• FTSE 100 closes up five points
  • UK inflation falls but remains high
  • Wall Street stocks continue rally

5.10pm: FTSE closes ahead

FTSE 100 index closed in positive territory midweek, just, as the UK benchmark was boosted by positive sentiment across the Pond and traders brushed off any inflation fears.

The UK index of leading shares finished up around five points, or 0.08%, at 7,223, just shy of the session high of 7,229.

On Wall Street, the Dow Jones Industrial Average added over 161 points at 35,618. The Nasdaq gained over 19 at 15,148, while the S&P 500 added over 17 at 4,537 as traders continue to cheer a strong third quarter earnings season.

“Rising costs don’t matter, it seems, so long as you can keep earnings rising as well. That is the theme that has emerged from corporate updates over the past week, and the market has eagerly latched on to the narrative as a useful counter to the supply chain crisis and rising inflation,” said Chris Beauchamp, the chief market analyst at online trading firm IG.

He added: ” Stock markets have performed well over the past week, emboldened by better earnings, with the Dow knocking on the door of a new record high. Sentiment has shifted remarkably in just a week, but then rallies can do that, as investors switch from doom and gloom to relentless optimism. We can only hope that earnings season continues to deliver the goods.”

4.10pm: FTSE 100 zig zags

Although the FTSE 100 is mounting a late mini-rally, individual companies are offering a lot more interest than the index, which is on course to trade in its smallest daily range this year.

“By and large companies are reporting decent numbers with an ability to pass on rising costs, without a significant impact on their sales growth numbers,” says market analyst Michael Hewson at CMC Markets.

“While that is encouraging given the build-up in savings levels over the pandemic, most of this ability to pass on these costs predates the recent surge in energy prices, which means that the barriers to it continuing are growing”.

The blue chip index has been lifted by a late surge by Vodafone (LSE:VOD), Kingfisher (LSE:KGF), Burberry (LSE:BRBY) and BT Group (LSE:BT.A).

British Airways owner IAG remains bottom of the list.

Says Hewson: “At the beginning of September, a wave of optimism broke over the travel sector as the prospect of the lifting of restrictions on overseas travel came into focus, which in turn prompted some decent gains for airlines. This light at the end of the tunnel for airlines was welcome news for the beleaguered travel sector given how it has borne the brunt of various lockdown restrictions.

“Unfortunately for the airlines, the light at the end of the tunnel has turned out to be the train of rising fuel costs, higher airport charges, and the prospect of further Covid restrictions coming in the other direction, with the likes of IAG, easyJet, Lufthansa and TUI unable to catch a break with TUI dropping to its lowest levels this year.

“It’s hard to think of a bigger own goal than Heathrow Airport hiking their charges by 56% at the very time that fuel prices are surging, and infection rates are on the rise again. Gatwick and other regional airports must be rubbing their hands.”

Meanwhile, reports have come through that China Evergrande’s plan to sell its property division has fallen through, while others are talking about the possibility that the London Metal Exchange might run out of copper.

2.59pm: Wall Street opens higher, Bitcoin hits new high

The FTSE’s modest resurgence proved only a dalliance, as the index has dipped back underwater, despite Wall Street starting more decisively on the front foot than futures markets had anticipated.

New York’s main indices are all in the green, with the Dow Jones and S&P 500 rising 0.3%, while the tech-powered Nasdaq making gains but starting to fizzle out already.

Netflix (NASDAQ:NFLX) is one of the notable fallers, down over 2% despite its headline figures for the past quarter beating expectations.

Computer chip component supplier ASML Holding (NASDAQ:ASML), another of the Nasdaq’s top 20, is down more than 3% despite also topping Street estimates with its quarterly numbers overnight.

‘Sell the news’ seems to be the feeling for investors.

Meanwhile, Bitcoin has hit a new high, up 5% to US$65,844.

“The party is on,” says Naeem Aslam, market analyst at AvaTrade. “The fact is that this is only a beginning as investors know the true value of bitcoin is much higher than this. Given the price momentum we are seeing on the back of Bitcoin’s ETF, we believe that Bitcoin can easily go all the way to 100K by the end of this year.”

