FTSE 100 trims losses as Amazon leads Wall Street lower

• FTSE 100 closes 46 points down
• Travel stocks, miners and banks lead retreat
• Amazon leads US stocks lower

5.15pm: FTSE closes day lower

FTSE 100 closed in the red on Friday, while Wall Street also lagged, as the upbeat mood appeared to run out of steam.

Britain’s blue-chip index finished down around 46 points, or 0.65%, at 7,032, off a session peak of 7,078 and a low of 6,996.

Over the week as a  whole, the Footsie added just 0.07%.

« Yet another week of strong earnings releases from the US, yet high expectations appear to be hindering the ability to maintain the ongoing uptrend, » noted Joshua Mahony, the senior market analyst at online trading firm IG.

« Meanwhile, the rise of both inflation and growth in the eurozone has dampened sentiment somewhat given the potential implications for monetary policy. »

Across the pond, the Nasdaq was leading the losers south, down 105 points, or 0.71%, to 14,673. The Dow Jones Industrial Average shed 128 points, or 0.37% at 34,955. The S&P 500 lost over 23 points at 4,395.

4.10pm: FTSE down 40 points

The FTSE 100 is looking like it will finish July below where it started, with the index down 40 points today and 85 points (1.2%) below where it ended last month.

It was a “disappointing” end to the week and the month for market analyst Michael Hewson at CMC.

“Markets in Europe have also slipped back today, at the end of a week that has lacked a clear direction overall.

“We’ve seen moves in both directions, but they’ve lacked any sort of conviction, with the overriding concern being one of concern about whether the second half of the year will be able to match up to some of the decent numbers we’ve seen from various company updates this week.”

READ: Week ahead brings more banks, BP and Greggs, plus focus on Bank of England and US jobs report

While the Footsie has enjoyed a slight boost since Wall Street came online, though the Dow, S&P and Nasdaq are all trading lower.

After falling 7% at the opening bell Amazon has been hit with a €746mln (£636mln) fine for breaking European Union data protection laws by regulators in Luxembourg.

The online retail colossus said it believed the fine to be « without merit », adding that it would defend itself « vigorously ».

Another big faller across the pond is Pinterest, down 19% to $58.55 after revealing a decline in user numbers as well as downgrading its tjhird-quarter outlook. 

2.42pm: Wall Street slides

The main indices on Wall Street opened in negative territory on Friday as the disappointing Amazon earnings and a rise in inflation dented sentiment.

Shortly after the opening bell, the Dow Jones Industrial Average was down 0.18% at 35,022 while the S&P 500 dropped 0.59% to 4,392 and the Nasdaq fell 0.99% to 14,631.

Amazon itself was a key weight on the Nasdaq in early deals, sliding 7.9% to US$3,314 – its biggest fall in 11 months. 

READ: BANG vs FAANG – BlackBerry, AMC, Nokia and GameStop take on Big Tech in earnings season

Things may not have been helped by new economic data which showed the core personal consumption expenditures (PCE) index jumped 3.5% year-on-year in June, well above the target of 2% set by the Federal Reserve, raising fears that the recent inflationary pressures could continue for longer.

Back in London, the FTSE 100 was also in the red, down 41 points at 7,037 at around 2.40pm.

2.23pm: FTSE 100 still wallowing

Britain’s high street banks are all trading lower now, with NatWest PLC results taking us past halfway through the reporting season and the set to meet next week.

The former RBS had one of the biggest levels of excess capital on its book ahead of this round of earnings, and today released £605mln of money set aside for bad debts, paving the way for a share buyback of up to £750mln and an interim dividend of 3p.

Its shares were in positive territory earlier but now investors have decided they’re not fans, with (), () (who both reported earlier in the week) and () and Standard Chartered (due up next week) also seeing their shares slide as the day goes on.

It seems part of a wider risk-off mood, with most other blue chips also in negative territory. 

Intertek, one of the many unexciting but worthy members of the FTSE 350, is however leading the fallers, down 10%.

The testing, assurance, certification and assurance services provider’s interim results were broadly as expected with revenues up 5.8% and underlying sales up 12% as the business recovers strongly from the pandemic that affected its markets around the world.

