FTSE 100 misses the mark; Wall Street mixed bag as Big Tech earnings come in

• FTSE 100 falls 12 points to 7,238
• Volvo float goes well
• Convatec the top mid-cap performer after third-quarter update

5:05pm: FTSE falls flat at Friday’s close

The UK’s top index regained some ground on Friday afternoon, but the momentum wasn’t enough to put the index into positive territory. The FTSE 100 lost 12 points on the day to close at 7,238, a loss of 0.16% on the day.

« European markets are on the back foot as a jump in eurozone inflation highlights the growing pressure that could build on the ECB, » IG senior analyst Joshua Mahoney wrote in a note.

Over on Wall Street, Amazon shares dropped after the e-commerce behemoth missed 3Q expectations due to supply chain disruptions and rising costs for labor, materials and freight. Apple also disappointed investors in its fiscal 1Q results after iPhone sales missed expectations despite the launch of its heralded iPhone 13 series.

« In the US, Apple and Amazon earnings have helped drive markets lower. However, oil & gas stocks remain in favour after multiyear highs for ExxonMobil and Chevron profits, » Mahoney added.

3.45pm: NatWest leads the market lower

London’s index of top shares looks set to end the week on a dull note, thanks largely to resource stocks, which are out of favour today.

The FTSE 100 was down 30 points at 7,219, with () the day’s big faller after its third-quarter figures underwhelmed. The lender slipped 4.6% to 220.7p, bringing a disappointing end to an otherwise halfway decent results season for the banking sector.

Its fellow UK-focused lender, Lloyds Banking Group defied the trend and rose 1.4% to 50.27p after Deutsche Bank issued a ‘buy’ note.

READ Lloyds is a ‘buy’ for Deutsche Bank after strong beat in capital

3.00pm: Microsoft usurps Apple as biggest US company by market cap

As expected the S&P 500 has opened lower but the Dow Jones has sprung a surprise by heading higher.

The Dow Jones industrial average was up 13 points (0.0%) at 35,748 while the S&P 500 was down 12 points (0.3%) at 4,584.

In an indication of how poorly the latest set of results from Apple were received, it briefly lost its position today as the US’s highest-valued company to former nemesis, Microsoft.

“A combination of disappointing tech results and higher rates are testing investors nerves just as indices move back into uncharted territory,” suggested Craig Erlam at OANDA.

“Results from Amazon and Apple were the latest to surprise, and not in a good way, with supply and labour challenges forcing the former to invest heavily to avoid festive disruptions and the chip shortage heavily impacting the latter to the tune of $6 billion and the fourth quarter is not going to be any easier for either company which explains the drop in after-hours trading.

“That said, while some expenses may be more permanent, like higher cost labour, most of the challenges facing both companies are temporary and they will bounce back strongly. Apple is continuing to report strong growth and the fourth quarter is expected to be the best ever in terms of revenue. Amazon is investing serious amounts of cash which is never a bad thing for a company with its record,” he added.

In London, the afternoon session has gone the way that much of the morning session did, with the FTSE 100 loitering around 7,225, down 25 points.

Chances are, the losses would be greater were it not for sterling being down almost half a cent against the greenback.

1.45pm: Convatec breaks a leg (theatrically speaking)

One of Europe’s biggest flotations of the year appears to be going swimmingly today; unfortunately for the London Stock Exchange, it’s on the Stockholm exchange.

Then again, the flotation is for Volvo Cars, arguably the most famous Swedish company in the world. IKEA might quibble with that but on the other hand, Volvo does not bring out many of its products in kit form…

That being said, Volvo is actually owned by Zehjiang Geely Holding, a not overly Swedish sounding holding company.

The flotation valued Volvo Cars at 158bn krona, which is roughly £13.5bn.

