Kamis, 10 Juni 2021

FTSE 100 off its best levels as ECB keeps rates and bond buying unchanged; Wall Street set for cautious start - Proactive Investors UK

  • FTSE 100 ahead 17 points
  • BT boosted by French stakebuilding
  • Sainsbury leads fallers

1.42pm: US core inflation rate excluding energy and food highest since 1992

As perhaps people were beginning to suspect, US inflation has come in higher than expected.

The consumer price index is showing a gain of 5% in May, up from the 4.7% forecast and the 4.2% seen in April.

This is the highest level since a 5.4% increase in August 2008.

Core inflation - excluding food and energy - jumped from 3% to 3.8%, the highest level since June 1992.

Used cars and trucks were again a big contributor to the increase, up 7.3%.

Meanwhile weekly jobless claims have fallen, albeit not by as much as expected.

The number of Americans claiming unemployment benefits fell to 376,000 last week, compared to 385,000 the previous week and a forecast of 370,000.

So far markets have hardly reacted.

The Dow Jones Industrial Average is expected to open up 0.17%, the S&P 500 is forecast to be virtually unchanged and the Nasdaq Composite to dip 0.2%.

The FTSE 100 is currently up 17.26 points or 0.24% at 7098.27.

12.58pm: ECB confirms monetary policy stance

The European Central Bank has kept interest rates on hold and also kept its bond buying programme unchanged despite a rise in inflation, confirming its "very accommodative monetary policy stance."

It said it would keep rates at the current level or lower "until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently  reflected in underlying inflation dynamics."

The inflation rate had risen to the ECB's target but it seems keen to see how things pan out before changing direction.

As for bond purchases it will keep the €1.85trn programme going until next March "and in any case until it judges that the coronovirus crisis phase is over."

It expects purchases over the coming quarter "to continue to be conducted at a significantly higher pace than during the first months of the year."

Bond buying under the pandemic emergency purchase programme has been pickiing up the pace and is now running at around €80bn a month.

Meanwhile the FTSE 100 is currently up 10.31 points or 0.15% at 7091.32.

12.30pm: Leading UK shares slip below 7100 ahead of US open

Wall Street is set for a cautious open ahead of the latest US inflation figures.

The consumer price index is expected to show an annualised rise of 4.7%, up from 4.2% in April and the biggest year-on-year increase since September 2008.

Ahead of the figures the Dow Jones Industrial Average is forecast to open 0.21% or 74 points higher, while the S&P 500 is expected to edge up 0.07% and the Nasdaq Composite is indicated 0.22% lower.

That could all change, however, if inflation comes in higher than anticipated, prompting renewed concerns that the Federal Reserve would have to act to curb the growing pricing pressures.

Sophie Griffiths at Oanda said: "A stronger-than-forecast print today could tip the taper talk dial to sooner rather than later, which could bring stocks lower. US futures are pointing to a mixed start on the US open, with the tech-heavy Nasdaq set to underperform its peers."

Also due are the weekly jobless claims figures, which are expected to show a fall from 385,000 to 370,000.

And ahead of all that comes the latest European Central Bank meeting.

In anticipation of the flood of economic data, the FTSE 100 has come off its best levels and is now up just 6.78 points or 0.09% at 7087.79 having earlier touched 7110.

11.45am: Airlines and hospitality companies under pressure

Travel and hospitality shares are heading lower on continuing concerns about whether the government will actually end all lockdown restrictions as planned on June 21.

The doubts are increasing following news yesterday that there were 7,540 new COVID-19 cases across the UK, the highest since February.

So airlines, which had picked up as the EU and US unveiled an easing of travel restrictions this week, have come back under pressure.

British Airways owner International Consolidated Airlines Group PLC (LON:IAG) is down 1.08% while EasyJet PLC (LON:EZJ) has dropped even further, down 2.64%.

Wagamama company Restaurant Group PLC (LON:RTN) has lost 5.3%, and InterContinental Hotels Group PLC (LON:IHG) i 0.88% lower.

