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FTSE 100 ends the day on a downward trend; Wall Street mixed as inflation concerns outweighs solid earnings

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The UK blue chip index close to day’s low while US markets head south after latest data

  • FTSE 100 closes 35 points lower

  • Royal Mail rises after £400mln shareholder return

  • Mining shares under pressure

4:50pm: FTSE 100 closes 35 points lower

The FTSE 100 closed lower on Thursday as crude prices weighed down the UK’s blue chip index.

The main index finished the day at 7,256 points, a 35-point drop for a loss of 0.48% on the day.

« Stock markets, particularly in the US, continue to suffer a hangover from the end of earnings season, while the continued weakness in crude oil has meant that energy stocks are the main detractor in markets like the Dow and the FTSE 100, » IG chief market analyst Chris Beauchamp wrote.

« A late November spike in volatility seems to be on the cards, as the Vix ticks up for a second day. The earlier bounce this month didn’t too much to hit equities, but now that most of earnings season is out of the way, and with a while to go until the next Fed meeting, the stars appear to be aligning for a period of weakness within the overall strong period usually witnessed in Q4. »

3.58pm: Leading shares near day’s low

The decline in leading shares has picked up pace, with the FTSE 100 close to its lows for the day.

It has lost 41.84 points or 0.57% to 7249.36, following the lead of Wall Street where after a mixed start, the three main US indices are now all in negative territory.

The Dow Jones Industrial Average is down 237 points or 0.66%, the more broadly based S&P 500 has dipped 0.09% and the tech heavy Nasdaq Composite is down 0.16%.

With metal prices weakening along with the strong dollar, commodity companies are among the main fallers in the UK blue chip index.

Anglo American PLC (LSE:AAL) is down 3.11%, Antofagasta PLC (LSE:ANTO) has fallen 2.2% and Rio Tinto PLC (LSE:RIO) has lost 2.17%.

Precious metals miner Fresnillo PLC (LSE:FRES) has also lost ground, down 3.85%.

A dip in the crude price following reports that the US and China might release some of their strategic reserves to take the froth out of the oil market has pushed Royal Dutch Shell PLC (A shares) (LSE:RDSA) down 2.53% and BP PLC (LSE:BP.) 2.41% lower.

Elsewhere GlaxoSmithKline PLC (LSE:GSK) is down 2.59% after its shares went ex-dividend.

But Royal Mail PLC (LSE:RMG) has risen 8.97% after it accompanied a positive update with news of a £400mln return to shareholders.

And optimistic comments from housebuilder Crest Nicholson (LSE:CRST), up 4.79%,  has helped the whole sector with Persimmon PLC (LSE:PSN) puttingt on 4.76%.

The Berkeley Group Holdings PLC (LSE:BKG) is 4% better and Taylor Wimpey PLC (LSE:TW.) is up 3.7%.

2.58pm: Strong Philly manufacturing report

US indices started mixed at the open as investors digested a strong Philadelphia Federal Reserve manufacturing index reading for November, which showed a big jump in regional activity.

In early deals, The Dow Jones Industrial Average dropped around 41 points at 35,890. The S&P 500 was up seven to stand at 4,695. The Nasdaq exchange added around 31 points in New York to 15,952.

The Philly index rose to 39.0 in November, which was well above the consensus of a figure of 24.0 and up from 28.3 the previous month. This marks a seven month high.

This follows the news that initial jobless claims came in higher than expected at 269,000.

But following their results, Macy’s, Inc. (NYSE:M) has surged 20%  and Kohl’s Corporation (NYSE:KSS) has climbed 10.26%.

Back in the UK, the FTSE 100 is now down 21.20 points or 0.29% at 7270. It has traded in a range of just 32 points so far today.

2.39pm: Turkish lira tumbles as cental bank cuts rates

Normally central banks would be expected to raise interest rates if inflation is getting out of control.

That is what is concerning investors awaiting further news from the Bank of England and the US Federal Reserve.

