FTSE 100 finishes slightly ahead despite mixed US

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  • FTSE 100 closes 47 points higher
  • Dow Jones, S&P 500 advance, Nasdaq weak after data
  • Sterling rises ahead of UK CPI tomorrow

4.40pm: FTSE on right side of green

At the close, the UK’s blue-chip index had added 47 points on the day to finish at 7,454 for a gain of 0.6%.

The win came despite mixed US 2Q bank earnings and retail sales figures that came in below expectations.

“European and most US stock indices remain in positive territory for the day despite mixed US bank results,” IG’s Axel Rudolph said.

“Weaker-than-expected US retail sales – the core number remaining strong, though – did not have much of an impact on the US dollar which managed to stabilise near last week’s multi-month lows.”

3.30pm: Greater fulfilment

Amazon has said it will hire up to 2,000 people to staff a new UK fulfilment centre, located in Stockton-on-Tees, which it is due to open in October, Reuters has reported.

Amazon said a staff of 1,000 will initially be required before it adds additional employees as activity ramps up.

The company announced plans to shut three older warehouses in the UK in January, impacting 1,200 jobs, with workers given the chance to transfer to other units.

The move comes after Amazon saw its recent Prime Day sales reach record levels, helped by a surge in sales of stationery and office supplies, according to Adobe Analytics data.

The internet retailer’s US online sales rose to US$12.7bln over the two-day period, jumping by 6.1% compared to last year.

Research analysts claimed the 2023 event offered “deeper” discounts than in previous years.

Over the course of the event, customers bought 375mln items worldwide which provided total savings worth more than US$2.5bln.

3.30pm: Some baggage shifted

Unions representing baggage handlers working with easyJet at London’s Gatwick airport said strikes have been suspended after an improved pay offer, Reuters has reported, though other walkouts this summer will still go ahead.

Around 600 DHL workers who fulfil contracts for Gatwick’s biggest airline easyJet have called off strikes planned for 28 July to 1 August and will now be balloted on the new pay offer.

Strikes planned by around 450 ASC, Menzies Aviation and GGS staff, who work for other airlines including British Airways, are still scheduled to take place from July 28 to August 1 and from August 4 to August 8. 

3.10pm: More disappointing US data

A further batch of US data has missed forecasts, with June industrial production falling by 0.5%, against forecasts of being flat, with net revisions of minus 0.3%. Meanwhile, manufacturing output fell 0.3%, also below the consensus for 0.0%.

Also commenting on the latest data, Kieran Clancy, senior US economist at Pantheon Macroeconomics said: “The drop in manufacturing output partly reflects a 3% slump in auto production, but this only partially reverses the 11% surge in April/May. Auto production remains significantly above its pre-Covid level, so further declines in the months ahead are a decent bet. Manufacturing output ex-autos fell for the second straight month, by 0.1%, resulting in a 0.9% annualized decline over the second quarter as a whole; the ISM manufacturing index points to a much steeper decline in Q3.”

He added: “The upshot here is that most of the manufacturing sector remains in a sorry state, and we see few signs of help on the horizon. The post-zero-Covid rebound in China’s manufacturing sector already has fizzled out, and an aggressive fiscal response by the Chinese authorities is extremely unlikely. Domestic US capital spending, meanwhile, is suffering under the weight of significantly higher borrowing costs, though capital spending intentions in the regional Fed manufacturing surveys might have bottomed.”

2.45pm: Wall Street wavers

The FTSE 100 index jumped higher in midafternoon trading as Wall Street started mixed after June US retail sales data missed forecasts but May growth was revised higher.

After around 15 minutes of New York trading, the Dow Jones Industrial Average was up 125 points, or 0.4%, at 34,710, having posted its highest close of the year on Monday. Meanwhile, the broader S&P 500 edged up 0.1%, but the tech-laden Nasdaq Composite shed 0.3%.

Kieran Clancy senior US Economist at Pantheon Macroeconomics commented: “The undershoot in June headline retail sales is largely offset by upward revisions to prior data. Overall, the data suggest that real consumers’ spending rose at around a 1% annualized rate in the second quarter, down sharply from the 4.2% surge in Q1.”

He added: “The jump in spending at the start of the year was largely due to warmer-than-usual weather and the one-time uplift to social security payments, which temporarily boosted spending above trend. The broader picture, however, is that growth in consumers’ spending has weakened significantly since the Fed started hiking rates aggressively; a further downshift lies ahead.”

It was also very busy day for US corporate earnings, notably with results from a welter of financial giants including Bank of America, Bank of New York Mellon, and Morgan Stanley.

