FTSE 100 makes positive start to the week, but ends off new 18 month peak

  • FTSE 100 closes 18 points higher
  • Oil stocks provide fuel
  • HSBC results add support

5.00pm: Not so manic Monday

The FTSE 100 index made a positive start to the new week, hitting a new 18-month high at one stage before easing back from that peak as Wall Street made a tentative start before pushing higher.

At the close, the UK blue-chip index was 18.27 points, or 0.3% higher at 7,222.82, below the day’s peak of 7,247.53 but above the session low of 7,204.55.

On Wall Street around London’s close, the Dow Jones Industrials Average was 82 points, or 0.2% higher at 35,759, with the broader S&P 500 index ahead 0.5%, while the tech-laden Nasdaq Composite gained 0.7%.

Commenting on the UK market, Michael Hewson, chief market analyst at CMC Markets (UK) noted: “The main gainers today, given the continued rise in oil prices to multiyear highs, have been the likes of BP and Royal Dutch Shell, while BHP Group is also doing well given its exposure to US shale, as US oil prices make new seven-year highs.”

He added: “HSBC is also having a good day, following up a good H1 performance with a decent Q3. Profits after tax rose to $4.2bn, taking total profits year to date to $12.66bn. Q3 revenues came in slightly better compared to a year ago, although there was a slight decline from the levels seen in Q2.

“All areas of the business showed a strong improvement, the most notable of which was the UK business which followed up its H1 contribution of $2.1bn with another $1.5bn of profits before tax in Q3. The Asia business contributed $3.3bn, while the headline number of $5.4bn was boosted by another release of credit impairment charges of $700m on top of the $700m released in H1.”

3.40pm: Sabadell turns down Co-Op Bank bid for TSB

The Co-op Bank has confirmed weekend reports that it placed a bid for TSB; the bid was turned down by TSB’s owner, Sabadell.

Reports indicate that the Co-op was willing to stump up around GBP1bn for the bank whose slogan used to be, “the bank that likes to say yes”.

The FTSE 100 remains in cruise mode, up 22 points (0.3%) at 7,227.

2.40pm: Traders sit on their hands ahead of Wednesday’s Budget

As expected, US indices have opened higher and as expected, the FTSE 100 has entered its usual afternoon torpor.

The Dow Jones 30-share average was up 28 points (0.1%) at 35,705 and the S&P 500 was 5 points (0.1%) heavier at 4,550.

In London, the FTSE 100 has subsided to 7,228, up 24 points (0.3%), with traders understandably sitting on their hands ahead of Wednesday’s Budget.

“The outlook for UK growth hinges critically on Covid, the supply bottlenecks and also, to a much lesser extent, on Wednesday’s Budget. Much has already been written and leaked on the latter, so the comments here will be brief – not least because Wednesday’s events are likely to be rather less important for the market than those of the following Thursday [Bank of England interest rate-setting day],” said Rupert Thompson, the chief investment officer at wealth management group Kingswood.

“The Budget will be the third major fiscal event of the year. The Budget in March saw significant tax hikes announced, with personal income tax allowances and thresholds frozen and corporation taxes hiked from 2023. This was then followed in September by a 1.25% rise in national insurance rates for both employees and employers to fund extra spending on the NHS and social care.

“The main focus this time will be on government spending and setting out new longer-term fiscal rules. The good news for the Chancellor is that the economy has rebounded faster than expected and the budget deficit this year is undershooting expectations. It is now forecast to come in at a mere GBP200bn or so, down from GBP320bn last year.

“This undershoot gives Sunak some room to indulge his boss’s spendthrift inclinations and new money has apparently been found for areas such as health, transport and education. All the same, the Chancellor’s largesse will be limited by his desire both to put the public finances back on a sustainable footing and to give himself room for some give-aways further out, ahead of the next election,” Thompson opined.

1.15pm: US indices to open higher

US markets are expected to start the week on the front foot on what is set to be a busy week of results from tech giants.

Spread betting quotes point to the Dow Jones average rising 14 points to 35,691 while the broader-based S&P 500 is tipped to open around 4,552, up 7 points.

