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FTSE 100 in neutral while Bitcoin soars

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The UK’s premier share index closed down around two points, or 0.03%, at 7,025, off the session high of 7,038 but well above the low of 6,980.

  • FTSE 100 off around two points

  • Bitcoin prices surge

  • Blockchain companies back in demand

5.05pm: FTSE closes a tad lower

FTSE 100 closed slightly lower on Monday and US shares were muted as stocks appeared to come off the recent boil.

The UK’s premier share index closed down around two points, or 0.03%, at 7,025, off the session high of 7,038 but well above the low of 6,980.

FTSE 250 fared better though, adding almost 50 points, or 0.22%, at 22,933.

On Wall Street, the Dow Jones added around 21 points at 35,083. The S&P 500 gained around six points at 4,418. The tech heavy Nasdaq advanced around seven points at 14,844.

« Unsurprisingly, and perhaps fairly, the looming FOMC meeting this week gets the blame for why the bounce in stocks of the past week has slowed, » note Chris Beauchamp, market analyst at online trading firm IG.

« But it is a jam-packed week for earnings too, and by the end of this week, and of July, we will be much better informed (hopefully) about the outlook of the Fed but also about whether the strong start to earnings season was an aberration or whether it will be confirmed by the avalanche of earnings in coming sessions. »

4.05pm: Non event for Footsie

Today has been a bit of a non-event for the FTSE 100.

The index did briefly crawl into positive territory shortly after lunch but is now modestly in debit at 7,109, down 9 points (0.1%).

All of the volatility was taking place among the small caps, especially those with any sort of connection to blockchain technology, as cryptocurrency markets sparked back into life on speculation that Amazon.com is contemplating accepting Bitcoin on its platform.

Four of the five top movers – GSTechnologies Ltd, Quantum Blockchain, Online Blockchain PLC and Argo Blockchain PLC – were blockchain players. The gains on the four ranged from 22% to 47%.

At the bottom of the greasy pole was RTC Group PLC, which tumbled 21% to 39.5p after it reminded investors that the withdrawal of all NATO forces from Afghanistan will herald the end of its main business in that country.

The engineering and technical recruitment group managed to limit the decline in profit before tax in the first half of 2021 to £162,000 from £231,000 the year before.

 

Praise be, the FTSE 100 has crawled into positive territory.

London’s index of heavyweight shares was up just 4 points (0.0%) at 7,031, thanks largely for enthusiasm for mining shares.

The move into credit means AstraZeneca PLC is now out of step with the market trend, 2,2% lower at 8,291p.

The drugs giant said its Ultomiris drug has been recommended for approval in the European Union by the Committee for Medicinal Products for Human Use (CHMP) for children and adolescents with paroxysmal nocturnal haemoglobinuria.

The new is unlikely to have been responsible for the share price slide, however.

Meanwhile, Deutsche Bank ha revealed that the 550 or so market professionals around the world that it surveyed earlier this week now have a new thing that is keeping them awake at night.

Previously, survey respondents had named inflation fears as the main worry in May and June and while 42% of those surveyed still named it as a concern, it has been overtaken by the heebie-jeebies over more COVID-19 variants, with 63% of respondents citing it as the major worry.

“While inflation concerns are still elevated, the expected inflation/deflation balance was at the lowest since January even though we’ve subsequently seen inflation numbers not seen for a generation,” Deutsche Bank said.

“Elsewhere readers are on balance supportive of England lifting all covid restrictions but with a wide range of views; however people were much more pessimistic about life being back to normal by year-end than they were a month ago,” Deutsche added.

2.45pm: US stocks start the week in reverse

Wall Street’s main indices have started the week on the back foot ahead of a heavy week for US earnings.

Shortly after the opening bell, the Dow Jones Industrial Average was down 0.09% at 35,029 while the S&P 500 dropped 0.07% to 4,408 and the Nasdaq fell 0.27% to 14,796.