Cash flow was strong and earnings per share rose by 24% to 78.2p, with the dividend unchanged at 34.2p per share.

The share reaction is thought to be because analysts are focusing on a lower than expected recovery in profit margins in the half.

« Intertek continues its organic strategy with bolt-on acquisitions sought, this should continue to leverage growth, » said broker Shore Capital.

« The pandemic continues to weigh, however, we expect to retain our current forecasts assumptions given the direction of travel our of pandemic effects and a return to secular growth trends. »

With the shares having more than doubled since 2015, Shore Cap’s analysts said they re cautious on the valuation, « reflecting high multiples for underlying mid-single digit industry growth rates and our concern over margin sustainability in a competitive environment ».

The Footsie is down 48 points at 7031, looking like the index will finish July below where it started. 

12.55pm: Wall Street called lower

Wall Street is heading for a fall at the opening bell, according to the futures market, led by big tech stocks.

The Nasdaq composite index is pitched to tumble over 1%, following the Amazon.com results last night that have are being described as “disappointing” even though revenues were up 24% to an eye-popping US$113bn and profits swelled by a third to US$7.7bn, but both growth measures were slower than the previous quarter a bit short of analyst expectations.

“Whether this is the start of a late summer pullback or just a bit of profit taking following an eventful week isn’t clear at this stage,” says market analyst Craig Erlam at Oanda.

“It’s been a funny old week of incredible earnings, downbeat outlooks for the current quarter, mixed data and a cautious Fed.

“The buzz around the second quarter is fading and it may well be affecting investor sentiment.

“It seems most of the big tech companies that have been reliably growing at an extraordinary rate for numerous quarters are all facing issues in the coming quarters either related to supply chains, advertising, sales growth or a combination of these. It’s far from a doom a gloom story but things may become a little more challenging than they have been.”

With this slight disappointment mixed in mixed guidance for the third quarter and surges in the delta variant that could result in further dampening of recovery in the new quarter and further supply bottlenecks, Erlamd acknowledged “there may well be a case for these markets to come off a little”, though nothing more than “a small corrective move”.

As the analysts said, there’s still plenty more earnings reports to come before the season is over, with around a quarter of the S&P 500 due to report next week, along with some big macro data.

Amazon shares are trending for a 7% decline in pre-market trading, while other predicted fallers include (), which endured a disheartening 8% decline on its first day yesterday and is pencilled in for another, smaller, fall today.

Walt Disney Co is also expected to begin in the red with Scarlett Johansson, the star of its new Marvel epic Black Widow, reported to have sued the studio for breach of contract (more on the story here).

(), on the other hand, is expected to spurt higher after unveiling its highest second-quarter profit since late 2019 with earnings per share of US$1.10 versus a Street consensus of US$1.01.

Back in Blighty, the Footsie is continuing to wallow in the red, down 59 points or 0.8% at 7020.

() is now top of the leaderboard after earlier saying it expects trading in the second half to mirror the healthy patterns seen in the first six months of the year (more here).

11.33am: Footsie slips below 7000

The FTSE 100 momentarily slipped below 7000, led by what could be called pandemic recovery-sensitive stocks, while the futures market is pointing towards Wall Street also joining the rest of the world in red when it opens later.

BA owner (), hotels operators () and InterContinental Hotels Group PLC, airline industry-adjacent suppliers () and Rolls Royce Holdings PLC, events organiser  () are among the 15 biggest blue chip fallers.

“It’s looking like a soggy end to July both in meteorological terms and with the markets as so-so numbers from Amazon and a sell-off in Asia linked to Covid concerns had a dampening effect on sentiment,” says analyst Danni Hewson at AJ Bell.

IAG’s downbeat results and the reaction to Natwest’s latest numbers did little to lift the mood, she added, while miners continue to see more sellers than buyers.

“The mining sector also slumped and investors continued to fret about the Chinese crackdown on its technology sector, despite Beijing’s efforts to dial back some of its recent rhetoric. There was talk about targeted rather than broad-based action.

“As the flood of corporate updates on both sides of the Atlantic slows to a stream and then a trickle, we enter the summer lull for the markets – although this can be a dangerous time for equities.