A Volvo Cars deu hoje entrada na bolsa de valores de Estocolmo – Nasdaq Stockholm e assinalou a data dando as boas vindas a mais de 200.000 novos acionistas.https://t.co/qIY7Ph3U5E

— Luis Neves (@lmalvesneves) October 29, 2021

London’s FTSE 100 remains in the doldrums, down 27 points (0.4%) at 7,223 while its mid-cap counterpart, the FTSE 250 is hardly faring any better, down 57 points (0.3%) at 23,139 despite Convatec Group PLC surging 6.7% to 211.1p on the back of a well-received trading update.

The group’s third-quarter revenue of US$511mln was up 3.7% year-on-year with the group boasting of continued momentum in Advanced Wound Care, modest growth in Ostomy Care and Continence Care, with declines, as expected, in Infusion Care and Critical Care against tough prior year comparatives.

12.15pm: US stocks to end the week on a dull note

US stocks look set to end the week on the back foot after quarterly reports released after-hours on Thursday from both () and Amazon Inc showed the impact of supply-chain problems and tight labour markets.

Futures for the Dow Jones Industrial Average were 0.2% lower on Friday, while those for the S&P 500 fell 0.5%, and contracts for the tech-laden Nasdaq-100 shed 0.9% weighed by disappointments from two of its biggest components.

Apple said that supply-chain disruptions were hindering the manufacturing of iPhones and other products and would bring increased challenges during the holiday season. Amazon posted lower-than-expected third-quarter sales and signalled that a tight labour market and supply-chain disruptions would weigh on its fourth-quarter earnings.

In premarket trading, Apple shares fell 3.5%, and Amazon.com shares retreated 4.8% but Facebook shares added 1.2% after the company changed its name to Meta to reflect growth opportunities beyond its namesake social-media platform in the digital realms known as the metaverse.

In London, the FTSE 100 was down 20 points (0.3%) at 7,230

11.35am: Mortgage approvals dip in September

House purchase mortgage approvals in September fell to 72,600 from 74,200 in August, according to the .

The consensus forecast had been for a figure of 71,000.

Net consumer credit rose by £0.2bn, in line with its six-month average but below the consensus forecast of £0.5bn.

Households’ total liquid assets, i.e. their deposits with banks and building societies, as well as cash stored in National Savings and Investment accounts etc., rose by £9.4bn in September, down marginally from the £9.9bn increase in August.

There was clearly an impact from buyers racing to complete their purchases before the stamp duty threshold returned to its normal level at the start of October, suggested Martin Beck, the senior economic advisor to the EY ITEM Club.

Mortgage Approvals in the United Kingdom decreased to 72.60 Thousand in September from 74.45 Thousand in August of 2021. https://t.co/xjNGJUUXea pic.twitter.com/dGH2EdhQxM

— Trading Economics (@tEconomics) October 29, 2021

“The lending data has made clear that the stamp duty holiday has been highly distortionary, causing transactions to be brought forwards and being a major factor behind the frothiness in prices over the past year. The flip side is likely to be a softening in demand over the coming months and a slowdown in house price inflation, or even a modest decline in prices. September’s 14-month low for mortgage approvals suggests this process is already underway,” Beck suggested.

“Net unsecured lending fell back to £0.2bn in September, following a sizeable net repayment of non-credit card debt. With gross unsecured lending still 10% down on its pre-pandemic level and increases in household deposits remaining high, consumers’ appetite to spend using credit clearly remains diminished. If the consumer recovery is to remain on track, this situation will have to change.

““Real incomes face a range of headwinds over the months ahead, including high inflation, a fiscal squeeze, and the likelihood of higher debt servicing costs. So, the consumer recovery will become increasingly reliant on households’ appetite for borrowing increasing, and on some of the ‘excess’ savings accumulated over the past 18 months being spent,” Beck concluded.

The FTSE 100 was down 38 points *0.5%) at 7,212.

10.40am: As if we needed telling … air travel plummeted in the second quarter

The second quarter of 2021 seems a long time ago now, especially in view of the findings of the International Passenger Survey published today by the Office of National Statistics (ONS).