2.30pm: Tories to see Thursday mauling

The Conservatives are heavily odds-on with bookmaker William Hill to lose all three seats in Thursday’s by-elections.

Rishi Sunak’s party are currently 2/9 to see Somerton and Frome, Uxbridge and South Ruislip and Selby and Ainsty all fall to either the Lib Dems or Labour.

Should the Conservatives manage to cling onto one of the seats being contested in Thursday’s votes, they are 1/12 to lose at least two of the triple by-elections, and massively odds-on at 1/100 to be trumped in at least one.

In a statement, William Hill spokesperson, Lee Phelps, said: “It is anticipated to be a dreaded triple by-election for the Conservatives on Thursday, with Rishi Sunak’s party expected to lose three further seats from their ever-decreasing majority.

“Subsequently, we are just 2/9 for the Tories to lose all three of their Somerton and Frome, Uxbridge and South Ruislip and Selby and Ainsty seats in Thursday’s vote.

“Such is the extent of the Conservative’s downfall that they are 1/100 to lose at least one of the three seats up for grabs this week, and 1/12 to see two or more snapped up by one of Labour or the Liberal Democrats.”

2.15pm: US shopping gap

US retail sales rose 0.2% on a monthly basis in June, below market expectations for an increase of 0.5%. However, on a positive note, the 0.3% growth recorded in May got revised higher to 0.5%.

Retail Sales Ex-Autos rose 0.2% in the same period, compared to analysts’ estimate of 0.3%.

On an annualised basis, total sales for the April 2023 through to June 2023 period were up 1.6% from the same period a year ago.

Craig Erlam, senior market analyst, UK & EMEA, OANDA commented: “The numbers were much weaker than expected for June but then the May figures were revised up so it wasn’t all bad.

“I’m not convinced today’s data really changes things as far as the consumer or economy is concerned, all things considered, nor has it really changed anything on interest rate expectations, with markets almost fully pricing in a hike next week and probably no more after that.”

1.30pm: A look at some of today’s movers

Risers

Darktrace – up 24% to 364.9p: Shares surged after it came out the other end of a review by Ernst & Young unscathed. The cyber security firm said the independent review should have no impact on its financial statements, nor does it change its belief that previous statements fairly represented its financial position.

Niox – up 11% to 71p: Shares in the company, which designs, develops and commercialises asthma devices, jumped after an upbeat first-half trading update. Revenue grew by roughly 22% to £18.8mln in the six months to 30 June 2023, while adjusted underlying earnings (EBITDA) nearly doubled to £6.2mln year-on-year.

Just Group – up 8% to 83p: The financial services firm saw its shares bounce following a first-half trading update in which it reaffirmed it is confident in achieving full-year targets. Retirement income sales more than doubled to £1.9bn in the six months to 30 June 2023, while defined benefit de-risking sales were up 149% to £1.4bn.

Arbuthnot – up 12% to 1,061p: Profit before tax jumped 676% to £26.4mln for the private and commercial bank, reflecting the benefits of higher interest rates and growth in the specialist lending subsidiaries which sent shares higher.

Zotefoams – up 10% to 353p: Shares gained 10% to 353p in early trading after the company announced a joint development agreement for its ReZorce drinks cartons with a world-leading beverage packaging company. 

Fallers

Pelatro – down 50% to 4p: Shares screeched lower after the company said it is exploring potential fundraising options due to delays in payments from key customers, including one owing US$0.55mln and two “unwilling” to pay.

United Oil & Gas – down 31% to 1.24p: Shares plunged as the company’s trading update, ahead of its interim results, highlighted numerous challenges including a squeeze on working capital.

1.05pm: US preview

US stocks are seen opening flat to lower as investors await the latest retail sales and industrial production data, as well as a busy day for corporate earnings, including results from Bank of America, Bank of New York Mellon, Morgan Stanley (NYSE:MS) and PNC Financial.

Naeem Aslam, chief investment officer at Zaye Capital Markets commented: “So far, the banks that have reported earnings, have posted strong numbers as the higher interest rate environment has added more gains to their top line numbers.

Having said this, traders and investors continue to trade very carefully as all the S&P 500 sectors closed in negative territory yesterday, but if you zoom out and look at the YTD performance of the index, it continues to unpack some stellar numbers.

We are confident that as the odds of a soft landing continue to add up, there are greater chances that the US stock market is likely to perform well in the second half of this year as well.”