While equities were negative, Bitcoin was enjoying a strong bounce, up 12% in the last 24 hours at US$38,317 amid reports that Amazon may be considering accepting payments in the cryptocurrency.

The Nasdaq’s biggest players will continue to be in focus for the remainder of the day as investors await earnings from Tesla due after the closing bell.

Back in London, the FTSE 100 was still struggling to make headway in late afternoon and was down 5 points at 7,022 at around 2.40pm.

2.05pm: Bitcoin buzz returns

Equity markets are lacklustre today but cryptocurrency markets are back in favour.

While the FTSE 100 is down 3 points (0.0%) at 7,025, Bitcoin has rallied 12% to US$38,706 after online retail giant and tax specialist Amazon.com appeared to signal an interest in accepting Bitcoin as a payment currency.

“It appears like the pace of buying has been rising ever since last week’s « B-Word » conference with Elon Musk [Tesla CEO] and Jack Dorsey {Twitter CEO]. In addition, speculation has been growing that Amazon could be accepting Bitcoin payments later this year, which would be massive news and a big catalyst behind further gains if the story turns out to be correct,” said Fawad Razaqzada at ThinkMarkets.

“Are we also seeing some pre-emptive buying ahead of Tesla’s earnings today? It could be that some speculators are anticipating pro-crypto remarks from Tesla CEO Elon Musk or his team when the electric car maker produces its quarterly results after the stock markets close tonight. So do watch out for that possibility,” Razaqzada suggested.

Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown, said the buying frenzy appeared to have been triggered by a simple job ad from Amazon.

“Although Amazon has scores of openings for blockchain specialists, it was the listing for a digital currency and blockchain product lead that has led to heightened speculation that cryptocurrency payments could be integrated on its platforms.

“Given the might of Amazon Web Services, it isn’t surprising that the tech giant wants to be at the cutting edge of new payments technology and establishing a new digital currency is likely to be on the agenda but the expectation that payment may also be accepted from the current crypto kids on the block has also led to a spike in their value. Over the past 24 hours Bitcoin has risen by 11%, Ethereum by 8% and Dogecoin by 11%,” she noted.

“Crypto fans are also hanging on every word of Elon Musk and his hint that Tesla could start accepting Bitcoin again is also behind the crypto bounce. The suspension of Bitcoin as a means of payment for Tesla cars sent the crypto world reeling in May, but in a debate with Twitter CEO Jack Dorsey, Mr Musk indicated that could change given mining has reached a tipping point, with much more renewable energy used instead of fossil fuels,” she added.

12.35pm: US indices to open lower as results barrage begins

At the start of what is set to be a hectic week for company announcements, US indices are expected to open in the red.

Spread betting quotes indicate the Dow Jones will surrender 127 points to open at 34,924 and the S&P 500 will yield 13 points to clock in at 4,399. The teach-heavy Nasdaq 100, the index most likely to be affected by this week’s multitude of results from tech giants, is expected to retreat 25 points to 15,086.

“As we look ahead to this week’s key events, uppermost in investors’ minds will be the Federal Reserve rate meeting, which starts tomorrow, and where speculation about a discussion on the tapering of asset purchases, and a possible timeline is likely to be top of mind,” said CMC’s Michael Hewson.

“It is also set to be another busy week of earnings reports as the big tech giants report their latest quarterly numbers.

“These are especially important given that these tech companies have predominantly driven the moves higher in US markets to recent record highs, and investors won’t want to see any signs of a paring back of guidance expectations over the rest of the year.

“Starting with Tesla later tonight, we can also look forward to the numbers from Apple, Amazon. Alphabet, Facebook and Microsoft, along with a host of other high-profile names throughout the week,” he added.

In London, the FTSE 100 remains mired in the red but has not changed much in the last hour or so, down 20 points (0.3%) at 7,007/

The FTSE 250 has eked out an 8 point (0.0%) gain at 22,891, with sentiment helped by a hardening of sterling against the US dollar. The pound is trading at around US$1.3784, compared to US$1.3750 around midnight last night.

