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- FTSE 100 closes 28 points higher
- Dow just higher; S&P 500, Nasdaq weaker
- UK service sector still growing but at a slower pace
4.45pm: FTSE finishes higher
At the close, the UK’s blue-chip index had gained 0.4% to finish at 7,663 points.
This, despite a “generally negative” day for equities, according to IG’s Chris Beauchamp.
“Sometimes markets go up on bad data, as it means rate cuts are coming, and sometimes they go down, since recession fears rise. Today traders seem to have picked the latter option, with the warning from Mester about more rate hikes sounding in their ears too. Compared to the rebound in stocks since the lows of March it is still a drop in the ocean, but it shows investors are still skittish about the outlook for the year.”
3.50pm: Borderline
The UK plans to simplify and speed up post-Brexit border checks after repeated delays that the government previously blamed on the COVID-19 pandemic and then the war in Ukraine, Reuters has reported.
The new model announced on Wednesday will be backed by more than £1bn in spending and will cut the need for physical checks “for many types of goods”, a government statement said, adding that required checks will take place away from ports to prevent delays at the border.
Britain, which left the EU’s single market in January 2021, has delayed full implementation of border controls on several occasions because of worries about port disruption and COVID-19, and more recently the risk of adding to a cost-of-living crisis.
The government proposals include a new “single trade window” under which traders need only submit information once and in one place, which is expected to be fully operational by 2027.
Arrangements for goods moving into Northern Ireland from Great Britain will follow the deal Prime Minister Rishi Sunak struck with the EU in February on post-Brexit trade rules for the region, the government said.
It added that none of the additional checks or controls set out in the new model will apply to imports into Northern Ireland from the EU, providing Northern Ireland traders with full access to the single market.
The government intends to publish the final version of the plans by the end of the year after a six-week engagement period.
3.30pm: UnCo-operative environment
The Co-op has warned that its profits are likely to fall in the year ahead as the food retail to funerals group expects the “turbulent economic headwinds, including inflationary pressures” to continue, the Guardian reported.
That “volatile external environment” contributed to an 11% fall in profits at the 160-year-old mutual’s grocery arm, which has more than 2,000 stores, but underlying operating profit across the business remained steady at £100mln. Profits at the grocery business were hit by a £55mln rise in pay and a £37mln investment in trying to keep prices down for shoppers.
Pre-tax profits at the group, however, jumped to £247mln in the year to 31 December 2022, up from £57mln the year earlier, thanks to a one-off profit from the sale of its petrol forecourts business to Asda in October and a strong performance by its funerals and legal business.
The Co-op saw its group sales increase by 3% to £11.5bn, including a 1.3% rise at its grocery business.
3.10pm: Double Direct
Analysts at Citi have double upgraded their rating for Direct Line to ‘buy’ from ‘sell’, noting that their industry channel checks give more confidence on 2023 motor earnings.
The analysts said Direct Line’s share price decline of around 40% in the year-to-date and a 32% reduction in 2023 consensus earnings per share estimates mean the risk is now skewed to the upside.
“We believe there is sufficient solvency self-help to avoid an equity raise, that the motor pricing cycle has bottomed out, and DLG’s current circa 5.3x 2024E price-to-earnings represents an attractive entry point,” they said.
The Citi analysts said they believe consensus motor earnings have now sufficiently reset following the company’s full-year 2022 results and are now at the bottom of the motor pricing cycle.
In late afternoon trading, Direct Line shares were up 6.8% at 1583.20p, below Citi’s new price target of 188p.
2.50pm: Dow manages to gain
The FTSE 100 index held just off session highs as US stocks started mixed on Wednesday albeit with recession fears reignited by a series of weaker-than-expected US economic data this week.
Around 20 minutes after the New York market open, the Dow Jones Industrials Average had managed to add 96 points, or 0.3% at 33,499, but the broader S&P 500 was down 0.1%, and the tech-laden Nasdaq Composite shed 0.6%.
On the data front today, ADP US private sector payrolls by fell more than expected in March coming in at 145,000, far below the consensus analyst expectation of 200,000.
“The data adds to evidence that the labour market is starting to cool and comes ahead of Friday’s closely watched non-farm payroll report,” commented FOREX.com market analyst Fiona Cincotta.
However, Pantheon Macroeconomics senior US economist Kieran Clancy noted that the ADP employment report has been a poor guide to the initial official payroll estimate since the ADP rebuilt and relaunched its model back in August last year.
