FTSE 100 ends in the green despite dip in airlines

• FTSE 100 up 13 points
• US markets trend higher 
• Proctor & Gamble hikes forecast for commodity and freight costs

5:05pm: The Footsie edges out small gain 

The UK-blue chip index added 13 points (0.19%) by day’s end to sit at 7,218. The gain was facilitated by positivity in the US market which countered headwinds from airline sector. 

News that Heathrow increased fees by 53% drove aviation stocks lower, as the airport now has the distinction of being the most expensive in the world. 

“Airlines are on the back foot once again today, with sharp losses for IAG, Tui, and easyJet dragging down the wider FTSE index,” Joshua Mahony, Senior Market Analyst at IG wrote in an afternoon note. “Rising UK Covid cases and the recent emergence of the Delta plus strain do provide a little cause for concern, although there remains hope that the successful vaccination drive should help protect the travel sector from any further disruptions. from any further disruptions.” 

The analyst went on to say that the Heathrow fee hike comes at an inopportune time, as airlines had hoped to raise prices to offset lockdown losses. 

Elsewhere, the Dow Jones Industrial Average continues to trend higher up 165 points (0.47%) to 35,424 at noon. The S&P 500 was also in the green at midday, adding 28 points (0.63%) holding at 4,514. The tech-weighed NASDAQ climbed 97 points (0.64%) sitting at 15,117, better than expected earnings have aided in growth across the US market. 

4:15pm: The FTSE 100 spikes to highest levels of the day in a late surge from London’s blue-chip stocks

A mix of stocks are leading the way, with () topping the Footsie leaderboard, up 2.75%, followed by Hikma Pharma (LSE:HIK), Fresnillo () and Polymetal International ().

“US markets are helping to drive European indices higher, as fears over rising inflation and the impending period of monetary tightening are put on the back burner for now,” said Joshua Mahony at IG. 

He said UK banks also remain a key focus as we close in on a November rate-rise, with markets now pricing in an 82% chance of a 25-basis point hike.

“Notably, the past week has seen tech outperform despite rising Treasury yields, highlighting easing concerns that monetary tightening will drive a swift move from growth to value.”

The Footsie is up 14 points at 7220.

3.35pm: Proctor & Gamble warning weighs on UK peers 

Traders in London are still struggling to find direction but US benchmarks have started on the front foot as Wall Street has cheered further strong third-quarter corporate earnings.

The Dow Jones Industrial Average added over 112 points or 0.3% at 35,371 while the broader-based S&P 500 advanced 0.5% and the Nasdaq index was up 0.24% in early deals in New York.

So far in the current earnings season, 82% of S&P 500 companies that have so far reported earnings have beaten expectations.

Today it was the turn of pharmaceuticals and consumer goods giant (), which beat third-quarter earnings expectations by 25 cents per share, though revenue fell slightly below.

Proctor & Gamble was a faller, even though the consumer products giant’s first-quarter beat revenue and earnings estimates.

However, it hiked its forecast for commodity and freight costs for coming quarters, seeing further increases in inflation.

Later, an update from () will be keenly watched, with the video streaming giant has given guidance for 3.5mln of net subscriber additions and earnings per share of US$2.55 a share, while the Street is forecasting 3.8mln net adds, US$7.48bn of revenue and US$2.57 of EPS.

Its new hit show, Squid Game, which has attracted a record 111mln viewers around the world since going live, launched on 17 September so perhaps came too late to move the dial much.

Netflix shares are modestly in the red, as are those of Amazon, Tesla and Nvidia, while the rest of the tech giants are moving higher.

In London the Footsie is up 2 points at 7,205.7, with gaming group () top of the risers as suitor Draftkings is given more time, with the ‘put up or shut up’ option extended until 16 November.

() is also on the leaderboard after Credit Suisse removed its negative rating on the education group.

With investors reading across from J&J and P&G in the States, Reckitt Benckiser () and Unilever plc () are both trading lower. 

2.25pm: UK signs £400mln green tech deal with Bill Gates

The FTSE 100 was flatlining in the early afternoon and was unmoved at 7,203.

News that the UK has partnered with Bill Gates in a £400mln deal to invest in technologies tackling climate change is not the sort that moves markets.

The government and the billionaire’s fund Breakthrough Energy Ventures will each contribute £200mln or £400mln each over the next ten years, depending on who you listened to.

The initiative was announced at the Global Investment Summit on Tuesday morning.

It was not clear how much the exact investment will be as Gates reportedly said it amounts to £400mln for each party.

Weirdly the prime minister’s official spokesman just repeated that the investment is just £200m each. But Gates repeatedly said at 9.30 in front of business leaders at the government’s Global Investment Summit that it was £400m each. When it comes to backing green hydrogen…

— Robert Peston (@Peston) October 19, 2021

1.10pm: Asda seeks 15,000 Christmas staff

The FTSE 100 held its gains at lunchtime, rising 4 points to 7,208 as various companies announce their Christmas hiring plans. 

Grocery giant Asda today said it is looking for 15,000 extra staff for the festive period.

Some 500 would be working for depots, 1,500 for home delivery but everyone else would be based in the stores.

