The index of UK blue-chips firmly back above 7,000 while Dow is in demand as investors await central bank news
- FTSE 100 closes 102 points higher
- Investors await FOMC outcome
- Evergrande also remains in focus
5:10pm: Miners buoy FTSE 100 to higher close
The FTSE 100 index gained for a second day, climbing back above 7,000 as mining stocks recovered from a beating earlier in the week over concerns that the Evergrande debacle in China could results in weaker demand for base metals. Investors also took key central bank meetings in the US and the UK in their stride.
At the close, the UK blue-chip index was 102 points, or 1.47% higher at 7,083, just below the session peak of 7,090.
The more UK plc focused FTSE 250 added 173 points, or 0.73% to 23,785.
“Central banks have the power to shake and stir markets, so it probably says something about exactly what investors are expecting to hear from both the Fed later today and the Bank of England tomorrow that both London and Wall Street seem positively upbeat, » AJ Bell financial analyst Danni Hewson said.
« Taper tantrums and rate rise ripples look to be on the back burner and fears of an imminent Evergrande collapse have also abated somewhat.
« The FTSE 100 has sailed happily above the 7,000 mark thanks to a really positive showing from miners helped by healthier commodity prices. »
On Wall Street by London’s close, the Dow Jones Industrials Average was 430, or 1.3% higher at 34,350, with the broader S&P 500 index ahead 1.1% while the tech-laden Nasdaq Composite gained 1%.
3.43pm: Miners and betting companies pull UK market higher
Markets are in recovery mode after the recent scares about the possible collapse of Chinese property giant Evergrande, and the prospect of CO2 running out in the UK.
With temporary sticking plasters put on both of those problems, investors are in a better mood than earlier in the week.
Ahead of the latest Federal Reserve ruminations, which may also prove more benign than once feared, the FTSE 100 is showing a triply digit gain.
The leading index is up 101.09 points or 1.45% at 7082.07, while the Dow Jones Industrial Average has jumped 361 points or 1.06%.
Mining shares are supporting the FTSE 100, as they recover from concerns that problems in China could lead to a slowing economy and falling demand for base metals.
() has added 4.74%, () has climbed 4.23% and () is up 3.98%.
Companies with exposure to Asia are also showing some relief that Evergrande may not have a knock-on effect on the area.
() has risen 4.81% while () has put on 3.56%.
The takeover buzz in the betting sector is also giving the UK market a lift.
(), which is mulling over a 2800p a share offer from US group Draftkings, is up 5.48% at 2385p while rival () has added 4.06%.
Michael Hewson at CMC Markets UK said: « It’s been another positive session for European stocks, as concerns about fallout from Evergrande continue to diminish, after this morning’s agreement on some of its domestic bond coupons. The company didn’t provide any details on what was agreed and there is still the not insignificant matter of its US dollar bond payments due tomorrow, which are said to be in the region of $83.5mln in interest.
« Despite this little wrinkle, markets appear to be working on the assumption that the problem has been contained, let’s hope they are right.
« This assumption is clearly manifesting itself in Asia focussed areas of the market with HSBC and Standard Chartered up near the top of the FTSE100, along with Prudential, all three of which do the majority of their business in the region.
« Basic resources are also going well, as firmer commodity prices push up the likes of Antofagasta, Glencore and Anglo American. »
3.11pm: US home sales slightly below forecasts
As the Federal Reserve continues its meeting, the latest housing figures have come in marginally lower than expected.
Existing homes sales in August came in at 5.88mln compared to estimates of 5.89mln, and down from 6mln the previous month.
US Existing Home Sales Change Aug: 5.88M (est 5.89M; prev R 6.00M)
– Existing Home Sales (M/M): -2.0% (est -1.7%; prev R 2.2%)
– Median Home Price (USD) Aug: 356.7K or +14.9% (prev 359.9K or +17.8% From Jul 2020)
— LiveSquawk (@LiveSquawk) September 22, 2021
Quite what the Fed will make of this is uncertain, given that on Tuesday housing starts came in much higher than expected.
Such mixed signals however are more likely than not to leave the Fed erring on the side of caution as far as tapering or raising rates goes.
Nor does it seem to have worried the Dow Jones Industrial Average, which is now up 339 points or 1%.
As for the FTSE 100, it continues to move higher and is now up 98.59 points or 1.41% at 7079.57.
2.47pm: US markets advance
US markets have opened in positive territory as investors await the latest news from the Federal Reserve and the Evergrande crisis eases, for the moment at least.
The Dow Jones Industrial Average is up 148.71 points or 0.44% at 34,068.55 while the S&P 500 has added 0.46% and the Nasdaq Composite is 0.24% better.
The moves come shortly ahead of the latest US housing figures.
The positive start has also given the UK’s leading index some encouragement.
The FTSE 100 is now up 95.63 points or 1.37% at 7076.61 while the more domestically focused FTSE 250 is also ahead but not by as much, adding 0.66%.
1.17pm: Could the wheels come off the recovery?
The FTSE 100 remains near its highs for the day.
The leading index is up 87.97 points or 1.26% at 7068.95.
But how confident should investors really be?