Turkey however is somewhat different.

The Central Bank of the Republic of Turkey has cut its benchmark rate from 16% to 15%, the third decrease in as many months, despite inflation running at 20%.

The bank had been under severe pressure from the country’s president, Recep Tayyip Erdoğan, to cut rates and once more it has obliged.

The news has sent the lira tumbling and it now stands at 11.11 against the dollar, having previously lost 6% in the last three trading days.

Simon Harvey, Senior FX Market Analyst at Monex Europe, said: « Predicting the endgame in Turkey is difficult in such volatile conditions, although the two pathways out of the current climate are clear

« Either the central bank pushes back on the political pressure to lower interest rates, and in turn tries to appease markets and wait until transitory elements of inflation begin to subside before cutting again, or the central bank tries to navigate a softer easing cycle via more palatable communications, smaller and less frequent interest rate cuts, and altering liquidity conditions to soften the [lira] impact

« For now, the central bank hasn’t indicated which exit strategy it favours, thus leaving the lira exposed to increased short speculation. »

1.47pm: US weekly jobless claims dip

US initial jobless claims fell last week to a new pandemic low, but not by as much as expected.

The number of Americans seeking employment benefit for the first time came in at 268,000, down from 269,000 the previous week, which was itself revised upwards from 267,000.

Economists had been expecting a fall to 260,000.

The news has had little impact on Wall Street so far, with all three main indices expected to show slight gains at the open.

12.36pm: M&S to supply food to Costa Coffee

Shares in Marks and Spencer Group PLC (LSE:MKS) have added 2.49% to 233.37p after it unveiled a link-up with Costa Coffee.

The move means M&S Food –  including its sandwiches and salads as well as the Plant Kitchen and Made Without brands – will be available in more than 2,500 Costa stores across the UK as well as via drive-thru lanes.

The arrangement is due to be fully launched next year.

Meanwhile the FTSE 100 continues to hover in the red, down 12.64 points or 0.17% at 7278.56.

12.21pm: HS2 extension scrapped

As expected, an extension of the HS2 network to Leeds from Birmingham has been axed by the government.

Plans for Northern Powerhouse Rail link across the Pennines have been also downgraded with certain sections to be upgraded rather than a complete rebuild, Transport secretary Grant Shapps told MPs.

11.48am: US investors await latest jobless claims figures

US stocks are expected to edge higher at the open on Thursday ahead of more corporate earnings, notably from the retail sector, and weekly jobless claims data that will be closely watched as investors fret over likely Federal Reserve rate hikes in the medium term.

Futures for the Dow Jones Industrials Average were around 0.2% higher, while those for the broader S&P 500 index added 0.3%, and contracts for the tech-laden Nasdaq-100 futures climbed 0.5%.

Stocks have wavered this week as earnings have rolled in and amid concerns over rising inflation, although the major indexes are still hovering close to their record highs.

On the data front, the number of Americans seeking unemployment benefits for the first time is expected to show a fall from 267,000 to 260,000 last week. 

In the corporate world retailers Macy’s and Kohl’s are scheduled to release earnings figures.

Technology firm Nvidia rose in out-of-hours trading after posting record quarterly revenue after markets closed. But Cisco Systems (NASDAQ:CSCO) fell after the networking company gave forward earnings guidance that was below Wall Street’s estimates and said it was affected by the semiconductor shortage.

Back in the UK, the FTSE 100 is down 13.81 points or 0.19% at 7277.39.

10.51am: More firms fear they will not survive the next three months

The number of UK businesses trading has slipped and more of them worry about going bust in the next three months.

According to the latest business insights survey from the Office of National Statistics, the percentage of currently trading businesses fell slightly from 93% in late October 2021, to 91% in early November 2021; this is the first time the figure had fallen since January 2021 and is primarily led by the transportation and storage industry.

