- FTSE 100 closes ahead 31 points
- BT heads higher
- Sainsbury drops
4:50pm: FTSE closes higher, Wall Street hits new highs
The UK’s blue-chip index finished the day ahead 31 points to close at 7,280, a 0.43% gain on the day.
Meanwhile, over on Wall Street, tech stocks hit new highs, boosted by Tesla, which set a new record high above $1200 per share.
3.50pm: Pound sees biggest fall for 14 months
The Bank of England‘s decision to keep interest rates on hold has given leading shares a boost after they were beginning to drift a bit aimlessly.
The FTSE 100 is currently up 30.51 points or 0.42% at 7279.40, with its overseas earners helped by a drop in sterling as the Bank ruled out a rise in borrowing costs.
Michael Hewson, chief market analyst at CMC Markets UK, said: “European markets have seen an altogether more positive session today, with the FTSE100 rebounding strongly after the Bank of England wrong footed the markets by not nudging interest rates higher when they met earlier today.
“A rate rise had been widely expected, given earlier briefings by senior central bank officials, and when this didn’t happen the FTSE100 underwent a sharp jump into positive territory, although the pound got absolutely pummelled, while gilt yields also fell sharply.”
Indeed, the pound has suffered its biggest fall in 14 months, down 1.5% to $1.3488.
Among the risers in the leading index, BT Group PLC (LSE:BT.A) has soared 10.9% after well received results while the latest update from Smith & Nephew PLC (LSE:SN) has also pleased the market and its shares have climbed 3.52%.
JD Sports Fashion PLC (LSE:JD.) has shrugged off being forced by the Competition and Markets Authority to sell trainers shop Footasylum, adding 3%.
Barratt Developments PLC (LSE:BDEV) is leading the housebuilders higher after rates were held, up 2.54%.
But banks are lower as their margins would have benefitted from a rise, with NatWest Group PLC (LSE:NWG) down 5.29%.
And J Sainsbury PLC (LSE:SBRY) has fallen 2.98% as its update flagged supply chain worries.
Oil prices have recovered from an earlier dip, as OPEC+ seems set to keep its output target rather than increase it.
Brent crude is currently up 0.76% at $82.61 a barrel.
3.24pm: Global recovery continues
A survey of the global economy shows the recovery picking up pace.
The rate of global economic expansion accelerated to a three month high in October, as a slower upturn at manufacturers was offset by stronger growth at services providers.
But stretched supply chains, rising price inflation and a subdued trend in global exports stymied efforts to raise output further, according to JP Morgan.
The bank’s Global Composite Output Index – produced by JP Morgan and IHS Markit in association with ISM and IFPSM – rose to 54.5 in October, up from 53.3 in September, to signal expansion for the sixteenth month in a row.
The rate of global economic expansion accelerated to a three-month high in October, with the #PMI at 54.5 (Sep: 53.3), amid stronger services growth. Inflationary pressures intensified due to ongoing supply issues. Read more: https://t.co/AmGl8oEUCs pic.twitter.com/hof969DOe8
— IHS Markit PMI(TM) (@IHSMarkitPMI) November 4, 2021
2.30pm: OPEC said to stick to output plan
With the OPEC+ meeting going on, reports are suggesting the group will stick to its current plans for output.
That means a 400,000 barrel a day increase, rather than the bigger rise some- not least the US – had been hoping for to bring crude prices down.
OPEC+ AGREES TO STICK TO ITS AIM TO INCREASE OUTPUT BY 400K B/D – DELEGATES.
— Breaking Market News (@FinancialJuice) November 4, 2021
2.16pm: Dow dips but S&P and Nasdaq move ahead
US markets have made a mixed start after Wednesday’s record highs in the wake of a dovish Federal Reserve meeting.
With the US central bank deciding to taper its bond buying programme, much as expected, the leading US indices hit new peaks.
But the Dow Jones Industrial Average is suffering a bit of profit-taking, down 18.58 points at 36,139.
The more broadly based S&P 500 however continues on its record breaking way, up another 0.34%, while the tech-heavy Nasdaq Composite has climbed 0.61%.
In the UK, the FTSE 100 remains positive, up 35.02 points or 0.48% at 7283.91.