“With experienced investors away from their desks on holiday and trading volumes lower, it sometimes doesn’t take much for a market correction to begin and with Covid-19, inflationary pressures and regulatory crackdowns all in the background, there are plenty of potential catalysts for a sell-off.”

More news on the China theme has emerged, with the US market regulator pressing pause on IPOs from the People’s Republic after a record US$12.8bn of flotations from the Asian superpower already this year.

The Securities and Exchange Commission (SEC) has stopped processing IPO registrations from Chinese companies « while it crafts new guidance for disclosing to investors the risk of a new regulatory crackdown by Beijing », according to a Reuters report.

Beijing regulators recently clamped down on Uber rival Didi shortly days after its US$68bn IPO, followed by crackdowns on Tencent and online education companies this week.

The SEC has apparently told Chinese companies to hold fife on IPO registrations until it gives them specific guidance on how to disclose the regulatory risks they face in their homeland. 

10.24am: Beijing pledges improvements

With China being a key focus of the markets this week, it’s very timely that Chinese leader Xi Jinping today led a meeting of the Chinese Communist Party’s central committee.

The meeting was to “study and analyze current economic circumstances and make plans for related work for the second half of 2021”, according to local news agency Xinhua.

Among the notable announcements emerging from the meeting, the party’s Politburo pledged to stabilise commodity prices and supply, to “improve” the system of monitoring overseas listings, is “in favour of accelerating the growth of the electric vehicle industry”, and will soon publish an action plan for carbon peaking pre-2030.

???????? #CHINA HOLDS POLITBURO MEETING :XINHUA – BBG

*CHINA SAYS ECONOMIC RECOVERY NOT SOLID YET

*CHINA POLITBURO VOWS TO STABILIZE COMMODITY PRICES, SUPPLIES

*CHINA POLITBURO TO IMPROVE OVERSEAS LISTING SUPERVISION SYSTEM

— Christophe Barraud???? (@C_Barraud) July 30, 2021

London’s China-focused funds, such as JPMorgan China Growth & Income PLC, Baillie Gifford China Growth Trust PLC, () and the FTSE 100 giant SMT, mentioned below, were all in the red earlier but have popped higher.

Chinese EV carmaker Nio Inc and () will also be ones to watch later. 

The FTSE 100, meanwhile, has resumed its decline and is now down 56 points or 0.8% at 7022.

After notching up a record high yesterday, the FTSE 250 Index is also on the back foot today, down 0.15% at 22,917. 

9.38am: Blue chips trim losses

London’s blue chips have trimmed the worst of their early losses, now down 42 points or 0.6% to 7036, with all of Europe’s and most of Asia’s major indices also in the red.

“The tone in markets has weakened considerably since the US close,” said analysts at Daiwa Capital Markets. 

“Sentiment wasn’t helped by Amazon’s miss on both earnings and guidance – likely reflecting the re-opening of brick and mortar stores – with the stock declining around 7% in extended trade.

“Meanwhile, ahead of tomorrow’s official PMI readings, China-related regulatory concerns have re-emerged, while reports of China curbing steel production to meet emissions targets has also sent metals prices lower during Asian trading.”

So after recovering somewhat yesterday the Shanghai Composite and Hang Seng are down, with the decline rubbing off elsewhere, including on the (), often the FTSE’s gauge for big tech in China and the US. 

READ: How exposed are London’s investment trusts to China?

Asia analyst Jeffrey Halley at Oanda speculated that “a combination of factors may be driving investor sentiment”, including a Friday ‘delta-dip’ likely to be one factor, with cases of the Covid-19 variant appearing in three provinces in China and rising in Japan and South Korea.

“China also releases official manufacturing and non-manufacturing PMIs this weekend. After some middling GDP and jobless claims data from the US overnight, that suggests the recovery remains on course, but at a slower pace, investors may be concerned the China PMIs could signal something similar.”

8.44am: FTSE opens 1% lower

The FTSE 100 took its cue from Asia’s main markets, which once again succumbed to worries over China’s all-out assault on its home-grown tech giants.

The volatility followed a day in which a modicum of calm seemed to have been restored to the sector and after some meant-to-be soothing words from Beijing on the issue.

Here at home, the miners, so reliant on the economic fortunes of the People’s Republic, took a bashing early on with Rio Tinto (), down 3.2%, leading the retreat.

