Senin, 19 Juli 2021

FTSE 100 stabilises below 6,900; US equities set to fall out of bed - Proactive Investors UK

  • FTSE 100 falls 164 points at close
  • US indices slide
  • Sterling lower against most major currencies

5.00pm FTSE loses 164 points on Freedom Day to close 2.3% lower

The FTSE 100 finished Monday down 164 points or 2.3% to hit 6,844 as the UK's supposed 'Freedom Day' fell flat in the eyes of investors.

"Today was supposed to be a landmark day where the UK economy finally shook off the handbrake of Covid-19 restrictions," commented chief market analyst Michael Hewson at CMC Markets UK. "Instead of a story of vaccine success it has turned out to be, not only a political shambles, but a big market sell-off over concern about the effect rising hospitalisations, along with big increases in the numbers of people self-isolating will have on the recovery story."

Hewson added: "These rising virus concerns have rippled out across global markets with European markets sliding sharply, the DAX hitting a two-month low, and the FTSE100 set to close at its lowest level in three months, with nearly all sectors in negative territory."

3.24pm Pound down against major currencies

Whatever you think of the decision to further ease lockdown restrictions in England, one would expect the market to look forward to an economic boost.

It’s curious, therefore, that sterling has lost six-tenths of a cent against the US dollar at US$1.37 – a fall of 0.5% today, taking the three-month decline to just over 2%.

Against the euro, the pound is down 0.6%; against the Japanese yen, it is off 1.3% and against the Chinese yuan it is 0.3% lower.

It’s giving the Brazilian real a pounding, however (up 1.0%) and is up 0.7% against the Canadian dollar.

“It’s difficult to have a conversation with anyone here in the UK without a debate as to whether the UK is correct to lift all legal Covid restrictions today with cases surging through the population. Those for suggest that with all the vulnerable groups fully vaccinated and every adult having been offered at least one jab then we have to start learning to live with the virus and the summer is the best place to start,” said the ever reasonable Jim Reid at Deutsche Bank

“To delay would only postpone cases and risks the peak occurring in winter when the health service is usually more stretched. Mental health considerations also come into the equation as does the still relatively low death rate.

“Those against will suggest that fully reopening now after the recent surge in cases could soon lead to high hospitalisations and genuinely risk pressurising the health service. They would also argue that new variants could emerge with such a wide prevalence of cases and could also create huge numbers of long Covid cases and more deaths than should occur. Anyway, the world will be watching the UK experiment with huge interest. It could show a pathway back towards normality or it could be a warning to even heavily vaccinated countries that Covid will be a problem for a decent length of time still,” Reid said.

The foreign exchange market appears to have made a judgement already on infection trends in the UK, although as we know the market’s view can flip in a moment.

Normally, a weak exchange rate is good for the internationally-focused FTSE 100 but today a flare stuck up the Footsie’s fundament would not propel it into positive territory; the index is down 191 points (2.7%) at 6,817.

2.45pm: Wall Street slides at the opening bell

The main indices on Wall Street opened on the back foot on Monday, weighed down by jitters around the Delta variant of COVID-19.

Shortly after the opening bell, the Dow Jones Industrial Average sank 1.33% to 34,226 while the S&P 500 slipped 1.25% to 4,273 and the Nasdaq dropped 1.34% to 14,234.

Also on the slide were Brent crude prices, which dropped 3.4% to US$71.08 a barrel, its lowest level since early July, following a deal between the OPEC+ group of nations to increase production.

Back in London, the FTSE 100 had continued to sink in late afternoon, falling 166 points to 6,841 at around 2.40pm.

2.20pm: FTSE 100 seriously under the weather

The Footsie has gone from bad to worse as the start of trading in the US looms.

London’s index of heavyweight shares – getting less heavyweight by the hour, it must be said – was down 169 points (2.4%) at 6,839.

All eyes are said to be on England today as it conducts an experiment on behalf of other countries where the majority of the adult population has been vaccinated by lifting numerous lockdown restrictions.

