FTSE 100 dips on interest rate worries after GDP figures, but Anglo American leads miners higher

  • FTSE 100 down 21 points
  • US markets fall
  • House prices edge lower

5:05pm Footsie slips 21 points at month’s end

The FTSE 100 was unable to end in the green shedding 21 points by the close to sit at 7,086. While the UK blue chip index closed in the negative, it did register a 0.8% 3Q gain.

Looking forward, the end of the furlough scheme is expected to weigh on the market in the month ahead, as almost one million Britons are left in a precarious position.

Across the pond, jobs are also a cause for concern with a monthly rise in US jobless claims. The data weighed on investor sentiment which sent the three key markets south.

The S&P 500 dropped 31 points to sit at 4,328 over the lunch hour, while the Dow Jones Industrial Average continued its decline falling 434 points to 33,956. Following suit, the NASDAQ’s lost 27 points which left it at 14,485.

“Mixed US markets are being led higher by tech outperformance today, with a disappointing jobless claims figure driving treasury yields lower to the benefit of growth stocks,” Joshua Mahony, Senior Market Analyst at IG wrote in a morning note.

“The third consecutive rise in initial jobless claims serves to highlight the uneven recovery path underway in the US,” he added.

3.47pm: Airlines help pull markets lower

Leading shares are in the red heading to the close, as the stronger than expected UK economic growth in the second quarter renewed talk of interest rate rises.

After spending much of the day in positive territory, the FTSE 100 is now down 20.97 points or 0.3% at 7087.19.

Commodity companies continue to provide some support.

Anglo American PLC (LSE:AAL) has added 3.25%, Evraz PLC (LSE:EVR) is up 3.02%, Rio Tinto has risen 2.28%, Fresnillo PLC (LSE:FRES) is ahead 2.12% and BHP PLC is 1.6% better.

Diageo PLC (LSE:DGE) has gained 1.6% following its latest trading update.

But British American Tobacco has lost 4.33% as its shares went ex-dividend while Next PLC (LSE:NXT) is down 3.17% on profit taking following this week’s positive statement.

Airlines are lower after promising to improve their refund procedures after numerous complaints.

British Airways owner International Consolidated Airlines PLC is down 4.24%, Wizz Air PLC has lost 4.03% and EasyJet has fallen 2.68%.

The mid-cap FTSE 250 index is also lower, down 0.21%.

Michael Hewson, chief market analyst at CMC Markets UK, said: “After starting on the front foot today, markets in Europe have seen the morning gains slowly slip away in a manner that has pretty much reflective of the wider uncertainty that has been characteristic of sentiment for most of this quarter.

“We’ve seen swings in both directions as we look set to finish what has been a mixed month very much on the back foot, with the DAX set to post its worst month this year, the FTSE 100 has managed to shrug off most of its losses to finish close to where it finished at the end of August and is still set to finish the quarter higher.

“Whether it is as fortunate in October remains to be seen, given that the FTSE 250 also suffered its worst month this year, with the FTSE 100 benefitting from the outperformance of companies like Rolls Royce which is up over 20%, and decent gains from the likes of BP, Royal Dutch Shell, and British Airways owner IAG.”

After a bright start on Wall Street, it is now a more mixed picture. The Nasdaq Composite is still up, by 0.45%, but the Dow Jones Industrial Average has dropped 0.38% and the S&P 500 is virtually flat.

2.56pm: Virgin Galactic soars

US markets have opened higher as investors bet on an agreement on a deal to avoid a government shutdown, and shrugged off worse than expected weekly jobless claims.

The Dow Jones Industrial Average has added 65 points or 0.19% while the S&P 500 is up 0.3% and the Nasdaq Composite has advanced by 0.55%.

Virgin Galactic Holdings Inc (NYSE:SPCE) has soared 12% after the Federal Aviation Administration finished an enquiry into the space tourism company’s test flight with Richard Branson.

The FAA wants some new procedures but the news paves the way for flights – which have been grounded since 11 August – to begin again.

But retailer Bed Bath & Beyond has slumped 27% after it warned supply chain problems and inflation costs would hit its sales and profits.

