FTSE 100 edges higher but Wall Street set for opening fall after Walmart and Home Depot slip

• FTSE 100 up 7 points
• Dow forecast to fall 213 points
• BHP higher after merger news

12.38pm: US investors await July retail numbers

Wall Street is set for a downbeat start ahead of the latest retail sales figures.

Both the Dow Jones Industrial Average and the S&P 500 set new record highs on Monday.

But now the Dow is forecast to open 213 points or 0.6% lower, the S&P is expected to fall 0.47% and the tech heavy Nasdaq Composite is indicated 0.37% lower.

Home Depot is proving a drag, with the retailer’s shares down 3.2% in pre-market trading. Its second quarter earnings topped expectations but a 4.5% rise in same store sales was below the estimated 5%.

Walmart shares are also down following its results, off 1.43% despite beating forecasts.

It said revenues rose 2.4% to US$141bn, with adjusted operating income up 12% and raised its full year guidance. But online sales growth slowed compared to the first quarter.

Walmart down–let’s foment a reason why because this was a real good q.

— Jim Cramer (@jimcramer) August 17, 2021

Meanwhile the official retail sales numbers for July – due at 1.30pm BST – are expected to show the effects of the spread of the Delta variant, with analysts forecasting a dip of 0.2%.

This follows an unexpected 0.6% rise in June.

Michael Hewson, chief market analyst at CMC Markets UK, said: « There is little doubt that US consumer spending has been supported by the two fiscal packages that were delivered in January and March, and continue to be so, although an improving economy did see US consumer confidence in July back to levels last seen pre-pandemic.

« Whether this translates into another positive month for US retail sales remains to be seen, however the surprise rebound in June could well be tempered by a modest slowdown in July with expectations of a -0.2% decline, as higher prices deter discretionary spending. »

Also on the agenda are US industrial production numbers, which are expected to show a 0.5% rise.

Investors will be interpreting the news in the light of what it could mean for the Federal Reserve’s bond buying programme, and the potential for movements in interest rates.

Fed policymakers are moving toward an agreement to start scaling back their easy money policies in about three months if the economic recovery continues, The Wall Street Journal reported on Monday that Boston Fed President Eric Rosengren said in an interview he expected to see enough job growth by the September meeting to meet the criteria for reducing bond purchases.

Back in the UK the FTSE 100 remains in positive territory but is struggling to do much more.

It is  currently up 7.07 points or 7161.05.

11.08am: Eurozone GDP grows 2% in second quarter

Things are improving in the European economy.

Eurozone GDP grew by 2% in the three months from April to June, compared to a 0.3% decline in the first quarter.

In the wider EU, the economy grew by 1.9% after a 0.1% fall in the first three months of the year.

 

Euro area #GDP +2.0% in Q2 2021, +13.6% compared with Q2 2020: flash estimate from #Eurostat https://t.co/ZXLViyDcYq pic.twitter.com/2BXpEmjGvb

— EU_Eurostat (@EU_Eurostat) August 17, 2021

Back in the UK, the FTSE 100 is managing to stay in positive territory, up 6.83 points at 7160.81.

10.14am: BHP leads the way after merger news

Leading shares have edged into positive territory as positive corporate announcements and UK jobs figures outweigh the worries about a Chinese slowdown.

The leading index, having fallen as low as 7118, is now up 6.65 points at 7160.63.

Miner () continues to lead the way, up 6% after news it planned to merge its oil assets with Australia’s Woodside Petroleum.

AJ Bell investment director Russ Mould said: « Just 24 hours after it confirmed it was in talks over an exit from the oil and gas industry, mining giant BHP takes the headlines again as it confirms its plans to merge its oil assets with Woodside Petroleum.

“The market is clearly excited about the move and while investors are set to get shares in the combined venture rather than an immediate cash payout, this will give them the option of selling the shares should they choose and realising value that way.

“The news comes alongside results which encompass a big capital return to shareholders and a plan to tidy up the company’s corporate structure with its main listing widely expected to be in Australia and the green light on a new potash project.

“BHP has a clear strategy now of focusing on future-proofed commodities which are part of the transition away from fossil fuels or in other words being part of the solution rather than part of the problem and it’s an approach which is winning favour from the market. »

But COVID-19 concerns are never far away, and news that New Zealand is to go into lockdown after its first case in eight months has revived fears the Delta variant could derail the global economic recovery.

So hotel group () is down 2.32%, InterContinental Hotels Group PLC has lost 1.79% and British Airways owner International Consolidated Airlines PLC has fallen 2.17%.

Among the mid-caps travel group () is down 2.6%.

Whitbread may also be affected by the news that its chairman Adam Crozier is taking up the same role at telecoms group BT in December.

Crozier is also chairman of Asos but will give up that post before he joints BT, as well as a role at () at the end of the year.

Whitbread, in an attempt to ease concerns Crozier might be taking on too much, said: « Following discussions with Adam, and taking account of the planned changes in his portfolio, the board is delighted that he is continuing as chairman of Whitbread and is fully satisfied that he can continue to devote sufficient and appropriate time to the group. »

9.49am: Afghanistan situation adds to global concerns

There were enough global issues for the markets to worry about already, but the Taliban taking control of Afghanistan is another one to add to the list.

So far there has been little immediate impact but longer term the events in Kabul could have repercussions.

Nigel Green, chief executive of financial advisory group deVere said: “Despite the news coming out of Afghanistan, there is not likely to be an immediate shockwave rippling through global stock markets.

“Investors are currently more focused on other key factors that could impact returns.

“These include the fallout from the delta variant of Covid, concerns about peak earnings, disappointing Chinese economic data, slowing growth, and this week’s publication of the minutes of the Federal Reserve’s latest meeting which could hint at a shift in policy.”