Things have not got off to a good start, with the Health Minister, Sajid Javid, testing positive for COVID-19 while the prime minister Boris Johnson and the chancellor of the exchequer Rishi Sunak have been obliged to self-isolate as a result.

Johnson has urged England’s residents to be cautious as restrictions are lifted – a bit like Billy Bunter dishing out advice on dieting – and if nothing else, investors in Just Eat Takeaway.com NV (LON:JET) have taken the advice; the stock is the only Footsie constituent to have risen today, notching up a 0.5% rise at 5,875.

The advent of Freedom Day/Infection Day (delete according to personal view) has obviously divided opinions on social media.

Punch-ups in the supermarkets and the pubs of England can’t be far off. Sell face mask makers, buy bandage makers.

12.35pm: US equities to fall out of bed

US equities are set to fall out of bed with a bump today, joining the general retreat of equity markets worldwide.

Based on spread betting quotes, the Dow Jones industrial average is set to plunge 377 points to 34,311; the S&P 500 is expected to tumble 34 points to 4,293 and the Nasdaq 100 is tipped to surrender 56 points at 14,625.

Investors remain perturbed at the coronavirus pandemic and also the outlook for third-quarter earnings updates.

“Last week’s earnings reports have by and large been positive, but attention is now shifting to what comes next in terms of the outlook, as Covid cases rise, and here the economic picture is less clear,” said CMC’s Michael Hewson.

“There was a great deal of optimism over the summer reopening; however, as we look ahead to the rest of the year and look at how Delta variant infections are rising, some of that optimism is dissipating, prompting the question as to where we go next for Q3 earnings expectations.

“One of the big drivers of inflation concerns over the past few months has been the steady rise in oil prices, as concerns about demand overshooting supply helped to drive prices to three-year highs. At the weekend OPEC+ appear to have put their difference to one side and agreed a deal to increase output by up to 400k barrels a day on a monthly basis starting in August, and continue until production has been restored to the level it was pre-pandemic,” Hewson added.

As noted by Daiwa Capital Markets, this week’s US economic diary is relatively sparse.

Today will see the release of the NAHB housing survey for July, which will set the tone for the housing-focus data released over the remainder of the week.

“That data includes tomorrow’s housing starts and building permits report for June, in which Daiwa America’s Mike Moran expects to see a modest decline in starts amidst the recent moderation of new home sales and an associated rise in inventories; however, Mike expects Thursday’s existing home sales report to be more robust – albeit well shy of last year’s highs – and is picking a 3.4%M/M [month-on-month] rebound in in sales in June on the back of the already-published rebound in pending home sales in May,” Daiwa said.

Economists seem to be queuing up to say how dull it is going to be on the macroeconomic front.

“We are now entering the Fed’s ‘quiet period’ where senior officials avoid talking about the monetary policy outlook, while the data calendar is relatively thin so we are not expecting major market moves to be driven from the US macro news flow over the coming week. Nonetheless, it still paints a positive picture of US economic prospects with housing activity picking up after a recent quiet patch with a lack of housing supply continuing to support house price growth,” according to ING.

All that “very little happening” and yet the market is tanking.

In London, the FTSE 100 has stabilised at lower levels, after quickly ducking below 7,000 this morning to be followed by an equally quick duck below 6,900.

London’s index of blue-chip shares is now at 6,874, down 134 points (1.9%).

11.30am: Resource stocks out of favour

In the resource sector, metals are competing with oil to have the worst of it. Oil is winning – or losing, depending on how you look at it.

The price of gold on the futures market is down 0.6% while silver is 1.4% weaker but Brent crude for September delivery is weaker still, down 2.6% at US$71.71 a barrel.