Despite the rise on Wall Street, the FTSE 100 has edged into negative territory and is now down 3.58 points at 7104.58 having earlier climbed as high as 7159.

The stronger GDP figures could bring the prospect of interest rate rises closer, investors fear.

1.45pm: US jobless claims jump again

Mixed signals from the US economy.

US jobless claims have shown a surprise increase for the second week in a row.

The number of Americans seeking unemployment benefits for the first time rose from 351,000 to 362,000 last week, the worst level in seven weeks. The forecast was for a fall to 330,000.

The four week moving average rose 4,250 to 340,000.

Meanwhile the country’s economy grew slightly more than expected in the latest revision to second quarter GDP:

The key data for the US Federal Reserve though is likely to be next Friday’s (8 October) non farm payroll numbers.

12.30pm: US debt ceiling in focus

US stocks are expected to open higher on the last trading day of September following a mixed session on Wednesday, as investors remain on edge over whether US lawmakers will vote to suspend the debt ceiling to avoid a credit default.

Futures for the Dow Jones Industrial Average futures added 0.43% in Thursday pre-market trading, while the broader S&P 500 index gained 0.43% and those for the tech-heavy Nasdaq-100 rose 0.95%.

At the close on Wednesday, the Dow rose 91 points to 34,391, while the S&P 500 edged up 7 points at 4,360 and the Nasdaq moved 34 points lower to 14,512.

While the Democrat-dominated House of Representatives passed a bill to suspend the debt ceiling as the US moves toward a first-ever default, Republicans are expected to block the plan in the Senate.

“US equity futures have adopted a more positive tone in Asia.. with Senate majority leader Schumer telling reporters that the Senate will vote this morning on a continuing resolution to keep the government open until 3 December, thus averting a shutdown from tomorrow,” Daiwa Capital Markets analyst Chris Scicluna said.

“Of course, this leaves the much thornier issue of the debt ceiling still to be addressed – a standalone bill approved by the House yesterday will certainly fail to pass in the Senate – with Republicans still hoping to leverage this in a bid to force Biden to substantially pare his budget spending plans. Despite the rise in equity futures, Treasury yields have traded slightly lower in Asia.”

“While it appears that Congress will pass a continuing resolution today to keep the government open until 3 December, this simply turns attention to the even more pressing need to raise or suspend the debt ceiling by about the middle of next month in order for the US to avert a default,” he added.

Meanwhile the weekly US jobless claims are expected to show a fall from the previous week’s higher than expected figure of 351,000, to 330,000.

Back in the UK and the FTSE 100 is currrently up 18.15 points or 0.26% at 7126.31.

11.15am: Mixed market performances for the month

It is month end and quarter end, and Neil Wilson at Markets.com has been looking at how markets have performed.

He said: “Scores on the doors are FTSE 100 up 1.6% for the quarter, 0.5% for September, which is not bad going considering the kind of volatility we have seen. Less positive for the US indices with the S&P 500 down 3.6% in September, just holding onto its quarterly gain of 1.4%. The Nasdaq 100 is down 5% this month. The DAX is down for both the month and the quarter. Hang Seng -15% almost for the quarter after all the tumult for tech stocks and Evergrande

“Three-quarters of the way into 2021 and the S&P 500 is up 16%, the FTSE 100 up 10% and the DAX up 12%. The FTSE All World Index – a measure of global stocks – is lower for September, flat for the quarter, but still up 26% over the last 12 months. Flattish performance this quarter reflects stagnating growth rates globally and a rocky month we have just seen.

“September lived up to its promise for volatility, October is set to bring more with inflation, central bank tightening and slowing growth combining to create a less positive backdrop for equity markets. Investors should also be keeping a close eye on Washington – whilst a default is unthinkable – the merry dance keeps bond markets guessing.”

At the moment the FTSE 100 is still in positive territory, following the better than expected UK GDP figures.

But it is off its best, now up 8.01 points or 0.11% at 7116.17.

10.53am: Car production drops by more than a quarter

UK car production slumped by 27% in August, with 37,246 cars manufactured.

