FTSE 100 closes higher after snoozy Monday session, lacking lead from Wall Street


  • FTSE 100 closes around 14 points higher
  • US markets closed for Memorial Day
  • Oil price higher as EU mulls more sanctions against Russia

4.50pm: Footsie not really in holiday mood yet

The FTSE 100 index started the shortened trading week ahead of Thursday and Friday’s Platinum Jubilee bank holidays in fairly positive fashion on Monday, albeit turning volatile in the afternoon due to a lack of any lead from Wall Street, closed itself for the Memorial Day US public holiday.

At the close, the UK blue-chip index was 14.60 points, or 0.2% higher at 7,600.06, below the session peak of 7,625.63 but above the day’s low of 7,576.37.

Chris Beauchamp, chief market analyst at online trading platform IG commented: “The US drove the bounce last week, and with the Americans at leisure today, the FTSE has found it almost impossible to maintain the bullish atmosphere. The limited morning gains have shrunk as the day has gone on, as investors struggle to find a reason to drive equities higher from here.”

He added: “All eyes will be on the US tomorrow to see if Wall Street can put new energy into the bounce, or whether the usual pre-NFP (non-farm payrolls) nervousness will make an early appearance.”

2.00pm: Sky’s not the limit

Shares in British Airways owner IAG (LSE:IAG) are up 4% today but passengers are being warned of « major delays » as workers are carrying out a ballot over a potential pay strike. 

BA check-in staff at Heathrow airport, who are employed in the company’s ‘A scales division’, said the company has refused to reverse a 10% pay cut imposed on them during the pandemic, even though management pay has been restored to pre-pandemic levels. 

The industrial action ballot covers around 500 staff and is expected to close on Monday 27 June, trade union Unite said, with the result potentially leading to strikes in July, just as families prepare to go on summer holidays.

Unite general secretary Sharon Graham said: “British Airways used the cover of Covid to brutally cut members’ pay. BA has now reversed the pay cuts imposed on management but refuses to do this for our members. This is disgraceful. Unite will not allow our members to be treated as a second-class workforce.

“Our members are rightly furious and ready to take action. A strike by our members will make an immediate impact on the service to customers so I urge BA to get a grip and restore these workers’ pay immediately.

“Unite will be giving its members the union’s complete support until this dispute is resolved.”

The union also said is undertaking a consultative ballot of a separate group of BA’s check in staff over pay, saying BA has had « every opportunity to resolve this dispute through negotiations but has decided not to do so. Our members are therefore balloting for industrial action as a last resort ».

“Strike action and the accompanying disruption can be avoided by BA returning to negotiations and restoring our members’ pay rates to pre-pandemic levels.”

The FTSE 100 meanwhile is 1 point in the red.

1.14pm: Stopped clock

Were the Footsie a watch, I’d be seeing about installing a new battery around about now as the index appears to have stopped.

The FTSE 100 was up 3 points (0.0%) at 7,588, weighed down by losses on index heavyweights AstraZeneca PLC (LSE:AZN), Shell and HSBC Holdings PLC (LSE:HSBA), all of which are down by 1% or so.

Away from the FTSE 350, Countryside Partnerships PLC (LSE:CSP) is the latest company to attract the interest of private equity.

The shares rose 20% to 287.4p after Inclusive Capital Partners said it had made a bid approach, offering 295p a share.

“There has been precious little good news at Countryside Partnerships for a while but the share price plunge to five-year lows has drawn a bid from Inclusive Capital, to suggest they thought there was a bargain to be had,” says AJ Bell investment director Russ Mould.

“Yes, it is easy to argue times are looking tougher for the builders and developers but before the news of the 295p-a-share cash offer, Countryside’s shares were trading on barely eight times (potentially depressed) forward earnings and 1.3 times historic book, or net asset, value. At first glance, that prices in a lot of bad news and not much good,” he continued.

READ: Countryside bid highlights sector value but is lowball bid say analysts

12.15pm: Back to square one

The Office for National Statistics (ONS) has experimented with an alternative measure of inflation, focusing only on basic items.

The ONS tracked how the prices of 30 basic food items changed between April 2021 and April 2022, using the lowest prices available across the month.

The ONS said there is considerable variation across the 30 items, with the prices for six items falling over the year, but the prices of five items rising by 15% or more.

The difference between the lowest-cost version of an item and the next lowest-cost version of it is often large; for over two-thirds of the items monitored, the next item was at least 20% more expensive, the ONS reported.

The items where the lowest prices rose at the fastest rate were pasta (up 50% between April 2021 and April 2022), crisps (17%), bread (16%), minced beef (16%) and rice (15%).

Mama mia! It turns out that when the chips are down, British consumers can still rely on potatoes.

Price decreases were measured for potatoes (a 14% fall in price), cheese (7%), pizza (4%), chips (3%), sausages (3%) and apples (1%).

Combining the lowest-cost items into an index shows that, overall, the prices of the cheapest items have risen since April 2021 in line with official measures of inflation.

Looking across all items over time, there was some evidence of “shrinkflation” – the practice of keeping the price the same but reducing the size of the product.

All interesting stuff and a distraction from the fact that the FTSE 100 has now retreated back to Friday’s closing level.

 

11.10am: Aerospace stocks wanted as Covid situation in China improves

US markets are closed today so if you are hoping for a US-inspired jolt this afternoon to rouse the market from its lethargy, think again.