Despite these falls, the FTSE 100 is still up 25.61 points or 0.36% at 7106.62.

But the more domestically focused FTSE 250 has slipped back, down 0.42% at 22,662.94.

10.35am: Pharma firms ahead

Leading shares remain in positive territory, with the FTSE 100 up 19.77 points or 0.28% at 7100.78.

Pharmaceutical firms are adding to their recent gains and providing support for the index.

AstraZeneca PLC (LON:AZN) has added 127p or 1.56% to 8257p while GlaxoSmithKline PLC (LON:GSK) has climbed 20.20p or 1.46% to 1400.6p.

Auto Trader Group PLC (LON:AUTO) continues to lead the way, up 6.68% to 616.4p, with BT Group PLC (LON:BT.) close behind, 3.19% better at 189p.

But investors are still playing it cool ahead of the raft of inflation data coming up later.

Russ Mould, AJ Bell investment director, said: "The FTSE 100 started Thursday on the front foot, reclaiming the 7,100 mantle early on, but all the focus is on announcements coming later this afternoon from Washington and Frankfurt.

“US inflation figures could set the tone for the rest of the month, let alone the rest of the day when they are released later. A higher than expected number could put the markets back in panic mode over rising prices, even if the US Federal Reserve has done its best to convince investors the trajectory of interest rates is more closely tied to the employment market.

“The European Central Bank meets later with little expectation of any change in emphasis let alone policy but any sign that the ECB might seek to taper its support for the economy could also provoke a shock.”

9.40am: Coal miner climbs again

It does not seem fair to ignore Thungela Resources PLC (LON:TGA), the thermal coal company spun off from Anglo American PLC (LON:AAL) which is spending its one and only week in the leading index.

After a rollercoaster week so far, its shares have added 1.4% to 132p a day before its departure from the FTSE 100 as its listing nationality changes from London to Johannesberg.

The rise still means it is below its listing price of 150p.

Elsewhere BT Group PLC (LON:BT.) continues to be buoyed by news that French telecoms group Altice has taken a 12% stake, even though it ruled out making a bid (for at least six months anyway under UK takeover rules).

AJ Bell investment director Russ Mould said: "It has been said for years that UK assets are cheap and 2021 is proving to be the year when investors finally put their money where their mouth is. Not only have we seen a spate of mergers and acquisitions, but investments of the strategic and activist kind are taking shape too.

“BT has long traded on a low rating because the market has been concerned about the significant amount of money it has to spend on upgrading communications infrastructure, as well as competition in the broadband space and a large net debt position and a hefty pension deficit.

“Altice is an established name in the telecoms space and the purchase of a 12% holding in BT is a significant move, matching the stake already held by Deutsche Telekom.

“While Altice says there are no plans to make a bid at the moment, one must expect it to push for change within the business, given BT needs to find a solution to its very stretched balance sheet and how the market generally has a negative view of the company.

“Selling or finding a partner for the sports broadcasting arm is one option that’s already on that table, with a successful deal letting it focus on the core telephony business.

“BT’s Openreach division is also seen as a valuable part of the operation and that could be sold off.

“BT last year was rumoured to have attracted private equity interest with KKR touted as a potential bidder."

BT is helping support the leading index, which is back above the 7100 level, up 22.95 points or 0.32% at 7103.96.

8.42am: Markets move higher but ex-divs limit gains

The FTSE 100 remains in positive territory ahead of the inflation data dump, up 12.9 points or 7093.91.

Among the risers is Auto Trader Group PLC (LON:AUTO), which has accelerated 5.19% to 607.8p despite its figures showing the scars of the pandemic.

Revenues fell by  29% and pre-tax profit by 37%, although these were both better than expected. The company also increased its dividend and promised to reintroduce a share buyback programme.

Richard Hunter, head of markets at interactive investor, commented “With the pandemic pain in the rear view mirror, Auto Trader is well placed to benefit from a return to normality.