Beazley PLC, up 4.3% at 393.8p, is leading the advance after the insurer’s interims got the thumbs-up from the market.

« After a tough 2020 that included significant Covid-19 related claims, Beazley’s 1H21 was far more encouraging. The company reported that its gross written premiums were up 22% YoY with premium rates on its renewal business increasing by 20%, accelerating from 1Q21 of 16%, which should be ahead of its expectations,” said Karl Morris, the director of financials at Edison Group.

Also going well is low-cost airline easyJet PLC, which is up 4.3% at 848.4p, piggybacking on well-received results from Ryanair.

10.55am: Miners defy the trend

London’s index of leading shares is just about keeping its head above 7,000, thanks largely to miners, which are defying the weaker trend.

The FTSE 100 was down 22 points (0.3%) at 7,006.

“Sentiment has come under pressure due to a widening tech crackdown in China. The Chinese government has decided to reform its education tech sector and the new regulations that were released over the weekend (but were materialising on Friday) ban companies that teach school curriculums from making profits, raising capital or going public,” said Jim Reid at Deutsche Bank.

On the plus side, there are tentative signs that the coronavirus situation in the UK is improving.

“In the UK, the seven-day average of recorded new infections has declined from a peak of 71.6 per 100.000 residents on 21 July to 57.5 on 25 July,” reported Holger Schmieding of Berenberg.

“The UK remains the test case. The number of patients in hospital with Covid-19 in the UK has risen to 5,001 on 22 July, up from an average of 900 in late May but far below the peak of 38.4k in mid-January. If recorded infections in the UK decline in coming weeks, the hospitalisation rate should peak within a few weeks well below a level that could cause serious stress for the UK’s medical system,” he added.

Source: Berenberg BankCovid-19 hospitalisation rates

“If so, this would bode well for other countries with fast vaccination progress but less elevated infection rates and more cautious governments.

“Of course, we need to watch the risks carefully. Across much of the Eurozone and the US, the Delta wave is still mounting. Also, most of the infections recorded now in England probably still reflect the situation just before the biggest nation within the UK lifted all its remaining mandatory restrictions on 19 July. It may take some two weeks to gauge whether and to what extent ‘freedom day’ may have added to infection risks,” he added.

Cruise ships operator Carnival PLC evidently feels confident enough in the improving situation to hold a celebration at the Port of Seattle on Friday to celebrate a return to service in the US of the Princess Cruises and Holland America Line.

The market seems a bit more sceptical about the return of floating Petri dishes with the shares in London down 1.8% at 1,418.2p.

9.55am: Banks lead the retreat

Banks are leading the Footsie lower in a week in which many of the big names of the sector are due to report.

The FTSE 100 index was down 32 points (0.5%), with Asia-focused banks () Holdings PLC and () – both down 1.9% – the hardest hit index constituents.

Natwest Group PLC and (), both down 1.6%, hardly fare any better while () PLC is 1.2% weaker.

“Barclays, Lloyds Banking and NatWest all report after their US counterparts provided clues on what to expect having reported earlier this month. In particular, there could be further large releases of impairment provisions as economic recovery has proved stronger than expected, lessening the levels of bad debts,” said Richard Hunter, the head of markets at interactive investor.

“For those with an investment banking operation, there could also be a further boost to earnings given the heightened levels of M&A activity and IPOs. In any event, given that the banks are each strongly capitalised going into the numbers, strong earnings could prompt further dividend increases, particularly with the regulatory shackles having been lifted,” he added.

() was 3.2% firmer at 16.23p after its first-quarter results.

“Ryanair’s results painted a rosy picture of the future for European air travel as vaccination passports open the door to a summer travel season. The group’s seen bookings rise since the new rules waving quarantine for double-jabbed travellers were announced and expects to fly 9m people in July and a further 10m in August. This is still below pre-Covid levels, but a huge improvement on the past year,” reported Laura Hoy, an equity analyst at Hargreaves Lansdown.