The FTSE 100 has seen early gains pared and is now up just 11 points (0.1%) at 7,596.

Aerospace-related stocks are going well after China said its Covid woes are lessening; British Airways owner International Consolidated Airlines Group SA (LSE:IAG) is 3.1% higher at 135.86p; Melrose Industries PLC (LSE:MRO, OTC:MLSPF), which owns automotive and aerospace engineer GKN, is 4.0% better at 134.1p while Rolls-Royce Holdings PLC (LSE:RR.), the jet engine maker, is 2.5% to the good at 89.39p.

“The lifting of restrictions in China also appears to have helped boost the fortunes of British Airways owner IAG, which lifted by more than 4%. It’s highly reliant on a bounce-back in long haul travel, and a dip in cases in China could herald a fresh wave of bookings internationally, particularly for the more lucrative business seats. Rolls Royce was lifted higher on the tailwind of relief, given that it’s highly reliant on the number of flying hours airlines complete for its core business of manufacturing and maintaining commercial jet engines,” explained Susannah Streeter at Hargreaves Lansdown.

The aerospace stocks are not rising because of cheaper oil prices, that’s for sure; Brent crude is trading 70 cents (0.6%) higher at US$116.26 a barrel on futures markets.

Crude oil prices rose over the weekend as EU members continue talks to agree on a sixth package of sanctions against Russia for its invasion of Ukraine.

“OPEC+ is set to maintain existing production ramp-up plans and confirm a monthly increase of 432kb/d to oil output when they meet on Thursday. This is seen as a somewhat moot point by analysts that question if OPEC+ has even been able to realise prior increases in their monthly production allocations this year,” reported broker SP Angel.

9.55am: Sainsbury’s  announces prices initiative 

With inflation really starting to bite, the big grocery chains are obviously competing to be seen as doing their bit to help.

J Sainsbury PLC (LSE:SBRY) has made a commitment to invest more than £500mln into lower prices by March 2023 as it continues to respond to the rise of hard discounters Aldi and Lidl.

The commitment follows a report in the Retail Gazette a couple of weeks back that Sainsbury’s was planning more price cuts – or at least limiting price rises – after the success of its Aldi price match initiative; Tesco PLC (LSE:TSCO) has a similar price match initiative scheme.

“Customers are making choices about where they spend money based on their household finances right now so we have to make it easy for them to manage their budget in our shops,” said Simon Roberts, the chief executive officer of Sainsbury’s.

Shares in Sainsbury’s were up 1.4% at 234.2p and outperforming the FTSE 100, which was up 29 points (0.4%) at 7,615.

8.45am: On the front foot

London has got off to a brighter start than expected after signs that the Covid situation is improving in China.

The FTSE 100 was up 24 points (0.3%) at 7,609.

“European markets have opened on a stronger footing with tech stocks staging gains as positive momentum carries forward from the Asian session after China eased some of its covid restrictions over the weekend. It comes after the S&P 500 and the Dow Jones finally ended their near two-month losing streak on Friday to post their strongest week since November 2020. With US markets closed for the Memorial Day holiday it looks like today is setting up to be a thin volume session, potentially leading to bigger market swings than normal,” said Victoria Scholar, the head of investment at interactive investor.

Among the better performers on the FTSE 100 is Scottish Mortgage Investment Trust PLC (LSE:SMT), up 3.2% at 820p, as the tech recovery continues.

Also on the recovery trail is JD Sports Fashion PLC (LSE:JD.), the sportswear retailer that parted company with its executive chairman Peter Cowgill last week.

The shares hit the skids last week after Thursday’s announcement but are up 4.2% at 125p this morning.

6.35am: Subdued start in store

The FTSE 100 looks set to ignore the pull higher of Wall Street and Asia to make a subdued start to trading.

The Dow ended Friday 1.8% higher, while the tech-heavy Nasdaq surged 3.3%, ending a roller-coaster week on a high.

Asia began in fine fettle as the Chinese authorities said they would ease Covid restrictions in Shanghai, allowing a return to the workplace.  

The mood was also lifted by hopes the US Federal Reserve may pause its fiscal tightening efforts after interest rate increases in June and July.

It was this prospect that sent the dollar to a five-week low against a basket of currencies.

“It’s probably no coincidence that the rebound currently being seen in equity markets appears to be coming against a backdrop of a weaker US dollar, and declining US treasury yields, with the US dollar falling for the second week in a row, and the US 10-year yield for the third week in succession,” said Michael Hewson of CMC Markets.

“The reversals being seen in both the greenback and yields would appear to suggest that markets think the top is in for both, in the belief that inflationary pressure in the US may well have peaked in the short term.”

Later this week we’ll receive two statistical insights into the state of the world’s largest economy in manufacturing data (Wednesday) and non-farm payrolls (Friday).

Monday is expected to be a fairly muted session with traders in the US off work celebrating Memorial Day.

Here in the UK, a trading week shortened by Jubilee celebrations will feature updates from discount retailer B&M, boot marker Dr Martens, and utility group Pennon.

Around the market

  • Pound US$1.2640 (flat)
  • Bitcoin US$30,325.30 (+2.89%)
  • Gold US$1,866.30 (+0.48%)
  • Oil US$120 (+0.48%)



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