Top of the losers’ list was Intertek (), the testing firm, after what on the face of it looked like a robust set of interims. That said, the half-time dividend was held as the group said it planned to invest in growth.

NatWest Group () shares fell with the market on the day it swung into a profit and resumed its pay-out after a Covid hiatus.

“NatWest has followed in the footsteps of Barclays and Lloyds earlier this week by reporting a decent set of first-half numbers, as the unlocking of the UK economy boosts confidence, and a lot of the worst-case scenarios failed to play out,” said Michael Hewson, analyst at CMC Markets.

6.50 am: FTSE 100 called lower 

UK equities are set to open lower, taking their lead from sliding Asian markets rather than US markets, which finished higher yesterday.

Spread betting quotes indicate the FTSE 100 will open 44 points lower at 7,034.

The Chinese regulators appear to have been taken aback by the reaction of the markets to various signals that a crackdown on trading is on the way and have back-pedalled a bit, issuing assurances that the measures would be targeted rather than broad-based.

After the bell yesterday results from tax and labour relations specialist Amazon.com disappointed the market.

“Revenues for Q2 came in short of expectations, while Q3 guidance was also lower than expected, although this also needs to be set into some sort of context. Revenues were still in excess of $110bn at $113bn, while sales for Q3 were expected to be equally as good. They just weren’t good enough,” declared CMC’s Michael Hewson.

Also disappointing the market was Robinhood, which saw its shares slide 8% on their market debut, despite the trading app developer pricing its initial public offering at the bottom end of the expected range at US$38 a share.

All of which took some of the shine off a decent day for US markets; the Dow Jones closed 154 points heavier at 35,085 and the S&P 500 rose 19 points to 4,419.

In Asia, red is the colour and selling is the game. Japan’s Nikkei 225 is off 450 points at 27,333 following disturbing trends in the number of COVID cases while in Hong Kong the Hang Seng is down 600 points at 25,715.

“With Mainland and Hong Kong markets enduring a torrid week on Chinese government clampdowns and restrictions, the assurances from the central government that such measures are targeted and not broad may be falling on deaf ears with investors pondering weekend event risk. All in all, it looks like investors are taking risks of the table over the weekend. With sentiment remaining fragile, despite some stabilisation yesterday, the fast-money herds don’t need much to spook them,” suggested OANDA’s Jeffrey Halley.

Closer to home, International Consolidated Airlines SA and NatWest Group are the big guns issuing updates on Friday and there’s little doubt which will sound the more optimistic.

Banking giant NatWest is issuing second-quarter results and the expectation is for an adjusted profit before tax of some £935mln and CET1 – a measure of balance street strength – of 18.1%.

The government recently indicated it would sell off another chunk of shares in the nationalised bank, which could either mean things are going well or the government is cashing in while it can.

Given the strength of the housing market and the relatively low level (so far) of loan defaults, it is probably more a case of the former.

Half-year results from British Airways owner IAG are unlikely to make for great reading as coronavirus travel restrictions continue to be a millstone around the neck of the travel industry.

However, investors will likely be hoping the easing of restrictions, albeit slightly, will lift the firm’s fortunes across the rest of the year, so the outlook statement will therefore be crucial as well as the group’s ongoing cost management.

With this in mind, analysts at UBS are predicting the focus to be on forward bookings and the impact of the UK’s traffic light system, as well as on the current rate of cash burn.

Around the markets

• Sterling: US$1.3943, down 0.18 cents
• 10-year gilt: 0.576%, down 0.25 basis points
• Gold: US$1,827.10 an ounce, down US$4.10
• Brent crude: US$74.64 a barrel, down 46 cents
• Bitcoin: US$39,730, up US$7

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were lower on Friday as Australia reported a record daily rise in COVID-19 cases despite an extended lockdown.

Australia’s military will help enforce a lockdown in Sydney after the city recorded 239 new cases.

NSW state authorities said the outbreak was likely to get worse.

The Shanghai Composite in China fell 1.14% and Hong Kong’s Hang Seng index slumped 2.35%

In Japan, the Nikkei 225 declined 1.68% while South Korea’s Kospi dipped 1.15%.

Shares in Australia slipped, with the S&P/ASX 200 trading 0.26% lower.