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FTSE 100 closes in the red as Wall Street beats an early retreat

Last updated: 12:00 09 Nov 2021 EST, First published: 01:49 09 Nov 2021 EST

City of London
  • FTSE 100 closes off 26 points
  • US stocks extend retreat
  • Rolls-Royce gets mini-nuclear boost

5.00pm: Footsie dragged back

The FTSE 100 ended weaker on Tuesday, pulled back in the afternoon by big early falls on Wall Street as investors awaited fresh direction ahead of tomorrow's US CPI inflation data.

At the close, the UK blue-chip index was 26.36 points, or 0.4% lower at 7,274.04, above the session low of 7,268.79, but well below the day’s peak of 7,314.13.

On Wall Street around London’s close, the Dow Jones Industrials Average was down 238 points, or 0.7% at 36,193, with the broader S&P 500 index losing 0.5%, and the tech-laden Nasdaq Composite off 0.6%.

Joshua Mahony, senior market analyst at IG, a global leader in online trading commented: "US markets are lagging their European counterparts, with stocks largely losing traction despite a welcome rebound in the German ZEW economic sentiment survey. Fresh off the back of a 19-month low for the German ZEW survey, today's rebound highlights fading fears that supply bottlenecks and rising prices will hurt the manufacturing sector in the coming months."

Mahoney added: "Chinese PPI data highlighted the ongoing pressures being placed on manufacturers, with factory input prices up 8.6% compared with October 2020. Nonetheless, the fact that we are seeing Chinese PPI flatline in October does bring some hope that we may start to see prices ease off in the near future. Nonetheless, China continues to pose a risk to markets, with UBS warning that the property crisis could wipe $1 trillion from global growth.

"While traders have largely moved on from the Evergrande story in favour of a more positive US earnings theme, there is undoubtedly still significant risk as the Chinese attempt to avoid a hard landing in the property market. "

The analysts noted: "Roll-Royce has been one of the big positive movers in the UK, with the company planning to build a host of small nuclear reactors in a bid to kick-start a new push that should help alleviate the need for fossil fuels. With natural gas prices on the rise, nuclear is increasingly seen as a viable alternative energy source that keeps emissions low and can provide a reliable baseload.

"With many focusing on how Rolls-Royce have suffered a huge collapse in demand as airlines halted operations, today’s news could bring a major revenue source as they seek to export the same technology to other nations globally."

3.50pm: US markets drag UK lower

It was never a very convincing rise on London's leading index and the pullback on Wall Street, with all three main indices lower after this week's record highs, has taken the shine off UK shares.

Still, the FTSE 100 is off its worst levels, and is now down 22.98 points or 0.31% at 7277.42, having dipped as low as 7268.

The mid-cap FTSE 250 is also on the way down, falling 0.56%.

Michael Hewson, chief market analyst at CMC Markets UK, said: While we’ve managed to make marginal new record highs for the DAX and the CAC40, the FTSE100 has lagged behind, slipping into negative territory, largely due to weakness in the financials and basic resources sector.

"The lacklustre nature of European markets today appears to be driven by some profit taking in US markets, ahead of tomorrow’s October CPI numbers."

Bucking the downward trend in the leading index is Associated British Foods PLC (LSE:ABF), up 7.35% after its latest update.

Rolls-Royce Holdings PLC (LSE:RR.) has put on 4.01% as it secured funding from private investors to deliver its first small-scale nuclear reactors. 

BT Group PLC (LSE:BT.A) is 2.59% better as analysts at Berenberg moved their recommendation from hold to buy.

And Tesco PLC (LSE:TSCO) is up 1.29%. It was the only supermarket in the latest Kantar report to see positive sales growth in the last 12 weeks.

On the way down was cybersecurity specialist Darktrace PLC (LSE:DARK), down 4.62% as its recent weakness continued.

And Persimmon PLC (LSE:PSN) has lost 2.61% following a trading statement.

3.02pm: US markets in decline

US shares made a downbeat start after Monday's new records, as traders mulled over the latest inflation data, while General Electric (NYSE:GE) shares lit up at the open.

In early deals in New York, the Dow Jones Industrial Average shed 115 points or 0.32% to 36,317. The S&P 500 lost 0.26% while the tech-heavy Nasdaq Composite fell 0.42%. 

Shares in GE gained around 6% to US$114.94 after the conglomerate reported plans to split up into three separate publicly traded companies focused on the aviation, healthcare and energy sectors.

Back in the UK, the FTSE 100 is now in the red after the slippage on Wall Street. The index is down 24.67 points or 0.34% at 7275.73, having earlier climbed as high as 7314.

