FTSE 100 hits new pandemic high but Johnson Matthey slumps, while Wall Street set for opening rise

  • FTSE 100 climbs 34 points
  • Auto Trader takes the top spot
  • Burberry among the fallers

2.58pm: US investors continue to mull inflation data

With things a little quieter than normal in the US due to the Veterans Day holiday – when some companies and non-essential Federal services have the day off – Wall Street has made a mixed start.

Confounding expectations, the Dow Jones Industrial Average is down 43 points or 0.12% at 36,036. But the S&P 500 is up 0.28% and the Nasdaq Composite has added 0.78% after Wednesday’s falls following the higher than expected US inflation numbers.

In the UK the FTSE 100 continues to climb. It is up 34.34 points or 0.47% at 7374.41 having earlier touched the day’s high of 7376.

2.24pm: Mixed fortunes for crude benchmarks

Oil prices are having a muted day after falling back on Wednesday in the wake of the US Energy Information Administration reporting that crude inventories rose by 1mln barrels last week.

Brent has edged up 0.04% to US$82.67 a barrel but West Texas Intermediate, the US benchmark, is down 0.23% at US$81.15.

On Wednesday they lost 2.52% and 3.34% respectively.

BP PLC (LSE:BP.) is down 1.08% and Royal Dutch Shell PLC (A shares) (LSE:RDSA) is off 1.27%, but both shares have gone ex-dividend.

Overall the FTSE 100 continues to hold steady in positive territory, up 30.14 points or 0.41% at 7369.8.

12.36pm: Leading shares at highest level since February 2020

The FTSE 100 has hit a new pandemic high.

It climbed to 7373 – the highest level since the COVID-19 crash of February 2020 – although it has since dipped to 7368.9, still around 29 points better on the day.

Auto Trader Group PLC (LSE:AUTO) continues to lead the way, up 13.45%, but Johnson Matthey PLC (LSE:JMAT) is still in decline, down 18.02%.

12.25pm: US shares forecast to recover a little ground after inflation driven fall

US stocks are expected to open higher after worse-than-expected consumer inflation data for October sent stocks tumbling on Wednesday.

Futures for the Dow Jones Industrial Average rose 0.12% in Thursday pre-market trading, while the broader S&P 500 index gained 0.34% and those for the tech-heavy Nasdaq Composite added 0.59%.

Stocks closed lower after October’s consumer price reading showing the biggest annual jump in more than 30 years, triggering a spike in bond yields.

The consumer price index jumped 6.2% from a year ago, well above the 5.9% estimate. The yield on the benchmark 10-year Treasury, which had trended lower in recent weeks, jumped by about 11 basis points.

On the day, the Dow Jones fell by 240 points, or 0.66%, to 36,079 and the S&P 500 dropped 0.82% to 4,646, while the Nasdaq declined 1.66% to 15,622.

“The jump in US inflation, and the yields soured the mood in the equity markets,” commented Ipek Ozkardeskaya, senior analyst at Swissquote.

“Nasdaq of course paid the highest price among the three major US indices. The tech-heavy index lost 1.66% as it is plenty of the so-called growth companies who need the rates to stay as low as possible to grow faster.”

Back in the UK, and the FTSE 100 remains in positive territory, up 29.4 pointss or 0.41% at 7369.54.

11.48am: UK GDP growth lags rivals

The UK’s economic growth may be disappointing in its own terms, but it also suffers in comparison with other major countries.

Meanwhile the European Union has raised its growth forecasts for this year but cut its expectations for 2022.

With the eurozone economy recovering from the pandemic faster than expected, it now forecasts growth of 5% this year, up from its 4.8% prediction in July.

But it now believes growth will slip to 4.3% next year, down from the 4.5% it expected in July.

10.50am: Miners provide support on demand hopes

Leading shares continue to shrug off the disappointing UK growth figures.

The FTSE 100 is up 27.63 or 0.38% at 7367.78, close to its high for the day so far.

Providing some support is the mining sector, on hopes for increasing demand for commodities.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Mining stocks are among the biggest gainers so far on the FTSE 100 amid higher inflation readings around the world, partly indicating surges in global demand for goods.”

Chris Beauchamp, chief market analyst at IG, said: “Copper prices have rallied almost 2% in early trading today, clawing back some ground lost over the past two days and contributing to the view that a new leg higher is about to begin for the metal. As a result, FTSE 100 mining stocks have made headway in the opening hours of trading, providing the index with the fuel to move higher as well.”

Anglo American PLC (LSE:AAL) has added 4.48%, Polymetal International PLC (LSE:POLY) has put on 3.87%, Glencore PLC (LSE:GLEN) has climbed 2.72%, Rio Tinto PLC (LSE:RIO) has risen 2.53% and BHP Group PLC (LSE:BHP) is 2.32% better.

9.58am: Matthey’s battery business decision does not go down well

Johnson Matthey PLC (LSE:JMAT) is outpacing Burberry but in a bad way.

The autocatalyst specialist is the biggest faller in the FTSE 100 after it said it was exiting its battery materials business and warned on trading.