“Central banks and tech earnings will take centre stage this week, while on the economic data front, there is not much on the agenda until the US GDP data is published on Thursday (see the economic calendar below, for more). Judging by the ongoing risk-on sentiment, we might see some further follow-through in risk-taking in the early parts of this week. Whether the markets will be able to kick on from there will depend, in part, by the outcome of the US technology sector earnings that will be released throughout the week,” said Fawad Razaqzada of ThinkMarkets.

In London, after a bright start, the Footsie has taken its foot off the accelerator pedal; it’s up 29 points (0.4%) at 7,234.

12.10pm: Petrol price peak “a dark day for motorists”, claims pro-motoring organisation

UK petrol prices have risen to their highest level, with the average price of a litre rising to 142.94p on Sunday, topping the previous high of 142.48p set in April 2012.

The roadside recovery firm RAC, which compiled the data, called a “dark day for drivers” but outside Mother Nature was lifting up her skirts and dancing a little jig.

The timing of the release is interesting as it coincides with the chancellor of the exchequer Rishi Sunak’s preparation for the Budget.

It is rumoured that Sunak considered raising excise duty on fuel in his 2020 budget but like successive chancellors before him, he left duty unchanged, as it has been since 2010.

In 2019/20 fuel duty tax receipts in the United Kingdom came to around GBP27.57bn.

READ Saudi Aramco boss says oil has a future despite shift to green energy

The FTSE 100 was up 31 points (0.4%) at 7,236.

11.05am: Oil price surge continues

Crude oil prices climbed to their highest levels since 2014 last week and they are back on the rise today.

Brent crude for December delivery is trading at US$86.01 a barrel, up 48 cents on the day while the US benchmark, West Texas Intermediate, is trading 64 cents higher at US$84.40.

Not surprisingly, this is triggering demand for the shares of BP PLC (LSE:BP.), which is up 1.1% at 358.75p and Royal Dutch Shell, up 0.7% at 1,780p.

That in turn is underpinning the FTSE 100, which is up 34 points (0.5%) at 7,239.

“The pandemic is gaining increasing attention from investors again, with a number of countries having moved to toughen up restrictions in light of rising cases,” noted Deutsche Bank’s Jim Reid.

“This week, something to look out for will be the US FDA’s advisory committee meeting tomorrow, where they’ll be discussing Pfizer’s request for an emergency use authorization for its vaccine on 5-11-year-olds. The CDC’s advisory committee is then holding a meeting on November 2 and 3 the following week, and the White House have said that if it’s authorised then the vaccine would be made available at over 25,000 paediatricians’ offices and other primary care sites, as well as in pharmacies, and school and community-based clinics,” said Reid.

Concerns about a resurgence of Covid-cases triggering stricter lockdown rules could be the cause of investors’ current lack of enthusiasm for packing firms Mondi PLC (LSE:MNDI), Smurfitt Kappa and DS Smith PLC (LSE:SMDS) plus marketing and advertising giant WPP PLC (LSE:WPP), all of which tend to do better when the global economy is going full throttle.

Mondi is off 1.3%, Smurfitt is down 0.6%, Smith is 0.5% weaker and WPP is 0.9% in the hole.

10.00am: Resource and banking stocks set the early pace

Not for the first time this month, the FTSE 100 is grateful to resource stocks, which are largely responsible for the index’s firm start.

London’s index of heavyweight stocks was up 36 points (0.5%) at 7,241.

“The coming days look busy as more of the UK’s big companies report on third-quarter trading and Chancellor Rishi Sunak delivers his latest Budget.

“As we head into winter, Covid is starting to move back into the market’s consciousness amid concern about a rising number of infections in the UK – threatening the return of restrictions which could hit the travel and hospitality sectors in particular,” said Russ Mould, AJ Bell’s investment director.

One of those travel stocks – British Airways owner International Consolidated Airlines Group (LSE:IAG) SA – seems to be bearing up well, with the shares 2.1% firmer at 159.26p.

Results from banking giant HSBC Holdings PLC were received well, if not ecstatically. HSBC is up 1.0% at 439.05p but it is getting a good view of the disappearing registration plate of sector peer Barclays PLC (LSE:BARC), which is 2.1% to the good at 202.95p.