“However, despite an influx of travellers, Ryanair’s losses widened over the past three months as the costs to restart flights—fuel, staff, airport handling costs—rose significantly. Ticket prices, on the other hand, were depressed. The airline is using ultra-low fares to offset the knock to passenger confidence that ever-shifting quarantine rules have had. Operating with costs outweighing revenue isn’t a long-term strategy, but management doesn’t expect it will last forever—guidance still suggests the group may be able to break even at the full year.

“Unfortunately, Ryanair is still at the mercy of the virus and, although a recovery is materialising, the group noted that travel within Europe will be depressed for the foreseeable future. We’re encouraged by the group’s progress, but it may have to toe the precarious line between low fares and high costs for some time,” she added.

 

The FTSE 100 took its cue from Asia’s main markets, which were rattled by a further clampdown on Chinese tech stocks.

Not even three quick-fire three Olympic gold medals for Great Britain could lift the mood in the Square Mile.

In a sense, Monday represents the calm before the storm ahead of what Richard Hunter, head of markets at Interactive Investor, calls an “avalanche of earnings” both here and in the US.

Stateside we also have the two-day Federal Reserve Meeting, which is probably more about tapering than interest rate rises, along with a significant economic reading in the form of gross domestic product data.

On the Footsie, miners led the way with copper, iron ore, zinc and nickel all well bid.

Antofagasta (), up 1.9%, led the way, followed by Rio Tinto () and Anglo American ().

6.50 am: FTSE 100 set to open in the red

The FTSE 100 looks likely to take its cue from Asia’s main markets, where sentiment has been hit by China’s continued clampdown on technology companies.

The Shanghai Composite was off 2.4% and Hong Kong’s Hang Seng dropped 3.2% after online education firms were hit with draconian new restrictions.

At the same time, Tencent endured a further blow after it was forced by the authorities to give up certain music streaming rights.

It all made for a difficult start to the week, which should have been a lot easier after Wall Street’s close last week in record territory.

Only Japan really seemed to buck the regional trend with the Nikkei 225 trading 1% higher.

Here in the UK, there is cause for a little optimism with Covid infection rates starting to show some signs of subsiding, prompting hopes the third wave has hit its peak.

The Daily Mail dubbed as « dramatic » the fall in positive tests from 49,000 a week ago to just over 29,000.

And it pointed out it is the first time cases have fallen below 30,000 since July 6, with daily deaths standing at 28 on Sunday, up just three on the same time a week earlier.

The last five-day run of falling numbers was in February, shortly after the UK passed the peak of the winter wave.

Looking ahead, it is a big week for corporate news with updates from three major airlines – British Airways owner IAG (), Ryanair () and Wizz Air ().

We also have scheduled news from telco BT (), drugs groups () () and GlaxoSmithKline () as well as a cocktail of oilers, miners and banks.

In the US, the tech stocks begin their reporting round starting with Tesla after hours on Monday. We also have numbers from Apple, Amazon. Alphabet, Facebook and Microsoft upcoming this week.

Finally, the Federal Reserve begins its monthly musings on interest rates on Tuesday; however, the central bank’s take on the potential tapering of asset purchases is likely to be uppermost on traders’ minds.

Around the markets

  • Pound US$1.3756 (flat)

  • Bitcoin US$38,348.22 (+11.3%)

  • Gold US$1,810.80 (+0.3%)

  • Brent crude US$73.59 (-0.7%)

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region slipped on Monday as Chinese tech and education stocks plunged on regulatory pressure and a summit between China and the United States got off to a tense start.

The Shanghai Composite in China slumped 3.04% and Hong Kong’s Hang Seng index dipped 3.34%.

In Japan, the Nikkei 225 lifted 0.91% while South Korea’s declined 0.75%.

Shares in Australia gained, with the S&P/ASX 200 trading 0.08% higher.



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