Its chief executive Robert MacLeod has also decided to retire.

The company said the returns from the battery business would not justify further investment, and while demand was increasing, so was competition from alternative technologies and other manufacturers.

As it put the for sale sign up on the division, it also said first half results would be in line with forecasts but full year trading would be towards the lower end of market expectations.

It said: “This is primarily due to the wide-spread supply chain shortages affecting the automotive industry and the consequential impact on precious metals prices, together with acute labour shortages in the US that are adversely impacting our health business, which is subject to strategic review.”

The news has sent its shares down 16.61% to 2304p.

Neil Wilson at markets.com said: “A decision to offload its capital intensive battery operation [has] dealt a blow to hopes it could be a major player in the electric vehicle growth space in the coming years.”

Russ Mould, investment director at AJ Bell, added: “”Electric vehicle battery technology was meant to represent the future of Johnson Matthey. It underpinned the company’s growth plans and showed that the business, whose fortunes have historically been pinned to the combustion engine, was moving with the times.

“The decision to pull out of this market is a shock, and it looks to have cost Robert Macleod his job as chief executive. It takes a lot of guts to say something is not worth pursuing because the economics don’t stack up, but it’s the right thing to do if the business is to avoid spending more money that might not generate a positive return.

“The battery technology story has been the backbone of Johnson Matthey’s sales pitch for quite a few years and there will be a lot of disappointed investors on today’s news…

“A 12% [now 16.61%] share price decline is arguably a mild reaction to what initially reads like a drastic change in strategy. Buried at the bottom of the announcement is also a mild profit warning, saying that the trading outlook is towards the lower end of market expectations.”

9.25am: Sterling down again

The pound weakened against the dollar on Wednesday after the surge in US inflation brought renewed talk of possible rate rises by the Federal Reserve.

Today’s disappointing UK economic growth figures have seen that trend continue.

Sterling is down 0.16% at US$1.339, with some uncertainty over whether the weak data will stop the Bank of England from edging up UK rates in December or not.

Victoria Scholar, head of investment at interactive investor, said: “The UK’s growth figures are adding to selling pressure on the pound, which has slumped to session lows, extending yesterday’s sharp drop against the US dollar as its downward trendline continues. GBPUSD has broken below support at $1.34 falling to levels not seen since last December. The pound has been trading in a descending trendline since the highs in May, retracing around a third of its gains since the pandemic-induced trough in March 2020.”

But the pound’s weakness is providing some support for the FTSE 100, which is full of overseas earners which benefit from a fall in sterling.

9.20am: Postive results help buoy market

Heading higher are two companies whose results have pleased the market.

Auto Trader Group PLC (LSE:AUTO) has accelerated 11.55%, making it the top riser in the leading index. The car market place recorded its highest ever six-monthly revenue and profits, up 82% to GBP215.4mln and more than doubled to GBP151.7mln respectively.

Close behind – well not that close actually – is 3i Group plc (LSE:III). Its shares are up 3.41% after the investment group’s half year update showed a total return of GBP2,199 million, or 24% on opening shareholders’ funds, compared to 15% this time last year.

Overall the FTSE 100 remains positive, up 18.19 points or 0.24% at 7357.96.

The mid-cap FTSE 250 is 0.14% better at 23,465.63.

9.07am: Ex-divs dip

If it’s Thursday it must be the day when a number of top companies are quoted without the right to their dividends.

The ex-divs this week are mainly big oil. So Royal Dutch Shell PLC (A shares) (LSE:RDSA) is down 2.08% and BP PLC (LSE:BP.) is 1.78% lower.

J Sainsbury PLC (LSE:SBRY) is the third of the day, edging down 0.14%.

8.20am: UK markets cautious after GDP data

Leading shares have made a cautious start after the UK economy saw a sharp slowdown in the third quarter.

The FTSE 100 is up 13.2 points or 0.18% at 7352.27 as investors assess the fall in GDP growth from 5.5% in the second quarter to 1.3% in the three months to September.

And growth could fall further in the fourth quarter, according to economists.

Rory Macqueen at think tank NIESR said: “The post-COVID-19 bounce seems to be nearing its end, with hospitality returning to normal growth rates in September after a bumper August. Wholesale and retail activity shrank for a fifth consecutive month and gas distribution for the fourth, which may suggest supply constraints or the unwinding of unusually high demand earlier in the year

“Overall growth is likely to slow further in the fourth quarter but will benefit if public confidence in keeping COVID-19 under control has enabled a return to growth in consumer-facing services sectors.”

Earlier this week NIESR raised its growth forecasts for this year but cut them for 2022.

It has raised its forecast for UK GDP growth for this year from the 6.8% it pencilled in in August to 6.9%. But it now expects the economy to grow by 4.7% in 2022, down from the previous figure of 5.3%.

Burberry Group PLC (LSE:BRBY) is a big faller, down 7.78% following its figures.

Half year revenues jumped 38% to GBP1.2bn, with adjusted operating profit rising four-fold to GBP196mln. The dividend was raised 3% to 11.6p per share and a GBP150mln share buyback was restarted.