“HSBC is a giant in its industry, and with signs of more positive economic conditions comes a brighter set of results. Pre-tax profits have been buoyed by a huge swing in expected credit losses – with a chunky charge this time last year, turning into a release that buffer this quarter. The group is so confident about the direction of travel, it’s announced a $2bn share buyback programme.

“A CET1 ratio well above target risks looking like a waste of uninvested equity, and capital returns are one way to deal with that. However, a lack of available investment opportunities could be a potential concern for more growth-minded investors,” said Sophie Lund-Yates at Hargreaves Lansdown.

“HSBC is the latest bank to hint at an expected hike in interest rates. This helps elevate the mood because higher interest rates improve the profitability of loans. All in, the picture is looking healthier for HSBC, but while interest rates remain on the floor, the group will continue to be held back. One thing the group has in its favour is a highly diversified business model, which means when one area struggles, another can pick up the slack. Both its sprawling geographical footprint, plus alternative banking activities, like consulting and trading businesses, means HSBC is in a more enviable position than others,” she added.

8.35am: Market underwhelmed by HSBC’s US$2bn share buyback announcement

HSBC got the busiest week of the third-quarter reporting season underway though the share price reaction to a 76% increase in earnings a US$2bn share buyback programme probably wasn’t what the bank’s board had anticipated with the stock making little headway early on.

“HSBC has flexed its financial muscles as it continues to emerge from the horror show of 2020,” noted Richard Hunter, head of markets at Interactive Investor.

He also pointed out that the numbers were flattered by further bad debt releases, “in what will be the likely theme of the season”.

So perhaps we shouldn’t have been surprised by the market’s rather blase attitude to the quarterlies.

London opened in reasonably good cheer, with the Footsie rising 22 points to 7,226.35 and miners leading the way.

Chilean copper producer Antofagasta was up 1.9% to top the leader board, followed by BHP and Rio Tinto.

6.50 am: FTSE 100 called higher

The FTSE 100 looks set to creep into positive territory in the opening session of what looks set to be a news-packed week.

Centre stage on Wednesday will be Rishi Sunak’s autumn Budget, though spending initiatives, such as the GBP6bn set aside to clear the NHS backlog, were widely discussed over the weekend leaving little room for surprises.

HSBC has already kicked off the corporate reporting deluge, announcing a 76% rise in third-quarter profitability alongside a US$2bn share buyback.

After hours Monday Facebook will deliver its earnings readout, while tech rivals Microsoft, Google owner Alphabet and Apple report later in the week.

Here at home eyes will be on the likes of Lloyds, Shell, NatWest and GlaxoSmithKline.

“One of the more notable takeaways from the earnings reports seen so far has been the ability of companies, for the most part, to pass on increases in prices onto their customers without seeing a drop in sales,” said Michael Hewson, an analyst at CMC Markets.

“However, investors are also having to cope with an everchanging backdrop when it comes to what the economy might look like as we head into year-end.”

Asia’s main markets were largely unchanged, while the dollar traded close to its October lows.

Global market sentiment will continue to be shaped by worries over the rising Covid infections, said CMC’s Hewson.

“In China, which is already battling a slowing economy, an increase in infections is prompting some cities to shutdown transportation services, while Singapore has already implemented another lockdown,” he noted.

“In the UK the volume is also being turned up a notch on tightening restrictions to protect the NHS from being overwhelmed again.”

Around the markets

  • Pound US$1.3782 (+0.2%)
  • Bitcoin US$$61,919.80 (+1/72%)
  • Gold US$1,800.30 (+0.22%)
  • Brent crude US$86.27 (+0.87%)

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mostly higher on Monday even as China’s latest COVID-19 outbreak seems increasingly likely to spread further, with more than 100 locally transmitted cases confirmed over the last week across 11 provincial areas.

China’s Shanghai Composite gained 0.29% and Hong Kong’s Hang Seng index rose 0.08%

In Japan, the Nikkei 225 fell 0.88% while South Korea’s Kospi lifted 0.26%.

Australia’s S&P/ASX200 gained 0.41% to 7,445.90 after Telstra and the Australian government finalised a A$2.1 billion deal to acquire the largest telecommunications company in the Pacific, Digicel Pacific, in a move largely seen as an effort to counter China’s influence in the region.



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