Over a quarter (28%) of businesses currently trading reported a decrease in turnover compared with normal expectations for this time of year; this is up from 24% in late September 2021, and is the highest percentage since early August 2021.

Of businesses not permanently stopped trading, 6% reported no or low confidence that they would survive the next 3 months, which compares with 4% reported in early October 2021.

Dr Jackie Mulligan, member of the Government’s High Streets Task Force and founder of the local shopping platform Shopappy, said: « In theory, we’re emerging from the pandemic but for many small business owners, things are getting harder, not easier, so it’s sadly no surprise more are expecting not to survive.

« The removal of all the various Government supports coupled with runaway inflation and increased costs due to supply chain issues is putting an unbearable strain on so many small businesses. Many will need to decide whether to up the prices of their products and services to take the pressure off their own finances, which puts their income and sales at risk, or simply take it on the chin, which can make their business non-viable.

« Throw Black Friday into the mix, which takes even more revenue away form smaller retailers, and it’s no surprise the high street is facing an existential crisis. »

10.45am: US plan for reserves finds support from China

Crude prices have recovered a little but are still down on the reports of government’s possibly releasing some of their strategic reserves.

Brent is now down 0.15% while West Texas Intermediate is off 0.42%.

Joshua Mahony, senior market analyst at IG, said: « Crude oil has suffered sharp losses over the past 24 hours, with [US president] Biden’s calls for a release of strategic reserves overshadowing the decline in US stockpiles announced yesterday.

« While Biden has had little success in attempting to force OPEC members into raising production to drive down energy prices, his latest ploy to push for a multilateral release of strategic reserves appears to have found support in China.

« A simultaneous release of stocks from both the US and China certainly brings some short-term relief given today’s declines, but there remains plenty of questions over whether the lack of new investment will ultimately lead to a long-standing supply deficit that pushes up energy prices for years to come. »

10.35am: Mid-cap index outperforms

The FTSE 100 is off its worst levels but still down on the day.

Pressured by the fall in commodity companies and the strong pound, the leading index is down 9.49 points or 0.13% at 7281.71.

But the mid-cap FTSE 250 index is heading the other way, edging up 0.46% to 23,541.13.

Playtech PLC (AIM:PTEC) has put on 3.98% after the gaming software group received its third takeover approach in two months, this time from a consortium backed by former Formula 1 team owner Eddie Jordan.

9.18am: Housebuilders in demand

A positive update from housebuilder Crest Nicholson (LSE:CRST) – which said demand for properties remained high – has boosted the whole sector.

Crest has climbed 2.52%, while Taylor Wimpey PLC (LSE:TW.) is up 2.39%, Persimmon PLC (LSE:PSN) has put on 1.9% and Barratt Developments PLC (LSE:BDEV) has built up a 1.88% rise.

But this is not enough to pull the leading index into positive territory.

The FTSE 100 is currently down 15.98 points or 0.22% at 7275.22.

8.33am: Commodity companies under pressure

Reports that China and the US might release some of their strategic oil reserves to help ease the pain of rising crude prices has had some effect.

Brent crude is down 1.08% to US$79.41 a barrel while West Texas Intermediate is 1.53% lower at US$77.16.

So BP PLC (LSE:BP.) has fallen 1.46% while Royal Dutch Shell PLC (A shares) (LSE:RDSA) is down 1.61%.

Metal prices including copper are also lower,  helping push down mining companies.

Antofagasta PLC (LSE:ANTO) is the biggest FTSE 100 faller, down 2.31%, while Rio Tinto PLC (LSE:RIO) has lost 2.03% and Anglo American PLC (LSE:AAL) has dropped 1.77%.

Elsewhere GlaxoSmithKline PLC (LSE:GSK) has lost 2.07% – the pharmaceuticals giant is one of a number of companies to go ex-dividend.

But even so the leading index is off its worst levels, now down 11.13 points or 0.15% at 7280.07.

8.18am: Investors remain cautious about economic outlook

It is indeed a downbeat start to the day with leading shares heading lower again.