1.57pm: Pricing pressures continue in US

Inflationary pressures remain high in the US, as evidenced by the latest producer price index.

The PPI came in at 8.6% for the second month running, in line with forecasts, as supply chain issues and high fuel costs continue to push up prices.

The Bureau of Labor Statistics said: "One-third of the October advance in the index for final demand goods can be traced to prices for gasoline, which rose 6.7%.

"The indexes for diesel fuel, fresh and dry vegetables, gas fuels, jet fuel, and plastic resins and materials also moved higher. In contrast, prices for beef and veal decreased 10.3%. The indexes for light motor trucks and for residential electric power also fell."

The figures come ahead of the consumer price index on Wednesday.

12.08pm: US investors await inflation news

US stocks are expected to open mixed as investors turn their attention to the latest inflation data, due for release over the next two days. 

Futures for the Dow Jones Industrial Average declined 0.07% in Tuesday pre-market trading, while the broader S&P 500 index added 0.03% and those for the tech-heavy Nasdaq 100 gained 0.17%.

Stocks closed higher on Monday after the House of Representatives passed a more than $1 trillion infrastructure bill late on Friday that would provide new funding for projects such as transportation, utilities and broadband.

At the close, the Dow rose 104 points to 36,432, while the S&P 500 gained 4 points at 4,702 and the Nasdaq added 11 points at 15,982. 

Ahead of the release of the US Consumer Price Index for October on Wednesday, the Producer Price Index for the same month will be in focus today. 

“There wasn’t an awful lot of newsflow for investors yesterday as they looked forward to tomorrow’s US CPI release, but the astonishing equity advance showed no signs of relenting just yet, with the S&P 500 up for an 8th consecutive session to another record high,” said Deutsche Bank strategist Jim Reid. 

“For reference, that’s the longest winning streak since April 2019, and if we get a 9th day in the green today, that would mark the longest run of consecutive gains since November 2004, back when George W. Bush had just beaten John Kerry to win a second term. It's also 17 out of 19 days up, which hasn’t happened since December 1971.

“All these records for various equity indices might seem jarring when you consider that there are still strong inflationary pressures in the pipeline, and with them the prospect of a renewed hawkish shift by central banks,” Reid added.

Meanwhile the FTSE 100 is holding on to its gains, up 12.19 points or 0.17% at 7312.59.

11.49am: UK to grow strongly this year, but less so in 2022 - NIESR

The UK economy will grow slightly more than previously expected this year, but growth will slow more than predicted in 2022 as household incomes are squeezed and inequality rises.

That is the latest update from the National Institute of Economic and Social Research.

It has raised its forecast for UK GDP growth for this year from the 6.8% it pencilled in in August to 6.9%. But it now expects the economy to grow by 4.7% in 2022, down from the previous figure of 5.3%.

On inflation, it expects the consumer price index to peak at 5% in the second quarter of 2022, in line with what the Bank of England was saying last week.

And it believes the Bank will raise interest rates from the record low of 0.1% to 0.5% by that time.

NIESR Interim Deputy Director for Macroeconomics, Paul Mortimer-Lee, said: “A squeeze on real incomes for workers and those on Universal Credit will slow economic growth next year, with the adverse effects on consumption offset by lower savings. Meanwhile, inflation is set to peak around 5%, forcing a reluctant Bank of England to raise interest rates, albeit grudgingly. Unemployment should settle in a narrow range around 4 1/4%. The risks are skewed to the upside on inflation and the downside on growth.”

NIESR Deputy Director for Public Policy, Professor Adrian Pabst, added: “Britain’s broken economic model shows no signs of turning into a high-wage, high-productivity, high-growth economy anytime soon. England’s regions and the three devolved nations are not catching up with London and the metropolitan South-East. Instead, regional disparities are widening while the poorest households risk sliding into destitution." 

10.51am: Housebuilders down after Persimmon update

Builders have been fairly strong recently as growth in the UK housing market shows little sign of slackening off.

But the sector has seen some profit taking following the latest update from Persimmon PLC (LSE:PSN).

It said it continued to see healthy demand for its houses in the second half of the year, and expected to complete roughly 10% more new homes this year than it did last.

But it did flag up some challenges, not least the current supply chain problems.

Its shares are down 3.12% on the news, while rival Berkeley Group Holdings PLC has lost 1.05% and Taylor Wimpey PLC (LSE:TW.) is down 0.83%.

Overall the FTSE 100 is up 11.06 points or 0.15% at 7311.46.