1.05pm: Chancellor Sunak making headlines

London’s blue chip index is managing to keep its head above water in the early afternoon, with the FTSE 100 up just over one point at almost 7,219.

Its sibling is not doing so well, with the FTSE 250 sliding lower as the session wears on, now down over 60 points to 22,993, with travel and leisure stocks the big weight around its neck.

READ: Travel and leisure sectors under pressure as UK coronavirus cases mount

Although the mid-cap index is more focused on the domestic economy than its big brother, the index is falling despite reports that the Chancellor of the Exchequer, Rishi Sunak, is ready to expand the UK business loan program by another six months.

Citing the usual “people familiar with the matter”, Bloomberg News reported Sunak is planning to extend the program of state-backed business loans that was implemented to aid the economic recovery during the early stages of the pandemic.

This follows earlier reports that the Chancellor is planning to cut tax surcharges on bank profits in his Budget next week, with the aim of helping the City of London remain competitive following Brexit.

The surcharge will be slashed from 8% to 3%, the Financial Times reported, after his March Budget’s hike to corporation tax meant that banks currently pay 27% tax on their profits, which is broadly in line with other financial centres such as New York and Paris.

According to the FT, the chancellor will say that unless the surcharge is reduced, the overall UK corporation tax rate for banks after 2023 would be uncompetitive, with banks facing a combined rate of 33%.

Bank shares are in the red and are falling further, with Virgin Money (LSE:VMUK) down over 2%, Lloyds Banking (LSE:LLOY), Barclays (LSE:BARC), Standard Chartered (LSE:STAN) and OSB Group (LSE:OSB) all down more than 1%, with HSBC (LSE:HSBA) and NatWest (LSE:NWG) more passive.

This comes as UK gilt yields slip back in the wake of this morning’s CPI numbers, which are perhaps bolstering views that the Bank of England is not likely to hike rates as soon or as much as expected over the coming year.

12.01pm: Into the green

The Footsie has pulled itself onto dry land, though traders returning confidence is not extended to US stocks, which are expected to open flat.

Futures for the Dow Jones, S&P 500 and Nasdaq are seeing the dial waver either side of zero.

This comes a day after Wall Street’s main indices finished mostly higher as companies continued to report strong third-quarter earnings.

But even though Netflix reported better-than-expected subscriber numbers, buoyed by its blockbuster Squid Game series, pre-market trading indicates the shares will fall 2.5%.

Investors are shrugging off the fine for Facebook (see below) as just a drop in the ocean for the social media behemoth, with pre-market trading pointing to a 0.5% gain.

Fallers are expected to include biotech Novavax, where the shares are down 18% in pre-market trading, on reports that the manufacturing process for its Covid-19 jab continues to struggle to meet US regulatory requirements.

Another is Micron Technology, the memory and semiconductor company, which spooked investors with its new plan to invest US$150bn into memory manufacturing and development over the next decade.

“14 out of 15 companies reporting during New York trading on Tuesday beat estimates”

“Whilst inflation concerns are still very much bubbling under the surface of markets, risk appetite strengthened further yesterday thanks in no small part to decent earnings reports,” said Jim Reid, a strategist at Deutsche Bank (NYSE:DB).

Reid noted that 10 of the 11 companies reporting during New York trading on Tuesday beat estimates, while all four of those reporting after the close beat as well. That brings the total number of reporters for the season so far to 57, 50 of which have beaten earnings expectations.

“There are no signs of widespread erosions of margins at the moment. Perhaps there is so much money sloshing about that for now prices are broadly being passed on. We’ll get a better picture of this as the earnings season develops,” he added.

11.11am: Halma tops Footsie, Facebook fined

Stock markets are mixed across Europe, with London and Paris in the red but others are on the front foot.

The FTSE is down less than three points down now, at just under 7,215, with top risers including Halma (LSE:HLMA), Unilever (LSE:ULVR) and Ocado (LSE:OCDO).

Unilever is rebounding today, having been dragged down by a cautious outlook from rival Proctor & Gamble yesterday, with a lift today coming as investors read across from Nestle as it upgraded full-year guidance.

