FTSE 100 back to square one despite enthusiasm for oil giants

  • FTSE 100 closes 16 points lower
  • Dow loses early gains while Nasdaq tumbles
  • Brent crude rises to three-year high

5.11pm: Footsie closes in the red

The FTSE 100 index ended lower on Monday as a rise in the price of Brent Crude Oil (LSE:BRENT) to a three-year high added to stagflation worries.

At the close, the UK blue-chip index was 16 points, or 0.23% lower at 7,011, above the session low of 7,002 but well below the peak of 7,072.

The more UK plc focused FTSE 250 shed 321 points, or 1.4% to 22,655.

On Wall Street by London’s close, the Dow Jones Industrials Average was 345 points, or 1% lower at 33,982, with the broader S&P 500 index down 1.34%, while the tech-laden Nasdaq Composite lost 2.21%.

“With price increases slamming economies from all directions, concerns about stagflation seem to have turned from niggling worries to an anxiety attack, with US indices falling sharply in early trading,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“The FTSE 100 fell into the red late into the day, heading back towards the psychologically significant 7,000 mark, as investor sentiment turned more negative. As many businesses grapple with labour shortages and an ongoing supply chain crisis amid higher demand for goods, there are concerns that higher costs will drag on the overall economic recovery.”

4.05pm: FTSE 100 retreats

Most of the Footsie’s gains have dissipated in the second half of the afternoon session.

London’s index of heavyweight shares was up just 3 points (0.0%) at 7,030, despite index heavyweights BP PLC (LSE:BP.) and Royal Dutch Shell PLC (LSE:RDSB) both putting on around 2% in line with the rise in crude oil prices.

2.45pm: US indices open mixed

The S&P 500 has opened lower, as expected, but the Dow Jones has pulled off a surprise, opening in positive territory.

The S&P 500 was down 16 points (0.4%) at 4,340 but the Dow wasup 23 points (0.1%) at 34,344.

The tech-heavy Nasdaq Composite was the worst performer of the big three, sliding 184 points (1.3%) at 14,382.

In London, after an indecisive morning, the FTSE 100 has progressed to 7,060, up 33 points (0.5%), with a bit of support from resource stocks.

Commodity trader Glencore PLC (LSE:GLEN) is 2.6% heavier at 359.95p while Royal Dutch Shell PLC (LSE:RDSB), buoyed by the rising oil price, is 2.0% better at 1,678.6p. Brent crude for December delivery is up US$2.13 at US$81.41 a barrel – the highest level since 2018.

“The OPEC+ ministerial monitoring committee meeting has ended. The OPEC-JMMC has recommended proceeding with the previously agreed 400K barrel per day hike in November. WTI crude has surged to $77 a barrel, hitting the highest in more than 7 years. Brent has broken above $80 a barrel,” reported Fawad Razaqzada at ThinkMarkets.

“The full meeting of the OPEC and its allies has started. Before the meeting, two options were being considered: to increase oil output by 400K barrels per day or 800K bpd, with a pause in December. It looks like the group favours the former and oil prices have reacted accordingly. It should be noted that both options will in effect offer no increase beyond what was previously agreed. To that end, the impact of the decision should have limited influence on oil prices but if the OPEC+ somehow surprised us later and opt for 800K in November with a pause in December, then this would at least relieve some pressure in the short-term,” he added.

12.40pm: The Footsie rises despite the strength of sterling

US indices are set to take a step back when trading commences at 2.30pm this afternoon.

Spread betting quotes suggest the Dow Jones average will slide 154 points to 34,172 and the S&P 500 will tumble 23 points to 4,354.

In London, the FTSE 100 is 13 points (0.2%) firmer, despite sterling making headway against the dollar – generally viewed as a bad thing for most of the FTSE 100 constituents.

In contrast, a strong pound is usually viewed as positive for the FTSE 250, stuffed full as it is of mid-cap companies that export more than they export, but the mid-cap index is down 63 points (0.3%) at 22,913.

Mid-cap Plus500 Ltd (LSE:PLUS), up 3.3%, is doing its bit to support the FTSE 250; Plus500’s shares are higher after the company raised full-year revenue and profits guidance after making further progress in the third quarter of 2021.

Sector peer CMC Markets PLC (LSE:CMCX, FRA:T8Q) rises 2.2% in sympathy.

11.15am: Footsie ambles into positive territory

The Footsie is now in positive territory, fuelled – if that’s not a touchy word in the current environment – by demand for supermarket stocks.

The FTSE 100 is up 11 points (0.2%) at 7,038, with Sainsbury’s, Ocado Group PLC (LSE:OCDO) and Tesco three of the four best performers.

The interloper in the top four is Informa PLC (LSE:INF), the events organiser, which is 1.8% firmer at 570.8p on expectations that the UK government will further relax restrictions on foreign travel.

French Connection Group (LSE:FCCN) PLC, a stock market star back in the mists of time, looks set to reach the end of the line as a publicly listed company after its board agreed to recommend a takeover offer from major shareholder, Apinder Singh Ghura.