Chris Beauchamp, chief market analyst said: "Earnings growth and GDP expansion are both expected to slow next year, which helps to explain the cautious tone of many strategists after a year of incredible performance for some equity indices.

"With little in the way of news to drive indices this morning we have seen little movement overall, and with strong gains having been registered in the past six weeks there is a growing possibility that some kind of mid-month weakness will appear to spook investors.

"Historically however late November and then December are positive periods for stock markets, keeping the hope of a last push higher into year-end firmly alive."

10.14am: Crude oil price supported by growing demand

Oil prices are heading higher, with Brent crude up 0.74% at US$84.05 a barrel.

Naeem Aslam, chief market analyst at Avatrade said: "Support for crude oil prices continues to rise because of a surge in demand fuelled by rapid economic recovery.

"The United States has also eased travel restrictions, which will add to the worldwide demand for jet fuel as coronavirus cases continue to decline because of widespread vaccine campaigns. Furthermore, President Biden’s newly approved infrastructure bill is also expected to push demand for oil upwards.

"Similarly, recent economic reports coming out of China, the second largest economy in the world, also show better than expected economic growth, supported by higher demand from the winter holiday season and improvement in supply chains. Hence, demand from Beijing is also expected to rise.

"On the other hand, with rapidly rising demand, supply is expected to remain tight. Over the next few weeks, oil-producing countries are also expecting an uptick in demand because of which Saudi Arabia has raised its oil prices by $1.40 per barrel for Asian countries as well. Working to ease pressure on prices, the United States is discussing various ways to pump oil into markets, including using its Strategic Petroleum Reserve."

With the strength in the crude price, BP PLC (LSE:BP.) is up 0.51% while Royal Dutch Shell PLC (LSE:RDSB) is 0.46% higher.

Overall the FTSE 100 remains fairly flat, up just 8.08 points or 0.11% at 7308.48 despite the new records on Wall Street.

9.21am:  Inflation concerns limit market gains

Well it may not be spectacular, but at least the market is heading in the right direction.

The FTSE 100 is currently up 8.36 points or 0.11% at 7308.76, helped by the rise in Associated British Foods PLC (LSE:ABF) - 6.7% higher following its figures.

BT Group PLC (LSE:BT.A) is also better, up 2.08% after analysts at Berenberg moved their recommendation from hold to buy.

Rolls-Royce Holdings PLC (LSE:RR.) has risen 2.74% as it secured funding from private investors to deliver the first small-scale nuclear reactors.

Overall though, inflation concerns continue to dampen sentiment, with recent surveys and economic data showing pricing pressures are growing.

Later come US producer price figures, which will give some guide to the consumer price index due on Wednesday.

Michael Hewson at CMC Markets UK said: "Today’s October [producer price] numbers are expected to level out at 8.6%, unchanged from September, but still 2% above where they were in May, and usually a leading indicator for CPI which is due tomorrow, and which is also expected to rise sharply. Core PPI also rose sharply to 6.8%, with close attention also set to be on the monthly numbers for any signs of a slowdown as well.

"While some of these costs have been passed on by companies, as shown by recent earnings numbers, there is rising concern as to how long this can continue before consumers decide to stop spending, especially as some of the biggest price increases are manifesting themselves into food and energy."  

8.33am: Supermarket sales drop and prices rise

UK grocery sales fell back in the last twelve weeks, as shoppers saw prices continue to rise.

Sales dropped by 1.9% year on year in the 12 weeks to 31 October 2021, according to the latest figures from Kantar, but are still higher than before the pandemic, up 7.3% compared with 2019. 

Like-for-like grocery price inflation stood at 2.1% in the latest four weeks, its highest level since August 2020. In the latest 12 weeks, inflation is 1.5%.

Prices are rising fastest in markets such as savoury snacks, canned colas and crisps while falling in fresh bacon, vegetables and cat and dog treats.

Kantar said some habits from the pandemic remain, with bigger but fewer trips to the supermarket.

Shoppers made 40 million fewer trips to supermarkets per month than in 2019, while a fifth of households order their groceries online each month. 

Halloween gave a boost to sales, with seasonal confectionery up 27%.

And people are preparing for Christmas early this year: 4.7 million households bought mince pies in October and 1.6 million bought Christmas puddings. 

Tesco PLC (LSE:TSCO), up 0.27% at 275.58p, was the only retailer to achieve year-on-year growth with sales rising by 0.3% over the 12 weeks to 31 October. 