He added: “Traders will also be paying close attention to the US retail sales data, which will be released later today. The number is of high importance, as it will tell us the real conditions of US consumers and their ability to dig deep in their pockets. Due to the fact that recent inflation numbers have shown massive improvement, the odds are that we may actually see more improvement in consumer spending as the job market and wage earnings growth both remain stable to robust.”

In pre-market trading, futures for the Dow Jones Industrial Average (DJIA) were down 0.01%, while those for the S&P 500 lost 0.05%, and contracts for the Nasdaq-100 slipped 0.1%.

On Monday, the DJIA recorded a sixth straight day of gains, adding 76 points, or 0.2%, to post its highest close of the year at 34,585. The S&P 500 rose 0.4% and the Nasdaq Composite jumped 0.9%.

12.50pm: Bank of England bonuses

The Bank of England has caused a stir after paying bonuses to its own staff at a time when it is calling for pay restraints to fight inflation.

A total of £25mln was paid last year in staff bonuses, with some employees receiving up to £22,5000 in addition to their base salaries.

Governor Andrew Bailey, who has been leading calls for pay restraint, is paid just under £500,000 a year, while the annual pay at the BoE is roughly £62,000.

“For this year, the Bank has given a 3.5% pay award to its staff. There is no question of the Bank unduly rewarding its staff,” the bank said.

The campaign to tame inflation means mortgage holders have faced steep rises in repayments, roughly £200 a month by the end of this year.

Inflation is expected to remain at elevated levels in the UK, where tomorrow’s reading of the Consumer Price Index is set to stay above 8%. Its equivalent in the US fell to 3% last week. The BOE’s target for inflation, set by the government, is 2%.

12.36pm: Insolvencies hit record 

Corporate insolvencies rose by 27% in June to 2,163 in England and Wales as higher interest rates and a slowing economy take its toll.

Quarterly insolvencies hit 6,402, up 16% on the same period last year and the first time a three-month period has topped 6,000 since the financial crisis.

“The increased pressure doesn’t seem to have found its way into employment numbers yet, and the labour market remains strong, but we’d expect that to change in the months ahead,” said Nicholas Hyett, investment manager at Wealth Club.

“Unpleasant though it sounds that would be a relief for the Bank of England – which is looking to take some heat out of the economy. If economic data continues to weaken, then there’s a chance the Bank will declare an early victory in its battle with inflation, meaning rates peak at lower levels than anticipated and mortgage holders breathe a big sigh of relief.”

12.07pm: Pound goes strong 

The British pound held above US$1.3, lingering around its strongest level since April 2022 ahead of key inflation data scheduled for release on Wednesday.

The upcoming CPI report is expected to indicate a slowdown in the inflation rate to 8.2% in June, the lowest since March 2022, but still significantly above the Bank of England’s target of 2%.

The core rate is projected to remain unchanged at May’s record high of 7.1%.

Elsewhere, investors have recently been shifting away from the dollar due to signs of cooling inflation in the US, which has raised expectations that the Federal Reserve’s aggressive policy tightening may be approaching an end

11.39am: Help to Buy going out on a whimper

Help to Buy is on course to hit a record low this year as the scheme fails to deliver for first-time buyers.

So far this year, Help to Buy ISA, which closed to new entrants in November 2019, has been used to buy 11,040 properties.

In the three months to March, the Help to Buy equity loan was used to 3,202 homes, down 41% from the same year earlier.

“Help to Buy is going out with a whimper, as the schemes fail to deliver for first-time buyers. The government needs to protect the Lifetime ISA from the same fate,” said Sarah Coles, head of personal finance at Hargreaves Lansdown.

“Both Help to Buy schemes are on their way out. It was officially the final month for completions using the Help to Buy equity loan – although some will be pushed as far as May. It’s also more than three and a half years since the Help to Buy ISA closed to new entrants and, although bonuses can be claimed until 2030, it has been allowed to wither on the vine,” she added.

“The government also needs to reconsider the fact that LISA savers have to pay a 25% penalty if they buy a property worth more than £450,000. This doesn’t just remove the government bonus, but a chunk of their own savings too. It’s ludicrous that people should be penalised for trying to do the right thing and being hit by forces out of their control.”

11.13am: Pret boosted by subscription service

Coffee and sandwich chain Pret A Manger said first-half revenues were boosted by strong demand for its subscription service.

Sales in the first six months of the year totalled £429.9mln, up 20.2% on the same period a year earlier.

Pret added that it achieved weekly record revenues in the last two months thanks to its subscription service, Club Pret, which proved popular among customers after expanding to include food.

The service costs £30 a month after a 20% hike in June and allows customers to get 10% off food and cold drinks and five barista-made drinks for free a day.