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: ‘’A series of temporary fixes to ominous global problems has pushed the FTSE 100 back over the psycologically important 7,000 mark but there’s a chance the nuts and bolts may weaken again, and the wheels could fall off the recovery.
« The deal to settle a domestic bond payment due to be made by the crisis hit Chinese property group Evergrande, seems to have calmed nerves among investors and stopped immediate contagion to other sectors. Mining stocks, which were among the worst hit on Monday when fears mounted that a collapse of the firm was imminent, are among the top risers today on the FTSE 100. Worries about the immediate impact on demand for raw materials for construction have subsided but with another debt payment due to be made by Evergrande on an overseas bond tomorrow, the myriad problems facing the group are far from over.
« In the UK, the latest supply chain crisis has been patched up, with the government stepping in to pay the operating costs for a major CO2 producter. CF industries shut two sites that produce 60% of the UK’s commercial carbon dioxide supplies, because of soaring gas prices. Again this may just be a kludge with only three weeks of financial support guaranteed and now the energy regulator OFGEM is warning that more energy suppliers could go to the wall. It’s clear the crisis in the energy sector is far from over, and companies will be forced to absorb costs, hitting margins or pass rises onto customers, fuelling inflation concerns. »
12.22pm: US investors await central bank news
After a roller-coaster day on the US markets which saw an early surge but a closing dip on the main indices, investors are looking at a positive start to trading today.
The Dow Jones Industrial Average is forecast to rise 0.56% or around 180 points while the S&P 500 is set for a 0.52% increase and the Nasdaq Composite is indicated 0.31% higher.
The calmer mood follows news that the troubled Chinese property developer Evergrande plans to make an interest payment due tomorrow although there is still the small matter of an overseas bond payment also due the same day.
Also in focus is the outcome of the latest US Federal Reserve meeting, where all eyes will be on the central bank’s comments on tapering its support for the economy, and also any signs that interest rates may rise next year.
Michael Hewson at CMC Markets said: « With many of the Fed members who are calling for a scaling back of bond purchases being voting members next year, the timing of a taper still remains very much a matter of when and not if. In other words, December, or possibly later.
« Attention will also be focussed on the dot plots in order to determine whether any more Fed members have moved up their expectations of the first increase in interest rates, with further dots getting moved into 2022 likely to send a very hawkish signal. In the June meeting there were 7 dots indicating a rate lift off in 2022, so an increase there could well be viewed as hawkish and could also signal a faster taper. A move the other way would obviously be construed as dovish.
« The one fly in the ointment given the risks emanating from events in China is whether the Fed adopts a less hawkish stance .. in order to buy itself some time until the situation becomes clearer. »
Back with the US economy, and later come existing home sales for August. These are expected to show a decline from 5.9mln to 5.89mln.
Elsewhere () shares are down around 6% in premarket trading after the delivery giant reported an 11% drop in quarterly profits.
In the UK, the FTSE 100 is now up 82.20 points or 1.18% at 7063.18, helped by the Evergrande news and the government’s actions to avert the CO2 crisis.
11.55am: Utilities in decline
There are some fallers in the leading index, inevitably.
It being a risk off sort of day, many of those out of favour are defensive stocks like utilities.
So () PLC is down 1.1%, National GridPLC is 0.84% lower, () is off 0.66% and () has fallen 0.58%.
Energy companies are also been undermined after the business secretary Kwasi Kwarteng, speaking to MPs, refused to rule out windfall taxes on businesses benefiting from rising gas prices.
Meanwhile B&Q owner () is down another 1.4% in the wake of Tuesday’s update.
11.41am: BP and Shell in demand
Oil prices are on the rise again.
Brent crude is up 1.43% at US$75.42 a barrel, while West Texas Intermediate – the US benchmark – is 1.63% better at US$71.64.
Neil Wilson at Markets.com said: « Oil rose, as near-term weakness in prices caught in the broader risk sell-off waned, allowing firmer price action to take over. Goldman Sachs said that combined with the spike global gas prices, a colder winter in Europe and Asia could drive demand for crude and [add] $5 a barrel to the price of oil. API data showed a draw of more than 6mln barrels last week, well above the 2.4mln expected. »
So () is 2.73% better while () has seen its A shares climb 2.27%.
As for the FTSE 100, it is currently up 82.37 points or 1.18% at 7063.35, having earlier touched 7070.
10.42am: Investors bet on bookies
The potential £15bn bid for betting company () from US group DraftKings has prompted a flutter of interest in the rest of the sector.
Entain itself is up 6.1% at 2399p.
That is below the mooted 2800p a share offer price for the Ladbrokes and Coral owner and suggests investors do not believe a rival bid is in the works, even from MGM which had a bid for Entain rejected earlier in the year.
Laura Hoy, equity analyst at Hargreaves Lansdown, said: « While Entain confirmed it would mull the proposal over, there’s no guarantee that a deal will go ahead. Even if the offer is accepted, the usual regulatory scrutiny could be further complicated by antitrust concerns due to BetMGM, Entain’s joint venture with US Casino operator MGM.
