FTSE 100 off its worst levels as Wall Street opening fall is less than expected

• FTSE 100 down 106 points
• Dow falls 
• Oil price under pressure

2.53pm: US markets perform better than forecast

As expected Wall Street has opened lower, following the minutes from the last Federal Reserve meeting and concerns about the effect of the Delta variant on the recovering global economy.

The Dow Jones Industrial Average is down 131.1 points or 0.37% at 34,829.59 while the S&P 500 has fallen 0.38% and the Nasdaq Composite 0.61%.

But this was less than expected and  a better performance than European markets and indeed, has helped pull  the FTSE 100 back from its worst levels.

The UK leading index is now down 106.02 or 1.48% at 7063.3. At its worst it had fallen as low as 6993.06.

Meanwhile Craig Erlam, senior market analyst at OANDA Europe, said the Fed minutes really did not reveal anything that wasn’t already known.

He said: « We’ve heard from a lot of policy makers from across the spectrum since [the last meeting] and they’ve arguably become more hawkish on the timing of tapering, thanks in large part to July’s knockout jobs report.

« So is this really a mini-taper tantrum, of sorts, or a combination of factors at a time when stocks have been trading around record highs and we’re in wait-and-see mode ahead of next weeks Jackson Hole {central bankers meeting]? This isn’t the busiest period of the year and maybe investors are seizing the opportunity to lock in some profits and wait for another dip.

« It does seem that the case for caution is growing, whether that be the uncertainty around the timing and pace of the taper or the rising number of delta cases around the world. The findings from the Oxford study overnight showing a drop in the effectiveness of the vaccine 90 days after the second dose won’t alleviate delta concerns as it spreads rapidly across numerous countries. »

2.15pm: Utilities and healthcare stocks outperform

There are some risers amid the slump in the leading index, and they are mostly what can be described as defensive stocks.

Steve Clayton, Hargreaves Lansdown Select fund manager, said: “With sentiment getting knocked it is perhaps no surprise to see defensive sectors faring best in a sea of red in the markets today. Shares in utilities and healthcare companies are holding up relatively well, but commodity and energy producers are amongst the worst hit.

« If vaccinations can keep the virus from doing its worst, then confidence should improve before too long. Businesses drove a lot of costs out during the pandemic, which bodes well for future profit margins.”

Electricity group SSE PLC is up 0.49%, National Grid PLC has added 0.31% and United Utilities PLC is off just 0.33%.

In heathcare Smith & Nephew PLC has edged up 0.32%.

But the FTSE 100 is still well in the red, down 126.15 points or 1.76% at 7043.17.

1.42pm: US jobless claims beat forecasts

US weekly jobless claims have come in better than expected, providing more evidence of a strengthening US economy and supporting the Federal Reserve’s plans to start easing its bond buying programme.

The number of Americans seeking unemployment support fell by 29,000 to 348,000 last week, less than the 365,000 expected and a new post-pandemic low.

The previous week’s figure was revised up but only marginally, by 2,000 to 377,000.

Last week’s figure was the lowest since mid-March, as was the four week moving average of 377,750.

 

Initial jobless claims are now within shouting distance of pre Covid levels pic.twitter.com/OkYDQmEMEH

— Tom Hearden (@followtheh) August 19, 2021

So far there has been little reaction on Wall Street, which is still expected to open lower.

In the UK the FTSE 100 is off its lows but still down 129.32 points or 1.8% at 7040.

12.28pm: Investors await jobless figures

The cocktail of concerns for investors – the Federal Reserve easing its bond buying programme, a Chinese slowdown as well as the spread of the Delta variant – has spilled over onto Wall Street.

With oil falling and the dollar rising, US markets are set to fall back again from their record levels set earlier this week.

The Dow Jones Industrial Average is forecast to fall 0.89% or 309 points while the S&P 500 is expected to open 0.81% lower and the Nasaq Composite is indicated down 0.66%.

With the Fed set to start withdrawing support, any new economic data will be scoured for signs of the economy recovering and, if so, how quickly.

The latest indicator will be the weekly jobless claims, due before the US market opens.

Analysts expect the number of Americans seeking unemployment benefits to fall to 365,000 from the previous week’s figure of 375,000.