Pret also thanked global expansion for improving sales, with it now operating 600 shops across 15 countries, with sales from abroad accounting for nearly a fifth of total revenue.

Pano Christou, Pret chief executive, said: “It’s been three years of transformation at Pret, in which we’ve evolved into a truly global, multi-channel brand, and emerged as a stronger business than we were in 2019.

“We’re focused on continuing to grow, while constantly innovating to bring Pret’s freshly made food and organic coffee to brand new places, from Bishop’s Stortford to Bradford and from Italy to India.”

10.48am: Tin soars on back of supply chaos

Tin futures hit a 5-month high of $29,000 per tonne and are more than 60% above their November 2022 low as supply chains in Myanmar are set to cause chaos.

From the start of next month, all mining activities, including exploration and processing, will be suspended in the Wa state to preserve remaining resources.

Indonesia is also expected to encourage domestic processing by banning the export of tin ingots.

On the demand side, global semiconductor sales, which serve as a proxy for tin soldering usage, recorded a year-on-year decline of 21.1% in May.

Cornish Metals, the UK-listed tin miner, gained 2% to 12p.

10.19am: Bond yields ease

Government bond yields around globally fell for a second day on Tuesda.

The US 10-year Treasury note yield, often viewed as a proxy for global borrowing costs, retreated to 3.76%, its lowest level since late June.

Investors are increasingly convinced as a result that major central banks, and specially the Federal Reserve, will soon end their tightening campaign.

The Bank of England will decide on monetary policy in August only, but either a 25bps or a 50bps hike are seen as certain.

Bets for a 25bps hike in the fed funds rate next week currently stand at 97% but investors remain divided on the need of further increases, with chances for a September increase currently standing at 12% and for November at 22%.

9.55am: Vodafone to get another half a billion from Vantage sale

Vodafone Group PLC (LSE:VOD) has announced that it will receive an additional €500mln (£429mln) in proceeds from the sale of its infrastructure arm Vantage Towers, bringing the total net proceeds to €5.4bn.

The deal involves a consortium of long-term infrastructure investors led by Global Infrastructure Partners and KKR on the other side of the table.

As a result of this transaction, the consortium’s ownership in Oak Holdings, the parent company of Vantage Towers, will increase to 40%.

In addition, Vodafone has reached an agreement with the consortium to extend a six-month window for the potential acquisition of additional shares in Oak Holdings.

Private equity firms have been circling British telecoms leader Vodafone’s stake in Frankfurt-listed Vantage Towers, which owns tens of thousands of telecoms towers across Europe, since early 2022.

Vodafone shares dropped 1.36% in today’s morning trades, though the wider FTSE 100 index remains in the green at 7,417.

9.40am: UK sees biggest drop in grocery price inflation since peak

According to analysts at Kantar, the UK is experiencing the lowest level of grocery price inflation this year.

Average prices in supermarkets were found to be 14.9% higher compared to the same period last year, based on the data from the four weeks leading up to 9th July.

This figure represents a decrease from the previous four-week period, where prices were recorded to be 16.5% higher, and it marks the most significant decline since inflation reached its peak at 17.5% in March.

This trend suggests that the reduction in commodity prices and the easing of other cost pressures are now starting to have an impact on consumers.

9.20am: US to avoid recession, says Goldman

Goldman Sachs (NYSE:GS) has revised its assessment of the likelihood of a US recession within the next 12 months, lowering the probability from 25% to 20%. 

Although this figure remains slightly above the average postwar probability of 15% for a recession occurring approximately every seven years, it is significantly lower than the median of 54% reported by forecasters in the recent Wall Street Journal survey.

Goldmans believes that the Federal Reserve’s push to bring down inflation does necessitate a complete economic recession, noting that the resilience of the US economy is evident as various indicators portray ongoing strength.

Futures contracts are expecting US markets to open unchanged this afternoon.

In London, the FTSE 100 blue-chip index is 0.2% higher, pulled up by an exceptionally strong Ocado price rally.

8.58am: Footsie higher in opening hours

London’s blue-chip index opened higher on Tuesday, adding 10 points, or 0.14% to 7,416.

Ocado Group PLC (LSE:OCDO) can take most of the credit. The grocery technology group surged an impressive 13% when Tuesday trades kicked into gear.

Ocado reported an underlying profit for the first half of the year as it opened a first customer warehouse in Japan and its UK businesses broke even.

Victoria Scholar, head of investment, interactive investor, commented: “European markets have opened mixed with the FTSE 100 trading around the flatline. Ocado has soared to the top of the UK index, hitting a five-month high, after maintaining its full-year guidance.