“The upshot is that the ADP number ought not to be taken seriously; our forecast for March payrolls—based on the contemporaneous Homebase data and the lagged NFIB hiring intentions index—is 250,000 though we expect payroll growth to slow markedly in the second quarter,” Clancy said.
2.25pm: Mind the pay gap
Banks are among the worst offenders in regard to men being paid more than women, according to new research, led by HSBC’s UK business which had a 51.5% gap in wages and a 77% gap in bonuses.
Currently, more than 80% of companies pay male employees more than women on average, with the gap now larger than in 2017 when organisations were first forced to begin reporting.
The gender pay gap is the difference between men’s and women’s median pay expressed as a percentage of the average man’s salary.
The total average was 12.2% in the 12 months to 4 April, against 11.9% in 2017/18 and in line with last year.
In the finance sector, the gender pay gap was much higher than the national average, dropping only slightly year-on-year to 22.7% – the second highest industry behind education.
2.10pm: What a picture
Art held its value as an alternative investment asset in 2022, despite demand from previously heavy buyers in China falling sharply.
In total, the global art market in 2022 was estimated to be worth US$67.8bln, ahead of the US$64.1bln valuation in 2019, a report from UBS Group and Art Basel found.
Sales across the world increased by 3% year-on-year, driven by gains in the high end of the market.
The US market remains the leading country in terms of sales by value, making up a 45% share of the industry. Stateside, the market reached a record valuation of US$30.2bln, the report added.
Britain reclaimed its place as the second-largest art market in 2022 as it accounted for 18% of global sales by value, replacing China which saw its share drop from 20% to 17%. The UK art market, which was worth US$11.9bln in 2022, remained below its 2019 valuation of US$12.2bln.
1.30pm: A look at some of today’s fallers and risers
Risers
Fulham Shore – up 32% to 13.9p: Shares soared after the owner of the Franca Manca and Real Greek restaurant chain agreed to be bought in a £93mln deal. Japanese buyer Toridoll is offering 14.15p a share, a premium of more than a third of Tuesday’s closing price.
Northern Bear – up 28% to 47.7p: Shares rallied after it unveiled a dividend growth strategy and said it anticipates strong trading results for the year ended 31 March 2023. The company plans to declare an ordinary dividend of 4p per share and a special dividend of 1p per share for the period. Despite challenges in the construction industry, Northern Bear has exceeded the previous year’s results, with an expected adjusted operating profit of over £2.75mln.
Scotgold – up 17% to 14.7p: The company secured US$500,000 of much-needed financial support and said it had embarked on a more cost-effective method of extracting ore from its mine near Loch Lomond. The company also said that its main debt provider had agreed to defer interest payments until the end of the year.
Fallers
Drumz – down 16% to 0.56p: The investing company saw its shares fall after it said it was raising money at a discount to acquire Acuity Risk Management (ARM), a supplier of governance, risk and compliance software and services. The AIM-listed outfit, which already owns 25% of ARM shares, announced a conditional fundraise of £1.45mln before expenses at a price of 4.5p per share, a discount of approximately 33.3% to the last closing price.
1.00pm: US open
Wall Street is likely to open lower after the first of three jobs reports out this week indicated the first sign of weakness in the US labour market, putting the Federal Reserve in a tricky position in its battle to return inflation to its targeted range, while concern about a potential recession has propelled the price of gold towards its all-time high.
Futures for the Dow Jones Industrial Average (DJIA) fell 0.1% in Wednesday’s premarket trading, while those for the broader S&P 500 index shed 0.2%, and contracts for the Nasdaq-100 were also 0.2% lower.
The Labor Department reported on Tuesday that US job openings slipped to 9.9 million in February, the fewest since May 2021.
The DJIA and S&P 500 each finished down for the first time in five sessions, with both declining 0.6% to 33,402 and 4,101 respectively, while the Nasdaq Composite lost 0.5% to 12,126.
Spot gold rallied above $2,000 an ounce to $2,024.89, its highest since March 2022, as the dollar weakened in response to the data. It was last trading at $2,025.53.
“Figures on job openings and factory orders are pointing towards a potential recession for the world’s largest economy, but the upside might be a pause in interest rates which would typically be a positive for stocks,” commented AJ Bell head of financial analysis Danni Hewson.
“The concern is the Federal Reserve might have to sound the retreat before its war on inflation is truly done. This could leave us with the worst of all worlds – the dreaded stagflation where the economy is shrinking but prices are continuing to surge higher.”