In other news, Facebook Inc (NASDAQ:FB) might have even more reason to want to change its name, as it has been fined GBP50mln by the UK competition watchdog for deliberately ignoring a previous ruling in relation to the company’s acquisition of Giphy, as well as another GBP500,000 for changing its chief compliance officer on two separate occasions without seeking consent first.

The Competitions & Markets Authority explained that one of its standard practices is to issue an initial enforcement order (IEO) at the start of an investigation into a completed acquisition, aimed at preventing the companies involved from integrating further while a merger investigation is ongoing.

Having imposed an IEO on Facebook in June 2020 over the Giphy deal, Facebook was required to provide the CMA with regular updates outlining its compliance with the order.

“Facebook significantly limited the scope of those updates, despite repeated warnings from the CMA,” the regulator said, adding that the company was also criticised last year by the Competition Appeal Tribunal and Court of Appeal for its lack of cooperation with the CMA.

“This is the first time a company has been found by the CMA to have breached an IEO by consciously refusing to report all the required information. Given the multiple warnings it gave Facebook, the CMA considers that Facebook’s failure to comply was deliberate. As a result, the CMA has issued a fine of GBP50 million for this major breach, which fundamentally undermined its ability to prevent, monitor and put right any issues.”

Facebook is also reported to be mulling rebranding itself as part of a corporate restructure, in a similar manner to Google’s move to become Alphabet.

Other news for US company watchers includes the earnings report from Netflix Inc (NASDAQ:NFLX) after the closing bell last night, where the video streaming group announced better numbers on new subscribers and profits but said margins will be squeezed hard in the next quarter as it ramps up spending on new shows.

Later tonight it will be the turn of Elon Musk as Tesla Inc (NASDAQ:TSLA) opens the bonnet on its third-quarter figures and reveals how it is coping with the shortage of semiconductors and other supply bottlenecks.

9.44am: Travel and leisure hit by Covid warning

Shares on the London Stock Exchange are, on the whole, lower, with the Footsie down 12 points at just under 7,206, the mid caps of the FTSE 250 down 30 points to 23,024, while the AIM index is just below flat.

With calls for the government to implement a ‘Plan B’ measures for the coming winter, with UK Covid-19 cases among the highest in the world, travel and leisure stocks are among the main stock market fallers.

Names include IAG, easyJet (LSE:EZJ), Tui (LSE:TUI), Cineworld (LSE:CINE), SSP (LSE:SSP), Mitchells & Butlers (LSE:MAB) (LSE:MAB), Wizz Air (LSE:WIZZ) and WH Smith (LSE:SMWH).

9.05am: Inflation thoughts

More reactions are coming in on the earlier UK CPI figures, which fell to 3.1% in September from 3.2% in August.

Market analyst Neil Wilson at Markets.com: “UK inflation has fallen! But before we rejoice too much, it’s probably a one-off. CPI fell to 3.1% in September from 3.1% in August. The end of the Eat Out to Help Out scheme at the end of August last year, which led to restaurants raising prices in September, is a big factor. The surge in energy prices and ongoing supply chain problems are still expected to drive inflation to 4% this year. Moreover, the RPI rose 4.9%.”

Laith Khalaf, head of investment analysis at AJ Bell: “Inflation dropped back slightly in September, largely because the effects of last year’s Eat Out to Help Out scheme fell out of the annual calculation. The latest numbers don’t include the petrol pump crisis or the most recent surge in energy prices, or indeed the knock on effects across the economy, so inflation will still get worse before it gets better. Inflation is also being broadly felt, seeing as the biggest drivers are housing and transport costs, which are unavoidable for almost everyone in the country… we haven’t yet really tested the Bank of England‘s judgment that price rises are temporary, which makes the recent shift to more hawkish rhetoric surprising. It could be that in the last month, the Bank has identified new data that seriously undermine the case for price rises being transitory, and tighter monetary policy is imminent. But we shouldn’t rule out the possibility than in the cold light of day, the interest rate committee decides it needs more time to assess the economic situation before raising interest rates, particularly given the peculiar circumstances created by the pandemic.”