According to Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown: “The FTSE 100 has relinquished some of the gains it accumulated last week on weaker-than-expected Chinese economic data… The sheer scale of China’s economy means a perceived stalling in the post-pandemic recovery has ramifications for global demand and economies.

“There’s also little news to distract the market from looming UK inflation data later this week, with the UK poised to assess the latest reading and what this will mean for the interest rate trajectory.”

8.35am: Hong Kong stocks tumble

Hong Kong’s Hang Seng index has tumbled more than 2% today as Asian stocks get smacked by China’s gloomy economic outlook.

The Hang Seng was also forced to close on Monday due to the arrival of Typhoon Talim, which may be contributing to the drag.

Most major Chinese conglomerates including Tencent, Alibaba, JD.com and the Industrial and Commercial Bank of China opt to list in Hong Kong, making it a proxy for investor sentiment of the Land of the Dragon.

In the second quarter of this year, China’s economy saw growth of 6.3% compared to the same period last year, but this fell well short of the 7.3% forecasts.

Draconian Covid lockdowns caused considerable pain for the Chinese economy, for which Hang Seng is suffering the effects.

But as a cornerstone of the global economy, fears of a major Chinese downturn are affecting markets outside of Asia too.

Since China is a major buyer of luxury goods, Paris’ CAC 40 index, which is heavily weighted to luxury stocks including Carter-owner Richemont, LVMH and Hermes, was rattled by yesterday’s frightful GDP figures.

Meanwhile, a downturn in metal prices may be causing a drag on London-listed mining group.

8.05am: Robinhood heads to the UK

Silicon Valley trading platform Robinhood, which sprung to fame during the 2021 meme stock frenzy, is preparing to open its services up to UK customers.

First reported by the Telegraph, the group has published numerous job listings on LinkedIn.

One says the group is “expanding internationally this year as Robinhood is hiring world-class talent in the UK”.

Robinhood is very much tailored to the younger retail investing scene. This put it in a relatively good position during the 2020 Covid-era market crash, as traders flocked to so-called ‘meme stocks’ as a way of short-squeezing private equity investors.

US companies Gamestop, AMC and Bed Bath & Beyond were targeted by Robinhood users, who pumped the price of these companies, causing panic among private equity houses shorting these stocks.

The company went public on the Nasdaq on July 29, 2021, under the stock ticker HOOD. The opening price was $38 but has since plummeted to less than US$13.

7.50am: Ocado reports underlying profit

Ocado Group PLC (LSE:OCDO) reported an underlying profit for the first half of the year as it opened a first customer warehouse in Japan and its UK businesses broke even.

The outlook for the full year was held firm, including for underlying profits for all businesses on an EBITDA level and £200mln of underlying cash flow improvement.

Revenue of £1.4bn was declared by the FTSE 100-listed group for the half-year to 28 May 2023, up 8.6% on a year ago.

UK joint venture Ocado Retail, which is 50% owned by Marks and Spencer, returned to profitability in the second quarter, while the UK logistics business, which works with customers including Morrisons, had what was described as a “steady, profitable” period.

7.42am: What impact will bearish Chinese equities have?

Chinese stocks fell nearly an entire percentage point on Monday, the worst daily performance in three weeks.

The gloom was put down to bad GDP figures that showed the economy expanding by 6.3% year on year; well below the 7.3% forecast.

French markets stand to fare worst from this development, given the weighting on luxury stocks like LVMH, Hermes and Cartier-owner Richemont. Hence why the CAC 40 closed 1.12% on Monday.

Few commentators have suggested much of an impact on London equities markets, although mining and energy stocks do have some exposure.

Tickmill Group’s Patrick Munnelly noted that weak Chinese growth leads to lower metal prices, hence why we saw low-single-digit losses from the likes of Glencore and Rio Tinto yesterday.

As it stands, the FTSE 100 is expected to open lower when trading commences, albeit only by a handful of points.

7.15am: Footsie straddles the line in pre-market trades

We can expect the Footsie to open relatively unchanged from yesterday’s closing price of 7,406, if spread bets on IG are to go by.

There could be a slight move to the upside, given the preference for long positions on the futures market in the past hour (65% lng to 35% short.)

The FX markets should be lively, however. With the US dollar continuing to plunge to new yearly lows against the pound, traders will be contemplating whether the bottom is in.

On the macroeconomic front, US retail sales are due later alongside a spate on industrial economic figures, but the UK calendar is essentially empty

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