The offer is at 30p a share; French Connection shares are up 18% at 28.2p.

9.40am: Is everyone on holiday?

Traders are probably too busy booking late holidays to trade equities this morning, judging by the market’s tranquillity.

The FTSE 100 is down 7 points (0.1%) at 7,020, largely thanks to BT Group PLC (LSE:BT.A) tumbling 9.2% to 149.7p on reports that Sky is nearing a deal to co-invest with VMO2 on fibre broadband.

Also on the slide is Morrison (Wm) Supermarkets PLC after the weekend sealed-bid competition from its two suitors failed to produce much excitement.

READ Morrisons shareholders to vote for GBP7.1bn offer by auction winner Clayton, Dubilier & Rice

The Yorkshire-based supermarket group will be bought by US private equity firm Clayton, Dubilier & Rice (CD&R) after it won an auction on Saturday.

The group offered 287p per share, equating to GBP7.1bn, while fellow suitor Fortress proposed 286p per share.

Morrison shares were trading at 285.8p this morning, down 3.8%.

Rivals Sainsbury (J) PLC and Tesco PLC (LSE:TSCO) were the best Footsie performers, with the former up 4.0% at 295.8p and the latter 1.3% firmer.

British Airways owner International Consolidated Airlines Group (LSE:IAG) SA was 1.1% higher at 190.04p on reports that the UK government is to slash the number of countries on the travel “red list” from 54 to nine.

8.45am: Flat as a pancake

The FTSE 100 opened the trading week flat – which was a slightly better than expected start given Asia’s earlier jitters over the imminent collapse of Evergrande.

Hong Kong’s Hang Seng ended the session down 2.2% and at a 12-month low after shares in the Chinese property group were suspended.

Luckily, this was viewed more as a local difficulty than a systemic problem, though Evergrande’s woes could still have international ramifications.

Here at home, the blue-chip index spluttered and spat as the UK continued to be dogged by wholesale supply chain issues allied with inflation and stagnation concerns.

“The higher volatility and constant rotation between value and growth stocks are likely to persist in the near term, which clouds visibility for the FTSE100’s generally cyclical constituents,” said Richard Hunter, head of markets at Interactive Investor.

“With investor sentiment finely balanced, the main UK indices have been under pressure, although some solace has been found in the FTSE100 given the more recent weakness in sterling.”

With US private equity group Clayton, Dubilier & Rice declared the winner of the GBP7bn battle for control of Morrisons, shares in larger rival Sainsbury were up 2% in early trade.

Market chatter suggests it will be the next grocer through the check-out, and one report even went as far as to assert that Sainsbury had already hired a bid defence team.

Has the market got a whiff of something amiss at BT Group? The shares were marked down 7% in early trade.

Last week it was revealed it faces a GBP600mln legal case over landline charges, while it is also said to be negotiating the sale of its BT Sports arm, reportedly to DAZN.

Whether either forms the narrative to Monday’s early fall remains to be seen.

6.50 am: Footsie called lower

The FTSE 100 looks set to open firmly in negative territory and below 7,000 with the markets bracing for a shock from Evergrande.

Shares in the failing Chinese property group were suspended, sending Hong Kong’s Hang Seng down 2%.

“Evergrande is has a US$260mln offshore note maturing today, which only has a five-day grace period, and if no sign of payment occurs, the negative noise around the company and China’s property market will increase once again,” explained Jeffrey Halley, Asia-Pacific analyst at OANDA.

“There still remains very little visibility from the Chinese Government over Evergrande’s fate, although a slow and steady dismantling of the company appears to be the favoured course right now.”

Elsewhere in Asia, the mood was subdued with share trading liquidity severely curtailed as a result of public holidays in mainland China, Korea and parts of Australia.

Here at home, it looks likely to be another busy week for news flow with Tesco, Greggs and Imperial Brands (LSE:IMB) among a flood of updates.

There is also plenty of macro data. US non-farm payrolls are released on Friday, and could potentially yield clues on the state of the world’s largest economy.

Before that, we have UK PMI data, while on Thursday the Bank of England publishes its monetary policy report.

OPEC+, the oil cartel, meets later Monday. Crude prices were flat ahead of the gathering suggesting supply constraints may be lifted.

Around the markets

  • Sterling US$1.3550 (flat)
  • Bitcoin $47,803.76 (-0.53%)
  • Gold US$ 1,761.70 (+0.19%)
  • Brent Crude US$79.25 (flat)

6.50am: Early Markets – Asia / Australia

Asian markets were mixed on Monday, with the Hang Seng index in Hong Kong tumbling more than 2%.

Hong Kong-listed shares of China Evergrande Group were halted as unconfirmed reports suggested another Hong Kong-listed property developer was preparing to pay US$7 billion for a partial stake in the company.

China’s markets are closed for holidays and are set to reopen on Friday.

In Japan, the Nikkei 225 fell 1.15% while South Korea’s Kospi slumped 1.62%.

Australia’s S&P/ASX200 surged 1.29% to 7,278.50 by the last hour of trading, with the financial sector outperforming.



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