Ahead of the all-important non-farm payrolls report on Friday, today’s release of the ADP National Employment Report is expected to reveal that an additional 200,000 private-sector jobs were created in March, down from 242,000 in February.
Also due out today, the ISM services index for March is likely to show a decline to 54.4 from 55.1 in February, noted ING strategist Francesco Pesole.
“Back in December, a one-off drop below 50 sparked recessionary panic and crippled the dollar.
Now, the combination with yesterday’s decline in job openings could mean that even prints in the 52-53 area could have a similar effect, as markets see more than one high-frequency piece of data moving in the direction of economic slowdown,” he added.
12.40pm: Royal Mail talks end in stalemate
The never-ending saga surrounding Royal Mail rumbles on.
Royal Mail, which is owned by International Distributions Services, revealed that talks with union bosses have ended in stalemate, raising the prospect of further postal strikes.
The two sides have been negotiating for 11 months over pay, jobs and conditions for the 112,000-strong workforce, which led to 18 days of strikes in 2022 and 2023.
A spokesman for Royal Mail said: “After 11 months of talks, including mediation by Sir Brendan Barber and Acas, we are deeply concerned that our talks with CWU have concluded without an agreement.”
“We made substantial efforts to reach an agreement, including making a number of further improvements to our offer.”
It stressed it remained committed to striking a deal.
For its part, the CWU said there has been progress in several areas, and it was willing to continue talks but had been advised that the directors leading the negotiations for Royal Mail were no longer available.
Shares in IDS were down 1.3% to 217p, while the FTSE 100 was up 33 points to 7,667.
12.15pm: FTSE 100 outperforming European indices
A scan across Europe shows us that London’s blue-chip index is outperforming its peers on the continent.
The German DAX is down 0.35%, while the French CAC 40 shed 0.2%, but the FTSE 100 is up 0.39% to 7,763.
STOXX 600, which tracks the 600 largest stocks traded across 18 European countries, is down 0.16%.
It isn’t all gloomy, however, with the Spanish IBEX 35 up 0.56%, boosted by the S&P Global Spain Composite PMI climbing to 58.2 in March 2023, the strongest growth since November 2021.
12.07pm: More PMI figures
More PMI figures, and the UK private sector output, which tracks both the manufacturing and services sector, was confirmed at 52.2 in March, down from 53.1 in February, although anything above 50 is still considered expansion.
This sustained rebound in private sector output contrasts with six months of marginal declines between August 2022 and January 2023, supported by rising output in both the manufacturing and service sectors.
New business volumes increased at the fastest pace since April 2022. On the price front, input cost inflation was the lowest since April 2021 and prices charged inflation was also the weakest for just under two years.
FTSE 100 is up 31 points to 7,665
11.49am: CBI scandal
Away from the markets momentarily, and the sexual misconduct scandal surrounding managers at Britain’s largest business lobby group took its latest turn.
New allegations towards the management of the Confederation of British Industry (CBI) have prompted Andrew Bailey, the Governor of the Bank of England, to cancel his scheduled meeting next month.
Bailey was due to address hundreds of executives at the gathering in Old Billingsgate which is touted as the CBI’s “most high-profile dinner and networking evening.”
M&S, one of the CBI’s most prominent members, and Rolls-Royce have both raised the matter directly with the CBI this week, according to the Telegraph.
The food and clothing retailer also demanded information about how the investigation led by law firm Fox Williams is being conducted, amid claims that all complaints are going through the CBI first.
11.33am: UBS executives move to reassure investors
In the latest update on UBS’ takeover of Credit Suisse, executives at the former told shareholders that the biggest bank rescue since the global financial crisis more than a decade ago was a milestone for the industry and a major challenge for the bank.
Chairman Colm Kelleher moved to reassure investors, adding the takeover was “a new beginning” with “huge opportunities ahead for the combined bank and for the Swiss financial centre as a whole.”
Swiss authorities announced last month that UBS would buy Credit Suisse in a shotgun merger for US$3.3bn after a run on deposits pushed it to the brink of collapse.
The move not only angered shareholders but also Swiss nationals.
A survey from political research firm gfs.bern found a majority of Swiss people did not support the deal as it would create a financial institution with assets more than double the size of the country’s annual economic output.
Credit Suisse’s collapse had ignited fears of another banking crisis, although London’s big lenders held firm and were largely unimpacted by the news in Europe.
Investment group Shore Capital stated that UK lenders Lloyds, Barclays, and NatWest were well-positioned in the immediate aftermath of the Credit Suisse fallout.