Richard Hunter, head of markets at interactive investor, said: “The initial share price reaction to the numbers reflect a weakening of sales during the second quarter, even though numbers for the first-half as a whole are in comfortably positive territory, and generally high expectations.”

There are also concerns about the economy in China, which is one of the company’s key markets and where inflationary pressures are growing and there are plans to narrow the wealth gap among its citizens.

Freetrade analyst Gemma Boothroyd said: “A geographically diversified sales strategy is good news, but with China’s ‘common prosperity’ drive in full swing – how precarious is Burberry’s footing?

“It’s impossible to know how much of an impact these policies will have on Chinese spending power. But if China’s upper-class soon ends up with a lot less money to play with, Burberry needs a plan b.”

The problems with the struggling property group Evergrande are also hanging over the country’s economy, despite the firm reportedly making another key bond payment at the last minute to avoid default.

7.45am: UK growth disappoints

The UK economy grew by less than expected in the third quarter, according to the latest official figures.

The country’s GDP grew by 1.3% in the three months from July to September, lower than the 1.5% forecast by economists.

And it was much lower than the 5.5% recorded in the second quarter, as the economy emerged from lockdown.

For September the rise was better than forecast, up 0.6% compared to an expected rise of 0.4%.

But the August figure of 0.4% has been revised down ot 0.2% and the July fall is worse, now seen as a 0.2% decline rather than the initial fall of 0.1%.

Despite the disappointment, some economists believe the Bank of England could still raise rates in December.

Dean Turner, economist at UBS Global Wealth Management, said: “While today’s GDP figures mark a sharp slowdown from the second quarter of the year, and came in slightly below consensus, there’s no need to sound the alarm just yet. The release confirms that the economy continues its recovery from the pandemic, with activity in services recovering as business returns to normal.

“The service sector led the economy in the third quarter, with activity almost back to pre-pandemic levels, helped by a notable recovery in areas such as accommodation, and arts, recreation, and entertainment. In our view, the switch to spending on services and away from goods is likely to continue in the coming months which, along with supply chain bottlenecks easing, should relieve some of the pressure on inflation – which we still expect to fall from spring of next year.

“As we move towards the end of the year, the key focus of markets will be the timing of the Bank of England‘s interest rate hike. Today’s GDP release, although slightly below the Bank’s recent forecasts, is unlikely to be a deciding factor on the timing of its next move. The two labour market reports that will be released before they next meet will be of more importance. We expect these will be relatively strong, giving the Bank the green light to increase rates when they meet in December.”

6.50am: Markets set to open marginally higher

The FTSE 100 is seen slightly higher ahead of what’s set to be a quieter Thursday in the markets.

CFD firm IG Markets has the London benchmark creeping around 7 higher, making a price of 7,321 to 7,325 with just over an hour to go until the open.

The UK market diary is somewhat shy of catalysts meanwhile Veterans Day in the United States and Canada will lead to lighter trading volumes.

Sentiments in the US particularly are being weighed by worries over inflation, after this week’s CPI data marking America’s highest level in decades.

“Not only did US CPI hit its highest levels in 31 years, at 6.2%, but core prices also surged, rising to 4.6%. With the biggest components of the rise being in food and energy, there is rising concern that we could only be getting started with further increases in prices, especially as the weather hasn’t even started to get cold yet,” said Michael Hewson, analyst at CMC Markets.

“There is a fear now that consumers, as well as markets may well have to absorb further price rises, with all the inherent risks that brings for company profit margins, and consumer inflation expectations.”

The Dow Jones ended Wednesday down 240 points or 0.66% at 36,079 whilst the S&P 500 dropped 0.82% to 4,646.

Closing at 15,622, the Nasdaq ended the session down 1.66% whilst the small-cap focussed Russell 2,000 moved 1.55% lower to 2,389.

In Asia, Japan’s Nikkei meanwhile rose by 148 points or 0.59% to trade at 29,255 and Hong Kong’s Hang Seng added 0.72% rising to 25,181. The Shanghai Composite moved higher, up 1.1% to 3,531.

Around the markets

The pound: US$1.3432, up 0.2%

Gold: US$1,852 per ounce, up 0.2%

Silver: US$24.99 per ounce, up 0.93%

Brent crude: US$82.55 per barrel, down 2.6%

WTI crude: US$81.33 per barrel, down 3.3%

Bitcoin: US$64,829, down 2.3%

Ethereum: US$4,667, down 1.1%

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mixed on Thursday as employment in Australia fell unexpectedly by 46,300 jobs in October.

That was far off expectations for a 50,000 rise by analysts in a Reuters poll.

China’s Shanghai Composite gained 1% while Hong Kong’s Hang Seng index rose 0.51%

In Japan, the Nikkei 225 lifted 0.59% but South Korea’s Kospi dipped 0.33%.

Australia’s S&P/ASX200 slipped 0.57% to 7,381.90 as unemployment in Australia climbed to 5.2%, higher than the 4.8% expected in a Reuters poll.



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