J Sainsbury PLC saw sales fall 2.8%, the recently taken over Morrisons dropped 4.3% and Ocado Group PLC (LSE:OCDO) lost 2.1%.

8.18am: Cautious start for UK market

Leading shares have indeed made an underwhelming start as the downbeat mood of the week continues.

The FTSE 100 is barely changed, up just 0.57 points at 7300.97 despite new records yet again being set on Wall Street.

Indeed, the current high asset valuations are beginning to cause some concern, not just from Morgan Stanley (NYSE:MS) (below).

The US Federal Reserve also warned on Monday that a rise in risky asset prices this year could see them dropping sharply if the economic recovery turns sour.

It said: "Prices of risky assets generally increased since the previous report, and, in some markets, prices are high compared with expected cash flows."

It is also worried that problems in China's real estate sector - including struggling Evergrande - could hurt its financial system and spread elsewhere.

One standout so far is Associated British Foods PLC (LSE:ABF), up 5.38% and the biggest riser in the leading index.

The company said it expected “significant progress” in profits in the coming months as its retail business Primark rebounds strongly.

The fast-fashion firm is estimated to claw back at least the estimated £2bn of sales lost due to store closures last financial year, unless COVID-19 restrictions are imposed again.

Richard Hunter, head of markets at interactive investor, commented “The benefits of the group’s business diversity and geographic breadth have enabled AB Foods to deliver progress, despite further major disruptions which capped the contribution of Primark.

"The divisions which did most of the heavy lifting during the pandemic, when Primark stores were shuttered, continue to make a vital contribution, with the important Grocery and Sugar businesses still seeing growth...

"The real driver of the business, though, is Primark, which is straining at the leash for a clear run. During this reporting period, one third of available trading days were lost due to various lockdown restrictions, resulting in an estimated loss of sales of some £2 billion. When the stores were open, however, the picture was starkly different.

"Like-for-like sales unsurprisingly remain 12% shy of pre-pandemic levels, but the second half operating margin of 10.6% is a healthy reminder of Primark’s capabilities. The adjusted operating profit, which rose by a remarkable 15% during the period, also reflects the swathe of customers returning to its stores when possible, releasing pent-up demand and with high basket sizes further improving the return."

6.50am: Markets set for slow start

The FTSE 100 is heading for a fall on Tuesday morning, extending their underwhelming start to the week.

Spread-betters on the IG platform predict London’s blue-chip index will tumble 20 points at the open, after giving up almost 4 points yesterday to close at just over 7,300.

This despite all three of the Footsie’s Wall Street cousins setting more record highs overnight, although apart from the Dow Jones climbing 0.3% the S&P 500 and Nasdaq each only inched 0.1% higher.

A warning also came from Morgan Stanley (NYSE:MS) wealth management chief that the “risks of a market bubble are growing,” with valuations “stretched” with investors “putting stock in the Fed’s patience with interest rate hikes”.

More specifically to this week, the lack of macro data on the calendar, says market analyst Jeffrey Halley at Oanda, is leaving markets “to their own devices thus far, drifting on the tides of sentiment swings and rent-a-comment from central bank officials”.

“With nothing of note to sink its teeth into, the Street continued moving back into its happy place, interest rates lower for longer, buy-everything except for the US dollar,” he added.

“The FOMO gnomes of Wall Street managed to push equities slightly higher to yet another record close; bond yields drifted a little higher after falling on Friday. Still, it was probably most clearly seen in currency markets, where the US Dollar retreated overnight. Even gold rallied once again overnight, after holding on to its rise through $1800.00 on Friday.”

For today in London, there is some data, though it is restricted to the retail sector, with the British Retail Consortium finding a 0.2% decline in like-for-like sales in October, improving on the 0.6% the month before.

Later there will also be supermarket industry data from Kantar, plus results from Primark owner Associated British Foods PLC (LSE:ABF) and Watches of Switzerland.

Outside retail, there’s updates from housebuilder Persimmon, property developer Land Securities and insurer Direct Line.

6.50am: Early Markets - Asia / Australia

Stocks in the Asia-Pacific region were mixed on Tuesday with Japanese conglomerate SoftBank Group’s shares surging about 10% after announcing a plan to buy back up to one trillion yen (US$8.83 billion) of its own shares.

China’s Shanghai Composite gained 0.16% and Hong Kong’s Hang Seng index rose 0.20%

In Japan, the Nikkei 225 slipped 0.75% while South Korea’s Kospi was up by 0.04%.

Australia’s S&P/ASX200 dropped 0.24% to close at 7,434.2 points as the gains in the materials sector were offset by financials and consumer stocks.

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