Mark Ostwald, economist and strategist at ADM Investor Services: “Per see, the BoE’s MPC are unlikely to take any solace from this reading, particularly as the much disparaged RPI measure pushed up to 4.9% y/y from 4.7%. That said, while PPI remains very elevated, it is somewhat surprisingly not seeing the sort of upward pressure on input prices which might be expected given the vast array of UK supply chain disruptions … All of which is well and good, but is in many [ways] peripheral to the key criticism of the BoE, i.e. a spectacular failure of its forward guidance, which will now have to be stepped up in a very coherent and cogent fashion, if already out of control market pricing of the UK’s rate trajectory is not to pose an even bigger threat.”

8.37am: Footsie opens lower

The FTSE 100 has defied expectations and started on the back foot as UK inflation numbers fell but left the interest rate debate still rumbling.

London’s blue-chip index dropped three points to 7,214.2 in early trades.

Leading the decline was miner Antofagasta (LSE:ANTO), down 3.5% after releasing a quarterly production update, and with peers Rio Tinto (LSE:RIO), BHP Group (LSE:BHP) and Glencore (LSE:GLEN) also among the big fallers.

Consumer names such as British Airways owner IAG (LSE:IAG), retailers B&M (LSE:BME) and JD Sports (LSE:JD.) are also down the bottom of the blue-chips list.

B&M was hit by a ‘sell’ recommendation from Deutsche Bank (NYSE:DB).

Near the top of the early leaderboard is fashion house Burberry (LSE:BRBY) after it announced the appointment of former Versace and Alexander McQueen boss Jonathan Akeroyd as its new chief executive. The shares are up 1.2%.

September’s consumer price index (CPI) fell to 3.1% from 3.2% in August, with the market having expected no change. Core CPI inflation, which excludes fuel and food prices, fell to 2.9% from 3.1%, when the consensus forecast had been for 3.0%.

“September’s slight decline in CPI inflation won’t settle the debate on the MPC regarding how soon it should raise interest rates,” said economist Samuel Tombs at Pantheon Macroeconomics.

“Hawks will be able to continue to warn of the dangers that high inflation poses to inflation expectations, while the doves will be able to point out that the above-target rate is primarily due to rising prices for oil and some goods affected by global supply chain problems. Indeed, the core rate was boosted by 0.5 percentage points in September by the very high inflation for used cars, which increased to 19.2%, from 18.3% in August, as a result of the continued shortage of supply of new vehicles.”

6.40am: FTSE called higher

The FTSE 100 is expected to open in the green ahead of the UK CPI numbers, which could lead to a rate hike from the Bank of England.

London’s main index is called 10 points higher at 7,227.

“Today’s numbers would almost appear to be academic if the recent shift in narrative by Bank of England governor Andrew Bailey is any indication. If markets are right, we look set to see a rate rise, either at next month’s November meeting, or at the December meeting just before Christmas,” commented Michael Hewson at CMC Markets.

“While this seems plausible, what is less so is the market expectation that we could see a rise in bank rate to 1.2% by the end of next year. This strikes me as the market getting way ahead of itself, and not in any way plausible.”

“The shift in sentiment is no better exemplified than in the move in UK 2-year gilt yields which have risen 33 basis points in October alone to currently sit at their highest levels since May 2019.”

In August, the UK CPI jumped to 3.2%, from 2% in July, mostly due to price rises in restaurants and other hospitality venues, when compared to the suppressed levels a year previously due to the ‘eat out to help out’ scheme.

Since those August numbers prices have increased further and with various emergency government support measures also coming to an end we can probably expect to see further upward pressure in prices, although most consensus expectations for today’s numbers are for headline CPI to remain steady at 3.2% and core prices to slip back to 3%.

6.50am: Early Markets – Asia / Australia

Asia-Pacific shares were mixed on Wednesday after the International Monetary Fund slashed its 2021 economic growth forecast for Asia, now expecting the region to grow by 6.5% this year.

That compared against the IMF’s April forecast for a 7.6% growth.

China’s Shanghai Composite dipped 0.07% while Hong Kong’s Hang Seng index surged 1.27%

In Japan, the Nikkei 225 gained 0.07% but South Korea’s Kospi dipped 0.38%.

Australian shares ended the day in the green with the S&P/ASX200 rising 0.53% to 7,413.70.



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