- FTSE 100 fnishes 82 points ahead
- Centrica boosted by upgrade
- Scottish Mortgage lifted by Nasdaq rise
4.05pm FTSE 100 finishes 82 points ahead
The UK’s blue chip index had a good Thursday, finishing 82 points higher at 7,078 points for a 1.17% gain on the trading day.
Analyst Joshua Mahoney at IG noted a second day of declines in natural gas prices and an agreement to temporarily raise the debt ceiling provided the basis for another day of market optimism, but cautioned that the temporary nature of those pledges bring concerns over future volatility.
“US markets have joined their European counterparts in the green today, with fears over a energy driven spike in inflation easing after a second day of downside for natural gas prices,” according to Mahoney. “Treasury yields do continue to rise, highlighting how we remain within a position where the short-term fears are easing and inflation continues to bring expectations of monetary tightening.”
4.02pm: Miners in demand
Mining shares continue to dominate the risers in the leading index, on hopes that the global recovery will lead to increased demand for commodities.
So Anglo American PLC (LSE:AAL) is up 6.04%, Antofagasta PLC (LSE:ANTO) is 5.46% better, Rio Tinto PLC (LSE:RIO) has risen 4.17% and BHP PLC is 4.11% better.
3.40pm: Talk of US deal as soon as today
Reports that US lawmakers have indeed agreed a deal to extend the debt ceiling until December – with a vote perhaps as soon as today – and prevent the US defaulting have given a lift to global markets.
US Senate Majority Leader: Hopes For Passage On Debt Ceiling Thursday
— LiveSquawk (@LiveSquawk) October 7, 2021
Add to that an easing of the recent surge in gas prices after Russia indicated it could increase supplies to Europe, and investors are in a fairly upbeat mood at the moment.
The FTSE 100 – which has suffered a volatile week so far – is up 98,51 points or 1.41% at 7094.38, its high for the day.
On Wall Street, the Dow Jones Industrial Average has jumped 537 points or 1.56%, while the S&P 500 is up 1.46% and the tech heavy Nasdaq Composite is 1.7% higher.
2.43pm: Debt ceiling deal hopes lift markets
Wall Street has opened strongly, on hopes that a deal to prevent the US government from defaulting can be reached, and the latest better than expected jobless claims figures.
Ahead of the non-farm payroll numbers on Friday – which the Federal Reserve will be watching closely – the Dow Jones Industrial Average is up 404 points or 1.18%.
The S&P 500 has climbed 1.08% and the tech-heavy Nasdaq Composite is 1.17% higher.
Meanwhile the FTSE 100 is 87.7 points or 1.25% better at 7083.57.
1.50pm: Fall in US jobless claims
US weekly jobless claims have fallen by more than economists had been forecasting, another sign of an improving economy,
The number of Americans seeking unemployment benefits for the first time fell to 326,000 from 364,000 the previous week, itself revised upwards by 2,000.
This compares to expectations of a fall to 348,000.
The four week moving average rose by 3,500 to 344,000.
At 326,000, US initial jobless claims fell relative to the prior week and were better than consensus expectation (348,000).
This comes after two weeks of disappointments on both fronts.
Along with yesterday’s strong ADP, this is fueling more optimism about tomorrow’s #jobs report
— Mohamed A. El-Erian (@elerianm) October 7, 2021
The news has given a minor boost to the expected open on Wall Street, with the Dow Jones Industrial Average showing a 0.88% gain, the S&P 500 set to rise 0.93% and the Nasdaq Composite indicated 1.12% higher.
In the UK, the FTSE 100 remains 80.28 points or 1.15% higher at 7076.15, not far off its high for the day.
12.53pm: Inflation proving more long lasting than expected – BoE economist
The Bank of England’s new chief economist Huw Pill has said pricing pressures are proving more long lasting than had been expected.
The comments, in a questionnaire for the Treasury Select Committee, suggest that interest rates may need to rise to combat inflation, if it proves not to be as transitory as central banks had been hoping.
Here are the relevant remarks: “The risks to inflation, growth and employment in coming quarters will reflect both the sustainability of the recovery in demand and the persistence and magnitude of supply constraints.
“A benign view sees those supply constraints as temporary. Current inflationary pressures are part of an adjustment process, which will subside as bottlenecks are relieved. The end of the furlough scheme releases additional effective supply into the labour market. Monetary policy has a role in sustaining demand to create conditions amenable to adjustment and avoid that temporary supply constraints evolve into a permanent degradation of the supply side via hysteresis.