"With car showrooms being shut for large periods of the reporting year, the company provided free or reduced advertising over several months to stimulate demand, with an inevitable effect on revenues. For their part, retailers also redesigned their business models, largely introducing the likes of “click and collect” and home delivery. In addition, Auto Trader has launched a “Market Extension” product, on the basis that buyers are now willing to travel further distances to collect a car and that sellers are now able to advertise outside their immediate locality. Visits to the site also increased by 15% in the period, further underlining Auto Trader’s dominant position in its sector.

Alongside strong demand arising from customers now putting more value on their own exclusive use of a vehicle as opposed to using public transport and the well-reported increase in the levels of personal savings during the pandemic, these factors in aggregate bode well for prospects...

"Investors have chosen to err on the side of caution despite Auto Traders’ best efforts during the period. The share price had risen by 7% over the last year, as compared to an increase of 12% for the wider FTSE 100 prior to this release and the spike in opening trade may reflect a reset in investor thinking. Indeed, the market consensus of the shares as a buy is reflective of an improvement in prospects arising from Auto Trader’s cost efficient and powerful pricing model.”

A handful of companies going ex-dividend are helping limit the market's gains.

J Sainsbury PLC (LON:SBRY) is down 2.4% at 255.8p, Johnson Matthey PLC (LON:JMAT) has fallen 1.05% to 3112p and WPP PLC (LON:WPP) is 0.93% lower at 995.2p.

8.23am: Postive start on busy economic day

Leading shares have made a positive start, with the FTSE 100 up 11.8 points or 0.17% at 7092.85.

The biggest riser is BT Group PLC (LON:BT.), up 2.54% or 4.65p at 187.8p after France's second largest telecom company took a 12.1% stake in the UK business, worth more than £2bn.

But Altice - headed by billionaire Patrick Drahi - said it had no intention to make a takeover offer and supported the current management.

Drahi said: "BT has a significant opportunity to upgrade and extend its full-fibre broadband network to bring substantial benefits to millions of households across the UK. We fully support the management's strategy to deliver on this opportunity."

For its part BT said: "We welcome all investors who recognize the long-term value of our business and the important role it plays in the UK. We are making good progress in delivering our strategy and plan."

Elswhere inflation concerns are bound to dominate the day. Updates from the US and the European Central Bank are set to reopen the debate about whether pricing pressures are on the rise or whether this is just a transitory period as last year's pandemic-induced falls drop out of the system.

In the US, the widely watched consumer price index forecast to jump to a 13 year high of 4.7% in May, up from 4.2% the previous month.

Meanwhile the European Central Bank meets as the region's CPI went above its 2% target, prompting talk it should begin scaling back its €1.85trn bond buying programme.

Michael Hewson at CMC Markets said: "Last month we saw US CPI jump sharply to 4.2%, well ahead of expectations of 3.6%, and the highest level since September 2008, with core prices rising by 3%.

""If the recent April Producer Price Index numbers are any guide, we could well see an even higher number, given how much PPI tends to be a leading indicator for CPI, as we look towards today’s May numbers."

As for the ECB meeting, Hewson said: "With inflation rising back to the ECB’s target rate there will inevitably be unease amongst an increasing quorum of Northern countries who want the ECB to start considering scaling back support for the eurozone economy. However this seems unlikely given recent data for April that shows weak economic activity, which means this may well get pushed out to September."

6.39am: Leading shares set to start higher

The FTSE 100 is set to start Thursday on the front foot on what is supposed to be a big day for data.

CFD firm IG Markets sees London’s blue-chip benchmark up around 17 points, making the price 7,097 to 7,100 with just over an hour to go until the open.

Economic data drops in the US and a Europe Central Bank meeting specifically will be influential to trading today, with inflation very much a key consideration.

Among the economic data the focus will be on consumer price index figures which will update the inflationary picture.

“US markets finished yesterday’s session on the back foot across the board, as investors geared up for a big day data and central bank wise, with markets in Europe set to open slightly higher from where they left off yesterday evening,” said Michael Hewson, analyst at CMC Markets.

He added: “Even though recent US payrolls data has been on the soft side, there is potential for markets to feel nervous about inflation risk, and whether transitory price pressures might start to become more persistent.”