The FTSE 100 has fallen 22.09 points or 0.3% to 7269.07 as investors continue to worry about pricing pressures and interest rate rises.

The pound has added 0.1335% to US$1.3506 as the likelihood of the Bank of England acting on rates in December increased after the surge in inflation in October.

In turn, the strength of the pound is undermining the the major overseas earners in the leading index.

AJ Bell investment director Russ Mould said: « When some 70% of [the FTSE 100’s] constituents’ earnings are derived from overseas, strength in sterling isn’t that helpful. »

But Royal Mail PLC (LSE:RMG) has bucked the trend, rising 6.46% to 466.3p to become the leading riser in the blue chip index.

Half year revenues rose 7.1% to just over £6bn while operating profits of £404mln was a little above September’s guidance of between £395mln and £400mln.

And shareholders had more good news in terms of a £200mln share buyback and £200mln special dividend.

Michael Hewson at CMC Markets UK said: « This is exactly the sort of special delivery that shareholders tend to welcome. This would be alongside the interim dividend of 6.7p per share, payable on 12th January 2022. »

Richard Hunter, head of markets at interactive investor, said: « Royal Mail has been another beneficiary of enforced strategic acceleration resulting from the pandemic. It is currently skilfully spinning a number of plates as it continues to transform, and the share price has reflected this progress, having risen by 55% over the last year as compared to a gain of 14% for the wider FTSE 100.

« It would therefore be with some irony that, at current levels, the company is on the cusp of relegation at next month’s FTSE100 reshuffle as a result of recent share price weakness which has seen a dip of 16% over the last six months. However, bulls of the Royal Mail story are not to be deterred, with the market consensus of the shares as a buy remaining defiantly intact.”

6.50am: Leading shares set to slip again at open

FTSE 100 was tipped to start on the back foot again after yesterday’s jump in UK inflation to a ten year high.

Financial spread betters were calling the blue-chip index to open around six points down from Wednesday’s close of 7.291 (down 36) a couple of hours before trading started.

Rising inflation is likely to mean interest rates rise sooner rather than later but after being led a merry dance by the Bank of England earlier this month, economists were hedging their bets whether an increase would be at its next meeting on 16 December or later.

Today is likely to be another uncomfortable one for prime minister Boris Johnson after his mea culpa over the Owen Paterson standards fiasco yesterday.

Transport Secretary Grant Shapps is expected to announce the HS2 extension to Leeds will be scrapped, a move likely to spark a wave of criticism from Tory MPs in the northeast part of the government’s ‘red wall’.

Some £96bn of investment in the rail infrastructure elsewhere in the north is expected to replace the HS2 extension.

Royal Mail’s interims will also be watched to see if last year’s parcel boom really was a one-off.

Elsewhere, Asian markets were generally lower as coronavirus cases continue to rise even though beleaguered Hong Kong property group Evergrande has seemingly bought itself some time with the sale of its stake in streaming service HengTen for US$274mln.

The Nikkei 225 came off its worst levels on reports that Japan’s latest fiscal stimulus package would be 55.7trn yen, or around US$484bn. This is on top of the 80trn yen spent since the beginning of 2020

All of the three main US markets closed lower.

6.50am: Early Markets – Asia / Australia

Asia-Pacific shares were mostly lower on Thursday following overnight losses on Wall Street.

Some of the tech majors listed on Hong Kong’s Nasdaq-style technology board Hang Seng tech index, including Alibaba, Baidu, and Tencent, declined sharply.

China’s Shanghai Composite fell 0.35% while Hong Kong’s Hang Seng index slumped 1.35%.

In Japan, the Nikkei 225 slipped 0.30% and South Korea’s Kospi fell 0.34%.

Australia’s S&P/ASX200 was an outlier, rising 0.13% to close at 7,379.20 points even as energy stocks remained under pressure amid a sell-off in crude futures.

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