The news comes as several large UK companies look for temporary employees while others struggle with labour shortages.

() is looking to hire around 20,000 temporary workers to support higher demand during the Christmas period, which will go from late October through to early January.

Similarly, grocer () is hiring 22,000 people, Amazon.com Inc 20,000, 7,000 and () ‘only’ 3,000 staff.

12pm: US stocks called higher

US stocks are expected to open firmer as investors anticipate third-quarter earnings reports from companies including Netflix, () and Proctor and Gamble. 

Futures for the Dow Jones Industrial Average futures gained 0.28% in Tuesday pre-market trading, while the broader S&P 500 index rose 0.36% and those for the tech-heavy Nasdaq 100 added 0.26%.

Stocks closed mostly higher on Monday, albeit with a small pullback by the blue-chip Dow, with excitement about Apple’s new product launches boosting tech shares.

At the close, the Dow yesterday had declined by 0.1% to 35,259, while the S&P 500 rose 0.34% to 4,486 and the Nasdaq Composite gained 0.84% to 15,022.

“This will a big week for equity markets as the third-quarter earnings season gets in full swing.”

“It seems like solid corporate earnings have soothed concerns around inflationary pressures, with the improving risk sentiment elevating equity markets,” said Lukman Otunuga, senior research analyst at FXTM.

“This will a big week for equity markets as the third-quarter earnings season gets in full swing. Since corporate results officially kicked off last week, the reports have painted a positive picture with major US banks smashing analyst forecasts. Big names like Netflix, Tesla and Intel among many others will be under the spotlight this week as investors pay close attention to their earnings.”

The key questions on the minds of investors will be what impact higher inflation, supply chain disruptions and labour shortages have on third-quarter numbers, Otunuga added.

“Should we have another solid week of results, this may inject S&P 500 bulls with enough confidence to venture into uncharted territory beyond its all-time high.”

Meanwhile, the FTSE 100 stayed in green territory and added 6 points to 7,210.

11am: Interest rate hike questioned 

With lots of talk yesterday about a interest rate hike now potentially coming in just a couple of weeks, several people are questioning the logic of this potential change of heart.

The market has dramatically repriced the expected path of UK rates, following BoE governor Andrew Bailey’s comments over the weekend, with an 86% chance of a rate hike now seen at the 4 November meeting of the rate-setting Monetary Policy Committee and four hikes total over the next year, compared to only three just a week ago.

“I think the market might be getting a bit ahead of itself,” says market analyst Marshall Gittler at BDSwiss.

Looking at the nine members of the BoE’s rate-setting monetary policy committee (MPC), he notes that three are ‘doves’ who want to keep rates stable and two are ‘hawks’ who’ve already been agitating for higher rates.

“Looking at the four in the middle, it appears to me that two – Gov. Bailey and the new chief economist, Huw Pill – are likely to shift over into the ‘hawk’ column as well, but two others – Deputy Gov. Jon Cunliffe and Deputy Gov. Ben Broadbent – will probably remain neutral.”

Therefore Gittler expects a 4-5 vote on tightening rates in November, with four in favour and five against. 

“There is an increasingly wide divergence between what economists think the should do, which is nothing, and what the Bank has increasingly committed itself to do, which is to lift interest rates a bit.”

Rabobank’s BoE watcher Stefan Koopman has noted that there is an increasingly wide divergence between what economists think that the BoE should do, which is nothing, and what the BoE has increasingly committed itself to do, which is to lift interest rates a bit. Many others are also arguing that central banks shouldn’t be hiking rates with economies entering a supply-side inflation crunch.

“That may be so,” says Neil Wilson at Markets.com, but with inflation at 5% or more, he questions whether central banks should really be “trying to grease the wheels” as much as zero interest rate policies and quantitative easing are doing now.

The yield curve has flattened, with near-term UK 2yr gilt yields jumping to a two-and-a-half year high on Monday, but 10yr not keeping pace. 

“It shows the BoE’s boss, Andrew Bailey, is believed when he says the bank will act to curb inflation, but it also shows markets don’t think it’s necessarily the best step for achieving growth in the long run. Both markets and central banks have been wrong in the past.”

Economists at note that the BoE is acting as the UK economy experiences a taste of stagflation, which “won’t be anywhere near as severe or as persistent as in the 1970s” but is expected to last several months into 2022.

“For the next six months, the worsening product and labour shortages will put the brakes on the economic recovery at the same time as higher energy prices drive up CPI inflation from 3.2% in August to a peak of around 5.0% in April next year.

“The ’s growing fear that some of this rise in inflation is becoming embedded within wage growth and inflation expectations means it is on the cusp of raising interest rates from 0.10% for the first time since the pandemic.”

But forecasts that economic activity will be weaker than the Bank expects over the next six months, with inflation falling back to the 2% target in late 2022 and in 2023, which “suggests that interest rates won’t rise that far that fast”.

The FTSE’s gains have been cut to 4 points, leaving it at 7,208.06.

9.55am: Covid cases weigh on some sectors 

With Covid-19 cases in the UK almost reaching 50,000 a day, aerospace and hospitality stocks are understandably out of favour.