Jeffrey Halley, senior market analyst for Asia Pacific at OANDA, said: « US initial jobless claims, should they fall markedly from last week’s 375,000, could provoke more US dollar buying and equity sellers given the post-FOMC taper minutes mood. »

Back in the UK, the FTSE 100 is down 146.12 points or 2.04% at 7023.20.

11.59am: Burberry slips on China worries

Having fallen below 7000, the leading index has recovered some ground.

But the FTSE 100 is still on track for the biggest daily percentage fall since 19 July when it lost 2.34%.

It is currently down 142 points or 1.98% at 7027.32.

Miners continue to help push the market lower, with () still the day’s biggest faller so far, down 11.10%. Weaker commodity prices are hitting the sector, while Anglo shares are also being quoted without the right to its latest dividend.

Among the other losers, luxury goods group Burberry PLC has fallen 3.89% on worries about a Chinese economic slowdown and the government calling for wealth redistribution and clampdown on high incomes.

Commenting on the effect of this on the luxury sector as a whole, UBS analysts said: « Although the impact on sales, if any, at this stage may be difficult to estimate, we note that based on the history these concerns could drive a period of a de-rating versus the market. »

10.44am: Market decline gets worse

And there it goes.

The FTSE 100 is now at 6995.76, down 173.56 or 2.42%.

This is the first time the leading index has fallen below 7000 since late July.

10.18am: Just a handful of risers

That 7000 level still looks in danger.

The FTSE 100 is currently down 163.37 points or 2.28% at 7005.95.

And analysts are wondering whether this sell-off is the start of something worse.

AJ Bell investment director Russ Mould said: « The Fed minutes, showing a split between members over when to start scaling back financial stimulus, the continuing spread globally for the Delta variant, weakness in the Chinese economy and the turmoil in Afghanistan add up to a cocktail of worries which are dogging investor sentiment.

“The question now is whether a volatile week is the prelude to the kind of late summer sell-off we have seen in previous years or if the market can regain its poise moving into the autumn. »

To be positive for a moment there are a handful of risers in the leading index, rather random though they may be.

(, ) continues to benefit from its update earlier in the week, adding 0.89%.

() PLC is up 0.24%, () has put on 0.17% and cybersecurity business () has edged up 0.03%.

9.34am: Leading shares at day’s low

The decline is getting worse.

The FTSE 100 is now down 166.17 points or 2.32% to 7003,15, a low for the day.

Meanwhile the FTSE 250 has fallen 302 points or 1.27%.

And the downbeat mood is not confined to the UK. Germany’s Dax is down 1.6% while France’s CAC 40 is off 2.55%.

US futures are not looking bright either. After Wednesday’s negative moves, the Dow Jones Industrial Average is indicated down 0.9%, with the S&P 500 and Nasdaq Composite expected to show similar falls.

Neil Wilson at Markets.com said: « You have this cocktail that bad for stocks in the near term at least – Fed taper plus rolling over in economic data after peak growth plus worries about Delta exacting a longer-term drag on economic growth. »

8.37am: Commodity companies under pressure

Mining shares are dominating the fallers as commodity prices continue to struggle.

() – which is one of the companies going ex-dividend – has dropped 11.65%, BHP PLC is down 4.04% while () is 3.62% lower.

() has fallen 5% as it warned a drought in Chile would hamper copper production for the rest of the year, and cut its forecasts from 730,000-760,000 tonnes to 710,000 -740,000.

This came after it reported half year profits of US$1.78bn, a huge jump on the US$387.5mln at the same time last year.

With the oil price also under pressure, () is off 4.25%.

Overall the FTSE 100 is off its worst levels but still well in the red, down 121.95 points or 1.7% at 7047.37.

8.20am: Ex-divs among the fallers

The market is not being helped by a large number of stocks – unlucky 13 as it happens – going ex-dividend.

These include (), down 4.61%, (), 4.33% lower and (), which has fallen 3.78%.

On the positive side, Richard Hunter, head of markets at interactive investor, said: « Despite the wall of worry which investors are being forced to climb and another feeble round of opening trades, the main indices are still comfortably in positive territory for the year, with the FTSE100 remaining ahead by 9% and the FTSE250 by 15%.”