Specifically, analysts noted strong capital, funding, liquidity, and lower-risk asset bases thanks to more than a decade of regulatory tightening played into the hands of the UK banks.
Lloyds is up 0.7% to 48p, while Barclays gained 0.5% to 148p today.
NatWest, on the other hand, is down 0.2% to 262p.
FTSE 100 is 30 points, or 0.4%, to 7,664.
11.06am: UK service sector boosted by exports
More on today’s service PMI numbers, with the businesses’ surveyed reporting their biggest jump in export sales since tracking of that data began in September 2014.
“Export sales provided an additional boost to the service economy during March as the ongoing recovery in business travel and events helped to drive the fastest rise in new orders from abroad for at least eight and a half years,” said Tim Moore, economics director at S&P Global Market Intelligence which compiles the survey.
The increase in prices charged to customers also dropped to a 19-month low, although it is still higher than in any period between 1996, when the survey began, and 2021.
Costs also eased to their lowest point in almost two years, albeit they remained strong.
Looking ahead, the wider composite PMI, which features the services and manufacturing sectors “continues to point to a gradual recovery in business activity in the first quarter,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
“Businesses expect the recovery to strengthen over the coming months; the future activity index increased to a 12-month high of 71.1 in March, from 70.0 in February,” Tombs added.
10.27am: UK services rate of expansion slows in March
The S&P Global/CIPS UK Services PMI, which tracks the UK’s service sector, came in at 52.9, in line with estimates of 52.8, although the rate of growth slowed from February’s final reading of 53.5.
PMI figures pointed to a second straight month of growth in service sector activity (anything above 50 is considered expansion), helped by the largest increase in new orders since March 2022 and a slight increase in employment levels.
The services PMI is based on data collected from companies across a wide range of service sectors, including hospitality and transportation.
The UK service sector accounts for 79% of the total UK economic output (GDP), and 82% of employment, making it by far the largest sector.
9.58am: New car registrations up
New car registrations bounced back in March by 18.2%, racing to deliver the best ‘new plate month’ performance since before the pandemic, said the Society of Motor Manufacturers and Traders (SMMT).
March saw 287,825 new units delivered, the eighth consecutive month of growth for the new car market thanks to easing supply chains.
As a result, the first quarter of 2023 is the strongest since 2019 as just under half a million new cars joined the roads.
However, sales are still 37% below March 2019, highlighting that there is a large gap to close to reach parity.
Instead, today’s figures are presented against weak comparatives of 2022, when the industry was severely hampered by nosediving consumer confidence and poor model availability.
John Wilmot, chief executive of car leasing comparison website LeaseLoco believes it could take “years” before the new car market reaches the level of March 2019, when sales were above 450,000.
He also notes that the industry is far from out of the woods, and while supply chain issues have abated, inflation has reared its head, which is adversely impacting consumer purchasing power and confidence.
FTSE 100 up 20 points to 7,656.
9.29am: Grocery inflation still high
NieslenIQ data continued to show high levels of food inflation on UK grocery shelves at roughly 15%, although there may be brighter times ahead for shoppers.
Retail guru Clive Black of Shore Capital expects inflation to be “sticky” for the next two quarters before easing towards the end of the year.
This, he claims, implies better volume and mix going into 2024 for the supermarkets.
Black is expecting comparative headwinds for grocers, given last year they enjoyed the luxury of a winter FIFA World Cup, 14 weeks of sunshine and a post-pandemic Christmas.
In comparison, this year’s major events are scarce, the coronation of the King aside.
Amid high inflation, it’s the German discounters that continue to come out on top.
Aldi has the strongest 12-week trading momentum at 24.7%, followed by Lidl at 22.2%, while M&S also powers on, gaining 11.9%.
The big three are separated by 0.8%, with Tesco’s momentum at 8.6%, Asda at 8.5% and Sainsbury’s at 7.8%.
Morrison, Waitrose and Ocado lag behind the rest, however, all with 12-week trading momentum below 3%.
Shares in Tesco, Sainsbury’s, Ocado and M&S were all flat.
FTSE 100 was up 15 points, or 0.2%, to 7,649.
9.02am: Markets tread water
Equity markets are “treading water” according to Craig Erlam, a senior market analyst at OANDA.
Investors are weighing up what lies in store following a decline in US JOLTS job openings, as well as what the outlook for oil is.
Oil prices have begun to consolidate after the early week surge, with crude oil trading at US$80.9 per barrel, while Brent crude is at US$85.1/bbl.