« We suspect that BetMGM is a big part of the reason DraftKings is interested at all, which may mean it will look to offload other parts of the business like the Ladbrokes and Coral physical betting shops down the line, as Caesars Entertainment has done with William Hill’s shops. But MGM will have a hand in negotiating the terms of the deal, which could ultimately put DraftKings off following through. There’s also a chance DraftKing’s bold move could push MGM to make another offer for Entain, though we think this possibility is unlikely considering it would require MGM to substantially increase its former offer.”
Elsewhere in the sector, () PLC is up 6.12% while () – which also issued an update today – is ahead 3.86%.
Ahead of the latest news from the Federal Reserve on tapering and despite concerns about the Evergrande situation and the potential UK energy crisis, leading shares remain in the green.
The FTSE 100 is up 74.08 points or 1.06% at 7055.06.
9.55am: Investors more confident after recent problems
Leading shares are holding on to their early gains, despite the distractions of the Federal Reserve meeting and the Evergrande saga.
The beleaguered Chinese property company, whose potential collapse has sent shudders through global market, has said it would pay the interest due on Thursday on an onshore bond. But it has so far said nothing about a payment on an overseas bond also due on the same day.
Investors have been attempting to weigh up what the fallout for China and indeed the global economy would be from any Evergrande default.
Still, the comments from the company have given some support to the mining sector, which had been falling on fears that problems in the Chinese economy would undermine demand for base metals.
So () has added 4.1%, () is up 3.48%, BHP PLC is 3.27% better and () has climbed 2.74%.
() is 2.84% higher and () has put on 2.31%. Both have big presences in Asia.
Overall the FTSE 100 is up 74.06 points or 1.06% at 7055.04.
Russ Mould, investment director at AJ Bell. “Having seen some very bad days for equities in recent sessions, Europe and parts of Asia were more upbeat on Wednesday…
“So, what’s changed to make investors more confident? One key event is China’s troubled property developer Evergrande striking a deal over a bond repayment, thereby bringing a sense of relief to markets we might not see the business collapse – something that could cause ripples in multiple markets. Evergrande still has plenty of problems to fix including more bond payments later this week, but today’s deal would suggest catastrophe is not immediately around the corner.
“We also have the Federal Reserve issuing a policy statement later today and speculation is growing that we won’t get the dreaded tapering announcement at this event. That would be a massive relief to investors and could give further support to markets.”
8.44am: Leading shares start on the front foot
The FTSE 100 vaulted back over the 7,000-mark in a busy early session that saw the blue-chip index open 1% higher.
Once again, the bargain status of UK stocks appeared to be the driving force behind the movement.
Certainly, Wall Street and Asia’s main markets, jittery as a result of the Evergrande meltdown, failed to provide much positivity.
Looking ahead, much is being made of the US Federal Reserve’s monthly meeting, though its latest call on interest rates and potential tapering of monetary support is unlikely make its impact felt in London until Thursday.
“The Fed is expected to reiterate its stance on a tapering of its bond-buying programme, with the consensus still believing that December will most likely signal the firing of the starting gun,” said Richard Hunter, head of markets at Interactive Investor.
“However, with weaker employment numbers of late and the jobs market still almost six million shy of pre-pandemic levels, one of the Fed’s key requirements has not yet been met.
“At the same time, a combination of supply chain issues and spikes in the delta variant have tapped the brakes on the economic recovery, prompting downgrades of the outlook for this year.
“The additional complication of elevated inflation adds to the mix and, in this brittle environment, the comments will receive extra scrutiny.”
On the market, the big riser was (), up 8% after receiving a £15bn bid from US firm DraftKings. Rival () was dragged 5% higher, helped by a positive update.
The miners were also in bounce-back mode with (), up 5%, leading the charge.
6.50 am: FTSE 100 called higher
The Footsie is expected to start on the front foot ahead of the Fed interest rate decision, even though there are still concerns about China’s Evergrande.
It will be followed by the US Federal Open Markets Committee (FOMC), which is particularly significant as we’ll get the FOMC’s latest economic projections and the ‘dot plot’ of expected future rate hikes.
“Investors will be looking to determine whether recent events around surging energy prices, and Evergrande, have altered the prevailing narrative, that until a week ago, had been very much that this meeting was a waypoint on the way to the September payrolls number, which is due on October 8th. A decent number in October would more or less set in motion a timeline to the start of a tapering of asset purchases in either December or January,” said Michael Hewson at CMC Markets.
“Just prior to the August payrolls report being released there was a widespread expectation that today’s meeting would be the opportunity for the US central bank to signal the start of just such a program of reducing the amount of its US$120bn a month bond buying program.”
The FTSE 100 is called 10 points higher at 6,991.
6.50am: Early Markets – Asia / Australia
Stocks in the Asia-Pacific region were mixed on Wednesday as investors kept a close watch on the Chinese market for any fallout surrounding the embattled property developer China Evergrande Group.
China’s Shanghai Composite dropped more than 1% in early trade but has recouped its losses to trade 0.20% higher while stock markets in Hong Kong and South Korea are closed for a holiday.
Australia’s S&P/ASX200 has, in the last hour of trading, gained 0.64% to 7,320.
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