkishness of global central banks and ensuing selling of government bonds, resulting in climbing yields.
The yield on the US 10-year Treasury note hit its highest point since mid-July yesterday at 1.41%, while on a UK gilt spiked to 0.9%, and with both inching up today.
“It’s unusual for such a rise in real yields to be accompanied by a general rise in stock markets, yet that’s what happened,” said market analyst Marshall Gittler at BDSwiss.
“It looks like the optimism of central banks is spilling over into optimism of the markets.”
Though in Europe the usual bond yields up, markets down pattern is holding sway.
Mulling this over, Gittler noted that even though the Fed’s forecasts for interest rates rose sharply, the US central bank is still expected to be well below the rate of inflation.
“In other words, even as the Fed withdraws stimulus, its stance is expected to remain unusually accommodative. I would imagine other central banks are likely to tread carefully as well. I think that explains why stock prices can rise in the face of more hawkish central banks.”
Meanwhile, the FTSE 100 has trimmed its losses, now down 21 points or 0.3% at 7,057, while the more domestically focused FTSE 250 has extended its own, down 0.7% to 23,666.
A big issue for the UK economy at the moment is the lack of lorry drivers, with transport secretary Grant Shapps telling Sky News just now that the government “wouldn’t rule anything out” to try and sort out the problem, including potentially issuing short-term visas to European HGV drivers.
After BP’s announcement last night about its petrol stations, the MP tried to avert panic buying from drivers, saying the problem would be “smoothed out relatively quickly”.
Elsewhere, the REC Jobs Recovery Tracker revealed that there were 223,000 new job adverts posted in the week of 13-19 September 2021, giving a total of 1.90 million active job adverts in the UK.
This is a new record high for the tracker since it started collecting data in January last year.
10.34am: European markets on the slide
Some analysts are looking towards Sunday’s highly uncertain German election as a big focal point for continental stocks, with final opinion polls suggesting that the centre-right CDU/CSU has regained some ground, with the centre-left SPD lead narrowing to just 3 points and the classical-liberal FDP increasingly looking as though they may well be the kingmakers in the event that a three party coalition proves to be the only viable option.
“In that case,” says Marc Ostwald, chief economist & global strategist at ADM Investor Services, “it could well be that the SPD may win, but the FDP insist that it will only consider a coalition with the CDU and the Greens.
“It is also more than possible that another grand coalition is an option, but the resistance to this within both of the major parties looks to be large, though in the spirit of ‘Ordnungspolitik’ as was the case after the 2017 election, they both may be left with no choice.
“The complex process of excess seat election and the issue of whether the far left ‘Die Linke’ manage to cross the 5% minimum for entry into the Bundestag could alos prove critical in the potential coalition mathematics.”
9.47am: London’s losses grow
London stocks have extended their initial losses, with the blue-chip Footsie now down 31 points or 0.4% to just over 7,047, while the mid-caps of the FTSE 250 have fallen 0.6% to 23,696.
Leading the big cap fallers is JD Sports (LSE:JD.) after sportwear giant Nike last night cut its sales expectations and warned of expected delays during the pre-Christmas shopping season as products are held by supply chain issues.
“In Vietnam, nearly all footwear factories remain closed by government mandate. Our experience with COVID-related factory closures suggest that reopening and ramping back to full production scale will take time,” Nike’s financial chief said, with the company having lost 10 weeks of production in the south-east Asian country so far.
Stock markets are weaker this morning around Europe as investors are digesting the selloff in global bonds as yields start to escalate, while also looking ahead to the uncertainty of the German election on Sunday, says market analyst Neil Wilson at Markets.com.
“Central banks on the move: Norway’s central bank became the first in the G10 to raise rates after the pandemic, Turkey’s central bank – an outlier – lowered rates (to 18%), whilst the Bank of England and Federal Reserve sat on their hands but indicated they too are about to start moving. Yields are on the move too as bonds sell off on tightening expectations.
“Something has clearly changed and positioning on rates is shifting. US 10yr yields jumped to 1.44%, posting their biggest one-day gain since March, whilst 30yr bond yields jumped the most in a single day since March 2020. European bond yields are also marching higher.”
9.09am: Consumer confidence
More on the long-running GfK consumer confidence report that was published overnight and showed a decline in the overall index to -13 for September from -8 a month ago.
All five measures recorded by GfK fell month-on-month, with the biggest movement coming from British people’s view of the general economic situation over the next 12 months, where the sub-index tumbled 10 points to -16.