“Crude prices have slumped into a five-week low despite an agreement between Saudi Arabia and the UAE over production levels, with markets finally gaining greater certainly after the recent breakdown in talks. The deal allows for a 400,000 barrels per day [bpd] increase starting next month, with the UAE allowance upped to 3.5 million bpd. Nonetheless, just as we are seeing concerns for travel stocks in the UK, so the expectation of energy demand appears to be taking a hit as crude heads lower. Some had seen the breakdown in OPEC+ talks as the basis for an extended period of depressed production, yet it appears we will be seeing the group steadily increasing output in a bid to balance the energy market,” said Joshua Mahony at IG Group.

BP PLC (LON:BP.), down 3.6% at 281.6p, is one of the worst-performing blue-chips and its ugly sister, Royal Dutch Shell PLC (LON:RDSB) is hardly faring better, down 2.8% at 1,329.6p.

Given the heavy weighting of the oil giants in the index, it is little wonder that the FTSE 100 is taking a bath, shedding 148 points (2.1%) at 6,860.

10.35am: Not even housebuilders can make progress

It’s a bad day in the markets when not even the housebuilders can make progress following further evidence that the UK’s housing market remains bonkers.

Persimmon PLC (LON:PSN) was down 1.8% at 2,900p, Barratt Developments PLC (LON:BDEV) was off 2.3% at 671.4p, Taylor Wimpey PLC (LON:TW.) was 2.8% weaker at 151.05p and Berkeley Group Holdings PLC (LON:BKG) dipped 1.4% to 4,581p, despite property listings website Rightmove PLC (LON:RMV) claiming June was almost certainly a record for house sales as buyers rushed to beat the end of the stamp duty holiday window.

READ Rightmove predicts house sale record as buyers rush to use stamp duty holiday

Come to that, Rightmove itself was 0.9% lower at 663p.

The FTSE 100 was down 138 points (2.0%) at 6,870.

The first trading update as a listed company from Parsley Box Group PLC (LON:MEAL) led to the shares slumping 17% to 139.5p.

The company, which is attempting to carve out a niche in the increasingly crowded ready meal delivery market by targeting the Baby Boom generation, said new customer additions returned to more normal levels in the first half of 2021; in the same period of 2020, when the first UK lockdown was introduced, the group had enjoyed spectacular growth.

9.35am: Contamination Day for the Footsie

It’s “Contamination Day” in England and the Footsie seems to have caught a nasty dose.

The FTSE 100 was down 74 points (1.1%) at 6,934 with travel-related stocks and miners among the hardest hit as fears over the spread of the coronavirus return like the worst BBC “and now another chance to see” repeat ever.

British Airways owner International Consolidated Airlines SA (LON:IAG) remains the worst blue-chip performer with a 4.2% drop to 160.76p but aeroplane engines maker Rolls-Royce Holdings PLC (LON:RR.) is faring almost as badly, down 4.1% at 89.24p while hotels owner InterContinental Hotels Group PLC (LON:IHG) is off 3.5% at 4,5239p.

3I Group PLC (LON:III), up 0.7% at 1,167.5p, is the only Footsie constituent on the rise this morning. 

“Meanwhile concerns about variants, rising cases and declining vaccine efficacy are all conspiring to knock confidence. The FTSE 100 slumped to a 2-month low in early trade as it retreated well south of 7,000. US 10yr Treasury yields hover around 1.28% but are off the low hit earlier close to the 200-day SMA. I think we are already in a high summer lull for stock markets,” said Neil Wilson at markets.com.

At BDSwiss, Marshall Gittler notes his equity screens are a sea of red, signifying declining prices.

It does not sound like he is a fan of the easing of lockdown restrictions in England.

COVID-19 new cases in the UK

“How smart does that look, given the parabolic rise in the number of new cases and their stunning number, now 4.4x that of the Eurozone and 6.4x that of the US, relative to population?” Gittler wondered.

I dunno, Marshall; ask Boris Johnson if you can get hold of him (I understand he is self-isolating after his Health Minister, Sajid Javid, tested positive for COVID).

Shares in Ocado Group PLC (LON:OCDO) were down 2.2% at 1,765.5p after a fire at its fulfilment centre in South London on Friday.