“By contrast, a malign view sees mis-matches as persistent or even structural. The end of furlough does not add to effective labour supply, but simply adds to long-term unemployment. Monetary policy needs to constrain demand to recognise the lower potential of the economy, or otherwise risk that inflation and inflation expectations shift to a new higher equilibrium inconsistent with the MPC’s remit owing to self- sustaining second round effects in inflation associated with rising pricing power for firms and/or a wage/price spiral.
“Reality will lie somewhere between these two polar characterisations of the risks. In considering policy decisions, it will be necessary judge the balance of risk between the two scenarios.
“In my view, that balance of risks is currently shifting towards great concerns about the inflation outlook, as the current strength of inflation looks set to prove more long lasting than originally anticipated.“
12.20pm: US markets await jobless claims update
US stocks are expected to rise when the market opens, building on a recovery in late Wednesday trading following a report that Congress might reach a short-term agreement to raise the government borrowing limit, giving the Treasury headroom until December and preventing a default.
Investors are now looking to Friday’s key non-farm payroll data for further direction.
Futures for the Dow Jones Industrial Average futures rose 0.71% in Thursday pre-market trading, while the broader S&P 500 index added 0.86% and those for the tech-heavy Nasdaq 100 gained 1.06%.
The Nasdaq led Wednesday’s turnaround, adding 0.47% to finish at 14,502 points, while the S&P 500 was not too far behind at 4,364 points, a 0.41% gain. The Dow also had a good session, finishing 0.3% higher to close at 34,417 points.
Ahead of the key non-farm payroll number on Friday – and following Wednesday’s better than expected growth in ADP private payrolls – come the latest weekly US jobless claims.
They are expected to show a fall from 362,000 to 348,000.
Jeffrey Halley at Oanda said: “[The] weekly US initial jobless claims will allow some last minute rejigging of non-farm forecasts for tomorrow…
“The ADP employment number rose sharply to 568,000 jobs, well above forecasts. The ADP has been a poor indicator for the non-farms of late, is this the month we see a return to the mean?”
12.10pm: Better to come?
Leading shares continue to gain ground, with the FTSE 100 now up 80.01 points or 1.14% at 7075.88.
And after a torrid September, some market followers believe there is more to come.
Marc Kimsey, equity trader at Frederick & Oliver said: “Traders should be encouraged by the historical form of the fourth quarter, by far the strongest quarter, gaining 3.5% on average over the past 70 years, presenting a potential Christmas target of 7,250 points for the FTSE 100.”
12.02pm: Gas prices stabilise
The comments from Vladimir Putin saying Russia was prepared to stabilise the market has seen gas prices pull back from Wednesday’s records.
Gas for delivery in November is down 16% at 229p a therm having hit a peak of 400p yesterday.
But the market remains volatile, and Russia appears to be keen to link increased gas supplies with getting approval for its controversial Nord Stream 2 undersea pipeline.
Jeffrey Halley at Oanda said: “[Putin] sparked a near 10% sell-off in natural gas prices overnight after he offered to “stabilise” the natural gas market in Europe by potentially pumping more supplies through the Ukraine.
“The Russian Vice-President [Alexander Novak} also mentioned certifying Nord Stream 2 once again as a potential solution to Europe’s gaseous woes. President Putin also alluded to the benefit of long-term as to short-term supply contracts. Mr Putin’s comments were high on rhetoric but very low on detail such as how much and when. The message is fairly clear though, you can have all the gas you want in the future, you just need to sign here….”
Meanwhile, Fatih Birol, the head of the International Energy Agency told the Financial Times that Russia had the capacity to send substantially more gas to Europe.
Birol said Russia should prove it is a reliable supplier, adding: “What our numbers show is that Russia could increase its gas flows to Europe by about 100mln cubic metres a day; that is about 15% of the Russian exports to Europe in the winter season.
“If Russia does what it indicated yesterday and increases the volumes to Europe this would have a calming effect on the market. I don’t say they will do it but, if they wish so, they have the capacity to do it.”
The FT reckoned the comments indicated that the IEA believes Russia has held back huge volumes of potential gas sales even as prices have soared to record levels.
10.45am: Tech recovery helps Scottish Mortgage
The recovery on Wall Street, helped by hopes that the US debt ceiling crisis could be averted or at least delayed, included a 0.47% rise on the tech heavy Nasdaq Composite.