1.03pm: Builders up, banks down after UK rates held
With no 15 basis point interest rate rise – which could have added GBP228 a year to a typical GBP250,000 mortgage – shares in housebuilders have built up gains after the Bank of England decision.
But banks, which would have benefitted from an increase, have fallen back.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “House builders were among the stocks to make immediate gains on the announcement… With no splash of cold water imminent to cool down the red hot housing market, the expectations are that demand for new homes will continue to be brisk as the race for space continues.
“But there was disappointment for banks which had been holding out for some relief from the record low rates which have eaten into their lending margins.”
12.52pm: Bank of England “set to be first mover”
More on the Bank of England‘s decision to keep rates on hold.
Dean Turner, economist at UBS Global Wealth Management, said: “With markets on tenterhooks, in the end, the decision wasn’t even close. Despite very hawkish language of late, from the Governor in particular, the Bank of England kept interest rates on hold by a majority of 7-2. The market reaction is telling, with sterling down sharply after the announcement and gilts rallying.
“Nevertheless, we should still prepare for a hike in the coming months. It is clear that, if the economy moves broadly in line with expectations, interest rates will be going up, maybe as soon as December. However, the pace will be gradual, and the peak will be lower than markets were expecting going into the meeting.
“Although they didn’t move today, the Bank of England will likely be a first mover in the tightening game and this should underpin sterling.”
Michael Hewson, chief market analyst at CMC Markets UK, said: “Today’s events are a huge own goal for the central bank, already widely distrusted by the markets due to the unreliable boyfriend era of Mark Carney. Bailey had the opportunity to reset the narrative when he took over and restore the central banks credibility, and he’s completely bodged it in a fashion that is more Bill Bailey than Andrew Bailey.
“The least markets can ask for is a central bank that is disciplined on messaging, and this fiasco has shown the bank’s faults when it comes to forward guidance are still there in plain sight.”
12.50pm: Fed boost for US markets
Over in the US, markets are expected to hold on to their record levels after the US Federal Reserve struck a dovish tone as it announced an expected $15 billion tapering of its bond purchases.
The Dow Jones Industrial Average looks like it will be virtually flat, up just 0.01% in Thursday pre-market trading, while the broader S&P 500 index is forecast to rise 0.14% and the tech-heavy Nasdaq Composite is indicated 0.36% higher.
Investors reacted positively to the news at the end of the two-day Federal Open Market Committee meeting, with officials at the US central bank saying they still anticipated the current high level of inflation would be – to use the current central bank buzz word – transitory.
At the close on Wednesday, the S&P 500 gained 30 points to finish at 4,661 points, a 0.65% gain, while the Dow Jones added 105 points to reach 36,158 for a 0.29% lift. The Nasdaq finished at 15,812 points, a 162-point or 1.04% increase.
Meanwhile US weekly jobless claims have fallen by more than expected.
The number of Americans seeking unemployment benefits for the first time last week fell to 269,000, compared to expectations of a figure of 275,000.
The previous week’s number was revised up from 281,000 to 283,000.
Back in the UK, the FTSE 100 is now up 35.62 points or 0.49% at 7284.51, close to its high of the day as the weakness in sterling benefitted its overseas earners.
12.33pm: Sterling hit by Bank decision
The pound continues to fall, as some were caught unprepared after a number of hints from Bank of England policymakers that rates would indeed need to rise.
Neil Wilson at markets.com said: “The Bank of England delivered a surprise by not raising rates, sending gilts and sterling into a bit of a spin. It’s really one of those moments where you have to question the communication strategy of the BoE
“It had multiple occasions on which it could have gently nudged against the growing market anticipation around the November meeting being live but chose not to, and appeared to actively encourage tightening bets… I’d said a hike was no slam dunk due to the way certain MPC members were leaning, but [Bank governor Andrew] Bailey has been cheerleading tighter policy and didn’t vote for it himself – which suggests either he’s bad at communicating his views or there were simply not enough votes for him so he refrained from being a minority voter.”
12.22pm: Inflation to peak at 5% next April, says Bank
The Bank said it expected inflation to rise to just under 4% in October, mainly due to utility bills rising after the surge in wholesale gas prices.