Overseas residents made 277,000 visits by air to the UK in the second quarter, which was 97% fewer than in the same quarter of (pre-pandemic) 2019.

UK residents made 1 million visits abroad by air in the quarter, down 95% on two years earlier.

Overseas residents spent £386 million on their visits to the UK, down 94% on two years before while UK residents spent £1,122mln on visits abroad (-93%).

9.45am: Banks in demand (with one obvious exception)

The Footsie has rallied a little to regain the ground above 7,200 thanks largely to enthusiasm for banking stocks – with one notable exception.

London’s index of heavyweight shares is down 30 points (0.4%) at 7,220.

While investors continue to prod shares of () with a bargepole – the shares are now off 4.0% – they seem a lot keener on (), () and (), all of which are up by around 1%.

(), up 0.4%, is another stock doing its bit to pare the index’s losses, as the price of oil continues to head north.

“Both Brent and WTI oil prices edged up in early trading today but are heading or their first weekly losses in at least eight weeks after US oil stocks rose more than expected and Iran flagged it was resuming talks with Western powers which could lead to an end to sanctions,” reported SP Angel, the broker that specialises on resource stocks.

“Both benchmarks, which touched multi-year highs on Monday, but are on track to fall about 1% for the week – the first weekly drop in 10 weeks for WTI and the first in eight weeks for Brent.

“It appears that the heat has come out of a two-month rally stoked by tight gas and coal prices in Europe and China which had spurred fuel-switching in power generation to fuel oil and diesel while oil supplies were tight,” the broker opined.

Not for the first time, events in Blighty seem a bit less glam than those in the home of the brave and the land of the free.

“It was a tumultuous night across the pond for the US technology sector as Amazon and Apple proved that, for all their resources, they’re not immune to global supply chain challenges and Facebook, sorry Meta, unveiled a controversial name change.

“Meta – a term more often employed by pretentious film students discussing a knowingly self-referential movie – is being employed by Mark Zuckerberg’s charge to reflect its move into an apparent brave new future where we’ll all be interacting over the metaverse with virtual reality headsets.

“Given this future and, Meta or Facebook’s part in it, remains a long way from coming to fruition perhaps a better name would have been hubris,” suggested Russ Mould at AJ Bell.

Good gag, Russ but as we know, septics don’t really do irony – a term they usually reserve for describing Mike Tyson.

8.30am: NatWest results fail to shoot the lights out

London’s blue-chips are in decline with the retreat headed by (), which laid an egg with its third-quarter results.

The FTSE 100 was down 55 points (0.8%) at 7,194, with NatWest off 3.2% at 224p.

“These are not results to shoot the lights out, particularly given the strength of the numbers from its peers so far, but there are nonetheless some reasons to be cheerful,” suggested Richard Hunter at interactive investor.

“The theme of the reporting season has been a release of credit impairments and NatWest is no different, with a release of £242 million for the quarter given an improved macroeconomic outlook. This has contributed to a pre-tax profit figure of £1.1 billion, as opposed to a previous loss of £355 million, and is comfortably ahead of expectations.

“In addition, total income has also surpassed estimates, rising to £2.8 billion from £2.4 billion a year ago. Underpinning the growth is an extraordinarily robust balance sheet, where the capital cushion has risen to 18.7% from 18.2% in the previous quarter, and where the Liquidity Coverage Ratio stands at 166%,” Hunter noted, concluding that, “in all, the numbers are safe but lack sparkle”.

Miners are out of favour today, especially (), which is down 1.5% a 354.1p after its third-quarter production report. The commodities giant made no change to full-year production guidance.

6.30am: Amazon.com and () find US investors hard to please

It was another day of new highs in the US but back in the UK – as the Beatles didn’t sing – a morning of gentle decline looks in store.