This has given a lift to Scottish Mortgage Investment Trust PLC (LSE:SMT) (LSE:SMT), known in recent times for its highly successful backing of big tech in the US and China. Its shares are currently up 2.12% at 1375.5p.
Miners are still leading the way, with Antofagasta PLC (LSE:ANTO) adding 4.37%, Anglo American PLC (LSE:AAL) up 3.52%, precious metals specialist Fresnillo PLC (LSE:FRES) climbing 2.49% and Rio Tinto PLC (LSE:RIO) rising 2.46%.
Overall, helped by the rise in US markets and signs the energy market surge has eased for the moment, the FTSE 100 is up 61.93 points or 0.89% at 7057.80.
Chris Beauchamp, chief market analyst at IG, said: “Stock markets are in bullish mood this morning in Europe, with gains fuelled by hopes of some progress in US debt ceiling talks…
“It is too early to say that the run lower is at an end, and with non-farm payrolls tomorrow and earnings season next week there is still plenty of scope for volatility, but the key worry for investors appears to have been dealt with for the time being…
“Unlike other indices, the FTSE 100 has managed to avoid a return visit to recent lows, helped no doubt by sterling weakness, and seems poised to make more gains as the general atmosphere of risk aversion eases.”
9.39am: Ex-divs dip
Taylor Wimpey PLC (LSE:TW.), now down 0.91%, is not the only company going ex-dividend.
B&Q owner Kingfisher PLC (LSE:KGF) is down 1.64% and paper group DS Smith PLC (LSE:SMDS) is off 0.28%.
But that has done little to dampen the market at the moment.
The FTSE 100 remains in positive territory, up 52.57 points or 0.75% at 7048.44.
Richard Hunter, head of markets at interactive investor, said “Risk appetite has briefly returned for investors, although sentiment remains delicately poised.
“Progress on debt ceiling talks in the US seems to suggest a temporary deal to avoid default… At the same time, indications that Russia may be stepping up gas supplies also steadied energy prices, which have been the main culprit for the volatility which is currently being experienced.
“The spike in energy prices has unsettled investors both from a growth and an inflation perspective. Concerns about the timing of the Federal Reserve taper have been thrown into further disarray as higher energy prices could both crimp economic growth but also feed inflation, which is already at elevated levels.”
Friday’s US non-farm payroll numbers will be keenly watched in that respect, with investors searching for clues as to how the Fed might respond.
9.09am: Buoyant housing market continues, says Halifax
UK housebuyers appear to have taken advantage of the final knockings of the stamp duty holiday, helping prices in September to rise at the fastest rate since 2007.
That’s according to the latest Halifax house price survey, which is one of several reports on the sector, not all of which tally with each other.
The Halifax said prices climbed by 1.7% last month, the final one before the tax break finally ended in England and Northern Ireland.
Annual house price inflation was up from 7.2% to 7.4%, and the average UK property price now at record GBP267,587.
This reversed the recent three-month downward trend in annual growth, which had peaked at an annual rate of 9.6% in May
The bank reckons not all of the September rise was due to the ending of the stamp duty holiday, however.
And it says Wales and Scotland continued to outperform the UK average even though their tax breaks ended earlier in the year.
Russell Galley, Halifax managing director said: “While the end of the stamp duty holiday in England – and a desire amongst homebuyers to close deals at speed – may have played some part in these figures, it’s important to remember that most mortgages agreed in September would not have completed before the tax break expired. This shows that multiple factors have played a significant role in house price developments during the pandemic.
“The ‘race-for-space’ as people changed their preferences and lifestyle choices undoubtedly had a major impact. Looking at price changes over the past year, prices for flats are up just 6.1%, compared to 8.9% for semi-detached properties and 8.8% for detached. This translates into cash increases for detached properties of nearly GBP41,000 compared to just GBP6,640 for flats.
“Against a backdrop of rising pressures on the cost of living and impending increases in taxes, demand might be expected to soften in the months ahead, with some industry measures already indicating lower levels of buyer activity. Nevertheless, low borrowing costs and improving labour market prospects for those already in employment are likely to continue to provide support.
“Perhaps the biggest factor in determining the future of house prices remains the limited supply of available properties. With estate agents reporting a further reduction in the number of houses for sale, this is likely to underpin average prices – though not the recent rate of price growth – into next year.”