CPI inflation is then expected to rise to 4 1/2 % in November and remain around that level through the winter, accounted for by further increases in core goods and food price inflation.
It is now expected to peak at around 5% in April 2022, materially higher than expected in the August Report.
But pricing pressures will dissipate over time, the Bank said, as supply disruption eases, global demand rebalances, and energy prices stop rising.
As a result, CPI inflation is projected to fall back materially from the second half of next year and is expected to be a little above the 2% target in two years’ time and just below the target at the end of the forecast period.
Given its brief is to look at the medium term, rather than factors that are likely to be “transient”, it judged it appropriate to leave rates on hold.
But it hinted at rate increases in the coming months.
It said: “Provided the incoming data, particularly on the labour market, are broadly in line with the central projections in the November Monetary Policy Report, it will be necessary over coming months to increase Bank Rate in order to return CPI inflation sustainably to the 2% target. In observing the market-implied path for Bank Rate, the Committee notes that, in the November Monetary Policy Report central projections, CPI inflation is projected to be below the 2% target at the end of the forecast period, and would probably fall a little further beyond that point, given the margin of spare capacity that is expected to emerge.”
12.04pm: Disappointment for rate rise hawks
The Bank of England has left interest rates at their record low of 0.1%, confounding expectations it would raise them for the first time since the pandemic began.
The decision comes despite growing signs of inflationary pressures in the economy.
The Bank’s committee voted 7-2 in favour of the move, with Sir Dave Ramsden and Michael Saunders wanting an increase to 0.25%..
But another member joined those wanting to ease the Bank’s bond buying programme.
This was maintained at GBP875bn but three voted against keeping it at this level.
The Bank said: “At its recent meetings, the [monetary policy committee] has judged that some modest tightening of monetary policy over the forecast period was likely to be necessary to meet the 2% inflation target sustainably in the medium term…
“Nevertheless, near-term uncertainties remain, especially around the outlook for the labour market, and the extent to which domestic cost and price pressures persist into the medium term.
“At this meeting, the committee concluded that the existing stance of monetary policy remained appropriate.”
The FTSE 100, which was virtually flat ahead of the decision, is now up 17.83 points or 0.25% at 7266.72.
Sterling, which was already down 0.39%, has now fallen 0.8898% to $1.3572.
11.23am: Investors cautious ahead of high noon
Leading shares have lost most of their gains as investors await the Bank of England rate decision.
Neil Wilson at markets.com said there were a number of possible options for the Bank.
He said: “The Bank of England is expected to raise rates, but that does not mean it will. It’s going to be a tough call as the nine members of the Monetary Policy Committee are not singing from the same hymn sheet. There are possibly three main outcomes from today’s vote – hiking 15bps and no attempt to push back on market expectations for future rate rises; a hike with a pushback against expectations for further hikes; or no hike. The ‘no hike’ outcome could also be split into one in which the Bank signals readiness to move next month, or one without such a signal.”
The uncertainty means the FTSE 100 is now virtually flat, up just 1.76 points at 7250.65.
10.05am: Smith & Nephew cheers investors
Medical equipment group Smith & Nephew PLC (LSE:SN) is among the risers after a reassuring update.
Its third quarter revenues rose 5.5% to US$1,266mn despite a slowdown in its orthopaedics division, which it has now decided to combine with its sports medicine business.
Chief executive Roland Diggelmann said: “I’m pleased to see Advanced Wound Management and Sports Medicine & ENT deliver a second consecutive quarter of growth above 2019 levels…The performance of these franchises helped offset the near-term challenges in orthopaedics…
“”We see higher growth and more consistent execution opportunities from bringing our Sports Medicine and Orthopaedics franchises under one leadership team, which we’ve announced today. This will build on our unique strengths to support customers looking for a combined portfolio approach, while continuing to serve those focused on just one surgical discipline.
“We believe this change is another important step as we continue to recapture our pre-COVID momentum.”
Its shares have risen 2.86% to 1329p, putting it just behind BT Group PLC (LSE:BT.A) in the FTSE 100 risers.
BT meanwhile continued to be supported by its own results, up 5.59% to 150.10p.
Heading in the other direction following its latest update is J Sainsbury PLC (LSE:SBRY), down 3.12%.