OPEC+ had announced earlier in the week it would be cutting production which sparked controversy, although the news was welcomed by FTSE 100 oil giants Shell and BP.
Both gained around 3.5% on Monday, although the stocks are both largely flat today, with Shell up 0.19% and BP gaining 0.38% to 2,363p and 529p respectively.
Falling job openings in the US, the lowest level in almost two years, along with consecutive monthly sliding factory orders has increased the “likelihood of a recession later in the year in the US,” according to Richard Hunter, head of markets at interactive investor.
“The resilience of the labour market to date has kept the Federal Reserve on high alert in its battle against inflation, and most recent data has tended to suggest that the interest rate hiking policy is now taking a measured effect on crimping growth.”
FTSE 100 was up 14 points to 7,638.
8.35am: Gold glistens
Gold continues to glisten amid turmoil and uncertainty across the broader markets, and is now worth US$2,026 per ounce, having gained nearly 8% over the last 24 hours, reaching its highest value in a year.
Weakness in the latest US economic data and rising expectations that the Federal Reserve may look to start cutting interest rates are the latest factors pushing gold towards its all-time high of $2,075, according to City Index and FOREX.com market analyst Fawad Razaqzada.
“Gold has jolted above US$2,000 to reach a new high for the year, and silver has broken out above US$24 resistance to close in on the US$25 handle,” he said.
“Both metals have been supported by renewed weakness in bond yields and the US dollar.”
Data from The Royal Mint also found the gold rush was taking place among UK investors, too.
A survey of over 2,000 UK investors commissioned by the coin production company and research company Censuswide found that the volume of gold investments surged by 26% last year.
This increase was largely driven by Gen-z and Millennial investors, who raised their volume of purchases by 38% and 29%.
FTSE 100 was up 19 points to 7,653 in morning trading.
8.25am: FTSE opens higher
FTSE 100 pushed ahead on the open, gaining 15 points to 7,649.
The index was led by the food services giant Compass Group, which was 1.64% higher, changing hands at 2,044p.
RS Group is straggling at the other end of the index, however, having shed over 4% to 858p.
A fourth-quarter trading statement from the London-based electronics group showed a slow-down in like-for-like revenue growth, which was 1% in the three months to March compared to 8% in the prior 12 weeks.
8.00am: Entain goes shopping
Entain has gone shopping and nabbed itself sports media firm 365scores in a deal worth up to US$160mln.
365scores provides scores and sports information, as well as editorial and social content.
An initial US$150mln will be paid by the owner of brands such as Coral and Ladbrokes, with up to a further US$10mln in contingent payments.
Entain’s acquisition could be a sign that the group is looking to diversify its offering ahead of the UK government’s Gambling White Paper, set to be published over Easter.
The White Paper is expected to suggest a host of stricter rules on gambling companies surrounding customer protection.
7.48am: Sterling powers on
The sterling continues to go strong, closing yesterday at US$1.25, its highest level since 9 June last year.
The latest gains in sterling cement its place as the best-performing G10 currency of 2023 so far, having strengthened by 3.46% against the US dollar this year.
A stronger sterling, however, hasn’t been able to rally investment in the UK, with London only welcoming five new listings so far this year across its markets.
FTSE 100 in that time, for comparison, is up 1.06% to 7,643 points.
7.00am: FTSE 100 set to edge higher
The FTSE 100 is expected to edge higher at the open ahead of a batch of PMI prints in the UK, Europe and the US.
Spread betting companies are calling London’s lead index up by around 5 points.
US stocks slipped on Tuesday after a surprise fall in job openings sparked fears that the economic slowdown may be accelerating.
The Dow Jones Industrial Average slipped 198.77 points, or 0.6%, at 33,402.38. The S&P 500 shed 23.91 points, or 0.6%, at 4,100.60 while the Nasdaq Composite dipped 63.12 points, 0.5%, to 12,126.33.
In Asia, markets in Hong Kong and Shanghai were closed for Tomb Sweeping Day while in Tokyo the Nikkei 225 fell 1.6%.
New Zealand’s central bank surprised the market with a 50 basis point rate hike highlighting high inflation and strong employment suggesting the global rate tightening cycle is not coming to an end just yet.
Back in London and the early focus will be on results from RS Group, Topps Tiles and Hilton Food.
In the US later today, the ADP national employment report is due which will be closely watched ahead of non-farm payroll figures later this week and after yesterday’s surprising JOLTS figures which showed an unexpected fall in job openings.
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