The Society of Motor Manufacturers and Traders said the fall was due to the widely publicised global chip shortage and some extended summer factory shutdowns.

But production of the latest battery electric, plug-in hybrid and hybrid cars surged to a new high, representing more than a quarter (27.6%) of all cars made, equivalent to 10,274 units.

SMMT chief executive Mike Hawes said: “Another significant decline for UK car production is extremely worrying both for the sector and its many thousands of workers nationwide. While not the only factor at play, the impact of the semiconductor shortage on manufacturing cannot be overstated. Carmakers and their suppliers are battling to keep production lines rolling with constraints expected to continue well into 2022 and possibly beyond.

“Job support schemes such as furlough have proven such a lifeline to automotive businesses yet its cessation today comes at the worst time, with the industry still facing COVID-19-related stoppages which are damaging the sector and threatening the supply chain in particular. Other countries have extended their support; we need the UK to do likewise.”

9.46am: Miners support market rise

The FTSE 100 is holding on to its gains on the last day of the quarter.

The leading index is currently up 40.24 points or 0.57% at 7148.4 as investors shrug off the concerns which had started to dog the market.

Russ Mould, investment director at AJ Bell, said: “There is a decent showing across European equities including a 0.6% gain in the FTSE 100.

“That’s quite surprising given how a cocktail of issues have been clouding the market in recent sessions, namely rising bond yields making tech stocks less attractive, ongoing supply chain issues, the spike in energy prices and broader inflation, and the Evergrande drama still playing out.

“The UK market was propelled by miners, oil producers and financials – all beneficiaries of strong economic activity, which is again perhaps a surprising movement given growing fears over global economic growth as we head towards 2022.

“Oil producers are benefiting from higher oil prices but demand for miners and financials might represent investors rotating once more from high growth stocks towards lower rated names that offer growth at a cheaper price, even if that growth is less racy.”

Miners are indeed heavily represented in the top risers.

Anglo American PLC (LSE:AAL) has added 3.27%, BHP Group PLC (LSE:BHP) is 2.03% better and Rio Tinto PLC (LSE:RIO) has risen 1.97%.

9.06am: House prices dip in September

UK housing figures seem to arrive with remarkable frequency, and they do not always tally with each other.

This time it is the turn of the Nationwide, which has reported that annual house price growth eased back to 10% in September, from 11% the previous month as the boom from the stamp duty holiday eased.

The average price edged down marginally from GBP248,857 to GBP248,742.

Nationwide chief economist Robert Gardner said: “Annual house price growth remained in double digits for the fifth month in a row in September, though there was a modest slowdown… in August. House prices rose by 0.1% month-on-month, after taking account of seasonal effects. As a result, house prices remain around 13% higher than before the pandemic began in early 2020.”

The building society’s third quarter figures show a mixed picture across the UK.

Gardner said: “While price growth accelerated in Wales, Northern Ireland and Scotland, most English regions recorded a slowdown.”

But that does not mean things have improved much for first time buyers.

He said: “House prices have continued to rise more quickly than earnings in recent quarters, which means affordability is becoming more stretched. Raising a deposit remains the main barrier for most prospective first-time buyers. A 20% deposit on a typical first-time buyer home is now around 113% of gross income – a record high.”

8.57am: Ex-divs among the losers

A number of shares have gone ex-dividend, as is the usual Thursday practice.

Into this category come British American Tobacco PLC (LSE:BATS), which has fallen 2.45%, Barratt Developments PLC (LSE:BDEV), down 2.18% and Smith & Nephew PLC (LSE:SN), 0.38% lower.

But this has done little to hold back the market, with the FTSE 100 now up 43.02 points or 0.61% at 7151.18.

8.22am: UK GDP beats expectations

Leading shares have opened higher as new figures showed the UK economy growing more strongly than expected in the second quarter.

UK gross domestic product increased by 5.5% in the three months from April to June, up from a first estimate of 4.8% which was expected to remain unchanged.