Nicky Stevenson, managing director at national estate agent group Fine & Country, said: “A reality check has been forthcoming — it’s just not the one anyone was expecting.
“House price growth has accelerated just as the market’s crutches have been taken away. This is the exact opposite of what logic dictated should have happened in September and tells you the rally isn’t over yet.
“The housing market has hurtled into what had been widely billed as a period of adjustment but its reaction has defied gravity yet again.”
The news has given some support to housebuilders, with Persimmon PLC (LSE:PSN) up 0.88% and Barratt Developments PLC (LSE:BDEV) rising 0.7%.
But Taylor Wimpey (LSE:TW.) PLC is down 1.25% as its share went ex-dividend.
Overall investors have decided it’s going to be an up day for the market, with the FTSE 100 ahead by 62.28 points or 0.89% at 7058.15.
8.44am: Rollercoaster ride continues
The graph for FTSE 100 in the first week of the final quarter has resembled the outline of a rather tame roller coaster ride – probably one where’s there’s no height restriction.
For no sooner has the car nosed lower, then it lurches higher, but not too high.
For over a week now, the blue-chip index has been oscillating along a narrow band that periodically takes it (just) below the 7,000-mark before sense is restored.
One day the cocktail of higher energy prices, stagnant growth and Covid combined with the threat from the Chinese property sector collude to bring the market down.
But, such is the bipolar mood, that bargain-hunting tends to quickly reverse these declines – in the UK at least.
Thursday marked a positive start to proceedings, so traders looked to have taken their iodine.
The miners were in the box seat. Antofagasta, the Chilean copper giant, led the Footsie with a 4% gain, while Anglo American was up 2.8%.
Energy company Centrica was also among the risers with a 2.4% advance after a Morgan Stanley (NYSE:MS) upgrade to ‘overweight’
6.50 am: Strong start expected
The FTSE 100 is set to make a strong start to Thursday with sentiment buoyed by equity rallies in Asia and American politicians appear closer to approving the new, temporary, debt ceiling.
In the UK attentions remain on inflation, supply chains and the energy crisis. Nonetheless, the equity market has steadied off yesterday’s lows. For Europeans, attentions will later today be on the ECB which releases minutes from Thursday’s policy meeting.
CFD firm IG Markets sees London’s blue-chip benchmark rising more than 1% ahead of Thursday’s open, making a price of 7,063 to 7,066 with just over an hour to go until the open.
In America, Republicans and Democrats agreed to consider a stop-gap extension to the US borrowing limit until December, potentially breaking a deadlock and remove at least on layer of market risk for investors.
Elsewhere, bargain pickers can be seen in the market following this week’s weakness.
“Sentiment is rebounding in Asia this morning, with indexes up in the ballpark of 1-2.5% (China is still closed though) as investors buy the dip in tech,” Danske Bank analyst Aila Mhir said in a note.
“Optimism is extending into the US, with futures signalling another day of gains.”
Last night, on Wall Street, the Dow Jones closed Wednesday up 102 points or 0.3% at 34,416.
The S&P 500 similarly moved 0.4% higher to finish the session at 4,363 and the Nasdaq was slightly stronger still rising 0.47% to 14,501. The small-cap centred Russell 2,000, meanwhile, dipped 0.6% to 2,214.
In Asia, Japan’s Nikkei rose by 0.84% to 27,761 and Hong Kong’s Hang Seng was up 2.43% at 24,554, while the Shanghai Composite added 0.9% to 3,568.
Around the markets
The pound: US$1.3578, down 0.03%
Gold: US$1,757 per ounce, down 0.36%
Silver: US$22.54 per ounce, down 0.53%
Brent crude: US$80.79 per barrel, down 2.1%
WTI crude: US$76.79 per barrel, down 2.7%
Bitcoin: US$54,682, up 6%
Ethereum: US$3,530, up 1.76%
6.50am: Early Markets – Asia / Australia
Stocks in the Asia-Pacific region were higher on Thursday after US Senate GOP leader Mitch McConnell on Wednesday offered a short-term suspension of the U.S. debt ceiling to avert a national default and economic crisis.
China’s Shanghai Composite rose 0.90% while Hong Kong’s Hang Seng index surged 2.45%
In Japan, the Nikkei 225 gained 0.74% and South Korea’s Kospi lifted 1.63%.
Australia’s S&P/ASX200 gained 0.70% to 7,256 with IT emerging as the strongest sector.