Analysts at broker Shore Capital said this was unsurprising given the increase in inflation, the upcoming end of the government furlough scheme for around 1.5m people and now energy, food and fuel shortages (see BP’s petrol station warning last night).
“Overall it appears many consumers will appear to be anticipating a direct impact from tougher economic conditions and a potentially higher cost of living,” wrote ShoreCap’s Katie Cousins, noting the personal financial situation index is down for both last year and the year ahead.
Gfk’s index of major purchase intentions also fell, three points to -6, which is 15 points above the same period last year, which to Cousins, “indicates bad news for retailers ahead of the key ‘golden’ Q4 period”.
“Overall, we see this morning’s GfK report as a grim but unsurprising read. The commentary that accompanies this economic data states; ‘When consumer confidence drops, shoppers tend to spend less, and this dampens the overall economic prospects for the UK. This really is an unwelcome picture if this continues into 2022 and beyond’, which sets a worrying tone for consumer and retailers leaders, especially non-food discretionary, across the country, in our view.
“However, we note that even if the demand and sentiment were stronger, there is still the issue of stock shortages. Rising inflation, cuts to government support schemes, the power crisis along with the potential lack of products available are clearly a worry within the UK and likely to be causing big challenges for the Conservative party, especially with its upcoming annual conference. We expect these concerns to remain headwinds to the GfK Consumer Index recovery, throughout the upcoming months,” Cousins and her colleagues concluded.
8.48am: Early nudge lower
The FTSE 100 resisted the pull higher of Wall Street to open in the red.
While far from dominating sentiment early on, the latest UK consumer confidence numbers were rather lacklustre and will have provided traders pause for thought.
Uppermost in their minds likely will be the impending collapse of Evergrande, the Chinese property giant, and its potential impact on the real estate and financial sectors.
Topping the Footsie risers was AstraZeneca, up 3% after positive phase III data from its Lynparza drug, which met its goals a metastatic prostate cancer trial.
In the last five trading days, the Anglo-Swedish pharma giant has seen its value grow by 8.5%, or GBP11bn, and in the last six months has advanced 25%.
Turning to the natural resources sector, Touchstone Exploration investors received a boost from the company’s final exploration well of its latest campaign in Trinidad.
Results were far better than expected, propelling the shares 27% higher in the early exchanges.
6.50 am: Flat start predicted
The FTSE 100 is set for a flat start even though US markets powered higher overnight as UK investors focus instead on domestic issues and the seemingly worsening Evergrande situation.
Financial spread betters see London’s main index easing around three points at the open to follow yesterday’s five-point fall to 7,087.
In the US, all three of the main indices shot higher as investors decided that the Fed commitment to tighten its monetary policies was a good thing or at least no worse than expected.
Bond yields rose sharply which made the jump in US markets more impressive, said commentators. Dow Jones rose 1.5%, the S&P 500 1.3% and Nasdaq 1% as investors kept hitting the buy button.
Asian markets were mixed and again dominated by Evergrande with the Chinese regime said to be warning local governments to prepare for its collapse.
Reuters this morning reported that the beleaguered property firm had missed its latest interest repayment deadline.
The company, which owes $305bn, was due to make a payment of US$83.5mln but there has been no comment from Evergrande that this has been paid, said the wire.
If not, it has a 30-day grace period to pay after which it is in default.
Where any liability might lie in that event is the next question likely to trouble the markets.
Global banks have repeatedly assured investors that their risk is not material which begs the question of who does pick up the tab in the event of default.
Consumer mood the focus in the UK
Consumer confidence is the main UK point of interest today in an otherwise slim scheduled news list.
On the company front, Judges Scientific releases interims but the gas price crisis has dominated headlines this week and that seems unlikely to change heading into the weekend
Friday 24 September:
Interims: Judges Scientific PLC (AIM:JDG)
Economic data: UK GFK consumer confidence
6.50am: Early Markets – Asia / Australia
Stocks in the Asia-Pacific region were mostly lower on Friday as The Wall Street Journal reported on Thursday that Chinese authorities have told local officials to prepare for a potential demise of Evergrande.
Shares of China Evergrande Group in Hong Kong fell around 7%.
The Shanghai Composite slipped 0.21% while Hong Kong’s Hang Seng index fell 0.11%
Japan’s Nikkei 225 was an exception, surging 2% while South Korea’s Kospi dropped 0.17%.
Australia’s S&P/ASX200 has, in the last hour of trading, fell 0.43% to 7,338.