The Office for National Statistics said there were increases in all main components of expenditure, with the largest contribution from household consumption. This contributed 4.0 percentage points to the 5.5% increase following the easing of coronavirus restrictions in the second quarter when compared with those in place in the first three months of the year.

A rise in household spending of 7.9% as restaurants and cinemas reopened saw the household saving ratio decrease to 11.7% in second quarter, compared with 18.4% in the first, which was the second highest on record.

But the figures are quite backward looking and since June the economy has faced increasing challenges, not least from the supply chain problems, the surge in energy prices and the prospect of rising interest rates.

Richard Hunter, chief market analyst at interactive investor, said: “GDP is now just 3.3% shy of pre-pandemic levels, and far healthier than the near 20% decline seen as the initial lockdown was introduced in March 2020.

“Meanwhile, the immediate test for the UK economy now comes in the form of the winding down of the furlough scheme and the stamp duty holiday. In terms of the former, it remains unclear whether the expected spike in unemployment will come to pass, given the currently high levels of job availability as evidenced by shortages in various sectors.

“The recent economic challenges resulting from supply chain blockages have weighed on sterling, exacerbated by US dollar strength as some investors have sought haven investments. This in turn has boosted the FTSE 100, largely reliant as it is on overseas earnings, whereby overseas earnings become more valuable on sterling weakness.”

So in early trading the FTSE 100 is up 20.46 points or 0.29% at 7128.62.

Among the risers, drinks giant Diageo PLC (LSE:DGE) is up 1.64% after its latest trading update, while Royal Mail PLC (LSE:RMG) has recovered a little after Wednesday’s slump due to a downgrade from UBS, adding 1.49%.

6.50am: Leading shares expected to add to gains

The FTSE 100 is set to start Thursday higher whilst equity market limbo continues amid veneer of a chaos.

CFD firm IG Markets sees the London index up around 33 points making a price of 7,136 to 7,139 with just over an hour to go until the open.

Sentiments are in limbo, with share prices largely holding up though many big news headlines around the UK energy crisis and supply-chain problems create a background of risk and fear.

Next week may bring more clarity, or at least less noise, according to CMC Markets analyst Michael Hewson.

“We should get a better idea of sentiment next week, when all this week’s noise is behind us, however it is inescapable that the sudden turnaround in 10-year yields from 1.3% a week ago, to above 1.5% this week, does suggest that bond markets have undergone a significant change in sentiment,” the analyst said in a note.

“Fears over stagflation do appear to be rising, after all, how could they not be when you see the sorts of increases being seen in energy prices, a trend that will eat into people’s disposable income, thus reducing their capacity to spend on other incidentals.”

US equity markets saw a mixed close to Wednesday, with the Dow Jones ending the trading session up 90 points or 0.26% at 34,390.

The S&P 500 was up 0.16% at 4,359 whilst the Nasdaq closed lower, down 0.24% at 14,512. Small cap centred Russell 2,000 finished Wednesday 0.2% lower at 2,225.

In Asia, Japan’s Nikkei was up slightly at 29,545 whilst Hong Kong’s Hang Seng was a sliver lower at 29,541. The Shanghai composite was 0.75% in positive territory at 3,562.

Around the markets

The pound: US$1.3446, up 0.14%

Gold: US$1,732 per ounce, up 0.2%

Silver: US$21.58 per ounce, up 0.06%

Brent crude: US$78.46 per barrel, down 0.8%

WTI crude: US$74.76 per barrel, down 0.7%

Bitcoin: US$43,499, up 3.3%

Ethereum: US$3,027, up 4.4%

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mixed on Thursday as China’s manufacturing Purchasing Managers’ Index for September came in at 49.6, below the 50 mark that separates growth from contraction.

The September factory activity readings were released as China continues to grapple with a power crunch.

China’s Shanghai Composite nevertheless gained 0.79%, while Hong Kong’s Hang Seng index dipped 0.73%

In Japan, the Nikkei 225 slipped 0.11% and South Korea’s Kospi rose 0.49%.

Australia’s S&P/ASX200 continued its rise after a strong start this morning, with the index rising 1.60% by the last hour of trading.



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