Fortunately, no one was injured unless we are entering some sort of Blade Runner sentient androids scenario; the fire was caused by the collision of three robots.

8.30am: Covid and inflation worries lay the Footsie low

Ouch. The FTSE 100 went below the 7,000-mark amid growing worries about the Covid spread allied to inflation fears in the US.

Wall Street ended last week firmly in the red with the jitters continuing to rock the markets on Monday.

“The general breadth of economic concerns has inevitably spread to the UK market, with the likes of the oil and mining sectors under pressure within the premier index on fears of slowing growth,” said Richard Hunter, head of markets at Interactive Investor.

“At the same time, stocks caught in the reopening trade such as the travel sector continue to be volatile even after the easing of some international restrictions, as time begins to run down on a potential 2021 return to widespread tourism.”

Celebrations over the easing of almost all lockdown restrictions were muted as the infection rate continued its almost vertical ascent.

Travel stocks were in the cross-hairs amid concerns over potential further restrictions on where Brits can holiday this summer.

British Airways owner IAG (LON:IAG) fell 4%, while Premier Inn owner Whitbread (LON:WTB), which should be a staycation beneficiary, was off 2.5%.

Among the mid-caps, the cruise firm Carnival (LON:CCL) dropped 5.8%, while budget carrier easyJet (LON:EZJ) fell 3.4%.

Cineworld (LON:CINE) tumbled 7.1% following a welter of weekend data that suggests Britain could soon be back under lock and key.

Ocado (LON:OCDO) lost 3.1% of its value in the opening exchanges after a robot fire at a fulfilment centre in south London led to the cancellation of hundreds of grocery orders.

6.50 am: Footsie called lower 

The FTSE looks set to open below the 7,000-mark amid worries over the continued spread of the Covid virus and following falls after hours on Wall Street on Friday.

Inflation, a theme that has haunted the US for around two months, reared its ugly head again after Janet Yellen, the former Fed chair and current Treasury Secretary, issued a warning on rising prices.

She predicted the cost of living and raw materials would grow rapidly for several more months before settling into normal patterns.

This was enough to prompt another mini sell-off on Friday with tech and banking stocks hardest hit.

In Asia earlier, the spread of the Covid delta variant in Malaysia, Japan, Indonesia and Thailand provided the sell signal for equities across the region.

“Of course, you can choose your poison on that front globally, with the US, Europe, and the UK also experiencing rises in cases with populations pushing back on restrictions that seem to increase by the day in APAC,” said Jeffrey Halley, an analyst at OANDA.

“China has muddied the water more by erecting barriers for China tech IPOs in the US, which appears to be an ongoing process. It's Hong Kong or bust for your IPO from now on, it seems.”

Crude oil prices dipped a little after OPEC+ agreed on a deal to restrict production to 400,000 barrels a day from August.

Looking ahead to later in the week, there are updates here in the UK from Royal Mail (LON:RMG), consumer goods group Unilever (LON:ULVR) and telco Vodafone (LON:VOD) as well as miners Anglo American (LON: AAL) and Antofagasta (LON: ANTO).

Around the markets

  • Sterling US$1.3757 (flat)
  • Bitcoin US$$31,693.34 (-1.24%)
  • Gold US$1,812.60 (-0.13%)
  • Brent crude US$72.88 (-0.96%)

6.50am: Early Markets - Asia / Australia

Stocks in the Asia-Pacific region were lower on Monday as the state of Victoria in Australia extended its lockdown despite a slight drop in new COVID-19 infections.

The country's second-most populous state which includes Melbourne, on Monday reported 13 locally acquired cases, down from 16 a day earlier.

In Japan, the Nikkei 225 slumped 1.47% while South Korea’s Kospi declined 0.96%.

The Shanghai Composite in China fell 0.32% and Hong Kong’s Hang Seng index dipped 1.69%

Shares in Australia slipped, with the S&P/ASX 200 trading 0.90% lower.

READ OUR ASX REPORT HERE

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2021-07-19 11:33:00Z
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