Russ Mould, investment director at AJ Bell, said: “While the latest results from Sainsbury’s were broadly reassuring investors still found themselves spooked by warnings on supply chain and staffing issues.
“That the supply chain problems are most heavily affecting Argos, Sainsbury’s star turn through the course of the pandemic, is perhaps part of the problem.”
Overall the FTSE 100 is off its best levels but still in positive territory ahead of the key Bank of England rate decision.
It is up 16.95 points or 0.23% at 7265.84, having earlier reached 7281.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: ”Given there were no big surprises from the Federal Reserve, with the gentle unwinding of the stimulus programme widely expected, the financial markets are largely treading water this morning, with the FTSE 100 ticking up slightly while waiting for the next central bank move.
“While most bets are on the Bank of England‘s monetary policy committee lifting the interest rates a notch later, from the ultra-low level of 0.1%, there is likely to be dissent at the table.”
9.48am: UK building recovering
The UK construction sector picked up last month, and is doing better than analysts had been expecting.
The Markit/CIPS construction PMI for October rose to 54.6, compared to forecasts of a figure of 52.
UK Markit/CIPS Construction PMI Oct: 54.6 (est 52.0; prev 52.6)
— LiveSquawk (@LiveSquawk) November 4, 2021
The September figure of 52.6 was the lowest since January, due to supply chain issues and labour shortages although there are hopes these problems may be easing.
Tim Moore, director of economics at IHS Markit, said: “There were widespread reports that shortages of materials and staff had disrupted work on site, while rising fuel and energy prices added to pressure on costs.
“Nonetheless, the worst phase of the supply crunch may have passed, as the number of construction firms citing supplier delays fell to 54% in October, down from 63% in September. Similarly, reports of rising purchasing costs continued to recede from the record highs seen this summer.”
9.12am: UK car sales fall
Semiconductor shortages and falling consumer confidence have helped put the brake on UK car sales again.
New car registrations fell for the fourth consecutive month in October, down 24.6% from this time last year to 106,265, according to new figures from the Society of Motor Manufacturers and Traders (SMMT).
This was the weakest October since 1991.
Chip shortages and tax rises mean the industry expects to finish the year on 1.66m units, only 1.9% ahead of COVID-19-hit 2020
But environmentally conscious consumers continued to move away from petrol and diesel cars, in the month ahead of COP26.
Battery electric vehicles equalled their September market share of 15.2% with 16,155 units, while plug-in hybrid vehicles grew to 7.9% or 8,382 units.
Mike Hawes, SMMT Chief Executive, said: “The current performance reflects the challenging supply constraints, with the industry battling against semiconductor shortages and increasingly strong economic headwinds as inflation rises, taxes increase and consumer confidence has weakened.
“Electrified vehicles, however, continue to buck the trend, with almost one in six new cars registered this year capable of zero-emission motoring, growth that is fundamental to the UK’s ability to hit its net zero targets.
“With next year looking brighter, and even more new models expected, the continuation of this transition will depend on the preservation of incentives that overcome the affordability barrier, and the ability of the public and private sectors to increase public on street charging to allay EV driver concerns.”
8.56am: Crude dips ahead of OPEC decision
Oil prices have been on the slide recently as US inventories came in higher than expected, but they are now making an attempt to recover.
Brent crude is up 0.68% to US$82.55 a barrel while West Texas Intermediate, the US benchmark, has edged up 0.12% to US$80.96 as OPEC+ meets to decide on its output policy.
Victoria Scholar, head ofiInvestment at interactive investor, said: “Brent crude is attempting to regain some ground after yesterday’s sharp sell-off of more than 3%, sending the oil price close to 4-week lows on the back of EIA inventories data which showed a bigger than expected jump in supply.
“OPEC+ is unlikely to change its policy stance at today’s meeting sticking with tight supply, shrugging off gains of 130% for the global benchmark over the last year, which could see further upside ahead. The quicker-than-expected economic recovery out of the pandemic combined with OPEC’s refusal to turn on the taps makes $90 oil or even $100 oil an increasingly common forecast among analysts.”
The FTSE 100 remains in positive territory, up 23.43 points or 0.32% at 7272.32.