“However, the major geopolitical turbulence triggered by the Taliban’s effective power grab will certainly be added to investors’ growing list of global issues to track as it could have longer-term implications for markets.

“There will be questions regarding stability in the Middle East, the global influence of the U.S. and the mounting pressure on [US president Joe] Biden, the prospect of increasing international terror threats, and the growing dominance of China’s renminbi.”

9.11am: Just Eat climbs on upbeat comments

One of the key points from the jobs data is the rise in vacancies.

Jennifer Beckwith, CBI head of employment, said: “With employment up and unemployment down, the labour market is showing further signs of recovery.

“Yet, with vacancies at a record high, employers are concerned that staff shortages are stalling their ability to grow and support the country’s wider economic recovery.

“Recent changes to self-isolation mean that firms can at last continue to operate more normally, even if short-term absences remain a concern for sectors reliant on younger workers awaiting their second vaccine.

“A wider test and release scheme must be implemented so that self-isolation remains properly targeted at those who risk spreading the virus. »

Back with the market and the FTSE 100 has recovered most of its early losses, and is now virtually flat. 

The index is down just 1.43 points at 7152.55.

() continues to provide support after news it is merging its oil assets with those of Woodside Petroleum.

(, ) is also on the way up. Its shares have climbed 1.08% to 6197p after it said its losses will have peaked in the first half.

8.35am: China slowdown worries continue

Worries over the economic slowdown of China, the world’s growth engine, continued to dog international stock markets on Tuesday.

The FTSE 100 drifted 27 points lower at 7,127.26 in the wake of the latest domestic jobs print, which was slightly better than expected.

The UK’s unemployment rate dipped to 4.7% in the last quarter from 4.8% previously, compared with an expectation that the number would remain static.

According to the Office for National Statistics, the number of people in employment rose again, by 182,000 to 28.9mln, but remained 201,000 below pre-pandemic levels. Vacancies, meanwhile, rose to a record high of 953,000.

“The next reports will give an even stronger indication of where the economy stands as the government furlough scheme comes to an end, although the current demand and supply imbalance for labour may take some of the strain,” said Richard Hunter, head of markets at Interactive Investor.

The day’s big mover on the Footsie was miner BHP (), which confirmed it was in talks to spin off its oil assets in a deal that would see it merge them with those of Aussie giant Woodside Petroleum. BHP shares opened nearly 9% higher.

On the FTSE 250, publisher Future () gave up most of the ground gained a day after unveiling the £300mln takeover of rival Dennis. It fell 4% early on.

6.50 am: FTSE 100 set to open in the red

The FTSE 100 is expected to extend its losses on Tuesday as worries about China’s slowdown override the rebound on Wall Street overnight.

London’s main share index has been predicted to drop another 10 points, according to the IG spread betting platform, after closing down 64 points at 7,153 at the start of the week.

Having initially carried on the negative vibe in Asia and Europe, US stocks battled to reduce losses and ended with the Dow Jones climbing back into the green and the S&P 500 marking another record high, while the tech-powered Nasdaq retreated 0.2%.  

With some disappointing Chinese data having been the catalyst for the weak start to the week, the main focus today will be on more macro numbers, with UK unemployment figures and US retail sales providing today’s tea leaves to pore over.

The overriding theme on the markets is caution, says market analyst Jeffrey Halley at Oanda, but “balanced by the irresistible urge to buy the dip”, with the net results that “across multiple asset classes, markets are nervously marching on the spot”.

Looking at the UK labour market, as we will be this morning, the unemployment rate is forecast to remain at 4.8% for July but the overall picture has been improving and the was optimistic about the labour market in its latest meeting, adjusting its outlook for unemployment to 5.2% for this year, and then down to 4.7% in the second quarter of 2022.

The claimant count rate has recovered from March’s 7.2% to 5.8% in June, as businesses continue to reopen, with monthly claims expected to fall by another 84k from the 115k seen in June.

However, it’s worth watching for wobbles in the numbers.

“Now that we have the furlough scheme starting to wind down and businesses having to contribute more to the scheme, we could well start to see further convergence between the monthly claim’s numbers, and the ILO measure of unemployment. This could see the ILO measure edge higher, as struggling businesses decide to let any remaining employees go, suggesting that the next few months could be difficult ones for the labour market,” says Hewson.

As for US retail, he says these could go either way.

“These numbers have been quite difficult to predict this year, up one month and down the next. In June we were expected to see a decline of -0.5% and ended up with a gain of 0.6%.”

The market reaction could also be interesting, with Hewson noting that Wall Street is able to shrug off most of the negative news but that recent data “does appear to show that some parts of the US economy are suffering a crisis of confidence”.

“The reaction to Friday’s sharp drop in University of Michigan confidence to a ten-year low was in sharp contrast to the recent broader US consumer confidence levels which in July saw a return to levels last seen pre-pandemic, a number that came out less than three weeks ago.

“They can’t both be right,” he added.

Around the markets

Pound – down 0.1% to US$1.383

Oil – Brent crude up 0.1% to US$69.56 per barrel

Gold – up 0.2% to US$1,791.1 per oz

Bitcoin – down 2.7% (24hr change) to US$46,252.3

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were lower on Tuesday with Chinese internet stocks in Hong Kong falling again after China’s market regulator issued draft rules aimed at stopping unfair competition on the internet.

The Shanghai Composite declined 1.29% and Hong Kong’s Hang Seng index slumped 1.54%

In Japan, the Nikkei 225 fell 0.08% while South Korea’s Kospi slipped 0.77%.

Shares in Australia dipped, with the S&P/ASX 200 trading 0.88% lower.

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