8.12am: Leading shares rattled at the open

Markets have certainly been rattled by the growing prospect of the Federal Reserve easing its support for the economy, as evidenced by the minutes of the central bank’s last meeting.

Falls on Wall Street and in Asia are being replicated in Europe, with the FTSE 100 slumping 143.13 points or 2% at the open to 7026.19.

The domestically focused FTSE 250 is also under pressure, down 1.32% or 313.74 points at 23,522.63.

It is not just the Fed which is causing concern, with analysts worried about rising COVID-19 cases around the globe.

Symptomatic of that is the continuing fall in oil prices. They have dropped for the sixth day running, their worst losing streak since February last year.

The spread of the Delta variant has renewed concerns about another slowdown of the economy and thus lower demand for fuel.

This was emphasised by a surprise rise in US gasoline stockpiles, which increased by 696,000 barrels last week, the first rise in more than a month.

Jeffrey Halley, senior market analyst for Asia Pacific at OANDA, said: « The US official crude inventories fell by more than expected, as did distillates, but traders chose to focus on the unexpected rise in gasoline stocks.

« Oil markets usually tend to cherry-pick the data they want to fit their preferred narrative with official crude inventories. The fact that they focused on rising gasoline stocks underlines the growth/recovery fears and emphasises it as the prevailing sentiment in the market. »

So Brent crude is down 1.69% at US$67.08 a barrel, the lowest level since May.

On the wider political front, the fallout from the situation in Afghanistan is unpredictable, and markets as we know hate uncertainty.

6.45am: Markets set to come under the cosh

The FTSE 100 is set to start Thursday on the backfoot as equity markets dampened sentiments following Federal Reserve policy meeting minutes which confirm the direction of travel, towards a tapering of stimulus.

London’s blue-chip benchmark is seen close to 60 points lower with CFD firm IG Markets making a price of 7,084 to 7,087 with just over an hour to go until the open.

Central bank asset purchasing is seemingly set to wind down, though a guessing game remains in regards to market expectations for the timing with most commentators predicting either Q4 2021 or Q1 2022 depending on the relative strength of key economic indicators in the United States.

“Last nights Fed minutes didn’t add anything significant to the sum of overall knowledge about the central banks future intentions with respect to monetary policy that wasn’t already known beforehand,” said Michael Hewson, analyst at CMC Markets.

The analyst added: “The minutes certainly don’t alter the expectation that a taper is on its way, its accepted wisdom now that discussions on a taper are likely to start soon, with a slowdown in purchases starting sometime in Q4, despite concerns about some weakness in the more recent data, particularly retail sales and consumer confidence.”

On Wall Street, American equity benchmarks were all lit in red.

The Dow Jones dropped 382 points or 1.08% to close at 34,960 whilst the S&P 500, similarly, ditched 1.07% to finish Wednesday’s session at 4,400.

The Nasdaq lost 130 points or 0.89% to 14,525 and the small-cap centred Russell 2,000 index moved 0.84% lower to 2,158.

In Asia, Japan’s Nikkei moved down 0.67% to 27,400 while Hong Kong’s Hang Seng gave up 1.4% to 25,505 and the Shanghai Composite nudged 0.24% lower to 3,477.

Around the markets

The pound: US$1.3715, down 0.3%

Gold: US$1,778 per ounce, down 0.51%

Silver: US$23.26 per ounce, down 1.05%

Brent crude: US$67.40 per barrel, down 2.3%

WTI crude: US$64.45 per barrel, down 3.2%

Bitcoin: US$44,474, down 1.96%

Ethereum: US$3,012, down 1.93%

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were lower on Thursday as Australian mining shares declined following an overnight fall in iron ore prices.

Rio Tinto shares slipped 5.95% while () declined 6.78% and BHP dipped 6.38%.

Australia’s S&P/ASX 200 fell, with the index trading 0.33% lower.

The Shanghai Composite in China slipped 0.2% and Hong Kong’s Hang Seng index slumped 1.41% as regulatory concerns continued to weigh on investor sentiment.

In Japan, the Nikkei 225 fell 0.73% while South Korea’s Kospi declined 1.30%.

READ OUR ASX REPORT HERE