The FTSE 100 is tipped to open 28 points lower at 7,221.

“US economic data was a bit of a mixed bag yesterday, as weekly jobless claims continued to fall back, pulling continuing claims down to their lowest levels since the beginning of March 2020, at 2.24m, while Q3 GDP slowed sharply to 2% from 6.7% in Q2, as rising Delta infections hammered consumer confidence and crimped economic activity during the quarter,” said CMC’s Michael Hewson.

“Today we get a look at early indications of EU Q3 GDP, along with the preliminary releases for France, Germany, and Italy which are likely to show similar levels of economic activity, despite lower infection rates,” he added.

The Dow Jones stormed 240 points higher to close at 35,730 and the S&P 500 jumped 45 points to 4,596.

Earnings announcements after the bell from Apple and Amazon, however, failed to come up to the market’s high expectations.

“Amazon reported third-quarter revenues of US$110.8bn slightly behind market expectations despite rising 15% year-on-year. All divisions showed progress, but growth was particularly strong in AWS [Amazon Web Services] following a wide range of customer wins,” reported Nicholas Hyett at Hargreaves Lansdown.

“Marketing expenses have risen nearly 50% year-on-year, and a whole host of other costs are also outpacing revenue growth as the group ramps up its capacity to meet increased customer demand and expectations; however, even in a company with Amazon’s track record, a sudden, unexpected reverse in margins can make investors jumpy,” Hyett said.

As for fellow tax avoidance specialist Apple, it saw fiscal fourth-quarter sales rise 28.8% to a record US$63.4bn.

“Looking back, it’s hard to fault the year Apple’s had but that doesn’t cancel out some questions,” suggested Sophie Lund-Yates, a colleague of Hyett at Hargreaves Lansdown.

“The group’s costs as a proportion of sales for its phones are increasing, suggesting it’s getting harder to stay ahead of the competition. This is by no means a close race at the moment, but as a wider trend, it’s something to think about. Compared to less hardware-focused FAANG peers, Apple is also a lot more exposed to supply chain disruption. It’s managed to navigate the problems fairly well but hasn’t escaped unscathed, and an extended duration of these problems will spell trouble, especially because the market is unforgiving when it comes to Apple’s performance. Add in questions from some shareholders about forced labour and carbon footprint concerns and it becomes clear that while the Apple is still plenty good enough to eat, there’s some potential for bruising,” she added.

As for UK company results, () wraps up the results season for the banks with the prospect of interest rate rises definitely on the radar.

NatWest is the most geared of the UK banks to higher interest rates but for the quarter covered by today’s update this will not be the main thrust of the numbers.

Key within results will be assessing how those benefits are reinforced by a potentially larger rate hedge and offset by the significant decline in the flow of mortgage spreads, said UBS.

Rising yields would have significant implications for equity markets, the strategists said cyclical and value sectors such as banks and energy have the best macro skews to rising rates, with analysts at Berenberg seeing NatWest as likely to benefit most.

Around the markets

• Sterling: US$1.3970, down 0.03 cents
• Gilt: 1.008%, up 2.31 basis points
• Gold: US$1,795.60 an ounce, down US$7
• Brent crude: US$83.91 a barrel, up 25 cents
• Bitcoin: US$61,367, down 98 cents

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mixed on Friday as retail sales in Australia rose 1.3% month-on-month in September on a seasonally adjusted basis.

That was higher than forecasts for a 0.2% gain in a Reuters poll.

China’s Shanghai Composite rose 0.41% while Hong Kong’s Hang Seng index slipped 0.50%

In Japan, the Nikkei 225 gained 0.11% but South Korea’s Kospi fell 0.88%.

Australia’s S&P/ASX200 slumped 1.44% to 7,323.7 with the loss, in part, due to the Reserve Bank of Australia declining to buy bonds at its 11:15am announcement time, sending bond yields higher.

READ OUR ASX REPORT HERE