Despite this, the FTSE 100 has eked out a 14 point (0.2%) rise to 7,217.

British Airways owner (), down 2.9% at 170.64p, is the worst blue-chip performer, while aerospace engineer () is off 0.9% at 141.32p, as traders wonder whether travel restrictions might have to be ramped up again.

Of all deaths in the UK in week ending 8 October, 820 involved #COVID19, down 15.8% from the previous week.

Wales had the highest proportion of deaths involving COVID-19 at 11.3%, followed by Scotland (9.3), Northern Ireland (8.5%) and England (5.8%) https://t.co/6R5cuDMz7e pic.twitter.com/NJeWaldpkq

— Office for National Statistics (ONS) (@ONS) October 19, 2021

The prime minister has yet to categorically deny it, so it is not certain it will happen but with the likes of hotels group InterContinental Hotels Group PLC also on the slide – the shares are down 0.8% at 5,006p – the market is clearly a bit twitchy.

UK, Eastern Europe battle rising COVID https://t.co/1aAJVZov2e #UK #NewDeltavariant

— Angela Wheelock (@qbangela) October 19, 2021

The mid-cap FTSE 250 is a bit more effervescent, up 92 points (0.4%) at 23,061, helped by some upbeat corporate news flow.

() Group PLC, up 7.7% at 218.6p, was the best-performing mid-cap after its third-quarter trading statement and acquisition of cashback site Quidco.

“The relatively modest-sized acquisition of cashback firm Quidco could have an outsized impact on Moneysupermarket,” suggested AJ Bell’s investment director, Russ Mould.

“Quidco adds a new string to the bow for the company and Moneysupermarket should be able to use its own considerable skills and expertise to accelerate growth,” he added.

8.35am: Lukewarm start for FTSE 100

The FTSE 100 had a lukewarm start after a mixed performance of US stocks overnight, while investors remain concerned about inflation and expectations central banks will tighten the screw.

London’s main index shed 6 points to 7,197 in early trading.

British Airways () SA was the top faller with a 2% dip, followed by () and () both shedding 1%.

Looking at the FTSE 250 index, () rose 3% after full-year profits more than doubled, even though the housebuilder set aside a further £52mln for removing cladding from high rise developments.

Meanwhile, the £6.7bn takeover of defence contractor () by () will be investigated by the City watchdog on the grounds of national security after being referred by the UK government.

6.50am: FTSE 100 heading for rebound as focus turns to corporate results season

After pulling back from last week’s post-pandemic high at the start of the week, the FTSE 100 is predicted to resume its ascent on Tuesday.

London’s main equity benchmark has been called four-to-six points higher by spread betters in the City, following the 30-point drop to 7,203.83 the day before.

Overnight, Wall Street had a mixed time, with the Dow Jones dipping 0.1% but the S&P 500 and Nasdaq gaining 0.3% and 0.8% as most of the big tech stocks climbed.

The biggest drag on the Dow was Walt Disney Co, which delayed the release of three Marvel Studios sequels and the next in the Indiana Jones series, while Apple and Facebook were among the tech names driving the gains as they respectively announced news about new laptops and metaverse plans.

“The big question now is whether the markets are back to chopping and changing, or whether we sustain the positive momentum.”

“Not a particularly great start to a new week yesterday for markets in Europe, but having just come off the back of three days of strong gains at the end of last week, we were probably overdue a bit of a pullback,” said market analyst Michael Hewson at CMC Markets.

“The big question now is whether that means we are back to chopping and changing in the same broad range we’ve been in since the beginning of July, or whether we sustain the positive momentum of the last couple of weeks?”

He said that yesterday’s disappointing China GDP numbers were the perfect excuse for a bit of a pullback, while the focus will be on corporate results for the next few days.

“Thus far we’ve seen companies post some fairly decent beats on the earnings front, and while it’s been notable that most have cited concerns about rising costs, as well as supply chain disruptions, we haven’t seen many significant profit downgrades yet,” Hewson said.

“That could change over the course of the next few days, and while the risks from rising energy prices are now starting to make themselves felt, for airlines in particular who having only just been given the all-clear to start flying again, are now facing spiralling fuel costs, probably feel like they are lurching from one crisis to another.”

The company focus in London will be on the likes of (), () and () PLC, while later in the latest edition of US earnings season will include updates from Netflix,  () and () (read the Day Ahead report for more).

Around the markets

Pound: up 0.3% to US$1.3776

Oil: Brent barrel up 0.3% to US$84.57

Gold: up 0.8% to US$1,777.28

Bitcoin: up 0.2% (over 24 hrs) to US$62,469.97

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mostly higher on Tuesday as minutes from RBA’s October monetary policy meeting showed the RBA expects the Australian economy to “return to growth in the December quarter and to its pre-Delta path in the second half of 2022”.

China’s Shanghai Composite gained 0.68% while Hong Kong’s Hang Seng index surged 1.22%

In Japan, the Nikkei 225 rose 0.55% and South Korea’s Kospi gained 0.63%.

Australia’s S&P/ASX200 slipped 0.08% to 7,375, dragged down by banks and mining stocks.

READ OUR ASX REPORT HERE