8.19am: BT top riser as market opens higher
Leading shares have opened higher on a busy day for company news, as well as the little matter of the Bank of England interest rate decision.
Also coming up are US weekly jobless claims, ahead of Friday’s non-farm payroll numbers.
But with the US Federal Reserve already taking its foot off the gas a little in terms of its bond buying programme, albeit playing down imminent rate rises, these numbers lack a little urgency.
Elsewhere there is the latest OPEC+ meeting which will give an update on whether it plans to increase production.
Ipek Ozkardeskaya, senior analyst at Swissquote, said: “OPEC is under a growing pressure from the US, Japan and others to boost supply to help easing the global energy crisis. There is little chance that Saudis will give in to that pressure in my opinion, but there is still hope to see them increase supply by a little bit more than the actual 400,000 bpd, to make a little bit more money and help us spend a better winter, without of course letting the prices fall by much.”
Back with the UK, and the FTSE 100 is up 21.37 points or 0.29% at 7270.26.
BT Group PLC (LSE:BT.A) is the top riser, climbing 6.05% to 150.75p after its results beat expectations and it restarted dividend payments.
The telecoms giant saw six month revenues drop 3% to GBP10.3bn while pretax profits fell 5% to GBP1bn.
But it said its cost cutting programme was 18 months ahead of schedule, with an initial GBP1bn of savings and the expectation of an addition GBP2bn by the end of 2024, brought forward from 2025.
These are the last results before French billionaire Patrick Drahi, whose Altice group bought a 12% stake in BT earlier this year, is allowed to bid in December after a six month standstill expires.
BT chief executive Philip Jansen said: “These results demonstrate an acceleration of pace in the transformation of BT. We are creating a better BT for our customers, the country and our investors. We’re going further and faster on the UK’s next generation connectivity; we’re modernising BT and bringing down costs; and we’re reinstating the dividend today, as planned.”
6.50am: UK market set to start on front foot
The FTSE 100 is seen starting Thursday on the front foot albeit volumes may be somewhat muted whilst traders await a possible interest rate decision by the Bank of England.
CFD firm IG Markets has the London benchmark around 29 points higher, making the price 7,269 to 7,271 with just over an hour to go until the open.
Central bankers are in focus with, for the first time in quite a long time, the possibility that British interest rates might change given the recent shockwaves of inflation through the economy.
The Bank of England will announce the outcome of its latest meeting at midday, and even though a rate rise is touted by many it would still feel like something of a departure from what the markets have been accustomed to in recent times.
“It is true a rate rise now would be a sharp change in policy from the last meeting in September, but it wouldn’t be the end of the world either. A rate increase of 0.15% to 0.25% could be argued as being entirely consistent with the recovery in the UK economy seen since the emergency measures were implemented back in March 2020,” said Michael Hewson, analyst at CMC Markets.
“One thing is certain it will probably be a split decision and likely to be decided by the odd vote, but more than anything if the UK economy can’t withstand a 0.15% rise in base rate, then we are in a very sorry state indeed.”
Last night, in the United States, the Federal Reserve tapered, as expected – announcing an initial US$15bn reduction in its monthly asset-buying stimulus. It also guided that actual rate rises were still some way off for Americans.
On Wall Street, the Dow Jones moved 104 points higher to close up 0.29% at 36,157 whilst the S&P 500 added 0.65% to end the session at 4,660.
The Nasdaq climbed 1.04% to finish Wednesday at 15,811 and the small-cap focused Russell 2000 advanced further, gaining 1.8% to 2,404.
This morning, in Asia, Japan’s Nikkei was up 0.9% at 29,794 whilst Hong Kong’s Hang Seng was nudged 0.14% higher at 25,059. The Shanghai Composite, meanwhile, traded up 0.78% to 3,525.
Around the markets
The pound: US$1.3658, down 0.21%
Gold: US$1,772 per ounce, down 0.25%
Silver: US$23.48 per ounce, down 0.93%
Brent crude: US$81.43 per barrel, down 0.68%
WTI crude: US$80.04 per barrel, down 1%
Bitcoin: US$62,446, down 0.95%
Ethereum: US$4,566, up 0.01%