On Wall Street, the Dow Jones closed Wednesday 152 points or 0.44% lower at 34,447.

The S&P 500 edged down 0.18% to finish at 4,219 whilst the Nasdaq was only a sliver lower at 13,911. The small-cap focused Russell 2000 index meanwhile slipped 0.71% to 2,327.

In Asia, Japan’s Nikkei was rising 91 points or 0.32% to trade at 28,952 whilst Hong Kong’s Hang Seng gained 74 points or 0.26% to 28,817. The Shanghai Composite added 0.69% to 3,616.

Around the markets

The pound: US$1.4109, down 0.06%

Gold: US$1,886 per ounce, down 0.1%

Silver: US$27.72 per ounce, down 0.11%

Brent crude: US$71.77 per barrel, down 0.6%

WTI crude: US$69.47 per barrel, down 0.8%

Bitcoin: US$36,682, up 9.42%

6.50am: Early Markets - Asia / Australia

Stocks in the Asia-Pacific region were higher on Thursday as investors await the upcoming release of U.S. inflation data for May.

The Shanghai Composite in China rose 0.86% and Hong Kong’s Hang Seng index lifted 0.34%

In Japan, the Nikkei 225 gained 0.32% while South Korea’s Kospi rose 0.48%.

Shares in Australia gained, with the S&P/ASX 200 trading 0.47% higher.

READ OUR ASX REPORT HERE

Proactive Australia news:

Anson Resources Ltd (ASX:ASN) (OTCMKTS:ANSNF) (FRA:9MY) has been granted The Bull Nickel-Copper-PGE Project tenement E70/5420, which abuts Chalice Mining Ltd’s (ASX:CHN) (OTCMKTS:CGMLF) tenements and is 20 kilometres south-west along strike of the Julimar Nickel-Copper-PGE high-grade deposit.

Auroch Minerals Ltd (ASX:AOU) (FRA:T59) is encouraged by assays received from completed diamond drilling at Woodwind and Percussion prospects of the 100%-owned Leinster Nickel Project in Western Australia.

Hiremii Limited (ASX:HMI) is encouraged by achieving audit reviewed revenue of $3.5 million for the first half of FY2021, plus unaudited revenue of $2.3 million for the period January 2021-April 2021, taking total unaudited revenue to $5.8 million for the 10 months to April 2021.

Salt Lake Potash Ltd (ASX:SO4) (LON:SO4) (OTCMKTS:WHELF) (FRA:W1D) continues to march towards first sulphate of potash (SOP) production from Lake Way Project in Western Australia in the near term by concluding the debt financing process.

Piedmont Lithium Inc's (ASX:PLL) (NASDAQ:PLL) (OTCMKTS:PDDTF) updated scoping study has confirmed the integrated Carolina Lithium Project in the US will be one of the world’s largest and lowest-cost sustainable producers of lithium hydroxide.

archTIS Ltd (AX:AR9) has entered a contract to further expand the deployment of its NC Protect platform with an Australian Commonwealth national security agency.

Firefinch (ASX:FFX) has uncovered more high-grade gold during its latest exploration campaign at the operating Morila Gold Project in Mali.

Archer Materials Ltd (ASX:AXE) (OTCMKTS:ARRXF) (FRA:38A) CEO Dr Mohammad Choucair has sent a letter to investors outlining the importance of the company’s move to the fledgling innovation precinct Lot Fourteen in Adelaide.

Alderan Resources Ltd’s (ASX:AL8) induced polarisation (IP) geophysical survey has highlighted multiple copper and gold targets over the central portion of its Detroit project in the Drum Mountains region of western Utah, USA.

Latin Resources Ltd (ASX:LRS) (FRA:XL5) welcomes the announcement that Westminster Resources Ltd (CVE:WMR) has commenced the process of dual listing on the Australian Securities Exchange.

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2021-06-10 11:58:00Z
CAIiENGCBLqw_jFbyZG0V_fUC_IqGQgEKhAIACoHCAowg9D5CjDCw-YCMOHZtwU
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